Monday, September 23, 2013

Abhorrent Anniversary Gifts

Chances are you forgot to buy a present again this year, after all, anniversaries are hard to remember. What with the aftermath of that whole another former Disney girl goes off the rails thing, the release of another copy of a phone that'll make your life better and the anticipation of another brown people massacre, you could be forgiven for forgetting given the buzz surrounding Miley's strange twerking, Apple's chain jerking and Obama's postponed berserking. As if that weren't enough, there's always America's monthly mass shooting, the release of a video game glorifying said killing while looting or some kind of sporting event featuring flag saluting or home team rooting. Yes, it seems the official narrative of the Great Recession has sanctified September 15th, 2008 as the day the GFC (Global Financial Crisis) began with the failure of Lehman Brothers. On cue, the distraction industry inundated those still paying attention with a slew of stories to perpetuate this myth, ranging in theme from the horror of the meltdown to how it couldn't have been predicted to hagiographies of those who saved us from even greater disaster and how the world of finance has changed since, thus ensuring it couldn't happen again. Nearly all miss the point and couldn't be more wrong as all we had to do was open up the newly released Fortune 400 list of richest Americans to see the cause, how nothing's changed and that the worst is yet to come.

Though many will be cheered and applaud the newest Fortune list, the inequality in wealth that it illustrates was not only the disease at the root of the crisis but a sure sign that like a malignant cancer it is metastasizing. Hooray! Bill Gates is still the richest man in America and passed Carlos Slim to reclaim the #1 slot in the world. Mark Zucherberg's wealth jumped almost $10 billion to get him back into the top 20 so you can rest easy, all those hours you've spent on Facebook weren't wasted. Warren Buffet, the Oracle of Omaha, had the biggest dollar gain while some schmoe named David Duffield, co-CEO of some outfit called Workday had the biggest percentage rise. All told, the wealth of the richest 400 in America climbed from $1.7 trillion to $2.02 trillion in a single year making them worth more than such economies as Canada, Mexico and Russia. Hooray that is until you realize where this mind-boggling wealth is coming from and for that all you had to do was notice what stock prices did this September 18th when the Fed announced it was going to continue its $85 billion monthly bond buying program, AKA quantitative easing 3, AKA printing money to buy assets from banks at book value instead of  market value, AKA providing a massive tax payer subsidy to the stock market.

Fortunately for the attention span challenged, the past couple of weeks have also seen a couple of other reports highlighting the financial situation of the rest of the country. The US census bureau's report on income and poverty was full of sobering stats, but the most telling were regarding poverty and median income leaving people angry, disgusted and frustrated. Now, I'll grant you the fact that these statistics are subject to manipulation and often don't compare well over time, but the raw numbers are shocking in themselves. The poverty rate remained above 15%, some 46.5 million people; meanwhile children are the poorest group, 21.8% (the highest in the industrial world) or 16.1 million children under 18, and the younger, the poorer as 25.1% of kids under 5, the years of greatest brain development, were poor. Meanwhile, the median household income was unchanged from the previous year, not so bad in itself until you notice this means the household that falls in the exact middle of the income range, with half the families in the country earning more and half less, earns less than they did in 1989, a quarter century of stagnation.

These details are important when one wants to discuss inequality as many free market believers will close their ears upon hearing the word as visions of Marxist hordes coming to take away their money flash before their eyes. Ironically, the previous two paragraphs illustrate Marx's theories to a tee as the former shows how well capital is doing while the latter paints a grim picture of labour's situation. As America's 2nd richest man, the aforementioned Oracle, said "[t]here's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." It's not my purpose today to get into the nitty-gritty of this war, you can check out how it was waged here, here, here, here, here or here, but to look at the conscious choice we made five years ago to continue the slaughter along with how and why things will continue to get worse if nothing is done to stem the tide.

