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Thursday, July 10, 2014
 The Case for a National Individual Investment Program

Topic: Announcements
The Case For a National Individual Investment Program 
 
This article focuses on the National Individual Investment Program that I first advocated in 2010 in the article A Progressive Foundation for America's Economic Future. In this piece I flesh out more details on how such a program could operate and make the case for the program on practical and philosophical grounds.


Posted by rationalrevolution.net at 7:33 AM EDT | Post Comment | Permalink
Updated: Thursday, July 10, 2014 7:38 AM EDT
Wednesday, January 29, 2014
 Why Jobs are Not the Answer

Topic: Commentary

President Obama recently gave a speech in which he decried growing inequality in America, and minorly touched on the subject again during his State of the Union address (though he chose to focus much more on "creating jobs"). Since Obama's December speech on inequality, the topic of economic inequality has become more common in popular media, but again it seems that the vast majority of people fail to understand the basic root causes of inequality. One thing that I've commonly heard is the claim that inequality can be reduced simply by reducing unemployment. This is not only completely false, but is in fact the opposite of the truth.

The chart below shows both the unemployment rate and the percentage of income going to the top 1% of receivers over roughly the past 100 years.

 

 

The low unemployment rate in 1916 and 1917 was a product of World War I. This does not correspond to a rise in inequality for two reasons: 1) because unionization spiked during this time and 2) during war time various economic regulations were put in place to reduce profit taking (though large profiteering was still not eliminated). Following World War I, however, we see a sharp spike in unemployment, followed by a sharp fall in unemployment during the relatively unregulated 1920s. The area shaded in blue shows the inverse correlation between the unemployment rate and income inequality. As the unemployment rate fell during the 1920s, the percentage of income going to the top 1% of receivers increased. During this time unionization was declining because of government policies and public attitudes resulting from fears of communism following the Russian Revolution of 1917. There was no federal minimum wage at this time. We also see that as the unemployment rate began going back up in the late 1920s, income inequality began declining. What this shows basically is that we had peak income inequality during the period of lowest unemployment.

Following that we have the area shaded in yellow, which goes basically from World War II to 1980. This was the "Golden Age" of the American middle-class. During this period we saw relatively low sustained unemployment, high GDP, and low income inequality. But was the low inequality a product of low unemployment? No, not at all. It was a product of government policies. As you can see in the chart, this was a period of rising minimum wages and high unionization. The rise in unionization during that time was a product of government policy and support. In addition to those factors, this was also a period of heavy economic regulation, with government imposed economic controls over many industries, like aviation, energy, banking, etc. This was also the period of maximum progressive taxation, with effective tax rates on the highest incomes approaching 90% in the 1950s and 1960s.

 

 

In fact even during this period we see an overall trend of rising unemployment and declining income inequality, showing that income inequality wasn't a product of low unemployment. In fact declining income inequality is more closely correlated to the minimum wage during this period than the unemployment rate.

Then we have the period shaded in red. This is the period of de-regulation, accompanied by declining unionization, a falling minimum wage, and a marked decline of progressive income taxation. As you can also see in the first chart, there is a clear correlation between the unemployment rate and income inequality. As the unemployment rate declined during this period, income inequality rose. The periods of especially low unemployment in the late 90s and early 2000s are accompanied by spikes in inequality.

People (like the president) who claim that "creating jobs" is a way to address economic inequality are completely wrong. "Creating jobs" is one way to reduce poverty, yes, that is true, but reducing poverty is not the same thing as reducing inequality. I have seen multiple people claim that a "full employment" policy would reduce inequality. Totally false. The belief among these people is that when unemployment rates get very low, the labor market hardens, resulting in rising wages, which will, on their own, reduce inequality. This simply isn't the case, as the data shows, and understanding why this isn't the case is very important.

The only times in American history that we've seen both low unemployment rates and reduced income inequality has been during World War I and World War II. Those are the only two times. Both of those periods were accompanied by high unionization rates and heavy economic controls imposed by the government, including regulation of profits. Those are the only conditions in American history in which low unemployment has been accompanied by reduced income inequality, and both of those times the unemployment rate fell below 2%, heavily influenced by the fact that tens of thousands of working age men and women were taken out of the labor pool to fight in the wars.

The reason why low unemployment rates, by themselves, don't reduce income inequality is quite simple. It's because no matter what the labor market conditions are, an employer isn't going to intentionally hire someone who won't generate revenue for the business. So, every employed worker is generating profits, at least in theory. Times of low unemployment are actually times when workers are most likely to be generating profits, because times of low unemployment are also times of high consumption. Times of higher unemployment are times of lower consumption, during which employers may retain less profitable workers over the short-run in hopes that they will need to retain that talent for times when the economy "picks up". This means that employers actually get a lower rate of return on workers during times of higher unemployment, and a higher rate of return during times of low unemployment.

In addition, even if extremely low unemployment were to reduce the rate of return per-worker, the fact that a larger number of workers are working, creating more value, means that a greater volume of profits are being generated. Basically, the more people work, the more profits are generated, which raises the incomes of capital owners. The idea that the labor market, all by itself, will "naturally" and "inherently" reduce profits for capital owners is absurd, because even in the hardest of labor markets capital owners have distinct advantages in the labor exchange transactions, as explained in my articles on capitalism: Wages and Labor MarketsEvolution of the American Economy 

The way that capitalism works is that the owners of capital "get a cut" of all the value created by workers. Jobs are not charity, they are not gifts. Employers hire workers because they need workers to generate profits. The more consolidated that capital ownership is, the greater the amplifying effect of inequality, because it means that the excess value being created by each worker that goes to profits is being funneled to smaller portion of the population. And today, economic inequality in America and around the world is being driven not only by domestic working conditions, but by global working conditions. American inequality is being partly driven by the profits generated from foreign workers, in places like China, India, South America, etc. A piece of all the value those workers cerate is being funneled to a relative handful of major America capital owners.

The idea that "all we need to do" to reduce economic inequality is "create jobs" and reduce unemployment is rooted in a false belief that income inequality can be reduced through "market mechanisms", and that we don't really need to do anything significant to address it, other than "invest" and "work hard". This is completely false. Capitalism is a system that fundamentally and inherently drives economic inequality, because the entire system is predicated on transferring wealth from workers to property owners, i.e. capitalists. The more workers work, the more profits are generated, and the richer the few capital owners become. Thus, creating more jobs does nothing to reduce inequality, in fact it only increases inequality. The only things that are historically proven to reduce income inequality within capitalist economies are non-market policies, like collective bargaining through unions, minimum wage increases, regulation of executive pay, regulation of profits, regulation of markets.

Those are certainly not the only ways to reduce economic inequality, but those are the mechanisms that have been used in America and other Western capitalist economies to effectively reduce inequality in the short term. However, in my opinion, these types of policies are doomed to long term failure, because they fail to address the root cause of economic inequality in capitalist economies, which is consolidation of capital ownership. The problem with the New Deal reforms was that they did nothing to reduce consolidation of capital ownership, in fact they likely exacerbated it.  The source of wealth and power is ownership of capital, and as long as a relatively small number individuals are able to retain ownership of the majority of capital there is no way to check their political or economic power over the long term.

This is why real economic reform and real reduction of economic inequality requires re-distribution of capital ownership and mechanisms to ensure that capital ownership remains permanently highly distributed among all people. In my opinion the three fundamental building blocks of economic fairness and equality are distributed ownership of capital, universal public education, and universal public insurance for all major forms of risk, such as disability, unemployment, health, and life insurance.

"Markets" are never going to reduce economic inequality. "Creating jobs" will do nothing to reduce economic inequality, it's a proven fact.


Posted by rationalrevolution.net at 7:06 AM EST | Post Comment | Permalink
Updated: Wednesday, January 29, 2014 7:34 AM EST
Thursday, January 16, 2014
 Yes, There is a Gene for That

Topic: Commentary

This is an open response to an article in Jacobin called There's a Gene for That. I'm replying to this because it touches on a subject that I've been grappling with a lot lately, which is how many “leftists” fail to acknowledge biological reality.

Mr. Mehta, while you raise some reasonable points, I think that you have fallen into the same trap that many, if not most, leftists have fallen into with regard to biology, which is basically buying into the same fundamental framework as conservatives, but simply taking the opposite side of the coin.

Let me first say that as someone with degree in biology and who is a (let's say) “pseudo-neo-Marxist” (whatever that may mean), I am very frustrated with how many leftists view biology. In fact I think this frustration is a common circumstance among left leaning biologists.

I want you to hear me out and I want to change your mind on this issue.

When I read your article and listen to your argument, and the arguments of many other leftist who hold similar positions, what I hear is a mirror image of what conservatives believe in regard to biology. Both your view and the conservative view seems to be that biology dictates what is right and wrong, what is acceptable or not acceptable. The only difference is that conservatives claim that inequality is an inherent natural phenomenon, therefore it is justified, while leftists take the position that inequality and all manner of obvious injustices are bad, therefore “they cannot be natural”.

This is essentially what your argument boils down to in my mind. What I am going to tell you is that inequality and all manner of injustices are natural, but the fact that these things are natural does not in any way justify them.

