The Rise of the New Global Elite - Magazine - The Atlantic

A nice summary of everything that's wrong with the global economy - income inequality, plutocrats, hubris, etc. You see, the rich really do think they're smarter than you. Why else would they be so stinking rich, and you so stinking mediocre:

Though typically more guarded in their choice of words, many American plutocrats suggest, as Khodorkovsky did, that the trials faced by the working and middle classes are generally their own fault. When I asked one of Wall Street’s most successful investment-bank CEOs if he felt guilty for his firm’s role in creating the financial crisis, he told me with evident sincerity that he did not. The real culprit, he explained, was his feckless cousin, who owned three cars and a home he could not afford. One of America’s top hedge-fund managers made a near-identical case to me—though this time the offenders were his in-laws and their subprime mortgage. And a private-equity baron who divides his time between New York and Palm Beach pinned blame for the collapse on a favorite golf caddy in Arizona, who had bought three condos as investment properties at the height of the bubble.

and..

You might say that the American plutocracy is experiencing its John Galt moment. Libertarians (and run-of-the-mill high-school nerds) will recall that Galt is the plutocratic hero of Ayn Rand’s 1957 novel, Atlas Shrugged. Tired of being dragged down by the parasitic, envious, and less talented lower classes, Galt and his fellow capitalists revolted, retreating to “Galt’s Gulch,” a refuge in the Rocky Mountains. There, they passed their days in secluded natural splendor, while the rest of the world, bereft of their genius and hard work, collapsed. (G. K. Chesterton suggested a similar idea, though more gently, in his novel The Man Who Was Thursday: “The poor man really has a stake in the country. The rich man hasn’t; he can go away to New Guinea in a yacht.”)

This plutocratic fantasy is, of course, just that: no matter how smart and innovative and industrious the super-elite may be, they can’t exist without the wider community. Even setting aside the financial bailouts recently supplied by the governments of the world, the rich need the rest of us as workers, clients, and consumers. Yet, as a metaphor, Galt’s Gulch has an ominous ring at a time when the business elite view themselves increasingly as a global community, distinguished by their unique talents and above such parochial concerns as national identity, or devoting “their” taxes to paying down “our” budget deficit. They may not be isolating themselves geographically, as Rand fantasized. But they appear to be isolating themselves ideologically, which in the end may be of greater consequence.

Left Out - Francis Fukuyama - The American Interest Magazine

Francis Fukuyama???

Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society.

Yglesias » Production, Consumption, and Prosperity

A slightly muddled response to the resurgence of supply-side, producer-oriented economic blather.

If the wealthy were the source of all economic growth, we could produce our way to prosperity simply by making iPhones by the billions, have the Dallas Cowboys build eight more stadiums in Texas for eight new teams, have James Cameron film Avatars 2 through 9 simultaneously and have them in theaters by next summer.

But who would buy all those iPhones? Who would go to all of those football games? Who would watch all of those movies, buy all of those BlueRays? Precisely. The fact is no one would ever do that because there's no market for that much stuff, no audience, no customers. Which proves the point: demand for goods and services - not supply - is what drives the economy. When wealth is increasingly moved into the hands of fewer and fewer wealthy people, you destroy demand and push the economy into a golden-goose-killing death-spiral.

Businesses succeed when they build things that people want, and businesses prosper when they reinvest for the future rather than waiting for some bigger fish to buy them up and offer them the equivalent of lottery winnings.

What's needed are incentives to put more money in the hands of people who actually need things and fewer incentives for those at the high end of the income spectrum to take the money and run.

I am not a Communist — Crooked Timber

An interesting discussion on the meaning of innovation in the era of social networking. Namely that the most interesting work being done today is communal and shared, and implicitly anti-capitalist but noone wants to admit it for fear of being branded a Marxist. Except, as Henry points out:

The degree to which Marx and Engels might or might not have approved e.g of the methods employed by Russian Communists to come into power is still the topic of vigorous controversy. The degree to which Marx and Engels invented, or ‘helped invent’ the command economy is not. Neither had any role whatsoever in inventing it, except as conveniently dead sources of rhetorical justification to those who came after them. They were themselves extremely vague as to exactly how the economy would work after socialism.