Back to our anniversary. It's five years ago and we've been told the financial world is on the verge of collapse with the implication that there will be mass panic as bank machines refuse to spit out cash, credit lines seize up and pension plans crumble. Not only were bankers and brokers about to start jumping off window ledges, supermarkets soon to run out of food and grandma sure to freeze to death, but horror of horrors, we wouldn't be able to get the new iPhone 2.0! If anybody was to blame besides bankers it was Bush; Dubya had messed up the country and it was time for a change, brand America was due for an overhaul. Lo and behold, there was an election coming, contested between an old white guy who wanted to bomb Iran and a young, black, hip, handsome, debonair, peace loving constitutional law professor. Many (myself included) were blind to the fact that Obama was just another marketing stunt that changed the packaging but not the substance. At the same time he was surrounding himself with an economic team sure to carry on past policies favouring Wall Street and the rich, men such as Emanuel, Geithner, Bernanke and Summers, he had an all-star marketing team including a Facebook founder, a social secretary and David Axelrod who ensured the public wouldn't notice that Goldman Sachs was his campaign's biggest private contributor. Every tool in the marketing arsenal was used to create and sustain the Obama brand from the perfectly calibrated logo to viral marketing, product placement, infomercials and brand alliances.

Yes we can hope and change was nothing but cover for the great con job of the past five years. Sure, My administration," the president added, "is the only thing between you [bankers] and the pitchforks." Yes, the new president would be the greatest reformer since Franklin Roosevelt, the press sold it and the public bought it. Obama the socialist was coming to take away not only the wealth of the rich but everyone's, a fear so strong it spawned the Tea Party. The ultimate irony though is that despite all the noise, vile and bile directed against him by the rich, Obama left their great money making machine pretty much intact as he told the bankers behind closed doors "[y]ou guys have an acute public relations problem that’s turning into a political problem. And I want to help…I’m not here to go after you. I’m protecting you…. I’m going to shield you from congressional and public anger." Help and shield he did, enabling the greatest transfer of wealth, from the bottom up, in history.
Obama played the populist card when he had to with the help of the star-struck press. Stories of the president hauling in the heads of the 13 largest financial institutions to explain their actions and justify their sky-high salaries and bonuses were peppered with quotes to justify our faith: "

While millions were losing their homes and jobs, trillions were pledged to prop up the rich, the banks and corporations. TARP's $700 billion was quickly followed by trillions in loans and guarantees to the likes of McDonald's, Harley Davidson and UBS, $1.75 trillion in bond purchases in 2009 for QE1, $600 billion more the following year in QE2, another $400 billion of mortgage purchases in 2011 during 'Operation Twist' and of course the now-always-taper-threatened-in-order-to-allow-insiders-to-profit QE3, the monthly $85 billion in purchases. This back door bailout also includes six years of artificially low, near zero interest rates and the implicit guarantee that the government will step in and save them if necessary. Meanwhile, while the government plays back door man to the rich, we play the cuckold, getting screwed over, footing the bills and getting left out in the cold, some literally, thanks to the never-ending debt ceiling budget battles this profligacy along with Dubya's wars and 30 years of tax cuts for the rich have led to. The enormous shift in power away from labour has allowed capital to further squeeze jobs and wages from the lower and the middle classes. As late as 1980, economists believed labour's share of national income was pretty much fixed, but since that time it has slowly dwindled (not just in America). More money is flowing to corporate profits (and thus shareholders, ie. capital) than ever before while an ever larger slice of the smaller pie left to labour is being served to those at the top of the income scale. The result is obviously growing inequality.

Which brings us to another recently released study of note, Emmanual Saez's 2012 US inequality report, Striking it Richer: The Evolution of Top Incomes in the United States. Sadly, it brings no surprises, only confirmation of the suspicions of those paying attention; inequality is getting worse, itself no surprise as inequality feeds on itself in a vicious circle. After a brief drop immediately following the GFC, thanks in large part to policies that could have no other result, the top 1% of income earners have captured 95% of the income gains in the first three years of the so-called recovery, leaving America's income distribution more unequal than any time since records have been kept. The proportion of income going to the richest decile broke through the 50% mark for the first time ever while that going to that top 1% increased from 19.65% to 22.46% in just one year. In case you're wondering, the share going to the top 0.01% jumped from 4.32% to 5.47%, the largest percentage increase since 1927-1928. However, this inequality is dwarfed by that of wealth, perfectly encapsulated by this video. But wait, so what, right? Some people win, some lose, that's the way capitalism works.

