Blame the Stock Market for Income Inequality

From a Google Image Search – Wall Street Journal

Sometimes when you sit in the cheap seats, up in nosebleed territory, the world below seems far away and small. Although the individual actors may lose definition, the view offers compensations in terms of seeing overall patterns, movements and strategies. Watching the economy from the cheap seats is very different because all the action is above where all the rich folks are, and the cheap seats are below, sometimes far below. When doom befalls those in the pricey seats, the fallout reaches to the cheap seats, and although the impact is less, it makes already difficult lives tougher. But in the pricey seats there can be mayhem – some win – some lose – some topple back to the cheap seats. When those in the expensive seats, the box seats, win, the people in the cheap seats can watch the celebration but they are not invited to the after-party.

What my analogy says is that you don’t have to be an economics major to know about the ebb and flow of money in the world. And you don’t have to be an expert to draw some interesting conclusions. Listen to the news. Pundits quite often point out that people at lower income levels do not own stocks, but most economic decision-making must consider how bills, laws, regulations, taxes, all things economic (even tariffs) will affect the stock market. That means that the economic needs of folks who do not own stocks don’t matter much in decisions that affect the economy. Even so, the whole economy, top-to-bottom is affected by whatever economic measures are taken. The poor can get poorer, or there may be times when a flourishing economy at the top temporarily lightens economic stresses at the base.

Progressives blame Capitalism for the economic inequality that has become increasingly apparent both in American and globally. But if you listen from your cheap seat you eventually understand that a lot of the blame belongs with the stock market. Capitalism can and did exist without stocks or stock markets, but once the stock market turned investment into a game that anyone with money could play, it was as if Capitalism went on steroids. 

In order for the partnership to work, industry and business have to keep the investors happy with ever-bigger profits, rising stock values and higher dividends (if they are offered). This means that workers only get higher wages after owners and stock holders get paid. Since businesses get more investments when profits go to stock holders than when they go to workers guess who gets robbed?

When there were strong unions, workers could demand a share of the pie and then stop working (walkout, go on strike) if they were ignored. Conservatives have always opposed unions, but in the past decade they have managed to weaken unions by passing right-to-work laws which have stripped workers of much of the power they once had to act as a balance against the demands of stock holders. The market is doing well, worker incomes are not.

The profits that go to shareholders keep making those who have stocks and those who own businesses richer, and since money equals power, these particular citizens are able to exert a lot of pressure in Washington and can keep getting laws passed that favor those who are already wealthy. Lobbyists, PACS that fund elections, laws like the Supreme Court decision that gave free speech (and votes) to dollars (money equals speech, corporations are people) have expanded the power of wealthy Americans who own stock. And because those who cannot afford stocks know that everyone is hurt if the stock market tumbles they are afraid to oppose even the most outrageous legislation (like the Trump tax cuts) because they don’t know how their opposition will affect the overall economy and their own everyday lives.

The stock market becomes a rocket that delivers more and more money to those who already have it and turns workers into statistics in a global worker market where American salaries already seem too magnanimous. 

If it is the stock market that is responsible for a lot of the economic inequality that exists then do we do away with the stock market? Well, good luck with that. And although this conclusion was reached in the cheap seats, when the question was put to the “Google” it was clear that there are already expert articles which show that economists were ahead on this. It can take longer to draw valid conclusions about money when you have always been in the cheap seats. 

With income, the story is a familiar one of rising inequality. In 1989 and 2016, the poorest fifth had 3 percent of pre-tax family income. But the top fifth of families saw their share of income rise from 57 percent in 1989 to 64 percent in 2016. Put another way, the bottom group’s share remained miniscule, the top group’s share rose by 9 percentage points (or one-sixth), and middle America saw its share diminish.

For corporate equity, we find that the lowest-income fifth of families had 1.1 percent of corporate equity in 1989, and 2.0 percent in 2016 (over the same timespan, the second-bottom quintile share went from 3.5 percent to 1.6 percent, so the total share of corporate equity of the bottom 40 percent fell). By contrast, the highest-income quintile had 77 percent of corporate equity in 1989, and 89 percent of corporate equity in 2016. Hence, corporate equity is considerably more skewed than expenditure or income, and has become considerably more skewed over the past three decades.