So the future could look increasingly communistic without necessarily moving toward a scary command economy and leading us down the path to Hayekian serfdom.

Lance Mannion: All the mad men and all the mad women are about to go Galt

An analysis of Mad Men by way of Ayn Rand. Pretty great when you can read stuff like this:

Work, as far as they’re concerned, is not its own reward. They don’t take pride in a job well done because they can never be sure that they will continue to hold that job no matter how well they do it. Someone who can do it better will always come along to impress the bosses and where will that leave them? People who just work don’t have worth no matter how well or hard they work. People who just work are just useful to the people who produce.

Now, The Hobo Code is not an endorsement of their Randian world view. In fact the episode and the entire series is a refutation of the idea that the world of work and business is a world of solitary and independent heroes carrying the parasites along on their broad shoulders.

Why Income Matters | Mother Jones

Kevin Drum's latest on income inequality:

I think the rich in America have simply managed to reengineer our political and economic institutions to suppress middle class income, thus producing a vast pool of money that flows in their direction.

Follow the Money | Kevin Drum | Mother Jones

Tim Noah wraps up his series on income inequality:

1. Race and gender are responsible for none of it, and single parenthood is responsible for virtually none of it.
2. Immigration is responsible for 5 percent.
3. The imagined uniqueness of computers as a transformative technology is responsible for none of it.
4. Tax policy is responsible for 5 percent.
5. The decline of labor is responsible for 20 percent.
6. Trade is responsible for 10 percent.
7. Wall Street and corporate boards' pampering of the Stinking Rich is responsible for 30 percent.
8. Various failures in our education system are responsible for 30 percent.

Drum responds:

Labor unions have historically agitated for greater access to education, more labor-friendly trade policy, and higher wages for the middle class (which in turn means less for Noah's Stinking Rich). So in a world in which labor unions were as powerful a force as they were in the 50s and 60s, it's hard to believe that items 6, 7, and 8 would have evolved the way they have over the past three decades. If even a third of that evolution can be traced to the decline of organized labor as a counterweight to business interests, it means that the fading influence of unions is responsible not for 20% of the growth of inequality, but closer to half of it.

Ezra Klein - Two graphs that should really scare us

The bad news on job loss is that there's no good news:

So a 25-year-old worker whose firm went under in 2008 will still be earning less than the guy in the office park across from him whose firm barely rode out the recession. We tend to think of employment as being binary: You have a job, or you don't. But it's more complicated than that. Losing a job has lingering effects, and not just on income. It also raises your risk of death going forward

Here's What's the Matter With Kansas | Mother Jones

Questions:

Why has income inequality grown so explosively over the past 30 years? Why do so many working and middle class voters cast their ballots for a party that's so obviously a captive of corporations and the rich? Why is there no longer any real sustained effort to improve the lot of the middle class?

and answers.

The fortunes of what we used to call "the middle class" rose and fell with trade unions and the fact that World War II provided a wide open manufacturing market for American goods. Once the rest of the world started to catch up, and more to the point, when we started to import more than we exported, the game was up.

I'd also say that most middle class people today are actually struggling elites - over-educated, white collar, strugglers. The working classes that once swelled the ranks of the middle, are fading back into the lower end, buoyed only by Wal-Mart discounting.

IT’S A DEPRESSION | The Big Picture

Yes, it is:

Finally, you know it’s a depression when, 33 months after the onset of recession…

• Wages & Salaries are still down 3.7% from the prior peak
• Corporate profits are still down 20% from the peak
• Real GDP is still down 1.3% from the peak
• Industrial production is still down 7.2% from the peak
• Employment is still down 5.5% from the peak
• Retail sales are still down 4.5% from the peak
• Manufacturing orders are still down 22.1% from the peak
• Manufacturing shipments are still down 12.5% from the peak
• Exports are still down 9.2% from the peak
• Housing starts are still down 63.5% from the peak
• New home sales are still down 68.9% from the peak
• Existing home sales are still down 41.2% from the peak
• Non-residential construction is still down 35.7% from the peak

Folks, in a normal recession-recovery cycle, practically all these indicators are making new highs at this juncture of the business cycle.