In my opinion, it is of vital importance that “the left” understands this and takes this position, because what many leftists like yourself (presumably) have done, is placed the core foundation of leftist theory and ideology on quicksand. What you've done is you've basically said, “all leftist ideology is built on the premise that there are not inherent differences between people,” i.e. that all people “are in fact equal”.

What this argument does is it says, if it can be proven that all people are not in fact “biologically equal”, then our entire case for social equality falls apart.

What I'm telling you is that the case for social equality does not, and cannot, rest on an assumption of “biological equality”.

Biological inequality is an inescapable fact, however, what's also true is that minor biological differences are greatly exaggerated by social constructs. Essentially, “right and left” are “both right” when it comes to claims for the root causes of inequality, but the problem is that “the right” tries to justify all inequality via biological inequality while “the left” tries to claim that all inequality is social in origin, fearing that acknowledging any biological inequality proves the positions of “the right” correct. And the really big problem with all of this is that biological inequality is scientifically provable and quantifiable, while social causes of inequality are not, or at least are not as easily and directly provable and quantifiable. This puts “the left” in a very bad position, because even though it may be true that there are many social causes of inequality, it is much harder to prove those than it is to prove the biological causes.

Essentially both “the left” and “the right” take the same position, that the role of society should be to “enforce the natural order of things.” The difference is that “the right” claims that inequality and hierarchy are the natural order of things so those things must be good, and society should therefor be built on those principles; whereas “the left” takes the position that hierarchy and inequality are bad, therefore they must be “unnatural”, and therefore must be “caused by” society. The thinking then goes that if we can eliminate the effects of society, we would then “return to” a just natural state. (This is a major theme in feminsit "rape cutlure" theory)

What I'm telling you is that the natural order of things is unjust and all manner of behavioral ills are rooted in our biology. Historically society has tended to reinforce and exacerbate those natural injustices, however the role of society should be to counteract natural injustices and try to create a just world, despite the fact that the world is inherently unjust.

And this takes me to one of your core augments, which is that “evolutionary theory” has historically been used to justify “power and inequality”. Here I will point you to my article The Mis-portrayal of Darwin as a Racist. In that article I basically show the opposite of your claim, which ironically is a claim commonly made by anti-evolution right-wing fundamentalists against evolution. The conservative idea that human inequality is rooted in the “natural order of things” is an idea that greatly precedes evolutionary theory, and in fact Darwin and evolutionary theory did much to disprove many of these ideas. It was evolutionary theory, and later genetics, which showed that we are all much more similar to each other than was previously believed and tore down many of the fundamental assumptions about human inequality.

Nevertheless, the reason that there has been a long-held idea that inequality and hierarchy are a part of the natural order of things is because it is an obvious observation of the natural world, which people have been making for thousands of years. The issue comes with the belief that the world has “been designed the way it is supposed to be.” The world has not been designed, there is no “way it is supposed to be.” The natural world is not a guide to justice or a model for society, indeed the role of society should be to overcome the inherent injustices of the natural world.

You go to great lengths to demonstrate environmental effects on physiology, and these points are obviously true, but none of this is new information to biologists (nor ultaimtely do these arguments contradict a determinsit view, they merely add additional factors). Biologists well understand the complexities of gene expression, through mechanisms like epigenetics and other forms of environmental feedback loops that influence biological development, but really all of this misses the point.

The real point is that exploitation and market failures are demonstrable phenomena that drive economic and social inequality, regardless of any biological differences between individuals or groups. And here is the point I want to really drive home.

It doesn't matter if X group is “biologically more intelligent” than Y group. That fact, even if it is true, does not, and cannot ever, justify exploitation any more than X group being physically stronger than another would justify exploitation.

Forget about groups and statistics for a minute and think about individuals. If one individual is physically stronger than another, does that make it okay for the stronger person to enslave the weaker one, or to intimidate them into under-compensated labor? No, clearly it doesn't. The same goes for intelligence. The fact that one individual is smarter than another doesn't justify the smarter person taking advantage of the less intelligent one. And like I said, forget about “groups” and just think about individuals. It is obvious that on an individual basis some individuals are smarter than others. This is an inescapable fact. What difference does it make if X group is statistically more intelligent than another? This can no more justify exploitation than one individual being more intelligent than another or one individual being physically stronger than another.

To claim that various groups would all have demonstrably equal intelligence if not for environmental factors is as absurd as claiming that all individuals would have the same intelligence if not for environmental factors.

I worry when I see leftists (this is very common among so-called feminists) arguing about biology and denying even the possibly of biological differences between various groups, be they sexes, “races” or whatever. I worry because it both totally misses the point and it leads to arguments based on a premise that can easily be disproven, thus seemingly undermining the case for many “leftist causes”.

The case for social and economic equality does not rest on an assumption of biological equality, period. Do not ever base any argument for social or economic equality on an assumption of biological equality. By doing so you merely undermine the case for social and economic equality, because we aren't biologically equal.

This is something that Karl Marx understood very well, which is exactly why he famously stated (always quoted out of context), “From each according to his ability, to each according to his needs!” This statement inherently acknowledges that we are not all equal in ability.

But even more important, the mechanisms of economic redistribution from wage laborers to capital owners is a provable fact that stands on it's own, regardless of any other considerations. Both market failures and manipulation of markets by capitalists to misappropriate value to themselves are provable facts which stand on their own.

It doesn't matter if “the working class” are biologically less intelligent than the capital owning class in America. Even if this is true, which I strongly beleive that it is, it doesn't change the fact that the mechanisms of capitalism rob value from wage laborers and undermine democracy.

Theft is wrong. That the strong steal from the weak doesn't make it justifiable. The fact that more intelligent people are able to rise to the top of a corrupt system doesn't make the system defensible. The fact that smart people are more capable of rigging the game and cheating doesn't make it okay.

There are three major factors that drive economic inequality, but only two of them drive extreme levels of inequality. One is biological inequality, but while this is true, it is really only a minor factor. Two is the “winner take all” effect, which I'll go into, and three is private capital ownership. In America there is no question that two and three are the major drivers of inequality, but to deny the existence of factor number one simply makes it appear that factor number one is of crucial importance, when in fact it is not.

First let's address the “winner take all effect”. You have a one mile race with 100 competitors, where each competitor pays a $100 entry fee which is used for prize money. First prize for this race is $8,000, second prize is $1,500, and 3rd prize is $500. No prizes for anyone who places after 3rd.

The winner of the race runs the mile in 3 minutes 45 seconds, the second place finisher runs it in 3 minutes 46 seconds and the 3rd place finisher runs the mile in 3 minutes 48 seconds. The last place finisher runs the mile in 6 minutes.

The compensation for winning first place is 5.3 times larger than the compensation for 2nd place, but the first place winner isn't 5.3 times faster than the 2nd place winner, in fact they are only marginally faster. I think you see where this is going. The difference in reward is greatly disproportionate to the difference in performance. This phenomenon is ubiquitous within our economic system, and what people on “the right” do is they claim that our economic system “is a measure of” performance, such that they claim that an individual's compensation measures their contribution, i.e. that differences in compensation measure the differences in contribution. This is kind of true if you are talking about the bottom 99% of workers, but it is totally untrue when you talk about high-end incomes, in just the same way that it is untrue in the race example above.

What those on “the right” effectively try and do then is to claim that the winner is in fact 5.3 times faster than the 2nd place finisher because their reward is 5.3 times greater, when in fact they are only 1.003 times faster than the 2nd place finisher and only 1.74 times faster than even the last place finisher.

And this is where the biology issue becomes important, because what happens is that our social system amplifies modest biological differences, but the biological differences are there, they are real. We don't need to deny the biological differences, we need merely to show that while there is real biological inequality, it doesn't actually account for the vast inequality produced by our society. Maybe the first place winner won because he had a larger heart and longer legs than any of the other competitors, clear biological advantages. That does nothing to change the fact that he is still actually only 1.74 times faster than the last place finisher and that his prize money came from the entry fees of all the other racers who got nothing at the end of the race.

However a trap that many on “the left” fall into is trying to claim that the first place finisher is completely undeserving, and that they aren't actually even the legitimate winner of the race. This is also not true. I think that in America at least, it is probably the case that most of the richest people in the country actually are the top “contributors” to economic development and productivity. It isn't so much a matter of ranking that's the problem, the issue is that the people at the top, while legitimately at the top, are still massively over compensated, and that over compensation (just like the prize money in the race) comes from redistribution from all of the people who are under compensated. Yeah, maybe the people who are getting under compensated are in fact “inferior” to use a horrible right-wing term, but it doesn't change the fact that the compensation for “the winners” comes from redistribution from “the losers”.

I'm not going to address the issue of capital ownership in this post, it would take way too long, I'll just refer you to my article here: Understanding Capitalism V: Evolution of the American Economy

I do want to address one more issue as well though, which is the issue of “removing boundaries”. This is a really major topic of feminism, and one that I think many on “the left” have a lot of misunderstandings and wrong expectations about.

