Disappearing poverty

Toym Imao, “Desaparecidos (Memorializing Absence, Remembering the Disappeared)” (2015)*

In international human rights law, a “forced disappearance” occurs when a person is secretly abducted or imprisoned by a state or political organization (or by a third party with the authorization, support, or acquiescence of a state or political organization), followed by a refusal to acknowledge the person’s fate and whereabouts, with the intent of placing the victim outside the protection of the law.

The most infamous forced disappearances have occurred in Spain (during and after the Civil War), Chile (after the coup by General Pinochet in 1973), Argentina (during the so-called Dirty War from 1976 to 1983), and the United States (as part of the so-called War on Terror).

Now, Donald Trump’s Council of Economic Advisers (pdf) is attempting to carry out a forced disappearance of poverty.**

The aim of the Council’s report is to make the case for “expanding work requirements among non-disabled working-age adults in social welfare programs.”*** In order to do so, the authors of the report attempt to show that (1) there is a large pool of non-disabled  working-age adults who are currently beneficiaries of the three major non-cash welfare programs (Medicaid, food stamps or the Supplemental Nutrition Assistance Program, and housing assistance) who can and should be put to work, (2) independence or self-sufficiency is undermined by participation in government anti-poverty programs, and (3) government assistance to the poor has become outmoded because poverty itself has virtually disappeared in the United States.

We’ve seen all these moves before. As Jim Tankersley and Margot Sanger-Katz explain, the numbers of adults who are beneficiaries of welfare programs but not working are likely exaggerated. For example:

The Center on Budget and Policy Priorities calculated this year that three-quarters of food stamp recipients work within a year of participating in the program. That report suggests that Americans often use assistance programs as bridges to a new job, after they have lost previous employment.

The administration’s numbers may be particularly exaggerated for Medicaid. Under the Affordable Care Act, many states expanded their Medicaid program in 2014 to include more childless adults whose incomes bring them close to the poverty line. But the report examines adults who were enrolled in Medicaid in 2013, before the expansion, when most adults who were signed up were either pregnant women, the parents of young children or adults with extremely low incomes.

According to the council, about 53 percent of adult, non-disabled Medicaid beneficiaries worked less than 20 hours a week. Using a different set of government data from 2017, the Kaiser Family Foundation estimated that 62 percent of such people had full- or part-time jobs. Another 18 percent lived in a household with another working adult. Council officials say the data set they drew upon, while older, is a better measure than the one Kaiser used.

Then there’s the argument about the extent of poverty in the United States. While the government itself reports that poverty is still a large and persistent problem within the United States (since according to the official definition the poverty rate in 2016 was 12.7 percent, and the rate according to the Supplemental measure was 14 percent), the Council chooses to redefine poverty in terms of consumption (based on the work of, among others, Bruce D. Meyer and James X. Sullivan).

And, voilà, poverty is disappeared!****

Finally, they invoke the shibboleth that expanded work requirements respect and reinforce “independence” and the “dignity of work.”

Back in 2012, I suggested we need to contest the meaning of dependence:

In particular, why is selling one’s ability to work for a wage or salary any less a form of dependence than receiving some form of government assistance? It certainly is a different kind of dependence—on employers rather than on one’s fellow citizens—and probably a form of dependence that is more arbitrary and capricious—since employers have the freedom to hire people when and where they want, while government assistance is governed by clear rules.

We can also deconstruct the term by turning it around: why is receiving non-cash benefits from the government a form of dependence but cash distributions of the surplus—to large corporations and wealthy individuals—supported by a wide variety of government programs, is not?

As for the so-called dignity of work, I can only repeat what I wrote just a couple of years ago: what advocates of getting people back to work

choose to overlook or ignore is that, in a world in which the majority of people are forced to have the freedom to sell their ability to work to someone else—in which, in short, labor power is a commodity—there’s no necessary honor or dignity in work. It’s a necessity, born of the fact that people need to earn an income to purchase commodities to sustain themselves and to pay off their debts. And the most likely way to earn that income is to sell their ability to work to a small number of other people, their employers, who in turn get to appropriate and do what they will with the profits.

As I see it, the attempt to disappear poverty is actually a thinly disguised effort to discipline and punish the poor and to convert everyone—poor and non-poor workers alike—into a giant machine for producing surplus for the benefit of a tiny group of employers and wealthy individuals.