Even if the shares had remained unchanged at their 1989 levels, excess market power would have exacerbated inequality, because stock holdings were considerably more skewed than consumption. But because consumption inequality remained little changed, while inequality in stock holdings worsened, the effect of market power on inequality was even more substantial in 2016 than a generation earlier.”

https://www.sciencedirect.com/science/article/pii/S0304387817300858

https://digitalcommons.iwu.edu/uer/vol15/iss1/7/

A solution I like better than trying to close the stock market (which would be even harder than passing sensible gun laws) is for everyone to “inherit” some stocks when they turn 18, or 25, or, even better, at birth – and not risky stock, good solid stock, in accounts they cannot cash in until a real need arises (college, training, buying a house, starting a business) that also will serve as an investment. Medical emergencies would be handled in another way. Then everyone would have a reason to follow the market, to wish the economy well, to learn about investing and to experience an opportunity to have an economic goal and to reach that goal. This would also go far to lessen economic inequality, and reparations could be managed by giving those who have been held back by racial discrimination a larger share in the market.

You can start laughing now – but it could work and it would be so much more peaceful than a revolution.

From a Google Image Search – Giphy.gif

Conservatives and the Social Safety Net

From a Google Image Search – The Atlantic

Conservatives and the Social Safety Net

Conservatives adamantly oppose government programs because they say they believe that everything can be done better by the private sector, by capitalists, than can be achieved through any government program. (Well think about it for a minute, which works better, the public option in the ACA or the private prisons for criminals and immigrants?) Further, these Conservatives argue, large public programs that help people who are disabled, who are unemployed, who are poor, who are children, who are sick, and who are old are socialist programs and Americans are not socialists.

Our forefathers were farmers and entrepreneurs, in other words, capitalists, but they did not mandate any particular economic system for our young nation, and since socialism and communism both came out of Europe in the 1900’s, they probably didn’t even imagine that such an economic idea might exist one day. In the 30’s there was a pretty prominent movement of socialists in America, especially when the stock market crashed and the nation was slogging through a Great Depression. Many of our social safety net programs originate from those days of bread lines. 

In the 1950’s communism had a moment of philosophical consideration by some Americans but was brutally stomped out by McCarthyism. Sen. Joseph McCarthy (R) (WI) mowed down anyone who had ever even whispered to a communist, or at least he tried. People were black-listed and lost their jobs often for no reason except McCarthy’s say-so. Communism certainly did not fare well in the USSR and proved to be as corruptible as any government/economy. Interest in communism waned in America. Conservatives insist that capitalism is the only economic model that matches with democracy. Here’s a quote from The American Conservative offered up on June, 6, 2019, “Socialism will Always Destroy Democracy”. (Although it seems to me that Conservatism is doing a pretty good job of that these days.)

By definition (Merriam Webster) “Socialism definition is – any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.”

Strictly speaking none of the benefit programs produce anything or distribute any goods. They involve budget items that describe how we the people wish to spend our money. In a time, like now, of great income inequality, where we the people are a bit short of money because recent laws have favored the wealthy, and have allowed them to own an inordinate proportion of our nation’s wealth, these same wealthy Americans are telling us that they do not want to spend their money on a safety net. They also let us know that they have not left us enough money and that we cannot afford to spend our money that way either.

But the story they always tell us, about the mismatch between democracy and social programs that they label as socialism is not borne out in the real world. Canada is a thriving democracy with a very sound social safety net. There are many such nations around the world.

Conservatives still tell us these messages constantly. Capitalism rules. We don’t have enough money to offer benefits.

Of course, Conservatives go beyond this. They tell us that using our money to lift up the less fortunate, or any of us in a moment of misfortune is harmful to us and to society as a whole. It destroys initiative (hard to prove) and poor, sick, old, disabled people or people being discriminated against would rise higher, fight harder without “free” money. However, getting rid of the social safety net might also be a good way to bring back plagues, which were common before there were humanitarian programs.

