As we all know the United Kingdom by just a slight margin voted to leave the European Union. Be sure to check out this post on the stunning politics that lead up to the referendum and political aftermath by Vox's Zack Beauchamp. The ensuing analysis on what is happening in Europe is finding parallels to the political climate in the United States and the fury of all the people who feel left behind in the economy. The Financial Times' Edward Luce noted: "Winston Churchill joked that Britain and America were divided by a common language. Today blue-collar whites on both sides of the Atlantic are speaking in the same idiom. They both yearn for the certainties of a lost age."
The Guardian's John Harris noted that in some ways this was a vote of haves versus have-nots:
What defines these furies is often clear enough: a terrible shortage of homes, an impossibly precarious job market, a too-often overlooked sense that men (and men are particularly relevant here) who would once have been certain in their identity as miners, or steelworkers, now feel demeaned and ignored. The attempts of mainstream politics to still the anger have probably only made it worse: oily tributes to “hardworking families”, or the fingers-down-a-blackboard trope of “social mobility”, with its suggestion that the only thing Westminster can offer working-class people is a specious chance of not being working class anymore.
Here is the Economist's take:
Today’s crisis in liberalism—in the free-market, British sense—was born in 1989, out of the ashes of the Soviet Union... It was liberalism’s greatest triumph, but it also engendered a narrow, technocratic politics obsessed by process. In the ensuing quarter-century the majority has prospered, but plenty of voters feel as if they have been left behind. Their anger is justified. Proponents of globalisation, including this newspaper, must acknowledge that technocrats have made mistakes and ordinary people paid the price.
Given that a central theme in the debate was trade and immigration, TIME's Joe Klein offered these thoughts:
Progress isn’t always progressive. The need to retrench is sometimes the most logical next step. It is entirely possible that our trade deals could have been a bit more protective, and probable that immigration could have been handled in a more orderly way. Certainly, the latter is true in Europe. Free trade and the free movement of people are staples of the liberal capitalism that, over the past few centuries, has brought the greatest alleviation of poverty in human history. But they need to be regulated and modulated, and the regulators–the “experts,” the “establishments” and the “politicians”–are the people charged with making democracy hum. They are imperfect stewards, of course, and witlessly reviled now.
Elites across Europe and North America will need to move beyond evidence and demonstrate real empathy with the problems of their constituents if they are to remain in power. They will have to find a way to validate the concerns of their constituents on issues such as immigration and economic insecurity without gutting their own principles.
It is well understood that this year like the election of 1992 will largely be driven by kitchen-table economics. In the American Prospect, Harold Meyerson argues the politics of downward mobility are having a significant impact on both parties and this may be the first "post-middle class" election.
What explains this collective failure to understand that the 2008 crash and its aftermath might have an effect similar to that of the 1929 crash and its aftermath, both in the United States and Europe? To be sure, neither the economics nor politics of the 1930s have re-emerged full-blown today: In 2009, unlike 1929, governments did just enough to keep the world economy from toppling into the abyss. But the disruptions and dashed expectations that followed the collapse were deep enough to push both the Democratic and Republican Parties into uncharted waters. As in the 1930s, a new generation of Democrats moved their party leftward, challenging many of the practices and some of the tenets of capitalism. For their part, Republicans who had faithfully served the interests of big business while stoking the ire of their white working-class constituents against minorities and immigrants discovered that those downwardly mobile working-class whites had had it with the catering to big business.
Over at NPR, novelist Mat Johnson discusses what it's like being part of the "vanishing middle class" after growing up in poverty:
[I]t's becoming increasingly obvious to even casual observers that there is no real right-angle-triangle graph between our economic classes, with a slow and steady gradient to the top. We are separated by cliffs that are incredibly easy to fall off, but which have few handholds to climb. The "vanishing middle class" sounds cold, moderate, gradual. But it's not. For far too many, this economic reality is hot, violent and now.
A new report from the Stephen Rose at the Urban Institute suggests that, while there has been some downward mobility in the lower classes, part of the reason for the shrinking middle class has to do with upward mobility, check out this chart:
In the Washington Post, Robert Samuelson argues we will need to rethink how we discuss inequality:
People are getting ahead but don’t feel they’re getting ahead. The explanation is simple enough. The significant gains Rose cited occurred over a 35-year period. Though they are sizable now, the increases in any one year may have been so small that people don’t register a “positive change in standard of living,” as Komlos puts it.
Confusing matters further is the distinction between absolute and relative income. Absolute income refers to households’ spending money; relative income compares household income with some benchmark — say, median household income. Rose focused on absolute income.
Speaking of purchasing power, San Francisco's inequality woes are a reminder of how little Rose's benchmark of $100,000 in income will get you in some markets, writes Frederick Kao in Quartz:
With the average house in San Francisco costing over $1.25 million and median condo prices over $1.11 million, the minimum qualifying income to purchase a house has increased to $254,000, as estimated by the California Association of Realtors. Considering that the median household income in the city currently stands around $80,000, it is not an exaggeration to say that the dream of home ownership is now beyond the grasp of the vast majority of today’s renters.
For generations, the stability and prosperity of the American middle class has been anchored by home ownership...
According to a 2010 study conducted by the University of Warwick, a society’s level of happiness is tied less to measures of quantitative wealth and more to ties of qualitative wealth. This means that how a person judges their wellbeing in comparison to their neighbors has more of an impact on their happiness than their objective standard of living. At the same time, when a system no longer provides opportunities for the majority to partake in wealth building, it not only robs those who are excluded of opportunities, but also of their dignity.
