plutocracy

/ , / , , , , , , , /

The Times Are Changing – Tax Style

The following is part of correspondence I had recently with a friend here in Vermont:
The purpose of increasing taxes on the wealthy is twofold: one is to raise revenue; the other is to prevent growing concentration of wealth.  I think the second of the two is the more important.  The American system of opportunity and so on was founded on society being more equal than it is [not equal, but more equal].  As wealth gets entrenched further each decade inequality erodes that system and would eventually replace it with an “old world” class system.  So taxes on wealth are a buttress for democracy as much as a source of revenue.
As for the funding for the various social and infrastructure being bandied about at the moment: I see no reason for us not to augment the increase in revenue generated by the above mentioned taxes by judicious borrowing and the implementation of new taxes such as the “Tobin” tax on financial transactions you mention.
One of the most frustrating aspects of the current discussion is that whenever a social program is muted, so-called experts immediately decry its expense and the impact on the deficit.  We have to remember that the biggest cause of our current deficit has been the accumulated impact of the Reagan/Bush/Trump tax cuts none of which induced a corresponding increase in economic activity sufficient to allow the government to recoup the lost revenue. The only long term impact on the economy those tax cuts have had is to create the inequality we now suffer from.
Lastly: yes, we need to improve government efficiency, but the savings are likely to be minimal compared with the cost of additional programs.  One source of waste right now is the excessive use of consultants and private contractors who are outside direct government oversight.  In-sourcing those activities, and then providing suitable incentives for government employees to increase efficiency, ought to be high on our list.   Corporate style cost-cutting is unlikely to be effective [attractive as it sounds] because of the very different incentive structure in the public sector.  Don’t forget that a majority of the cost is a consequence of legislation, and our public employees have no salary or bonus incentive to get rid of waste.  
A critical question that we all need to ask is: what share of GDP ought pass through the government?  And then we need to fund that share properly rather than executing tax cuts without making corresponding spending cuts.  In a fully functioning democracy that share is more likely to be 30% rather than the current 20% [approx.].  If we are having that discussion we are at least getting at core issues rather than being lost in pointless argument.
Ironically, I think that’s where we are headed as the Democratic party shifts itself to the left somewhat and engages in a discussion of what the appropriate level of social and infrastructure spending our government ought engage in.  Unfortunately the GOP and a portion of the media are stuck in 1980.  Which is not constructive, and doesn’t address our issues. 
PS: The Warren proposal is based on the work of Piketty.  It is one of the first attempts anywhere to make practical use of his insights.  See his blog.
I have to admit that I find the entire current discussion very annoying.  For the better part of four decades the wealthy have perverted the economy and rigged it in their favor.  The research by Gilens and Page is decisive in this regard, not that most of you need persuasion.
Having benefitted from this deliberate skewing of economic outcomes in their favor we are now treated to endless bleating by the wealthy about the so-called “harm” that undoing the damage would do, not just to the wealthy, but to society as a whole.  Apparently incentives to work would plunge and investment would plunge even further.
Neither of those outcomes is likely to happen.  The wealthy will still be driven to accumulate more wealth, and they will still need to find investment opportunities for whatever wealth they possess.
Besides, as all the recent literature on stagnation has illustrated, the flow of investment in the past few decades has not sustained economic growth.  There is a better argument to be made that the wealthy have preferred to park their assets in the financial system rather than in the real economy because with rising inequality has come a constraint on consumption and hence a brake on returns in the real economy.  In other words, the wealthy have shot themselves on the foot.  And the rest of us are collateral damage.
Even more annoying are the inevitable bromides spewing from the mouths of the so-called centrists who decry the fiscal consequences of the social programs now being actively discussed in American politics.  In an eery replication of arguments of years gone by, they carefully warn against the budgetary impact of spreading the wealth more evenly throughout society via social and infrastructure spending.  We simply cannot afford it.  This argument is especially leveled against the various forms of universal health are being proposed by our bevy of Democratic presidential candidates.  They are simply being sensible they say.  There is no room for such a radical expense.
Phooey.
Of course there is.
The problem, as ever, is getting the entrenched and the privileged to play ball with the rest of us.  Their excessive accumulation came at our expense.  Now it’s time to even things up a bit.
Perhaps what’s most encouraging about the present furor over these new plans for social programs is that we are having the discussion at all.  The very act of proposing a wealth tax, or a renewed top rate of 70% for income tax, represents a sharp discontinuity in the framing of political argument.  The tide seems to have shifted against the neoliberal, and and its neoclassical underpinning, and in favor of something else. Quite what that is we have to determine, but the discussion is going to take place on very different terms.
Which helps explain why the rising tide of objection from sundry billionaires who decry such tax proposals as “extreme” or “dangerous” looks so pathetic.  Their self-interest can scarcely be hidden by their outcries of erstwhile sense.  Their problem is that their privilege has become dangerous to society and needs to end.
The real sense is to rid ourselves of such privilege.
I am reminded of a statement by Beatrice and Sidney Webb back in 1923:
“There can be no permanence in a situation in which we abandon production to capitalism, and yet give workers the political power to enforce demands on the national income which capitalism has neither the ability nor the incentive to supply.”
How true.
And now we arrive back at a point when that conflict becomes more evident.  The counter-cycle to the neoliberal era has arrived.  The Reagan/Thatcher denial of the social is being denied itself.
How far this new cycle runs will be interesting to see.  But I doubt the billionaires will like what is about to happen.
Addendum:
In my correspondence included above I could have added references to all sorts of other taxes and changes to taxes.  For instance: a carbon tax; the elimination of privileges to capital incomes versus work incomes; and so on.  The opportunity to generate revenues is a long list.  So the wealth tax and a new top rate on the income tax are just a beginning.