Conservatives convince people who need to benefit from these programs that illegal (undocumented) immigrants are collecting the benefits that citizens’ taxes have paid for, and there does seem to be some truth to that, but numbers are not huge and cutting off benefits to “the undeserving” seems to mean cutting off benefits to everyone.  Conservatives convince people of the unfairness of it all, they label it socialism and people end up voting against their own best interests.

Conservatives want to stay in the Industrial Age although the factories they long for have fled or switched to robotics. They want to stick to fossil fuels. It is all about money and profits. To do this against all evidence that industry has moved on to nations with cheaper labor and lots of laborers, and that burning fossil fuels is destroying a planet we don’t know how to escape from, means that holding on to power is essential. Without power the Conservative dream topples and the gravy train travels on more than just one track. I doubt we’ll see our money come back to us anytime soon.

Conservatives may be able to hold on to the 50’s or whatever was their favorite age, but for the rest of us we feel the end of the Industrial Age in our everyday lives, we are not all prepared to participate in the Tech Age, and that leaves a lot of us in a sort of economic limbo that can be quite scary. This is no time to take away the social safety net. And this is certainly no time to take it away because of a label. The social safety net is about people and it functions well in many democracies. At the very least Conservatives need to come up with something better than the same old arguments.

Are Democrats as Bad as Republicans?

 

generation-gap-The Happy Quilter

Are Democrats as bad as Republicans? It seems to depend on who’s talking. I hear people, mostly young people, saying that those at the top of both parties favor capitalism and this is making them greedy. Powerful members of both political groups take money from lobbyists and special interests. Senior members of both parties have stock-piled wealth, 20-somethings point out. This makes them indebted to and vulnerable to the those who are looting the middle class and ignoring the poorest Americans. If those in power control the capitalists they hurt their own bottom line.

Voters still matter for now it seems, because parties continue to conduct expensive campaigns to get elected. Given enough time and power parties may find ways to turn voting into an empty gesture. Some feel we are already there. For now what trickles down to voters in terms of policies depends on which power broker goes to Washington to represent us. Neither party has championed workers and the environment as they should have.  I expect nothing from the GOP as they have actively stripped workers of benefits and power; and because they are avowed climate change deniers who seem determined to plunder the planet until every drop of fossil fuel has been burned. Perhaps Democrats, who have tried harder to help the fight against fossil fuels and the development of alternative energies, have made some progress, although not enough; but they have not done nearly enough for workers, especially workers who are parents.

It seems that the real contrast between what various people say about our political parties does tend to be generational (and yes, this is an over-generalization). We know that people of all ages nodded yes to Bernie Sanders’ progressive and worker-focused ideas. But, the children of the Boomers had heard their parents express liberal compassion and, it seems, these children became disillusioned by what Boomers actually accomplished. They looked to their parents and grandparents to be more authentic, to hold the greedy at bay.

Our children (who are hardly children any more) resent the Boomers, feel we “sold out”, abandoned our ideals, and traded them in for financial success and material comforts. Boomer parents and grandparents perhaps convinced themselves that they did what was required of mature people in America and that they did this for their children. They found that their education made them desirable employees and before they knew it they got seduced by big paychecks, promotions, investments, McMansions, vacation homes, power, and convinced themselves that they did this for their families and, of course, providing for our families was important. Perhaps they even convinced themselves that America had cleaned up its act. But it is also possible that conservatives and 60’s and 70’s activists fell for the Gordon Gekko “greed is good” mantra (1987 movie, Wall Street). Did we not see the handwriting on the wall, the empty factories, the workers who lost their pensions? Did we think these were isolated events in an otherwise healthy economy? Did we notice that wealth was being squirreled away by a few who became rabid protectors of unfettered capitalism? If we had not “sold out”, but had stuck to our activist roots would our economy be different now?

There were roughly three groups of Boomers. There were some who came from wealthy and conservative or liberal families, were educated at top schools, and followed in the footsteps of their families. They tend to make up the rich and powerful “class”; the owners and the CEO’s of businesses. These Americans are capitalists and actively malign socialism.

In the second group were the activists, the hippies, those who demonstrated against the war in Vietnam, and attended women’s liberation  consciousness raising groups, and wanted to fight poverty and racial prejudice and inequality. Many of this second group of Boomers had also been to college, although they may not have been from wealthy homes. Some may have risen to be CEO’s and some may have worked in government jobs and as teachers. This group is not quite as susceptible to fear mongering about socialism.

