Showing posts with label income inequality. Show all posts
Showing posts with label income inequality. Show all posts

Thursday, April 08, 2021

Cut them down to size

Illustration of USA wealth curve 2016
USA wealth curve 2016



V.O. Diedlaff is free on Kindle April 9
When shrubbery gets overgrown it must be pruned. Same goes for big corporations sprouting monopolistic tendrils. But it's easier to prune a garden than an economy. About half a dozen companies buoy up the value of the stock market. Of those, five are major tech companies. They trade as AAPL, MSFT, AMZN, GOOGL and FB. Most, if not all, of these engage, or have engaged, in monopolistic practices.

Now and then these companies come under scrutiny, but little ever gets done. If one political party has a good idea, the other calls it a partisan ploy. One big reason our politics is so partisan comes down to the influence of large unregulated corporations. Today there are no fairness doctrines to constrain broadcast media, and no rules at all for social media.

Aside from partisan politics, trust-busting doesn't come easy. To tilt at financial monoliths without regard as to where their rubble will topple would be dangerously quixotic. Monopolies must be disassembled carefully. Adding to a hesitancy to disassemble them is the unspoken fear of unleashing the Invisible Hand.

I hope some day to be able to prove my belief that bad old ideas become parasites that stunt the growth of new thoughts. Adam Smith used the term Invisible Hand only twice in his writings and never in the context in which it's popularly used. The idea that an Invisible Hand will balance financial markets in lieu of regulating them has never been tested. That's because financial markets have always been regulated. When regulations were weakened to allow the Invisible Hand more freedom to balance markets, lenders and borrowers got greedy. The result was the Great Recession of 2008. When the government realized that banks were too big to fail — that if the banks failed the greater economy would collapse — it rescued them financially. Institutions were enabled while common folks lost their homes. Enamored of their bonuses, bankers quickly returned to believing in the balancing Invisible Hand.

Because they were too big to fail, the largest financial institutions should have been reorganized. They weren't. Small competitors can play a bit dirty without disturbing the economic order, but when large companies do so, they have become monopolies, and must be cut down for the social good.

It's high time for companies like AAPL, MSFT, AMZN, GOOGL and FB to face regulation and partial disassembly into companies designed to collaborate and compete with smaller entrepreneurs. Just like the Tooth Fairy, there is no Invisible Hand. It's a myth the greedy promoted while grabbing advantages for themselves.

America needs a more balanced economy; one with a larger middle class and reduced levels of both poverty and opulence. Pruning monopolies like the big five will help achieve this but it's not enough to rebalance our economy. According to Economic Policy Institute:

"In 2019, the ratio of CEO-to-typical-worker compensation was 320-to-1 under the realized measure of CEO pay; that is up from 293-to-1 in 2018 and a big increase from 21-to-1 in 1965 and 61-to-1 in 1989."

In 1965, a worker in 1965 whose boss made 21 times his salary could be invited to his boss' home for dinner. In 2019, a worker earning 320 times less than his boss is unlikely to ever meet him. Not only has the degree of income inequality increased enormously, class distinctions have grown, and our sense of community has shrunk. Back in 1965 the wealthiest paid high progressive taxes. They may have complained, but they didn't suffer all that much. We need to tax wealth to prevent it from growing into a weed that disrupts social harmony.

Lastly, a Hands-On effort to balance our economy will work faster and more efficiently than an Invisible Hand ever will. Yet we need to be cautious. The Soviet planned economy didn't work well. It might work better today because of our abundance of internet driven consumer data. Still, we shouldn't attempt it. When Capitalism excels it 's because competing businesses create innovation. Innovation stops happening when companies grow too large. We need to encourage innovation and that means more entrepreneurs and fewer corporate monoliths.

But we won't have more entrepreneurs without the right economic conditions. While many entrepreneurs start with little capital, they can't start at all if they live from one paycheck to the next. Universal Basic Income (UBI), or similar stimulus programs could allow people to take entrepreneurial  risks without risking everything. Larger organizations could receive government startup funding. A helping economy unleashing creativity and innovation is what we need to reverse climate change and restore American prosperity.


V.O Diedlaff is author of, We Can Fix It: Reclaiming the American Dream.

