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Debtors’ Prison & Ye Austerity Plan

Outside a Debtors' Prison in England

Outside a Debtors' Prison in England

You’ve probably heard of debtors’ prison, a prison where people who hadn’t paid their debts could be kept under lock and key until they paid their debt or got somebody else to pay for them. It was a dreadful system. Charles Dickens, whose father was housed in a debtors’ prison for a while, wrote eloquently about it.

We had similar prisons in this country until around 1831 when the United States government abolished imprisonment for debts owed to the federal government, and most states soon dropped the practice too. To imprison somebody for failing to pay a debt is fundamentally crazy – OK, let’s say it’s just fundamentally counterproductive – because it deprives the debtor of the ability to earn the money to pay off his or her debts.

What brings debtors’ prisons to mind in these paragraphs is the way debtor nations are treated these days. It’s called austerity. It’s equally counterproductive – or, in a simpler word, crazy.

A good example of the craziness is what’s happening to Greece. Greece has got some big, bad debts and hasn’t got the money to pay them. Now the grand institutions that can loan Greece money aren’t throwing the nation into debtor’s prison. But they are demanding ball-and-chain austerity. They won’t loan Greece anymore money unless that nation continues to fire thousands of state workers, cut the wages of thousands and thousands of others, drastically reduce workers’ benefits and slash their pensions.  Of course, when you do that to a nation, the entire economy declines, more and more people loose their jobs or have to take dramatic pay cuts. That’s what’s happening in Greece today.

As every taxpayer knows, the way a nation gets money to pay its debts is by taxing its citizens, the ones who are actually making money. But when the economy sinks and people earn much less or nothing at all, the tax revenue plunges. In other words, as the institutions that loan money to Greece insist on these austerity programs, the Greeks are less and less able to pay off their debts.

Republicans, who haven’t shown a deep grasp of economics over the past 100 years, are eager to have the United States immediately “put its fiscal house in order” and “cut the deficit.” This means slashing government payrolls and cutting or eliminating government programs – except those for sacred national defense, of course. But because we have a Democrat in the White House and because Democrats control Senate, Republican suitors haven’t been able to completely have their way with the economy.

Interestingly, the conservatives did win big in England and they immediately imposed an austerity budget on their fellow subjects. They believe it’s imperative that England immediately “put its fiscal house in order” and “cut the deficit.” As a result, the country has slid down and backward economically. But England, despite its grim stagnation, isn’t in the desperate situation that Greece is in. Greece is in the new version of debtors’ prison.

 

 

College Salaries: The Income Gap

Medieval illustration of a university

A Medieval University

In our free-wheeling capitalistic country with its ambivalent attitude toward intellectual activity and it’s slogan that “The business of America is business,” college administrators have come to think of colleges as business enterprises.  In this debased view,  administrators are the managers, professors  are the subordinate workers, and graduates are the product.  Thus, efficiency is the use of fewer professors working at lower pay to turn out more graduates.

The trustees of these enterprises often have the same attitudes and values as the trustees  of  large business organizations.  They endorse the salaries and bonuses paid to their college presidents as necessary to retain such wonderful talent,  though the talent isn’t obvious.  But if a college or university is really just another money making corporation,  then we shouldn’t be surprised by the avarice of the people at the top.

In the past ten years the salary of private-college professors has increased 14 percent while the pay for their presidents has shot up 75 percent.  The distinguished Chronicle of Higher Education recently noted that there’s a widening income gap between professors and the presidents of the colleges where they teach. The most recent figures are from 2009. Presumably things have gotten even more out of whack, but here are a few outstanding examples from two years ago.

Charles H. Polk, president of Mountain State University, took home a glorious $1,843,746. Haven’t heard of Mountain State? Mr. Polk’s salary used up 3.5 percent of the college’s entire budget. His college’s intellectual standing is such that it may soon lose its accreditation with the Higher Learning Commission of the North Central Association of Colleges and Schools.

The President of Rensselaer  Polytechnic Institute, Shirley Ann Jackson, was paid more than eleven times as much as her professors, a nifty $1,771,877.   And according to the Times Union of Albany, her college is in the hole for $806 million and has fallen to 50th in the U.S. News & World Report ranking of colleges.

Then there’s Kevin J. Manning, president of Stevenson University, with a handsome $1,493,655 compensation package. That’s over sixteen times what his professors were making.

