Another sign of the death of the middle class?

Corporate America is already pivoting to serve higher and lower class America on the assumption that middle America is squeezing out:

“As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

If there is any doubt, the speed at which companies are adapting to the new consumer landscape serves as very convincing evidence. Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts.”

(Via The Middle Class Is Steadily Eroding. Just Ask the Business World. – NYTimes.com.)

Strikes me as rearranging deck chairs on the way down. How about paying the people who work for you more and getting out of a quarterly mindset so as to reinflate the phenonoma that created a very prosperous half century or so?

Slippery slope of unrestrained profit engines

This blog post at Sociological Images just firmed up something in my mind that’s been bugging me:

“I sometimes would disagree with Tommy about the talents or behavior of some celebrity — a rock star or an actor.  Today’s equivalent might be Ke$ha or a Kardashian. Tommy’s response was usually, ‘He’s makin’ more money than you’ll ever see.’  And that settled the issue as far as Tommy was concerned.  A huge income trumped just about anything.”

….

I thought of Tommy and values today when I read the transcript of a CNBC interview with Alex Pereene. Pereene has recently gone on record criticizing Jamie Dimon, the CEO of JPMorgan. That bank currently faces an $11 billion fine for having dealt in shoddy mortgage-backed securities. JP Morgan can afford it, of course, but $11 billion begins to be real money. The question on CNBC was whether Dimon should continue as its CEO.

Pareene says no. The CNBC anchor, Maria Bartiromo then says.

Legal problems aside, JP Morgan remains one of the best, if not the best performing major bank in the world today. You believe the leader of that bank should step down?

Or as Tommy Fiedler would have put it, “His bank is makin’ more money than you’ll ever see.”

(Via Is Profit the Ultimate Value? On JP Morgan’s $11b Fine » Sociological Images.)

I’m happy to live in a capitalist society, but as I pointed out to someone the other day when they said ‘profit is the *only* motive’ and goal, I asked if they then supported slavery. Much sputtering later, my point was to say that if profit is all that matters, then they’re suggesting that America transform itself into something profoundly different than it has been for the last decades. I mean, if you get rid of minimum wage and squeeze it all the way down as far as you can, you have slavery or indentured servitude.

If you believe profit is the ‘only’ important thing to focus on, then you’re on a slippery slope.

Capitalism is an engine. A powerful one. I believe it’s the most powerful. Profoundly. But the question isn’t ‘which engine is more powerful’ but ‘what are you using that engine for?’

I believe it’s powerful enough to run a society that makes decisions about where the engine is taking them.

I had a strong jolt when reading about an academic who reported on the language used by capitalists from the 1800s who were slave owners:

The research: Caitlin Rosenthal pored over hundreds of account books from U.S. and West Indian plantations that operated from 1750 to 1860. She found that their owners employed advanced accounting and management tools, including depreciation and standardized efficiency metrics, to manage their land and their slaves. After comparing their practices with those described in the account books of northern factories, Rosenthal concluded that many plantations took a more scientific approach to management than the factories did.

The challenge: Did historians get the genesis of management wrong? Professor Rosenthal, defend your research.

Rosenthal: I was surprised by what we uncovered in these account books. The mythology is that on plantations, management was crude and just amounted to driving enslaved people harder and harder. These documents show that plantations used highly sophisticated accounting practices more consistently than many contemporary northern factories, which are often considered the birthplace of modern management. In some ways the conditions of slavery permitted a more scientific approach than the factories did.

Advanced Accounting
HBR: How so?

In the factory books, you see lots of turnover. But slaves couldn’t quit. While factories were worrying about filling positions and just keeping things going, plantation owners were focused on optimization. They could reallocate labor as they saw fit. I found real quantitative analysis in their records. They were literally looking at humans as capital.

This interview is going to make people queasy. I’m already cringing.

It should make you cringe. This is not an easy topic. People tend to think about the positive with regard to management and capitalism. With our modern lens, efficiency is good. Here it was equal to the brutal extraction of labor from oppressed people. But it’s important for businesspeople to read unvarnished history, not just the happy stories.

In other words, capitalism was taken to its logical endpoint once. It was morally problematic.

The question we need to interact with more is… where are we steering this engine, and what is driving?

I face a similar dilemma when I talk to people about alternative energy. “But it’s expensive,” they say, and therefore a country’s economic engine shouldn’t be choked by the drag.

