Posts Tagged ‘trust’

Alston

Last month, Philip Alston, the United Nations Special Rapporteur on extreme poverty and human rights (whose important work I have written about before), issued a tweet about the new poverty and healthcare numbers in the United States along with a challenge to the administration of Donald Trump (which in June decided to voluntarily remove itself from membership in the United Nations Human Rights Council after Alston issued a report on his 2017 mission to the United States).

The numbers for 2017 are indeed stupefying: more than 45 million Americans (13.9 percent of the population) were poor (according to the Supplemental Poverty Measure*), while 28.5 million (or 8.8 percent) did not have health insurance at any point during the year.

But the situation in the United States is even worse than widespread poverty and lack of access to decent healthcare. It’s high economic inequality, which according to a new report in Scientific American “negatively impacts nearly every aspect of human well-being—as well as the health of the biosphere.”

As Robert Sapolsky (unfortunately behind a paywall) explains, every step down the socioeconomic ladder, starting at the very top, is associated with worse health. Part of the problem, not surprisingly, stems from health risks (such as smoking and alcohol consumption) and protective factors (like health insurance and health-club memberships). But that’s only part of the explanation. But that’s only part of the explanation. The rest has to do with the “stressful psychosocial consequences” of low socioeconomic status.

while poverty is bad for your health, poverty amid plenty—inequality—can be worse by just about any measure: infant mortality, overall life expectancy, obesity, murder rates, and more. Health is particularly corroded by your nose constantly being rubbed in what you do not have.

It’s not only bodies that suffer from inequality. The natural environment, too, is negatively affected by the large and growing gap between the tiny group at the top and everyone else. According to James Boyce (also behind a paywall), more inequality leads to more environmental degradation—because the people who benefit from using or abusing the environment are economically and politically more powerful than those who are harmed. Moreover, those at the bottom—with less economic and political power—end up “bearing a disproportionate share of the environmental injury.”

Social and institutional trust, too, decline with growing inequality. And, as Bo Rothstein explains, societies like that of the United States can get trapped in a “feedback loop of corruption, distrust and inequality.”

Voters may realize they would benefit from policies that reduce inequality, but their distrust of one another and of their institutions prevents the political system from acting in the way they would prefer.

But what are the economics behind the kind of degrading and destructive inequality we’ve been witnessing in the United States in recent decades? For that, Scientific American turned to Nobel laureate Joseph Stiglitz for an explanation. Readers of this blog will be on familiar ground. As I’ve explained before (e.g., here), Stiglitz criticizes the “fictional narrative” of neoclassical economics, according to which everyone gets what they deserve through markets (which “may at one time have assuaged the guilt of those at the top and persuaded everyone else to accept this sorry state of affairs”), and offers an alternative explanation based on the shift from manufacturing to services (which in his view is a “winner-takes-all system”) and a political rewriting of the rules of economic game (in favor of large corporations, financial institutions, and pharmaceutical companies and against labor). So, for Stiglitz, the science of inequality is based on a set of power-related “market imperfections” that permit those at the top to engage in extracting rents (that is, in withdrawing “income from the national pie that is incommensurate with societal contribution”).

The major problem with Stiglitz’s “science” of economic inequality is that he fails to account for how the United States underwent a transition from less inequality (in the initial postwar period) to growing inequality (since the early 1980s). In order to accomplish that feat, he would need to look elsewhere, to the alternative science of exploitation.

While Stiglitz does mention exploitation at the beginning of his own account (with respect to American slavery), he then drops it from his approach in favor of rent extraction and market imperfections. If he’d followed his initial thrust, he might have been able to explain how—while New Deal reforms and World War II managed to engineer the shift from agriculture to manufacturing, reined in large corporations and Wall Street, and bolstered labor unions—what was kept intact was the ability of capital to appropriate and distribute the surplus produced by workers. Thus, American employers, however regulated, retained both the interest and the means to avoid and attempt to undo those regulations. And eventually they succeeded.

What is missing, then, from Stiglitz’s account is a third possibility, an approach that combines a focus on markets with power, that is, a class analysis of the distribution of income. According to this science of exploitation or class, markets are absolutely central to capitalism—on both the input side (e.g., when workers sell their labor power to capitalists) and the output side (when capitalists sell the finished goods to realize their value and capture profits). But so is power: workers are forced to have the freedom to sell their labor to capitalists because it has no use-value for them; and capitalists, who have access to the money to purchase the labor power, do so because they can productively consume it in order to appropriate the surplus-value the workers create.

