Finally, we are starting (perhaps) to force into Western consciousness the sheer reality that inequality is a huge problem–in the US and in many countries. Maybe.

The World Economic Forum has listed economic inequality as the number one global risk for 2017. That puts it ahead of climate, environment, cyber attacks, terrorism, failure of states, and other major global and national concerns.

This have been clearly developing for decades, but to date there has been a profound reluctance on the part of politicians (on the Left and on the Right) to recognize inequality as a major issue. Academicians, political analysts, and economists (such as Stiglitz, Krugman, and Reich)  have tried to to explain the political tendency to suppress it and have attempted to push it to public focus, to little avail.

Politicians have chosen to substitute “opportunity” or “shared prosperity.” “Poverty” is always a safe political focus. But, “inequality” may be understood as a need for “equality,” and of course not even our farthest Left citizens really want that–we just want a more moderate level of inequality, such as the US had in the 60s (Gini index of.38, vs. .46 now). The word “inequality” seems to suggest I have more than I deserve, that I should give some of mine to make things more equal. On the other hand, “poverty,” well that’s optional–it’s not my fault, and I can choose to contribute, but I’m not obligated to. Perhaps the implied obligation is one element of resistance to “inequality.” And, of course, there is a widespread ethos of individuality in the West, especially the US, which says we each make it or fail, based on our own strengths and weaknesses. We don’t need anyone’s help, least of all the government. Thus, a reluctance to suggest any form of redistribution as acceptable–that would mean my hard work would yield only limited rewards, which would in part by taken by the state to create more equality.  Given this, no surprise the US is the most unequal of developed countries.

But no matter what you call it or how you measure it, this has become a highly unequal world across the last 40 years. Consider this recent finding by Harvard scholars regarding mobility in the US: “…we find that rates of absolute upward income mobility in the United States have fallen sharply since 1940. Under the benchmark of copula stability, the fraction of children earning more than their parents fell from 92% in the 1940 birth cohort to 50% in the 1984 birth cohort. Rates of absolute mobility fell the most for children with parents in the middle class.” I’m fortunate to have been in that earlier cohort, and made a great deal more money than my parents, but the same opportunity does not exist now for my children and most children, except for those of the wealthy.

The WEF Global Risks Repot 2017 states: “This year’s findings are testament to the key challenges that the world now faces. The first two are in the economic category, in line with the fact that rising income and wealth disparity is rated by GRPS respondents as the most important trend in determining global developments over the next 10 years. This points to the need for reviving economic growth, but the growing mood of anti-establishment populism suggests we may have passed the stage where this alone would remedy fractures in society: reforming market capitalism must also be added to the agenda.”

Note the modest increase in growth in most recent recovery, less than 10% in 20 quarters, while the 1975 recovery exceeded 20%. That’s not the failure of the Obama administration. The present recovery reflects structural constraints we didn’t have in 1975. Certainly Congress and the President can enact policies to increase growth, but failure to recognize the structural limitations of that growth is not only wrong, but it’s going to expose the new administration to failure to deliver, when in fact, there are other policy priorities which could yield better progress toward “making America great again.”

Yes,we have passed that stage, but the likes of Donal Trump and many others on both sides do not yet recognize that. They continue to put all focus on reviving economic growth and using hard line trade negotiations and protective measures as the solution to jobs and wages. This stubborn insistence to turn back the clock to the age of US dominance in global manufacturing is doomed to failure. The major influence of resistance is technology. Then, there is globalization. Finally, if we should actually institute such tough protectionist measures as to succeed in bringing back manufacturing, we would incur two harsh punishments: (1) as a result of foreign equivalency responses in trade, we would dramatically slow the growth of US exporters and thus the US economy as a whole; and (2) we would dramatically raise the price of products which are presently imported from low wage countries. These responses would result in an uprising which would make the 2016 US populist movement seem tame by comparison.

Clearly, as the WEF report states, “…reforming market capitalism must also be added to the agenda.” To effect some reasonable level of redistribution, gradually over time, is going to take a lot more than reducing taxes on corporations and the wealthy and eliminating excessive regulations. It’s going to take a lot more than tough negotiating with foreign trade partners and building walls.

It’s going to take a comprehensive reform of market capitalism.