Yes, it is a fact that historically there have been many legal and social barriers that prevented various groups from “maximizing their potential”, this is indisputable. It is also indisputable that these barriers had a real impact on limiting the abilities and deminishing the lives of whole groups of people. However, it doesn't hold true that these barriers were necessarily the sole cause of performance differences between groups. In fact, what I think is a very likely case is that over time people intuitively picked up on stereotypical aptitudes of various groups (something our brains are “designed” to do) and then institutionalized rigid rules and social structures that reinforced and amplified those minor differences.

Again let's use a racing example. Today the best long distance runners in the world are indisputably Kenyan and Ethiopian runners, or let's just say East Africans. To deny the inherent biological advantages that individuals from these populations have for long distance running would be foolish at best.

But let's say that now that we've established that the best long distance runners tend to be from East Africa, that we decided as a culture to say that only people from East Africa are even allowed to compete in long distance races, and in fact only East Africans are allowed to run for more than one mile at a time.

If we did that, what would happen is that over time all non-East Africans would get worse and worse at long distance running. Not biologically worse, just worse due to lack of practice and training in that skill. So let's say that 100 years after that rule is put into place we look around and we see that East Africans are running marathons in under 2 hours, and we do a few sample tests and find that non-East African can't even finish a marathon. So some people say, “See, look how bad non-East Africans are are long distance running! Just proves that we should only let East Africans run!” But some decide, “Hey, that's not fair.” They do some studies and they find that, in fact if you train someone from Japan or Germany or whatever, they can greatly improve their long distance running ability.

So we decide, “Let's remove this rule, and allow everyone to run long distances.” Okay, so we do that and we then work on “closing the running gap,” and we make great progress, and non-East Africans are able to get their marathon times down to 2 hours and 30 minutes, but then, even after decades of trying and training and focus on helping non-East Africans run longer and faster, the gap is never fully closed and it still remains that all of the world's best long distance runners are East Africans.

Puzzled, the advocates of running equality demand that something must be wrong, and somehow various environmental factors must be giving East Africans an advantage that everyone else isn't getting. They start blaming the coaches and investing in all manner of programs to give non-East Africans advantages, but despite all this, the East Africans still dominate long-distance running. Not by a lot. Nothing like it was during the height of the ban, but they still edge out everyone else consistently.

Why? Because, they have inherent biological advantages. Yes, the social restrictions put in place by the ban exacerbated the performance differences, and were the cause of a large part of the differences, but they weren't the sole cause.

Don't read too much into what I'm saying here, I'm just saying that we must at least be open to this possibility as an explanation for many types of performance differences that we observe among various groups of individuals. What we are dealing with are confounding effects. There can be multiple causes of differences, and I think a very likely scenario, given how evolution and social systems work, is that our social system have evolved to greatly amplify minor biological differences.

What this means is that, unlike what many people on the left think, while we should expect social justice equality policies to greatly reduce performance differences among various groups, it may well be the case that underlying biological differences mean that performance differences, in aggregate, can't be fully eliminated via any amount of social engineering.

You have to at least be open to that possibility. And once you accept that possibility, you can then accept the fact that social and economic equality does not have to rest upon an assumed biological equality, in fact it shouldn't.  

Having said all of this, I think a very important point of agreement is that we need to be very skeptical and wary of the so-called science of biological determinism and genetic profiling because of the potential for misuse and abuse, given the fact that science, like all things, is a tool in the hands of the ruling class, whether that ruling class be American capitalists or the Chiense government. So while I beleive that the fundamental principles of "biological deteminism" are sound, I agree that there is much reason to be concerned about their implemetantion.


Posted by rationalrevolution.net at 7:17 AM EST | Post Comment | View Comments (4) | Permalink
Updated: Friday, January 17, 2014 9:01 AM EST
Friday, March 15, 2013
 Understanding Capitalism Part V: Evolution of the American Economy

Topic: Announcements

At long last, I'm finially publishing my latest aricle on capitalism. It's been almost 3 years in the making, but I've finally wrapped it up.

Understanding Capitalism Part V: Evolution of the American Economy

This article seeks to provide an understanding of capitalism by providing an overview of the the American economy from colonial times to present day, and then using economic theory to understand why America's economic history unfolded the way that it has, and to then understand what both America's economic history and economic theory  tell us about America's economic future. 


Posted by rationalrevolution.net at 6:46 PM EDT | Post Comment | View Comments (15) | Permalink
Wednesday, January 23, 2013
 Guns, Guns, Guns!!!

Topic: Commentary
Everyone else is talking about guns, so I guess I will too. I'll make this direct and to the point.

It shouldn't be possible for any citizen to buy any semi-automatic guns without a special permit, period. It shouldn't be possible for any merchant to sell any semi-automatic guns without a very special and highly regulated license.

The idea that easy access to "assault weapons" isn't part of the problem is absurd, and easily demonstrated if we talk about grenades. Grenades are generally illegal in the US and have been for a long time, and there is no market for them so there is no meaningful supply of them. As a result, we see no incidence of people using grenades in killing sprees. However, if someone wants to go on a killing spree then grenades would be the perfect weapons to use, even better than an "assault rifle". The reason that people don't use them isn't because they wouldn't be effective, its because they can't easily obtain them. It's certain that if grenades were sold at sporting goods stores to anyone who wanted to buy them that we would have incidents of them being used against people with large numbers of casualties. Assault weapons are essentially no different than a grenade. They are both weapons that are designed to kill large numbers of people easily in a short amount of time. The rational for restricting access to assault weapons is the same as for restricting access to grenades. If it were as difficult to acquire assault weapons and ammunition for them as it is to acquire grenades, there is no doubt that at the very least there would be fewer casualties from mass shootings. In my option, the goal of gun regulation should be to make the acquisition of assault weapons as difficult as the acquisition of grenades.

I grew up in hunting households, lots of people in my family owns guns, I own guns. I have no problem with guns. However I see no reason for any citizen to have a clip-loading semi-automatic rifle. It's absurd. I think that basic gun sales should be restricted essentially to revolvers, bolt/lever action rifles, and breech loading or pump action shotguns. To buy semi-automatic guns I think people should have to get a license that has to be renewed on a yearly basis (just to buy, not to own). Getting that license should require having an interview with a law enforcement officer regarding why the individual wants to get the license, what they intend to buy with it, and how they intend to use it, in addition to a more extensive background check, and passing a gun safety course. All high-capacity clips should be illegal for sale to the public, whether the limit is set at 10 rounds, 8 rounds, 6 rounds or 7 rounds, as New York just did is of not much consequence, it just needs to be set at something at or below 10 rounds.

Speaking of the new gun control legislation passed by New York, while this legislation contains good provisions on gun regulation, it contains a horrible provision on mental health, which essentially turns mental health professionals into law enforcement informants.

And here is the key issue. When it comes to "keeping guns out of the wrong hands" there are two basic ways to do this, either through reducing general availability or by preventing specific individuals from getting guns.

While a strategy that incorporates both is obviously going to be the most effective, a heavy reliance on trying to prevent specific individuals from obtaining or using guns will necessarily end up requiring a much larger loss of privacy and "freedom" for the entire population than a strategy that relies more heavily on reducing general availability of high capacity guns.

In order to prevent "bad people" from getting access to or using guns would require a massive expansion of the police state and domestic surveillance. The types of laws that New York just signed are a small example of the types of losses of privacy and freedom that would be part of a strategy focused on keeping guns out of the hands of specific individuals. In the laws that were signed in New York, very few people will be effected by no longer having the ability to buy magazines with more than 7 rounds or the ability to buy "assault rifles" or by more prevalent background checks, and those effects are, I would argue, of minimal consequence.

However, everyone is potentially effected by the mental health provision, which turns everyone's mental health providers into spies for the government, whether they want to be or not. Now, going to a mental health professional and discussing suicidal thoughts could conceivably end up getting you fired or permanently effecting you career, etc. What's going to happen when a mental health provider tells law enforcement that you told them you were thinking about suicide? Are they going to come interview you? Almost certainly if they do people will find out about it. Who is going to have access to the database that your information gets into? Today, tomorrow, years from now? What about employers that end up wanting to be able to check against the database in the future? Once the data is collected, almost certainly its use will expand over time, just looks at what's happening with sperm donors, today their privacy is very much in doubt and there are increasing pressures to open up those databases and make them public information, even though the donors were guaranteed privacy.

Lot's of people have suicidal thoughts, especially if there is some specific reason for them, like going through a divorce or losing a child or something. Having that reported one time could result in ending someone's career or future career in law enforcement or education other types of positions. What happens when a teacher goes to a psychiatrist and says that they are suicidal once privacy between the doctor and patient has essentially been eliminated? Will they lose their job? I'd bet that literally thousands of good teachers have reported being suicidal at some point in their life.

Not only that, but trying to keep guns "out of the hands of bad people", above and beyond obvious criminals, necessarily requires domestic surveillance. I can easily see this opening up all kinds of domestic surveillance initiatives like monitoring people's e-mails and social media posts. To some extent this is already going on, but efforts to "target people, not guns" could easily push these types of actives even further.

