From Laurie Loves Data
Right after WWII, income gains were shared between all income levels in the US
In 1980 that changed
The very wealthy got the lion's share of income and wealth
*Lobbying by businesses exploded
*The power of unions declined
*Trickle-down economics became the GOP mantra
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| "95th percentile" means 95% of the population earns less than you. "20th" percentile means that you are in the bottom 20%. |
The GFC (Global Financial Crisis) in 2008 permanently reduced the OECD (Organisation for Economic Co-operation and Development) trend growth rate. Normally, after a deep recession, there is a rebound back to the previous trend line and growth continues along that trend line. But this didn't happen after 2008. Even taking the trend from the low point, trend growth has been just 1.8% per annum, compared with 2.8% from 1980 to 2007. Excluding the Covid crash, trend growth was 2.2%.
And I think there is a high likelihood of deep recession in 2023, as Central Banks tighten to fight inflation, reducing trend growth even more.
Make no mistake: the GFC occurred because banking regulation was loosened. One of the tenets of Neo-liberalism is that banks can regulate themselves, that they can be trusted to be sensible. The GFC conclusively proved that this is false. The fall in growth in developed countries has been a key factor in the rise of semi-fascist populist movements in the US, the UK and Europe. And that fall in growth is due to an economic/social/political philosophy which promised higher growth and "trickle down" and instead has delivered lower growth, worse inequality, and grave danger to our democracies.
From Business Insider
- Large tax cuts for the rich lead to higher income inequality and don’t fuel economic growth or cut unemployment, a new paper by academics from the London School of Economics and King’s College London says.
- Their analysis of 50 years’ worth of tax cuts for the wealthy in 18 countries counters arguments that such cuts “trickle down” to the rest of the economy.
- “Cutting taxes on the rich increases top income shares, but has little effect on economic performance,” the researchers concluded.
Large tax cuts for the rich don’t lead to economic growth and employment but instead cause higher income inequality, a new study that examined tax cuts over 50 years suggested.
A recent paper by David Hope of the London School of Economics and Julian Limberg of King’s College London found that tax cuts for the rich in 18 countries predominantly benefited the wealthy.
“Our analysis finds strong evidence that cutting taxes on the rich increases income inequality but has no effect on growth or unemployment” in the short and long term, the researchers wrote.
After major tax cuts for the rich were introduced, the top 1% share of pretax national income increased by almost 1 percentage point, they found.
Their findings counter arguments that tax cuts for the rich “trickle down” to benefit other people, which the researchers noted have been part of the rationale for major tax reforms in the US.
Supporters say tax cuts for the rich can lead wealthy people to put in more hours and effort at work, boosting economic activity, the researchers said. Other arguments for trickle-down tax cuts include that they allow wealthy people to invest more and benefit the economy.
Hope and Limberg analysed major tax cuts for the rich in 18 countries that are part of the Organisation for Economic Cooperation and Development, including the US, Japan, and Norway, from 1965 to 2015.
Top incomes have risen rapidly since the 1980s, and as they grew, more tax cuts for the wealthy were introduced, the researchers said.
The researchers said their results were in line with a 2014 paper published in the American Economic Journal that suggested that lower taxes for the rich caused high earners to seek pay raises.
“Cutting taxes on the rich increases top income shares, but has little effect on economic performance,” Hope and Limberg concluded.
From The Guardian
Politicians rarely want to raise taxes on the rich. Joe Biden promised to do so but a closely divided Congress is already balking.
That’s because they’ve bought into one of the most dangerous of all economic ideas: that economic growth requires the rich to become even richer. Rubbish.
Economist John Kenneth Galbraith once dubbed it the “horse and sparrow” theory: “If you feed the horse enough oats, some will pass through to the road for the sparrows.”
We know it as trickle-down economics.
In a new study, David Hope of the London School of Economics and Julian Limberg of King’s College London lay waste to the theory. They reviewed data over the last half-century in advanced economies and found that tax cuts for the rich widened inequality without having any significant effect on jobs or growth. Nothing trickled down.
Meanwhile, the rich have become far richer. Since the start of the pandemic, just 651 American billionaires have gained $1tn of wealth. With this windfall they could send a $3,000 check to every person in America and still be as rich as they were before the pandemic. Don’t hold your breath.
