An Uneven Recovery: Rich Getting Richer, Everyone Else Poorer

Evidence continues to build regarding the growth and persistence of inequality in America. The Pew Research Group, one of the nation’s most trusted sources on social and demographic trends, has published a sobering report that illustrates the disparity of the economic recovery: not only were poor and middle-class people disproportionately affected by the recession, but they’ve since been disproportionately disadvantaged in the recovery (indeed, even among the wealthiest Americans, the super-rich outpaced the “average rich”).

The Poorest Countries in America

The US Census Bureau has released some recent data on the rate of poverty in America, and to no one surprise, the results are quite grim: 

In total, more than 15% of the population lived in poverty in 2010, the highest percentage since 1993, according to the most recent data from the Census Bureau. To put that in perspective, that means more than 46 million people fell below the poverty line, defined as $22,314 for a family of four. If you factor in the income spent on expenses like medical costs, child care and mortgage payments, the number of Americans whose remaining income falls below the poverty line is closer to 50 million, or roughly 16% of the population.

As severe as this sounds, some regions in the U.S. are much worse off. In November, the census released a breakdown of the poverty rate in every county in the U.S. in 2010, which showed dozens of counties where more than a third of the population lives in poverty and a handful whose overall poverty rates were closer to 50%.

The majority of these countries are composed of minorities, namely African-Americans and Native Americans. Indeed, contrary to popular belief, the latter group is the most impoverished minority in the United States. Many Indian reservations have been described as having a rate of development equal to third world countries, including a lack of plumbing, sanitation infrastructure, or arable land. 

But given the psychological and geographic distance that Native Americans have from the rest of the country — and the pervasive myths about them being non-taxpayers rolling in casino money — this is hardly acknowledged, let alone addressed. If close to 20% of the population being impoverished doesn’t seem to garner much political or public agitation, what more will it take? 

What Makes Us Feel Good About Our Work

This great TED Talk by researcher Dan Ariely explores a topic that is no doubt dear to all our hearts: how can we better enjoy the work we do, whether its part of a paying job or free time? What motivates us to drudge on with activities that constitute a huge chunk of our time awake? It’s a pretty interesting video that challenges a lot of assumptions, although some might find the conclusion to be rather intuitive.

Let me know what you think in the comments section below.

 

 

Video: Wealth Inequality in America

The rise and intensity of socioeconomic inequality in the US seems to be getting more attention, and for good reason — as the following video shows, the problem is far worse and more consequential than most Americans realize.

For those concerned about the reliability of such claims, or looking for additional information, the sources are as follows:

• Mother Jones
• Dan Ariely
• ThinkProgress
• CNN Money

Of course, you’re also free to read my long list of posts on the subject. As you can tell, it’s a topic close to my heart (though honestly, even I didn’t realized how much I’d written about it over the past year).

As always, please share your thoughts and concerns. Even if I don’t get around to responding, rest assured that I do read every comment I receive.

Bitter Pill: Why Medical Bills Are Killing Us

Reblogged from Health & Family:

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Corrections Appended: February 26, 2013

1. Routine Care, Unforgettable Bills
When Sean Recchi, a 42-year-old from Lancaster, Ohio, was told last March that he had non-Hodgkin’s lymphoma, his wife Stephanie knew she had to get him to MD Anderson Cancer Center in Houston. Stephanie’s father had been treated there 10 years earlier, and she and her family credited the doctors and nurses at MD Anderson with extending his life by at least eight years.

Read more… 24,425 more words

I highly recommend that everyone read this TIME report on the US healthcare system. It's by far one of the most in-depth and impartial articles on the subject I've ever read. Among many other topics, it discusses the little-known "chargemaster" system that exists in most hospitals, which arbitrarily marks up prices by as much 150%; it reveals that the healthcare industry is altogether the single biggest lobbyist in Washington; and that our public discourse is wrongfully focusing more who should pay rather than why healthcare is so expensive (and ultimately inefficient) in the first place. This should be required reading for everyone, namely the folks in Congress -- assuming they even care.