So this is the issue, if people are really concerned about protecting "liberty" and "their freedom", then they would support stronger gun regulation aimed at reducing the general availability of guns, especially high capacity guns. Making it so that citizens can't buy military style weapons is far less a "loss of freedom" than a massive surveillance state that attempts to pick out "bad people" from the population and turns mental healthcare providers into informants to the state.

But what we really have to do is acknowledge that the public discussion about "gun rights" is fundamentally misrepresented in the first place. You see, people in favor of stronger gun regulation talk about "legitimate use" for weapons, and how there isn't a real need for citizens to own military style weapons, like semi-automatic rifles and high capacity magazines and armor piercing bullets, etc., and opponents of gun regulation defend citizen's access to these weapons using veiled terminology and generalizations like simply deferring to "Second Amendment Rights", but the reality is that the reason that people want access to these weapons, other than for what they call "criminal use", is because they believe they will some day need these weapons to fight against our own law enforcement and military.

A perfect example of this is the recent comments by Rick Santorum on armor piercing bullets:

"Granholm said: You’re deflecting. Deer don’t wear armor. Why do you need an armor-piercing bullet?”

Santorum replied: But criminals could."

Granholm added: And police officers certainly do."

Santorum concluded: Having the ability to defend yourself is something that is a right in our country."

That's the reality that we have to get to, discussing this fact. The reality is that there is no viable use for armor piercing bullets, assault rifles, high capacity magazines, body armor, etc. in America other than fighting against law enforcement and the military, and this is what people are buying these weapons for. What most of these people do is they buy these weapons, stockpile them, and simply use them at shooting ranges while they fantasize about civil war and taking on "the gubmnt". So, for the most part, what "the right to own" these weapons is all about is allowing nuts to buy into their fantasies.

The reality is that these weapons will never be used for anything, and if they are used for anything it will certainly be something illegal. There is no legitimate use for an AR-15. It's not a home defense weapon, you can't carry it on you so you'll never have it in a public setting to "put down the bad guys", and it's not a hunting weapon. The only use for an AR-15 or similar type of weapon is to hang it on your wall to make yourself feel "tuff", or to kill police officers, national guardsmen, or masses of unarmed citizens in public spaces. That's the only use for those weapons, and the citizens who are defending the need for them have one thing in mind, and that's the idea that one day they will need to use them against "government forces" in order to "protect freedom". We have to just come right out and confront this issue and call it what it is - an insane fantasy, and we can't let our laws be dictated by insane fantasies. These are people who are still upset that the South lost the Civil War and fantasize about revenge.

First, let's discuss why this really is an insane fantasy, and then why this fantasy is perpetuated and catered to by "law makers". First, this is an insane fantasy not because we don't have a government that will never try to "take away our freedoms", but because armed resistance using these types of weapons will never be a viable reaction to any such efforts. I think about what these people think and how they view "government force" and I think about Eisenhower's use of the National Guard to force integration on the public schools at Central High in Little Rock, Arkansas. If ever there was a domestic display of "government force" in the 20th century, that was it. What would these gun fanatics do today in such a situation, would they "form a militia" and take on the National Guard? If they would then that's exactly why we shouldn't let them have these guns in the first place. If they wouldn't then there is no point to them owning such guns, because if they aren't going to fight the National Guard over something that clearly the vast majority of the people in that community felt like was the government using force to take away their freedom, then what are they going to fight over?

But more important, if "the government" ever did for some reason decide to use military force to do whatever, no amount of citizens with guns would be able to do anything about it, since guns are no match for tanks, drones, missiles, the air force, etc., etc. Even the guerrilla warriors in places that our military fights use things like rockets and explosives, etc.

So the point is, this fight between "the government" and citizens is #1 never going to happen, and #2 if it did, these weapons wouldn't be of any meaningful use anyway.

If revolt against the government is needed, then either the citizens would have to get law enforcement and the military on their side in the event of a military overthrow of the government, or change would have to come through non-violent protests. So in any event, having a bunch of guns really does nothing to "protect freedom". The military and law enforcement are more likely to take stronger action against armed people than unarmed people anyway. When it comes to individual incidents of opposition to government having weapons does nothing but escalate the situation and turn it into a certain bloodbath where the civilians are sure to get killed, like in the siege at Waco. In the event of mass unrest, non-violent protest, like what was seen in Tahrir Square in Egypt, is more effective. There isn't any believable scenario where citizens armed with guns, even assault rifles, are going to overthrow the government; that's just not going to happen, so allowing all of these weapons into the population just so nut-jobs can fantasize about overthrowing the government is absurd.

So why does this insane fantasy persist and why do certain powerful interests, like the NRA and right-wing politicians, cater to it? Because it's really all about gun sales. Gun manufacturers are selling a fantasy to anti-government fanatics. The NRA and politicians who talk about the Second Amendment "protecting freedom" are all just a bunch of shills for the gun industry, and this is a clear fact, because the exact same people who talk about arming citizens to protect against government overreach are the same people who support larger military budgets and stronger law enforcement. Think about it, you have a guy saying, "We need armed citizens to protect against government abuse of power," who also votes or lobbies for buying the government more weapons and creating stricter laws, longer prison terms, and increasing domestic surveillance.

These politicians and gun-industry front groups are basically intentionally "arming both sides" and escalating the tension between them in order to induce both sides to buy more weapons. If someone truly believed that we needed an armed citizenry to protect against government power then they wouldn't also be working to make that same government more powerful. If they really believed that the potential military force of the citizenry was an important check against government power then they would work to de-fund the US military, eliminate our "standing armies" (which the founders were against having), they would disapprove of the militarization of police forces and SWAT teams, they would have voted against the Patriot Act, they would oppose domestic surveillance, etc., but these people don't do that, in fact they do the opposite.

The fact that the very same people who claim to be so concerned about "protecting our freedom" from the government are the ones who are turning America into a police state shows how absurd this idea is. These are the same people who have given us the largest prison population in the world, who advocate for the death penalty, and who view any and all military spending as a good idea. If they truly believe that "the government" is the enemy, then why do they do so much to perpetually arm the enemy and give it ever growing military and police powers? 

The answer is obvious, its because they don't really believe that, all they really care about is advocating the interests of the arms industry and generating gun sales to whoever will buy them, be it the government or the citizens, and in fact, the more powerful they make the government, the more scared the citizens get, so they more guns they buy, its a "win-win". The more weapons they can put in government hands the more weapons their anti-government followers go out and buy.

This is what's really going on and this is what we have to openly and directly confront.

And the reason that the issue of "gun control" is important is precisely because of this situation. You notice that everything the opponents of "gun control" advocate as solutions to "gun violence" involves buying more guns, be it by citizens or by increased police presence. Here is a fact, you can't "protect freedom" by turning the country into a police state.

And this is why everyone should be very concerned about this and be in support of much stronger gun regulation, because the threat isn't just the threat from citizens shooting people, the threat is also the increased police power needed to "control" a population that's armed to the teeth. The fact that there are so many guns, and such powerful guns, in the population (300 million guns are owned by the American public, one for every person in America), is part of what police forces use to justify their escalated use of force. Because of the potential that individuals may have powerful military style weapons, police have to treat every situation as if its a military style conflict. This is why SWAT teams barge into houses, guns blazing, and end up shooting children and people sleeping in bed, etc. (This happens, and very disproportionately to the poor and minorities).

So allowing people to buy these weapons creates an arms race between the public and law enforcement, which causes an escalation of the force used by law enforcement against everybody. So we the citizens are victims of American gun culture in multiple ways, not just as shooting victims, but also as victims of the police state that grows in power and force as a reaction to the easy access to such powerful guns. And make no mistake that the opponents of "gun regulation" have no interest in protecting our "freedom", what these people are advocating is actually massive increases in the power of the police state as a "solution" to the problem of "gun violence".


Posted by rationalrevolution.net at 7:46 AM EST | Post Comment | View Comments (8) | Permalink
Thursday, January 26, 2012
 The Engineering of Labor Markets

Topic: Commentary
We hear a lot today about "structural unemployment" in America, the notion being that unemployment in America today is related to workers not having the right set of skills for the available jobs in the economy. There is some truth to this, but the reason for this has nothing to do with any inherent realities of a modern economy, it has to do with how American capitalists have intentionally engineered the global labor markets.

The first thing to acknowledge is that every economy, including the American economy, is engineered and planned. An idea came to prominence in the 1970s among the economic elite in America that the future of the American economy was in "high skill jobs", i.e. research, design, science, analytics, etc., and that "low skill jobs" were to be something outsourced to developing foreign countries, for them to do the work that was "beneath Americans", but also so that those "low skill job" could be done more cheaply by these much more desperate foreign workers.

This idea has dominated the thinking of America's economic engineers (corporate executives, investment bankers, financiers, major investors, wealthy philanthropists, influential professors, private equity moguls, Federal Reserve members, and all of their corresponding enablers and puppets in government, etc.) for the past three or four decades, and has been a major driver in the engineering of the current American "jobs market".

