Sunday, April 27, 2014

Jeff Madrick's Latest Take on Why Economic Recovery is a Myth

Jeff Madrick's latest NYRBlog post tries to look beyond the usual cant about the uneven distribution of wealth in an effort to tease out why any suggestion of economic recovery cannot, at least at present, be anything other than an illusion. Here is the crux of his punch line:
Inequality has traditionally meant that incomes at the top grow faster than the next category down, which in turn grow faster than the next category, and so on. All categories can grow to some extent. As has been apparent to economists for several years, however, this is no longer the case. We now have stagnating incomes for a large majority of Americans and runaway incomes at the very top—especially the top tenth of the top one percent. This is not so much “inequality” as a complete lack of growth for much of the country.
To this should be added the corollary that the elite "top tenth of the top one percent" have not achieved that status through economic growth. The "creation of wealth" through elaborate processes of exchange, many of which involve computational instruments whose workings are poorly understood (even by those who profit the most by them), has nothing to do with economic growth. To paraphrase a proposition posed by Robert Skidelsky, those who make money no longer have to worry about "real-world" matters like making things.

Unfortunately, this narrow elite of money-makers now have enough of the stuff that they can exert those controls of government through which they can continue their practices unimpeded. The Occupy movement tried to bring this state of affairs to our attention. Unfortunately, being informed about it did not lead to the problem being resolved. This is due, at least in part, to the fact that, while the rest of us may have the power of the ballot box, the votes of ordinary citizens simply cannot stand up to the support of the moneyed elite. Nor will logic prevail. Because those with wealth realize that they can maintain and grow their status simply by tweaking software, the idea that they may be snuffing out an entire country of potential consumers no longer signifies.

Throughout history many countries have perished through the irrational embrace of religious beliefs; the fate of our own country may follow a similar path, not through religion but through an intense obsession with a pernicious secular myth.


jones said...

Indeed. Adjusted for inflation, wages have not changed since 1965. The DOW keeps getting bigger, but "economic growth" hasn't meant anything to ordinary Americans since 1965.

Add to this that the work week has also remained constant or increased somewhat, AND the fact that productivity per employee has more than doubled over that same period, it becomes clear who benefits from "growth."

It's also mentioning that even though productivity (manufacturing output per worker) keeps increasing, the number of manufacturing jobs keeps decreasing:

This trend isn't because the United States doesn't manufacture anything anymore

"Growth" also means replacing jobs with automation. "Growth" is a negative factor for many Americans.

The problem isn't that Congress is bought and paid for, but, according to C. Wright Mills, Congress -- as the representational body in the US government -- is no longer the seat of power.

Beginning from a definition of "power" -- the ability to make and enact plans regardless of opposition -- Mills observes that individual Congressional representatives no longer write laws (lobbyists and corporate lawyers do) and representatives no longer read the laws (their staffers do -- remember the vote on the PATRIOT ACT?). From this is follows that Congress speaks for power, but does not wield it. Since Congress really now exists just to vote, individual representatives are more like levers of power or puppetstrings, but not puppet masters.

This shift towards management -- laws crafted by private executives and policy pushed by the executive branch -- represents a significant departure from the Constitution's original plan.

In the Constitution, Congress is given 10 sections under Article 1. The executive is given 4 sections, and the judiciary 3. In the Federalist 78, Hamilton writes: "Whoever attentively considers the different departments of power must perceive that, in a government in which they are separated from eachother, the judiciary, from the nature of its functions, will always be the least dangerous to the political rights of the Constitution.... it may truly be said to have neither FORCE nor WILL." In his 1787 Defence, Adams also noted that the legislature "is naturally and necessarily sovereign and supreme over the executive." The quantitative features of the Constitution represent a political philosophy -- one that has since been up-ended.

Stephen Smoliar said...

Unless I am mistaken, Mills developed his definition of "power" and then pursued its implications in a book entitled The Power Elite. It is worth noting that this book was published in 1956! Over half a century has elapsed, over the course of which the elite class has become narrower and the power has become stronger (perhaps even disproportionately so). (Mills died in 1962.) Sadly, Mills is remembered today (if he is remembered at all) as somewhat of a Cassandra figure, capable of seeing a dire future but condemned to be ignored by all who heard his voice.