 

/ / , , , , /

Elections Matter … Right?

Elections Matter … Right?

Well, only if those being elected have an inkling of what their constituents actually want.  And it seems that, here in America at least, there is a considerable gulf between what those who are elected think are the key issues and what those who do the electing think of as the key issues.  The lack of overlap is distinctly upsetting.

We are constantly being told that the US is a relatively conservative nation.  This is why some of the more obvious social democratic remedies for our economic and social ills are considered as beyond the pale. They won’t fly here, we are told, because Americans won’t go for them.

This is odd when we think about how extremely popular programs like Social Security for retirees and Medicare for the elderly are.  Despite the regularity with which the Republican party derides such programs, and despite the dire predictions that said programs will reduce America to some version of abject Soviet-style penury, the voting public simply loves them.  Getting rid of them is impossible.  This is why the only approach that remains to our political right is to starve the government of revenue sufficient to pay for “entitlement programs” so that the debate is shifted away from their efficacy and towards their affordability.  No one doubts their efficacy.  But we seem always to be discussing their affordability.  The US, we are told, despite being the wealthiest economy on earth, just can’t afford entitlements.

Even that word: “entitlements” is an attempt to pervert the narrative.  It makes the programs in question sound as if they are gross luxuries that require the pillaging of one person’s wealth in order to satisfy that of others who feel  entitled to something that is not rightly theirs.  So instead of being a reward for, or right of, citizenship social programs are presented purely as a burden on those unfortunate enough to have sufficient wealth to pay taxes.

The poor dears!

In any case, the gap between the perspective of our elected officials, their staffs, and the commentariat who opine on such matters, and the actual perspective of voters has reached a critical level.  I submit that the gap accounts for a substantial portion of the motivation driving what is thought of as populist politics.

If it is true that our elected officials, and the bureaucracy that administers policy, are tone deaf to the real world experience of the voters, and if officialdom persists in executing policies directed to solve problems that the voters don’t think they have, disillusion will inevitably result.  On both sides.

Officialdom will become cynical as to the apparent surliness of the electorate, and voters will become increasingly cynical about the motives of officialdom.  An opening will exist for the truly cynical populists we see cluttering politics right throughout the western world.

The disconnect is dangerous for the health of democracy.

Today’s New York Times has two columns (one analysis and one opinion) devoted to this issue, so I don’t need to go any further with it.

Except.

For anyone remotely aware of the stranglehold corporate America has on the legislative process via its lobbying efforts none of the above is at all surprising.  As the inestimable work of Gilens and Page  so clearly informs us, corporate America exerts an undue influence in Washington, and one consequence of that influence is the extraordinary bias it gives to the issues deemed important to policymakers.  This is not a question of money in elections, it is more a matter of corporate ability to dictate the legislative agenda subsequent to elections.  The corrosion of officialdom’s ability to understand the needs and/or wants of the electorate is due to the extraordinary capture of the legislative process by a small minority.  Of course policy is ineffective or non-responsive to widely held opinions.  Those opinions are being crowded out.  There is a giant blockage in the workings of our democratic machinery.