The result of this has been that massive segments of occupation have been eliminated from the American jobs market by the owners and controllers of capital and transferred to foreign countries, largely Mexico and China, but many more as well of course.  In the absence (or weakness) of unions capitalists dictate the conditions of employment, and the fact is that the parameters of "the game" in America are dictated almost entirely by the owners of the capital. The reality we live in is the reality designed by these people, and their engineering efforts have been effective. They have successfully transferred a large portion of "low skill work" to foreign countries and they have successfully shifted the American occupational portfolio disproportionately toward "higher skill work", but the "low skill work" that was outsourced to foreign countries wasn't actually "low skill", it was medium skill work.

What I'm saying here is that the American "jobs market" has been distorted by the practices of capital owners and government policy (at the request of capital owners), under the guise of so-called "free trade" (which is anything but) and neo-liberal "globalization". So what are the results of this? Well the results are quite obvious, and exactly what would be predicted by market theory.

The result of this is of course a shortage of "high skill workers" in America and a glut of "low and medium skill jobs" in places like China and Mexico, and the result of this is inflated prices for high skill workers in America as well as deflated prices for medium skill workers in America.

So one would ask then, if there is a glut of low and medium skill jobs in places like China and Mexico, then why aren't the wages of low and medium skill workers in those countries rising faster? After all, a glut of jobs should mean a shortage of workers.

Two reasons: The first is obviously developmental and based on population. Places like China, India, and Mexico have been able to adsorb a massive influx of low and medium skill jobs because of their large populations and relatively undeveloped economies which afforded relatively few competing opportunities for workers. Due to the relative wealth of the West, we've been able to pay foreign workers higher for their labor than what they could earn within their own economies, even for lower skilled work than those same workers could perform in their local economies. In other words, we were able to pay a worker in China, who could have been a Chinese doctor or skilled mason or software engineer, more to put together iPhones on an assembly line than they could have otherwise earned as a doctor, etc. if "we" weren't employing them. As foreign economies develop this "should" become less and less true. In addition, the relatively small population of the West compared to China and India has meant that the labor forces of those nation's are large compared to the populations of Western consumers they serve. But now we get to the second reason for why labor prices in these foreign countries haven't risen quite so rapidly, and that has to do with the policies of their governments. American capitalists have almost universally moved American production to countries ruled by authoritarian regimes, in places with anti-worker policies that are designed to keep wages low. The ruling class in these countries benefit from Western support and wealth, from American corporations if not from government policy as well, while the workers carry the burden.

But let's get back to America, and how all of this plays into growing income inequality here.

A very interesting debate too place between Alexander Hamilton and Thomas Jefferson. Hamilton (whom I would consider an economic genius superior to Adam Smith, even though I disagree with Hamilton on a number of issues) argued that economic diversity was key to the development of the American economy, and to this end Hamilton opposed "free trade" practices (then supported by Britain) and supported government subsidies for the development of industry in America (as well as polices that encouraged the illegal (in their home countries) immigration of skilled manufacturers from Europe and the theft of intellectual property from Europe (sound familiar?)). Hamilton was a supporter of corporations and manufacturing. Jefferson, on the other hand, argued that corporations and manufacturing would result in the concentration of too much property and power in the hands of banks and wealth elites and that democracy could only be maintained by an agricultural economy rooted in widespread ownership of land with land remaining the most important form for property. Jefferson argued that unless the majority of people owned the majority of the property then the majority would become disenfranchised (this was of course especially true in Jefferson's time when property ownership was a requirement for voting, but his argument was not based solely on that requirement, but rather the power grated by property ownership, regardless of any voting requirements). Hamilton's counter, of course, was that an agricultural economy was not diverse enough to provide enough opportunities for a diverse population to make the best use of its skills.
"It is a just observation, that minds of the strongest and most active powers for their proper objects fall below mediocrity and labor without effect, if confined to uncongenial pursuits. And it is thence to be inferred, that the results of human exertion may be immensely increased by diversifying its objects. When all the different kinds of industry obtain in a community, each individual can find his proper element, and can call into activity the whole vigor of his nature. And the community is benefitted by the services of its respective members, in the manner, in which each can serve it with most effect."
- Alexander Hamilton; Report on Manufacturers
"The spirit of enterprise, useful and prolific as it is, must necessarily be contracted or expanded in proportion to the simplicity or variety of the occupations and productions, which are to be found in a Society. It must be less in a nation of mere cultivators, than in a nation of cultivators and merchants; less in a nation of cultivators and merchants, than in a nation of cultivators, artificers and merchants."
- Alexander Hamilton; Report on Manufacturers
In the end both were right. But here is where Hamilton's point comes into focus: the economy that has been engineered by America's economic elite is not diverse enough for the American population. Everyone can't be a scientist or a doctor or a engineer, everyone can't even be a college graduate, not everyone has that aptitude, and yet, just because one doesn't have the aptitude to be an engineer doesn't mean that one should be relegated to flipping burgers at a fast food joint, where, as Hamilton put it, their labor is "confined to uncongenial pursuits," but this is exactly what has happened in the American economy.

If we take a global view of the job market, what we see is that the American job market is disproportionately comprised of  "high skill jobs", while the jobs markets in "developing" countries are disproportionately comprised of  "low and medium skill jobs", yet if we look at the labor force what we find is that the American labor force is not comprised of disproportionately "high skilled workers". America is not "exceptional", we are merely "normal". The problem is that our job market is not "normal". Our job market has been manipulated in a way that has put it our of sync with the needs and skills of the population.

The result is that the demand for "high skill workers" exceeds the supply in America, while the supply of "high skill workers" exceeds the demand in most of the rest of the world. This is why so many highly skilled people immigrate to America, because prices in our labor market for high skilled workers are artificially inflated while prices for high skilled workers in most of the rest of the world are artificially depressed due to a jobs market disproportionately comprised of low and medium skilled jobs.

The result of exporting many medium skilled jobs to foreign economies has been growth in truly low skill jobs in America, and a drop in labor prices for everyone except high skilled workers, because now there is a glut of medium skilled workers in America without many jobs for them to fill.

But the thing to remember is that the lack of medium skill level jobs in America isn't a product of the fact that those skills are no longer needed or valuable, its a product of the fact that those jobs have been exported to foreign markets by American capitalists. There is still massive demand for the products of medium skilled labor, we just aren't supplying that demand with American workers.

So this is a driver of American economic inequality, and its something that has been completely engineered by the economic elite in this country. The reality is that every country has a relatively equal distribution of worker capabilities. In any given population, aside from war-torn places like Afghanistan and Somalia perhaps, there is going to be pretty much a normal distribution of aptitudes. You are going to have some really capable people and some really incapable people, and the bulk of the population is going to be of moderate capability. It's absurd to expect any nation to be able to become a nation of nothing but engineers, scientists, executives and entrepreneurs. That's never going to happen anywhere. As Alexander Hamilton laid out over 200 years ago, a productive economy is a diverse economy, that is able to take advantage of the diverse range of skills, abilities, and aptitudes of its population. What our economic engineers have done is they have engineered a less diverse economy that does not match the diverse needs and capabilities of the American population. The result is artificially inflated prices of "highly skilled labor" and artificiality depressed prices for all other labor (though there are other reasons for declines in labor compensation as well). A true global job market, or a properly functioning global job market, is one in which the distribution of jobs matches the distribution of labor skills in every location.

American policy for the past several decades, however, of both private industry and the government which does its bidding, has been to try and intentionally distort this distribution, to try to skew the occupational skill distribution and "corner the market" on "high skilled jobs". The government has seen this in part as a measure of "national security" and "national prestige", to have a disproportionate number of "intellectual" workers active in the American economy, and the economic elite has perused this goal out of a combination of naivete and economic interests, in that doing so inflates the prices of high skilled workers (themselves and their peers) and deflates the prices of low and medium skilled workers, whose work generates the profits they benefit from.

It's a grand experiment that was always doomed to fail from the beginning, especially considering the lack of support for such an agenda through other aspects of American policy and society. America's conservative populace never wanted the education required to have a population of disproportionately highly skilled workers, and furthermore, even if Americans were more accepting of science and intellectualism, the reality is that the average person is... average, and always will be. The notion that America would ever be an economy with a disproportionately highly skilled work force is founded on a belief that America could be the Lake Wobegon of the world, a place where "everyone is above average".

We need an economy that matches the needs of the population, not economic elites that ridicule the American population for not fitting into the dystopia that they engineered, and yet the engineers of American economic dysfunction are more strongly in power now than ever. Virtually all elected officials in both parties, as well as the policy "experts" that they appoint and rely on, are beholden to the interests of America's private economic engineers and buy into their vision. The fact is that America's elite are largely divorced from reality and they are pursuing a quasi-utopian vision for America's future. This includes people like Bill Gates and Warren Buffet, the so-called "good billionaires", as well as political leaders like Barack Obama, and these are the people who are pursuing this agenda for ostensibly altruistic reasons, this isn't to mention the engineers of our economy whose agenda is dictated by much more self-serving and/or elitist objectives.

The problem with utopian visions is that when the goals are set too high and are unachievable then the effects on reality are disastrous. When we engineer an economy where the path to success is only attainable by 2% of the population, and everyone who doesn't make it is discarded and ridiculed, its a recipe for social disaster and collapse, and the important thing to understand is that it doesn't have to be this way - its a product of intentional (and flawed) design.