Sunday, January 31, 2021

Hopes of glitz and glory

Mark Twain and Charles Dudley Warner
Fiction, 448 pages

Whatever your politics, numbers don’t lie. Too many are displeased. Something stinks in Washington. During the early 1870s, two writers also suffered offended nostrils and together wrote a novel about it. Mark Twain and Charles Dudley Warner called their era the Gilded Age. That’s gilded, not golden. Their era lacked the solidity of deep values, having instead only a golden coating upon an unworthy foundation.

The book begins before the Civil War but largely details the years that follow. Historically this period marked the beginning of the Industrial Revolution in the United States, and some of the book’s characters are among its unwitting victims. This period saw massive capital investment in railroads and machinery as well as massive displacement of small business men and landholders. While the book’s events occur at the beginning of the age, its title lent its name to the era itself.

There are parallels here to our own age. At its height, the Gilded Age brought about massive income inequality. Some grew enormously wealthy while masses of others suffered in dire poverty. Since the 1980s our own society has moved in this direction as well. While the incomes of the top ten percent have stayed even with the living costs, those of the bottom 89 percent have not. The incomes of the wealthiest among us have soared, yet unlike Icarus, they show no signs of falling toward Earth. The technology sector with its high salaries distributed among relatively few workers echoes the effect of industrialization, though some writers fear that this time workers won’t eventually share its benefits after robots and AI eliminate their jobs.

The book touches upon industrialization as several of its characters seek speculative wealth from a new railroad line. However the bulk of the action takes place in Washington DC. Laura and her brother, George Washington Hawkins, as well as the ever optimistic and ever impoverished, Colonel Beriah Sellers, enjoy the patronage of the pious Senator Dilworthy. Since the book contains much satire, the reader is not overly surprised when Laura approaches the good senator in his study as he reads from an upside down Bible.

Washington in 1873, just like today, is a place where corruption prospers. Unlike that of today, however, the corruption is almost quaintly innocent. This book was the first novel from two authors who would subsequently write a good few more. It’s not their best. That said, it’s not that bad. Twain at his worst is better than most and Warner also writes well. However, the work doesn’t flow as well as what one would expect from authors with email and modern equipment. I’m glad I read it though. Along with satire it packs plenty of drama and provides a taste of what life was like in earlier times.

Tuesday, December 22, 2020

Help, I'm a cop

Burmese Days
George Orwell
Fiction, 291 pages 

"It's a drag being a cop" ~ Frank Zappa, "Help, I'm a rock"

George Orwell was brainwashed. This happened in Myanmar (formerly Burma) during his five years as a policeman. He was brainwashed by the pukka sahibs’ code. The code of imperialist occupiers. The code of colonial hypocrisy. A code similar to the one currently protested by the BLM movement.

The protagonist of "Burmese Days" is not a policeman. However, John Flory has seen through the code and now belongs nowhere--not in Burma, nor back in England.

"It is a stifling, stultifying world in which to live. It is a world in which every word and every thought is censored. In England it is hard even to imagine such an atmosphere. Everyone is free in England; we sell our souls in public and buy them back in private, among our friends. But even friendship can hardly exist when every white man is a cog in the wheels of despotism. Free speech is unthinkable. All other kinds of freedom are permitted. You are free to be a drunkard, an idler, a coward, a backbiter, a fornicator; but you are not free to think for yourself. Your opinion on every subject of any conceivable importance is dictated for you by the pukka sahibs’ code.

In the end the secrecy of your revolt poisons you like a secret disease. Your whole life is a life of lies. Year after year you sit in Kipling-haunted little Clubs, whisky to right of you, Pink’un to left of you, listening and eagerly agreeing while Colonel Bodger develops his theory that these bloody Nationalists should be boiled in oil. You hear your Oriental friends called ‘greasy little babus’, and you admit, dutifully, that they are greasy little babus. You see louts fresh from school kicking grey-haired servants. The time comes when you burn with hatred of your own countrymen, when you long for a native rising to drown their Empire in blood. And in this there is nothing honourable, hardly even any sincerity. For, au fond, what do you care if the Indian Empire is a despotism, if Indians are bullied and exploited? You only care because the right of free speech is denied you. You are a creature of the despotism, a pukka sahib, tied tighter than a monk or a savage by an unbreakable system of tabus."