The World’s Most Prosperous Countries

Measuring the prosperity of entire nations is no easy feat. The amount of data and research required is vast, and there are always concerns about methodology, subjectivity, and even conflicts of interest. Luckily, many different organizations – ranging from think-tanks and institutes, to publications and and nonprofits – have taken up the task, therefore providing us with a rough aggregate to work with.

So while the results will likely always be contentious, they’re likely to be as close to accurate as we’ll ever come (though methods are being improved upon each year). Below are some of the most up-to-date and popular indexes that purport to measure overall prosperity:

Forbes, a prominent business magazine, published a report on the world’s best countries to do business in. Nations were measured in 11 different factors obtained from 9 different sources. The countries are as follows:

1. New Zealand
2. Denmark
3. Hong Kong
4. Singapore
5. Canada
6. Ireland
7. Sweden
8. Norway
9. Finland
10. United Kingdom

The US places 12th, after Australia. This isn’t too bad, but it’s down from 10th place last year. Note how the majority of the countries at the top have such policies as high income taxation, subsidized education, and universal healthcare. The article details how some of them pull if off.

Meanwhile, the Legatum Institute, an international investment organization based in Dubai, has recently published its Prosperity Index for 2012, which is based on 89 different variables analysed across 141 nations around the world. Similar to the Forbes report, its source data includes Gallup World Poll, WTO, World Development Indicators, GDP, World Intellectual Property Organization, UN Human Development Report, World Bank, OECD, and World Values Survey. The 89 variables are grouped into 8 sub-indexes – such as education, health, and governance – which are averaged using equal weights. Their result was as follows:

1. Norway
2. Denmark
3. Sweden
4. Australia
5. New Zealand
6. Canada
7. Finland
8. The Netherlands
9. Switzerland
10. Ireland

As in the previous list, the US didn’t do too badly, also ranking 12th place. But arguably, for a country of such tremendous capital, innovation, and technology, we could do better.

Finally, the World Economic Forum has released its Global Competitiveness Report for 2012 to 2013 (in case anyone is wondering, the start of each new year is when all these indexes tend to get published). According to the WEF, the report “assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity.”

The study is quite extensive, being made up of over 110 variables, of which two thirds come from the Executive Opinion Survey, and one third comes from publicly available sources such as the United Nations. The variables are organized into twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness.

Because it seems to prefer dividing countries by quartiles, this list ranks the top 30 (courtesy of Wikipedia).

1.  Switzerland 5.72 (—)
2.  Singapore 5.67 (—)
3.  Finland 5.55 (+1)
4.  Sweden 5.53 (-1)
5.  Netherlands 5.50 (+2)
6.  Germany 5.48 (—)
7.  United States 5.47 (-2)
8.  United Kingdom 5.45 (+2)
9.  Hong Kong 5.41 (+2)
10.  Japan 5.40 (-1)
11.  Qatar 5.38 (+3)
12.  Denmark 5.29 (-4)
13.  Taiwan 5.28 (—)
14.  Canada 5.27 (-2)
15.  Norway 5.27 (+1)
16.  Austria 5.22 (+3)
17.  Belgium 5.21 (-2)
18.  Saudi Arabia 5.19 (+1)
19.  South Korea 5.12 (+5)
20.  Australia 5.12 (—)
21.  France 5.11 (-3)
22.  Luxembourg 5.09 (+1)
23.  New Zealand 5.09 (+2)
24.  United Arab Emirates 5.07 (+3)
25.  Malaysia 5.06 (−4)
26.  Israel 5.02 (-4)
27.  Ireland 4.91 (+2)
28.  Brunei 4.87 (—)
29.  China 4.83 (-3)
30.  Iceland 4.74 (—)

In this case, the US seems to fare much better than in the other reports, and even China – which is usually a slouch in such indexes – does relatively well.  Meanwhile, countries like New Zealand, Australia, and Norway – which had all topped the prior indexes – rank relatively low. Take that as you will.

