Posts Tagged ‘economic representations’

CEO

While Amazon let it slip last week that its Prime program—the annual membership that offers discount pricing and free 2-day shipping—now tops 100 million members, there’s another number people might be curious about: the company’s average annual wage, which Amazon revealed in compliance with a new regulation that asks companies to show a comparison between an average worker’s wage and the salary of their CEO.

Amazon has reported an average compensation for its varied, mostly warehouse (and now, with Whole Foods, grocery store), workers at $28,446 a year. The federal government defines its poverty guideline for a family of four to be $25,100. So, Amazon’s average wage falls easily within 150 percent of the poverty line—and stands at about one-half of the median household income in the United States.

No wonder, then, that Amazon is owned and run by literally the richest man in the world, Jeff Bezos. While he technically “made” only $1.7 million last year, he’s worth $127 billion.* So it means on paper, Bezos makes $59 for every dollar an average employee earns, which is actually a smaller ratio than the average of 271 to 1 for the largest 350 U.S. corporations (pdf).

While Amazon may not have been thrilled by being forced to reveal this not-so-flattering wage comparison, they do have one thing going for them: the only private employer bigger than the e-commerce giant is their retail competitor Walmart, whose workers average only $19,177 per year, putting them far under the federal poverty guidelines. Moreover, the ratio to average-worker pay of Walmart CEO Doug McMillon, who took in $22.8 million last year, was an astounding 1,188 to 1.

And the extraordinary numbers continue, across the economy. Royal Caribbean Cruises: 728-1. Regeneron Pharmaceuticals: 215-1. Netflix: 133-1. Live Nation Entertainment: 2,893-1. Honeywell International: 333-1. Fidelity National Information Services: 654-1. UnitedHealth Group: 298-1. And on and on.

Each such ratio indicates the obscene level of inequality in the United States, based on the amount of surplus pumped out of workers and distributed to those who run American corporations on behalf of their boards of directors.

While the figures of CEO-to-average-worker-pay are being reported in the business press, they have not been widely discussed in the media or by the nation’s politicians. It should come as no surprise, then, that Americans underestimate—by a wide margin—the degree of inequality in the United States.

CEO-worker

In a 2014 study, Sorapop Kiatpongsan and Michael Norton asked about 55,000 people around the globe, including 1,581 participants in the United States, how much money they thought corporate CEOs made compared with unskilled factory workers.** Then they asked how much more pay they thought CEOs should make. American respondents guessed that executives out-earned factory workers roughly 30-to-1—just about what that ratio was in the 1960s and exponentially lower than the actual estimate at the time of 354-to-1. They believed the ideal ratio should be about 7-to-1.

As it turns out, Americans didn’t answer the survey much differently from participants in other countries. Australians believed that roughly 8-to-1 would be a good ratio; the French settled on about 7-to-1; and the Germans settled on around 6-to-1. In every country, the CEO pay-gap ratio was far greater than people assumed. And though they didn’t concur on precisely what would be fair, both conservatives and liberals around the world also concurred that the pay gap should be smaller. People also agreed across income and education levels, as well as across age groups.

Why should this matter?

Because representations of the economy that minimize the existence of inequality or the problems associated with inequality are bound to reinforce the systematic misperceptions found by Norton and others.

That’s exactly what much mainstream economics accomplishes. It deflects attention from the existence of inequality (e.g., by focusing on growth, output, and the price level versus distribution) and from the economic and social problems created by inequality (by attributing the growing gap between the haves and have-nots to forces like globalization and technological change that are beyond our control or invoking more education as the only solution).

Mainstream economics therefore forms part of what others (such as Vladimir Gimpelson and Daniel Treisman) refer to as “ideology,” “which may predispose people to ‘see’ the level of inequality that their beliefs and values convince them must exist.” And the strength of mainstream economics in the United States—in colleges and universities as well as in the media, think tanks, and in government—and around the world is one of the main reasons Americans, like people in other countries, tend not to see the existing degree of inequality.

On the other hand, the ideology of mainstream economics is never complete. That’s why Americans and citizens around the globe do see that the degree of inequality created by existing economic arrangements is fundamentally unfair.

It’s that sense of unfairness, which is only partially masked by mainstream economics, that can serve as the basis for a radical rethinking and reimagining of contemporary economic and social institutions.