And in the third group there were the Boomers who went to work after high school and started families while they were quite young. They believed that they would have a great job in a factory for all of their lives (if they stayed healthy), that their pay would steadily increase, they might even be promoted, and that they would have benefits like health care for their families and good pensions when they retired. The third group of Boomers were most injured by a transitioning economy (manufacturing to service) and affirmative action (they say). Many have slipped from solidly middle class into the lower end of the middle class. And yet many of this third group voted for and still support Trump. They are the biggest fans of capitalism and the most frightened by the idea of socialism.

Could any of the Boomers have stopped the migration of manufacturing to nations with cheap labor and plentiful consumers? It seems to be a common understanding that high taxes and union demands for more money contributed to the flight of our factories. However, having China open up to capitalism was probably a far greater motivator. Our government did not really try to stem the exodus because those in our government stood to profit from these new markets.

Most middle class parents thought their children wanted the lives they (the parents) had. But after all the parental talk about “the establishment” and the “military-industrial complex”, the millennials and Gen Xer’s seemed to be angry because their parents did not see the dangers of unregulated capitalism and find ways to rein in the most ardent capitalists who were aligned with the military (such good customers).

Young people are idealistic. They easily feel betrayed by what they see as hypocrisy—the failure of their elders to honor stated values. Many young people see capitalism as a pernicious economic system that hoards wealth and sees people with less money merely as “workers”, rather than people with responsibilities and interests. Union busting has been pursued systematically and successfully by the powerful and wealthy. Small wonder young people are hunting around for another economic system. They also see where greed has gotten us in terms of some scary climate change realities and the frightening possibilities recently predicted. Younger people are aware of the unwillingness on the part of those in power to help us switch to energies that are cleaner than the fossil fuels we have relied on. Younger people accept that fossil fuels have created the global warming that is changing climates and biomes.

These same young people seem embarrassed by materialism. They do not seem to believe in hoarding. They do not subscribe to the doctrine of perpetual growth—that an economy must always offer more—higher prices, higher wages, higher profits, more and better stuff. Where does the constant drive to grow take us? Will a nation fail if it cruises once in a while instead of always going full throttle? (You can almost hear the old capitalists saying, “sacrilege”.)

Millennials and Gen Xers find imperialism despicable—a crime against the humans whose lives are changed by a land and power grab. Annexing territory, now that the earth has been everywhere carved up into nations, has pretty much gone out of fashion, although heavily populated nations may have eyes for more territory eventually. These young Americans (20 and 30 somethings) are not proud of America’s sins, which is how they think of things like regime change and proxy wars, or persistent racism, or acting as missionaries to spread democracy/capitalism (and perhaps even Christianity). In these matters they blame Democrats who did not fight against these policies as much as they blame Republicans who insisted on them.

Our offspring are the future of America and the world. The things they don’t like that they see in the parental generations may determine what America (and the world) will be like in the future. Unless corporations win; and then they will be serfs. It is one thing to choose an organic and low-demand lifestyle for yourself. It is another thing altogether to have a low-income life thrust upon you.

Sadly, since the flaws in economic systems reside in us, rather than in the systems themselves it doesn’t matter if we become socialists, communists, or remain capitalists. It is the messages human minds hear and channel that need work. These message determine the laws we make, which in turn determines the level of corruption those at the top can indulge in. What we used to call the “puritan ethic” or the “protestant ethic” should be replaced with an economic code more suited to the post-industrial age. There may not be enough consumer demand to justify three shifts and long work weeks. Robotic workers which take the place of human workers may provide the leisure hours we once imagined were coming. The idea of “manifest destiny” suited the promise of an almost empty continent and the white supremacist entitlement felt by even our poorest colonists. Now, unless we go to space, there are no new lands to populate. We could change our goals so that we pay attention to the quality of our lives rather than producing endless quantities of unnecessary and unaffordable goods. If we consider all of this, a progressive agenda makes good sense. Short of revolution can it be accomplished?