Perhaps we need to follow the example of the mothers of Argentina’s “desaparecidos,” who 40 years later are challenging the government’s attempt to erase the memory of those terrible years and put the brakes on the continuation of trials. In the case of the poor working-class today in the United States, we need to make sure they and their deteriorating conditions of life are not disappeared and that a real anti-poverty program—a radical change in economic institutions—is enacted.

 

*The forty-three figures in the art installation by Toym Imao represent those left behind by victims of forced disappearance. Empty and hollow, each figure represents a year since Martial Law was declared in the Philippines. Instead of portraits and picture frames, the figures hold empty niches, signifying death, the lack of closure, the emptiness, the hollow feeling, and the gut-wrenching pain those left behind must deal with.

Absence remains an open wound. But despite it, the desaparecidos remain present in our hearts and minds. Despite efforts to eradicate their existence, they will never be forgotten.

**Kevin Hassett (Chair, from the American Enterprise Institute, who was appointed by Trump and approved by the Senate in a 81–16 vote on 12 September 2017), as well as Tomas Philipson and Richard Burkhauser (both appointed by Trump), are the members of the current Council of Economic Advisers.

***Kentucky Governor Matt Bevin offered up his state to approve work requirements for Medicaid benefits. Once Federal Judge James E. Boasberg rejected the Department of Health and Human Services’ approval of Kentucky’s plan, Bevin announced that he would deprive Medicaid patients of dental and vision benefits, effective immediately. The Trump administration has just revived its efforts to let et Kentucky compel hundreds of thousands of poor residents to work or prepare for jobs to qualify for Medicaid.

****This comes just after the United Nations Human Rights Council published the report by Philip Alston, its Special Rapporteur on extreme poverty and human rights, according to whom

The United States is a land of stark contrasts. It is one of the world’s wealthiest societies, a global leader in many areas, and a land of unsurpassed technological and other forms of innovation. Its corporations are global trendsetters, its civil society is vibrant and sophisticated and its higher education system leads the world. But its immense wealth and expertise stand in shocking contrast with the conditions in which vast numbers of its citizens live.

Hundred years of empire

Just a few years ago, students at Oberlin College protested the college’s decision to fund a talk by Jeffrey Sachs, whom they considered to be a “neoliberal imperialist liar.”

As regular readers of this blog know, I am quite sympathetic with the Oberlin students’ concerns. I have called Sachs to task on many occasions (e.g., here, here, and generally here).

But it’s also true Sachs is changing his tune, at least on some issues. Here he [ht: ja] is on interventions by the United States in the Middle East:

It’s time to end US military engagements in the Middle East. Drones, special operations, CIA arms supplies, military advisers, aerial bombings — the whole nine yards. Over and done with. That might seem impossible in the face of ISIS, terrorism, Iranian ballistic missiles, and other US security interests, but a military withdrawal from the Middle East is by far the safest path for the United States and the region.

And then Sachs ups the ante: “America has been no different from other imperial powers in finding itself ensnared repeatedly in costly, bloody, and eventually futile overseas wars.”

That’s right: Sachs is accusing the United States of acting today as an imperial power—in a long line beginning with the Romans and continuing in modern times with the British, the French, and the United States itself in previous periods, from Puerto Rico, Cuba, and the Philippines through Vietnam and increasingly in the Middle East. In fact, in all these cases, the United States took up the preceding wars of other imperial powers, including Spain, Britain, and France, thereby extending imperial adventures that have been “both futile and self-destructive.”

Sachs is led therefore to conclude,

The United States should immediately end its fighting in the Middle East and turn to UN-based diplomacy for real solutions and security. The Turks, Arabs, and Persians have lived together as organized states for around 2,500 years. The United States has meddled unsuccessfully in the region for 65 years. It’s time to let the locals sort out their problems, supported by the good offices of the United Nations, including peacekeeping and peace-building efforts. Just recently, the Arabs once again wisely and rightly reiterated their support for a two-state solution between Israelis and Palestinians if Israel withdraws from the conquered territories. This gives added reason to back diplomacy, not war.

We are at the 100th anniversary of British and French imperial rule in the Mideast. The United States has unwisely prolonged the misery and blunders. One hundred years is enough.

I can only agree.

Even more: give Sachs another decade or two and he might actually become a Marxist.

Socialism is obvious

British Labor leader Jeremy Corbyn considers socialism—which he defines as “You care for each other, you care for everybody, and everybody cares for everybody else”—to be obvious.

As it turns out, socialism is increasingly obvious for folks on this side of the pond, too. Like Bernie Sanders. And Mark Workin and Melissa Young, who made the film Shift Change. And Richard Wolff, through Democracy at Work.