I have two reactions that response.

1) It completely indicates a lack of trust in the power of capitalism’s engine. The engine can handle the load, I believe in capitalism and its ability to factor around. We abolished slavery, capitalism made a lot of money off it. Capitalism continues to do just fine. We abolished child labor. The engine is still turning. To moan about the ‘end of capitalism’ over these things is to devalue capitalism. (i.e.: capitalism will survive Obamacare just fine, as capitalism continues to be the engine for many nations with all manners of universal healthcare).

2) If profit is the only response to alternative energy, then why doesn’t the person then demand that all cars have catalytic converters yanked out, engines spew black fumes, and coal stacks no longer filters to the point where pollution fog makes it hard to breathe? I mean, that would be cheaper for the energy producers, right?

The truth is, we get to define what’s attached to that engine because the country is not just capitalist. It’s capitalist + representative democracy. C+RD. C is the engine, RD decides what’s attached to the C.

The argument against all this (the argument for unrestrained capitalism) is that a rising tide of wealth raises all boats. But as you can easily see from the GINI coefficient of the US, the rising tide is apparently not lifting all boats because that’s just an analogy and the reality is that although the US is making lots more money, it’s not trickling down, arriving at, or showing up in the pockets of anyone outside the tip top of the pyramid.

The *unrestrained* pursuit of profit is becoming such an ideology that someone one TV literally cannot conceive of someone being a bad leader because they harmed millions of lives, and helped almost crater our economy, merely because ‘they made a lot of money.’

That’s fucked up.

The tale of the death of an adjunct at Duquesne University

You know, as Christ would have wanted them to do…

“Meanwhile, in the past year, her teaching load had been reduced by the university to one class a semester, which meant she was making well below $10,000 a year. With huge out-of-pocket bills from UPMC Mercy for her cancer treatment, Margaret Mary was left in abject penury. She could no longer keep her electricity on in her home, which became uninhabitable during the winter. She therefore took to working at an Eat ‘n Park at night and then trying to catch some sleep during the day at her office at Duquesne. When this was discovered by the university, the police were called in to eject her from her office. Still, despite her cancer and her poverty, she never missed a day of class.

Finally, in the spring, she was let go by the university, which told her she was no longer effective as an instructor — despite many glowing evaluations from students. She came to me to seek legal help to try to save her job. She said that all she wanted was money to pay her medical bills because Duquesne, which never paid her much to begin with, gave her nothing on her way out the door.

Duquesne knew all about Margaret Mary’s plight, for I apprised them of it in two letters. I never received a reply, and Margaret Mary was forced to die saddened, penniless and on the verge of being turned over to Orphan’s Court.”

(Via Death of an adjunct – Pittsburgh Post-Gazette.)

As the corporatizing of everything continues, either we will have to figure out how to create safety nets that do not depend at all on where we work, worship, or live, or we will all die like Margaret Mary. The fact that she was a fellow of the same belief system, university, or educated class did nothing for her, I doubt any of them will save any of us either.

Stories like these make me hope ACA gets through in the next couple months.

[link via M J Locke]

Follow up thought. Corporations are always whining, particularly HR, about the fact that Millennials job hop, and have no loyalty to systems (corporations, parties, religions).

Gee whiz. I wonder why the fuck not?

Six Radical Life-Extension Technologies

For trans-humanists to consider:

“CLEAN WATER This is a basic innovation. However, the marketing upside is huge. There is massive, seemingly endless demand for this tech. While on the low end it is highly at risk of being commodified, there is much profit to be made from premium versions of the product for all market segments.”

This list isn’t complete, of course. It’s simply six things that came to Paul Graham Raven’s mind as he considered the transhumanist argument for the moral need to research medicine to help humans live longer.

(Via Six Radical Life-Extension Technologies for Transhumanist Consideration — Weird Future — Medium.)

On twitter I alluded to the fact that by implementing these, of course, the possibility of cognitive surplus being unleashed to create even more innovation is then guaranteed, leading to the more sexy sort of transhuman technologies the transhumanists get very excited about.

Nice article.

