Archive for March, 2017

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Treasury Secretary Steve Mnuchin may not be worried. Nor, it seems, are other members of the economic and political elite. But the rest of us are—or we should be.

As regular readers of this blog know (cf. all these posts), the robots are here and they’re rapidly replacing workers, thus leading to less employment, downward pressure on wages, and even more inequality.

The latest evidence comes from the work of Daron Acemoglu and Pascual Restrepo, who argue, using a model in which robots compete against human labor in the production of different tasks, that in the United States robots have reduced both employment and wages during recent decades (from 1993 to 2007). That conclusion holds even accounting for the fact that some areas of the economy may grow (thus increasing employment for some workers) when the use of robots raises productivity and reduces costs in other industries.

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Even though U.S. employers have been introducing industrial robots at a pace that is less than in Europe, their use in American workplaces has in fact grown (between 1993 and 2007, the stock of robots in the United States increased fourfold, amounting to one new industrial robot for every thousand workers). And, once the direct and indirect effects are estimated, robots are responsible for up to 670,000 lost manufacturing jobs. And that number will rise, because industrial robots are expected to quadruple by 2025.

Actually, the effects have likely been even more dramatic, because Acemoglu and Restrepo take into account only three forces shaping the labor market: the displacement effect (because robots displace workers and reduce the demand for labor), the price-productivity effect (as automation lowers the costs of production in an industry, that industry expands), and the scale-productivity effect (the reduction of costs results in an expansion of total output).

What they’re missing is the effect on the value of labor power. As I explained last year, when productivity increases lower the prices of commodities workers consume, the value capitalists need to pay to get access to workers’ ability to work also goes down. As a result, even if workers’ real wages go up, the rate of exploitation can rise. Workers spend less of the day working for themselves and more for their employers. Capitalists, in other words, are able to extract more relative surplus-value.

And more surplus-value means more income for all those who share in the booty: CEOs, members of the 1 percent, and so on.

That’s why the increasing use of industrial robots, which under other circumstances we might actually celebrate, within existing economic institutions represents a disaster—not for their employers (who, like Mnuchin, are not particularly worried), but for all the workers who have been or are likely to be displaced and even those who manage to hang onto their jobs.

Workers are the ones who are going to continue to suffer from the “large and robust negative effects of robots”—unless and until they have a say in how robots and the resulting surplus are utilized.

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1,000,000!

Posted: 30 March 2017 in Uncategorized
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Apparently, there are lots of folks out there who also, every morning, wake up on the wrong side of capitalism.

That’s the only explanation I have for the fact that, as of yesterday, this blog reached an extraordinary milestone: it has received more than one million views.

I really don’t know what else to make of the number. I started this blog (at the suggestion of a couple of former students) back in 2009. I still call it “occasional” but, as regular readers know, it’s anything but. But I don’t have a particularly good handle on why so many people from so many “countries” (212, both official countries and territories, according to WordPress) have found their way to this blog.

I do get the occasional message from readers about how they or someone they’ve met find the information and analysis useful. That couldn’t please me more—to know that what I write here travels and serves a wide variety of people who are attempting, as that hoary German philosopher once wrote, to both interpret and change the world.

So, yes, the large number of views does seem to indicate that there are many people out there—students, professors, activists, and others—who are dissatisfied with business as usual, both with the uneven recovery from the latest crises of capitalism and with the blithe assertions by economic and political elites (and those who represent their interests in the academy and media) that there are no alternatives.

We, on the other hand, are guided by the idea that something is seriously wrong with contemporary economic and social institutions—and other worlds are indeed possible.

The readership as it turns out is even wider, as many of the posts that originally appear here are reposted on the Real-World Economics Review blog, Democracy at Work, Progress in Political Economy, and perhaps elsewhere. I want to thank all of them for their continued encouragement and support.

In all honesty, the major satisfaction I derive from this blog stems from the new kinds of research and writing it has allowed me to do—mostly concerning on-going events and commentary by others about what is going on in the world, especially (but not only) with respect to the economy and contemporary economists. My goal throughout has been to carry out (or at least point toward) a “ruthless criticism of everything existing,” a project to which many others around the world are also currently contributing.

For my part, I can’t say I’ve settled on the best way to conduct that critique and present it to readers. That’s why I’m always open to feedback and suggestions—about both topics and ways I can make this work more useful.

What I can say is I derive a great of pleasure from working on a daily basis on this blog (even if there were no readers)—and even more from the fact that so many people in the United States and around the world find it worthwhile to find the time to visit the blog and read what I write.

Perhaps someday we’ll all wake up from this nightmare, on the right side of capitalism—as it becomes a distant memory.

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It’s alive!

Posted: 29 March 2017 in Uncategorized
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Handbook

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Dissension in Republican ranks didn’t prevent Repeal and Replace. Poverty did.

Think about it: Medicaid now provides for the medical needs of one in five Americans. That’s 74 million people. Even more:

Medicaid now provides medical care to four out of 10 American children. It covers the costs of nearly half of all births in the United States. It pays for the care for two-thirds of people in nursing homes. And it provides for 10 million children and adults with physical or mental disabilities.

