Posts Tagged ‘economy’

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“Formal” freedom is the freedom of choice WITHIN the coordinates of the existing power relations, while “actual” freedom designates the site of an intervention which undermines these very coordinates.

— Slavoj Žižek, On Belief

The novel coronavirus pandemic has demonstrated how shallow and restricted the notion of formal freedom is in the United States.

After years of pretending that private healthcare and health insurance expanded the freedom of individual choice, even with the changes introduced by Obamacare, the existing health system has failed to protect most Americans from the ravages of the disease. Right now, with over 2 million confirmed cases and over 100 thousand deaths, the United States has over one quarter of the world’s cases and fatalities. And the numbers continue to rise in many states, with the forced reopening of businesses.

Yes, in recent years, Americans have been able to choose to work at a job and use their employer-provided health benefits or to purchase health insurance on state exchanges, thereby dramatically lowering the number of uninsured people. But they haven’t been able to choose what kind of health system they want, how they want their healthcare to be provided. As a result, the existing—understaffed and underfunded—public health system, in the midst of an obscenely unequal economy and society, has been unable to effectively confront the spread of COVID-19.

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It’s that same formal freedom that allows investors to purchase stocks, including equity shares in Hertz, which just happens to have entered bankruptcy protection in late May. Between the 3 and 8 June, Hertz’s stock exploded in price. During that week, it increased to $5.53 per share, from 82 cents, a preposterous rise of nearly seven times—apparently just one example of a more general “flight to crap” in U.S. stock markets. And just to highlight the absurdity of what freedom means in the United States, the nation’s second-largest car-rental agency filed with the Securities and Exchange commission to sell up to $500 million worth of new shares—shares that would likely be rendered worthless after creditors are paid off—in a move that was approved by the federal judge in Delaware overseeing the Hertz bankruptcy case. (And then, just yesterday, Hertz reversed course and decided to pull the plug on the deal.)

And it’s the freedom aircraft manufacturer Boeing relied on in late April to raise $25 billion by selling bonds to investors, to avoid taking aid from the federal government, and then a month later to fire 6,770 workers (part of its plan to reduce a total of 16 thousand jobs).

Meanwhile, employers and the White House (including Labor Secretary Eugene Scalia) are clamoring for businesses to be allowed the freedom to reopen. But they’re worried unemployed workers, who have received supplemental benefits as a result of the CARES act, will not want to return to work under with the risk of becoming infected with the virus. So, they’ve announced both that the extra $600 “disincentive” for people to return to work will be allowed to expire at the end of July and that any workers who refuse to be called back to work will lose their unemployment payments.

Clearly, employers’ freedom to reopen their businesses is coming at the expense of workers’ freedom to stay home during the pandemic. And that’s the limit of formal freedom under capitalism—the kind of fundamental clash during which it is possible to begin to exercise an actual freedom of reimagining and reinventing the rules of economic and social organization.

Thus far, however, we haven’t seen much in the way of actual freedom in the economic sphere. Massive unemployment, and therefore the unremitting pressure on all workers, both those with jobs and those without, will do that. But we might just be witnessing such a site in the other fundamental clash currently taking place, the one that arose in response to the recent murders of George FloydAhmaud Arbery, and Breonna Taylor.

The first demand of the Black Lives Matter movement is, of course, freedom from police violence. It’s a freedom enumerated in the Constitution (in the Fourteenth Amendment) but undermined and subverted by the systemic racism that historically and still today has haunted the administration of justice in the United States—by both the police and the courts.

The pandemic has also highlighted—and further exacerbated—the obscene racial inequalities that characterize the American economy and society. For example, black Americans are dying from Covid-19 at three times the rate of white people. And while unemployment has skyrocketed for black and white workers in the COVID-19 labor market, the unemployment rate is much higher for black workers, which has in turn worsened the already-high income and benefits gaps between white and black workers.

As it turns out, the Black Lives Matter movement was already, back in 2016, thinking beyond police violence. As Robin G. D. Kelley explained, the organization is invested in a structural overhaul of the American system that oppresses most people. Its demands therefore include

ending all forms of violence and injustice endured by black people; redirecting resources from prisons and the military to education, health, and safety; creating a just, democratically controlled economy; and securing black political power within a genuinely inclusive democracy.

That’s more than a laundry list of demands or a simple political platform (like those of the Democratic and Republican parties). It’s a vision of economic and social transformation that will produce deep structural changes—for black communities and for all Americans. In other words, it aspires to an enactment of actual freedom that questions the existing coordinates of power relations in the United States (and around the world).

The Black Lives Matter movement infuses the current protests—indeed, the multiracial national uprising we’re witnessing across the country—with the potential of becoming the most recent in the tradition of real progressive social movements which, as Kelley explained in his 2002 book Freedom Dreams: The Black Radical Imagination,

do not simply produce statistics and narratives of oppression; rather, the best ones do what great poetry always does: transport us to another place, compel us to imagine a new society.

