Don’t miss the event … all signs are pointing towards the inevitable!
Bruce Judson on the Societal Dangers of Income Inequality By Roosevelt Institute | 12.08.11 |
I got the chance to talk with Bruce Judson, who has been writing the “Restoring Capitalism” column and whose comprehensive plan for reversing the rise in economic inequality will be published as an e-book, Making Capitalism Work
for the 99%: A Manifesto, this week. We talked about his work before the financial crisis that examined the startling rise of income inequality in the U.S., how it can lead to social unrest and instability, and what course we must take to correct these trends.
Bryce Covert: You talked about the societal dangers of growing income inequality in your 2009 book It Could Happen Here before it was on the national agenda. What made you pay attention to the trend?
Bruce Judson: I started discussing the book with Harper Collins in 2007. At that time, a number of prominent people were also very concerned about it, including Paul Krugman, Robert Reich, Elizabeth Warren, and Roosevelt Institute Chief Economist Joseph Stiglitz. They all said it was dangerous for our democracy. But I kept wondering why. What happens next? So I started my own research.
In the book, I took a historic perspective on what happens when extreme inequality arises in a society. It describes a series of steps, or a narrative, for how growing economic inequality can ultimately lead a democracy to implode. The book argued that if economic inequality in America continued unchecked, it would lead to a dysfunctional economy, even greater political polarization, ultimately political paralysis, anger and mistrust throughout the society, protests, and eventually reform or some type of political instability.
Sadly, each of the stages of misery seems to be happening like dominoes falling. And I am convinced the Occupy movement reflects the coalescing of the deep and unfortunate anger that pervades our society as a result.
Cont’d below the fold …
BC: What historical trends stood out as most similar to our situation?
BJ: I was terrified by the similarities between our society and the era of the Great Depression. As a nation, we were moving toward levels of economic inequality we had not seen since the financial crash of the late 1920s. My reading of history, of events surrounding the New Deal era and the Depression, is that excess inequality tended to be associated with high speculation and a lack of appropriate constraints on the financial industry.
In essence, I came to believe growing economic inequality was intimately linked to economic catastrophe, which would be so great that it would tear our social fabric.
BC: Why is inequality so destabilizing and dangerous?
BJ: There are very few things in America that are taboo. But one thing we never, ever talk about is the potential for political instability in the U.S. We’re taught as children that we had one great revolution. We take the stability of our democracy for granted.
But economic inequality is very dangerous, and the reason is that in our society wealth and power go together. As wealth becomes substantial, it starts to use its political power to ensure its hegemony and mucks up the important, competitive elements that make capitalism work. Over time, what was formally a vibrant economy with efficient markets becomes an inefficient, dysfunctional one.
Here’s a recent example. The New York Times wrote that Wall Street does not want a transparent market for swaps and that Washington politicians were listening to its demands. The reason for the opposition is that, in effect, traders make more money by keeping “prices in the shadows.” A transparent market means that you have the equivalent of a stock exchange, where all participants can see the prices of recent trades. That’s all it means.
It’s hard for me to see how this would even be a serious discussion if the financial industry did not have political influence. Is there any public interest in a market that is opaque, rather than transparent?
Lane Kenworthy, The Good Society
September 2015A generation ago, perhaps even just a few years ago, worry about high or rising income inequality stemmed mainly from a belief that it is unfair. In recent years the source of apprehension has shifted. The dominant concern now is that inequality may have harmful effects on a range of outcomes we value, from education to health to economic growth to happiness to democracy and more. Does it?
HOW SHOULD WE ASSESS INCOME INEQUALITY’S EFFECTS?
The most informative test, which I’ll use here, is to see whether changes in income inequality in the world’s rich countries correlate with changes in the various outcomes. It’s important to understand why this analytical approach is useful, so bear with me for a moment while I elaborate.
Research on inequality’s effects has examined countries, regions (states, counties), cities, and individuals. I focus on countries for two reasons. First, the nation is where we now have the best data on income inequality, with income measured including transfers and taxes, reliably comparable across units, and covering a relatively long period of time. Second, countries are the unit of greatest interest from a policy perspective. Most of the relevant levers for influencing income inequality are at the level of the national government, rather than the region or city.
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I examine eighteen affluent democratic nations for which we have data on income inequality and on many of the outcomes of interest: Australia, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States.DEMOCRACY
Rising income inequality is hypothesized to have polluted American politics by (1) reducing trust in political institutions, (2) reducing voter turnout, (3) increasing polarization between the two parties, and (4) increasing the influence of the rich on policy decisions.
The first three hypotheses don’t square with the over-time patterns in the United States. According to data from the American National Election Studies (NES), trust in government and in the political process began declining in the 1960s and continued in the 1970s, before income inequality began increasing. And during the period of rising income inequality since the 1970s, political trust has changed very little.
Voter turnout in presidential elections also declined beginning in the 1960s, prior to the rise in income inequality. Moreover, it reached a low point in 1996 and has increased since then, returning by 2008 to the level of the early 1960s. Voter turnout in off-year elections has not changed since 1974, despite the steady increase in income inequality.