Basically, what our economy today tells us is, "if you can't be a superstar then you are a worthless piece of shit," but that's not true. Not everyone can start the next global mega-corporation; its not possible, no matter how capable everyone is. We can't have a system where everyone is a general or a ship's admiral. Someone has to man the torpedoes and someone has to be on the front lines, it can't work any other way, and those "front line" positions, the jobs performed by average workers, are a absolutely vital to the productivity of the economy and provide the basis of wealth upon which all of civilization exists and upon which the lifestyles and opportunities of the wealthy elite are afforded.

Ultimately, the root cause of this whole situation is the loss of control over capital by the American public, and so we now come back full circle to debate between Hamilton and Jefferson. Productive opportunities in America no longer reflect to the diversity of capabilities and aptitudes of the population because property ownership has become to concentrated in the hands of banks and corporations, and thus a small wealthy elite who have undermined democracy. Hamilton and Jefferson were both right.


Posted by rationalrevolution.net at 6:30 AM EST | Post Comment | View Comments (9) | Permalink
Updated: Thursday, January 26, 2012 6:48 AM EST
Monday, December 5, 2011
 Income Inequality - the Heart of the Matter

Topic: Commentary
There is a fundamental misunderstanding of income in America, and this misunderstanding of income is at the heart of differences of opinion about income inequality. I came to this conclusion long ago, but it has been increasingly reinforced over recent months as the Occupy Wall Street movement has sparked more conversations about income inequality.

A fundamental tenet of neoclassical capitalist economics is the notion that "everyone is paid the value of their contribution". Not only is this a very fuzzy notion but it breaks down in all kinds of ways. Nevertheless, this concept, this idea, that in our economic system everyone's pay is an inherently exact measure of the value of their contributions is the core foundation of our entire economic system. The assumption that this is true is the foundation upon which every aspect of our economic social contract is built.

Yet, this foundational tenet is wrong, and understanding this is the key to everything; not just understanding that this tenet is wrong, but understanding that belief in this tenet is essential to the acceptance of our economic system, and that acceptance or non-acceptance of this tenet is the primary driver of public perception and disagreement on essentially every aspect of economics in America.

This starting assumption, that incomes precisely reflect contributions, drives all downstream views of economic justice. If the exact same logic is applied under two different starting assumptions, 1) that all incomes always accurately reflect the value of the contributions of the individual or 2) that incomes do not necessarily accurately reflect the value of the contributions of the individual and that there can be massive disconnects between contributions and incomes, two completely different conclusions will be reached.

This is, to a large extent, the only thing that really separates Marxists from libertarians. Marxists and libertarians essentially apply the exact same set of logic to two different starting assumptions, the libertarian assumption being that incomes are inherently accurate reflections of contributions, the Marxist assumption being that incomes can be greatly distorted and tend to be distorted in favor of the wealthy, or more precisely, tend to be distorted favor of capital owners.

The position of both Marxists and libertarians is that "redistribution is unfair". That is the driving logic of both worldviews, the difference is that Marxists argue that redistribution happens between the creation of value and the realization of incomes, while libertarians argue that incomes are inherently fair, and that thus taxing different levels of income differently is a form of unfair redistribution.

The evidence against the assumption that incomes inherently reflect contributions is, however, overwhelming. But even when people acknowledge that incomes don't always accurately reflect contributions the full implications of this fact are seldom fully comprehended. People still generally don't understand the fact that if someone receives more income than is warranted by their contributions then it necessarily means that someone else has to receive less. Many people take the view that, well even if CEOs are over paid, good for them, it does me no harm. But that's not true (for mulitple reasons).

Every business operates on a fixed budget. Ignoring borrowing, basically everyone is paid a portion of the revenues. If the net revenues are $1,000,000 and there are 10 employees, that can be divided up lots of different ways, but however its done the amount that can be paid to any employee is relative to the amount paid to the other employees.  Divided evenly, all ten employees would be paid $100,000, but if one employee is paid $500,000 then that means everyone else has to be paid out of the remaining $500,000, which means that if the remaining employee's income were distributed evenly from the remaining revenue they would each be paid $55,555, a lot less. It's no different in any business or corporation.

When one person is paid more everyone else has to be paid less. That's not a problem if incomes accurately reflect contributions, but if anyone is over-paid, i.e. paid more than the value of their contributions, then that means everyone else has to be under-paid, and that's exactly what's happening in our economy right now, and it goes well beyond that when we start talking about capital income vs. wage income.

But let's address this notion that incomes accurately reflect contributions head on. This idea is based on market theory, and, as is so often the case, the conclusion that compensation accurately reflects contribution only holds true in market theory under ideal market conditions. And this is the crux of the whole matter.  Market theory itself doesn't say that incomes magically automatically always reflect the value of contributions, market theory says that theoretically this will be true, only under ideal market conditions, which, of course, never exist! What today's so-called "conservatives" (they aren't actually conservative at all, they are radial market liberals) and apologists for the super-rich do is they pull a scam; their arguments proceed from the unstated assumption that we are operating under ideal market conditions, and not only that, but they also tend to infer that if market conditions are less than ideal then market conditions result in a redistribution of income from high to low, when in fact market theory itself (classically developed as a critique against the the rich feudal aristocracy) states the opposite.

An obvious example of this is provided by the recent study on executive compensation which found that executive compensation at top American corporations is set by board members, many of whom are picked by the executives whose compensation they determine, and through a system of always automatically setting pay packages above the industry average. Basically this means that executive compensation isn't determined by market principles at all, indeed the determination of executive compensation completely violates every market principle. Executive compensation is in fact set along the lines of the corrupt system of interpersonal relationships and favoritism that economists and philosophers like Adam Smith and John Locke railed against. And this is just the tiniest tip of the iceberg.

I believe that if we were able to do a study in major American corporations, where we recorded the actual work-products of every employee, executive and board member, and we removed the names of the people from the list, then we attempted to objectively evaluate the "market value" of each work-product itself, and then we tied those work products back to the employees and totaled up the values by employee, what we would find is that no one's actual compensation would match the value of their work products. In fact what we would find is that there would be huge disparities between pay and actual value creation across the board with many people creating more value than their pay and many people creating less than their pay, but most importantly what we would find is that the biggest disparities would be for those with the highest pay.

The reality is that redistribution takes place within any business that has more than one "employee" (self-employed), and I would estimate that the amount of redistribution that takes place within large corporations is tremendous, with the overwhelming majority of that redistribution being redistribution from lower level workers to executives. If a corporation with 10,000 employees underpaid every worker by an average of just $500 a year that would amount to $5,000,000, which could then be paid to the CEO. You think this isn't happening?

Let's again consider an obvious example: the case of the Washington Mutual CEO who received almost $20 million in compensation while on the job for only 17 days, during which time the bank collapsed and had to be taken over by the government. It is obvious in this situation that the CEO, Alan Fishman, didn't create $20 million in value, which means that his pay was a form of redistribution. The only way to pay someone more than the value that they create is to redistribute value that was created by someone else.

That's an extreme example, but executives at major corporations across the board are over compensated. They've established a system where executive compensation is completely shielded from market forces, while average workers are put into competition with computers, machines, foreign workers and each other to drive compensation down. And again that's just the start of it, and doesn't even begin to approach the issue of  folks like hedge fund managers and the entire financial industry, who not-only clearly benefit from market inefficiencies, but who actively work to create and expand market inefficiencies, both through government influence and the engineering of the private financial system.

But this is the issue, in America we are taught that the measure of someone's contribution is their income. The concept that someone's income might not actually reflect their contributions is totally foreign to many Americans. This belief that incomes always reflect contributions is reflected in the fact that in virtually every situation people in America use the term "earned" or "made" to describe income, even when decrying incomes as unjustified! There were dozens of articles written about how Alan Fishman had "earned" $20 million for only 17 days of "work", virtually all of which decried the income as an example of out of control executive compensation practices, yet it not one single article that I've read about this did anyone even address the fact that this money had to have come from someone else, nor did they clearly state that he didn't actually "earn" that money. We also see this reflected in the way that everyone, and I mean everyone, who covers the individuals on Wall Street always talks about how smart they are. In any article, documentary, or broadcast you see on the subject of high finance there is always an obligatory statement about how  these guys are "wizards", or the "smartest guys in the room", or "geniuses", yet these obligatory statements aren't made even when discussing the work of major pioneers in computer engineering or biological science or chemistry, etc.

There is an instinctive need to justify the incomes of the super-rich by attributing super-human capability to them, but the reality is that they aren't super-human, they aren't thousands of times smarter than the average guy, no one is.

The underlying assumption in America, however, is that all income is eared all the time... but it isn't!

The notion of even objectively evaluating an individual's contribution in any way other than simply citing their income is so foreign to many Americans that when you even raise the subject they get so flustered and confused by it that you can't even proceed. We've established income as the self-definition of contribution in this country, with no way to objectively evaluate contribution by itself, under the assumption that "markets" always correctly establish the value of every individual's contributions, and all incomes are determined under perfect market conditions (even though we all know that perfect market conditions don't now, never have, and never will exist).