It’s only a possibility, at this stage—the potential of moving beyond a formal freedom from fear to an actual freedom of redrawing the existing boundaries of the economy and society, by generating radically new questions, theories, and knowledges. It’s a freedom that can only be produced by a combination of ruthless critical thinking and collective political activity.

It’s a freedom that allows us—indeed, compels us—to imagine a new society.

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There are lies, there are outrageous lies, and there are statistics.

— Robert Giffen, Economic Journal (1892)

Are U.S. unemployment numbers rigged? Sure, they are!

They’re not rigged in the way Paul Krugman implied last Friday (“This being the Trump era, you can’t completely discount the possibility that they’ve gotten to the BLS”). Or in the way former General Electric CEO Jack Welch suggested back in 2012 (when he asserted that the Obama White House had manipulated the job figures for political gains). Or in the way Donald Trump used to say the unemployment rate was “phony” (“The number is probably 28, 29, as high as 35 [percent]. In fact, I even heard recently 42 percent.”) until, of course, he became president and declared the rising jobs numbers a “blowout” (even though he and his economic advisers used some questionable math) and, most recently, the falling unemployment rate a “great day” (for George Floyd, whom Trump said was “looking down right now and saying this is a great thing that’s happening for our country,” and “for everybody”).

No, the jobs numbers are not manipulated in those ways. They’re rigged—in my view, much more seriously—in terms of the ways the various categories are defined and measured and the manner in which the data are collected. And, of course, the ways values are imputed to the rising and falling numbers.

Let’s start with the last point: why should we believe, as most news outlets and Trump himself proclaimed (including FiveThirtyEight, which declared it “shockingly good”), that the much-publicized recent fall in the official unemployment rate (from 14.7 percent in April to 13.3 percent in May) is a good thing? We’re still in the midst of the COVID-19 pandemic, when workers should be paid to stay home. Instead, they’re being forced to have the freedom to return to selling their ability to work—because their employers want to make profits by hiring them and workers themselves are finding it difficult to get by on unemployment benefits (when, that is, they’ve been able to obtain them). Why is that something we should applaud?

Moreover, even according to the unadjusted numbers, there were still 21 million unemployed American workers in May. Let’s remember that, at the worst point of the Second Great Depression (in October 2009), the highest unemployment rate was 10 percent and the largest number of unemployed workers was 15.4 million.

As for the rest, the first sign there may be a problem with the unemployment numbers is the admission, in the text of the official report from the Bureau of Labor Statistics, that many workers may have been misclassified. Workers who were “employed but absent from work” were supposed to be counted as “unemployed on temporary layoff” but many, it seems, were not.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis).

Fixing that error would raise the official unemployment rate in May to 16.3 percent.

Now, let’s consider what the official statistics mean and don’t mean. This is an exercise I used to do with all of my students, most of whom had no idea how the unemployment numbers were defined and calculated, even after taking many mainstream economics courses.

The official or headline unemployment rate is actually one of 6 rates reported by the Bureau of Labor Statistics, referred to as U-3. To be counted as unemployed according to the U-3 rate, a worker has to (a) have had a job, (b) been laid off from a job, and (c) be actively looking for a new job. (In addition, they’re not counted if they’re in the armed forces, in prison, or undocumented.)

The rates and total numbers of officially unemployed workers, from January 2007 to May 2020, are illustrated in the two charts below.

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So, who is not included in these numbers? The headline unemployment rate doesn’t include workers (such as high school and college graduates) who are looking for their first jobs. It doesn’t include workers who are involuntarily working at part-time jobs (working any number of hours, including 1 hour a week, counts as “employed”). And it doesn’t include workers who want a job but are “discouraged” and therefore have given up actively looking for a job.

The so-called U-6 rate includes two of those groups, in addition to the unemployed workers that form the U-3 rate: workers who are employed part-time for “economic reasons” and workers who are considered “marginally attached” to the labor force.

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As readers can see, the U-6 rate (the green line in the chart above) is always much higher than the U-3 rate (the blue line). In May, it was 21.2 percent, compared to the rate of 13.3 percent that was widely reported in news outlets.

And then there’s the group of 4.8 million workers who were considered misclassified in the most report. Add them all together and the United States actually had a total of 45.4 million workers who were either unemployed or underemployed in May. That’s exactly one-third the size of the entire employed population in the United States.

But that U-6 plus misclassified total still doesn’t adequately capture the dire straits of American workers. In addition to first-time job-seekers who have unable to find a job (some unknown portion of an estimated 3.8 million high-school graduates, 1 million who graduated with associate’s degrees, and 2 million with bachelor’s degrees), it doesn’t include any of the estimated 8 million undocumented workers who have lost their jobs.

The only conclusion is that the official unemployment figures are in fact rigged—not by any particular malfeasance or corrupt intervention into the Bureau of Labor Statistics, but by the way the unemployed are defined, measured, and counted. The reserve army of unemployed and underemployed workers is actually much larger than the figures cited by the White House and widely reported in news outlets.

In the end, what matters for American workers is less that the statistics are biased. It’s more that the prevailing economic institutions in the United States—which use and abuse them as wage-slaves, no more so than during the current pandemic—are rigged against them.

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