Posts Tagged ‘United States’

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According to Reuters [ht: sm],

Twelve of about 30 people who worked on [Carly] Fiorina’s failed 2010 California Senate campaign, most speaking out for the first time, told Reuters they would not work for her again. Fiorina, once one of America’s most powerful businesswomen, is now campaigning for the Republican nomination in 2016.

The reason: for more than four years, Fiorina – who has an estimated net worth of up to $120 million – didn’t pay them, a review of Federal Election Commission records shows.

On the campaign trail, the former Hewlett-Packard (HPQ.N) CEO has portrayed herself as a battle-hardened business leader who possesses the best financial skills among fellow Republican presidential hopefuls. But some former staffers on her Senate campaign are now raising questions about that portrayal.

Federal campaign filings show that, until a few months before Fiorina announced her presidential bid on May 4, she still owed staffers, consultants, strategists, legal experts and vendors nearly half a million dollars.

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Tyler Cowen has made a bit of a splash with his argument that, here in the United States, we’re probably in the midst of an economic “reset.”

What does Cowen mean? Essentially, his argument is that economic growth may continue at relatively low levels for the foreseeable future (in contrast to the higher rates of growth following on other postwar recessions), that low and stagnant wages will likely continue (his examples are lower salaries of adjunct faculty, two-tier wage systems in manufacturing, and lower wages for college graduates), and there’s probably not much government policy can do to avoid this “grimmer future.”

In this, Cowen is basically echoing the concerns expressed by others, in the form of the “new normal” (associated with, among others, PIMCO boss Mohamed El-Erian) and “secular stagnation” (which Larry Summers [pdf], among others, has been arguing).

My view, for what it’s worth, is Cowen is both right and wrong. He’s right in the sense that we have witnessed, and will likely continue to experience, a relatively slow recovery from the crash of 2007-08. That’s why I continue to refer to our current situation as a Second Great Depression. And, as we have seen, what recovery there has been during the past six years has mostly benefited those at the very top. The rest of the population has already been forced to “reset” their expectations in terms of stagnant wages and salaries.

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But Cowen is also wrong, in the sense that he’s only focused on the last few years. His view is that recent rates of economic growth have been relatively low (by postwar standards), and that trend may continue into the future (thereby requiring those at the bottom to revise their expectations downward). What he misses is the fact that a fundamental “reset” of the U.S. economy has been taking place for much longer, since at least the mid-1970s. Since then, we’ve seen the profit share growing and the labor share declining—a long-term trend that has only been exacerbated since the crash of 2008-08.

Or, if you want a different sort of evidence, consider taking a look at George Packer’s magnificent book, The Unwinding: An Inner History of the New America. Using fascinating profiles of several Americans (and a dos Passos-like sprinkling of alarming headlines, news bites, song lyrics, and slogans), Packer offers an epic retelling of American history from 1978 to 2012—of a shrinking middle-class and an economy that has lost its ability to offer any significant hope for recovery for the majority of the population.

It’s that unwinding—which we’ve been living through for almost four decades now but which Cowen and others miss—that is going to require a fundamental “reset” of our economic system.

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We know (e.g., as a result of the 2013 Pew Research Center survey) that most people in the world believe that current economic arrangements favor the well-off and that economic inequality is a very big problem.*

And they’re right: the economy system in most countries is fundamentally unfair (favoring those at the top over everyone else) and that, as a result, the gap (between those at the top and everyone else) is a problem that needs to be solved—if not within the current economy system, then in a different one.

But we also know, since at least the pioneering study by Dan Ariely and Michael I. Norton, that people’s beliefs about inequality are quite different from actual levels of inequality. That notion is confirmed by a new study, by Vladimir Gimpelson and Daniel Treisman, “Misperceiving Inequality.” What they show is that, on a wide variety of measures (of income and wealth inequality, poverty, earnings for different jobs, and so on), what people think they know is often wrong. Perhaps even more important, they show that the perceived level of inequality—and not the actual level—correlates strongly with demand for redistribution and reported conflict between rich and poor.

Why should this matter? Because representations of the economy that minimize the existence of inequality or the problems associated with inequality are bound to reinforce the systematic misperceptions found by researchers.

That’s exactly what much mainstream economics accomplishes. It deflects attention from the existence of inequality (e.g., by focusing on growth versus distribution) and from the economic and social problems created by inequality (by attributing inequality to forces like globalization and technological change beyond our control or invoking more education as the solution).

Mainstream economics therefore forms part of what Gimpelson and Treisman refers to as “ideology,” “which may predispose people to ‘see’ the level of inequality that their beliefs and values convince them must exist.” And the strength of mainstream economics in the United States—in colleges and universities as well as in the media, think tanks, and in government—is one of the main reasons Americans, more than citizens in other countries, tend not to believe in inequality.

*Specifically, the public in advanced (median of 74 percent), emerging (70 percent) and developing (70 percent) economies are mostly in agreement that the current economic system generally favors the wealthy and is not fair to most people in their country. And, in 31 of the 39 countries surveyed, half or more of the population believe that the gap between the rich and the poor is a very big problem in their societies.

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