 

*Bezos [ht: sm] received a hostile reception from workers when he arrived in Berlin to pick up an innovation award last Tuesday. As Frank Bsirske, the head of the Verdi trade union, explained: “We have a boss who wants to impose American working conditions on the world and take us back to the 19th century.” Meanwhile, back in the United States, Amazon reported that its profits more than doubled to $1.6 billion in the first quarter of 2018, sending shares of its stock soaring to an all-time high.

**This is the second high-profile paper in which Norton discovered that Americans have a notion of economic fairness that is strikingly more equal than the current reality, and more equal even than their own underestimate of the degree of inequality.

“Money Becomes King” is one of those “pithy, hard-headed songs” the late Tom Petty will be remembered for.

Back when I taught Principles of Economics, I started each class with a musical representation of economic ideas, with songs from a wide variety of musicians ranging from John Lee Hooker and Johnny Cash to The Kinks and The Coup—and Petty.

If you reach back in your memory
A little bell might ring
About a time that once existed
When money wasn’t king
If you stretch your imagination
I’ll tell you all a tale
About a time when everything
Wasn’t up for sale

There was this cat named Johnny
Who loved to play and sing
When money wasn’t king.

We’d all get so excited
When John would give a show
We’d raise the cash between us
And down the road we’d go
To hear him play that music
It spoke right to my soul
Every verse a diamond
And every chorus gold

The sound was my salvation
It was only everything
Before money became king.

Well I ain’t sure how it happened
And I don’t know exactly when
But everything got bigger
And the rules began to bend
And the TV taught the people
How to get their hair to shine
And how sweet life can be
If you keep a tight behind

And they raised the cost of living
And how could we have known
They’d double the price of tickets
To go see Johnny’s show?

So we hocked all our possessions
And we sold a little dope
And went off to rock ‘n’ roll.

We arrived there early
In time to see rehearsal
And John came out and lip-synched
His new lite-beer commercial
And as the crowd arrived
As far as I could see
The faces were all different
There was no one there like me

They sat in golden circles
And waiters served them wine
And talked through all the music
And to John paid little mind
And way up in the nosebleeds
We watched upon the screen
They hung between the billboards
So cheaper seats could see

Johnny rocked that golden circle
And all those VIPs
And that music that had freed us
Became a tired routine
And I saw his face in close-up
Tryin’ to give it all he had
Sometimes his eyes betrayed him
You could see that he was sad

And I tried to rock on with him
But I slowly became bored
Could that man on stage with everything
Somehow need some more?

There was no use in pretending
No magic left to hear
All the music gave me
Was a craving for lite-beer
As I walked out of the arena
My ears began to ring
And money became king.

And here’s a performance, albeit unrelated to economic representations, that shouldn’t be missed or forgotten:

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Food production has been a problem throughout the history of American capitalism.

Back in 1906, Upton Sinclair wrote The Jungle to portray the harsh working conditions and exploited lives of immigrants in the United States in Chicago and similar industrializing cities.* However, it seems, many readers were more concerned with his exposure of health violations and unsanitary practices in the American meatpacking industry during the early-twentieth century. Thus, Sinclair quipped: “I aimed at the public’s heart, and by accident I hit it in the stomach.”

A century later, Richard Linklater directed the film Fast Food Nation, which was loosely based on Eric Schlosser’s bestselling 2001 non-fiction book of the same name. Like Sinclair, Linklater focused on the working conditions in the slaughterhouses, to which he added fast-food restaurants—and, like Sinclair, he exposed the role exploited immigrants played in lowering costs and increasing profits in the American food industry.

The farm-to-table movement was supposed to change all that—with happy animals, humane working conditions, and foods sourced from local farmers. However, as Andrea Reusing [ht: db] explains, the authenticity attributed to the preparation and serving of good that is local, organic, and sustainable has increasingly “slipped further away from the food movement and into the realms of foodie-ism and corporate marketing.” Thus

it is increasingly unhitched from the issues it is so often assumed to address.

Farm-to-table’s sincere glow distracts from how the production and processing of even the most pristine ingredients — from field or dock or slaughterhouse to restaurant or school cafeteria — is nearly always configured to rely on cheap labor. Work very often performed by people who are themselves poor and hungry.