Stock markets have been hitting record highs. More initial public stock offerings have been launched this year than in over two decades. A wave of hi-tech IPOs has delivered gushers of money to Silicon Valley investors, founders and employees.
Oh, and tax rates are historically low.
Yet at the same time, more than 20 million Americans are jobless, 8 million have fallen into poverty, 19 million are at risk of eviction and 26 million are going hungry. Mainstream economists are already talking about a “K-shaped” recovery – the better-off reaping most gains while the bottom half continue to slide.
The practical alternative to trickle-down economics might be called build-up economics. Not only should the rich pay for today’s devastating crisis but they should also invest in the public’s long-term wellbeing. The rich themselves would benefit from doing so, as would everyone else.
At one time, America’s major political parties were on the way to embodying these two theories. Speaking to the Democratic national convention in 1896, populist William Jennings Bryan noted: “There are two ideas of government. There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests upon them.”
Build-up economics reached its zenith in the decades after the second world war, when the richest Americans paid a marginal income tax rate of between 70% and 90%. That revenue helped fund massive investment in infrastructure, education, health and basic research – creating the largest and most productive middle class the world had ever seen.
But starting in the 1980s, America retreated from public investment. The result is crumbling infrastructure, inadequate schools, wildly dysfunctional healthcare and public health systems and a shrinking core of basic research. Productivity has plummeted.
Yet we know public investment pays off. Studies show an average return on infrastructure investment of $1.92 for every public dollar invested, and a return on early childhood education of between 10% and 16% – with 80% of the benefits going to the general public.
[Read more here]
The popular protests that erupted in 2019 and have continued to rumble – from France and Spain in Europe to Hong Kong and India in Asia; from Chile, Colombia and Bolivia in Latin America to Lebanon, Iran and Iraq in the Middle East – have perplexed analysts. Because they have been so far-flung and have lacked an iconic moment like the fall of the Berlin Wall, the common thread hasn’t been obvious. But there is one: rage at being left behind. In each instance, the match may differ, but the kindling has (in most cases) been furnished by the gross inequality produced by global capitalism.
Consider Lebanon. The demonstrations that erupted there in October were triggered by the government’s plan to tax calls made through WhatsApp and other internet services, but they quickly mushroomed into a broader protest against high unemployment, sectarian rule, corruption, and the government’s failure to provide basic services like electricity and sanitation.
According to the World Inequality Database, the top 1% of Lebanon’s population receives about 25% of the nation’s income. Six Lebanese billionaires have a combined personal wealth of about $11bn, according to Forbes. Three of those billionaires are the sons of Rafik Hariri, who made a fortune in construction and twice served as Lebanon’s prime minister before being assassinated in 2005. (A fourth son, Saad Hariri, was prime minister until his recent resignation amid reports that he had given more than $16m to a bikini model he had met while vacationing in the Seychelles.) Protesters maintained that the pampered elite, rather than strapped working people, should foot the bill for the country’s economic problems.
In Chile, an increase in subway fares catalyzed protest. The popular discontent caught many observers by surprise, since Chile has experienced years of steady growth and has a reputation for good governance. In fact Chile, with a per capita income of $15,800, is a member of the Organization for Economic Cooperation and Development for prosperous nations. Of the OECD’s 36 members, however, Chile has one of the highest levels of inequality. Its economy is dominated by a group of powerful oligarchs, among them its current president, Sebastián Piñera, who is worth an estimated $2.8bn (amassed largely in the credit card business). Despite their country’s wealth, working Chileans have had to grapple with rising utility costs, stagnant wages and paltry pensions. The protests have registered their fury.
In Hong Kong, months of demonstrations have had one overriding goal: resisting China’s encroachments on the city’s autonomy and democratic institutions. That the protests have become so virulent and lasted so long, however, reflects deep exasperation with the region’s sky-high cost of living. By some accounts, Hong Kong is the world’s most unaffordable city, with rents higher than London and New York for apartments half the size. It may also be the world’s most unequal city: its 93 or so billionaires have a combined worth of more than $300bn while nearly one in five residents lives in poverty.