Finally, there is much-cited Human Development Index, undertaken by the United Nations Development Programme. The HDI is composite statistic of life expectancy, education, and income indices that ranks countries into four tiers of human development. Unfortunately, the 2012 report isn’t available yet, but rather than wait on that, I’ll share 2011 for now. It also works through quartiles, so here are the top 47 out of nearly 200 countries (again, courtesy of Wikipedia):

Norway 0.943 ()  Australia 0.929 ()  Netherlands 0.910  United States 0.910  New Zealand 0.908  Canada 0.908 ()  Ireland 0.908 ()  Liechtenstein 0.905  Germany 0.905 ()  Sweden 0.904  Switzerland 0.903  Japan 0.901 ()  Hong Kong 0.898  Iceland 0.898  South Korea 0.897  Denmark 0.895

Israel 0.888 ()  Belgium 0.886 ()  Austria 0.885 ()  France 0.884 ()  Slovenia 0.884 ()  Finland 0.882 ()  Spain 0.878 ()  Italy 0.874 ()  Luxembourg 0.867 ()  Singapore 0.866 ()  Czech Republic 0.865 ()  United Kingdom 0.863 ()  Greece 0.861 ()  UAE 0.846  Cyprus 0.840 ()  Andorra 0.838 ()

Brunei 0.838 ()  Estonia 0.835 ()  Slovakia 0.834 ()  Malta 0.832 ()  Qatar 0.831 ()  Hungary 0.816 ()  Poland 0.813 ()  Lithuania 0.810 ( 1)  Portugal 0.809 ( 1)  Bahrain 0.806 ()  Latvia 0.805 ()  Chile 0.805 ()  Argentina 0.797 ( 1)  Croatia 0.796 ( 1)  Barbados 0.793

Now, take into account that the standard HDI doesn’t factor in inequality, and the fact that many people in a given country don’t have access to the resources present. Here’s what happens when HDI is adjusted for inequality. The loss in percentage points due to inequality are also noted.

Rank	Country	IHDI	HDI	Loss (%)	Rank change
1	Norway	0.890	0.943	5.6	0
2	Australia	0.856	0.929	7.9	0
3	Sweden	0.851	0.904	5.9	5
4	Netherlands	0.846	0.910	7.0	-1
5	Iceland	0.845	0.898	5.9	5
6	Ireland	0.843	0.908	7.2	0
7	Germany	0.842	0.905	6.9	0
8	Denmark	0.842	0.895	6.0	4
9	Switzerland	0.840	0.903	7.0	0
10	Slovenia	0.837	0.884	5.3	7
11	Finland	0.833	0.882	5.6	7
12	Canada	0.829	0.908	8.7	-7
13	Czech Republic	0.821	0.865	5.0	9
14	Austria	0.820	0.885	7.4	1
15	Belgium	0.819	0.886	7.6	-1
16	France	0.804	0.884	9.1	0
17	Spain	0.799	0.878	8.9	2
18	Luxembourg	0.799	0.867	7.8	3
19	United Kingdom	0.791	0.863	8.4	4
20	Slovakia	0.787	0.834	5.7	7
21	Israel	0.779	0.888	12.3	-8
22	Italy	0.779	0.874	10.9	-2
23	United States	0.771	0.910	15.3	-19
24	Estonia	0.769	0.835	7.9	2
25	Hungary	0.759	0.816	7.0	3
26	Greece	0.756	0.861	12.2	-2
27	Cyprus	0.755	0.840	10.1	-2
28	South Korea	0.749	0.897	16.5	-17
29	Poland	0.734	0.813	9.7	0
30	Lithuania	0.730	0.810	9.8	0
31	Portugal	0.726	0.809	10.2	0
32	Montenegro	0.718	0.771	6.9	7
33	Latvia	0.717	0.805	10.9	-1
34	Serbia	0.694	0.766	9.5	9
35	Belarus	0.693	0.756	8.3	10
36	Romania	0.683	0.781	12.6	1
37	Bulgaria	0.683	0.771	11.4	3
38	Croatia	0.675	0.796	15.1	-3
39	Russia	0.670	0.755	11.3	7
40	Ukraine	0.662	0.729	9.2	14
41	The Bahamas	0.658	0.771	14.7	-3
42	Kazakhstan	0.656	0.745	11.9	5
43	Uruguay	0.654	0.783	16.4	-7
44	Chile	0.652	0.805	19.0	-11
45	Bosnia and Herzegovina	0.649	0.733	11.6	7
46	Trinidad and Tobago	0.644	0.760	15.3	-2
47	Argentina	0.641	0.797	19.5	-13

Pretty interesting stuff, eh?

