Let's start with a cartoon from Tom Toles:
Over at Salon, Thom Hartman says if you want to see a thriving U.S. middle class, we will need to undo the tax cuts of the 1980s:
Despite what you might read in the Wall Street Journal or see on Fox News, capitalism is not an economic system that produces a middle class. In fact, if left to its own devices, capitalism tends towards vast levels of inequality and monopoly. The natural and most stable state of capitalism actually looks a lot like the Victorian England depicted in Charles Dickens’ novels.
At the top there is a very small class of superrich. Below them, there is a slightly larger, but still very small, “middle” class of professionals and mercantilists – doctor, lawyers, shop-owners – who help keep things running for the superrich and supply the working poor with their needs. And at the very bottom there is the great mass of people – typically over 90 percent of the population – who make up the working poor. They have no wealth – in fact they’re typically in debt most of their lives – and can barely survive on what little money they make...
The only ways a working-class “middle class” can come about in a capitalist society are by massive social upheaval – a middle class emerged after the Black Plague in Europe in the 14th century – or by heavily taxing the rich.
In TIME, the Aspen Institue's Maureen Conway looks at why education is not enough to reduce inequality:
[I]f we want the masses to get “good jobs” so they can support themselves through their work — and not just the lucky few who can get ahead of their peers through education — then we need to look much more carefully at the nature of work and the kind of opportunity a job offers. Businesses have choices about the ways they structure work just as surely as individuals have choices about pursuing education. Our society is unlikely to address the inequality we face by encouraging an arms race among people desperate to gain access to shrinking opportunities for decent work. We must address the dynamics that encourage companies to extract from, rather than invest in, their employees.
Bloomberg has a sweeping series of articles on the plight and promise of the middle class. In this one, the editors discuss what they say are the barriers to small business dynamism:
Americans are starting fewer businesses, even in Silicon Valley. Established companies aren't reinvesting profits, instead spending almost all their earnings on dividends and share buybacks. Unless your company looks like the next Uber, financing is also harder to find, whether from banks, venture capitalists or the markets...
A thriving economy is a turbulent economy, with lots of new businesses that start and fail -- or go on to be the next Apple or Google. Companies less than five years old and with fewer than 20 employees are especially important. They are the primary source of net new jobs, but they aren't the employment engine they once were.
And in this one, the editors look at what they argue is a middle class overburdened with debt:
[S]top subsidizing debt. Believe it or not, the government actually encourages excessive borrowing at taxpayer expense. The income-tax deduction for interest paid on mortgage debt, for example, costs an estimated $75 billion a year. The so-called too-big-to-fail subsidy -- the break on borrowing costs that the largest banks enjoy because creditors assume the government will bail them out -- costs tens of billions more. Reducing such handouts will be politically difficult, but must be done to improve incentives and make the financial system more resilient.
Second, consider changing the way loans are made. There's such a thing as predatory lending, and regulators should try harder to curb it. Rules requiring lenders to consider borrowers' ability to pay should be extended beyond mortgages -- to auto loans, for example.
You may also be in Bloomberg's snapshot forecasting the global middle class.
The next time you get a mani and or pedi, ladies and gents, take a moment to consider the conditions your salon worker faces. According to this New York Times series they aren't very good, particularly in New York City:
There are now more than 17,000 nail salons in the United States, according to census data. The number of salons in New York City alone has more than tripled over a decade and a half to nearly 2,000 in 2012.
But largely overlooked is the rampant exploitation of those who toil in the industry. The New York Times interviewed more than 150 nail salon workers and owners, in four languages, and found that a vast majority of workers are paid below minimum wage; sometimes they are not even paid. Workers endure all manner of humiliation, including having their tips docked as punishment for minor transgressions, constant video monitoring by owners, even physical abuse. Employers are rarely punished for labor and other violations.