January 12, 2017

Often I feel I am wasting my time and that of those few who are kind enough to read what I write. I feel we are missing the point. The questions I want help with are simple: First, do we acknowledge that inequality has risen to an extreme level? If yes, is there acknowledgement that this is a big problem, if it is not moderated?

Common elements of debate I engage in miss the essential point::

• Both major political parties have played into rising inequality.

This is a fair point. The last four decades has seen a historic decline in the “middle class,” a class that both Democrats and Republicans have ceased to court, fight for, or even talk about. At this time, it doesn’t matter who’s to blame.

• Many of those same winners in the game are also big philanthropists.

I don’t know whether this is true overall, but I acknowledge the outstanding ones, like the Gates Foundation, which purposefully finds the greatest global problems and eschews giving to universities, churches, and pet projects. However, we must create an overwhelming public demand – a true mandate – for economic policies that serve regular Americans and political process policies that ensure everyone participates fully and equally in our democracy. We can not simply rely on patriotic philanthropy to fulfill the needs of this nation, we must comprehensively imbed it into our very fabric of our critical policies. At this time, it doesn’t help to try to identify the good guys.

• A supply-side solution is coming–if we can just reduce the taxes further and further on the wealthy, they will take all those “savings” and invest them in jobs creating businesses, and this will solve the jobs problem.

America gave trickle-down economics a true chance. And what really happened was it turned out to be a false premise – the rich were rewarded with the idea they would somehow transfer wealth down, where instead, they just kept it. If a supply-solution was going to happen, it would have happened sometime in the last four decades. Instead we must accept that for all of us to grow, we must all grow at the same time. At this time, debating economic theories doesn’t help move the needle.

In the cacophony of these and other distracting arguments, we must not allow ourselves to miss the forest for the trees. Arguments on each of these points keep us from getting back to the real point and the real question: do we accept that the problem of inequality urgently needs to be moderated?

If so, then let’s bypass all the partisan and economic disputes, and thoughtfully move on to address individual views of practical ways to improve the situation.

For example, many want to remind me of the problems of government, frustrations with government, all the regulations which hamper business. But is the implication of such criticism of government that if government will just “get out of the way,” that somehow, magically, private industry will solve the inequality problem? I don’t think that’s going to work. Capitalism does many things well, but its core is the profit motive.

Travis Kalanick is not motivated to find jobs and protections for the hundreds of thousands of displaced Uber workers if he discovers that self-driving cars can do the job at less expense. In fact, if he did try to do that, the cost of such would sink his company. So, who’s going to try to create solutions for those people, hopefully solutions which are not simply welfare, but ways to help the displaced become productive again? Do we believe that’s simply “up to those now unemployed?” Do we think that as a society we have no obligation or no opportunity to collectively help to improve the situation for our fellow citizens? Can’t we see that doing something collectively to make all that displacement better is going to benefit all of us?

So, I’d like to suggest that perhaps we can agree inequality is a problem, a major problem, and we can start to address solutions, hopefully solutions which are not just a drop in the bucket, but preferably practical, immediate, and comprehensive. What can be done?

Jan 9, 2017

I’ve done a lot of writing about inequality, but I’m feeling both my readers and I are missing the point.  Critical comments (which I welcome, always learn something) seem to fall into these categories:

