My latest newspaper column: class warfare is back!

My regular column ran again today, March 2nd, under the header "Class warfare is nothing new." I've linked to the St. Cloud Times but their archive is only free for seven days after publication, so I've pasted the text in below as well.

-Dr.DRL
--------------------------------------------------
Class warfare is nothing new
St. Cloud (MN) Times March 2, 2011


Recent events in Wisconsin eerily echo those of a century ago, when progressive reformers in both political parties sought to constrain the power of corporations and the influence of money in politics for the good of the nation. They saw a healthy working class and a growing middle class as bulwarks of democracy and central to a strong economy. The consolidation of economic and political power by corporations representing a wealthy minority was seen as a threat to the very character of America. Fears of class warfare were not unfounded, as radical representatives of socialist and anarchist groups marched to protest the growing power of corporations while those who ran the corporations sought to cement their power over the working class.


Early 20th century
In his 1905 State of the Union message Republican President Theodore Roosevelt noted “The fortunes amassed through corporate organization are so large, and vest such power in those that wield them, as to make it a matter of necessity to give ... the government, which represents the people as a whole ... some effective power of supervision over their corporate use.” Antitrust laws and other regulations were enacted to constrain the power of corporations and to weigh their political and economic interests against those of the working and middle classes they employed.

Though widespread in the tumultuous years of the Great Depression, accusations of class warfare fell to the margins of American politics in the 1950s, reflecting an amicable truce made possible by a rapidly expanding economy, new opportunities for education and increasing geographical mobility that began to erode some of the historical barriers that separated the working class from the wealthy. The corresponding growth of the middle class — buoyed by rising wages, access to education, widespread home ownership and relative political stability — yielded a period of social and economic progress unmatched in our history.



Income disparity

Unfortunately we’ve lost much of the ground gained during the past half-century as political power and wealth have again become increasingly concentrated at the very top of pyramid, while the wages and rights of workers have been curtailed. Income disparity has risen to levels unseen since the 1920s. Today the top 1 percent own 38 percent of all wealth in the United States and the top 10 percent control 71 percent, leaving a relatively small piece of pie to be split among the 270 million Americans who don’t fit in either group.


Union membership was at its highest in the late 1950s; today only 15 percent of all workers are unionized and the collective voice of labor has become muted as a result. Nonunion workers have taking to questioning why unions receive “unfair” wages and benefits, instead of demanding more from their own employers.

In a shocking rebuke to Roosevelt, the Supreme Court ruling in Citizens United last year effectively ended limits to political spending by corporations, handing them a massive cudgel to use against unions, politicians and even government agencies that might question their interests or motives.



It seems Roosevelt’s opinion that “in order to insure a healthy social and industrial life, every big corporation should be held responsible by, and be accountable to, some sovereign strong enough to control its conduct” has been forgotten. One result is the growing influence of corporations on elections, clearly evident in the financial support the anti-labor Koch Industries provided for Wisconsin Gov. Scott Walker’s campaign in 2010.

Ongoing class warfare



Today we are seeing the results of this long process played out on the streets of Madison and other state capitals. Despite limited coverage by the mainstream media, hundreds of thousands of Americans have stood up to protest Wisconsin’s attempt to eliminate collective bargaining for public employees, knowing that once the public sector unions are gone the private sector comes next. Once the unions are gone, there is nothing to stand between the interests of working people and the power of corporations and the plutocrats who control them.




As protesters in Madison have been pointing out in recent days, “It’s only class warfare when the workers fight back.” The truth is that class warfare has been going on in America for decades, but we’ve all been too polite to talk about it.

###

On wealth, income, and power in America

I highly recommend William Domhoff's article below. First written in 2005, he's just updated the data and charts. It's the best single presentation I've seen on this critical issue.

-Dr.DRL
----------------------------------------------------------------------------

Wealth, Income, and Power

by G. William Domhoff

September 2005 (updated January 2011)

My latest column: Income inequality needs attention

This will make my congressperson (Michele Bachmann, Nutcase-MN) even more crazy. I hope.
--------------------------------

Income inequality needs attention
St. Cloud (MN) Times
Feb.2, 2011


Last week’s State of the Union address and the two Republican responses overlooked the problem at the very foundation of our economy: rising income inequality.

One of the complaints heard from crowds of protesters rocking Egypt in recent days is about income inequality, which has reached record levels in recent years. The fact is income distribution is far more balanced in Egypt than in the United States.

Economists and demographers use a measure called the “Gini index” to calculate income inequality. Though easy to understand it is perhaps too complicated to explain in detail here. Suffice it to say that the calculation reflects the proportional distribution of income, with an index of zero indicating total equality (i.e. every individual has an equal share) and a score of 100 indicating total inequality (i.e. one person receives all income.)

Using this method, the CIA has calculated Gini indexes for 134 nations, producing a list in which higher ranking indicates greater inequality. The worst inequality is found in Namibia (No. 1) while the most positive conditions are in Sweden (No. 134). Within this negative ranking the United States appears in 42nd place for most inequality, while Egypt is 90th.

Americans have historically been complacent about income inequality. After all, a central part of our national mythology is the “up from the bootstraps” belief that with hard work anyone can become wealthy.

But that’s simply no longer true.

Real wages — average weekly earnings corrected for inflation — peaked in 1973 and remained 8 percent below that peak in December 2010. Meanwhile, the Consumer Price Index increased 490 percent that period.