Worldwide, the numbers are stark. As calculated by Oxfam, 26 people have the same amount of wealth as the 3.8 billion people in the world’s bottom half. In the United States, the three richest people have the same amount of wealth as the bottom 160 million.
And the political fallout continues to spread. Not only the current round of street protests but also such recent upheavals as Brexit, Trump, the gilets jaunes in France, and rightwing populist governments in Hungary, Poland and Italy all have roots in the financial crash that was set off by the fall of Lehman Brothers in September 2008 and followed by the world’s worst economic contraction since 1929.
In the US alone, the great recession erased about $8tn in household stock-market wealth and $6tn in home value. From 2003 to 2013, inflation-adjusted net wealth for a typical household fell 36%, from $87,992 to $56,335, while the net worth of wealthy households rose by 14%. Workers without college degrees and low-income Americans were especially hard hit.
In a recent New York Times article about Vladimir Putin’s growing worldwide stature, the former Kremlin adviser Gleb Pavlovsky sought to explain why Putin turned away from his earlier aspirations to join the western family of nations and toward his current brand of authoritarian nationalism. The “decisive threshold” was the 2008 financial meltdown, Pavlovsky said. Before it, Putin saw America as running the world economy. “Suddenly it turned out: no, they are not running anything.” At that moment “all the old norms vanished” and Russia set about creating its own norms.
Many members of the liberal establishment in America [and elsewhere!] have failed to come to terms with the waning appeal of the free-market model. They dismiss populism as a sort of exogenous disease to be cured by appeals to reason and facts rather than recognize it as a darkly symptomatic response to a system that has failed so spectacularly to meet the basic needs of so many.
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| Source: Green Left |
A HAPPY customer is a repeat customer, or so the saying goes. But how to keep customers happy? The answer, according to a recent study, is to treat your own employees well. Glassdoor, a website which lets workers assess employers, looked back over the records of 293 companies across 13 industries between 2008 and 2018. It then studied the link between employee satisfaction, based on its own ratings, and the American Customer Satisfaction Index, a benchmark gauge of shoppers’ sentiment.
A one-point improvement in Glassdoor’s employee-satisfaction rating (on a five-point scale) translated into a statistically significant 1.3-point increase in customer satisfaction (rated from zero to 100). As might be expected, the link was strongest in industries where workers have the most direct contact with customers, such as retail, restaurants and tourism. In such trades, a one-point gain in employee satisfaction raised that of customers by 3.2 points (see charts). Companies with high scores for both employee and customer satisfaction include Southwest Airlines, Trader Joe’s (a grocer) and Hilton Hotels. The link is less strong in manufacturing, energy and technology—all sectors in which employees and customers rarely interact.
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| A cartoon by Clay Jones Source |
In the fall of 1999, I interviewed Tony Blair, who was then the Prime Minister of the United Kingdom, at 10 Downing Street. I asked Blair, a former barrister who had rebranded the vaguely socialist Labour Party as the explicitly pro-enterprise New Labour, if he believed socialism was dead. He hemmed and hawed. Eventually, he said that if I meant old-style socialism—extensive government controls, punitive tax rates on the very rich, and a pervasive suspicion of capitalism—then, yes, socialism was done.
At the time, this wasn’t a particularly controversial thing to say. With the collapse of the Soviet Union, state socialism on the Eastern Bloc model had been discredited. China and India had both embarked on historic efforts to deregulate their economies and embrace global capitalism. In many Western countries, the parties of the center-left had adopted, or were about to adopt, more market-friendly policies. Blair and his friend Bill Clinton claimed to be pioneering a “Third Way” between capitalism and socialism.
Twenty years on, Jeremy Corbyn, a lifelong socialist, leads the Labour Party. Bernie Sanders is running for President again, under the banner of “democratic socialism.” Two members of the Democratic Socialists of America—Alexandria Ocasio-Cortez and Rashida Tlaib—are sitting in the House of Representatives. In Germany, the Greens and the socialist Left Party are challenging the once mighty S.P.D. What explains this left-wing revival? There are three answers, I think, and they are all linked: economic cleavages, political capture, and a crisis of legitimacy.
