plutocracy

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Ugly and Uglier

Is uglier even a word? Anyway: this is not about economics.

One reason I have not been very communicative in the past two months is my disgust at the state of the nation. America is simply not the place I came to live in back in the late 1970’s. It is a tired, aging, and deeply unsettled country grappling with an identity crisis and its steady loss of economic energy.

America as a myth was always built around the notion that it was a “land of opportunity”. That opportunity was open to as many interpretations as there were people thinking about it, but that was, I think part of the point. Most often opportunity meant, or at least implied, that citizens of the US has a better chance of personal success, of achieving financial security, and of being able to pass that along to future generations than people elsewhere. This was, post-war, largely myth: other countries were rapidly catching up and were building their own versions of the myth, such that the American exceptionalism people here are so proud of was deeply diminished if not eradicated by the latter end of the last century.

Freedom and opportunity abounded in the industrial west, it wasn’t just concentrated here.

Not only this but because of the politics of America since 1980 American reality and American myth parted company. The ability of the elite to speak of a “rising tide lifting all boats” began to sound very hollow, if not being an outright lie, as it became more and more obvious that certain parts of our citizenry were being tossed overboard to fend for themselves. Eventually, as we all now know, that part being tossed overboard constituted the majority and America became tightly controlled by and governed on behalf of a privileged few.

Discontent festered and was roused by the clarity that the myth had become a lie. The ability of the American capitalist machinery to act as a conveyor belt providing just enough prosperity to its workers to prevent insurrection broke down. And so we arrived at our populist moment where the seams of unity ripped apart and our citizenry turned upon itself in ragged and unhealthy conflict.

That this was eminently predictable is of no comfort to those of us who have railed against the neoliberal turn a few decades back. Division and the breakdown of solidarity was utterly inevitable as the elite dug ever more deeply into the national income.

The populist moment has produced the ugliest leadership in American history, and has allowed the most base instincts top rise to the surface.

America never faced its racist past and dealt with it. All comprise, of course, try to avoid their own ugly memories. Where those memories are more recent it is easy for them to cause conflict if they are replayed and dragged into the current spotlight.

The discontent that spilled over in the last election threw racism up in its wake. It is now clear that large sections of the population resented, or were willing to be led to resent, the historic presence of a black man in the White House. Everything Obama touched has become a litmus test for his unworthy successor. It is as if Trump is driven simply to undo the entire Obama era regardless of efficacy. There is no other agenda.

So it does not matter that healthcare reform may leave tens of millions of people without a health care plan, all that matters is that the hated word “Obama” is banished from the scene. Millions may have to suffer degradation, economic hardship, illness and even death in order for the current leadership to satisfy its urge. Despite the majority of the public supporting Obamacare, and despite the current Republican alternative being reviled and detested with only a mere 15% support throughout the electorate, the GOP marches onward to fulfill its promise. Obama will be effaced from memory. This single mindedness can only be explained by a deeper more visceral emotion than party politics.

That emotion is racism.

It shows too in the entirely different field of sports.

Trump has engaged in an entirely unpresidential slanging match with sports figures over the last weekend. Not only is it demeaning for a president to engage in social media slanging, it speaks volumes about his personal driving force.

The argument started last year when one American football player refused to stand through the playing of the national anthem that is a prelude to all sports events in America. His reason was simple: he was staging a protest against the apparent brutality of various police authorities against black citizens. He was and is entirely within his rights to stage a protest.

Trump, though, sees it somewhat differently. He sees the protest as an affront to the American flag and hence to the country itself. Others have piled on by arguing that the protest is disrespectful of the military who, those people assert, are single handedly responsible for the protection of American freedoms. It was Trump’s comment that players who don’t stand for the national anthem should be fired. Over the weekend Trump spent far more time slanging sports players and what he perceives as their disrespect than he did talking about the storm created crisis in Puerto Rico. Why? Both are instances of his basic enmity for minorities.

Oh: and it isn’t patriotic to stand and salute the flag. It is patriotic to stand for and further the values that America is supposed to represent. So the military does not have a unique responsibility to protect or further those values. We all do.

And, I think, the players who kneel during the national anthem are doing more for those values than Trump is. They are arguing for equal treatment before the law. Without which America is greatly diminished. The biggest threat to that equality comes from the bigotry that seems to motivate Trump and his ilk so strongly.

Then again, as Trump’s comments show, there is a significant minority of voters who object to and/or fear equality.

These are dangerous times. Economic inequality, financial insecurity, and now social unrest have undermined cohesion. Trump keeps opening up the divide.