The result is that we have a situation where when someone like John Paulson brings in over $5 billion that people just scratch their heads and "Wow". But the notion that John Paulson "made" $5 billion in a single year is totally absurd. For that to be true John Paulson would have to have created as much value as 100,000 workers with an income of $50,000 each. It's like saying that John Paulson built 200,000 cars all by himself in a single year, while the "average American" can build about 2 cars a year.

The "cult of the super-rich", the worship of the super-rich, the belief that the super-rich are exponentially superior to the average person, is all a result of the belief that incomes accurately measure individual contribution. If that were actually true then it would in-fact mean that some individuals are thousands of times "better" and "more productive" than the average person, but no one is 1,000 times smarter or 1,000 times harder working than the average person, they simply aren't. Maybe 2 time or 3 times or maybe even 10 times, but not 1,000 times, not even 100 times.

So now what we have is a situation where we have two conflicting sets of beliefs, and what happens is that people will rationalize one set of beliefs in order to maintain the other. In order to maintain the belief that our economic system is even remotely fair, or that incomes are even remotely reflective of contributions, you have to believe that some people are thousands of time more productive than the average person. If some people aren't thousands of time better than the average person then our economic system can't possibly be justifiable, because our economic system rewards some individuals thousand of time more than the average individual.

What we see regarding beliefs about our economic system is very similar to what we see in religion and other areas of strongly held beliefs, like beliefs about loved ones, etc. where some people's beliefs are so important to them, so central to their entire worldview, that they automatically rationalize anything that would contradict their core beliefs, and one of the core foundational beliefs of "America" is the belief that we have a "fair" economy.

So, the situation that we face is that for many people, the belief that America has a fundamentally fair economy is so central to their worldview that anything that would undermine this belief is vehemently attacked, denied, rationalized, or ignored. Its just like a parent that may never be able to accept the fact that their son raped and murdered their daughter, or something horrific like that, where they would come up with all kinds of explanations in contradiction to the facts to rationalize in their mind how it had to have been someone else. Or how a religious person who believes that god rewards good people and punishes bad people on earth will conclude that everyone "deserves" every bad thing that happens to them and everyone who does well is an inherently "good person". When faced with examples of nice young children that are stricken with cancer such a person will rationalize that the child had a "bad soul" or something because the belief that peoples' conditions are a result of god's grace is so central to their worldview that they can't accept anything that would call that belief into question.

This is where we are in America today, and we have to acknowledge that and understand it. We have a fundamentally unjust economic system, where incomes are not necessarily reflective of contributions, in which the biggest incomes in this country are the most unjustifiable. At the same time we essentially have a national religion in which the belief that everyone's income is "earned" is central to the worldview and people don't want to believe that their worldview is fundamentally wrong. People don't want to believe that we have a fundamentally unjust economic system. Economic fairness and the superiority of our economic system so are central to the identity of America, that for many Americans its a belief that they cannot challenge, no matter how many facts they have to deny or what other beliefs they have to hold in order to rationalize it.


Posted by rationalrevolution.net at 1:04 PM EST | Post Comment | View Comments (7) | Permalink
Updated: Tuesday, December 6, 2011 10:39 AM EST
Friday, October 28, 2011
 Occupy Wall Street for President

Topic: Semi-random Thoughts

The Occupy Wall Street movement is more popular among Americans than either President Obama or any of the Republican candidates. It's been said that if Occupy Wall Street were running for president it would win... Well, in that case, let's write it in! (Actually I think that "The 99%" is better, but Occupy Wall Street is more recognized)

Here is the deal, voting in the 2012 presidential elections is meaningless, as long as you vote for either the Democratic or Republican candidate. Yes, its true that Obama isn't as bad as whomever  the Republicans are going to put forward, but its also true that no matter who is elected president in 2012 the following 4 years are going to be total gridlock anyway.

So one question here is, "Would you really not vote for Obama if you genuinely thought he could lose and we'd end up with a Republican president?" Yes, I would still not vote for Obama even under those circumstances, because sending a message about the failures of our political system is more important than whoever wins the presidency for the next 4 years.

In addition, I'm not convinced that we wouldn't be better off today if John McCain had won the presidency in 2008, because if McCain had won it's very doubtful that many of the regressive policies that Obama has been able to usher through Congress with the support of the Democrats would have been possible with the Democrats in opposition to McCain instead of being pulled along by Obama, such as the pro-insurance industry health care "reform" laws pushed through by Obama. We'd be better off in the long run with no reforms than what we got with the misleadingly titled "Affordable Health Care Act". Yes there are a few good provisions in it, but ultimately it entrenches for-profit interests and does nothing to bring down costs, all it really does is prevent denying coverage to people, which is good, but in the grand scheme of things its put us on a path that makes reforms that would bring down the costs of health care and improve quality more difficult and has even paved the way for the dismantling of Medicare.(Republicans have already come out with plans to basically eliminate Medicare and transition it to the "ObamaCare" model). Basically, I think McCain would have faced a similar situation of gridlock to what Obama faces, and he may in fact have been less inclined and able to lead Congress down path of doing Wall Street's bidding, which is exactly what Obama has done. How can anyone who supports Occupy Wall Street vote for Obama? He is Wall Street's candidate!

My point is this, right now, no matter who wins the presidency in 2012, we the people lose. Voting for the lesser of two evils is no solution, it just prolongs the suffering.

What we should do is all write in Occupy Wall Street for president, and if you want some insurance, vote Democrat in all of the Congressional elections. Why? I believe that all we have to do is get Occupy Wall Street to come in 3rd place in the elections and that alone would be a powerful statement. It would force news coverage of the issue. It would send a powerful signal to our own government and elites, as well as the rest of the world, that we are deeply unsatisfied with our political system, and that we have lost faith in our political system to represent the will of the people

The reality is that either a Democrat or a Republican is going to win the presidency in 2012. Voting for a 3rd party (unless something radical happens in the next few months) isn't going to do anything.  Voting for a 3rd party candidate isn't going to be a protest vote that matters. Right now all we have is a protest vote, that's all we can do. Voting for either the Democrat or the Republican is just giving legitimacy to the failed and corrupt system. The challenge is how to register a protest vote that matters, and if any protest vote can matter then this is one that can. If you vote for a 3rd party candidate, be it a Green Party candidate or a Libertarian one, etc., all that's going to happen is they are going to get like 1% or 2% of the vote at max and they will be a foot note. 

At most we'd have a Ralph Nader situation all over again, and you see the lessons people drew from that, they blamed it on Ralph Nader said 3rd parties were stupid. But if Occupy Wall Street comes in 3rd place, even if it is with only 1% of the vote, it would still be a major story and a major signal saying, "NO ONE IN THE POLITICAL CLASS REPRESENTS US, THE SYSTEM HAS FAILED!"

And what if Occupy Wall Street got 5% of the vote or more? That would be massive. Even if a 3rd party candidate got 5% it would just be a side note news story for a few days and then it would be forgotten, but if Occupy Wall Street got 5% it would be clear, this is the vote of the disenfranchised people.We don't like either one of you at all!

Voting  for Occupy Wall Street is better than voting for a 3rd party person, because that's part of how the system is supposed to work, that just looks like you like that person, but that's not the point here, the point is that we are disenfranchised altogether.

Voting for either the Democrat or the Republican isn't going to do anything to fix our system, the election of 2008 just proved that. Millions of progressives voted for Obama hoping for change that would reform the corruption and inequalities of our system and Obama not only failed to deliver, he has in fact sided with the status quo, for whatever reason. It doesn't matter if he's siding with the status quo because he wants to or because he has no choice, its irrelevant, the fact is that he can't do anything other than entrench the status quo, his years in office have proven that.

Let's all vote for Occupy Wall Street on November 6, 2012, and make an effort between now and then to get as many people as possible to do the same.


Posted by rationalrevolution.net at 11:24 AM EDT | Post Comment | View Comments (13) | Permalink
Updated: Friday, October 28, 2011 11:49 AM EDT
Thursday, October 20, 2011
 We are all Eloi

Topic: Commentary
As you may or may not know, the Eloi are the leisurely class of H.G. Well's Time Machine, who live above ground and depend on the production of the "working-class" Morlocks for their survival.

I've been following the Occupy Wall Street movement and reading a lot of the statements coming out of it and related blogs and articles, etc. and one thing that's struck me is, I believe, a prevalence of unrealistic economic expectations. This doesn't just apply to the Occupy Wall Streeters though, its prevalent throughout American society and just as bad or worse among conservatives.

One thing that really stands out is when people complain about rising costs of living. Now I understand where these folks are coming from, but we also need to be very clear about something, which is that right now Americans have among the lowest costs of living of anyone in the world. American costs of living are a little different than for many other people. Here in America the costs of living are distributed differently than in most other countries. Here the costs of health care and education are relatively high, while the costs of food, clothing, energy, housing, and yes taxes, are relatively low.