Looking at all these indexes – which are still just a handful of many – what patterns do you see with respect to the countries that typically rank the highest? What characteristics do they generally have in common?

Is Trust the Key to Sweden’s Success?

Sweden has long been hailed for its near-utopian balance between prosperity, progressive civil liberties, and economic competitiveness. Indeed, it’s one of the few countries in the world that manages to provide a generous, tax-funded welfare system while nonetheless promoting high economic growth and business freedom (a combination of policies that are seen as impossible to many Americans).

The Breakdown of the Basic Bargain

Companies claim that the reason they can’t hire people (or pay those they do hire better) is that demand for their goods and services is low. Economists have similarly noted that a lack of demand is a major reason our economy is so sluggish. Here’s the problem: it’s precisely because people are jobless and underpaid that demand is low – without disposable income, people obviously aren’t going to buy things.

Indeed, that’s part of what started this crisis in the first place: 30 years of stagnant wages and incomes meant that people had to take on debt in order to pay for even basic things. Corporations are making record profits and sitting on almost $2 trillion of capital and assets. If they invested in paying their workers better or hiring more people, they’d create the market they’d need for their goods and services. Workers are also consumers, something Henry Ford observed almost a century ago when he paid his employees 3 times the average wage, leading to greater sales and more profits for his company.

And it’s not that many companies are making profit in spite of the economic downturn, but because of it, generally speaking of course. Joblessness makes people desperate enough to accept worse pay and fewer benefits. Productivity continues to rise even though wages haven’t kept pace. The basic bargain between workers and bosses has eroded.

The fact that companies seem either ignorant or apathetic to this problem gives lie to the notion that “business experience” has anything to do with being able to fix the economy. Running a company and helping to manage an economy are two different things. The former is about making profit for one entity and its shareholders, the latter is about improving conditions for society as a whole.

Of course, the same companies that claim they can’t afford to pay workers better often have plenty of money – millions in fact – to enrich executives and shareholders with. Not only is this an ethic quandary  but it makes little practice sense. It’s economically more useful to pay thousands of people better than to concentrate that wealth in the hands of a relative few. The former will stimulate the economy far better than the latter.

Of course, all this something of a collective action problem, as companies can’t always be coordinated to act in the interests of the economy. Again, business corporations aren’t formed for the public good. That is precisely why it’s traditionally been left to the government to be the “lender/spender” of last resort, through public works programs, unemployment insurance, stimulus spending, and the like. The problem is that our government either didn’t do these things as robustly as they should have, or did so incompetently – unlike, relatively-speaking the governments of Canada, Australia, or Germany, whose economies are performing far better than both are own and the developed-world average.

All of this raises another important point: the reason demand is so important in our economy is because our society, and by extension our economic system, is too consumerist. We shouldn’t need to keep buying things in order to thrive, especially since the environment cannot sustain such habits indefinitely. It’s easier said than done, but we need to reconsider the social and ethical values that place so much importance on endless consumption as a driver of prosperity. It’s a viscous cycle that the planet can’t support.

An Inefficient and Wasteful System

Bloomberg News recently reported that under Obama, the after-tax profits of US corporations have grown by an immense 171%, more than under any president since World War II, and more than twice as high as their peak even during the Reagan administration. In fact, corporate profits are at their highest level relative to the size of the economy since the government began keeping records in 1947. Companies are sitting on about $1.7 trillion in assets.