His administration is ugly and getting uglier.

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Same Old

Allow me to break my silence for a moment and comment on David Brook’s latest apology for the status quo. I realize others have already done so, but I feel compelled to add to the discussion.

First: by way of explanation for my absence. I have been busy elsewhere, and especially busy looking at the future of the workplace.

Second: it is because of this detour that I want to take a shot at Brooks.

Let’s recapitulate Brook’s argument. He takes a look at the last couple of years and extrapolates. He wants to debunk that argument that the American economy faces a crisis of distribution, and replace that problem with another: America has a productivity problem.

Why is this important?

Because has become a totem of both right and left sided populists that the economy is failing to generate opportunity, income, and security for the vast middle class. It has become commonplace for us to read about the decline and/or disappearance of that famous center of economic and social gravity. This is especially true in the aftermath of the Great Recession of 2008, and the subsequent glacial pace of recovery.

If it is true that the economy has been rigged in favor of a few — the much criticized 1% and big business — then populists of all stripes have a good case and the debate becomes one of how to divide the spoils of growth more equitably.

If, on the other hand, distribution is not the issue, but the problem is the deeper one of growth itself then the debate can be shifted by the likes of Brooks back onto their preferred territory.

Brooks goes to great lengths to describe our economic problem as being a lack of productivity growth. He tells us that the recent uptick of 1.1% is miserable in any decent historical context. And indeed it is. But to focus on recent years is to miss the larger and much more historically important point: the last four decades have seen a growing chasm open up between the pace of productivity growth and the pace of wage growth. A divergence has emerged that belies the traditional and orthodox view in economics that productivity growth inevitably filters down [or up?] into wage growth. As David Ruccio points out in his own critique of Brooks labor productivity has risen 76.1% since 1987, whereas wages have grown only 5.5%.

During this time the share of our national income going to wages has shrunk whilst the share going to capital returns has increased.

Of course these two trends are linked.

And this is my point:

The early 1980’s saw a sea change in corporate management technique. In particular various ideas that had been marginal throughout the post-war period suddenly emerged as central to modern management. Primary amongst these techniques was the idea of “shareholder value”. This is a doctrine based upon the same sandy foundation as mainstream economic theory, and it is no accident that the infamous Milton Friedman was a cheerleader for its adoption.

The main thrust of shareholder value is that a corporation must be managed to maximize returns to shareholders and that other goals are distractions.

This was, at the time, a revolutionary redirection of the purpose of management. Up to that point managers were regarded more as administration specialists and were presumed to take into account a wide range of targets for their efforts. They were not expected to narrow their focus so radically as to exclude all but shareholders from their concerns. Indeed the most successful books on management prior to 1980 scarcely mention shareholders at all. More to the point: very few, if any, companies have internal by-laws dictating that shareholder value is the aim of the business’s existence. Their is no legal injunction urging management on. It is all an ideological construction.

But, along with the radicalization of economics itself, the doctrine of shareholder value swept to victory in management suites across the country. It became necessary for management to pursue ever higher returns to capital even if this implied an obsession with short term investment and the sacrifice of a longer term perspective.

Inevitably business strategists trying to make a name for themselves developed an entire panoply of ideas that supported this quest for returns on capital. A key one being the notion of core competence, which simple though it sounds, led to a revolution in the workplace and whole litany of subsequent ills.

Managers compelled by the incessant urging of Wall Street to increase profits sued the idea of core competence to shed, first layers of middle management, second peripheral activities such as IT, and then to ship entire parts of their companies abroad in search of lower cost labor and thus higher returns on capital. So the 1990’s became a decade of downsizing, outsourcing, and offshoring, and we end up with sone of our largest companies in terms of sales being slivers of what their predecessors once were. Apple, as an example, tells us that “is responsible” for about 750,000 jobs, but only around 75,000 of those workers are employed directly on Apple’s books. The rest are scattered around the globe and are subject to work and wage conditions that Apple blithely ignores.

Along the way, also in order to bolster shareholder value, corporations did away with a whole slew of benefits, they altered their retirement plans from “defined benefits” to “defined contribution” and thus placed the burden of financial planning on the shoulders of their workers. They reduced or eliminated costly training programs and preferred, instead, to rely on workers taking on the responsibility to train themselves.