The Center for American Progress' Karla Walter and Jackie Odum contend in a new report that "right-to-work" laws harm workers, unionized or not:
[D]eclining union membership harms union and nonunion workers alike. According to research from the Economic Policy Institute, wages in right-to-work states are 3.1 percent lower—or about $1,560 less per year—than those in states without right-to-work laws. The rate of employer-sponsored health insurance is 2.6 percentage points lower in right-to-work states, and the rate of employer-sponsored pensions is 4.8 percentage points lower. Additionally, workplace safety has become a growing concern for workers in right-to-work states. For instance, worker fatalities in construction are 34 percent higher in right-to-work states than in non-right-to-work states.
This week Nobel Laureate Joseph Stiglitz is back with a report published by the Roosevelt Institute on suggestions for changing the rules of the economy via government action to provide more reward for work and less for wealth and lessen the inequality gap:
A Washington Post article by Jim Tankersly suggests the report's suggestions will become pillars of the coming presidential campaign of Hillary Clinton. Over at TIME, Rana Foroohar wrote on a recent panel discussion on the report:
“Our economy is a system,” says Stiglitz, and combatting inequality is going to require a systemic approach across multiple areas–financial reform, corporate governance, CEO pay, tax policy, anti-trust law, monetary policy, education, healthcare, and labor law. It might also involve revamping institutions like the Fed; Stiglitz and Solow both agreed that the Fed needs to start tabulating unemployment in a new way, perhaps focusing not on a particular number target, but on when wages actually start to go up, which Stiglitz said is the best sign of when the country’s employment picture is actually improving.
Thinking in these more holistic terms would be a big shift for lawmakers used to tackling each of these issues alone in their respective silos. But as Stiglitz and the other economists on the panel pointed out, they are often interrelated–consider the way in which pension funds work with shareholder “activists” to goad corporations into over-borrowing to make large payouts to investors even as lowered wages and profits kept in offshore tax havens mean that long-term investments aren’t made into the real economy, slowing growth. Or how continuing to tie worker’s healthcare benefits to companies makes them virtual slaves, decreasing their ability to negotiate higher wages, not to mention start their own businesses.
Is Senator Elizabeth Warren scary? This Bloomberg report looks at Warren's quest to take on Citigroup and other big banks and why they might be quaking in their boots:
Not even the big banks. Executives at Citigroup, JPMorgan, Goldman Sachs, Bank of America, and other financial institutions declined to be interviewed for this story. Even the head of the Securities Industry and Financial Markets Association, or SIFMA, a lobbying group for the securities industry, wouldn’t discuss Warren publicly...In April, in a speech titled “The Unfinished Business of Financial Reform,” she laid out how she hopes to move her agenda forward. Among other things, she called for the breakup of the big banks; they are still too big to fail, she said, and bailing them out of the next crisis would cost billions. And she wants jail time for managers who violate the law. “It’s time to stop recidivism in financial crimes and to end the ‘slap on the wrist’ culture that exists at the Justice Department and the SEC,” Warren said.
Meanwhile, the National Review Online's Larry Ludlow says bashing banks is not a good plan:
[I]t's doubtful the political assault on banks will end. But I wonder, at some point, will someone in the U.S. -- a big-shot politician, a small-business person, a struggling middle-class mom or dad -- actually say something good about a bank? Maybe.
Banks do make business loans, which have picked up quite a bit. They do provide mortgages, though the terms are more difficult. They do offer credit cards, decent ATM machines, car loans, farm loans, and student loans. Even though the Fed has decimated interest rates, they do allow large savings accounts. And they do, after all, connect savings with investment. (I think that was their original purpose.)
Hurdles of Poverty
New research shows that for all the efforts to end food deserts, places in which there is no convenient access to decently stocked super markets, do not lead to major changes in the diets of the poor, reports the NYT's Margot Sanger Katz:
It’s possible that poverty itself explains a lot of the shopping variation. In general, fresher, healthier food is more expensive to buy than less healthy processed food. It also takes more time and resources to cook, and keeps for fewer days.