Busted: Stories of the Financial Crisis | The Nation

The problem with the economy, is that no one is willing to come to terms with the failures of Capitalism:

This raises our last question; fittingly, it is the same as the first, the part Lanchester never quite answers. We know why everyone owes everyone: because there was fresh dough to be made in extending credit, until there wasn't. What we don't know is, Why can't anyone pay? Why didn't property values ascend forever? Why didn't the market just keep expanding? This is not a question answered by Johnson and Kwak either. It is, let's say, above their pay grade (or perhaps far below). To tell the story, one would need an account of where value actually comes from. This is not impossibly complex; unlike the niceties of derivatives, it's not rocket science. If value is generated by people laboring to produce stuff that gets sold, and profit comes from exploiting the productive value of labor—this is a simplification, of course, but not a mistake—sooner or later people will have to labor productively to make good on any extended credit. By people I mean people.

But this becomes decreasingly likely, until it is impossible. Promises to do all that work later will reach limits, particularly as companies cut labor costs, replace workers with machines and outsource work to overseas markets. New value, arising only from the discrepancy between wages and productivity, appears elsewhere when it appears at all (witness the growth of India and China). Or it appears to glimmer in the future: credit is the name for spending it now. But even the future has a limited number of hours, technically. Meanwhile, over in the finance sector, where the money seemed so recently to reside, there is only a genteel, bloody struggle over how existing value is divided; no new value is created. The gap between value that can be realized and "fictitious capital"—claims on future value, all those derivatives purling through the purportedly new economy—has become a chasm. No one can vault over it any longer.

But the economy made its tiger's leap out of the stale factory and into the open air of finance for a reason; we can't just return to the fading industrial base with an oops shrug. We have no new line of widgets to labor over and sell. This is why ours is a real crisis, not just a panic. This is why we have seen exactly what the analysis grimly promised: shortages cheek by jowl with surpluses, unemployed workers stacked up next to unused factories. We deferred this reckoning once, twice, three times, depending on your measure. Certainly the most recent credit bubble was pure deferral, pure delusion: Wile E. Coyote out over the gap, legs spinning. He hovered there for a while, and lots of people pretended the laws of physics had been revised, even as he started to plummet. Boom. By boom I mean bust.

Versions of this plaint have been made frequently enough by "mainstream" economists, seemingly unaware they're borrowing the lineaments of an account they've spent careers disavowing as a mystery cult. Well, there are no atheists in foxholes. Or, as a friend says, Marxism is like gold; in an economic crisis, everybody runs to those who have it. Not surprisingly, economists cannot borrow, even at low levels of interest, the insights most needed: the basic understanding that capitalism's flaws are internal to its own logic and can't be whisked away by another round of financial regulation or everybody promising to be less of a creep. It is indeed a compulsion, and it ends poorly.

Ezra Klein - The scariest jobs graph you've seen yet

Ezra's right. Even if the economy revs up and generates the highly unlikely number of 500,000 jobs a month, it will take 3 years to get back to where we were before the recession began. As it stands, things are likely to malinger as they are today for the next two decades.

The End of Men - Magazine - The Atlantic

This is pretty interesting, but I'm not sure if it is really an accurate picture of reality. The idea that anyone is succeeding in this economy feels pretty misleading.

After the New Economy — Crooked Timber

Apparently being a creative type, or a knowledge worker has been a sham all along.

The conventional wisdom of the late 1990s was that the New Economy was an unprecedented miracle about to transform us forever. The conventional wisdom after the party ended and the recession and scandals began was that it had all been “a mix of collective folly and outright criminality.”