On Bullshit Jobs

I’m guessing Strike! magazine comes from a very certain perspective (labor, union oriented). Nonetheless, as an entrepreneur and artist, a lot of this rings a bell with me:

“This is a profound psychological violence here. How can one even begin to speak of dignity in labour when one secretly feels one’s job should not exist? How can it not create a sense of deep rage and resentment. Yet it is the peculiar genius of our society that its rulers have figured out a way, as in the case of the fish-fryers, to ensure that rage is directed precisely against those who actually do get to do meaningful work. For instance: in our society, there seems a general rule that, the more obviously one’s work benefits other people, the less one is likely to be paid for it.  Again, an objective measure is hard to find, but one easy way to get a sense is to ask: what would happen were this entire class of people to simply disappear? Say what you like about nurses, garbage collectors, or mechanics, it’s obvious that were they to vanish in a puff of smoke, the results would be immediate and catastrophic. A world without teachers or dock-workers would soon be in trouble, and even one without science fiction writers or ska musicians would clearly be a lesser place. It’s not entirely clear how humanity would suffer were all private equity CEOs, lobbyists, PR researchers, actuaries, telemarketers, bailiffs or legal consultants to similarly vanish. (Many suspect it might markedly improve.) Yet apart from a handful of well-touted exceptions (doctors), the rule holds surprisingly well.”

(Via On the Phenomenon of Bullshit Jobs | Strike! Magazine.)

I tend to come at this from the opposite perspective though. I often make the argument to my anti-red, flag-loving, 40-hr a week wage-bound friends that they live in a more Russian communist looking sort of environ than I do. To whit:

the number of salaried paper-pushers ultimately seems to expand, and more and more employees find themselves, not unlike Soviet workers actually, working 40 or even 50 hour weeks on paper, but effectively working 15 hours just as Keynes predicted, since the rest of their time is spent organising or attending motivational seminars, updating their facebook profiles or downloading TV box-sets.

These same people get corporate healthcare (the large behemoth hands it out) socialized by the size of the large company. Their profits are handled by the large company. Many of them expect retirement to be handled by the large company.

Of course, that whole system is vaporizing too, to be fair.

Which is why this article was an interesting swirl, and got me wondering how we transition to whatever seems to be coming down the pipeline…

Must read article: College for free? America can afford it

America already invests enough in college education that if the money were just given directly to the colleges as a per-student free education grant, everyone could go for free. It’s the complicated structure that makes it a mess (and banks parasite out in the middle). Some one actually ran the numbers, if you don’t think this is possible:

“Q. You write that free education is critical for democracy. Why?

A. As Thomas Jefferson argued, people in a democracy need to be able to understand the current issues in order to participate in an effective manner. If you don’t have a population that’s been well-educated, they’re not going to understand the difficult issues of the time and they’re not going to be able to participate fully.

Q. How much will all this cost? Where does that come from?

A. In 2008-09, there were 6.5 million full-time undergrads in public four-year universities and 4.3 million in community colleges. In 2009-10, the average cost of tuition, room and board at public four-year schools was $15,014; at two-year public colleges, it was $7,703. Do the math: The cost of making all public universities free would have been $97 billion in 2009-10, and $33 billion for all community colleges — total $130 billion.

That seems like a lot, but remember: In 2010, the federal government spent more than $30 billion on Pell grants and billions more to subsidize and service student loans. States spent $10 billion on financial aid and another $76 billion for direct support to universities. Include various state and federal tax breaks, and tax deductions for tuition, and it’s possible to make all public higher education free by just using resources more effectively.

It’s important to remember, too, that tuition rates are inflated because colleges charge more to subsidize financial aid for low-income students and to provide merit scholarships for high-scoring students. If we eliminated financial aid, and each college were given a set amount per student, we could significantly reduce the cost of making public higher education free in America. And the government would save billions in servicing and subsidizing student loans, as well as defaults.”

(Via College for free? America can afford it: Opinion | NJ.com.)

Interesting thoughts on meritocracy and lead

Matthew Yglesias on meritocracy and lead:

“Obviously the right response to lead and other atmospheric toxins is to clean them up. But the fact of the matter is that we’re not going to eliminate lead from the build environment next year, and we’re certainly not going to go back in time to the late 1960s and clean up the environment that today’s 45-year-olds grew up in. And though lead is very important, it’s also obviously not the only source of relative cognitive disadvantage out there (consider mercury or bad school lunches or just noise). The point, however, is that the unfairness that who your parents were and where they lived 30 or 40 years ago has a major impact on your income and opportunities today isn’t a contrast to the idea that the American economic system in some sense rewards merit—this happens precisely because the system rewards merit and possession of ‘merit’ is largely driven by factors that are themselves totally beyond a person’s individual control.”