Benjamin Ginsberg, author of The Fall of the Faculty,  recently pointed out  that “between 1997 and 2007, the number of administrative and support personnel per hundred students increased dramatically at most schools—103 percent at Williams College; 111 percent at Johns Hopkins; 325 percent at Wake Forest University; and 351 percent at Yeshiva University, to cite some noteworthy examples.”

So forget about collegiality and the life of the intellect.  These college leaders have entered the big corporation candy store and they’re greedy, greedy, greedy.  We’ve wandered a long way from the day when a graduate of Williams College said of it’s president, Mark Hopkins, “The ideal college is Mark Hopkins at one end of a log and a student at the other.”

A University Classroom in the 14th Century

The scene above is a Medieval depiction of a classroom in the 14th century.  Scan the young scholars sitting on the benches and you’ll see that student behaviour hasn’t changed much in six  or seven hundred years. That fellow at the far end of the second row is about to nod off and the poor guy in blue at this end of the third row has fallen asleep or has a wretched hangover. Further along the same bench you’ll find a couple of students chatting amiably and at the far end of the back row another couple are conferring quite oblivious to the Magister at the lectern.  Maybe the lecture is really dull. That’s possible. On the other hand, some of those students are paying rapt attention.  Our bet is that the guy in blue stayed up much to late last night,  drinking and singing Gaudeamus igitur, juvenes dum sumus.

Romney, Lies and Audio Tape

Mitt Romney

Mitt Romney

Romney has already launched his first television ad against the President and — good grief! As has been pointed out by Democrats and Independents and anyone who cares,  the ad distorts what Obama actually said. What’s even more astonishing, Romney’s Republican confederates agree it’s a lie. They say they want it that way.

The ad uses an audio of Obama campaigning in New Hampshire  in 2008, his voice saying, “If we keep talking about the economy, we’re going to lose.” In actual fact, in that 2008 speech it’s clear that Obama is quoting an aide to his opponent, Senator McCain. But in the 2011 ad, Romney makes the listener believe that it’s Obama who doesn’t want to discuss the economy.

Liar, liar! Pants on fire!Romney’s people distributed a press release admitting that the words are not Obama’s and Romney himself, in Des Moines, proudly told reporters, “There was no hidden effort on the part of our campaign. It was instead to point out that what’s sauce for the goose is now sauce for the gander,” By no hidden effort Romney apparently means that since his press release  admits the distortion, there’s no hidden effort to deceive.

Having attempted to fool the public once, with the deceptive ad, his campaign now tries to fool the public a second time by saying they’re not trying to deceive.

“It was instead to point out that what’s sauce for the goose is now sauce for the gander.”  That old expression is another way of saying that what’s fair for one person is fair for the other. How in the world does that apply here? Obama wasn’t putting words into McCain’s mouth. Romney is. His run for the presidency should be quite a spectacle

Cargo Cults and Occupy Wall Street

Occupy Wall Street in Portland

Probably the best known example of a cargo cult arose in New Guinea during World War II when the indigenous inhabitants, a pre-industrial society,  saw US military personal build landing fields and use radios to call in aircraft loaded with supplies. After the US left New Guinea, the locals built crude landing strips and make-believe radios and imitated the actions they had seen performed by the military, all in the vain hope that planes would arrive, bringing them what they wanted.

Cargo cults appear to be springing up everywhere these days. The locals get together in an open field, a park or other public space, and imitate in empty ritual the authentic acts that others have used to produce real results. But because they don’t actually understand the inner workings of what they believe they’re imitating, they don’t get anything at all.

No, we’re not being churlish or mean spirited.  But, yes, we’re referring to the Occupy Wall Street movement.

Sure, like Occupy Wall Street, we’d like to see the very rich pay their fair share of taxes. And, yes, we think the income distribution in this country is a disgrace. And, of course, we’d like to see our economic system change for the betterment of all of us. But nothing will be accomplished simply by an imitation of the non-violent protests by the “leaderless” young in Cairo’s Tahrir Square. The United States isn’t the same as Egypt under Hosni Mubarak, nor is youth an explosive demographic in the US as it is in Egypt and the Middle East in general.

Occupy Wall Street has posted a “DETAILED LIST OF DEMANDS & OVERVIEW OF TACTICS FOR DC PROTEST.” Currently, the demands are being edited, so we’ll wait on that. But the tactics for the DC protest do not, on the face of it, have a chance of succeeding. It’s very hard to believe that peacefully blocking all entrances to the Capital building – that’s the tactic – will cause Congress to pass the legislation the movement demands.

OK, maybe we are getting churlish. We’ve been driven to it.

