28
Aug
14

crumbs don’t hack it

crumbs 3

I have learned a lot from my son. In the last year, he has had to take a sizeable pay cut just to stay employed in today’s economy. He will do better than most adjusting to these new circumstances, but the economy will be diminished as he now has less disposable income to invest and spend.

Now recognize that what has happened to him is a trend, multiply that by the hundreds of thousands in his cohort with similar experiences, and you will see we are in deep doo-doo. My neighbor says the one-percenters and their bought government are trying to turn the US into a third-world country.

I’m sure that if you were to ask the one-percenters directly, they would disagree with my neighbor’s assessment that this is their intent, but it is the effective result of their policies of intentional pay and asset inequality.

The time has come that the doctrine of “trickle down” must be recognized as discredited and a mere justification for personal greed. What crumbs fall from the tables of the winners-take-all cannot create the economic growth that we need. The time has come to recognize that the fortunes of the middle class and poor are linked, and are one in the same as never before in the memorable past. If the vastly more numerous middle class and poor do not have disposable income, they cannot invest the money or make the purchases that our economy needs to expand.

On August 13th in Forbes, writer Erik Sherman correctly asserted that, at a personal level, our addiction to the cheap goods we buy at places like Wal-Mart simply perpetuates the off-shoring of good-paying jobs to Asia and other places which keep the costs of the labor content of goods low. Cheap hamburgers from McDonald’s are made possible because restaurant workers in the US are paid less than they need to live.

“A tiny fraction of the population gets the most and then uses its power and influence to change laws and further favor itself,” says Sherman. “The notion that this somehow helps the economy or is ‘earned’ is ludicrous. There have been multiple studies showing either zero or negative correlation between the size of CEO compensation and the performance of public companies, which means that, often, the more the CEO makes, the worse the company does.”

It was a relief to see, in a recent TED talk, that this realization is finally beginning to be discussed among the big-money people. Nick Hanauer, a Seattle-based venture capitalist, says that growing inequality is about to push our societies into conditions resembling pre-revolutionary France. If something doesn’t change, soon and big, he sees pitchforks in our future (as in revolution). If you want to hear his argument about why a dramatic increase in minimum wage could grow the middle class, deliver economic prosperity, and prevent a revolt, click here.

Although I find Hanauer’s talk of “fellow plutocrats” rather distasteful, he does remind his economic class that a higher minimum wage (such as instituted in 1914 by Henry Ford and contrary to the conventional wisdom that higher wages will kill jobs) is one of the most important ways to encourage prosperity for all.

We are still the richest country in the world. There are enough assets in our economy to meet everyone’s need, but not everyone’s greed. The rich cannot physically buy and use enough goods and services to boost the economy. Nor can they or will they invest enough to make a difference.

To challenge trickle-down effectively, progressives must tell their own story about economic growth. In that story, it isn’t the rich that lead the way to growth and prosperity. Instead, it is a thriving and vibrant middle class that shows us the path. A strong middle class is a prerequisite for robust entrepreneurship and innovation, a source of trust that greases social interactions and reduces transaction costs, a bastion of civic engagement that produces better governance, and a promoter of education and other long-term investments.

By 2030, the global middle class is expected to more than double in size from 2 billion to 4.9 billion. That demographic change is going to have a huge impact around the world. For the poor who join the middle class, it’s going to mean a significant amount of disposable income for the first time in their lives. Today, half of the 2 billion people in the global middle class are from North America and Europe. By 2030, that share is expected to shrink to 22%. On the other hand, Asia is expected to have 64% of the planet’s middle class by 2030.

Are we, as a nation, prepared to let this growth pass us by? As long as we allow “trickle down” to stand in the face of all contrary evidence, it will be death by our own hand.

hungry kids 2

۞

Groove of the Day

Listen to U2 performing “Crumbs from Your Table”


5 Responses to “crumbs don’t hack it”


  1. 1 anonymouse
    August 28, 2014 at 12:45 pm

    You know what they say about statistics? According to Kiplinger and the IRS, that “Top 1 percent” of American taxpayers, a group of approximate 1.37 million, earned at least $388,905 AGI, or roughly 18.7% of the country’s total taxable income, and they paid 35% of all income taxes, which tends to blow a hole in the “fair share” argument. But by comparison, the bottom 50% of all taxpayers by AGI, a group of 68 million earning less than $34.8K/yr, earned only 11.5% of overall taxable income and payed only 2.89% of all income taxes.

    The greater concern might be wealth inequality rather than income inequality, since the “Top 1 percent” account for just under 20% of income, but are estimated to hold more than 30% of total wealth.

    • August 28, 2014 at 7:50 pm

      Who pays taxes is irrelevant to whether people have enough income to live on, or enough wealth to invest. As I recall, the “fair share” argument never figured in to the point I was making.

      • 3 anonymouse
        August 28, 2014 at 8:29 pm

        One of the problems with a consumer society is defining just what is “enough to live on”. And what has ever been enough wealth? Certainly my answer is not the same as the next guy’s, especially if we are talking to the likes of George Soros, Warren Buffett, Bill Gates, or Donald Trump. America is still a land of opportunity, but perhaps achieving that success is a bit more difficult these days.

      • August 28, 2014 at 8:59 pm

        I agree that “enough to live on” can be a subjective thing.

        My son Henry lives at a level of austerity that few could tolerate. He has paid off his student loans as few other young people do. He has two degrees from a top-50 college, and a 3.5+ GPA. He is a hard worker with many accomplishments, so when his former employer laid him off with no satisfactory explanation, it totally mystified me. It could only have been that they determined they were paying him too much, and that they could hire a less-qualified replacement for less money.

        He is in Florida, a low-paying labor market, so I put his experience together with that of young people in trouble with the law, and have come to the conclusion that Florida doesn’t care about young people even if they’re high-potential straight-shooters. I am encouraging him to find an environment which places a higher value on smarts and talent, and with a less extractive and exploitative employment ethic, and luckily he is beginning to believe me.

        Florida epitomizes the “living wage = fewer jobs” mindset, which I believe is bad for the economy. We will indeed become a third-world economy if we follow Florida’s lead.

    • 5 anonymouse
      August 29, 2014 at 7:23 am

      Why do people gather wealth? If it is a safety net for themselves and their families, we all understand the need for wealth. If it is something more altruistic, such as being able to support their charitible causes, we all admire wealth. But when it becomes merely ostentatiousness or selfishness, then those who “have not” may rightly question what is enough wealth.

      Recently, some retired friends of mine visited an African school and community that they had been supporting via their church. They were so taken by what their previous contributions had been able to achieve, that they went home and donated half of their acquired wealth to ensure the future of the effort. A noble gesture to a noteworthy cause, and one of their own choosing. In extremely poor countries, there isn’t really a discussion between need and want, enough versus too much wealth; there is only day-to-day survival and nothing else matters.

      My friends saw true need and responded according to their hearts, but their life experiences are different than mine, and naturally, so are their priorities. Although they are very curious about my work with our young friends, and they certainly seem to enjoy discussing and encouraging my efforts, they don’t see or feel the need to take action on this issue as I do, here in our own backyard. I guess that in our own way, each is trying to do the right thing, but our life experiences color how we see the world. I see the struggle of a few young men trying to get beyond the conseqeunces of their impulsive actions and find a future for themselves, while my friends see the starving masses in a far off land.


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