Posts Tagged ‘United States’

net worth

According to a new study by the Federal Reserve Bank of St. Louis, little has changed over the past 25 years in terms of the glaring wealth gap in the United States between blacks and Hispanics on one hand, and whites on the other.

The median wealth levels of Hispanic and black families are about 90 percent lower today than the median wealth levels for whites. Back in 1989, the median wealth of a white family was $130,102. In 2013, it was $134,008, after adjusting for inflation. For a Hispanic family, they were $9,229 and $13,900, while for a black family, they were $7,736 and $11,184.

The one group that has experienced an improvement, both absolutely and relative to whites, are Asian families. Their real median wealth grew between 1989 and 2013 from $64,165 to $91,440. And, because of that growth, and the precipitous decline in white family wealth after 2007, Asian household wealth rose from 49 to 68 percent of white wealth.

While the authors of the study do not attempt to analyze all the factors causing the large and persistent gap between white and black/Hispanic wealth, they do look at the role of age profiles and educational attainment and conclude that

differences in the age composition and in the level of educational attainment across groups explain relatively little of the gaps. Indeed, race- and ethnicity-related financial-health disparities are greatest among older and better-educated groups, where financial health and wealth generally are at their highest levels.

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As the Economist explains,

Inflation rates around the world have been sinking over the last three years. Pervasive economic weakness in the rich world and a slowdown in Chinese growth drove the initial decline. Lately tumbling oil prices have helped to push inflation into negative territory across much of the euro area. America, Britain and China, where inflation rates have dropped below 1%, may soon join Europe in deflation. Falling prices for things like petrol have been “unambiguously good” for consumers, in the words of Mark Carney, the governor of the Bank of England. But broad and persistent deflation is not a healthy thing for a modern economy. It will make big debts harder for households and governments to repay, and it could hinder central banks looking to perk up slumping economies.

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Special mention

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By his own account, Yanis Varoufakis is an “erratic Marxist.” He’s also, it appears, a committed critic of postmodernism.

In my previous discussion of Varoufakis’s interpretation of Marxism, I deliberately avoided mentioning his “pot shot” at postmodernism:

A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe is would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone.

I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s.

But, as friends reminded me, I had forgotten (or repressed?) Varoufakis’s earlier attack on postmodernism, which he delivered in two reviews (or two versions of a review) of a book on postmodernism and economics.

As it turns out, I had a hand in the book in question, Postmodernism, Economics, and Knowledgewhich I edited with two close friends and comrades: Jack Amariglio and Stephen Cullenberg.

In the longer version of the review, which appeared in 2002 in the Journal of Economic Methodology [unfortunately gated], Varoufakis was actually quite complimentary about at least some aspects of the book.

Anyone interested in the postmodern stirrings of economic discourse should turn immediately to Post-Modernism, Economics and Knowledge, edited by S. Cullenberg, J. Amariglio and D. Ruccio (Routledge 2001). It explicates Postmodernity’s various strands succinctly and with sensitivity to the large retinue of meanings that the postmodern condition has acquired over the years. It comprises twenty-two taut, well-crafted chapters categorised in seven distinct parts blending nicely into one another. Of the contributors most are economists, albeit of a somewhat iconoclastic disposition, while three philosophers, one English professor and one anthropologist combine forces with them to offer the reader a delightful mixture of perspectives. Perhaps the book’s greatest asset is its clear, thoughtful introduction that gives the whole edifice its integrity, restrains the wayward tendencies of some contributors and whets the reader’s appetite.

But then, in the rest of the review, and especially in the shorter version published in The Post-Autistic Economics Review, Varoufakis spends most of his time attacking postmodernism, presumably to warn off “young dissidents” who are or might be attracted to the idea (“the task of the PAE movement must be to clear the way for radical criticism that avoids the postmodern trap as resolutely as it opposes economic autism”). His basic argument is that the postmodern critique of mainstream economics is doomed to failure, by first being absorbed into mainstream economics and then strengthening it (“Postmodernity unwittingly blows fresh wind in the sails of neoclassicism, the undisputed champion of the deconstructed human agent. While warning us correctly that new authoritarianisms will be born when we get caught up in our own rhetoric, it offers no resistance to the current authoritarianism of neoclassical economics and, more so, the socio-economic system that it serves”), supplemented by the all-too-common allusion that postmodernism is the easy way out (“the postmodern turn will be chosen by pseudo-dissidents whose prime interests lie in acquiring a chic image”).