Let me leave you with the final paragraph of the Gilens and Page paper I linked to above:

“Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts.  Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a wide-spread (if still contested) franchise.  But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.”

Yes, elections matter.  But, apparently, lobbying can neutralize them.

 

/ , / , , , , /

Clueless or Just Plain Stupid?

Here we are deep into the dark forest known as the Trump administration and half my friends are still grappling with the 2016 election result. How come America elected an erstwhile tyrant? How come a boatload of voters look quite happy tossing so-called democracy overboard?

Well, as you know, I have a simple answer. Money. Or, more precisely, the lack of it. If there is one characteristic of contemporary America that stands in stark contrast to those happier times a few decades back it is the corrosion of self-confidence and belief that  is a direct consequence of the obliteration of wage growth.

For some reason that eludes me our policy elite — both parties, the big media, academics, and business leaders — all fail to understand that for them to be allowed to govern peacefully on behalf of the masses they need to deliver the goods to those masses. Else they get a rude awakening.

This particular rude awakening was the arrival of the nincompoop called Trump.

Elites gain and keep power through two methods: one is the ballot box, which has the advantage of being relatively peaceful, and the other is force. Our elite tried to invent a third way, which is corruption of democracy and its perversion into plutocracy. The ballot box stayed in place, but was rendered increasingly meaningless by a relentless campaign to subvert electoral decisions by drowning the legislative process in oceans of lobbyist distributed loot.

This effort was a huge success.

Our elections have become irrelevant. No matter which party is elected subsequent legislation will bolster the elite at the expense of the masses. Meanwhile those masses are then told to buckle up, work harder, get better educated, and get ready for austerity. Why? Because hard times are upon us and we can’t afford any goodies for the masses. Entitlements are programs for the masses and sound greedy. The national interest is a program for the elite and sounds lofty. Nowadays the two no longer intersect. So entitlements have to go. After all the national interest sounds like a lofty goal.

[Wave the flag here. Start a war there.]

Meanwhile in the trenches, and as part of this program, corporations have adopted a strict shareholder value policy that is intended to drive down wages. Employees being a cost rather than an asset, they are homogeneous, malleable, and ultimately disposable. What were once benefits used to entice worker loyalty have become costs to be cut. The extra cash available is then funneled to shareholders who shift it abroad to avoid taxes or to invest in places with cheaper labor.

Which brings me to our new Fed chief Jerome Powell.

Is he clueless or just plain stupid?

Having been complicit in the above game, although his comments suggest he had no clue about the ideological content of the game, he spoke yesterday about his surprise that the newfound strength of the economy, its low unemployment, and the influx of cash to corporations generated by the recent tax cut wasn’t generating a surge in wages.

His antiquated and ideologically driven economic models tell him this is odd.

So he expressed surprise. He actually used the words “puzzle” and “mystery”.

What a dolt.

There is no puzzle. Nor is there a mystery.

American elitist policy has been explicitly constructed to squeeze workers to the bone in order to bolster profits. Those policies are indifferent to the state of the economy. They are an expression of power. And contemporary power resides in the hands of the corporate elite. Since the balance between wages and profits is not a function of the exquisite mathematics of neoclassical economic theory, but is determined, instead, by raw power, the fact that economic indicators suggest that wages ought to be rising is irrelevant.

The real factor to watch is the balance of power which is something economists explicitly ignore in order to maintain their ideological purity.

And the struggle for power just threw Trump into the finely tuned gears of the elite’s self-enriching engine.

Let me correct myself: I don’t think Powell is either clueless of just plain stupid. He is simply trying to ignore reality.

Because reality has become inconvenient. It contradicts what our elite prefers to believe.

So rather than waste time tearing their hair out over Trump’s manifest ignorance and disregard for democracy, perhaps my friends all ought to be pondering their own role in transferring power to the unelected elite that is currently enriching itself and starving the masses of a prosperous and secure future.

So who is clueless?

Who is just plain stupid?

Do you want democracy or not?

If you do, ponder on the state of the demos.

 

 

/ , / , , , , , , /

Why Innovate?