Right. But wrong. Huh? Well, the thing is, capitalism and thus society works better when inequality isn't so severe as can be seen in many ways. The first and most obvious is to look at the history of income distribution, the chart above that practically forms, in the words of Robert Reich, a suspension bridge. Before a new standard was set last year, inequality had peaked in 1928 and then again in 2007. It's no coincidence the Great Depression followed the former in 1929 and the GFC followed the latter in 2008 as the majority of the population simply don't have enough purchasing power necessary to maintain a consumer economy. Worse, epidemiologists Richard Wilkinson and Kate Pinkett convincingly demonstrated the link between inequality and a wide range of social ills such as teenage births, homicides, obesity, lower educational achievement, drug use, mental illness and infant mortality rates in their book The Spirit Level. Not only do they show the link, they dispell the "correlation is not causation" complaint by showing the same effects between countries as well as within countries finding the same correlation among the 50 US states.

Perhaps most ironically of all, as America moves its way up the inequality charts, the most American story of all, the rags to riches, Horatio Alger, land of opportunity parable, slowly dies. As "The Great Gatsby Curve" illustrates, the more unequal the economy, as measured by the GINI index, the more closely children's income is tied to that of their parents. The US already has one of the lowest earning elasticities (how much a father's income affects their offspring's) in the developed world, and as it becomes more unequal this affect will only worsen. Social mobility has become a thing of the past in much of America, the chances of someone born into the lowest economic quintile in Atlanta has a 4% chance of reaching the top 20%. One study suggested that the loss of life from income inequality in the US in 1990 was the equivalent of the combined loss of life due to lung cancer, diabetes, motor vehicle accidents, HIV infection, suicide and homicide.

The reason for the negative economic and social effects of inequality is bundled up with why the phenomenon seems to feed on itself, getting worse and worse. Inequality increases economic insecurity for those at the bottom while transforming wealth into political power for those at the top. The proletariat, er, the 99%, er, well, the majority of us are forced to fight for fewer jobs, which pay less and offer less security, thus upping the stress. The official unemployment rate may be down but the labour-force participation rate is also down, at a 35 year low, as new jobs haven't kept up with population growth. The jobs created are paying less on average, with less hours than those lost in the GFC. Those who kept their job have most likely had their hours and benefits cut and are probably earning the same or less as five years ago but are happy now just to have a job. If you don't have a job you are shamed as being lazy, someone gaming the system, a taker (or skiver for you Brits) coasting on the beneficence of the rich. These makers (yeah, there's a British version too, strivers), ensure the only legislation that passes protects their power and/or expands GDP, like blowing brown people up, creating a crazy health care system centered on insurance or passing new free trade deals such the upcoming TPP which will lower wages for 90% of workers.

There were of course a couple other significant anniversaries that have passed in the past couple weeks that illustrate the corrosiveness of inequality on empathy and imagination: 9/11, both the 12th and the 40th and Occupy Wall Street's 2nd. Whether created or not, the only answer to the fear that was produced by the terrorist strikes in America a dozen years ago could ever be blowing stuff up as not only does it enrich those buying the election but also because those at the top are no longer able to understand the Other. Mirror neurons, which allow us to get into the heads of others, seem to reflect better for the powerless but much worse for the powerful. In simpler terms, the rich and powerful have less empathy helping explain the results of a study last year showing the rich are more likely to lie, cheat and even take candy from children. Amassing great wealth breeds an arrogance made even more harmful given the with us or against us atmosphere of the GFC and war on terror. Worse, those in power thanks to their wealth know they won't need to sacrifice anything as only poor people's children fight and die in wars. Thus the public ignores both the epidemic of returning GI suicides and the near doubling of suicide rates in the past 10 years for the general public aged between 50 and 59; used up by war and used up by the GFC.

The CIA helping Pinochet take out Allende in Chile in 1973 turned another possible socialist success story (I know there haven't been any yet) into a laboratory for the Chicago Boys to study free market economics. Ever wonder where economists got their field research to test and try to prove their wacky theories? Chile was the real ground zero. Allende's mistake was trying to give the wealth of the nation back to the people when everyone knows mulinational corporations are the only actors rational enough to control it properly. Er, wait, that's right, thanks to folks like Gary Becker, people are rational actors constantly making rational economic choices in a world of equal knowledge and power as we make our way through a world filled with attempts to alter our decision making process, ie. advertising. How is that supposed to work again? Wouldn't it be great if we all really did have equal information and power to make this fiction possible? Oops, that sounds like socialism, sorry guys. By the way, why didn't many people notice that John Kerry met with Henry Kissinger, a man intimitately involved with the events of September 11th, 1973, on September 11th this year to discuss Syria?