I am speaking for younger generations I do not belong to and I am sorry about that. I may not have this right, but I am trying to understand an age that could either bring exciting and life-changing developments, or could put us in a new dark age, with capitalists and CEO’s as our “aristocratic masters” for decades. I recently read America: The Farewell Tourby Chris Hedges which inspired some of my thoughts, as he has no great love of capitalism and no great fear of socialism. He is the child of a calm and confirmed pair of activists, though they are not boomers and he is not as young as most Americans who hold similar views. His book has left me with food for thought. This is what books do for us. They send us off into ideas and analyses that continue to occupy our minds. He agrees with younger Americans that the Democrats are just as bad as the Republicans. I am not there yet and whether or not I get there depends on what the Democrats do next.

This is a view from the cheap seats.

Photo Credit: From a Google Image Search – The Happy Quilters

 

Capitalism Run Amok

What if the only thing wrong with our government is that it has too many Capitalists messing with it? It occurs to me that perhaps the Great Factory Migration, globalism, and the rather turgid state of the America economy, and in fact the slowing economies of what I will call “old” Capitalist nations are all creating panic attacks in the ranks of our millionaires and billionaires. These folks have decided that they can boost the economy by pulling the strings of government. Am I against Capitalism as a way to do business? No, I am not. But what we are seeing convinces me that Capitalism definitely needs to be regulated.

Why are rich businessmen way too involved in our government? They blame the government for the current state of the economy and of business in America. Everything the GOP regurgitates as domestic policy has been dictated to them by their pals in the private sector. Who does it benefit to trim back the responsibilities of the federal government to only those spelled out in the Constitution? Well, since it includes plans to get rid of our social safety net programs, it doesn’t benefit we the people so that makes it fairly easy to ascertain who benefits. Wealthy corporatists benefit.

Who is most happy to see the House of Representatives and Donald Trump go on a spree reversing every regulation on business and on the environment? Well these reversals do not benefit we the people regardless of what some Americans have been lead to believe. Once again the benefits accrue to big business (which has not been looking big enough to please the wealthiest Conservative businessmen.)

While it may be true that the President cannot have any significant effect on the stock market, the Capitalists can. They can be more bullish about investing and freer with their dollars when they like the direction in which governance is moving. Since the Capitalist have bought and paid for the GOP and since the GOP is in charge of all three branches of government our “oligarchs” are, in a sense, applauding the current state of affairs in Washington. This is the sort of gentlemen’s club way of saying, “now we’re talking.” Donald Trump doesn’t bother these folks. He may be gauche but he is still one of them. One of them One of them.

Perhaps it is not really members of Congress who still believe in “trickle down” economics at all. Perhaps they have been “body-snatched” by corporate heads who like the way this economic approach lines their pockets. Corporate types must realize that if they corner all the dollars there will no consumers, and that will be bad for their profits and their comforts. It won’t be much fun to live in a dirty, sick, and poverty-stricken world. But I guess they can arrange to turn certain states (not blue states) into small worlds that they can control as they have already established control, with the help of the Republicans and ALEC, of at least 30 state governments.

It seems that if we could get money out of government, get these billionaires and millionaires a new hobby then our government might be able to return to regular order. How do we do that? We could try to overturn all the invasive laws passed at their command, such as Citizen’s United v FEC, etc. but the numbers are not on the side of we the people right now. Perhaps these wealthy meddlers are just bored.

Space is the answer to everything. We could be like North Korea, a nation which puts all its resources into bombing those who they hate, except we could put all those resources that are lining the idle pockets of the corporatists into figuring out how to travel in space, and do it without starving the American people. Think of all the resources that could be mined without ruining the few pristine spaces left on this planet. It couldn’t hurt to have the focus of every nation turned skyward so that we would perhaps stop sniping at each other on this planet which is seeming too small to contain us.

You may think that I am just a nut, but I am quite serious about this. Of course it will not bring only positive things but it will be interesting enough and, in the end, profitable enough to keep us occupied for centuries as the last Age of Discovery did. It involves terrible risks and I suppose the entire human race could be wiped out, but that could happen if we don’t try for the stars, and it would be far from a noble experience.

See https://www.tremr.com/jim-mcguiness/criminal-conquest-of-the-united-states-of-america which led me to think these thoughts.