The list of corporate activities that were re-invented in the service of shareholder value is too long to do justice to here, but the malevolence of the consequences are easily seen in the divergence of the rewards going to wages as opposed to those going to capital. Most of this shift could not have taken place without the revolution in information processing that obviated the need for middle management, and allowed the development of worldwide logistical arrangements that bolstered productivity, but far from likewise bolstering wages actually inhibited wage increases.

So Brooks could not be more wrong.

Apart from the onrushing threat of automation, which is constantly sold by its apologists as a boon for productivity, the distribution of the manna produced by all that productivity is our number one economic issue. The data simply doesn’t support his contention otherwise.

One last thing: even were Brooks to have a good argument his solutions remain firmly in denial of reality. In order to shake up a moribund economy that is struggling to generate much growth he suggests all the usual right of center policies such as the reduction of regulation and so on. What he appears to miss, or is ignorant of, is that our economy has become steadily more subject to oligopolistic control. In almost every industry oligopoly stifles precisely the kind of entrepreneurial activity he advocates. Such is the dominance of our largest companies that they act to slow down innovation which they see, rightly, as a destabilizing threat to their longevity. When Brooks and his ilk start advocating the break-up of our biggest banks, or the empowerment of the anti-trust part of the SEC, we will know he takes his own ideas seriously.

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Test Bed For Gridlock?

We all complain about the gridlock in Washington. Nothing, it seems, can get done. Everyone becomes more and more cynical and disenchanted with government. Our belief and faith in our key democratic institutions plummets. And so on. That’s the story repeated relentlessly in the media.

So wouldn’t it be nice if we could examine a microcosm of that gridlock, tease it apart, and expose its inner workings to see what the problem is. We would then have a small laboratory version of the whole to poke and prod under our microscope.

Well, guess what? We have just such a sliver. It’s called the Republican Senate Caucus. Let’s get cracking and take a look.

First, let’s establish the problem we are trying to solve.

Gridlock is our government’s inability to govern. Or, more precisely, to put into law the things that we out here in the hinterland of voter-dom want to see done. Yes, I know that the notion of voter homogeneity is ridiculous. The country is deeply divided on what ought to get done, so, to some extent, the lack of anything actually being done is welcome. It stops one side or the other from getting a raw deal. Gridlock is akin to trench warfare. There’s an awful lot of smoke and fury at election time, after which not much legislative territory has changed hands. Instead we all sit back exhausted and plan, however reluctantly, for the next major battle.

This time is different. Why? Because the Republicans own the entire legislative process from beginning to end. They can, in theory, do whatever they want. Indeed, last November they were jumping for joy at the prospect of unified government. They were energized, enthused, positively giddy, and triumphant. Now, they shouted to all and sundry, is our chance to enact a truly conservative set of policies.

Their first and most iconic target?

Obamacare.

Well here we are mired once more in gridlock. The trenches are filled with exhausted foot soldiers. The casualties are mounting. There are distinct rumblings of discontent in the ranks. The generals are being called buffoons. Their leadership is being visibly called into question. Failure upon failure is sapping morale. Worst of all: not a single yard of territory has been gained. Obamacare is still the law of the land. Its citadel is still untouched. Seven long years of promise produced nothing. Six long months of legislative siege have produced even less.

And this gridlock is the product entirely — exclusively — of the internal arguments within the Republican party.

This has nothing to to do Democrats.

It has nothing to do with our convoluted constitutionally belabored legislative process.

It has nothing to do with anything other than the party in power.

Which is a party that cannot muster its fifty-two Senators to stand together on what has been the most important issue ever according to its leadership.

Actually it didn’t even need fifty-two. It could have managed with just fifty and used the Vice-President’s vote as the decider.

So here we are in national legislative gridlock, not because of partisan bickering, not because of cultural or economic divisions on the country, and not because of the novelty of the issue at hand. No. We are in gridlock because fifty-two people cannot agree amongst themselves on a topic they all keep telling us is something they really want to deal with.

Never again should the media refer to partisan gridlock. Those days are over. We have exposed, in our little microcosm experiment, where the nation’s problems lie.

The Republican party has always been a coalition of disparate parts. Its unity has been paper thin for a long time now. The constant drumbeat of “tax cuts for the wealthy” has been the cement that held the rickety structure together. The cultural issue-driven conservatives, the libertarians, the corporate apologists, and even the few remaining old time moderates could all rally behind tax cuts.

What they could not rally behind was slashing healthcare for millions of people in order to deliver yet one more tax cut for the rich.

It was a tax cut too far.