That’s the first stage of the analysis, when markets and power combine to generate the surplus-value capitalists are able to realize in the form of profits. And that’s under the assumption that markets are competitive, that is, there are not market imperfections such as monopoly power. It is literally a different reading of commodity values and profits, and therefore a critique of the idea that capitalist factors of production “get what they deserve.” They don’t, because of the existence of class exploitation.

But what if markets aren’t competitive? What if, for example, there is some kind of monopoly power? Well, it depends on what industry or sector we’re referring to. Let’s take one of the industries mentioned by Stiglitz: Big Pharma. In the case where giant pharmaceutical companies are able to sell the commodities they produce at a price greater than their value, they are able to appropriate surplus from their own workers and to receive a distribution of surplus from other companies, when they pay for the drugs covered in their health-care plans. As a result, the rate of profit for the pharmaceutical companies rises (as their monopoly power increases) and the rate of profit for other employers falls (unless, of course, they can change their healthcare plans or cut some other distribution of their surplus-value).**

The analysis could go on. My only point is to point out there’s a third possibility in the debate over growing inequality in the United States—a theory that is missing from Stiglitz’s article and from Scientific American’s entire report on inequality, a science that combines markets and power and is focused on the role of class in making sense of the obscene levels of inequality that are destroying nearly every aspect of human well-being including the natural environment in the United States today.

And, of course, that third approach has policy implications very different from the others—not to force workers to increase their productivity in order to receive higher wages through the labor market or to hope that decreasing market concentration will make the distribution of income more equal, but instead to attack the problem at its source. That would mean changing both markets and power with the goal of eliminating class exploitation.

 

*The official rate was 12.3 percent, which means that 39.7 million Americans fell below the poverty line.

**This is one of the reasons capitalist employers might support “affordable” healthcare, to raise their rates of profit.

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Chris Dillow’s latest post reminds me of a point I overlooked in my own post yesterday on the public’s declining trust in the expertise of mainstream economists: the effects of inequality.

The argument I made was that, because mainstream economists relegate issues like power and class to the margins, they literally don’t see (for themselves) or show (to others) the unequal distributions that are either presumed by capitalism or that follow from capitalist ways of organizing economic and social life. Therefore, many members of the public who are affected by and/or concerned with such issues have become more likely to ignore and even challenge the self-professed expertise of mainstream economists.

What Dillow adds to this is the idea that trust itself has declined with growing inequality (which, as it turns out, I wrote about back in 2014).

As a way of expanding my original argument, we may be witnessing a self-reinforcing vicious cycle: the policies promoted by mainstream economists have led to increasing inequality, which mainstream economists tend to overlook or ignore. That growing inequality has, in turn, decreased the level of trust in the wider society, including trust in so-called experts. Together, the falling level of trust and the fact that mainstream economists literally don’t see or show the distributional consequences of the policies they support have propelled the larger public to question the presumed expertise of mainstream economists.

And rightly so. As Bob Dylan once sang, “You don’t need a weather man/To know which way the wind blows.”

Trust this!

Posted: 15 July 2015 in Uncategorized
Tags: , , , ,

Simon Wren-Lewis gives the lie to the idea that Europe’s lack of trust in Greece is responsible for the current crisis.

But does this help explain why other Eurozone countries keep going on about how Greece has lost their trust? I think the answer is a clear no. In fact I would go further: I think this talk of lost trust is largely spin. The issue of trust might have explained the total amount the Troika lent from 2010 to 2012. However, as I have said often, the mistake was not that the total sum lent to Greece was insufficient, but that far too much of it went to bail out Greece’s private sector creditors, and too little went to ease the transition to primary surplus. . .

The narrative about failing to deliver is just an attempt to disguise the fact that the Troika has largely run the Greek economy for the last five years and is therefore responsible for the results.

If anything, the Greek people are the ones who have learned they can’t trust the governments in power in the rest of Europe to do anything other than extract an enormous tribute—in the form of “extensive mental waterboarding” and continued austerity measures—in order to come up with the necessary funds to restore the banking system and give the country some breathing room.