In What Money Can't Buy, Michael Sandel puts forward the argument that without realizing, debating or noticing it we have drifted from having a market economy to being a market society. What was once a tool for organizing productive activity has become a way of life allowing market values to usurp moral values. Particularly in America, but more and more around the world thanks to austerity, market values have penetrated every part of our world, from education to politics, health to war. Students are paid to get good grades, admissions to elite universities are auctioned and the whole idea of education has been transformed from gaining knowledge into job training. The arts, philosophy and non-financially lucrative scientific fields are shunned in favor of finance, public relations and programming. With student loan debt of almost $30,000, the average graduate can't afford to believe in anything that won't get them a well paid job. Seems like slavery to me but instead economic freedom is being able to bet on people dying by buying people's life insurance; the gamble lies in the higher payoff the sooner the insured die.

Obscene wealth and growing inequality have separated us from each other creating an ever growing empathy deficit. It's not only gated communities, private beaches and exclusive restaurants anymore as barriers are being thrown up all around us. Sports have traditionally been about competion but also about bringing people together, be they teams, cities or nations, societies large and small. As recently as 1980, we'd go to a ball game at a stadium named for a public figure where one would rub shoulders with Joe Six pack and Richie Rich as tickets prices ranged from a couple of bucks for bleacher seats to a few dollars for the best seats in the house and root for our home town heroes. Today we go to InsertCorporation Stadium, segregate ourselves according to wealth to the bleachers, box seats or luxury boxes, to cheer for a team threatening to change cities if their owners aren't granted more public concessions, made up of free agents who change teams for raises of tens of millions. While there, we're as likely to be discussing transfer fees and salary cap restructuring as we are ERAs or wins and losses. An institution that was a source of civic pride and social glue has been transformed removing a bond that held us together, in the words of Sandel -
In fact, for most of the twentieth century, ballparks were places where corporate executives sat side by side with blue-collar workers, where everyone waited in the same lines to buy hot dogs or beer, and where rich and poor alike got wet if it rained. In the last few deades, however, this has changed. The advent of the skybox suites high above the field of play has separated the affluent and the priviliged from the common folk in the stands below.
As for Occupy, another potential source of human contact and feeling of community, well thanks to the wilting of the collective imagination, how you view it solely depends on where you get your news. They might have just been a gang of smelly hedonists looking for a good time as evidenced by their lack of a coherent message or the nudge that awoke a glimmer of public consciousness to the problems of inequality. The reason for the ferocity of both the media propaganda machine and the coordinated nationwide military style attacks on the movement was the importance of convincing people, particularly those who would be activists, that there's no hope to change anything, thereby creating a self-fulfilling prophecy. Rather than entering the humanities to expand their minds, today's youth, the imagination of tomorrow, are streaming into the indoctrination machine. In 2006, just before the GFC, 25% of graduating seniors at Harvard, 24% at Yale and a mind blowing 46% at Princeton were starting their careers in financial services. The creation and maintenance of a reality where everything is only about profit and there's nothing else to believe in.

No wonder wealth reduces compassion. The self interest needed to survive in a system of such extreme inequality not only drives financially measurable crimes from petty theft to hiding $32 trillion in tax havens forming a fraction of the tax evasion industry or pseudo-financially-measurable-for-bank crimes such as laundering terrorist money and world wide interest rate manipulation, it rips at the fabric holding societies together. Gun nuts are right, it's not just guns that kill people, it's a system that glorifies greed driving people over the edge. American exceptionalism in terms of inequality is becoming as dangerous to itself as their military version is to the world yet strangely much of the world seems to want to emulate their uniqueness. Chilean economist Manfred Max Neef has claimed that "[t]his economy can go on no longer…because it has become absolutely criminal…this economic model is killing more people in the world than all the armies put together" and has proposed an economic crimes tribunal to mete out justice. He's also part of the King of Bhutan's General Assembly working to develop a new economic paradigm based on well-being, happiness, ecological stability, adequate distribution of wealth and intelligent use of natural resources. Basically, the opposite of what we do now so it must be worth a shot. 