My point is this: expecting our costs of living to go down is not realistic. While neoliberal globalization has had a great many negative impacts on American society and the American economy, we aren't the only victims, and we aren't even the worst victims. While globalization and other aspects of the neoliberal economic reforms of the past 30 years have had a dramatic impact on economic inequality in America, the one thing they have done is result in cheap commodities. Yes, this has been driving a race to the bottom, but expecting incomes for the 99% to rise and costs of living to be unaffected simply isn't realistic.

The truth is that while the 99% in America is surely exploited by our own top 1%, all Americans are among the top 1% in the world, and whether we know it or not, we are all benefiting from the exploitation of billions of much poorer people around the world, as well as illegal immigrants here in our own country.

While the American economy may be a pyramid scheme with 99% of us under the 1% capstone at the top, the truth is that the entire American economy is at the top of a global pyramid scheme. The American working class is merely at the base of the peak of the pyramid. We're all Eloi, whether we realize it or not. Sure the top 1%, or really the top 0.5% to 0.1% are the true and pure Eloi, the true leisurely class, but Americans as a whole are still at the top of the global pyramid, we still benefit massively from the exploitation of the global Mortlock population, but just as in Time Machine, the Mortlocks of the developing world aren't feeding us and giving us cheap commodities for nothing, they are feeding upon us too. We have allowed ourselves to become captives of a system from which there is no easy escape, from which there isn't going to be any "nice" solution, where we make a few tweaks and everything just gets better. Its not going to happen. Yes, American capitalists are the one who got us into this mess, but the fact is that now we're all in it together.

Just as the aristocrats fell with the French Revolution and plantation owners lost virtually everything after the Civil War and the emancipation of the slaves, there isn't going to be a solution to the global economic condition in which the super-rich retain their wealth, there can't be. Like it or not, lots of the super-rich are going to lose what they've got, but here is the thing, in the global scheme of things, all Americans are super-rich. We're all gonna lose out economically over the next few decades, there simply isn't any other way given the nature of the global pyramid of exploitation, not to mention the ecological pressures of a growing and industrializing global population. We've been living off of credit and the exploitation of developing nations and illegal immigrants for decades now, it can't go on, its not going to go on.

What we see in American politics and society right now is the first phase of coming to grips with tragedy. We're still in the denial phase. We are operating under denial politics right now, and the denial is pervasive throughout society and across the political spectrum.

So, my point, however bleak it may be, is this: What we need to be talking about is how we are going to prepare for an American future where prices rise and the costs of living for everyone in America goes up significantly. Redistribution? Damn right we need to be talking about redistribution, we need to be talking about taking back the wealth that has been stolen from the American working class by the super-rich for the past 30 years. But we also need to remember that a portion of the wealth of the American super-rich is wealth that has been stolen from the global working class as well, that's part of the reason that income inequality has risen so much so rapidly, because its not just Americans who are getting screwed by the American super-rich (or the super-rich in other countries), its the global working class.

Americans spend among the lowest portion of their income on basic necessities like food and housing of anyone in the world, and we've been able to maintain this for decades based on whole systems of global and domestic exploitation. Its been good for all of us, we've all taken advantage of it. Don't think that we're gonna get out of this without all of us paying the price.

See also: American Prosperity: Made in China


Posted by rationalrevolution.net at 10:25 AM EDT | Post Comment | View Comments (6) | Permalink
Wednesday, October 5, 2011
 Now a proven fact that executive pay is a form of theft

Topic: Commentary

There is a new article out in the Washington Post about executive pay. The article does a good job of laying out the basic facts, but I'm going to put the basic facts into a larger context.

What this article basically states is that based on recent data that has come from government regulations that went into effect in 2006 forcing public corporations to disclose more information about executive pay practices, we now have hard facts that tell us how executive pay is determined at major US corporations and to a lesser degree how those practices have changed over time. Much of this is stuff that we already knew in the general sense, but we now have much more concrete information.

As we know, executive pay is set by boards of directors and boards of directors are essentially picked by share holders, but not exactly. The reality is that the pool of folks at the top is rather small and incestuous, meaning that a lot of corporate executives either currently sit on the boards of other companies or they are former board members of other companies, and the number of individuals or institutions that hold enough shares to be able to determine board members is relatively small and spans many companies. In practice in many cases executives themselves play a large role in who gets onto the board of the companies that they are leading, which is to say that executives are in many cases picking the very people who will set their pay. These board positions are themselves largely ceremonial positions that pay nice sums of money, and individuals can easily serve on multiple boards. In the example given by the Washington Post, board members for Amgen are paid $350,000 a year.

For smaller companies, like start-ups, board members are often direct investors themselves, but for large companies board members are not typically direct investors, they are people appointed by institutional investors. They do also hold shares, but these shares are often given to them as a result of becoming a board member, instead of becoming a board member because they hold lots of shares.

At any rate, what has been discovered by these disclosures since 2006 is that 90% of corporate boards explicitly decide to set executive compensation at or above average. In other words, when determining executive pay they look at the the average compensation for comperable executives then they set a compensation package above that average value, 90% of the time! Obviously, if everyone is setting a value above average then pay is just going to shoot up over time, which is exactly what we have seen.

But let's put this in a bigger context now. What we are really saying is that executive pay is not determined by labor markets. This is a huge deal, because the whole underpinning of the capitalist wage system is labor markets, and let's look at the difference between how labor markets work vs. how this "peer benchmarking" system works for executives.

Labor markets inherently drive compensation down, while the executive pay system inherently drives compensation up. In a labor market "labor prices" are determined by the lowest amount of pay that individuals will accept for a given set of labor. The labor market system for determining compensation is at the heart of the criticisms of capitalism noting that the labor market system compels a race to the bottom and deprives workers of the value of their labor by pitting them against one another in a bargaining war over who will agree to taking the lowest compensation to get a job. At the same time, defenders of capitalism and market theory have defended labor markets as efficient means of determining the value of a worker's contributions.

So what we have here is that there are two completely different systems and sets of principles in place for determining compensation for corporate employees, and that the compensation for executives is not determined by markets. While the hypocrisy is overwhelming, this isn't just a matter of hypocrisy, its a matter of real money and real wealth. While these corporate and financial elite and their defenders have been extolling the virtues of markets, and have been portraying the compensation of those at the top as a product of "fair and balanced" market forces, the reality is that they have engineered a system where executive compensation is not determined by market forces at all, indeed the system of executive compensation violates every market principle.

And the important thing to understand is that this is made possible due to the massive concentration of private capital ownership. It is the consolidation of capital ownership that makes this all possible, because decision making is in the hands of relatively few powerful people.

The justification for the growing economic inequality in America has always been that the high incomes of those at the top are justified because they are determined by the same market principles that determine everyone's income. We now have not just theoretical arguments or anecdotal claims, but solid proof that this is not true. This shows that the real mantra of the corporate elite is, "markets for thee, but not for me."

When we combine this with the recent reporting on the raiding of corporate pension accounts to help fund growing executive compensation the case becomes clear that the corporate elite (the executives, board members, and major investors) have in fact been involved in decades of direct theft from the working class (domestic and foreign). This isn't theoretical, we are talking about concrete systems that have been in place for 30 years that have directly transferred wealth created by the working class to an undeserving elite minority who we can factually prove never earned it.

While economics as a whole may not be a zero sum game, accounting is. A corporation's revenue is a finite value. The only way that one individual in a corporation can be paid more is if someone else is paid less. This means that inflation of executive compensation has to be at the expense of the other employees, there is no way around it.

And here is the kicker, the thieves have accumulated so much wealth and power that they now control the political system. So at this point the theft hasn't just taken place due to the actions of the executives and capital owners, the politicians are accomplices to the crime, which is why what has been done isn't against the law, because the thieves control the people who write the laws. This is why we have politicians and corporate media pundits repeating the claim that raising taxes on high incomes "punishes achievement". It's total nonsense. The reality is that these high incomes are virtually all entirely unearned and undeserved, even though those receiving them may themselves think they deserve it. And its not just that they are unearned and undeserved, these high incomes come at the expense of the rest of us, at the expense of the other 99% of the population, the "working class". And on top of it all, it also turns out that the worst perpetrators of these crimes are those in the health care industry! Surprise, surprise.

If people understand the full implications of what that Washington Post article is saying, it should cause a revolution. While the article doesn't state it, the real conclusion that we can draw from the evidence it presents is that we now have solid proof that trillions of dollars have been stolen from the working class by the corporate elite over the past 30 years, that the high incomes that have been justified on the basis of "market theory" are in fact products of complete violations of market principles in ways that funnel value created by corporate employees to corporate executives, their cronies, and capital owners.

The ultimate lesson here is that "we the people" have lost control of the nation's capital. Indeed there is no such thing as "the nation's capital", the capital is owned and controlled by an elite minority of people, few of which have any national allegiance or sense of responsibility. Virtually all of our nation's economic problems stem from this fact. The capital that our society depends upon is owned and controlled by a small minority of people whose interests in direct conflict with the interests of the working class, and it is that minority of people who have the majority of political power.


Posted by rationalrevolution.net at 10:02 AM EDT | Post Comment | View Comments (16) | Permalink
Updated: Wednesday, October 5, 2011 10:12 AM EDT

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