Saturday, October 10, 2015

October 10 2015. The way the U.S. is working isn’t working—and the situation is deteriorating..




No more!

Though my primary research focus has been on the U.S. economy since 2004—and on the American Business Model (ABM) in particular—I would have needed to be deaf, dumb, blind, and peculiarly unaware, not to notice that the U.S. problems were not confined to the economy, but were pervasive.

This should scarcely have surprised me given the importance of economic matters in virtually any culture—but particularly given the dominant status of money in American life.

Money is the American religion—though the near worship of  celebrity status (often regardless of achievement) probably runs it a close second. The two, of course, are kissing cousins.

Is money a universal religion? Yes and no. It’s a matter of degree. Some societies seem more driven by it than others—to the point where more admirable values get short shrift. I would argue that the latter is the current American situation.

Unfortunately, at a certain personality-dependent point, reasonable ambition has a tendency to morph into greed—and the consequences thereafter can be fairly horrendous. Greed is a particularly ugly quality.

You would be hard pressed to find more blatant manifestations of it than in the U.S. financial sector in general—or in the rarified world of corporate CEO’s, where short-termism, in the interests of pushing up share prices for personal gain through share buybacks, and other financial engineering, has become virtually the norm—at incalculable cost to the corporations’ longer-term interests, those of employees, the community, the National Interest—and those of society as a whole.

But America’s problems cannot all be blamed upon money (though it influences just about everything there). They can also be traced to:

  • History.
  • Culture.
  • A Flawed Constitution.
  • Racism.
  • Education (and the lack of it).
  • A Catastrophically Expensive & Ineffective Healthcare System.
  • Insularity.
  • Militarization.
  • A Series of Failed, Futile, and Cripplingly Expensive Wars.
  • Media.
  • Rugged Individualism.
  • The Sophisticated Manipulation, Through Propaganda, of the American Public for Decades.
  • A Massive Breakdown in Trust (leading to a decline in Social Capital).
  • A Quite Extraordinary Lack of Social Concern.
  • Arrogance.
  • Hubris.

I was reluctant to accept this for some time because the U.S. has been such an important influence in my life, I regard the country with great affection, I have so many American friends, and because it is decidedly distressing to see any person, thing, or country that you have grown up to admire, progress into accelerating decline.

Many Americans don’t accept that the U.S. is in decline. They point to the strong dollar, a booming stock market (until recently), growing GDP, and relatively low unemployment.

So, if employees are in demand, why aren’t wages and salaries going up? It’s supposed to work that way—but it isn’t.

Would that it were that simple—and that statistics couldn’t be used to confuse, manipulate, distract, and deny. They are, in their own way, as much weapons as guns—and may just be even more dangerous. They can delude.

If superficially positive statistics are repeated often enough—without adequate context, analysis, and critical comment—which is certainly the case as far as the mass media in the U.S. are concerned—people can be persuaded that things are going reasonably well—even if one’s own circumstances are bleak.

Such propaganda taps into the guilt factor—even though closer examination of the credibility of the data might be more appropriate.

Clearly, the economy is healthy enough, and everybody else seems to be doing well enough, so why can’t I hack it?

The system encourages people to blame themselves rather than the system—and many of us do just that. We are all too conscious of our own inadequacies (whatever about the public face we put on things). We all have our fears and insecurities.

In truth, most of us could try harder—and do a little more (one always can)—but the greater truth is that the system is rigged. It is designed by the ultra-rich to favor the ultra-rich—and that is exactly what it does.

It is not slightly rigged—moderately deficient in the way most human constructs are (because human nature is just that).

We are talking here about the legal hijacking of an economy by an ultra-rich few to the detriment of the many. It is a process which has now been going on, largely in plain sight, but comparatively unnoticed, for more than 40 years. It started in the early 70s. Prior to that, from the end of WW II, the National Cake had been shared with comparative fairness.

After that time, even though productivity and corporate profits increased dramatically, the earnings of most Americans in real terms (after inflation is factored in) either remained more or less static, or actually declined. Labor’s share of GDP declined. Corporate profits, as a percentage of GDP, increased.

Has that been that the case in other developed nations? Largely not. In fact, as far as the populations of most countries are concerned, economic progress over the last four decades or so has been dramatic.

Not so in the U.S. Not so in the richest, best endowed, and arguably most capitalist country in the world—a truly extraordinary situation—and all without generating civil unrest.

People just accepted this lack of progress—largely because they had absolutely no idea how much better the rest of the world was doing—and continues to do in relative terms.