Now they’re joined by Shannon Rieger, a recipient of the Janice Nittoli “Forward Thinking” Award from The Century Fund.

Rieger’s argument is that, in the face of growing inequality (such that “the top 1 percent wage has increased by 138 percent since 1979, [while] the wages of the entire bottom 90 percent of earners have grown by the comparatively meager margin of just 15 percent—and an even more unequal distribution of wealth”), it’s imperative that the United States “develop policies that not only mitigate existing economic inequality and poverty, but that actually reverse these trends for the long term.”

And her proposed solution? Enterprises that are owned and managed by their employees.

By creating a policy environment to support and promote democratic employee-owned businesses, the United States could promote a more equitable employment system and a more just distribution of wealth. Doing so would not only help the country recover from the recent economic devastation of the Great Recession, but also begin to reverse the deep wealth and income disparities that have plagued American workers and families for decades.

Worker-owned cooperatives (which, across the world, employ more than 250 million people, and in 2013, generated $2.95 trillion in turnover) are a particular form of democratic employee-owned business that Rieger considers to have particularly rich potential in the United States.

But they need support, to “help grow the sector to scale.” So, as Rieger explains,

it is crucial that the United States establish a national-level regulatory framework for worker-cooperatives. Foundational components of such a framework could include a clear, universal definition for worker-cooperatives and a national worker-cooperative incorporation code; financial support mechanisms, such as a dedicated worker-ownership fund; and cross-sector partnerships with the existing decentralized network of employee ownership service providers.

Using examples from around the world (including the Marcora Law in Italy) Rieger makes the obvious case for the growth of democratic worker-owned enterprises in the United States.*

Worker-owned enterprises, as a key feature of a socialist transition from capitalism, are certainly obvious to me.

 

*The Marcora Law, which was passed in 1985, offers Italian workers an array of financial support options and a “right of first refusal” opportunity to purchase and re-launch troubled businesses as worker-cooperatives. As Rieger explains,

a U.S. worker-buyout policy modeled after the Marcora Law should become a component of federal-level policy framework for worker-cooperatives. By creating federal legislation that recognizes the worker-owned cooperative business as a distinct form of democratic employee-ownership, and that aligns existing state-level incorporation codes and the worker-ownership service provider network under universal regulatory guidelines, the United States could make a meaningful, effective commitment to expanding the democratic worker-ownership sector.

Protest of the day

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For more than a week, vast nocturnal protest gatherings that are rising in number—from parents with babies to students, workers, artists, and pensioners—have spread across France [ht: jf] in a citizen-led movement that has rattled the government.

Called Nuit debout, which loosely means “rise up at night”, the protest movement is increasingly being likened to the Occupy initiative that mobilised hundreds of thousands of people in 2011 or Spain’s Indignados.

Despite France’s long history of youth protest movements – from May 1968 to vast rallies against pension changes – Nuit debout, which has spread to cities such as Toulouse, Lyon and Nantes and even over the border to Brussels, is seen as a new phenomenon.

It began on 31 March with a night-time sit-in in Paris after the latest street demonstrations by students and unions critical of President François Hollande’s proposed changes to labour laws. But the movement and its radical nocturnal action had been dreamed up months earlier at a Paris meeting of leftwing activists. . .

The idea emerged among activists linked to a leftwing revue and the team behind the hit documentary film Merci Patron!, which depicts a couple taking on France’s richest man, billionaire Bernard Arnault. But the movement gained its own momentum – not just because of the labour protests or in solidarity with theFrench Goodyear tyre plant workers who kidnapped their bosses in 2014. It has expanded to address a host of different grievances, including the state of emergency and security crackdown in response to last year’s terrorist attacks.

Country on the verge of an economic breakdown

According to those in charge, Spaniards should have been thrilled. After years of stagnation, the country has in fact been growing.

For example, earlier this year, IMF Chief Economist Olivier Blanchard admired the country’s “virtuous cycle”of confidence, investment, and consumption. For his part, German Finance Minister Wolfgang Schäuble applauded Spain’s “far-reaching reforms” as the reason for one of the highest growth rates in Europe. Meanwhile, the government of Prime Minister Mariano Rajoy was preening: “The contrast in growth is the result of this government’s economic policies. Spain is now a role model,” Economy Minister Luis de Guindos said in April.

Yet, Pedro Almodóvar’s country is actually on the verge of an economic breakdown—which is why the two ruling parties lost so badly in yesterday’s election.