All that time yelling and screaming about Obamacare was a hollow sham. None of the Republican leaders seem to have spent any time working their caucus to build an alternative. This is astonishing. Did they really think “repeal” was viable? Did Ryan or McConnell ever stop to think through what a healthcare bill has to have in it? Why were they not planning carefully for their attack? Did they think they would never be in charge? Are they that defeatist?

They became a party with no substance to back up its rhetoric. They became a party of permanent opposition and thus untethered from having to have alternative policies at the ready. Both Ryan and McConnell readied themselves to be, and prospered in being, naysayers. They never prepared to govern.

Their caucus took their lead. Heaping ridicule on Obama took the place of policy argument. Outright opposition took the stead of thoughtful critique. The radical right wandered even further right in an unmoored exploration of idealist fantasy, solving every world problem by exclaiming the virtues of free markets apparently oblivious to what the workings of a free market might be. The so-called House Freedom Caucus rose to great power because Ryan never reined it in — he’s a closet member anyway — and never thought to water down its ideological extremities as preparation for power.

In the Senate, once McConnell declared war on Obama within minutes of the latter’s victory in 2008, the scene was set for sterile parliamentary maneuvering as a replacement for thought. McConnell is regarded as a master of Senate rules and practice. He is clearly in the shallow end of policy making. He needs to stay in the shallow end. He nearly drowned when he set out to swim in the deep end to draft an alternative to Obamacare.

This exposure of the manifest divisions within the Republican party — recall that we are talking about a mere fifty-two people — gives us a clear source of our national malaise. Gridlock in Washington exists because our two party system is actually many more parties kluged together in an anachronism. They need to be set free.

In times of great change such as ours, when both society at large, and the economy specifically, are undergoing massive re-drawing of institutions, are shaking off tried and true traditions whilst trying on new replacements; while the influence of money and corporate lobbying stifle the expression of voter sentiment and allow the surge of enormous privilege to a very small part of society. And while demographic shifts alter the very nature of the electorate that seeks representation in  Congress, it is not surprising that our old two party alignment no longer fit the political landscape.

We need new political parties.

We just saw why. One of our old ones cannot solve a problem it regarded as iconic. Gridlock reins, not between our political parties, but within them. Yes this is a moment of great partisan division and conflict, but the strife is internal to the parties. The external conflict between them pales into weak skirmishing by comparison.

In short: the Republicans gridlocked themselves.

Now what?

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Healthcare Abyss

What are we to make of a major political party that is prepared to cast tens of millions of voters into the abyss? Really?

What are we to make of a major political party that had no response to its own signature battle cry? “Repeal Obamacare!” Then what?

Nothing, that’s what.

What are we to make of a major political party that imagined a topic like healthcare was simple? Or that it could get rid of a hated law without consequences? Or that it need not spend much time or effort in thinking through what to do next?

The bankruptcy of the Republican leadership is stark. Everything it now says is hollow. There is no meaning to its various initiatives because they totally lack substance. They lack thought. They lack cohesion. They lack connection to reality. They even lack conservatism. Above all else they lack morality.

Think about this: the final vote, aborted in any case due to deep divisions in Republican ranks, was postponed while we all waited for Senator John McCain to recover from surgery. His vote was viewed as pivotal. His surgery would have cost $76,000 to someone without insurance, and yet he was going to return to vote to end insurance coverage for about twenty million of his fellow Americans. His moral depravation is exposed for all to see.

And it is depraved to slash at the lives of so many people whilst snuggled in the comfort of your own well-being.

I have a great deal of respect for the long conservative tradition in politics. It is a point of view laden with rich history and intellectual substance. It demands of us that we think carefully and deeply about how to react. Those of us steeped in the more progressive tradition are foolish is we dismiss true conservatism lightly: it has enduring appeal and deserves the devotion of its admirers.

But this modern Republican party does not. It has shed all semblance of and relation to that conservative tradition. It has had no conversation with itself about how true conservatism relates to the modern economy or the modern society emerging as we enter the digital age. It is in persistent and massive denial of contemporary trends and their disruption of the very institutions that conservatives seek to preserve. We need modern conservatives to offer us thoughtful responses to these trends, not simply a spiteful or willful desire to retreat to some supposedly preferable past.

Because that past is exactly that. Past.

We need to engage now. We need to engage with what we face today. And one of the issues most demanding of such engagement is our national healthcare crisis.

American healthcare is plainly failing systemically. It is delivering poor results at great cost. It is shameful. And it is a deplorable waste of both financial and human resources. It is absorbing vast swathes of our economy that could be more usefully channelled into productive and wealth creating endeavor.

