“Over time, wealth inequality became more pernicious to society than income inequality. The problem is not just that a chief executive at a big company makes 33 times what a surgeon makes, and a surgeon makes nine times what an elementary-school teacher makes, and an elementary-school teacher makes twice what a person working the checkout at a dollar store makes—though that is a problem. It is that the chief executive also owns all of the apartments the cashiers live in, and their suppressed wages and hefty student-loan payments mean they can barely afford to make rent. ‘The key element shaping inequality is no longer the employment relationship, but rather whether one is able to buy assets that appreciate at a faster rate than both inflation and wages,’ Adkins, Cooper, and Konings argue in their excellent treatise, The Asset Economy. ‘The millennial generation is the first to experience this reality in its full force.’”Annie Lowery, “The End of the Asset Economy,” The Atlantic.
From my current read, “Enemy of All Mankind: A True Story of Piracy, Power, and History’s First Global Manhunt” by Steven Johnson.
I don’t want to imagine. I don’t do well on open water, I’m tallish, and I crave solitude. My absolute worst nightmare.
From Farhad Manjoo’s, “Even in a Pandemic, the Billionaires Are Winning”. The title should begin, “Especially in a Pandemic”.
Manjoo turns to Chuck Collins, a scholar of inequality at the Institute for Policy Studies, to tell the sordid story.
“In previous recessions. . . billionaires were hit along with the rest of us; it took almost three years for Forbes’s 400 richest people to recover losses incurred in 2008’s Great Recession.
But in the coronavirus recession of 2020, most billionaires have not lost their shirts. Instead, they’ve put on bejeweled overcoats and gloves made of spun gold — that is, they’ve gotten richer than ever before.
On Tuesday, as the stock market soared to a record, Collins was watching the billionaires cross a depressing threshold: $1 trillion.
That is the amount of new wealth American billionaires have amassed since March, at the start of the devastating lockdowns that state and local governments imposed to curb the pandemic.
On March 18, according to a report Collins and his colleagues published last week, America’s 614 billionaires were worth a combined $2.95 trillion. When the markets closed on Tuesday, there were 650 billionaires and their combined wealth was now close to $4 trillion. In the worst economic crisis since the 1930s, American billionaires’ wealth grew by a third.”
Meanwhile, as the rise in homelessness and strained food banks illustrate, ordinary people are losing.
2. Minneapolis just banned drive throughs. Last sentence is perplexing.
4A. Trump’s America. The shining city on a hill is an ugly pile of ruble.
“. . . the revised rules appear very likely to clear the way for new mining, oil and gas drilling, and development in areas where protected species live.”
“Why are the wealthy so much wealthier than everyone else? One reason is that the rich tend to store their wealth in businesses and stocks, and those in the middle class store theirs in housing. The top 10 percent of the wealthiest households own nearly 90 percent of the stocks in America, while those in the bottom 90 percent own a little more than half of all the real estate in America.
So you can think of wealth inequality as a race between the stock market and the housing market. . . . In periods when home prices are rising, wealth inequality tends to shrink as the wealth in the middle class grows. But during periods when the stock market outperforms real estate, wealth inequality tends to increase.
Another reason is that income inequality feeds wealth inequality. . . . Even if the rich and the poor had the same proportion of stocks and bonds, and saved at the same rate, the rich would simply put away more money.”
7. The long wait for season three of Netflix’s The Crown is almost over. The Crown’s production quality boggles the mind. Like watching one movie after another. So good, it’s turned this anti-monarchist into a huge fan. And we’re getting Olivia Colman to boot. Forget football this Thanksgiving.
From Tyler Cowen, “The Marriages of Power Couples Reinforce Income Inequality“:
Universal preschool, further experiments with charter schools, and higher subsidies or tax credits for children are among the policy innovations that might lift opportunities for children of lower earners. Even if those are good ideas, it is not clear how much they can overturn the advantage that comes from being a child of highly educated, highly motivated parents with lots of will and also money to spend on lessons, outings, travel and other investments in the future of their children.
The technical term is “assortative mating”. Read the New York Times marriage announcements for examples. In hindsight, I probably should have “married up”. My wife’s beauty blinded me to the fact that she rarely balanced her checkbook; planned to be a public school teacher; and owed more on her old, beat up Honda than it was worth. It’s a limit of the discipline that few economic models factor in “hotness”.