John Flory's story isn't a pleasant one. It's a story of a conflicted man wanting, but unable, to do the right thing. I wonder how many good cops feel this way, wanting to improve society but hampered by their coworkers. At any rate, it's a good read. This essay about Orwell and BLM is another good read.

Monday, August 24, 2020

Wrong name. Right problem.

 

Systemic Racism is not a good name for it. It’s not a formal system and there is no formal name. And yet it’s there, flowing through our culture like kerosene saturating a dry rag.

 It’s in the things we don’t think about. Pointless commentary, children’s rhymes, ethnic jokes, in the things we don’t realize we’ve said. Those things get inside our heads and it doesn’t occur to us to get them out.

 And in some cases, those things pollute entire organizations. Take the Kenosha, Wisconsin police for example. There is no excuse for the appalling crime committed on August 23 by its officers. And yet I don’t blame the police, at least not entirely.

Our culture is ailing and the disease has worsened in recent years. Many Americans are a paycheck or two away from being homeless. This is stressful for people, including police officers. That doesn’t excuse violent behavior, though it may help to explain it. There’s plenty we can do to change policing laws and weed out bad cops, but police thuggery is a symptom, not the root of America’s problem.

 Money is the problem. Too little is a problem. So is too much. Those with too much think of themselves as winners and of those with too little as losers. If the cops kill a few losers, it’s a small price to pay to maintain law and order.

 And what is “law and order”? It’s the maintenance of an unjust status quo. That’s what the president means when he uses those words in response to “Black lives matter” Those words don’t address justice. They address social control. During the 1890s, Tom Watson tried to unite poor blacks and whites politically. He said, “You are kept apart that you may be separately fleeced of your earnings. You are made to hate each other because upon that hatred is rested the keystone of the arch of financial despotism which enslaves you both. You are deceived and blinded that you may not see how this race antagonism perpetuates a monetary system which beggars both.” Let’s replace law and order with social justice before someone touches a match to a kerosene soaked rag.

Wednesday, June 03, 2020

We




We are men. We know pain,
Which we freely acknowledge,
Yet we don’t complain.

It isn’t the pain that aggrieves.
It’s the unfairness
that comes
From those who deceive us.

Hypocrites all, they try to fool us
With improvised news,
With which they would school us.

They haven’t an ethos they would defend
Unless it’s that destiny decrees they hold the hill,
Even if that means crushing those below.

Winners keep losers poor and in debt.
And as they drown push them deeper
until they sputter, “I can’t breathe.”

Winners need losers in order to win.
So brainwash some. Impoverish many.
Murder a few. But never admit.
You’re no better than they.


Tuesday, July 04, 2017

Is there an artful approach to artificial intelligence?

During the week concluding 2017’s first half, three New York Times stories addressed the potential social dangers of Artificial Intelligence. Is this a mere coincidence, or is it rather a symptom of growing alarm? Previously economists have noted that just as industrialization eliminated many jobs only to create new ones, automation has done the same. But some economists now suspect that this time it will be different.

Kai-Fu Lee penned the most thoughtful of the week’s three stories. He notes, “Unlike the Industrial Revolution and the computer revolution, the A.I. revolution is not taking certain jobs (artisans, personal assistants who use paper and typewriters) and replacing them with other jobs (assembly-line workers, personal assistants conversant with computers). Instead, it is poised to bring about a wide-scale decimation of jobs — mostly lower-paying jobs but some higher-paying ones, too.” These will include, “Bank tellers, customer service representatives, telemarketers, stock and bond traders, even paralegals and radiologists,” who will, “gradually be replaced by such software.” In time robots and self driving vehicles will replace a slew of other jobs.

Lee notes that A.I. software is being developed faster than most people realize and that it has the potential to disrupt society in two ways. He asks; “we are thus facing two developments that do not sit easily together: enormous wealth concentrated in relatively few hands and enormous numbers of people out of work. What is to be done?”

