Posts Tagged ‘inequality’

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Trickle-up economics, by any other name. . .

According to a new study of the distributional effects of the Republicans’ American Health Care Act (as introduced on 6 March 2017 and modified on 21 March 2017) by the Urban Institute and Brookings (pdf),

Upper-income families would receive net benefits from the tax and spending changes proposed in the AHCA, and lower-income families would experience net losses. Higher-income families benefit the most from the tax cut, with 70.6 percent of the tax reductions in 2022 received by those with incomes over $200,000 and 46.2 percent of the tax reductions received by those with incomes over $1,000,000. Reductions in federal funding for health benefits would hurt lower-income families the most; families with incomes below $30,000 would sustain more than three-quarters of the losses in benefits. Taking both tax and benefit changes into account, the largest average gains under the AHCA would go to those with the highest incomes ($5,640 on average for those with incomes over $200,000), and the largest average losses from the AHCA would go those with the lowest incomes.

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2o16 will be remembered by many for the troubling signs associated with Brexit and Trump’s victory in the U.S. presidential race.

But, for the world’s billionaires, it was a great year.

According to Forbes [ht: ja],

It was a record year for the richest people on earth, as the number of billionaires jumped 13% to 2,043 from 1,810 last year, the first time ever that Forbes has pinned down more than 2,000 ten-figure-fortunes. Their total net worth rose by 18% to $7.67 trillion, also a record. The change in the number of billionaires — up 233 since the 2016 list — was the biggest in the 31 years that Forbes has been tracking billionaires globally. Gainers since last year’s list outnumbered losers by more than three to one.

Yes, indeed, capitalism has been very, very good to the world’s billionaires.

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But apparently they’re worried, too—albeit for very different reasons. And with very different means at their disposal.

According to CNN [ht: db], many of the world’s billionaires are commissioning secret shelters to house their families and staff.

Gary Lynch, general manager of Texas-based Rising S Company, says 2016 sales for their custom high-end underground bunkers grew 700% compared to 2015, while overall sales have grown 300% since the November US presidential election alone.

The company’s plate steel bunkers, which are designed to last for generations, can hold a minimum of one year’s worth of food per resident and withstand earthquakes.

So, precisely because 2016 was a great year for the world’s billionaires, it looks like 2017 will be highly remunerative for companies that design and build luxurious “doomsday bunkers” to protect the billionaires from the torches and pitchforks wielded by those they’re leaving behind.

We’re #1!

Posted: 20 March 2017 in Uncategorized
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According to calculations by Kenneth Thomas (based on data in the latest Credit Suisse Global Wealth Report), the United States has the most unequal distribution of wealth of any rich nation.

And it’s not even close!

Thomas calculates the ratio of mean to median wealth for each country (the last column in the table above) to devise a measure of wealth inequality.

As you can see, the U.S. inequality ratio is more than 50% higher than #2 Denmark and fully three times as high as the median country on the list, France.

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It is likely, if some version of Trump/Ryancare is approved in the United States, millions more people will not be able to purchase the insurance necessary to receive adequate healthcare.

The problem is, the United States is already an outlier when it comes to the relationship between health expenditures and health outcomes—measured in this case by life expectancy.

As Esteban Ortiz-Ospina and Max Roser explain,

all countries in this graph have followed an upward trajectory (life expectancy increased as health expenditure increased), but the U.S. stands out as an exception following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

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Even more worrisome, higher incomes in the United States are associated with greater longevity, and differences in life expectancy across income groups have increased over time.

As Raj Chetty et al. (pdf) discovered,

Higher income was associated with longer life throughout the income distribution. Men in the bottom 1% of the income distribution at the age of 40 years had an expected age of death of 72.7 years. Men in the top 1% of the income distribution had an expected age of death of 87.3 years, which is 14.6 years (95% CI, 14.4- 14.8 years) longer than those in the bottom 1%. Women in the bottom 1% of the income distribution at the age of 40 years had an expected age of death of 78.8 years. Women in the top 1% had an expected age of death of 88.9 years, which is 10.1 years (95% CI, 9.9-10.3 years) longer than those in the bottom 1%.

As a result, the average life expectancy of the lowest income classes in America is now equal to that in Sudan or Pakistan.

And, with Trump/Ryancare, that class difference in life expectancy is only going to get worse.