How was this done?

Much of what was done—and continues to be done—was highly technical and involved legislation which tilted matters to favor the ultra-rich—but, in essence, the process involved:

  • Suborning the political process at federal, state, and local level through selecting and backing politicians who would do what their financial backers wanted. There was nothing new in this—the rich had always sought to advance their own interests in this way—but it began to be done in a much more organized and systematic way.
  • Crushing the trade unions to the point where they have become nearly irrelevant in the private sector, and are under siege in the public. This campaign has involved both legal and illegal means—and considerable propaganda.
  • Blocking any legislation which might increase employee rights in any way. Why should the citizens of the richest country in the world have so few employee rights? It defies logic.
  • Blocking any and all environmental legislation wherever possible.
  • Gaining control of, and disciplining the media to the point where they serve solely to advance the causes and interests of their owners. A byproduct of those has been the laying off of vast numbers of journalists and other staff, the near abolition of investigative journalism, widespread self-censorship by reporters who know which side their bread is buttered, and mass media who persistently ignore crucial issues—such as the U.S. economic decline—which are taking place in front of their eyes.
  • The most sophisticated and sustained propaganda campaign in World history which has kept the American public remarkably complacent even while bad things have been happening to it. In fact, this propaganda is so effective that many are persuaded to vote against their own interests.
  • The creation of a climate of fear which has dissuaded dissent. If you lose your job in many developed economies, your pride may be hurt, but you will be able to maintain some reasonable approximation to your standard of living while employed. In contrast, if you lose your job in the U.S.—which can happen arbitrarily—your whole way of life is likely to come crashing down unless you have adequate reserves—which all too many Americans do not. As a consequence, people are reluctant to support unions or to question the system. They have too much to lose. they are cowed.
  • The deliberate and systematic cultivation of a distrust of government—because once trade unions have been neutralized, as is largely the current situation, and given that the ultra-rich largely own the media, the only meaningful potential opposition left is the government. Destroy its credibility, which has largely been done, and all that remains are the ultra-rich, the corporations they control, and those who support them.
  • The development of truly massive financial support for business. While opposing financial support for the long-term unemployed, paid maternity leave, equal rights for women, minimum compulsory vacation time, and virtually anything which might benefit the typical American, the ultra-rich, and their interests have implemented financial support for their various activities on an entirely unprecedented scale—which makes a nonsense of their stated preference for unfettered capitalism. The Federal Reserve supports the financial system on a scale that boggles the imagination but which involves trillions of dollars. After that come tax breaks, grants, special infrastructure support, and an array of other incentives which

A consequence is an economy which is distorted and unfair in more ways than you can possibly imagine. You are not supposed to be able to. The movers and shakers trade on your ignorance, and on the fact that few legislators read the finer details of the bills they pass.

Yes, I know that sounds incredible—but it is true.

It is amazing what you can with money when it is translated into power. You can steal with it legally—because whatever the law says (even if passed through bribery and corruption)—is legal.

It is just that which led to the American Revolution. You can make a good case that it time for another one (preferably without the bloodshed).

Overall, the evidence is incontrovertible that the U.S. just isn’t working effectively any more, and that the nation just isn’t doing well under a whole host of headings that impact negatively on the lives of most Americans.

  • Americans have less job security than the citizens of other developed nations.
  • Americans have fewer worker rights.
  • The earnings of most Americans, when inflation is factored in, have not increased in over 40 years—and, in many cases, are in decline.
  • Americans live sicker and die sooner.

And so it goes on and on and on—one negative issue after another. Since I have written about these issues before many times, I won’t repeat them—but they are very real.

The following excellent piece from the Washington Post attempts to get to grips with the political aspect. Significant though it is, it is only one problem area.


These political scientists may have just discovered why U.S. politics are a disaster

By Ana Swanson October 7 at 7:11 AM

There's a lot of disgust in America with politicians' inability to get things done. In the race to win the Republican presidential nomination, that disgust has so far benefited outsider candidates. Non-career politicians Donald Trump, Carly Fiorina and Ben Carson have all promised to ride in and fix Washington.

But new research by Nolan McCarty, a professor at Princeton University, and other political scientists suggests this disgust — and America's political dysfunction — won't be that easy to fix. Working with political scientist Boris Shor and economist John Voorheis, McCarty has released a new study that shows that the growing ideological gap between the Republican and Democratic parties — a common obstacle to getting anything done in Washington — is not just due to politicians' incompetence or their unwillingness to work together. It's due, at least in part, to a deeper, structural problem: the widening gap between the rich and poor.

