23 June 2013

Another Brick in the Wall, Part 2

Last September, I mused that education wasn't the path to some kind of global growth and income equality. The occasion was an Apple circle jerk, wherein a handful of folks got rewarded for iPhone leveraging. Great way to spread the wealth, Steve.

Well, more equally depressing news from Brazil. If you've been keeping up, this is getting to be old news, but this write up bears inspection.
... sustained, meteoric growth in emerging economies may no longer be possible.

Doesn't work at Apple, so why should it work for nation-states? It's easy (relatively) to grow at high rates when you're teeny. Not so easy when you've consumed the entire globe.

Ooops. The fiction that both the Left and the Right have been peddling has been met with facts on the ground, and found to be fantasy (double, at least). Capital demands its returns, and has always preferred cost cutting (i.e., firing employees) to expanding employment and output. The earlier Apple piece doesn't change that. In the old days, even when I was in school, the rule of thumb was that cost was 80/20. The 80 went to labor and the rest to capital and management. This recent paper has a slightly lower labor share, both for the US and elsewhere, and a more steeply declining labor share in recent years in the US. Can you say, Depression?

Back to the article:
And shrinking and older populations, of course, limit future economic growth.

This is the Right Wingnut excuse: you poor folks aren't having enough babies. And is directly contradicted by the author's earlier arguments (which are true), that automation (capitalization) is increasing productivity. More babies without an increasing labor share just means an ever faster decline into permanent Depression. We don't need no stinkin' workers. Remember, it was the Black Plague killing off about half of Europe that impelled the existence of a middle class in the first place. We need another plague. Someplace else, of course.

The author then goes into a spin, contradicting himself in adjoining paragraphs.
There was something special about the 20th-century mix of widespread, well-paying manufacturing jobs, which enabled the rise of a middle class that would take significant control of government, through its roles as voters and taxpayers.

Yes, there was. And I've (and I expect some formal academics somewhere) labeled this the WWII social contract afterglow. By the time of Vietnam, the OPEC oil embargo, and Alzheimer Ronnie's ascension to the throne, the afterglow had faded and the Right Wingnuts began their final charge. It's worked.

So, then he writes:
Just as inequality in income and wealth has been rising in the United States, newly growing nations find themselves in a more stratified world, without developing their own strong egalitarian histories to undergird political institutions or economic expectations. Many of the wealthy may produce their public goods -- like secure streets and clean, beautiful parks -- in gated communities.

As if the USofA is a bastion of equality. Not. And he doesn't write alarm about restrictions to gated communities.

A word about the author and his affiliation. When I lived in DC, George Mason was an emerging Right Wing bunker, and has taken that tack ever since. This is particularly true of the econ department. It was the home of Vern Smith, who had been one of my graduate professors at UMass, and was then paid to mouthpiece resource stripping when he had some spare time. Cowen is a self-described libertarian. I doubt that Cowen sees the cognitive dissonance twixt his avowed world view and his essay.

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