There is also this story of one black, middle-class family's debate on whether or not to have their child attend a segregated school in New York City:
As a reporter, I’d witnessed how the presence of even a handful of middle-class families made it less likely that a school would be neglected. I also knew that we would be able to make up for Najya anything the school was lacking.
As I told Faraji my plan, he slowly shook his head no. He wanted to look into parochial schools, or one of the “good” public schools, or even private schools. So we argued...At the heart of Faraji’s concern was a fear that grips black families like ours. We each came from working-class roots, fought our way into the middle class and had no family wealth or safety net to fall back on. Faraji believed that our gains were too tenuous to risk putting our child in anything but a top-notch school. And he was right to be worried. In 2014, the Brookings Institution found that black children are particularly vulnerable to downward mobility — nearly seven of 10 black children born into middle-income families don’t maintain that income level as adults. There was no margin for error, and we had to use our relative status to fight to give Najya every advantage.
Check out this Wharton knowledge video with the Calvert Foundation's Margo Kane:
Speaking of Silicon Valley, this incubator has chosen Oakland as the site of an experiment on universal basic income:
The idea is pretty simple. Give some people a small amount of money per month, no strings attached, for a year, and see what happens. With any luck, people will use it to lift themselves out of poverty. In this case, as Matt Krisiloff of Y Combinator Research (YCR) told Ars, that means spending about $1.5 million over the course of a year to study the distribution of "$1,500 or $2,000" per month to "30 to 50" people. There will also be a similar-sized control group that gets nothing. The project is set to start before the end of 2016...
Apparently the quiet hand of private equity continues to creep up Main Street as reported by this pair of New York Times articles. Danielle Ivory, Ben Protess and Kitty Bennett report on the emergency services takeover:
The business of driving ambulances and operating fire brigades represents just one facet of a profound shift on Wall Street and Main Street alike, a New York Times investigation has found. Since the 2008 financial crisis, private equity firms, the “corporate raiders” of an earlier era, have increasingly taken over a wide array of civic and financial services that are central to American life...Today, people interact with private equity when they dial 911, pay their mortgage, play a round of golf or turn on the kitchen tap for a glass of water.
Private equity put a unique stamp on these businesses. Unlike other for-profit companies, which often have years of experience making a product or offering a service, private equity is primarily skilled in making money. And in many of these businesses, The Times found, private equity firms applied a sophisticated moneymaking playbook: a mix of cost cuts, price increases, lobbying and litigation.
In emergency care and firefighting, this approach creates a fundamental tension: the push to turn a profit while caring for people in their most vulnerable moments.
Here Matthew Goldstein, Rachel Abrams and Ben Protess look at private equity's practices in the housing market:
Private equity plowed into the housing market after big banks and regional lenders, facing a crackdown from federal regulators for wrongful foreclosure practices, pulled back in the aftermath of the crisis. The shift led private equity firms to spend tens of billions of dollars acquiring homes and troubled mortgages from banks and the government...
But much of this investment has not benefited poor neighborhoods. Banks are expected, under the Community Reinvestment Act, to help meet the credit needs of low-income neighborhoods in areas they serve. Private equity has no such obligation.
You might be interested in this Center for American Progress report on why the economy needs better anti-trust regulations:
When firms with dominant market power are able to elevate the prices they charge and earn supra-normal returns—which are economic rents—they simultaneously lower the real incomes of those who buy from them. In other words: The seller benefits when market power elevates the price of hospital care or raises the price of an airline ticket, but the buyer has less income for other needs. Moreover, the tendency of monopolies to restrict output combined with reduced competitive pressure to invest can translate into reduced employment.
And finally in new twist in American political life, the candidates of both major parties are under scrutiny for their philanthropy. Over at Inside Philanthropy, David Callahan looks at the Clinton Foundation:
As far as I can see, most people—including in nonprofits, politics and the media—know little about how the Clinton Foundation operates. That’s understandable, since the foundation ranks as one of the more complex nonprofits around. Yet grasping the mechanics of this place is a precondition for unraveling the controversies around it, relating to its effectiveness and possible conflicts of interest. I’ll get into those controversies in later posts. Here, I focus on the foundation’s mechanics...
The Clinton Foundation runs a bunch of [..] programs. I could keep going through them, but you can check out the full list yourself. What you’ll find, by and large, are more activities of the sort that any other nonprofit might be undertaking. And, like other nonprofits, the Clinton Foundation is chasing after grant money from the real foundations that have it, like Gates and Rockefeller, as well as foreign governments, most of which also donate to other major nonprofits.
Meanwhile over at the Huffington Post, Shane Ferro says there are issues with the Trump Foundation:
We are in a time when big, flashy philanthropy is trendy. The threshold to crack the top 100 charitable foundations in America is $885 million in assets. Globally, 154 of the world’s wealthiest have signed on to Warren Buffett’s Giving Pledge, in which the person or couple pledges to give away a majority of their money.
The Trump Foundation has never had more than a few million dollars in it, and in recent years, barely $1 million. In 2014, the most recent year records are available, the charity gave out less than $600,000 in grants, and ended the year with $1.3 million in assets. That makes it a very, very small foundation for a self-proclaimed billionaire...
The Foundation Center, which tracks American grantmakers, has a page for background information on the Trump Foundation, but all that’s listed there is — surprise! — just a bio of Trump himself.