So, who can they trust? They might be inclined to lend credence to the IMF, which has now acknowledged in an update (pdf) to its recent debt sustainability analysis (pdf) that Greece needs significant debt relief.

IMF

Just two weeks ago, the IMF argued that the peak in debt (at 177 percent of GDP in 2014) was already behind us and that gross debt financing would remain below a safe (15-percent) threshold. Now, its estimates are much higher: debt would peak at close to 200 percent of GDP in the next two years and gross debt financing levels would exceed 15 percent and “continue rising in the long term.”

The problem is that the IMF blames the dramatically revised scenario on events in the past two weeks. No Greek should accept (nor should the rest of us) that two weeks of capital controls could alone raise the debt ratio by 28 percentage points of GDP a full seven years later. The IMF is simply unwilling to accept the fact that its own analyses and policies—alone and in conjunction with the other two members of the troika—have gotten it terribly wrong.

The result has been an economic depression and social crisis unseen in Europe since the 1930s.

That just leaves the Greeks themselves, who need to trust they can buy themselves some time to enact the anti-austerity structural reforms necessary to dig themselves out of the current crisis. That’s probably going to mean confronting not only the elites in Europe that are pushing the current bailout plan, but also eventually its own elite that has put the country in such dire straits in the first place.

Inequality-States

source

Yesterday in class, I was forced to discuss a violation of the university’s Honor Code (which students have to study and sign and which, like most such codes, explains to students they can’t steal one another’s work and they can’t plagiarize other sources, whether in print or from the internet). The students’ view was that the Code was there to protect the credibility of their education in the eyes of others and to serve as an incentive to do their own work.

My own view, which I discussed with them, is a bit different: the Code is a condition of their membership and participation in an intellectual community. Basically, it represents a kind of trust in their fellow students (they’ll discuss and debate issues with one another, inside and outside the classroom, and not violate their mutual trust by stealing from one another) and a trust in the ideas that have been developed and disseminated by others (which should serve as the basis of their own thinking, and be appropriately cited).

I was reminded of that discussion when someone [ht: sm] sent me the link to a new piece of research by Jean M. Twenge, W. Keith Campbell, and Nathan Carter, who found that Americans’ trust in others and confidence in social institutions are at their lowest point in over three decades.

“Compared to Americans in the 1970s-2000s, Americans in the last few years are less likely to say they can trust others, and are less likely to believe that institutions such as government, the press, religious organizations, schools, and large corporations are ‘doing a good job,'” explains psychological scientist and lead researcher Jean M. Twenge of San Diego State University.

Twenge and colleagues W. Keith Campbell and Nathan Carter, both of the University of Georgia, found that as income inequality and poverty rose, public trust declined, indicating that socioeconomic factors may play an important role in driving this downward trend in public trust:

“With the rich getting richer and the poor getting poorer, people trust each other less,” says Twenge. “There’s a growing perception that other people are cheating or taking advantage to get ahead, as evidenced, for example, by the ideas around ‘the 1%’ in the Occupy protests.”

Twenge and colleagues were interested in understanding how cultural change over the last 40 years has affected social capital — the cooperative relationships that are critical for maintaining a democratic society – in which public trust plays an important role.

To examine trust over time, the researchers looked at data from two large, nationally representative surveys of people in the US: the General Social Survey of adults (1972-2012) and the Monitoring the Future survey of 12th graders (1976-2012). Together, the surveys included data from nearly 140,000 participants. Both surveys included questions designed to measure trust in other people and questions intended to gauge confidence in large institutions.

The data showed, for example, that while 46% of adult Americans agreed that “most people can be trusted” in 1972-1974, only 33% agreed in 2010-2012. And this finding was mirrored by data from 12th graders – while 32% agreed that “most people can be trusted” in 1976-1978, only 18% did so in 2010-2012.

Confidence in institutions rose and fell in waves, with respondents in both surveys reporting high confidence in institutions in the late 1980s and again in the early 2000s, with confidence then declining to reach its lowest point in the early 2010s.

This decline in confidence applied across various institutions, including the press/news media, medicine, corporations, universities, and Congress. The notable exception was confidence in the military, which increased in both surveys.

After accounting for the year the survey data were collected, the researchers found that institutional confidence seemed to track rising rates of income inequality and poverty.

Clearly, adhering to an Honor Code in the university is pushing back against a trend of growing inequality and declining trust in the larger society.