Dr. Jekyll and Mr. Tea Party | Mother Jones

Tea Partiers are pro-corporate and opposed to anything that helps ordinary people:

Here's the thing: as near as I can tell, tea partiers are not, in fact, especially put out by bailouts to the wealthy. Santelli's founding rant, as Continetti points out, was aimed at homeowners being bailed out of mortgages they couldn't afford. And as Continetti himself admits just a few sentences later, tea partiers don't have much to say about Wall Street banks. That's pretty odd for a movement supposedly opposed to big bailouts. The reality is quite different: if the tea partiers are really upset that Congress hasn't yet reined in the financial sector, they sure have a funny way of showing it. All the evidence I've seen suggests just the opposite: most tea partiers think not that Obama's financial reform proposals are too modest, but that they verge on socialism. They think he wants to take over the banks the same way he took over the car companies.

Long Road to Adulthood Is Growing Even Longer - NYTimes.com

Confusing moneymaking with maturity:

People between 20 and 34 are taking longer to finish their educations, establish themselves in careers, marry, have children and become financially independent, said Frank F. Furstenberg, who leads the MacArthur Foundation Research Network on Transitions to Adulthood, a team of scholars who have been studying this transformation.

“A new period of life is emerging in which young people are no longer adolescents but not yet adults,” Mr. Furstenberg said.

Which is a stupid way of saying that it takes much longer to gain an economic foothold in a downwardly-mobile economy. In lieu of any other social structures, those who have the support of family are the lucky ones.

Microeconomic and Macroeconomic Excess Supply - Grasping Reality with Both Hands

A Macroeconomic explanation for what we already knew. We are in a downward wage and price deflationary spiral. There is an excess supply of goods and labor and low demand from consumers (who are broke) and employers (who are trying to maintain profits). Economic equilibrium looks more like entropy to me.

[via Yglesias]

CSU now more affordable - The Denver Post

For incomes of $57,000 or less, tuition is half off.

n 1: On Your Marx

We are all Marxists now -- which is to say, we are all keen observers of the failure of capitalism and free markets in the age of peak oil, government bailouts, and corporate incompetence:

Marxists differ in the details of their accounts of the postwar economy, but the story, which ends for now in the cliffhanger of the first contraction of the world economy since 1945, goes something like this: The so-called Golden Age of postwar capitalism from 1950–70—a time of rising wages, profits, and investment—was the product of special and perishable circumstances. The wartime destruction of the Japanese and German productive base meant that, with the resumption of peace and renewed growth in demand for non-military goods, all the major industrial economies could for a time thrive without threat to one another. But the maturation of European and Japanese industry toward the end of the ’60s spelled the return of mutually destructive competition. Firms producing internationally tradable goods (cars, electronics, et cetera) could only survive by reducing prices, which in turn reduced profitability. And yet the capital sunk in manufacturing plants was enough to make capitalists reluctant to exit a given product line in spite of reduced profitability. Besides, governments don’t like to see big firms fail even when they can’t compete. (The Obama administration has lately proved almost as indulgent of GM as the state-directed Japanese banks have always been of Japanese industry.) And the more recent advent of China as a manufacturing power only exacerbated the situation, as the Chinese (to quote Brenner) “continued to expand capacity faster than it could be scrapped system-wide and to rain down torrents of redundant, increasingly high-tech goods upon the world market.”

The orthodox story blames declining profitability (and price inflation) during the ’70s on the excessive demands of labor—a plausible enough explanation until you consider that the worldwide defeat of labor since the ’80s has failed to restore prior levels of growth. The high wages of the early ’70s are long gone. What has endured and intensified since then is a systemic bias in favor of short-term financial speculation over longer-term productive investment.

Out-of-work job applicants told unemployed need not apply - Yahoo! Finance

People like to think that it couldn't happen to them, so if you're unemployed you must be a loser. Fact is most of the layoffs I've witnessed and experienced have been the result of corporate implosions and malfeasance. Employees end up paying the highest costs.