Every so often one of the numerous news feeds that fill my inbox contains a story that stops me short. In this era of Trump dominated news I have become numb to the corruption that he has brought in his wake and to the absurdity of his autocratic style with its contempt for the rule of law. Instead I focus on why it was that so many Americans were willing to elect someone so ill fitted to the job. The insecurities of the contemporary workplace offer a partial answer. So when I read Steve LeVine’s “The Future of Work” feed from Axios recently, not only did it stop me short, it gave additional insight into that electoral conundrum.

Not that I was reading anything particularly new. Sadly the there was no news. What struck me, however, was the brazen attitude and expression of the CEO’s quoted. LeVine didn’t give us his source, I assume it was some conference or other, so I am simply quoting his article verbatim before I comment:

Now I don’t want to appear a Luddite, I appreciate the march of technology as much as most, but there ought to be a social benefit from that march. In the past the great waves of technological change have wrought equally great waves of social upheaval. We are all aware that the social and economic histories of the past two hundred years or so are deeply intertwined. We can reflect on the massive increases in standards of living that flowed from those past waves. We recognize that the average person today is far better off materially than even the wealthiest person of the pre-industrial age.
We are all better off in other ways too: we eat better and live longer than our predecessors.
Those previous upheavals forced changes in our political structure too. This is what, I imagine, must frustrate utopian thinkers of both extremes in politics. Instead of creating a seething and volatile working class that then seized power, industrialization and its aftermath simply multiplied the middle class. It opened the doors hitherto barred to most ordinary people. It spread opportunity and reward  more widely than at any time in history.
But we would be naive to extrapolate from that experience. Or, at least, we would be naive to assume that the progress we now reflect on as being the inevitable consequence of prior waves of technological innovation will be reproduced by the current wave. It took a long and difficult struggle to wrest generalized progress from those prior waves. Capitalists do not surrender their gains easily. We must remember the unrest that was necessary to force a more equal distribution of the social gains innovation produced.
What is different in this wave of change is the breezy technocratic framing given too its consequences. CEO after CEO blathers on breathlessly about the future. Wages, we are told, will never again rise across the board. No, not this time. This time only the skilled will benefit.
We didn’t have the same corporate structures before. In the past the battle was more raw. Workers and capitalists were in more immediate contact. Most large business empires were privately owned by their founders or their families. So conflict was more intimate and could be more easily characterized in utopian or ideological terms.
How do workers engage in battle with technocrats? How do they re-frame the discussion in the face of a managerial elite educated in endless technical justifications for efficiency and shareholder value as the exclusive goal of what we all call work? And how does society justify having to absorb the entire cost of an upheaval foisted on it by the motivation of private interests searching for private gains?
Most of us did not ask for all this automation. We did not necessarily agree with the redefinition of corporate objectives that excludes workers as being on a par with shareholders in the division of incomes. It is all just happening to us.
Let me reframe my thought: why innovate if the consequent changes don’t make us better off? All of us, not just the owners of the machines. There ought to be a congruence between both private and social gains. Otherwise we no longer live in a democracy. Because in a democracy the benefit of the majority is its defining characteristic. That’s why we invented democracy: to make sure the gains of innovation were fairly spread across the entire population rather than concentrated in the hands of a few. Democracy is designed to undo the extremes of capitalism. If it fails, if we allow it to fail, then the dystopia hidden behind the blank technocratic blandness of the CEO’s quoted by LeVine will deprive the the majority of the inevitability of progress so often assumed by the cheerleaders of technology. Such a future would have no democratic legitimacy. It would be a fraud on the efforts of of bygone workers.
Why innovate to produce such a future?

/ , / , , , , , , /

The Future of Work is Now

The future of work has become one of the most hotly debated and analyzed topics of the past couple of years. No one with a pretension of a serious nature or a desire to be seen opining on the “big” issues can afford not to have a point of view on it. Thus we are bombarded by an endless torrent of articles, books, academic papers, and speeches on the way in which the workplace will be changed by the emergence of  various technologies. The usual umbrella under which these technologies lurk is the one we call artificial intelligence.

There is no doubt that AI will have an enormous impact. There are countless breathless accounts of the number of jobs that will simply disappear as AI sweeps through the economy. These accounts usually appear from those involved in the invention and application of AI. They all end up expressing some form of fatalistic vision where the workplace will inevitably collapse under the impress of technology, wages will similarly collapse for those poor souls unable to keep up with the onslaught of robotics, with the resultant picture being grim for just about everyone except for the few who remain in the so-called “knowledge economy”.