Occupy Wall Street

Occupy Wall Street poster

Occupy Wall Street poster

The Occupy Wall Street protest is now a month old and has collected $300,000. And at this point, with coordinated gatherings taking place not only in other cities across the United States, but also across the globe, we can leave off calling it a protest and begin to call it a movement.

Our conservative House Majority Leader, Eric Cantor, famously said that he, for one, was “increasingly concerned about the growing mobs occupying Wall Street and the other cities across the country.” On the other hand, a recent Time magazine poll found that 54 percent of Americans held a favorable view of those mobs, while only 27 percent — that would be exactly half as many, right? —  held a favorable view of the Tea Party movement.

Occupy Wall Street is inclusive, so it’s no surprise that it includes some flakey people, such as those youngsters who want to experience the countercultural sentiments of the late 1960s and not much more. And, yes, Fox News found those hippy kids right away and was shocked and disgusted. Fox news’s Bill Schulz believes he discovered that people were having sexual intercourse in public, or, well, under a blanket in public, and, according to Schulz, many of the protestors hadn’t bathed in weeks and the smell of the place was, in his words, “equal parts patchouli, body odor, and urine.” Schulz had a little hissy fit on TV,  he was so, so, so  upset. Fox’s Sean Hannity interviewed a young woman who had taken off her shirt and was naked from the waist up. Wow! Apparently Hannity thought she was a good representative sample of the movement. If she was, then Wall Street, the upper 1 percent and Representative Cantor have nothing to be concerned about.

At this point, no one can say whether the Occupy Wall Street movement is going to change anything. (Yes, they’ve changed the name of Zuccotti Park to Freedom Park, but we suspect that won’t stick.) Probably the most thoughtful criticism of the movement is that it’s diffuse, that on the one hand it can’t actually represent the “99 percent” that it aspires to, because no movement can do that, but on the other hand it’s so broadly inclusive that it embraces contradictory aims. It often appears to be a movement with vague goals, no policies and, most damning,  no smarts.

But appearances can be deceiving. Despite the impression you my have received, the Occupy Wall Street movement in New York city is highly organized. And we don’t mean that they’ve merely learned to pick up their trash and bathe. The movement may not have official leaders, but it sure does have “groups” and “committees,” and those committees publish their minutes online and are clearly working toward their goals. This is a big organization and it’s growing. In addition to receiving donations of food and other supplies, it has an deepening stream of financial donations and, yes,  a way of keeping track of money. Exploring the movement’s informative web site  should do away with any notion that Occupy Wall Street is hapless, amateurish and incapable of developing into a political force. Quite the contrary. Occupy Wall Street

CEO and Average Worker Pay

Recently a chart appeared on Facebook  and elsewhere showing CEO pay compared to the pay of the average worker in different countries.CEO & Worker Pay If the figures you had seen before made you angry, this chart would have made your head explode. It listed CEO pay in the United States as  475 times greater than the pay of the average worker. Now the chart has gone viral; it appears all over the place and is cited as evidence of the radical unfairness of  our economic system.

We’re grumpy skeptics at Critical Pages.  We’re skeptical even when what we read confirms us in our grumpiness. The chart about CEO and average worker pay appeared to have no author. It had no dates or sources. It turns out we had reason to be skeptical.

PolitiFact, the online project of the St. Petersburg Times that seeks the facts behind statements by politicians, has completed a study of the US figures on the chart. It turns out that the numbers were produced by three graduate students some six years ago.  “So what we’re left with,” says PolitiFact, ” is an unsourced, undated chart with numbers that, at best, were only correct (approximately) in 1999 and 2000 according to one measure, and wrong according to a different measure.”  According to PolitiFact,  “The latest number for the U.S. is 185 to 1 in one study and 325 to 1 in another — and those numbers were not generated by groups that might have an ideological interest in downplaying the gaps between rich and poor.”

There’s no question that the ratio of the CEO’s pay to the pay of the average worker is shamefully large.  Such disparities of pay are bad for everyone and bad for the economic system itself. No need to exaggerate.

Class Warfare, Anybody? ( Part 2)

Storming of the Bastille by Jean-Pierre HouelWe statistical rabble-rousers are back. In an earlier post we talked about the distribution of wealth in this country. Now we’re ready to talk about the distributions of income. Income, remember, includes what you earn from work, and also whatever interest you get on the money you keep in the bank (not much, these days) and from stock dividends, bonds, rents, and so forth.