The most basic problem is that in rich countries like Britain and the United States the pro-market tilt failed to deliver the promised results on a consistent basis. (In China and India, the story was different.) Blair was operating under the theory that opening markets, cutting taxes, and stripping away restrictions on businesses would boost the growth rates of G.D.P. and productivity, leading to higher wages and living standards for everyone. Also, faster growth would expand the tax base, which would allow the government to spend more on things like education and health care. For a time, during the economic boom of the late nineteen-nineties, things seemed to be working to plan. But that didn’t last very long, and it culminated in the financial crisis and the Great Recession[GFC], the recovery from which was slow and patchy.
In Britain, the annual rate of productivity growth averaged a dismal 0.4 per cent in the decade after 2008, and inflation-adjusted wages fell sharply. Problems like homelessness and poverty became more acute as the public safety net was cut back under Conservative austerity politics. On this side of the Atlantic, the recovery from recession has been somewhat stronger, but wages have lagged behind growth in productivity, and the long-term trends are alarming. In a speech at George Washington University last week, Sanders noted that “the average wage of the American worker in real dollars is no higher than it was forty-six years ago.” He also said that “three families control more wealth than the bottom half of our country,” and that, in some poorer parts of the population, “life expectancy is declining for the first time in modern American history.”
[In Australia, real average wages have been flat or falling for nearly a decade, even as real GDP has risen]
When a system posited on delivering the goods to the masses fails to accomplish that task, protests are bound to arise, especially if the people at the very top seem to be benefiting from the privations of others. Under state socialism, this led to widespread resentment of the nomenklatura, with their imported foods and country dachas. Under free-market capitalism, it leads to resentment of the one per cent, or 0.1 per cent, and anger at the political system that protects their interests.
In retrospect, a key moment for the revival of American socialism was the Wall Street bailout of 2008 and 2009, when taxpayers were forced to rescue the very rogues who had helped bring about the financial crisis, even as many ordinary families were being evicted from their homes for failing to service their mortgages. From an economic perspective, there were some sound reasons to prevent the financial system from collapsing. From a political perspective, the decision to save the banks persuaded many Americans—on the left, center, and right—that the political system had been captured.
The legitimacy of the market economy is at stake. From Adam Smith to Milton Friedman, defenders of capitalism have argued that it is ultimately a moral system, because competition ensures that it harnesses selfishness to the common good. But where is the morality in a system where the economic gains are so narrowly shared, and giant companies with substantial market power—the heirs to the trusts—exercise dominion over great swaths of the economy? Until a twenty-first-century Friedman provides a convincing answer to this question, the revival of the S-word will continue.
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| (Source) |
Britain and America are in the midst of a barely reported public health crisis. They are experiencing not merely a slowdown in [the rise in] life expectancy, which in many other rich countries is continuing to lengthen, but the start of an alarming increase in death rates across all our populations, men and women alike. We are needlessly allowing our people to die early.
In Britain, life expectancy, which increased steadily for a century, slowed dramatically between 2010 and 2016. The rate of increase dropped by 90% for women and 76% for men, to 82.8 years and 79.1 years respectively. Now, death rates among older people have so much increased over the last two years – with expectations that this will continue – that two major insurance companies, Aviva and Legal and General, are releasing hundreds of millions of pounds they had been holding as reserves to pay annuities to pay to shareholders instead. Society, once again, affecting the citadels of high finance.
Trends in the US are more serious and foretell what is likely to happen in Britain without an urgent change in course. Death rates of people in midlife (between 25 and 64) are increasing across the racial and ethnic divide. It has long been known that the mortality rates of midlife American black and Hispanic people have been worse than the non-Hispanic white population, but last week the British Medical Journal published an important study re-examining the trends for all racial groups between 1999 and 2016 .
The malaises that have plagued the black population are extending to the non-Hispanic, midlife white population. As the report states: “All cause mortality increased… among non-Hispanic whites.” Why? “Drug overdoses were the leading cause of increased mortality in midlife, but mortality also increased for alcohol-related conditions, suicides and organ diseases involving multiple body systems” (notably liver, heart diseases and cancers).