And the alternative? Varoufakis proposes “an historically grounded understanding of how systematic patterns of power and economics are the joint products of the continual feedback between technological developments and evolving social formations” guided by “an unbending commitment to a rational transformation of society.”

Now, in the reminder of this comment I don’t want to offer a defense of our project of postmodern criticism (developed in that book or in other volumes, such as Postmodern Materialism and the Future of Marxist Theory and Postmodern Moments in Modern Economics). Suffice it to say, given our work on the journal Rethinking Marxism and our other Marxist associations, we’ve never been particularly sympathetic either to neoclassical economics or to capitalism. On the contrary.

What interests me more, given the current crises of capitalism and the predicament of the Left (whether in Greece, Spain, or the United States), are the terms with which we can formulate our critique. Varoufakis sees (or at least saw) a strict dichotomy: postmodern fragmentation or rational transformation. For me, there is no such dichotomy, at least if we allow that rationality is itself a contradictory discursive and social construction. If so, then the battle is between different rationalities, which of course have very different effects.

One rationality, embodied as much in the troika’s formula of austerity for Greece as in the lopsided economy recovery in the United States, is captured by neoclassical economics: everybody gets what they deserve, as long as free markets are unleashed on the world. The other rationality starts with the proposition that everyone should get what they deserve but they don’t—and can’t—within existing economic institutions. Those institutions—capitalist institutions—make “just deserts” impossible.

That idea, that there’s a clash of rationalities within the world today, is precisely an effect of the postmodern questioning of metanarratives. Postmodernism, in this sense, represents a critique of a singular (humanist) rationality, just as it serves to undermine the neoclassical claim of a monopoly on scientific knowledge (indeed, the scientism that animates much of economic theory, mainstream as well as heterodox), the presumption of causal hierarchies within economic analysis (again, both mainstream and heterodox), and much else.

My point is not to simply reverse Varoufakis’s claims, for example, by asserting that fragmentation, irrationality, disunity, and so on are necessarily progressive and that esssentialism, rationality, and unity are necessarily regressive. None of those moves is necessarily one or another, outside of a particular historical conjuncture.

And that’s the point, isn’t it? The effects of the moves that we make, the demands we hold up, the criticisms we formulate depend on a specific context, on what is taken to be the existing common sense and how best to disrupt that common sense. The fact is, modernism (at least in economics) has long been associated with a humanist, universal, scientistic set of claims, and part of the task of carrying out a ruthless criticism of mainstream economics is to challenge and deconstruct those claims (including the idea that such claims are even possible).

Is that all? No, of course not. In my view, the postmodern critique of mainstream economics needs to be supplemented by a Marxist critique. But, I want to be clear, it also goes in the other direction: that Marxist critique (traditionally formulated in terms of “laws of motion,” a hierarchy of base and superstructure, and so on) needs to be supplemented by postmodernism.

In the end, the Varoufakises of the world may disagree. However, what I believe we can come to some agreement on is the need to continue to criticize “the inexorable devaluation of political goods, the vulgar commodification of human bodies and values, the impossibility of conceptualising freedom-from-the-market, the depiction of Central Banks as ‘independent’ only when under the thumb of financial capital, the confusion of liberty with the freedom to exploit and to demean and, above all else, the portrayal of coercion as tâtonnement.”

In my view, both postmodernism and Marxism, each in their different ways, play useful roles in carrying out that critique.

Feed the Birds

Special mention

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wages-education

As I have explained to generations of students, Americans like to think that education is the solution to all economic and social problems. Including, of course, growing inequality.

Why? Because focusing on education—encouraging people to get more higher education—involves no particular tradeoffs. More education for some doesn’t mean less education for others (at least in principle). And providing more education doesn’t involve any structural changes in society—just more funding. (Of course, suggesting more education under current conditions—when public financing of higher education continues to decline, and students and their families are forced to take on more and more debt—is itself disingenuous).

As a result, there’s a broad consensus in the middle—among conservatives and liberals alike—that encouraging more young people who have yet to enter the labor market and existing workers who want to get ahead to obtain a college education will solve the problem of inequality.

Uh, no. That’s because, as Paul Krugman points out, focusing on education is an elaborate dodge from the real issues.

the reason this is an evasion is that whatever serious people may want to believe, soaring inequality isn’t about education; it’s about power. . .