All and all, that’s not bad for an anti-business socialist. I always felt the cries of indignation and self-victimization on the part of executives (and their lobbyists) were hollow, but this confirms my initial skepticism. I’m not quite sure what more they could ask for given the record-breaking profits that are being made – if making more money than ever isn’t enough, I doubt they’ll ever be satisfied.

Meanwhile, wages and salaries make up a 54% share of the economy, down from 59% in 2001, and the lowest since mid-1955. This stagnation remains despite the continuing rise of productivity, which traditionally (and intuitively) always coincides with growing wages.  And as I’ve noted at length before, inequality and financial stagnation continue to afflict the overwhelming majority of the population.

This growth in inequality is hardly limited to the United States, although it certainly remains the egregious example. Just last week, Bloomberg reported that the world’s ten richest people – many of whom are American nationals – made an eye-watering $241 billion last year, bringing their total net worth to an immense $1.7 trillion. Perhaps most shocking, the article reports that many of these already phenomenally wealthy individuals are seeking to make even more money in 2013 – apparently, having more money than you know what to do with just isn’t enough.

I can only imagine what the social and environmental costs will be of trying to push the gamut of profitability further and further. There just never seems to be enough money for these people – I’m subsequently convinced that greed is an addiction, one whose consequences are not socially, economically, or ecologically sustainable in the long term.

Keep in mind that while a staggering $241 billion was going into the hands of the world’s wealthiest people (who already had around $800 billion between them), the majority of the world’s population continued to live in horrific poverty. Millions continue to starve or die from preventable diseases. Unemployment and income stagnation continues to bedevil much of the developed world as well. Education, healthcare, housing, and public services across the world (especially in the US and Southern Europe) are experiencing funding cuts and degradation in quality. A litany of scientific achievements remain unfulfilled, including cures for diseases and innovations to alleviate the existential threat of climate change.

In other words, all that money can be much better spent allocated. There is so much more that it can do to benefit the human condition. Sure, some of it will doubtless be given to charity and the like. But typically, the proportion of income donated to charitable causes is small, to say nothing of the quality or importance of the cause to which the money goes. Most of these billions will sit in banks or be spent on superfluous luxuries. It’s literally more money than one individual or family knows what to do with.

We must ask ourselves – what kind of economic system rewards the richest people with more riches while so much poverty and misery remain. What kind of system concentrates an almost unmanageable amount of healthy into the hands of a mere sliver of the population? This isn’t about implementing a 90% tax on the richest 1%, 0.1%, or even 0.01%. This is about – at the very least – questioning a system that seems to be entrenching our species into increasingly unsustainable, wasteful, and damaging practices.

I’m not saying people can’t or shouldn’t be rich, or that they shouldn’t have the right to spend money on unnecessarily luxuries that they feel like having.  But there’s a difference between simply being wealthy, and piling on an ever-growing proportion of the world’s resources and capital through questionable practices. Few people could make that sort of money without some level of exploitation. Much of this wealth is at the expense of the planet and its denizens, and recent environmental and economic events make that clear.

There is something very wrong with this status quo and we can’t afford to ignore that.

An Interesting Interview With Noam Chomsky

Slate had a  long and informative interview with Noam Chomsky some time back, and I’ve been meaning to share it. He covers a lot ground, including the future of the labor movement, the problems with our current political and economic system, and the pernicious influence of the media. I can’t share everything here, but the following are some of the highlights that stood out for me (I strongly encourage you to read the rest).

LF: Worker co-ops are a growing movement. One question that I hear is  — will change come from changing ownership if you don’t change the profit paradigm?

NC: It’s a little like asking if shareholder voting is a good idea, or the Buffet rule is a good idea. Yes, it’s a good step, a small step. Worker ownership within a state capitalist, semi-market system is better than private ownership but it has inherent problems. Markets have well-known inherent inefficiencies. They’re very destructive.  The obvious one, in a market system, in a really functioning one, whoever’s making the decisions doesn’t pay attention to what are called externalities, effects on others. I sell you a car, if our eyes are open we’ll make a good deal for ourselves but we’re not asking how it’s going to affect her [over there.] It will, there’ll be more congestion, gas prices will go up, there will be environmental effects and that multiplies over the whole population. Well, that’s very serious.