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Special mention

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One of the courses I’m offering this semester is A Tale of Two Depressions, cotaught with one of my colleagues, Ben Giamo, from American Studies. It’s a comparison of the conditions and consequences of the two major crises of capitalism during the past hundred years, the 1930s and the period after the crash of 2007-08.*

It just so happens the Guardian is also right now revisiting the 1930s. Readers will find lots of interesting material, from some evocative street photography from the period (including bread lines, hunger marches, and various protests) to classics of political theater (from Bertolt Brecht and Federico García Lorca to John Dos Passos and Clifford Odets).

I’ve been writing about the Second Great Depression, in mostly economic terms, since 2010. For the Guardian, the idea is that the situation then, in the 1930s, offers lessons for us today—partly for economic reasons but, increasingly, given the victory of Donald Trump and the growth of other right-wing populist-nationalist movements in Europe, in political terms.

Larry Elliott focuses on the economics. Unfortunately, he makes the mistake many commit, by starting with the stock-market crash of 1929—which, as it turns out, was the trigger, but not the cause, of the First Great Depression. He does a much better job examining the different responses to the two precipitating crashes (yes, there were lessons were learned, especially in the United States, with the quick bailout of Wall Street), including identifying those who were left out of the post-2009 recovery.

Wage increases have been hard to come by, and the strong desire of governments to reduce budget deficits has resulted in unpopular austerity measures. Not all the lessons of the 1930s have been well learned , and the over-hasty tightening of fiscal policy has slowed growth and caused political alienation among those who feel they are being punished for a crisis they did not create, while the real villains get away scot-free . A familiar refrain in both the referendum on Brexit and the 2016 US presidential election was: there might be a recovery going on, but it’s not happening around here. . .

The winners from the liberal economic system that emerged at the end of the cold war have, like their forebears in the 20s, failed to look out for the losers. A rising tide has not lifted all boats, and those who do not consider themselves the beneficiaries of globalisation have grown weary of hearing how marvellous it is.

The 30s are proof that nothing in economics is inevitable. There was eventually a backlash against the economic orthodoxies and Skidelsky can see why there is another backlash happening today. “Globalisation enables capital to escape national and union control. I am much more sympathetic since the start of the crisis to the Marxist way of analysing things.

And then, of course, there’s the political backlash, the topic of the most recent piece in the series. Jonathan Freedland begins by noting the differences between the two periods: the fact that ultra-nationalist and fascist movements managed to seize power in Germany, Italy, and Spain in the 1930s, which has not (yet) happened in the more recent period. Trump, for example, has criticized the media but has not (yet) closed any sites down. Nor has he suggested Muslims wear identifying symbols.

These are crumbs of comfort; they are not intended to minimise the real danger Trump represents to the fundamental norms that underpin liberal democracy. Rather, the point is that we have not reached the 1930s yet. Those sounding the alarm are suggesting only that we may be travelling in that direction – which is bad enough.

There are other warning signs, which suggest closer parallels between the 1930s and today: the shattering of the faith in globalization’s ability to spread the wealth, the growing hostility to those deemed outsiders, and a growing impatience with the rule of law and with democracy. Then, as now, capitalism faces a profound crisis of legitimacy.

In the end, Freedland takes comfort in our having a memory of the 1930s: “We can learn the period’s lessons and avoid its mistakes.” What he fails to acknowledge, however, is that economic and political elites in the 1930s also had vivid memories—of the great crashes of 1873 and 1893 and, of course, the horrors of the “war to end all wars.” But those events were forgotten amidst more short-run memories, including their joining to put down workers’ actions, including the widespread attacks after the 1926 general strike led by the Trades Union Congress in England and the anti-union “American Plan” during the 1920s on the other side of the Atlantic.

The more or less inevitable result in both countries was growing inequality, as large corporations and a tiny group of wealthy individuals at the top managed to capture a larger and larger share of national income—thus creating a financial bubble that eventually crashed, in 1929 just as in 2007-08.

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The memory of the 1929 crash certainly didn’t prevent the most recent one, nor did it create a recovery that has benefited the majority of the population. In fact, it seems the only lesson learned was how it might be possible, in recent years, for those at the top to recovery more quickly than they managed to do after the First Great Depression what they had lost.

It’s that rush to return to business as usual, characterized by obscene levels of inequality, and not the lack of memory of the 1930s, that has created the conditions for the growth and strengthening of populist, right-wing movements in the United States and Europe.

 

*As is my custom, the syllabus is publicly available on the course web site. Readers might find the large collection of additional materials—music, charts, videos, and so on—of interest. They can be found by following the News link.

March 8, 2017

Special mention

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