(Via Meritocracy isn’t fair: Lead poisoned children are genuinely less able but still deserve great lives..)

Public Transit and density multipliers getting more study, with amazing economic benefits

Density and moving people around in density is the most critical innovation and economic enabler. The city is technology, and a force multiplier. So is transit:

“Every time a metro area added about 4 seats to rails and buses per 1,000 residents, the central city ended up with 320 more employees per square mile — an increase of 19 percent. Adding 85 rail miles delivered a 7 percent increase. A 10 percent expansion in transit service (by adding either rail and bus seats or rail miles) produced a wage increase between $53 and $194 per worker per year in the city center. The gross metropolitan product rose between 1 and 2 percent, too.

On average, across all the metro areas in the study, expanding transit service produced an economic benefit via agglomeration of roughly $45 million a year — with that figure ranging between $1.5 million and $1.8 billion based on the size of the city. Big cities stand to benefit more simply because they have more people sharing the transit infrastructure. They also tend to have more of the traffic that cripples agglomeration in the absence of transit.

‘As to how big it is,’ says Chatman of this hidden economic benefit, ‘it’s most likely to be large in places that have congested road conditions, transit networks that are at capacity — those kinds of places — and probably less in smaller cities without very much road congestion.’

Chatman stresses that because his method is so new, the results must be replicated before they’re accepted. He also knows that some people will question the causality of the data: How can the researchers know, for instance, that transit alone is responsible for agglomeration? In response, Chatman points to the controls he and Noland installed in their statistical models — and to the fact that he’s been critical of rail as an economic investment strategy in the past.

‘Put it this way: I’m a skeptic on this stuff, and I was surprised to see these results so robust,’ he says.”

(Via Public Transit Is Worth Way More to a City Than You Might Think – Eric Jaffe – The Atlantic Cities.)

The cult of shareholder value is killing us

Fuck ‘shareholder value.’

The most interesting, innovate companies right now don’t give a shit about their stock price. And here’s the evidence that middling, corporate drones are fucking everything else up with their quarterly obsessions:

“Over the last month, the Financial Times has been doing a great job in cataloguing the problems caused by the shareholder value theory. Now Robin Harding has terrific article pinpointing its role in undermining the US economic recovery.

In his article entitled ‘Corporate investment: A mysterious divergence’ he explores a conundrum that has puzzled the world’s top economists: why is net investment at a measly 4 per cent of output when pre-tax corporate profits are now at record highs – more than 12 per cent of GDP?

In standard economic theory, this makes no sense. When profits go up, companies should be seizing investment opportunities to lay the groundwork for even more profits in future. In turn, that investment should create jobs, generate more capital goods and lead to higher wages. That’s how capitalism is meant to work. So why isn’t it happening? Mr. Harding explores systematically why all the leading scapegoats for what’s gone wrong—regulations, Obamacare, tax policy, fear of another financial crisis and so on—and shows why they don’t add up.

Then he comes up with the kind of thing that you rarely see in economics—a study that enables us to pinpoint the problem by offering ‘with’ and ‘without’ data.

A brilliant study by economists from the Stern School of Business and Harvard Business School, Alexander Ljungqvist, Joan Farre-Mensa, and John Asker, entitled ‘Corporate Investment and Stock Market Listing: A Puzzle?’ compares the investment patterns of public companies and privately held firms. It turns out that the lag in investment is a phenomenon of the public companies more than the privately held firms.

‘They find that, keeping company size and industry constant, private US companies invest nearly twice as much as those listed on the stock market: 6.8 per cent of total assets versus just 3.7 per cent.’

As Matthew Yglesias at Slate writes:

‘On this account we are reaping the bitter fruits of the ‘shareholder value’ revolution. Executives at publicly traded companies are paid to generate higher share prices, which is done by hitting quarterly earnings targets. This leads to underinvestment relative to the behavior of managers of privately held firms. Not because managers of private firms are indifferent to the interests of shareholders, but because there’s less need for creating the shareholder value link via a simplistic relationship between compensation, share price, and quarterly earnings.’”

(Via How The ‘World’s Dumbest Idea’ Killed The US Economic Recovery – Forbes.)