Party polarization refers to the fact that elected Republican legislators have moved to the right on key economic issues while Democratic legislators have moved to the left. Here too, timing is a problem for the “inequality is harmful” hypothesis. In the authoritative study of party polarization, Polarized America, Nolan McCarty, Keith Poole, and Howard Rosenthal write that “In both chambers [the House and the Senate], the Republicans became more moderate until the 1960s and then moved in a sharply conservative direction in the 1970s. The pattern for the Democrats is almost exactly the opposite. Consequently, the two party means [average party positions] moved closer together during the twentieth century until the 1970s and then moved apart.”104 Income inequality between the top 1% and the bottom 99% didn’t begin increasing until the 1980s, after the polarization of the parties commenced. And income inequality within the bottom 99% hasn’t changed much since the mid-1990s, yet party polarization has continued unabated.
What about inequality of political influence? Money clearly matters in American politics,106 so with the richest getting a large and rising share of the country’s income, it’s sensible to hypothesize that they would have growing success in swaying policy makers to support their preferences.
Austerity policies do more harm than good, IMF study concludes
A strong warning that austerity policies can do more harm than good has been delivered by economists from the International Monetary Fund, in a critique of the neoliberal doctrine that has dominated economics for the past three decades. In an article seized on by the shadow chancellor, John McDonnell, the IMF economists said rising inequality was bad for growth and that governments should use controls to cope with destabilising capital flows.
The IMF team praised some aspects of the liberalising agenda that was ushered in by Ronald Reagan and Margaret Thatcher in the 1980s, such as the expansion of trade and the increase in foreign direct investment. But it said other aspects of the programme had not delivered the expected improvements in economic performance. Looking specifically at removing barriers to flows of capital and plans to strengthen the public finances, the three IMF economists came up with conclusions that contradicted neoliberal theory.
“The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries,” they said. “The costs in terms of increased inequality are prominent. Such costs epitomise the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
“Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.”
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The economists rejected the notion that austerity could be good for growth by boosting the confidence of the private sector to invest. It said that in practice, “episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1% of GDP increases the long-term unemployment rate by 0.6 percentage points.”
Up All Night: France’s young target Hollande over labour reforms | The Guardian – May 14, 2016 |
In Paris’s Place de la République, in the shadow of Marianne – the allegorical symbol of liberté, egalité, fraternité – all the talk is of defiance, despite the many baton-wielding riot police.
After an extraordinary week in which France’s Socialist government resorted to emergency constitutional powers to force through deeply divisive reforms to employment law – avoiding a parliamentary vote it would almost certainly have lost – the youthful movement whose protests have spread across France is debating its response.
“We had had enough before. Now we’ve had enough of enough,” one participant in the Nuit Debout (Up All Night) movement that has occupied the central Paris square since March said yesterday.
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Supporters of the Nuit Debout movement in Paris's Place de la République. (Photo: Jacky Naegelen/Reuters)The youth-led cause has been taken up across France, but Place de la République – still a shrine to those killed in last year’s terrorist attacks – has become the rallying point for protests against the “El Khomri law“. (It is named after work and employment minister Myriam El Khomri but happens to sound a bit like connerie – bullshit.)
Scenes of riot police in protective gear clearing the square with teargas were broadcast around the world and made the square look like a war zone, but most evenings the atmosphere is more like a music festival: people sit around smoking, drinking beer, discussing politics and planning a workers’ paradise.
There are makeshift tents and stands: Poètes Debout, Avocats Debout, Cinéma Debout, Ecologie Debout, Féministes Debout. There is a medical centre, a canteen, even a welcome stand.
Hollande dictates labour reform as strikes, fuel blockades and petrol shortages continue
The employers’ federation, Medef, said the strikes would have a negative effect on France’s fragile economic growth. its head, Pierre Gattaz, said the government should resist “blackmail”, calling the strikers “thugs”.
The government is under increasing pressure to find a way out of the standoff, but neither president nor unions have indicated they are prepared to budge.
While there were still long queues at petrol stations in some parts of the country on Friday, the situation eased slightly in some areas as union blockades of fuel depots were lifted. But six of France’s eight oil refineries were still shut down or operating at reduced capacity as a result of the union action.
Strikes continued at nuclear power stations – which provide three quarters of the country’s electricity – but have not affected supply.
Polls have shown that a majority of French people blame the government for the crisis, saying it mishandled the reforms. An Opinionway poll found 66% of French people think the government should abandon their plans.
The French counterstrike against work e-mail | The New Yorker |
Even if the best candidate isn’t elected president in this election cycle, Bernie represents more than himself …. the movement with a social face is here to stay in the coming years with appreciation of the younger generation and like-minded elders in American society. Gender equality should be part hereof, in addition to a fight against racial bias in society.
Founded in the bloodied French Revolution, the U.S. Constitution is lacking a bit of liberté, egalité, fraternité.