You probably won’t be stunned to learn that the United States has a very unequal distribution of income. But the actual figures may still shock you. In 2006, the top 1 percent of earners walked off with 21.3 percent of the nation’s income, the next 19 percent below the top took 40.1 percent, and the rest of us, the bottom 80 percent, got a crummy 38.6 percent of the nation’s income.

Economists have come up with a way of measuring income inequality, the Gini coefficient, a ratio which can vary from zero, where everybody earns the same, to 100 where one exceedingly rich person earns all the income in the country.  We’re not quite half way to 100. Using that scale, South Africa has a Gini index of 65, U.S. has an index of 45 and Sweden is the lowest with 23. Remember, the goal here is to get a low score.

So, if we make a list with the country which has the most income equality at the top, and we go down the list, we have Sweden at the top with 23, Norway with 25, Austria at 26, Germany at 27, Denmark at 29, Australia 30.5, Italy     32, Canada 32.1, France 32.7 – OK, to make a sad story shorter, you have to descend past Switzerland, the United Kingdom, Egypt, India, Japan, Israel, China, Russia and Iran before you sink to the inequality of the United States.

In 2010 psychologists Dan Ariely of Duke University and Michael I. Nortonof the Harvard Business School, showed pie charts representing various levels of wealth distribution and asked people to choose the one which they thought represented distribution in the U.S. In another, they asked people to choose which society they would prefer to live in. Ninety percent or more of the 5,522 respondents  whatever their gender, age, income level, or party affiliation — thought that the American wealth distribution most resembled one in which the top 20  percent has about 60 percent of the wealth. In fact, as noted, the top 20 percent control about 85 percent of the wealth. Recently the same experiment was carried out by Paul Solman on NPR’s News Hour. No surprises. He got essentially the same results. People not only didn’t realize what an enormous share of the nation’s wealth was owned by the top 20 percent. As the psychologist Dan Ariely pointed out, what was perhaps more disturbing was that they truly had no idea that the bottom 40 percent, getting   up toward half the nation, had 0.3 percent of the US wealth, or just about nothing.

But studies  show that the great, great majority of our fellow citizens aren’t mean spirited bastards. Yes, they’re uninformed. And yes, they hold the comforting belief that the top 20 percent possess only somewhat more than half the wealth of the country. They can’t believe the top fifth actually controls 85 percent. It’s clear that most Americans would like to live in a country that has a more equal distribution of wealth. A country where a person born poor has a good chance to earn a decent living and to move into the middle class. That would be a country where, after a lifetime of work, you didn’t worry about an impoverished old age, a nation where you couldn’t be bankrupted by sickness, a nation where the poor don’t buy lottery tickets, knowing that the astronomical odds against their winning are no worse than their chance of earning their way  out of poverty. A country like, say, one of those wicked socialist European nations our masters warn us against.

(“The Storming of the Bastille” which illustrates this post, was painted by Jean-Pierre Houël who was born in 1735 and died in 1813.  He lived through exciting times — the reign of Louis XV, the French Revolution, and Napoleon’s First Empire. He traveled widely, loved to paint landscapes, and was skilled at engraving and guache, and a water colorist famed for his ability to depict light and atmospheric effects. No, we don’t expect any such scenes to occur here. But we do think that class warfare is, in fact, going on right now. At Critical Pages, we’re on the side of the angels.)

 

 

Class Warfare, Anybody? (Part 1)

Is there class warfare in the United States. Well, no. Mobs armed with stones and Molotov cocktails aren’t running in the streets, trying to overthrow the existing order. The poor aren’t rioting, smashing windows and peeing against bank doors, demanding a greater share of the wealth of this country. The rich aren’t — well, uh, well — what do the rich do in class warfare? Come to think of it, class warfare is always portrayed as the poor assaulting the rich, demanding a re-distribution of wealth. And that’s right, isn’t it? The rich don’t attack the poor, because the poor don’t have anything that the rich want. So class warfare is always a matter of poor people — and they’re the big majority — ganging up against rich people, a small minority.

Liberty Leading the People (French Revolution) by Eugene Delacroix

Liberty Leading the People by Eugene Delacroix

You might say that in class warfare the rich are an embattled minority, trying to hold their own against great odds. But, as we said earlier, we don’t have class warfare in this country. Indeed, you might go so far as to say we don’t have class warfare in this country because that particular war was over a long time ago when the rich won. Of course, saying things like that might be understood as in invitation to class warfare, so we shouldn’t go down that path. Anyway, let’s look at how the wealth of this country is spread up and down the different levels of society.