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There are, in fact, over 7.5 million food-preparation workers in the United States, who earn less than $10.50 an hour—which comes to less than $21,000 a year. Many of those workers are immigrants, both documented and undocumented.**

Over the course of the past century, we’ve moved from the meatpacking industry to the food-service sector. But the problems identified by Sinclair and Linklater remain: exploited workers and immigrants that are subjected to inhumane treatment during the process of immigration and on the job.

As a chef herself, Reusing follows the lead of Sinclair and Linklater in suggesting that

As chefs, we need to talk more about the economic realities of our kitchens and dining rooms and allow eaters to begin to experience them as we do: imperfect places where abundance and hope exist beside scarcity and compromise. Places that are weakened by the same structural inequality that afflicts every aspect of American life.

 

*Sinclair’s novel was first published in serial form in 1905 in the Socialist newspaper Appeal to Reason and published the next year as a book by Doubleday.

**Overall, according to a report by the Food Chain Workers Alliance and Solidarity Research Cooperative (pdf), the American food system employs over 21.5 million workers, making it the largest source of employment in the United States. Eleven million workers are in the food service sector, comprising more than half of the food chain.

Culture, it seems, is back on the agenda in economics. Thomas Piketty, in Capital in the Twenty-First Century, famously invoked the novels of Honoré de Balzac and Jane Austen because they dramatized the immobility of a nineteenth-century world where inequality guaranteed more inequality (which, of course, is where we’re heading again). Robert J. Shiller, past president of the American Economic Association, focused on “Narrative Economics” in his address at the January 2017 Allied Social Association meetings in Chicago. His basic argument was that popular narratives, “the stories and models people are talking about,” play an important role in economic fluctuations. And just the other day, Gary Saul Morson and Morton Schapiro—professor of the arts and humanities and professor of economics and president of Northwestern University, respectively—economists would benefit greatly if they broadened their focus and practiced “humanonomics.”

Dealing as it does with human beings, economics has much to learn from the humanities. Not only could its models be more realistic and its predictions more accurate, but economic policies could be more effective and more just.

Whether one considers how to foster economic growth in diverse cultures, the moral questions raised when universities pursue self-interest at the expense of their students, or deeply personal issues concerning health care, marriage, and families, economic insights are necessary but insufficient. If those insights are all we consider, policies flounder and people suffer.

In their passion for mathematically-based explanations, economists have a hard time in at least three areas: accounting for culture, using narrative explanation, and addressing ethical issues that cannot be reduced to economic categories alone.

As regular readers of this blog know, I’m all in favor of opening up economics to the humanities and the various artifacts of culture, from popular music to novels. In fact, I’ve been involved in various projects along these lines, including the New Economic Criticism, the postmodern moments of modern economics, and economic representations in both academic and everyday arenas.

And, to their credit, the authors I cite above do attempt to go beyond most of their mainstream colleagues in economics, who treat culture either as a commodity like any other (and therefore subject to the same kind of supply-and-demand analysis) or as a reminder term (e.g., to explain different levels of economic development, when all the usual explanations—based on preferences, technology, and endowments—have failed).

But in their attempt to invoke culture—as illustrative of economic ideas, a factor in determining economic events, or as a way of humanizing economic discourse—they forget one of the key lessons of Raymond Williams: that culture both registers the clashes of interest in society (culture represents, therefore, not just objects but the struggles over meaning within society) and stamps its mark on those interests and clashes (and in this sense is “performative,” since it modifies and changes those meanings).

In fact, that’s the approach I took in my 2014 talk on “Culture Beyond Capitalism” in the opening session of the 18th International Conference on Cultural Economics, sponsored by the Association for Cultural Economics International, at the University of Quebec in Montréal.

As I explained,

The basic idea is that culture offers to us a series of images and stories—audio and visual, printed and painted—that point the way toward alternative ways of thinking about and organizing economic and social life. That give us a glimpse of how things might be different from what they are. Much more so than mainstream academic economics has been interested in or able to do, even after the spectacular debacle of the most recent economic crisis, and even now in the midst of what I have to come the Second Great Depression.

I then went on to discuss a series of cultural artifacts—in music, film, short stories, art, and so on—which give us the sense of how things might be different, of how alternative economic theories and institutions might be imagined and created.