Just as in the United States, the economic recovery in Spain has been fundamentally lopsided, with a tiny minority at the top benefiting from government-imposed austerity policies and everyone else falling further and further behind.

As Tyler Durden recently explained,

Amid all the singing and dancing over Spain’s miraculous recovery and Europe’s renaissance on the back of Draghi’s money-printing machine, it appears – just like in America – that below the glossy veneer of engineered equity and bond prices, all is not well. . .the average wage in Spain has fallen to its lowest level since 2007, according to figures released by the Spanish Ministry of Finance, and after peaking at 19.3 million in 2009, the number of workers is also collapsing. . .

The ministry says the fall was not so much due to salaries being lowered for people at work, but that newly created jobs now offer much lower pay than before the crisis.

However, the crisis has no effect on Spain’s biggest earners as those who earn 10 times the minimum wage saw their salaries continue to grow. The 127,706 people fell in this category earn an average of 148,824 euros in 2014.

The reason for those declining wages and employment is, of course, that unemployment rates—for all workers (25.1 percent, as a three-year average) and, especially, for young workers (53.2 percent, even higher than in Greece)—still remain extremely high.

source

For years now, the country governed by, first, the Socialist Party and, then, the Popular Party, has been on the verge of an economic breakdown.

And, yesterday, Spaniards responded that the two ruling parties and their European supporters had their chance and squandered it. There was still time last year, earlier this year, even in recent months. “But now it’s too late.”

Cartoon of the day

Special mention

 

#ThisIsACoup

The details of the agreement between Greece and its European creditors are now available. And there’s no doubt about it: this (as the top-trending Twitter hash tag puts it) is a coup. Greece has been forced to surrender (or, given the upcoming debate in parliament, to have the freedom to consider surrendering) a large part of its national sovereignty in exchange for a new European Stability Mechanism program bailout.

Alexis Tsipras [ht: sk] may or may not be a hero, “who fought like a lion against unfathomably large interests” and made it possible for Greece “to live to fight another day.” But that’s really beside the point. So, in the end, is Greek sovereignty—and, for that matter, the humiliating terms sponsored by Germany.

Because what we’re really witnessing is a coup in Europe as a whole. Merkel, Tsipras, Schäuble, and the rest are just the dramatis personae of a series of events that have turned the European project against its own people.

The dream, of course, was to expand democracy, eliminate national rivalries, and promote universal prosperity. But now the European project has become a nightmare of enforcing the conditions of creating and capturing profits—of large enterprises and banks—across an entire continent. And anything that gets in the way—whether existing pensions and state-owned enterprises or rehiring doctors, nurses, and cleaning women—will be sacrificed on the altar of those free-flowing profits.

And who are the losers? The hundreds of millions of workers, farmers, students, young people, and children who are being forced to endure extraordinary levels of unemployment, poverty, and economic insecurity in order to promote a post-2008 recovery that is benefiting only a tiny minority across the continent. And that’s just as true in Germany as in Greece, in England as in Spain. Not to the same degree, of course. But the current negotiations over Greek debt—in which all of their leaders and finance ministers have participated and to which they have given their assent—have demonstrated to the working people of Europe that nothing will be allowed to stand in the way of the interests of the free deployment of capital under conditions that are administered by the troika.

And if an entire nation has to be humiliated in order to serve as an example, so be it. . .

Cartoon of the day

Special mention

 

Cartoon of the day

Special mention

 

It’s the class conflict, stupid!

Most of the commentary on the ongoing euro crisis, especially the current Greek debt negotiations, has been couched in terms of a conflict between nations. This is particularly true of mainstream economists, whose nation-state-based models downplay or ignore class, even as the policies they advocate have tremendous class implications.

So, it’s fallen to—however ironically—financial strategist and professor of finance Michael Pettis to remind us the current conflict is not between nations, but between classes.

The whole piece, beginning with the French indemnity of 1871-73, is worth a careful read. But I want to focus here on what Pettis writes about the class conditions that led to and follow on from the current crisis.

First, Pettis makes the important point that the capital flows from north to south within the euro zone were based on important class changes within Germany (he uses his native Spain throughout as his example in the south but most of his analysis follows for Greece and other countries):

It was not the German people who lent money to the Spanish people. The policies implemented by Berlin that resulted in the huge swing in Germany’s current account from deficit in the 1990s to surplus in the 2000s were imposed at a cost to German workers, and have been at least partly responsible for Germany’s extremely low productivity growth — most of Germany’s growth before the crisis can be explained by the change in its current account — rather than by rising productivity.