Some who have pondered this question believe that education is the key to creating jobs in this soon-to-come economy. But Lee believes education is only a partial solution. “Artificial intelligence is poorly suited for jobs involving creativity, planning and “cross-domain” thinking — for example, the work of a trial lawyer. But these skills are typically required by high-paying jobs that may be hard to retrain displaced workers to do.” Lower paying, people-skill, jobs can’t easily be performed by artificial intelligence but, “How many bartenders does a society really need?”

Lee, among others, suggests that in addition to educating workers, a universal income may also be required. To prevent massive unemployment, Lee believes that service jobs which today are poorly paid, or done by volunteers, will acquire greater status. Wealth held by A.I.’s landlords and other wealthy people and companies will need to be taxed to pay for the new, and newly remodeled, jobs necessitated by A.I.

This means higher taxes, a solution applied during the Great Depression of the thirties, World War II, and the Cold War. However, high taxation went away in the Reagan era and it shows no sign of returning soon. Although high progressive taxes brought about a period during which America had a broader and more prosperous middle class, that approach has been unpopular in recent years. Instead, tax cuts, particularly for the wealthy have been used under the theory that wealth would trickle down and benefit society at large. These tax cuts have given the economy a few short-lived bumps, but they’ve also increased the nation’s deficits. Today, the top 20 percent of Americans hold roughly 90 percent of the country’s wealth. Recently both the Congress and the Senate proposed tax plans that would leave more than 20 million Americans without health insurance. Though universal health care is the norm in most well-developed nations, it’s an idea that remains unpopular in the United States. Lee and others who propose universal income are unrealistic: if universal healthcare is too socialistic for the United States, then a universal income will meet the same resistance.

Before universal income, or something like it, can become a reality, America’s economic attitudes will need to change. The difficulty here is that those with the most money influence our political process in a variety of ways—and they seem set on preserving their wealth. Today many Americans face poverty and economic uncertainty. The growth of A.I. will soon put more money in fewer hands increasing the misery of the 80 percent of Americans currently sharing 10 percent of the wealth.

Lee writes from Beijing. Perhaps his solution will work in China. But unless something major changes here, it won’t work in the United States.

Lee makes a secondary point as well. China and the United States are the two countries most likely to advance advanced A.I. technology. As they do so other nations may be plunged into poverty. Lee concludes, “…we are going to have to start thinking about how to minimize the looming A.I.-fueled gap between the haves and the have-nots, both within and between nations. Or to put the matter more optimistically: A.I. is presenting us with an opportunity to rethink economic inequality on a global scale. These challenges are too far-ranging in their effects for any nation to isolate itself from the rest of the world.”

Read more:
The Real Threat of Artificial Intelligence
Daily Report: Automation’s Effect on Developing Tech Economies
Robocalypse Now? Central Bankers Argue Whether Automation Will Kill Jobs

Sunday, December 02, 2012

After Dancing Long and Well, It’s Time to Pay the Piper


It’s absurd to maintain tax cuts for the wealthy when the country faces massive debt and many of its citizens are unemployed. By now, most of us realize that prosperity does not trickle down from the wealthy, and never did.

It’s argued, however, that increasing taxes for the wealthiest citizens may result in lost jobs. But it’s also argued that the resulting reduction in the federal deficit will more than compensate for those lost jobs. Further, it’s not certain that job losses will occur since businesses are running on minimal staffs already. After Clinton raised taxes, the economy thrived, so it’s entirely possible that the effect of tax increases for the wealthiest may have no, or only minimal, effect on job losses.

Alternatives that include reducing entitlement funding will also increase the hardships already faced by entitlement beneficiaries. As for cutting federal spending, we all know that Republicans never actually follow through with such reductions despite their talk. To do so would result in lost jobs for federal employees and for those who supply the government with goods and services. Clearly not an acceptable alternative.

During the Eisenhower years and beyond, affluent Americans paid much higher taxes than they do today. The country prospered and employment was strong. Currently the wealthiest citizens hold a greater percentage of America’s wealth then they ever held previously resulting in record levels of income inequality. Yet does all this capital in so few hands result in economic growth? Not at all. In order to bring economic growth, capital needs to be moving, not sitting stagnantly in the hands of the elite. The United States does not have a royal class, yet the desire to worship royalty remains present in those who seek to protect it from imaginary threats.