Posts Tagged ‘United States’

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It’s clear the British referendum on the European Union was a gross miscalculation on the part of David Cameron, who decided to move ahead with the vote in an attempt to placate the nationalist, anti-immigrant forces inside and outside the Conservative Party. And he lost—by much more than any of us expected.

A couple of issues should then concern us.

First, the fact that the 52-48 result in favor of Leave was so unexpected, not to mention mainstream economists’ overwhelming support for Remain, is a reminder to those of us on this side of the pond that supposedly expert opinion is increasingly unreliable and out of touch. So, even though Trump’s numbers currently favor his defeat, and mainstream economists on this side of the pond have been so dismissive of the kinds of issues raised by Bernie Sanders, we should continue to expect the unexpected and do everything we can both to oppose Trump’s election in November and to continue Sanders’s political revolution.

Second, the British vote is just the latest (but not yet final) nail in the coffin of neoliberal Europe. Europe without a real and vibrant Social Chapter was (in Thomas Friedman’s language) only a “golden straightjacket” to protect European and non-European corporate interests. That transcontinental free-market utopia—after the combination of bank bailouts, austerity, and high unemployment, the costs imposed on Greece (and Spain and Portugal), the unwillingness to treat ordinary people’s concerns about open borders and to humanely integrate war-ravaged refugees, and so much more—now lies in tatters.

The real issue, within Great Britain and the rest of Europe, is whether the Left will be able to reassemble the pieces to create a new “social-democratic internationalism”—a politics that attends to both national concerns (like healthcare, wages, and immigration) and internationalist ones (having to do with such things as debt relief, human rights, and global warming). In Britain, that means forming a demos, under the aegis of the Labor Party, consisting of groups of voters who ended up on opposite sides of the Leave-Remain vote—to defend workers’ rights within Britain while maintaining an internationalist concern with the plight of workers in other countries. It’s the kind of politics outlined by both Richard Tuck (who argued for Leave) and James Stafford (who supported Remain).

That’s important because, notwithstanding the title of my post, we’re far from being after Brexit. The process of Britain’s exit from the European Union is just starting. And while the Tories are engaged in their own internecine battle (which, as Boris Johnson steps forward, may even exceed the spectacle that led to Trump becoming the presumptive Republican nominee), with even more fallout for economic and political elites across the rest of the continent, the British and European left-wing parties and movements have an opportunity to imagine and create the kind of social-democratic internationalism the various countries’ working-classes have long wanted and ultimately deserve.

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The U.S. economy is a remarkable success according to the standards of neoclassical economic theory. Yet, for “prime-age” men, who need to work to provide for themselves and their families, it is increasingly a failure.

That’s the clear lesson from the latest report from the Council of Economic Advisors (pdf) on “The Long-Term Decline in Prime-Age Male Labor Force Participation” (which has been taken up and discussed in a wide variety of news media, from the Financial Times [ht: bn] to the New York Times).

On one hand, the United States, more than any other advanced country, has labor market institutions that represent a neoclassical economist’s free-market dream.

The United States has the lowest level of labor market regulation, the fewest employment protections, the third-lowest minimum cost of labor, and among the lowest rates of collective bargaining coverage among OECD countries. . .In the United States, governments and institutions (such as labor unions) place relatively few barriers in the way of employers who want to change who they employ and what they pay.

That’s exactly what labor markets look like in neoclassical models and what neoclassical economists recommend as the best, “flexible” labor-market policy. It’s a world in which it’s easy to hire and fire workers, which is supposed to facilitate matches between employers who want profits and individuals who want to work.

And yet, on the other hand, the labor-force participation rate of men between the ages of 225 and 54 has been declining since the late-1950s—from a peak of 98 percent to close to 88 percent today (which means the United States now ranks third lowest, above only Israel and Italy, among 34 OECD nations). And the rate for men with a high-school degree or less had plummeted even more, to 83 percent.

In a world in which selling their ability to labor is the principal way for workers to earn enough income to purchase the commodities necessary to support themselves and their families, the extraordinary success in creating neoclassical labor markets in the United States has resulted in a complete failure from the perspective of working people. As a result of declining wages (and, in addition, high incarceration rates, which makes finding a job that much more difficult), prime-age men are simply being forced by employers to drop out of the labor force.*

Now, the decrease in the labor-force participation rate for male workers has not escaped the attention of other mainstream economists and policymakers, as the long-run decline has tremendous implications for economic growth.** Fewer workers (especially since the labor-force participation rate for prime-age women, which had been increasing, leveled off after 1990 and since 2000 has also started to decline) means, in the absence of large productivity gains, less output and slower rates of growth. Therefore, they propose policies that seek to create more flexibility for prime-age men and women within the labor market, to increase their labor-force participation rates.