Moreover because German capital flows to Spain ensured that Spanish inflation exceeded German inflation, lending rates that may have been “reasonable” in Germany were extremely low in Spain, perhaps even negative in real terms. With German, Spanish, and other banks offering nearly unlimited amounts of extremely cheap credit to all takers in Spain, the fact that some of these borrowers were terribly irresponsible was not a Spanish “choice.” I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other.

This is a  conflict among economic groups, in other words, and not a national conflict, although it is increasingly hard to prevent it from becoming a national conflict.

Here, we can see that, while relative productivity in Germany was pretty constant, relative real wages were falling and corporate profits (in absolute terms) rose dramatically in the run-up to the crash of 2008:

In other words, German banks managed to capture a large portion of the growing surplus created by German workers and, instead of seeing it invested domestically, lent it abroad (to a broad array of Spanish, Greek and other borrowers)—which was the flip side of Germany’s positive current account balance (since German capitalists, benefiting from lower unit labor costs, could easily outcompete potential exporters in the European south, while German demand for European goods dropped as wages fell).

Pettis’s second point is that countries don’t lend or borrow; different classes within countries create the conditions for and engage in large-scale capital flows between countries.

But didn’t Spain have a choice? After all it seems that Spain could have refused to accept the cheap credit, and so would not have suffered from speculative market excesses, poor investment, and the collapse in the savings rate. This might be true, of course, if there were such a decision-maker as “Spain”. There wasn’t. As long as a country has a large number of individuals, households, and business entities, it does not require uniform irresponsibility, or even majority irresponsibility, for the economy to misuse unlimited credit at excessively low interest rates. Every country under those conditions has done the same. . .

And this is a point that’s often missed in the popular debate. Over and over we hear — often, ironically, from those most committed to the idea of a Europe that transcends national boundaries — that Spain must bear responsibility for its actions and must repay what it owes to Germany. But there is no “Spain” and there is no “Germany” in this story. At the turn of the century Berlin, with the agreement of businesses and labor unions, put into place agreements to restrain wage growth relative to GDP growth. By holding back consumption, those policies forced up German savings rate. Because Germany was unable to invest these savings domestically, and in fact even lowered its investment rate, German banks exported the excess of savings over investment abroad to countries like Spain. . .

Above all this is not a story about nations. Before the crisis German workers were forced to pay to inflate the Spanish bubble by accepting very low wage growth, even as the European economy boomed. After the crisis Spanish workers were forced to absorb the cost of deflating the bubble in the form of soaring unemployment. But the story doesn’t end there. Before the crisis, German and Spanish lenders eagerly sought out Spanish borrowers and offered them unlimited amounts of extremely cheap loans — somewhere in the fine print I suppose the lenders suggested that it would be better if these loans were used to fund only highly productive investments.

But many of them didn’t, and because they didn’t, German and Spanish banks — mainly the German banks who originally exported excess German savings — must take very large losses as these foolish investments, funded by foolish loans, fail to generate the necessary returns. It is no great secret that banking systems resolve losses with the cooperation of their governments by passing them on to middle class savers, either directly, in the form of failed deposits or higher taxes, or indirectly, in the form of financial repression. Both German and Spanish banks must be recapitalized in order that they can eventually recognize the inevitable losses, and this means either many years of artificially boosted profits on the back of middle class savers, or the direct transfer of losses onto the government balance sheets, with German and Spanish household taxpayers covering the debt repayments.

Finally, Pettis reminds us that the winners and losers in the current crisis are not nations but classes within nations.

The “losers” in this system have been German and Spanish workers, until now, and German and Spanish middle class savers and taxpayers in the future as European banks are directly or indirectly bailed out. The winners have been banks, owners of assets, and business owners, mainly in Germany, whose profits were much higher during the last decade than they could possibly have been otherwise.

In fact, the current European crisis is boringly similar to nearly every currency and sovereign debt crisis in modern history, in that it pits the interests of workers and small producers against the interests of bankers. The former want higher wages and rapid economic growth. The latter want to protect the value of the currency and the sanctity of debt.

The lesson, as I see it, is that focusing on the conflict between nations, and ignoring the conflict between classes, only serves to postpone a resolution of the crisis and to invigorate right-wing nationalist sentiments across Europe. It also means that, even if and when the debt crisis is resolved (for example, by revising the terms of debt repayment for Greece, Spain, and other countries), the problem of class conflict within the existing system—in both the north and the south—will still have to be addressed.