Economists define wealth as your assets (your cash, savings in the bank, stocks and bonds, and the things you own that are convertable  to cash)  minus your debts. The most recent data we have is from 2007.  (We suspect that these figures have not changed for the better since then.)  As of 2007, the top 1 percent of households owned 34.6 percent of all privately held wealth, and the next 19 percent had 50.5 percent, which means that the top 20 percent of households owned 85 percent.

Or, to put it another way, the bottom 80 percent of all households, that’s four-fifths of all households in the United States, share 15 percent of the wealth. And as you go down the economic ladder, things get worse.  The bottom 40 percent of US households control 0.3 percent — that’s zero point three — which is, essentially nothing. That’s the bottom 40 percent. That’s a pretty big share of all the households in the US having no wealth to speak of.

By the way, most of the wealth that the bottom 80 percent own comes from the value of their home. If you look at purely financial wealth — total wealth minus the value of the home — the bottom 80 percent have only 7 percent of the nation’s wealth.

When it comes to financial wealth, the top 10 percent have 80 percent to 90 percent of stocks, bonds, trust funds, and business equity, and over 75 percent of non-home real estate. Some people – those class warfare types! – argue that when a group controls that much of the income producing capacity of a country, they essentially control the country.

These figures come from G. William Domhoff, of the Sociology Department at the University of California at Santa Cruz. They draw in large part on the work of the economist Edward Wolff. We plan to post more on this subject, but with restraint, understanding that you can stand only so much bad news before turning sour. Intrepid readers who want to pursue this further on their own can make a good start at Domhoff’s website.

(The illustration for this post is “Liberty Leading the People,”  a robust Romantic work by Eugene Delacroix. It celebrates not the French Revolution of 1789-1794, but the July Revolution of 1830 that toppled Charles X of France.  It’s a grand vision of  Liberty flanked by the bourgeois in his top hat and cravat, his firearm at the ready,  and the youthful worker with his pistols, two levels of society joining to overthrow the stupidly backward regime of Charles X.  If  class warfare breaks out in the United States, we doubt it will be commemorated in a painting displaying a handsome bare-breasted woman leading the people.)

 

 

Taxes (Don’t try this without an attorney.)

Google logoOn the Google corporate website, under the heading Our philosophy there’s a subheading that says You can make money without doing evil. Well, that’s good to know. In fact, Google has set up a philanthropic organization at www.google.org to do good.

On the google.org website, under the heading Philanthropy @ Google, it says, “Google approaches philanthropy in a variety of ways. In 2010, charitable giving at Google exceeded $145 million in funding to non-profits and academic institutions, and more than $184 million in total giving when including Google Grants, Google.org technology projects and product support for non-profits.”

That’s impressive. And it suggests that Google is interested in being a good corporate citizen, doing good instead of evil while making money.

On the other hand, we heard from National Public Radio that eight years ago Google transferred all of its non-U.S. intellectual rights to a Shamesubsidiary in Ireland. Intellectual property rights are the meat and bones of Google’s business. And if those rights were in the U.S., all profits due to those rights would be taxed at the usual corporate tax rate of 35 percent. But Google’s tax rate in Ireland is only 12.5 percent.

But wait, there’s more! Google’s Irish subsidiary pays royalties to a second Irish subsidiary that has its tax residency in Bermuda where the corporate tax rate is zero.

Wait, wait, there’s still more! Ordinarily, the first Irish subsidiary would have to pay taxes to shift money from Ireland to Bermuda, so to get around that little problem, Google sends the royalties from the first Irish subsidiary to a Ducth subsidiary that passes them on to the second Irish subsidiary that has designated no-tax Bermuda as its residency.

When it comes to arranging things to lower your taxes,  U.S. Supreme Court Justice Learned Hand has said this —  Everybody does so, rich or poor, and do right, for nobody owes any public duty to pay more taxes than the law demands. Taxes are enforced exactions, not voluntary contributions. 

Maybe the tax code needs to be rethought and rewritten.

Noted Economist with Wicked Felt-tipped Pen

The noted political economist is Robert Reich,  a professor of Public Policy at the University of California, Berkeley. In this video, he connects the dots about the structure of the US economy, and does it in a mere two minutes and fifteen seconds.  Reich is also a fast hand with the felt-tipped pen and may have an alternate career as a political cartoonist.  This video has been around a while and has been seen by well over a million people. But we have a weakness for the message. Check it out.

More Notes


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