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First, writes Galbraith, it is important to understand that most of the current statistics on inequality are flawed. For while economists typically focus on income data – or measures such as the “gini coefficient” – these are extremely crude and tend to focus on outdated ideas about how economies work. Second, he adds, if you crunch the numbers in a more granular and up-to-date way, this challenges some orthodoxies. In particular, most economists (and politicians) have assumed in recent years that the US was becoming more unequal because of industrial change, such as a loss of manufacturing jobs to China.
But Galbraith sees little evidence of this. “At the global level, the data give no support to the vast outpouring in the professional literature arguing that changes in inequality are based on so-called ‘real factors’ such as a race between technology and education,” he writes. “On the contrary, financial factors explain a very large share (practically everything) that can be explained.”
"Luckily, research (pdf) by Guido Heineck tackles just this question. Unluckily, his findings are depressing.
He looked at the correlations between UK individuals’ earnings and “big five” personality traits, controlling for other things such as age, education, marital status and region."
"The Congressional Research Service found that 200,000 millionaires — almost two-thirds of taxpayers with taxable income above $1 million — paid a lower tax rate (combining income and payroll taxes) than the typical taxpayer making less than $100,000."
"The last day or two I’ve been seeing some complaints that the chant of the Occupy Wall Street protesters that “We are the 99%” casts the net too widely, effacing all kinds of class, race, and gender distinctions. Well, yes, probably so. But I still find it cheering."
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What’s refreshing, though, about the 99% chant is that it strives towards something like universality. For the last few decades—pretty much those in which the rich have gotten a lot richer—many of us have been obsessed with slicing society into finer and finer pieces. That’s far from a useless effort; many stories are hidden behind averages, and we’ve learned that there’s a lot of particularity behind abstractions like the “working class.” This experience has given us the chance, as Kim Moody put it in a 1996 New Left Review article, “to get the active concept of class right this time,” in contrast with the 1930s or 1960s.
So yeah, the 99% thing may be a stretch; maybe 80% is more like it, and even so there would be a lot of tensions within such a large population. (Keeping those under cover is one of the advantages of not articulating an agenda, though that blessed state can’t go on forever.) But 99% is catchy, and it can lead in very fruitful directions.
"For many years now, societies have been limping on with broken institutions and splintered social contracts — right into the heart of this perfect storm. And I'd bet most of us have assumed that we'll continue to "get by" — that we can wait for the economy to repair itself, for the next economic boom to provide shelter from the approaching cyclone, for the invisible hand to pick us up and put us back on our feet. Yet, I'd suggest: the upheavals we're seeing now are stark evidence that the status quo's faith-based modus operandi hasn't worked — and isn't working. We're not magically going to "find" shelter from the gathering clouds of this economic whirlwind. We're going to have to build shelter: more resilient, less dysfunctional institutions that can deliver on the promise of real human prosperity that matters, lasts, and multiplies. Because if you didn't know what a lost decade looked and felt like before — well, you sure do now."
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Call it the logic of opulence: a paradigm of plenitude centred on more, bigger, faster, cheaper, nastier, now. Its glittering, unattainable fever dream seems to have driven the rioters mad. As one told the Guardian, "Why are you going to miss the opportunity to get free stuff that's worth loads of money?" Indeed: why, given a poisonous compact tattooed into the deeper calculus of everyday culture, not? Hence, as many have pointed out, the mob hasn't exactly been looting bookshops, but the stuff of faux-luxe, mass-designer plenitude: plasma TVs, fast fashion, video games. The vision they seemed to be pursuing, as if their long-denied birthright, is less one of sign-waving activism, fighting against deep-seated social injustice, and more one of raiding a consumerist Disneyland to which they've long been glumly denied a ticket.
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I call it a Great Splintering — not purely an economic phenomenon, as in "Great Contraction," but a social one: an era when social contracts are being torn up, abrogated, betrayed, abandoned, by accident, by design, by "regulatory capture," or simply by polities too gridlocked to progress. Broken social contracts aren't just tidy abstractions, empty of visibly real consequences, disconnected from the noise and clamor of our messy human lives. As they break, yesterday's ways of living, working, and playing rupture; yesterday's organizations, from corporations to banks to nations, creak and crack.
"The answer is that an extreme concentration of wealth at the center of our market economy has led to a form of central planning. The concentration of wealth is now in so few hands and is so extreme in degree, that the combined liquid financial power of all of those not in this small group is inconsequential to determining the direction of the economy. As a result, we now have the equivalent of centralized planning in global marketplaces. A few thousand extremely wealthy people making decisions on the allocation of our collective wealth. The result was inevitable: gross misallocation across all facets of the private economy. "
"Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret."
"We analyzed reams of demographic, economic, cultural, and political data to break the nation’s 3,141 counties into 12 statistically distinct “types of place.” When we look at family income over the past 30 years through that prism, the full picture of the income divide becomes clearer—and much starker. "
"More interesting than that, the report says, is that the respondents (a randomly selected 5,522-person sample, reflecting the country's ideological, economic and gender demographics, surveyed in December 2005) believed the top 20 percent should own only 32 percent of the wealth. Respondents with incomes over $100,000 per year had similar answers to those making less than $50,000. (The report has helpful, multi-colored charts.)
The respondents were presented with unlabeled pie charts representing the wealth distributions of the U.S., where the richest 20 percent controlled about 84 percent of wealth, and Sweden, where the top 20 percent only controlled 36 percent of wealth. Without knowing which country they were picking, 92 percent of respondents said they'd rather live in a country with Sweden's wealth distribution."
"The dramatic growth of inequality, then, is the result not of the "natural" workings of the market but of four decades' worth of deliberate political choices. Hacker and Pierson amass a great deal of evidence for this proposition, which leads them to the crux of their argument: that not just the U.S. economy but also the entire U.S. political system has devolved into a winner-take-all sport. They portray American politics not as a democratic game of majority rule but rather as a field of "organized combat" -- a struggle to the death among competing organized groups seeking to influence the policymaking process. Moreover, they suggest, business and the wealthy have all but vanquished the middle class and have thus been able to dominate policymaking for the better part of 40 years with little opposition."
"Or, as Ross Douthat put it in an op-ed yesterday:
This means that a culture war that's often seen as a clash between liberal elites and a conservative middle America looks more and more like a conflict within the educated class -- pitting Wheaton and Baylor against Brown and Bard, Redeemer Presbyterian Church against the 92nd Street Y, C. S. Lewis devotees against the Philip Pullman fan club."
The answer is capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.
in list: Economic Crisis
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