• Those that rightfully remind me that it’s not only Republicans, not only Conservatives, who have created the mess we’re in. Democrats and Liberals are also to blame. And, sometimes my labels are poorly applied–liberal, conservative, etc.
• Those who rightfully remind me of a litany of mistakes, excesses, problems, waste, etc., etc., which is characteristic of government, especially Federal government. I only remind that private industry also has many failures, losses, poor management.
•  Reminders of regulatory restraints on personal and small business activities which seem unnecessary and expensive. I agree.
• Reminders that we don’t want to raise taxes on the wealthy to a level which dampens the motivation to go out there and take risk and work hard to become successful. We still believe in the Horatio Alger story. I agree with this, also.
• Reminder that some, many many of the successful have contributed something very special to the betterment of the country and maybe the world. Examples include Microsoft, Apple, Google, Uber, and many others. I agree.
• Reminder that many of those same winners in the game are also big philanthropists. Maybe most end up giving away the bulk of what they gain, before leaving this world. I don’t know whether this is true overall, but I acknowledge the outstanding ones, like the Gates Foundation, which purposefully finds the greatest global problems and eschews giving to universities, churches, and pet projects.
• Some in this vein simply want to argue that the rights to the gains for those who take the risks and find the solutions to success should indisputably be theirs–all of it, 100% of it, and the less tax we impose on them, the better. Can’t agree on this.
• And, along this line, some continue to argue that a supply side solution is coming–if we can just reduce the taxes further and further on the wealthy, they will take all those “savings” and invest them in jobs creating businesses, and this will solve the jobs problem. Can’t agree here.
• Some who want to remind me that there is something good being developed by those on the Right, such as Trump’s plan for border taxes. I don’t dispute such, but never quite see how the magnitude of such individual things (like the Carrier deal to save 800 jobs) is sufficient to truly start to reverse the trend in inequality.
• Some who argue that inequality is natural, a good thing economically speaking and that there will be enough “trickle down” if we can gin up the growth rate by reducing taxes and regulation. Can’t agree, can’t see how anyone can continue to believe it.
• Some who argue the issue is not inequality, a natural thing, but we should focus only on equal opportunity. I’m not so sure about that focus, but the record of the last 40 years is not good in terms of opportunity either, under both Democratic and Republican administrations.
• I’m sure there are many who really don’t care about this issue, perhaps because it doesn’t affect them personally. I can understand–sometimes it feels that protecting our family is all we can do. But I hope you’ll reconsider.

Often I feel I am wasting my time and that of those few who are kind enough to read what I write. I feel we are both missing the point. The question I want help with is simple: First, do we acknowledge that inequality has risen to an extreme level? If yes, is there acknowledgement that this is a big problem, if it is not moderated?

If so, then let’s bypass all the above and thoughtfully move on to address individual views of practical ways to improve the situation.

For example, many want to remind me of the problems of government, frustrations with government, all the regulations which hamper business. I agree with a lot of that. But is the implication of such criticism of government that if government will just “get out of the way,” that somehow, magically, private industry will solve the inequality problem? I don’t think that’s going to work. Capitalism does many things well, but its core is the profit motive. Travis Kalanick is not motivated to find jobs and protections for the hundreds of thousands of displaced Uber workers if he discovers that self-driving cars can do the job at less expense. In fact, if he did try to do that, the cost of such would sink his company. So, who’s going to try to create solutions for those people, hopefully solutions which are not simply welfare, but ways to help the displaced become productive again? Do we believe that’s simply “up to those now unemployed?” Do we think that as a society we have no obligation or no opportunity to collectively help to improve the situation for our fellow citizens? Can’t we see that doing something collectively to make all that displacement better is going o benefit all of us?

So, I’d like to suggest that perhaps we can agree inequality is a problem, a major problem, and we can start to address solutions, hopefully solutions which are not just a drop in the bucket, but preferably comprehensive.

January 8, 2017

Texas A&M’s 2015 Urban Mobility Scorecard reports: “The  [US traffic congestion] problem is very large. In 2014, congestion caused urban Americans to travel an extra 6.9 billion hours and purchase an extra 3.1 billion gallons of fuel for a congestion cost of $160 billion. Trucks account for $28 billion (17 percent) of that cost, much more than their 7 percent of traffic.”

My home city of San Francisco and its surrounding communities constitute the California “Bay Area.” We have a major traffic problem. Bizjournals.com of January 3, 2017, reports that traffic congestion shot up 84% across the last decade in the Bay Area. 86,200 vehicle hours lost daily due to delays in 2005 rose to 158,300 daily hours lost in 2015. Much of this congestion comes from traffic flowing from suburbs to the San Francisco city business district and back in the evening. We are a city of small physical size, dynamic economy, surrounded on three sides by water, making us a delightful place to live, but a very hard place to create expanded transportation.

Traffic congestion is a major threat to our Bay Area economy. If we can’t fix our cost of housing and our traffic, we will inevitably lose business to other cities. We are the third most congested city now: “Washington, D.C. tops the list of gridlock-plagued cities, with 82 hours of delay per commuter, followed by Los Angeles (80 hours), San Francisco (78 hours), New York (74 hours), and San Jose (67 hours).”

In San Francisco, an estimated 45,000 Uber and Lyft cars have added significantly to traffic congestion and are a major source of concern to residents and transportation officials. So, Uber and Left are exacerbating the problem just now.