US doctors coined a phrase for this condition: “shit-life syndrome”. Poor working-age Americans of all races are locked in a cycle of poverty and neglect, amid wider affluence. They are ill educated and ill trained. The jobs available are drudge work paying the minimum wage, with minimal or no job security. They are trapped in poor neighbourhoods where the prospect of owning a home is a distant dream. There is little social housing, scant income support and contingent access to healthcare. Finding meaning in life is close to impossible; the struggle to survive commands all intellectual and emotional resources. Yet turn on the TV or visit a middle-class shopping mall and a very different and unattainable world presents itself. Knowing that you are valueless, you resort to drugs, antidepressants and booze. You eat junk food and watch your ill-treated body balloon. It is not just poverty, but growing relative poverty in an era of rising inequality, with all its psychological side-effects, that is the killer.
Nearly all indicators of inequality show American income disparities have increased since the late 1970s. The magnitude of change in inequality is sensitive to the particular income measure we use, but essentially all measures imply that income gaps are bigger today than they were three decades ago.
Statisticians analyzing the most comprehensive income measures find that much of the jump in inequality was due to gains at the very top of the distribution. More than three-quarters of the relative income gains enjoyed by Americans in the top fifth of the income distribution were obtained by people in the top 1% of the distribution.
As many observers have noted, the United States has exceptionally wide inequality for a high-income country. It also has relatively low average life expectancy. Among 34 countries in the Organization of Economic Cooperation and Development (OECD), the U.S. ranks 27th in life expectancy at birth. If we limit our comparison to the 21 large OECD countries with high incomes, America ranks dead last. This lowly rank is especially surprising because average income in the U.S. is about 40% higher than it is on average in other OECD countries, and real health spending per person is about 150% higher than it is in the other countries. Of course, wide income disparities in the U.S. mean that low-income Americans have lower incomes than people in comparable positions in the income distributions of many other rich countries.
A recent study of American life expectancy uncovered trends that may be partly traceable to increased income inequality. S. Jay Olshansky and his colleagues found evidence that white men and women who lack high school diplomas have seen a noticeable drop in life expectancy over the past three decades. These groups have struggled as job prospects for less educated workers have dried up. Their declining economic position may be worsening their chances of living a long life.
An older study of changes in life expectancy used Social Security records to determine the relationship between workers’ position in the wage distribution and their mortality rates. Hilary Waldron, a Social Security Administration researcher, estimated mortality rates of white men born between 1912 and 1941 who had earnings between ages 45 and 55. She divided these men according to their average position in the earnings distribution when they were between 45 and 55, and she then determined the effects of their income position on their mortality rates between ages 60 and 89. Between ages 60 and 80 men with a worse earnings position had a higher mortality rate. More disturbingly, the mortality differential between low-earnings and high-earnings men increased substantially over time. The mortality rates of both low-earnings and high-earnings men improved during the period Waldron examined. However, improvements in life span overwhelmingly favored the men at the top of the earnings distribution. Men born in 1912 who had earnings in the top half of the wage distribution lived 1.2 years longer than men born in the same year who had earnings in the bottom half of the earnings distribution. For men born in 1941 the difference in life expectancy soared. Better paid men in the younger birth cohort can expect to live 5.8 years longer than men born in the same year who are in the bottom half of the wage distribution.
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| Source: OECD |
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| Source |
The Republican gospel of cutting taxes and government services to the bone doesn’t lead to economic growth; it leads to crisis and decline. Just ask the people of Kansas, who finally have seen the light.
The states are supposed to be laboratories for testing government policy. For five years, Kansas’s Republican governor, Sam Brownback, conducted the nation’s most radical exercise in trickle-down economics — a “real-live experiment,” he called it. He and the GOP-controlled legislature slashed the state’s already-low tax rates, eliminated state income tax for most owner-operated businesses and sharply reduced vital government services. These measures were supposed to deliver “a shot of adrenaline into the heart of the Kansas economy,” Brownback said.
It ended up being a shot of poison. Growth rates lagged behind those in neighboring states and the nation as a whole. Deficits mounted to unsustainable levels. Services withered. Brownback had set in motion a vicious cycle, not a virtuous one.
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| Cartoon by Jim Morin |
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices
