Protests in New York are focusing on some political problems that are thought to be responsible–among other things–for greater income disparities in the US.
In its declaration, the three-week-old protest group comes out four-square against foreclosures, executive bonuses, workplace discrimination, politicians beholden to lobbyists, monopoly agriculture, and the sale of personal privacy data. It decries everything from colonialism to “faulty bookkeeping.”
Referred to as Occupy Wall Street, these protests seem long overdue and–unlike some other political movements, like the Tea Party–these focus on issues that really matter both to the economy and a political system that many see as not being representative of anyone but the super-rich.
The Atlantic Wire has published an editorial about the fight over labor unions in the US state of Wisconsin. The popularity of unions has suffered greatly since the 1970’s as people recognize that unions can sometimes bring higher prices and contribute to unemployment.
Another purpose of unions is to shift power and income from the wealthy to the middle and lower classes. It is largely a response to Marxist economics that has largely become irrelevant in our modern society.
Stripped of the power to collectively bargain, Wisconsin public unions will have lost their ability to “act as counterweights to the power of big money. And unions are among the most important of these institutions,” argues Paul Krugman. “You don’t have to love unions, you don’t have to believe that their policy positions are always right, to recognize that they’re among the few influential players in our political system representing the interests of middle- and working-class Americans, as opposed to the wealthy.”
I have written before that I believe American politics is mostly concerned with big business and helping the profits and income of the wealthy. This seems another example of just that. At least there is some controversy and argument left in the American people.
A short book review gives us a new perspective on problems in the US economy.
In the early 1980s, in a book called “American Journey,” I calculated that American corporate chief executive officers were making 30 to 40 times as much as they paid average production workers. Looking back at that, I see that I was surprised to learn that that ratio had increased from 25-to-1 in 1970 — and that in other developed countries the ratio was closer to 10-to-1.It seems now that I was easily shocked in the good old days. Today that compensation ratio goes from 300-to-1 to almost 1,000-to-1 in the United States, if you count various perks, including stock options and pensions.
Massaging those numbers produces rather startling results, as recorded in a new book, “Winner-Take-All Politics: How Washington Made the Rich Richer — And Turned Its Back on the Middle Class” by Jacob S. Hacker and Paul Pierson, professors, respectively, at Yale and the University of California, Berkeley.
Apparently, the real message of the book is that American politics has become enamored–but probably bought off–by big business in the states. American policy has rewarded the rich at the expense of the poor and middle class and the voters have been vulnerable to marketing that works against their own interests.
It is sad, but the real problem is finding a solution. Bad income distribution does deter investment and development of industries that help most people. What are we gonna do?
Is Another Economics Possible–This article attracted my attention because I have been thinking, for a couple of years now, that another economics is necessary.
Disappointment followed as I read through the article. The views described are those of the World Social Forum, “based on more cooperative, sustainable, egalitarian and democratic institutions than those favored at (the World Economic Forum in) Davos, Switzerland.”
Textbook economics treats individuals as selfish optimizers, unconcerned about the welfare of others. Only recently have economists begun to explore the importance of fairness, reciprocity and altruism, and to consider the possibility that incentives to behave selfishly can undermine both moral norms and altruistic preferences.
Textbook economics also largely ignores worker-owned businesses and consumer cooperatives, although these are geographically widespread in the United States. Recent research suggests that many workers would like to play a larger role in the management of their companies and that “shared capitalism” works remarkably well.
Of course these views are only valid for a superficial sort of economics. In real economics, being a “selfish optimizer” includes our desires to help our friends and communities.
While I like the idea of encouraging cooperative enterprise and egalitarianism, those are not new ideas and there is not a new economics being introduced. only old ideals reborn.
A new economics needs to explain how the world’s markets are working, and how government policy can help or hurt social welfare. My opinion? We need to get away from the Keynesian measures of growth and employment. They are not the best measures of welfare and happiness and satisfaction with our lives. Ultimately, those are much more important than how much money and stuff we have.
Gourmet magazine is getting shut down. Worth a mention here mostly because my mother is a long-time subscriber. I don’t know how many meals she has prepared using recipes she found there, and she enjoys trying those new dishes, not just your meat-and-potatoes kind of meals.
On the economics side, we can probably classify this as a luxury good. As incomes have fallen over the last 18 months or so, people will budget much less for non-necessity goods. (I think my mom considers Gourmet a necessity good, but most people would not.) The article focuses on advertising revenue, down by 43%, almost three times the drop in American incomes, so clearly income elasticity is greater than one.
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From the “Letters to the Editor” section of the Christian Science Monitor, some frightening arguments that the US should turn away from free trade and globalization. A closed economy–or partially closed one–is one thing that kept the Great Depression around for so long. Many people know this–but the arguments are so easy to buy into–blaming other countries for the US’s own problems.
And I have some British friends who are happily blaming the US for their problems.
It is true that much of the developed world has seen the loss of traditional industries and many people have had to train for new kinds of work, exactly what free trade brings about. It is also true that free trade should be thanked for many years of prosperity for some, and ending extreme poverty for many others.
I have some sympathy for arguments that we do not need to increase production and income levels, only redistribute what we already have. Seems to me that free trade is doing a pretty good job of exactly that–creating manufacturing jobs and income for people who need it most.
The most frightening arguments for closing markets seem to come from nationalistic perspectives–a simplistic bravado.