Take a look at the financial crisis. Ever since the New Deal regulation was essentially dismantled, there have been regular financial crises and one of the fundamental reasons, it’s understood, is that the CEO of Goldman Sachs or CitiGroup does not pay attention to what’s called systemic risk. Maybe you make a risky transaction and you cover your own potential losses, but you don’t take into account the fact that if it crashes it may crash the entire system.  Which is what a financial crash is.

The much more serious example of this is environmental impacts. In the case of financial institutions when they crash, the taxpayer comes to the rescue, but if you destroy the environment no one is going to come to the rescue…

LF: So it sounds as if you might support something like the Cleveland model where the ownership of the company is actually held by members of the community as well as the workers…

NC: That’s a step forward but you also have to get beyond that to dismantle the system of production for profit rather than production for use. That means dismantling at least large parts of market systems. Take the most advanced case: Mondragon. It’s worker owned, it’s not worker managed, although the management does come from the workforce often, but it’s in a market system and they still exploit workers in South America, and they do things that are harmful to the society as a whole and they have no choice. If you’re in a system where you must make profit in order to survive. You are compelled to ignore negative externalities, effects on others.

Markets also have a very bad psychological effect. They drive people to a conception of themselves and society in which you’re only after your own good, not the good of others and that’s extremely harmful.

LF: But they sort of give us a clock. If change hasn’t happened in ten minutes, it’s not going to happen.

NC: Well that’s a technique of indoctrination. That’s something I learned from my own experience. There was once an interview with Jeff Greenfield in which he was asked why I was never asked onto Nightline.  He gave a good answer. He said the main reason was that I lacked concision. I had never heard that word before. You have to have concision. You have to say something brief between two commercials.

What can you say that’s brief between two commercials? I can say Iran is a terrible state. I don’t need any evidence. I can say Ghaddaffi carries out terror.  Suppose I try to say the US carries out terror, in fact it’s one of the leading terrorist states in the world. You can’t say that between commercials. People rightly want to know what do you mean. They’ve never heard that before. Then you have to explain. You have to give background. That’s exactly what’s cut out. Concision is a technique of propaganda. It ensures you cannot do anything except repeat clichés, the standard doctrine, or sound like a lunatic.

LF: What about media’s conception of power? Who has it, who doesn’t have it and what’s our role if we’re not say, president or CEO.

NC: Well, not just the media but pretty much true of academic world, the picture is we the leading democracy in the world, the beacon of freedom and rights and democracy. The fact that democratic participation here is extremely marginal, doesn’t enter [the media story.]  The media will condemn the elections in Iran, rightly, because the candidates have to be vetted by the clerics. But they won’t point out that in the United States [candidates] have to be vetted by high concentrations of private capital. You can’t run in an election unless you can collect millions of dollars.

One interesting case is right now. This happens to be the 50^th anniversary of the US invasion of South Vietnam – the worst atrocity in the post war period. Killed millions of people, destroyed four countries, total horror story. Not a word. It didn’t happen because “we” did it. So it didn’t happen.

Take 9-11. That means something in the United States. The “world changed” after 9-11. Well, do a slight thought experiment. Suppose that on 9-11 the planes had bombed the White House… suppose they’d killed the president, established a military dictatorship, quickly killed thousands, tortured tens of thousands more, set up a major international terror center that was carrying out assassinations, overthrowing governments all over the place, installing other dictatorships, and drove the country into one of the worst depressions in its history and had to call on the state to bail them out. Suppose that had happened? It did happen. On the first 9-11 in 1973.  Except we were responsible for it, so it didn’t happen. That’s Allende’s Chile. You can’t imagine the media talking about this.

And you can generalize it broadly. The same is pretty much true of scholarship – except for on the fringes – it’s certainly true of the mainstream of the academic world.  In some respects critique of the media is a bit misleading [because they’re not alone among institutions of influence] and of course, they closely interact.