13 November 2013

And The Choir Sings, "Amen"

From the outset, this endeavor was built on the notion that economic collapse is always traceable to income and wealth concentration. The reasoning is straightforward: collapse of an economy can only happen when most of the folks have little of the GDP and a few folks have most of the GDP. And so it has happened. The mainstream pundits, on the whole, haven't been willing to call a spade, "you're a spade". But every now again, it happens.

Today is such a day. In the journalism biz, it is standard practice to run the lede (that's the term, and not my typo) in/as the first paragraph. Porter didn't do that, so I've put the nut here:
Professor Katz illustrates this with a nifty calculation. Between 1979 and 2012 the share of national income captured by the richest 1 percent of taxpayers increased from 10 percent to 22.5 percent. Had their share instead remained at 10 percent and the rest been distributed equitably among taxpayers in the bottom 99 percent, each would have $7,105 more to spend.

Can't get more obvious than that, now can we? The issue, as framed by Porter, is whether increased education is really the panacea to rebuilding the decimated middle class. In the piece, he presents evidence (from other researchers) that such hasn't been the case. And, one can reasonably infer, won't be in the near future. It's the distribution, stupid.
Both sides agree that the overall weakness of the job market since the turn of the millennium is a prime culprit. As Professor Katz noted: "The only moments we've had of broadly shared prosperity have been in tight labor markets."

In other words, without "countervailing power", to use a term from old style political economics, capitalists will always be able (sans a change in laws) to exploit the excessive breeding of the lower classes. Stop dipping your pen in that inkwell. I recall seeing Paul Theroux on C-SPAN/Booktv a few years ago flogging a book at some book festival. During the Q&A session he responded to some question with, "stop having so damn many kids!" Or thereabouts. Remember, what we now call the middle class had its birth following the plagues of Europe, which wiped out masses of peasants. Those that survived got more gelt. I mused about that before.

One of the researchers does get it, though:
Mr. Mishel's preferred explanation of inequality's rise is institutional: a shrinking minimum wage cut into the earnings of the nation's least-skilled workers while falling trade barriers, deregulation and the decline of labor unions eroded the income of the middle class. The rise of the top 1 percent, he believes, is mostly about executive pay and the growing footprint of finance.

Policy drives the economy, not data. Data always loses if it disagrees with policy comfortable to those who can control policy. Just like in the Dark Ages.

In another one of those coincidences of publication, we find Germany being called a spade, by some. As mentioned here a few times: Germany is intent on punishing the victims, mostly so, of The Great Recession. The EU/Euro can't work without a Federalist fiscal system. And that means the Northerners have to stop wringing the last kopeck out of the Southerners. The Germans, clearly, think they can keep going by killing their customers. They can't, but policy trumps data, of course.
The trade surplus has become a source of friction not only with euro zone partners but also with the United States. Washington has warned that Germany's export success, with no offsetting demand for imports, has depressed demand in the euro zone and increased the risk of deflation.

Too bad "Washington" hasn't figured out that the FIRE brigade here keeps its heel on the neck of the 99%, just as the Germans have the Greeks et al. Easier to give others advice than to do the right thing in one's own home.

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