Even before the housing crisis and recession rocked our economy, families were struggling to pay their bills, save for college and plan for retirement. The number of Americans living in poverty is higher now than at any time since the Census Bureau started keeping track during the Eisenhower administration. Today the deck is stacked against even the middle class, most of whom can only hope for a winning lottery ticket if they aspire to break into the top 10 percent of income distribution.
Extreme income inequality threatens our economic future. Given our consumer-based economy, if the middle and working classes do not have the means to consume the goods they help produce, demand will decline.

The corresponding concentration of income at the top does not help either; even the idle rich can only own so many cars or vacation homes.

The results of steeply declining demand for everything from new homes and cars to clothing and luxury items has had an all-too-real impact on our economy the past two years. Some observers, including former Secretary of Labor Robert Reich, believe underlying income inequality was in fact the root cause of the recession and Wall Street’s gambling simply a symptom.

In any case, income inequality has grown rapidly the past two decades and is at a level last seen in the 1920s, before the Depression, when the richest 1 percent of the population received 23.9 percent of all income.

The income tax is a good place to start a reform program. In the era of “no new taxes” and budget austerity, this is a hard subject to broach. But public investment, funded by higher tax rates on top earners, could dramatically improve the economy and the standard of living for the bottom 99 percent of the income curve. The top marginal income tax rate has been locked at 35 percent since 2003; couples who earn tens of millions annually pay the same tax rate as those who earn $336,550.

Historically the top rates were 50 percent when Ronald Reagan was president, 70 percent under Jimmy Carter, 91 percent under Kennedy and Ike, and 92 percent under Truman. Revenues from those taxes built the interstate highways, paid for the GI Bill, funded the Cold War, landed men on the moon, expanded public education, and subsidized the information infrastructure and engineering innovations that made the modern economy possible.

It’s not that anyone is suggesting our economy should be like Egypt’s. Nor that we should necessarily look to the countries with the highest income equality (Sweden, Norway, Luxembourg) for inspiration. But the company we keep in these rankings — Nigeria, Iran, Uruguay, Uganda and Argentina are near us — should at least give us pause.

If we were to address some of the core causes of income inequality by improving our trade balance, creating disincentives for companies to outsource jobs overseas, increasing wages, investing in education and most importantly returning to a more progressive tax structure, the economy would improve along with our Gini index. But first we need the leaders of both political parties to recognize the inherent problem.


-Dr.DRL

My January newspaper column: what's wrong with Facebook (and America?)

Here's my January newspaper column from the St. Cloud (MN) Times:

What do we do now? Facebook

Jan. 5, 2011


Monday’s financial headlines were dominated by Goldman Sachs’ $500 million investment in Facebook, raising the value of the privately owned Internet social media company to an estimated $50 billion.

All those connections between high school classmates, former colleagues and people who share an interest in online farm simulations are apparently worth more than anyone could have imagined when Facebook began as an undergraduate’s side project at Harvard in 2003.

With more than 500 million users worldwide, Facebook’s value now exceeds that of US Bank, Ford, Target, Monsanto or Visa. When Facebook goes public, as many assume it will in the next year, its market capitalization could exceed that of Boeing, Home Depot, Kraft or 3M, placing it within striking distance of Disney and McDonald’s among America’s largest corporations.

And Facebook doesn’t make a thing.

Fifty years ago, the largest corporations all made stuff. In 1961, the top 20 slots in the Fortune 500 were held by oil/chemical companies, automobile manufacturers, defense contractors, steel producers and food processors. Only one media company — CBS — was even in the top 100.

In 1961, 38 percent of American workers were producing something tangible: cars, steel, appliances, houses, oil, airplanes, bombs, etc. Today that number has fallen to 21 percent; about one in five of us actually makes something for a living now. The rest of us? Apparently we’re on Facebook.

This raises some basic questions about the future of our economy and the middle class.

The post-war American economic boom was based on the production of goods consumed domestically, relatively high wages in the manufacturing sector and public investment in education and infrastructure. The GI Bill, expansion of public universities and increased spending on K-12 education helped lift veterans and their children into the middle class, while those who did not pursue higher education could still get there by holding a union job. Still more families climbed into the middle class by sending mom into the work force, a shift that conveyed great advantages for the first generation to do so — but much less on subsequent generations when dual incomes became the status quo.

Today a $50 billion company makes no products at all, but rather supplies a virtual space in which people chatter, share pictures and play games. Facebook employs a few thousand people, has no factories, no warehouses, no distribution centers, no retail arm and no maintenance shops. Its founder did not graduate from college but was a billionaire before the age of 25.

Of course, this is all legal and proper; Facebook would not have 500 million users if people didn’t want its services.

What is wrong with the bigger picture is lack of counterbalancing stories for Facebook. When was the last time you read about a hugely profitable new product — an actual manufactured good — invented by, developed in, produced by and sold to Americans that wasn’t a drug? What was the last new industry that employed thousands of Americans at wages that would ensure a place in the middle class? When was the last massive public investment in our collective future, or that of our children?

America has long been in a state of slow decline. We have become a nation of consumers, rather than producers. Incomes have stagnated, and income inequality is growing. The middle class is eroding under a mountain of debt and fears that unemployment or illness could end their American dream.

We have stopped investing in schools, instead choosing to “train” children and young adults in skills that aren’t needed for careers that may not exist when they enter the job market. Few, if any, of our elected leaders appear to think beyond the next election cycle, and horizons beyond the next quarter don’t matter to Wall Street. Today’s children may well be the first generation in American history to collectively end up worse off than their parents when they reach middle age.

That, more than the $50 billion valuation of Facebook, should be dominating the headlines as we enter 2011.