The alternative, of course, is to create more flexibility for workers outside the labor market—by giving them more say in the enterprises where they work and by creating a universal basic income for all—so that they’re no longer forced to have the freedom to sell their ability to work to a small group of employers.

That kind of flexibility beyond the labor market represents the only real way of solving the failures of neoclassical economists and of the economic and social system they celebrate.

 

*As the report notes, “The direct effect of increased incarceration is to actually increase the reported participation rate because the official statistics cover only the non-institutionalized population and omit prisoners, people in long-term care, and active duty members of the Armed Services.” But the indirect effect runs in the opposite direction, as these men face substantially lower demand for their labor after they are released from prison.

**Even the International Monetary Fund has recently warned about the negative implications for U.S. economic growth of declining labor force participation—along with slow productivity growth, an increasingly polarized society with income gains concentrated among the wealthiest Americans, and too many people living in poverty.

RoseEveryone (including the Financial Times) knows that the U.S. middle-class is shrinking— and that’s because the share of income going to those at the very top has increased enormously and average incomes for most of the population have declined over the course of the past three decades.*

But that’s not the story Stephen J. Rose (pdf) wants to tell. According to him, only those at the very bottom (6 percent) have lost ground and the real story is the growth in the size of the upper middle-class—what he calls “a massive shift. . .in the center of gravity of the economy.”

However, Rose’s conclusion is just an illusion created by the bizarre way he divides up the population.

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For example, Rose sets the lower bound of the upper middle-class at $100,000 (ranging up to the “rich,” at $349,999), which is five times the poverty level. However, there’s nothing middle-class about that threshold, not when you consider that (according to the World Wealth and Income Database) the average income in the United States in 2014 was $55,133 while the top 10 percent threshold was $118,140, the top 5 percent threshold was $167,220, and the top 1 percent threshold was $387,810.

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Even with such a strange treatment of income thresholds, Rose finds an enormous increase in inequality between 1979 and 2014: combined, the share of income going to the rich and upper middle-class more than doubled, from 30 to 63.1 percent, while the amount of income going to everyone else—middle-class, lower middle-class, and poor—fell precipitously, to less than 40 percent.

That, in the end, regardless of the names attached to income groups, is the real story. It’s a case of relative immiseration: those at the very top were able to capture a large share of the growing surplus while everyone else—who were forced to have the freedom to work for falling wages—was being left behind.

 

*According to the World Wealth and Income Database, the share of income captured by the top 1 percent more than doubled, from 8.03 in 1979 to 17.85 in 2014, while the average income for the bottom 90 percent of the U.S. population fell (in 2014 dollars) from $34,607 in 1979 to $32,352 in 2014.

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The game is rigged—and Americans damn well know it.

As Emily Blazon explains, the idea that the game is rigged has a long history in the United States.

In its current usage, “rigged” exposes a structure that is rotten to the core and lights a match to burn it down. Dating back to the 19th century, the word “rig” has meant “a trick, a scheme”; it also carries an association of expert hands setting up equipment or tinkering with machinery. To rig a fleet (or jury-­rig another conveyance) connotes competence and pluck. But the “rigging” Sanders and Trump have in mind involves a swindle, and it has been deployed in American politics at several points over the last century, including in the Great Depression. Calling for an inquiry into the stock market in The Washington Post in 1932, a Republican senator attributed its gyrations to “a rigged game of crooked gambling pools.” In the wake of Watergate in the 1970s, “rigged” appeared frequently in the press. Liberal leaders, some newly elected after the scandal, attacked not only Nixon but also campaign finance, the primary process and government agencies as being controlled by corporate and political elites.

Right now, as in the past, many Americans believe the game—in both politics and economics—is rigged.

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According to a recent Reuters/Ipsos poll, about half of American voters believe that the system U.S. political parties use to pick their candidates for the White House is “rigged,” and more than two-thirds want to see the process changed

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At the same time, according to a Pew Research Center poll, a substantial majority of Americans (65 percent) say the economic system in the United States “unfairly favors powerful interests.” Fewer than one third (31 percent) say the system “is generally fair to most Americans.”

And given the mutual influence of politics and economics—those at the top of the economy who have an inordinate influence on political issues and candidates, while the rules of the economic game are set and reinforced by political elites—it’s reasonable to conclude that the game as a whole is rigged.

President Obama demonstrated he was acutely aware of the problem in his 2016 State of the Union address:

democracy breaks down when the average person feels their voice doesn’t matter; that the system is rigged in favor of the rich or the powerful or some special interest.

And that’s why the rich, the powerful, and the special interests who benefit from the current system are spending so much time these days, as they have throughout the history of U.S. capitalism, trying to convince the rest of the people the game is not rigged.