If people can’t afford healthier foods, then it would be reasonable to think that just giving them a better store wouldn’t solve their problems. But Ms. Handbury’s paper found that the education of the shoppers was much more predictive than their incomes. Poorer families bought less healthy food than richer ones. But a bigger gap was found between families with and without a college education.
Back in October, writer Sarah Smarsh in Aeon discusses why bad teeth are a large hurdle for the poor:
[I]t wasn’t sugar, heaps of which are sucked down daily by the middle and upper classes, that guided his and my grandma’s dental fates. And it wasn’t meth. It was lack of insurance, lack of knowledge, lack of good nutrition – poverties into which much of the country was born.
You know what else is a big barrier when you are poor? A lack of reliable transportation argues this New York Times report from Eduardo Porter:
In a large, continuing study of upward mobility based at Harvard, commuting time has emerged as the single strongest factor in the odds of escaping poverty. The longer an average commute in a given county, the worse the chances of low-income families there moving up the ladder.
The relationship between transportation and social mobility is stronger than that between mobility and several other factors, like crime, elementary-school test scores or the percentage of two-parent families in a community, said Nathaniel Hendren, a Harvard economist and one of the researchers on the study.
Get the Tech Outta My Face
Also in the New York Times, Anand Giridharadas discusses why talking about how philanthropists made their wealth is taboo:
There is an unwritten social rule now that you can harangue the wealthy to give money away, but you mustn’t ask how the money was made. There are no galas celebrating the money people knew better than to seek. Charity begins after profit.
So consider this utter faux pas of a thought experiment: Would a multinational corporation do more to advance its goal of corporate social responsibility by paying all of its workers at least $15 an hour or by doling out money from its foundation to, say, provide temporary housing to the families of hospitalized children or build playgrounds or promote physical activity?
In a sense, the debate comes down to this: Should corporations forgo some profit to help the world, or should they invest their profits in doing some good, in the process diverting attention from what’s behind their financial success?
You know what else is trendy? Bashing folks in Silicon Valley. In the New York Times, Nick Bilton looks are what he calls the shaky moral compass of the tech-denizens:
Homelessness is everywhere in the Valley. Consider the proximity of the Jungle, an encampment in San Jose, Calif., where 350 homeless people lived in tents and shacks. The Jungle sat like the backdrop for a dystopian sci-fi novel in the shadow of Apple, Google and other tech giants until it was shut down last year after pressure from neighbors and water-quality regulators. Or consider how a 24-hour bus route in Palo Alto becomes an impromptu homeless shelter at night...
Sure, every city has its homeless problems (Los Angeles’s Skid Row sits a few miles away from Beverly Hills), but Silicon Valley is supposed to be different, making the world a better … you get the point.
Meanwhile William Schambra has this piece in Nonprofit Quarterly arguing that high-tech mentality is eating up the sector:
In the pages of the Chronicle of Philanthropy and the Nonprofit Quarterly, Maria Mottola, Gail Nayowith, Jon Pratt, Paul Light, Cindy Gibson, and of course our own Ruth McCambridge and Rick Cohen raised powerful objections, not just against the obscenity of making nonprofits perform like dancing bears, but more important, against the problematic penetration of high-tech values into the nonprofit sector.
As they pointed out, the work of nonprofits is particular, engaged, immediate, patient, long-term, faithful and compassionately attentive to the infinite variety and complexity of the everyday human suffering it has been called to relieve. There has always been need for that kind of work, and there always will be, no matter how alluring the elimination of human frailty might be to some.
The proper work of the nonprofit sector cannot be pursued by the glittering gimmicks of the high-tech world. Human problems will not suddenly be solved by the clever flashes of out-of-the-box imagination so prized by technology. Three-minute elevator pitches cannot hope to capture the wisdom that the alleviation of human suffering demands.