Ah. But that simply raises a parallel issue:

A more productive and wealth creating economy would be a happy home ground for traditional conservatism. It would be a challenge to traditional liberalism. How, for instance would we distribute that productivity-created wealth? How, my progressive friends, would the left describe its own response to the healthcare crisis? And how would the left respond, within its own longstanding and respected tradition, to the likely inequity of a thriving economy?

I fear that the healthcare abyss has swallowed both our major parties. Short term political gain has replaced long term social or economic vision.

No wonder the voting public turned to Trump. Our corrupt and bankrupt politics, so evident in this healthcare crisis, deserves to be trumped.

But the country doesn’t.

And that’s the shame of where we are now.

Yet there’s hope.

Lurking behind the collapse of the latest Republican effort is a simple truth that ought enthuse progressive voters. That collapse is the logical consequence of the contradiction at the heart of the republican’s own effort.

Here’s another thing to think about: ever since Obamacare passed into law the Republicans have been determined to get rid of it. This began as a “repeal” movement and an attempt to return our healthcare system to its pre-2009 state. However, as the years passed by and as people signed up for the dreaded Obamacare in droves it became increasingly difficult to envisage simple repeal. It is a cast iron law of politics that a massive social program, once embedded, is extraordinarily difficult to get rid of. The Republicans have railed and screamed about Social Security and Medicare for decades, but it is suicidal for a politician to run on a platform of their repeal. So now it is getting impossible to get rid of Obamacare. The status quo ante of 2009 is no longer a viable political goal.

This means that the Republicans have to offer an alternative that keeps the much expanded coverage but that matches their pseudo-conservative ideals. They want to lower taxes yet they need to finance the expansion of insurance. How? They simply don’t know. They want to roll back the expansion of Medicaid. How? They have no answer.

The deeper problem for the Republicans is that there is no answer to these questions. Not within their contemporary armory. Repeal looks so simple precisely because these questions would never arise or need answering. But once they did and “repeal” became “repeal and replace” they were forced onto the agenda and thus exposed the contradiction between contemporary Republican belief and political necessity.

The next logical step in Republican efforts to deal with this conundrum is to drop the “repeal” and focus, instead, on “replace”. And this is a triumph for the left because that implies what the Democrats have been arguing for all along: fix Obamacare. Don’t repeal it.

The fight is not over, but we are on the right road.

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Healthcare Update

The Congressional Budget Office released its analysis of the Senate’s healthcare bill. It is as damning as expected. All you need to know is encapsulated in this one chart from the report:

Here’s a clue to the real objective: near the bottom of the chart is a bar indicating the cost to the Federal government of removing the various taxes that helped finance Obamacare [the ACA mentioned in the chart]. That cost is $541 billion over the next ten years. This, obviously, knocks a vast hole in the budget and is not allowed under the arcane Senate rules covering budgeting. Those rules require any law affecting the budget passed by simple majority vote, that is a law that the equally arcane filibuster cannot slow down or prevent, cannot add to the deficit. It has to be what is known as “revenue neutral”.

So, having decided to cut taxes on the rich and the health insurance providers to the tune of $541 billion, what is a good Republican supposed to do?

Why: hammer the poor of course. Make them pay for the tax cut.

And, as the chart shows the Republicans propose doing just that and then some. Their bill, if it passes into law, would slash Medicaid spending by $772 billion over those same ten years.

In fact, if you look at the bottom of the chart the entire healthcare bill will save the government about $321 billion.

Why the discrepancy? Why cut healthcare for the poor by way more than the cost of the tax cut?

I am glad you asked:

You see, this is just the first step. Not content with this tax cut, the republicans want to follow this bill up with something they call “tax reform”. By this they mean yet another round of tax cuts for the rich. And they want to use the same arcane Senate rules to push that through because they know the Democrats won’t cooperate. So tax reform has to be “scored” by the CBO to appear neutral also. And here’s the neat trick: this neutrality is averaged, in effect, over up to three bills during a single year. The black ink of the healthcare bill can be used to offset the flood of red ink in the so-called tax reform process.

Now you get it!

The poor, through their loss of healthcare coverage via the reduction of Medicaid, are not paying for one round of tax cuts for the rich. They are paying for two tax cuts for the rich.

And the Republicans aren’t even embarrassed by the venality of what they are proposing. Instead most are applauding. The few holdouts, there are a handful, are all that stands between the poor and a plutocratic onslaught the like of which we have never seen.

Let’s see whether the rich get there way again. Want to bet?

 

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