I suspect Cowen’s extrapolating from the present data too much. Sure assortative mating will continue contributing some to income inequality, but as I’ve written before here, academic achievement among female college students so dwarfs that of males that many female college grads will have no choice but to settle for partners with much more modest economic prospects.
I predicted this story about Ethiopia becoming the next China nearly twenty years ago after living there, traveling in other sub-Saharan African countries, and becoming a student of globalization.*
Long story short, the outsourced manufacturing race to the bottom has entered it’s final stage. China’s average manufacturing wage is 3,469 yuan ($560) per month. Pay at Ethiopia’s Huajian shoe factory (18 miles outside of Addis Ababa) ranges from the basic after-tax minimum of $30 a month to about twice that for supervisors.
A paragraph to ponder:
Huajian’s 3,500 workers in Ethiopia produced 2 million pairs of shoes last year. Located in one of the country’s first government-supported industrial zones, the factory began operating in January 2012, only three months after Zhang decided to invest. It became profitable in its first year and now earns $100,000 to $200,000 a month, he said, calling it an insufficient return that will rise as workers become better trained.
Meanwhile, last week, George Mason economist and blogger extraordinaire, Tyler Cowen, wrote in the New York Times about income inequality. The title is the thesis, “Income Inequality is Not Rising Globally. It’s Falling.”
Here’s the gist of Cowen’s argument:
We have evolved a political debate where essentially nationalistic concerns have been hiding behind the gentler cloak of egalitarianism. To clear up this confusion, one recommendation would be to preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.
The message from groups like Occupy Wall Street has been that inequality is up and that capitalism is failing us. A more correct and nuanced message is this: Although significant economic problems remain, we have been living in equalizing times for the world — a change that has been largely for the good. That may not make for convincing sloganeering, but it’s the truth.
A common view is that high and rising inequality within nations brings political trouble, maybe through violence or even revolution. So one might argue that a nationalistic perspective is important. But it’s hardly obvious that such predictions of political turmoil are true, especially for aging societies like the United States that are showing falling rates of crime.
I’m positively predisposed to counter-intuitive thinking, but Cowen was hopelessly naive if he thought his NYT readers might concede even some aspects of his argument.
Here’s the comment Cowen’s readers most liked:
This article is a classic example of a divide and conquer strategy. The gist is that less educated and skilled people in countries like the U.S are suffering but those in other countries are gaining. Hence, the world is equalizing. So, if you complain about the U.S., you are essentially wishing harm on others. In reality, what the “miracle” of capitalism has done is what it always does — it enriches owners of capital and exploits labor. Developing countries are, of course, better off; they started from nothing, and so anything is an improvement. So production is moved to places where people are desperate, and profits rise because of poor wages, no attention to work place safety, no regard for environmental concerns, etc. Yet, we are to celebrate because the workers in the poor countries are no longer earning zero. This logic then absolves companies from any criticism about the horrendous working conditions. After all, global inequality is falling!
The author also glides over the fact that people live in particular societies and their own inequality is most important. It matters for the distribution of political power (Citizens United, anyone?), for health (see, e.g., studies by Richard Wilkinson), for education, for housing and for a host of other things.
Finally, the author predictably criticizes redistribution (what, not unions?) But the real issue is changing the rules of the game so things aren’t rigged for elites. If so, redistribution will be less needed.
The other most highly rated reader responses were similarly critical. Taken together, they illustrate people’s unwillingness to compare themselves to foreign people in distant places. It’s no surprise that economically secure professionals like Cowen and myself choose cosmopolitanism, but for anyone else who lacks economic security, its a luxury they can’t afford.
It’s the same reason the well-to-do, who can afford higher prices elsewhere, brandish “I Don’t Shop at Walmart” bumper stickers. Cowen embraces cosmopolitanism because his university and book publishers and blog sponsors pay him handsomely; and his university provides his health care; and, like me, he has extraordinary job protections as a tenured professor; and he travels the world doing research, lecturing, and teaching.
I don’t begrudge him his professional success, but for him to assume others will embrace cosmopolitanism based upon his logic suggests he’s woefully out-of-touch with those that are struggling to get by.
Cowen might respond to that criticism by insisting that it’s in everyone’s best interests to think more globally, and I’d agree, but it’s going to take far more than abstract New York Times essays to get people to think beyond their household, community, state, and nation.
* Rest assured, normally my predictive skills are nothing special. For example, I was sure Jay-Z and Beyonce would live happily ever after.