The almost total agreement between all these accounts with respect to the dystopia they articulate is matched only by the paucity of mitigating prescriptions. Just about all of them agree that education is the only escape hatch available to the ordinary worker. Consequently there are as many equally breathless accounts about the need for everyone to engage in constant learning of one form or another as there are accounts of the impending wage disaster if we don’t all suddenly become perpetual students.

While I count myself amongst those concerned about the AI dominated future I consider myself a bit of a heretic.

Why?

Well, for one, no one has yet explained adequately how all this education will be paid for. How, for example, would a displaced worker afford the time or expense to make a transition, undergo a re-education, and yet still finance a continuation of her lifestyle? The unremittingly libertarian core creed of the technologists bringing us the future would appear to eliminate a collective response to this question. The state having been gutted of revenues here in the US is hardly capable of stepping in to play the role of financier of last resort to all this education.

Without an answer to this question all analyses ending with a call for ever more education are, in my opinion, sterile and worthless.

And any of them that do provide an answer that includes a role for private employers is simply missing the point: private industry has, for decades now, withdrawn itself from worker education.

Which is my main point today.

The future of work, if by that we mean the reconstruction of the workplace as a fractured, lean, and bleak landscape, is here already. It is here courtesy of the efforts over the past thirty years of private industry and its pursuit of shareholder value.

This salient fact is missing from the discussion by those obsessed by AI. They ignore the recent history that has seen a massive shift of risk onto the shoulders or ordinary workers. A shift that went unbalanced by an equal shift of reward such that prior standards of living were not undone.

The brilliance of the corporate adoption of the notion of shareholder value is that it provides what appears to be a profound and irrefutable logic to explain the grubby grab for a greater share of the national wealth by the shareholders of the economy.

Nowhere is it said that the objective of management is to maximize returns to shareholders. Nowhere, that is, except in the mainstream management literature. The notion of shareholder value is a modern conceit. It was constructed as a consequence of the unfortunate anti-social turn in economics during the 1970’s. It is a natural outcome of the determination of large corporations to push back against the post-war social contract that allowed space for increasing wages for workers. Those wages were viewed as an appropriation of profit that “ought” go to shareholders. After all those shareholders were being re-invenetd as noble entrepreneurs taking risks in order to provide the energy that resulted in growth from which workers would then benefit.

The problem during the 1980’s and later was that the economy’s innovative energy was apparently dissipating. Growth was slowing down. Gains in productivity were becoming patchy and harder to extract from arriving technologies. And yet the demands of investors were not recognizing this slowdown. On the contrary the demand was for ever increasing returns on capital.

One way of meeting the demand for higher returns in an environment that appeared to militate against them was to change the goals of the entire corporate reason for being.

By simplifying the purpose of a corporation and focusing it exclusively on shareholder value the way was opened for increasing portions of the national wealth to be allocated to profit, away from wages, and thus satisfy the rising demands of investors.

The consequence was a constant re-writing of the workplace arrangement, with every step designed to reduce worker compensation so as to free up cash for profit.

Nowhere has this process been more successful than in the deterioration of the value of benefits included in the overall compensation package workers now receive. The average worker is now more responsible for their own benefits than at any time in the post-war era.

But this shift of risk away from shareholders and onto workers was insufficient to maintain the momentum of returns to capital. More was needed.

Hence the adoption of more extensive measures such as outsourcing, offshoring, and the adoption of contingent work arrangements. All of these are logical consequences of the drive for ever more profit. And they have been standard practice for two or more decades.

The result is that our current workplace bears little resemblance to that of the immediate post-war years. It is dominated by contingent work, by a paucity of benefits, by stagnant wages, and by a the collapse of true opportunity. It is a bleak place. And it is here already.

Despite this there has been practically no institutional response. The policy conversation still takes place as if the older, richer, and more reliable workplace still dominates. Private industry having stripped away at the share of wages in our economy bemoans the inevitable slow growth. It takes no responsibility for having shaped the macroeconomic landscape. Our politicians are obsessed over the future and the onrush of AI and related technologies, yet they ignore the threadbare landscape in front of them.

Yes technology will shape the workplace. Yes it will produce a future of work. Yes we need to be concerned about that.

But what about the workplace shaped by the ideologically driven technology of shareholder value?

That technology has already produced its own future of work.

And that future is now.

We need to deal with it.

«< 4 5 6 7 8 >»