Letting the Rich Take All The Money
Robert Shiller, who was awarded the 2013 Economics Nobel prize, offered his explanation of the current state of hostilities in the world, comparing it to the 1930s.
The current world situation is not nearly so dire, but there are parallels, particularly to 1937. Now, as then, people have been disappointed for a long time, and many are despairing. They are becoming more fearful for their long-term economic future. And such fears can have severe consequences.
The consequences he talks about are the mess in Ukraine and the upheavals in Russia. It isn’t that people don’t have enough, it’s that they fear they are losing out. He discusses a 2005 book by Benjamin Friedman, The Moral Consequences of Economic Growth. The problem, he says, is that people are unhappy when they do not see themselves having an opportunity to better their lives.
Shiller talks about Ukraine and Russia, but it works here as well, and may make even more sense. The middle class has been deteriorating for decades, and lately the deterioration is increasing, as the 2013 Survey of Consumer Finances makes clear. Stagnation and insecurity, and the rising cost of things that matter most, food, education and medical care, make people unhappy. Mental doors long closed by social opprobrium reopen, allowing the expression of racism, virulent sexism, and loathing for the poor.
We get a similar approach in the norm-based economics described by George Akerloff in his 2007 Presidential Address to the American Economic Association:
Studs Terkel’s Working (1972) captures in a single volume much of the ethnographic findings summarized by Hodson. Terkel interviews people from many different occupations about their feelings about their jobs and concludes that people “search for daily meaning as well as daily bread.” (1972, p. xi). Some of the interviewees are successful in this search: like the stone mason, who cruises his Indiana county and basks in pride as he not infrequently passes his past work. At the opposite extreme is an Illinois steelworker, whose work denies him the dignity he seeks. He takes out his frustration at work by being disrespectful, and, in after hours, by getting into tavern brawls. Most workers are somewhere between these extremes, but in all cases, following Terkel, they have a feeling for how they should behave at work. It’s not just about the money; it is also about living up to an ideal about who they think they should be.
Yves Smith discusses Shiller’s article here and I hope you will read her excellent post. She points to this important article by Yasha Levine, a sharp explanation of the origins of capitalism and its effects on ordinary people. For further reading, let me suggest this 1985 essay by Alan Brinkley, Richard Hofstadter’s The Age of Reform: A Reconsideration, which examines populism and progressivism, looking at the reactionary content of the former, and Hofstadter’s suggestion that the progressive elites were motivated by a loss of status in the aggressively money-centered capitalism that emerged from the 19th Century.
Taking the two extremes Akerloff describes, the stonemason and the steel worker, it’s easy to see how the miserable state of labor in the US today might tilt many people towards the steelworker’s responses. We can see a huge rise in racism in the responses to Ferguson, where the killer cop raised thousands of dollars to enable him to stay in hiding, and the comments about his activities ranged from acceptance to praise. Liberals rapidly ran away from the overt racism that dominates the lives of African-Americans in St. Louis to a discussion of police militarization which might affect them if their protests moved off Twitter and into action, and the use of courts to fill up municipal coffers with traffic fines, which might affect any of us in our own communities.
The most obvious thing about Akerloff and Shiller is that neither discusses the role of raw economic and political power in the creation of the current morass, not just here but around the world. The interests of the rich have always dominated, but from time to time, their rapacity was tempered to some extent by the forces of democracy or in earlier times, by noblesse oblige. That has rotted away. The justifications for obscene wealth and capture of all of the profits from production have been stripped away as well. Who thinks Lloyd Blankfein is doing God’s Work? Who thinks the jackasses who run any business are doing anything beyond lining their own pockets at the expense of everyone else? Who thinks the toads in Congress care about the day to day interests of the regular people of this country? Who thinks the Supreme Court is anything but a bunch of political hacks bent on protecting the rich at the expense of everyone else? And worse, the status of liberal academics and intellectuals is falling, especially as measured by their pay. If Hofstadter is right, the setting is ripe for trouble.
Hard working decent people can’t make a living, can’t get ahead, don’t benefit from the labor and loss of time that go into work, have no sense of security in their jobs or in their health, and don’t see how their children will have better lives. They want to blame someone, and the social barriers that kept the collective id behind bars have dropped, leaving them free to blame those they’ve always blamed: the poor and sick, the immigrant, and the liberal intellectuals who reject their values and their beliefs. The airwaves are full of Fox News and worse encouraging these prejudices. If Hofstadter is wrong, and economic woes are the moving factor, the setting is ripe for trouble.
Elections don’t change things, the rich and the political elites win either way. Legislation doesn’t change things, the Supreme Court stands like a wall against change that might impact the rich and the political elites, just like it did in the 1930s. It’s getting to be more than public relations and war-mongering can hide.
Maybe someone should think about how we can make life better for everyone, even if it means the rich don’t get all the money.
Image courtesy of 401kcalculator.org via flickr.