Importantly, economic representations in culture are much wider than the realist fiction to which some mainstream economists have turned. One of the best examples, based on the work of Mark Osteen, concerns the relationship between noncapitalist gift economies and jazz improvisation.* According to Osteen, both jazz and gifts involve their participants in risk; both require elasticity; both are social rituals in which the parties express and recreate identities; both are temporally contingent and dynamic. Each of them invokes reciprocal relations, yet transcends mere balance: each, that is, partakes of excess and surplus. Osteen suggests that jazz—such as John Coltrane’s “Chasin’ the Trane”—may serve as both an example of gift practices and a model for another economy, based on an ethos of improvisation, communalism, and excess.

I wonder if economists such as Piketty, Shiller, Morson, and Schapiro, who suggest we include culture in our economic theorizing, are willing to identify and examine aspects of historical and contemporary culture that point us beyond capitalism.

 

*Mark Osteen, “Jazzing the Gift: Improvisation, Reciprocity, Excess,” Rethinking Marxism 22 (October 2010): 569-80.

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Last year, as I reported the other day, I published over 800 new posts.

I’ve never done this before. However, I decided to look back over the year and choose one post for each month of 2016:

January—Liberal ideology

February—Who are the capitalists?

March—Yea, they’re angry!

April—Life among the liberal econ

May—Letting capitalism off the hook

June—Globalization, inequality, and imperialism

July—Trump and the Prosperity Gospel

August—The Mandibles and dystopian finance fiction

September—What about the white working-class?

October—Nobel economics—or why does capital hire labor?

November—Condition of the working-class in the United States

December—China syndrome

Enjoy!

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“Why does it always have to represent something?”

Special mention

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Mainstream economists, such as Harvard’s Gregory Mankiw, celebrate international trade (including outsourcing, which they argue is just another form of international trade) at every opportunity. But right now, voters—especially in the United States and the United Kingdom—aren’t buying what mainstream economists are selling. They are (as I’ve argued here, here, and here) ignoring the so-called experts.

That rejection clearly disturbs Mankiw, who just adds fuel to the fire by arguing that the more education people acquire the more they will eventually come around to his view. The implication, of course, is that being against free trade is a sign of ignorance.

We all know that Mankiw and his mainstream colleagues have spent an enormous amount of time and effort—in abstract modeling and lending their support to trade agreements, in the classroom, research, and the public arena—extolling the benefits of more international trade.

trade

But it’s clear, not only from the Brexit vote and the rhetoric on both sides of the current U.S. presidential campaigns, but also from a survey earlier this year by Bloomberg, that many people remain opposed to free international trade: 65 percent favor restrictions on imported goods to protect American jobs, 44 percent think NAFTA has been bad for the U.S. economy, and 82 percent are willing to pay more for U.S.-made goods.

Clearly, mainstream economists’ campaign hasn’t worked. So, Mankiw turns to the research of two political scientists, Edward Mansfield and Diana Mutz (pdf and pdf) to find what he wants: anti-trade sentiments are positively correlated with isolationism, nationalism, and ethnocentrism and negatively with level of education. So, in his view,

there is reason for optimism. As society slowly becomes more educated from generation to generation, the general public’s attitudes toward globalization should move toward the experts’.

What I find interesting in Mansfield and Mutz’s research is actually something quite different: people’s attitudes toward international trade (including outsourcing) are not determined by narrow self-interest (such as their job skills or the industry within which they work) but, rather, by the “collective impact that trade policy has on the nation” (what they refer to as a “sociotropic influence,” because of the tendency to rely on collective-level information rather than personal experience).

That result is important because it suggests both mainstream economists and the general public, who may be and often are using very different representations of the economy, have an equally global view of the impact of international trade. Both groups are referring to and forming their judgements based on the nation as a whole. However, while mainstream economists tend to celebrate international trade based on the idea that the nation as a whole benefits (because of the efficient allocation of resources, cheaper imports, and so on), everyday economists may be emphasizing the fact that their nation is internally divided. Thus, in their view, many of their fellow citizens have been negatively affected by international trade and the only real beneficiaries are their employers. So, they continue to be critical of free trade and international trade agreements (such as NAFTA and the Trans-Pacific Partnership).

As I see it, more education won’t eliminate that critical view—as long as trade agreements are enacted within a profoundly unequal society and workers have no say in designing the policies that govern international trade.