Chances are, however, nothing much will come of it as most people are trapped in a never ending cycle, forced to work to simply survive and are voiceless in a world where power only listens to money. We were given the opportunity five years ago to change the world for the better but were instead fed a pipedream of hope and change. It seems a type of madness to try sustain a broken system, our current suicidal economic model of infinite growth, in a manner that seems designed to fail, but that's just what's happening. Budgets need to be cut when it's spending that goes to the needy, yet the US government continues to subsidize the rich to the tune of over $1 trillion per year. Capital is winning the struggle with labour, whose spending drives the economy. Left with so little, labour can simply survive, not thrive. In 1947, labour's share of US nonfarm business income was 65%, in 2000, 63%; in 2013 it's 57%. This shifts about $750 billion annually from the workers to the rentiers. The age of austerity offers little hope for today's youths, burdensome tuition indebtedness, worklessness, homelessness and powerlessness, virtually guaranteeing mass shootings will become a daily occurrence, in fact America's almost there already. If only this infection was contained to the US it may not be so bad but in a study of 22 other advanced countries it was found labour's share of income fell from 73% in 1980 to 65% in 2011, a trend occurring in poorer countries as well.

Perhaps the decades of shared prosperity in America from WWII until the late 70's that created a thriving middle class was simply a historical fluke due to unique circumstances, after all, most of human history has featured but two classes, the aristocracy and the peasants. We've forgotten the battle that took place in order to create the institutions that enabled this historical anomaly known as the middle class and are passively allowing the system to be dismantled as we stare blankly into our propaganda screens, be they TV, tablet or telephone. The tension is all around us; politically, partisanship rules the day as the likes of Citizens United has made the voice of the few louder than the many; economically, finance rules the day as the rentiers extract rents from the rabble; socially, we've become zombified by those aforementioned screens, disillusioned by a dollarocracy masquerading as democracy and indebted by an economic system that forces you to borrow to eat, sleep, learn or even get sick. The World Economic Forum (you know, those rich guys who meet in Davos every year) listed severe economic disparity at the top of their Global Risks 2013 report. President Obama was forced to admit that "[t]he folks in the middle and at the bottom haven't seen wage or income growth, not just over the last three, four years, but over the last 15 years," only to have it suggested later in the same interview that "[m]aybe a president just can't stop this accelerating inequality?".

This is exactly what the elite want us to believe, that no one can do anything about inequality, that it is a natural occurrence that 'incentivizes' effort. What if we could show them that even their lives would be better in a more equitable society? Woah! Wait, if you could do that what would the cognitive dissonance of working against their own self interest do to their brains? The same thing that should happen to the rest of us when we realize the neoliberal fairy tale of supply side, trickle down economics is just that, a fable, and scream the emperor has no clothes. Bankers shouldn't earn more than teachers and nurses, four members of one family shouldn't have more wealth than the combined wealth of just under the 50 million poorest American families and resources need to be allocated to those who are forced to start behind others. Intuitively, absolute poverty causes negative health and social outcomes, but unfortunately it is slightly less so regarding inequality leading to the 'so what' attitude of so many. Yet, 'status anxiety' or insecurity seems real enough in a society that places people in a hierarchy which increases competition for status and causes stress, leading to poor health and other negative outcomes such as the falling life expectancy of poor white women in the southeast of America, surprise, where inequality is highest. Too bad we seem to have lost our empathy, otherwise we might try to do something about it. Well, at least tell your friends to go see this movie -


Bruce said...

Hello theendisnear,

Yours is the first blog I have read and subscribed to (I am really computer illiterate). As a senior who retired just before the economic crash, your blog comes thru loud and clear for me. As someone who gets my daily news from Democracy Now your insight and view of our crazy economy and culture is pretty disturbing but in line with what I discern to be the way things unfortunately are.

Keep up the good work,


Shane said...

Hey Bruce,

Thanks for dropping by and leaving a comment. If you managed to subscribe that means you're at least as computer savvy as I am. Can I ask what subscription service you used?

As for the content of this post and the economic/cultural situation we face, I agree, it's disturbing. Things haven't improved in your neck of the woods with the cut to food stamps and now the gov't shutdown with debt default coming up fast. Tick tock it seems.

See you around (later than sooner, won't be posting too much now that university has started up again)