McCarty says he shares some of the disgust that Americans feel about polarized politics and gridlock in Washington. "But I think it’s important for readers and voters to understand . . . that these problems are not just simply because career politicians are acting in bad faith or, as Donald Trump would say, they’re stupid losers. They’re really deep structural problems," he says.

How the widening gap between the rich and poor has changed politics in America

By looking at extensive data on U.S. states over the past few decades, the researchers show that the widening gap between the rich and the poor in recent decades has moved state legislatures toward the right overall, while also increasing the ideological distance between those on the right and those on the left.

This map below shows the Gini coefficient, a measure of income inequality, for each state going back to 1997. A lower Gini figure indicates that people in the state are earning more equal incomes, while a higher one (marked here in darker green) shows that incomes are more unequal. (You can disregard the axes here — they just show latitude and longitude.)

From “Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization,” by John Voorheis, Nolan McCarty and Boris Shor.

The paper argues that this trend has gone hand in hand with the growing political divide. The states that have the highest levels of inequality, or the fastest growth in equality, have also tended to see the most political polarization, the paper says.

Using a scale of state legislator ideology that looks at annual surveys of the beliefs of candidates since the mid-1990s, the researchers map where Democrats have shifted to the left and Republicans have shifted to the right at the state level. The map below gives an ideological "score" in each state for each chamber — in most states, a House of Representatives and a Senate.

A more negative score and a deeper blue color on the map indicate that the state chamber is more liberal, while a positive score and deeper red color show the state is more conservative. You can see that blue states have become bluer and red states redder since 1997. A look at party composition in each state shows the same trend.

From “Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization,” by John Voorheis, Nolan McCarty and Boris Shor.

It's not just that these two trends of inequality and polarization are happening simultaneously. The researchers use statistical methods to eliminate other factors and show that a state's income inequality has a large, positive and causal effect on its political polarization. Furthermore, these results have increased in magnitude in recent years and seem to be concentrated in the states that are "reddest" by the end of the sample.

In other words, growing inequality is a strong force pushing both parties farther from the center.

The paper doesn't specifically say why this happens, except that politics gets more polarized with each election. It appears that people on either end of the economic spectrum have been developing even more different political preferences and electing people to represent those preferences.

Interestingly, however, the study shows that inequality is affecting the two parties in different ways.

First, the researchers find that Democrats as a whole have shifted farther to the left than the Republicans have to the right, with very liberal Democrats becoming even more liberal. But at the level of the state legislature, they find that ideology as a whole has shifted slightly to the right. The reason is that there has been a change in the partisan balance, with Republicans winning more seats from moderate Democrats over time.

"As the Democrat party has shrunk nationally over the course of the last 15 years, the disproportionate effect has been the replacement of moderate Democrats with Republicans, and that has tended to happen most often in states with high levels of inequality, or where inequality is growing the fastest,” McCarty said.

The map below, which shows the percentage of seats held by Republicans, illustrates how that has happened. The percentage of seats held by Republicans has increased, especially through the South and middle America, since 1997:

From “Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization,” by John Voorheis, Nolan McCarty and Boris Shor.

What this means for America's future, and for voters

This study offers evidence that inequality leads to political polarization. Though they have yet to produce definitive findings, the researchers also believe, as many others in their field do, that political polarization also in turn produces more inequality, creating a vicious feedback loop of inequality and polarized politics.

How does that work? Not only are more conservative lawmakers less likely to favor redistribution, the political gridlock that results from having a more polarized system makes it harder to pass bills that might reduce income inequality, such as increasing the minimum wage, strengthening union bargaining power, or increasing redistribution through welfare, researchers say.

The research suggests that political polarization is not just a product of gerrymandering, the way districts are drawn, or caused by features of the state political system, such as having closed partisan primaries, McCarty says.

Instead, he argues that America's political polarization is a reflection of bigger, broader changes in the United States, in particular that the country has become much more diverse in terms of its economic, racial and ethnic makeup than it was in the 1950s. The diversity, unsurprisingly, has a direct impact on the political system, and we have yet to figure out how to repair the system to reflect a more diverse society, McCarty says.

So what does this mean for average voters in the near term? For one, they should be skeptical of candidates who promise an easy fix to political dysfunction in Washington.

"These are deep, complicated problems, and people need to think big picture about what underlies them. They weren’t solved by electing Barack Obama, they’re probably not going to be solved by electing Donald Trump," McCarty says.

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