Tuesday, October 13, 2015

October 13 2015. Most Americans (the majority) are living on “the razor’s edge of poverty?”




The picture is grim—and doesn’t say much for the current  American Business Model.

On a purely numerical basis—in terms of dollars per capita—Americans still look comparatively well off compared to the populations of many other countries.

That picture changes fast when you compare the U.S. with other developed countries, and more fundamentally still when you factor in wealth and income inequality (excessive by global standards, socially divisive, and politically disastrous), the American cost of living, and the lack of a comprehensive social safety net.

The American cost of living is deceptive. One is bombarded with so much promotion you get the impression that, whatever about its flaws, the U.S. has to be the most competitive country in the world—with prices to match.

In fact, much of that marketing sound and fury masks the fact that American business has become increasingly monopolistic, that there is much less competition than you would think, and that U.S. prices for many goods and services are actually higher than those prevailing elsewhere (and arguably higher than they should, or would, be in a genuinely globally competitive environment).

Without genuine competition, capitalism doesn’t work. Let me stress the word ‘genuine.’

All too many U.S. market sectors are now excessively “concentrated” (to use the term the cognoscenti like to use). That’s a polite term for monopolization. A monopoly literally means that there is only one supplier of a good or a service—and no competition—but once you get the numbers down to about five (an oligopoly) there is a tendency for many of the negative consequences of a monopoly to come into effect (particularly where price competition is concerned).

Corporations don’t have to sit around a table and plot to fix prices—although some do (Trade associations sound harmless but provide a convenient forum for discussion). When the numbers are small, tacit understandings come into effect—which have the same result.

The U.S. does have comprehensive anti-monopoly laws (which were put there for very good reasons) but, particularly under Republican administrations, largely doesn’t enforce them.

This is actually anti-capitalist, in that competition is fundamental to free enterprise, but Republicans, and quite a few Democrats are not particularly well informed about economics, are ideologues rather than thinkers, and don’t see it that way. They associate anti-monopoly prosecutions with anti-business—and react accordingly. They are, of course, entirely wrong.

This increasing trend towards monopolization is a very serious problem in the U.S. because it doesn’t just lead to higher prices, but it also tends to stunt innovation, choke off potential competition, and lead to political corruption.

If you look at where the big money in politics comes from, you fill find that a disproportionate quantity of it comes from monopolistic-trending large corporations.

Monopolization also leads to companies becoming too big to fail (particularly if they are financial) or becoming so powerful that they can virtually dictate their own terms (as Boeing did when squeezing vast tax breaks out of Washington State). Genuine democracy doesn’t get much of a look-in when corporations become that powerful.

Monopolization is helped along significantly by Big Finance. Even when a corporation requires truly vast sums of money to buy a major competitor (much easier than actually competing), the major banks are well equipped to provide it. Lending to Big Business is much easier and more profitable than lending to thousands of small businesses. Big leads to Bigger—and competition gets crushed in the process. That is not just a tendency. It is what is actually happening across the board—from airlines to Fast Food to cable. The consequences for the buying public have not been good.

But, back to tissue of prices being higher than they should be in the U.S.

Most Americans don’t seem to be aware of this—and I was partially under a similar illusion (despite my studying the U.S. economy since 2004) until I moved to Europe six months ago. Then my eyes were opened with a vengeance.

Where many items are concerned (food, stationery, and many other basics—which I tend to note from a writer’s perspective)—I have found the UK to be significantly cheaper (and UK posted prices include tax (mostly VAT or Value Added Tax) where applicable).

Walking-around economics is a wonderful teacher. You tend to notice things when you are paying for them personally. You also notice people’s demeanor, how they dress, how healthy they are—and a whole host of other intangibles.

You sense whether they are coping, or are stressed out of their minds. 

Empathy—in the sense that you can truly relate to the feelings of another—can be deeply distressing, but it is a highly desirable attribute if you are a writer.

Good writing is earned. It comes expensive. It is exceptionally costly if you are empathetic. You feel the pain—and it does have an impact.

Economic models may—or may not—be useful; but they are decidedly not enough. As a media connection—a most attractive and interesting woman (a TV anchor) once remarked to me (over dinner): “You have to put your hands in their wounds.”

That is not the kind of remark you forget in a hurry.

She was quoting her lover—but that is another story.

Gas (petrol) is, of course, much dearer in the U.K.—probably a good thing (in my opinion) but since public transport is generally available in urban areas, you don’t have to have a car in the first place.

If you are a senior citizen, bus travel is free—and cities in the UK are designed for walking.

However, the cost factors which really hit Americans are:

  • Healthcare. These costs are so out of line compared with other developed nations that the fact they continue to be tolerated is truly incredible.
  • Housing. Rising faster than inflation.  Matters are plain out of whack.
  • Third level education and for-profit training. Costs here have increased so excessively for many years that Student Loan Debt now tops $1.2 trillion—a truly insane burden of private debt.
  • Auto purchase (and the necessity to have a car in the first place). Rising faster than inflation—and again supported by vast private debt.
  • Cable and internet. Internet access has now become a de-facto necessity—yet is largely in the hands of monopolies.
  • Low pay compared to the cost of living. In most cases, U.S. pay hasn’t increased in real terms since the 70s—and, in many cases, is currently in decline.
  • Costs of debt and other financial costs. Under the current American Business Model, most Americans are forced into debt—and they are kept there for the rest of their lives.
  • The lack of an adequate social safety net. This is just plain inexcusable—and creates a climate of chronic insecurity. It is exacerbated by the lack of worker rights and the current weakness of trade unions (which are now only marginally relevant in the private sector.

The following extract is by Mark Karlin of www.Buzzflash.com  at Truthout.

Living Without a Net: Nearly 50 Percent of Americans Don't Have Any Savings

A recent study by the for-profit website GOBankingRates.com found that just under 50 percent of Americans have no savings socked away.

Worse yet, another 13 percent in the US have savings that total under $1000, and 9 percent have just a "minimum [savings] account" balance requirement. Minimum balance requirements vary, but GOBankingRates cites ranges of $500 - $1500.

If you add these three figures together, a dismaying number of Americans - approximately 70 percent - have either no savings or less than around $1500 set aside. 

Commenting on the survey, blogger Jonathan Turley cuts to the chase:

The economic situation in this country is far worse than most people appreciate. We live in economically stratified areas where there is little interaction between distant economic classes. These reports are a startling wake up call for policy makers. The goal of everyone having a few months of cushion for bad times is clearly not occurring - leaving at least half or more of the population on the razor’s edge of poverty.

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