Oh, look, Business Insider talks about this as well:

“One of the big reasons the U.S. economy is so lousy is that big American companies are hoarding cash and ‘maximizing profits’ instead of investing in their people and future projects.
This behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth — the vast American middle class — of purchasing power. (See charts below).

If average Americans don’t get paid living wages, they can’t spend much money buying products and services. And when average Americans can’t buy products and services, the companies that sell products and services to average Americans can’t grow. So the profit obsession of America’s big companies is, ironically, hurting their ability to accelerate revenue growth.”

(Via Companies Need To Pay People More – Business Insider.)

Raising the minimum wage

Truth-out leans left, but that doesn’t mean this section isn’t wrong:

“NOOR: Can you talk more about your response to the conservative position that raising minimum wage will actually hurt the economy? You argue that in fact it actually benefits the economy. Talk more about why you believe so.

BABONES: There’s a theory that make raising the minimum wage will result in fewer jobs. And that theory seems to make intuitive sense, that when wages are higher, you know, people hire fewer people. And in isolation that would be true. There’s an assumption economists like to make called ceteris paribus, which means all other things remaining equal, this would happen.

But all other things are never equal. For example, if you raise the minimum wage, people make more money. That’s the first thing that’s not equal. As people make more money, they spend more, they pay more in taxes. The entire character of the economy changes.

And so what we really need to do is instead of arguing from theory that if you raise minimum wage it would cause problems for employers, you should argue from fact, that is, look at countries where the minimum wage is higher, see how well they’re doing. And, in fact, those countries are doing quite well. Even in the United States, we recently raised the minimum wage from an extraordinarily low level of $5.15 an hour in 2007 up to–now it’s $7.25 an hour–not a high level, but still that’s an enormous increase in the minimum wage, you know, almost a 50 percent increase in just a few years. And what have we seen? Even though there’s been a big recession in the U.S., we’ve seen low-wage employment actually increase. So, you know, the idea that raising the minimum wage will hurt employment just has no basis in empirical fact.”

(Via Australia Has $16 Minimum Wage and Is the Only Rich Country to Dodge the Global Recession.)

If RJ Gordon’s ideas about growth being a historical accident minimum wage looks like a safeguard against the US becoming what it was in the 1700 and 1800s: a large, not so powerful country with a lot of inequity:

“This paper raises basic questions about the process of economic growth. It questions the assumption, nearly universal since Solow’s seminal contributions of the 1950s, that economic growth is a continuous process that will persist forever. There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely. Rather, the paper suggests that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history. The paper is only about the United States and views the future from 2007 while pretending that the financial crisis did not happen. Its point of departure is growth in per-capita real GDP in the frontier country since 1300, the U.K. until 1906 and the U.S. afterwards. Growth in this frontier gradually accelerated after 1750, reached a peak in the middle of the 20th century, and has been slowing down since. The paper is about ‘how much further could the frontier growth rate decline?’

The analysis links periods of slow and rapid growth to the timing of the three industrial revolutions (IR’s), that is, IR #1 (steam, railroads) from 1750 to 1830; IR #2 (electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum) from 1870 to 1900; and IR #3 (computers, the web, mobile phones) from 1960 to present. It provides evidence that IR #2 was more important than the others and was largely responsible for 80 years of relatively rapid productivity growth between 1890 and 1972. Once the spin-off inventions from IR #2 (airplanes, air conditioning, interstate highways) had run their course, productivity growth during 1972-96 was much slower than before. In contrast, IR #3 created only a short-lived growth revival between 1996 and 2004. Many of the original and spin-off inventions of IR #2 could happen only once – urbanization, transportation speed, the freedom of females from the drudgery of carrying tons of water per year, and the role of central heating and air conditioning in achieving a year-round constant temperature.”

(Via Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds.)

That being said, even if you’re not as pessimistic as Gordon, the success of minimum wage abroad argues that it is not scary. Overseas economies are largely faltering based on austerity, which the US is semi-avoiding. If the US is a powerful country with large resources, and capitalism is awesome, a minimum wage shouldn’t hurt the economy. If conservatives argue against a minimum wage, to me it seems an admission that they don’t really believe in capitalism, or they’d shrug it off, knowing capitalism can handle pulling lower earning wage folk along just fine because it is a strong engine. Like it does in Australia, et al. I tend to view minimum wage non-existence as a feature of developing world economies with an oversupply of manual labor (here, cut grass for pennies and some table scraps because you have no other options and be grateful for it, peasant).