The education-centric story of our problems runs like this: We live in a period of unprecedented technological change, and too many American workers lack the skills to cope with that change. This “skills gap” is holding back growth, because businesses can’t find the workers they need. It also feeds inequality, as wages soar for workers with the right skills but stagnate or decline for the less educated. So what we need is more and better education. . .

As for wages and salaries, never mind college degrees — all the big gains are going to a tiny group of individuals holding strategic positions in corporate suites or astride the crossroads of finance. Rising inequality isn’t about who has the knowledge; it’s about who has the power.

There are two ways to look at this. One, using the chart above (from the Economic Policy Institute), is to see how workers with different levels of education have fared since 2007. It is clear that those in every education category experienced falling or, at best, stagnant wages since 2007. And while the data do show that college graduates have fared slightly better than high school graduates since 2007, this is not because of spectacular gains in the wages of college graduates, but because their wages fell more slowly than the wages of high school graduates.

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The other way is to look at changes in average incomes within the top 10 percent, most of whom have college and advanced degrees. As we can see, the top 1 percent (blue line) has been pulling away from everyone below them (such that, between 1976 and 2012, the ratio of the average incomes of the top 1 percent to the bottom 90 percent rose from 10.5 to 33.5). But the top .01 percent (bright green line) has been pulling away even faster—from the bottom 90 percent (the ratio of their incomes to the bottom 90 percent increased over the same period from 80 to 661) and from their fellow college graduates in the top 1 percent (that ratio increased from 7 to 21).

In other words, the wages of college graduates haven’t been faring all that well in recent years and, over the longer term, inequality has been growing among college graduates. Thus, the lack of education is not the problem, and more education is not the solution.

The fact is, in recent years and since the mid-1970s, wages of most workers have been stagnant, while productivity has continued to grow. As a result, corporate profits have soared to new record highs and a tiny minority at the top has been able to capture a share of those profits in the form of spectacularly high earnings and capital gains. That’s not because they have more education; it’s because they happen to be at the right place at the right time.

The “very serious people” at the top may try to convince the rest of us that obtaining more education will make us “worthy” of more income, thus leading to less inequality. But that’s just an attempt to deflect attention from the real causes.

And, to be honest, it doesn’t take a college education to understand the real causes of growing inequality in the United States.

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This chart, devised by Branko Milanovic, illustrates the remarkable economic recovery that has taken place in the United States beginning in 2010—a recovery, that is, not for the vast majority of people, but for a tiny minority at the top.

Consider the first period (blue line). It is remarkable that real income of all groups declined. But the hardest hit were the rich, with percentage losses increasing as we move toward to right portion of the graph, and the very poor.  I am not an expert on US welfare system, but it seems to me that the system failed to protect the poorest people from substantial income losses between 2007 and 2010. But for the bulk of the population, the years of the Great Recession meant a modest real income decline. The median person’s real income went down by a little over 3 percent. The upper middle class (the people between the 80th and 90th percentiles) did not see much change in their real income. But the top 10% clearly lost out: notice how the blue line starts decreasing ever more steeply as you move toward the top 1%. The Gini coefficient decreased by less than 1 point.

Now, look at the red line which shows the real change in the second period. It is almost a mirror-image of what happened in the first. The growth was zero or positive along the entire distribution, the strongest among the very poor (around the lowest 5th percentile) and among the rich (the top 10%). Median inflation-adjusted per capita income decreased by just under 1%. For the two top percentiles, which got clobbered by the recession, real income growth was in excess of 10%.

In other words, those at the very bottom lost a great deal during and immediately after the crash and, as a result of special measures (like an expansion of the food stamp program and increases in state minimum wages), they’ve managed to claw back some of what they lost—and they’re still poor. For pretty much everyone else, they lost out (as a result of growing unemployment and stagnant wages) and they still haven’t recovered (even though the unemployment rate has declined but their wages are still pretty much where they were before the crash). And those at the top? They lost a great deal (because of the initial decline in corporate profits and the stock market crash) and, as a result of the nature of the recovery (which has successfully restored the profits of large corporations and Wall Street equities), have now recovered most of what they lost—and they’re still rich.

So, after a brief hiatus (in 2009), the United States is back to having the most unequal distribution of income of all the rich countries on the planet.

And, unless things change (and I don’t mean the Fed’s tinkering with interest rates or one or another corporation raising wages above the federal minimum), that obscenely unequal distribution of income is only going to continue to get worse.