As the New York Times notes, Medicaid was a mere footnote when Lyndon B. Johnson signed the Social Security Amendments of 1965. Now, however, the U.S. economy has so impoverished the nation’s population that Medicaid has surpassed Medicare in the number of Americans it covers.

So many Americans rely on Medicaid it was politically impossible to garner enough support, from Democrats and at least some Republicans, to repeal Obamacare and replace it with a plan that gave tax breaks to the rich in exchange for decreasing health coverage for the growing ranks of the poor.

The problem, as it turns out, is not the health system. It’s the nation’s impoverishment.

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Young Americans are caught between two contradictory messages. On one hand, they’re told to go to college, to maintain pace with new technologies and job requirements. On the other hand, they’re told to “get out”—because, for most, a college education is simply unaffordable.

The American Dream, for them, looks more and more like “the sunken place.”

The Institute for Higher Education Policy [ht: mfa] is the latest group to document the unaffordability of a college education. While students from the highest income quintile (from families earning around $160 thousand or more) can afford most of the more than 2,000 colleges studied, low- and moderate-income students (bringing in around $69 thousand or less) can only afford to attend a tiny percentage of those colleges.

The Institute bases its conclusion on an “affordability benchmark” (the so-called Rule of 10, the idea that 10-year savings plus part-time earnings should cover the entire cost of a four-year degree) compared to the net price of a college education (equal to the cost of attendance minus grant aid). They then illustrate their findings with ten student profiles: five dependent students representing a different income quintile, and possessing attributes based on national averages for students in their quintile (Sonja, Hakim, Ava, Sergio, and Maria), and five independent students characterizing the diverse array of personal and family circumstances among independent students (Anthony, Traval, Aneesa, Jon Sook, and Mohammed).

As readers can see from the figure at the top of the post, while the student from the highest income bracket could afford to attend 90 percent of colleges in the sample, the low- and moderate-income students with fewer financial resources could only afford 1 to 5 percent of colleges.

Colleges were most dramatically unaffordable for students near the bottom of the income distribution, including all five of the independent students. Out of more than 2,000 colleges, nearly half (48 percent) were affordable for only the wealthiest student (with a family income over $160,000) and more than one-third (35 percent) were affordable only for that student and the next wealthiest (with a family income over $100,000).

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Not only do working-class students face financial barriers in attempting to enroll in most colleges, which they can only afford by burying themselves and their families under mountains of debt. They’re also far less likely to complete their students, often because working long hours to finance their education gets in the way of their studies (not to mention all the other activities traditionally associated with being in college).

As the authors of the report conclude,

This inability for low-earners to afford an education or improve their station erodes belief in a nation founded on the rejection of entrenched social stratification.

The only question for the nation is, will this educational horror film have a happy ending?

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mortality

We don’t need Louisiana Detective Rodie Sanchez coming out of retirement to solve the crime against the members of the working-class currently being committed in the United States.

We already know many of the details of the crime. We also know the identities of both the victims and the serial killer. The only real mystery is, what’s the country going to do about it?

The investigation itself is being painstakingly carried out by Anne Case and Agnus Deaton (pdf). They show, with abundant statistics, that mortality trends in the United States run counter to those in other rich countries, where they have been steadily declining for decades.

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The headlines, of course, have been about one group—middle-age white non-Hispanics with a high-school degree or less—whose mortality rates, especially those attributed to “deaths of despair” (drug overdoses, suicides, and alcohol-related liver mortality), increased from 1998 through 2015.* The focus in on that group for a number of reasons, including the fact that increasing rates for them (as against blacks and nonwhite Hispanics) have all but erased the racial gap in mortality among non-college-educated Americans—and, of course, because of the prominence of “white working-class” voters in explanations of Donald Trump’s electoral victory.

But we also need to go beyond the headlines and understand that, while rates for different ethnic and racial groups in the United States have moved in opposite directions in recent decades, the rates for working-class blacks and Hispanics are still very high—and, in recent years (as can be seen, in the case of blacks, in the chart at the top of the post), they’ve also begun to rise.

That’s the real crime story. All three groups within the American working-class—whites, blacks, and Hispanics—are being killed at abnormally high rates compared to the populations of other rich countries.

And the serial killer? Case and Deaton have a much more difficult time working in this area. That’s because they follow the headlines and emphasize the differences in the long-term trend rates and lose sight of the larger picture. So, they discount the role played by income inequality and, instead, endorse Charles Murray’s story about the decline in traditional American virtues among working-class whites (which I wrote about back in 2012).

The fact is, the labor-market factors identified by Case and Deaton—which have negatively affected whites, blacks, and Hispanics with a high-school degree or less—have become more severe as inequality has soared and the social safety net ripped apart in the United States from the early 1970s onward. The upward trend for whites and the narrowing of the racial gap, as significant as they are, shouldn’t hide from view the more general problem (as I wrote about in 2015) of a large and growing gap between the life expectancies (for both men and women) of those at the top and bottom of the distribution of income in the United States.

American TV is currently captivating viewers with stories of people accused of committing horrific acts. It’s time, however, to focus on the story of an economic system that has created its own killing fields.

 

*Mortality increases for whites in midlife have also been paralleled by morbidity increases, including deteriorations in self-reported physical and mental health, and rising reports of chronic pain.