But maybe advancing technology is bringing solutions, particularly with “ride sharing” offerings: A new study released by MIT, with New York City as a prototype,  uses an algorithm which results in findings that ride sharing services, such as UberPool and LyftLine could eventually reduce the number of vehicles on the streets of Manhattan by 75% without increasing travel time for riders.

“Led by Professor Daniela Rus of MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL), researchers developed an algorithm that found that 3,000 four-passenger cars could serve 98 percent of taxi demand in New York City, with an average wait-time of only 2.7 minutes. “Instead of transporting people one at a time, drivers could transport two to four people at once, results in fewer trips, in less time, to make the same amount of money,” says Rus. “A system like this could allow drivers to work shorter shifts, while also creating less traffic, cleaner air and shorter, less stressful commutes.”

“To our knowledge, this is the first time that scientists have been able to experimentally quantify the trade-off between fleet size, capacity, waiting time, travel delay, and operational costs for a range of vehicles, from taxis to vans and shuttles,” says Rus. “What’s more, the system is particularly suited to autonomous cars, since it can continuously reroute vehicles based on real-time requests.”

Will a similar algorithm apply to San Francisco, which is different from Manhattan? I imagine yes.

And, what about the implicit assumption that we will all be happy to share rides? That’s a big one. What if I want a private time to talk with a colleague or a romantic ride with only a special partner? What if I am not motivated by savings I can get by sharing, just want privacy and speed? This brings to mind “the fallacy of composition,” which arises when one infers that something is true of the whole from the fact that it is true of some part of the whole.  In this context, it means that I can get to my destination faster if I go alone, but if everyone else who’s traveling at the same time makes the same choice, then none of us will get to the destination as fast as we would if we all took ride sharing.

I’m not so sure the majority of travelers will use this indisputable logic to decide. Maybe most will have a bias to assume others will take ride sharing and I’ll be among the few who benefit in speed by riding alone.  We will need a major change in our attitude toward community–a growing realization that we are all in this together, together to protect the environment, together to reduce the cost and pollution and time and $ lost to traveling. Only if we can see a collective benefit which indeed transfers to a personal benefit, can we enjoy those savings and those benefits MIT illustrates with its algorithm.

But the vision is provocative. Already, I feel I will try harder to choose UberPool, with this in mind. It’s comforting to remember that I’m not only saving money, but contributing to lesser traffic congestion for others. I’m using pool about 60% of the time now, and will try to increase that percentage. Maybe this will override my sense of feeling cheap or burdening Uber drivers.

This is a utopian vision for commuters and for the environment. However, there is also bad news in this prospect of improvement. First, the 3,000 imagined pool drivers in New York can make as much as before on less time worked. But, what about the reminder of 14,000 taxi drivers–what about that 11,000 who lose jobs? And what of the estimated 35,000 Uber drivers working either full time or part time in New York? Furthermore, note the MIT comment above, “well suited to autonomous cars.” Just what if self driving vehicles do take over, as many predict, over the next 20 years? My post of March, 2016, estimates around 5 million US drivers could lose their jobs.

Should we, or indeed, can we, slow  or halt technology to protect workers? I doubt we can, although some will certainly try. A better solution is in government taking bold steps to re-train, invest in innovation, and during all the while providing support to those displaced. Isn’t there an implicit obligation to society (through Government as our collective agent) and to the likes of Travis Kalanick, the CEO and founder of Uber, to contribute from this windfall to assist those caught up in the maelstrom of economic and technological advancement?

January 6, 2017

Please, please, show me why this set of facts is wrong: “Between 1980 and 2014, the richest 1 per cent have seen their average real income increased by 169 per cent  (from $469,403, adjusted for inflation, to $1,260,508) and their share of national income more than double, from 10 per cent to 21 percent…Over the same thirty-four years, median household income grew by only 11 per cent.” Even so, these modest gains were mostly in the earlier part of the period. “…by 2014 [median income] was only .7 per cent higher than in 1989….” Furthermore, most of the modest gains for those of lower income are due to longer working hours. And, this while the percentage of Americans with college educations has doubled, suggesting that it’s not only those with only high school diplomas who have suffered. In fact, that group has actually seen a decrease in real income across this period (Stiglitz, 2016).

I understand some Conservatives simply detest Paul Krugman and Joseph Stiglitz, whose views are on the liberal side–favoring policies to achieve a more egalitarian society, believing government is as important as the free market in achieving just outcomes. The above quotes and facts are from Stiglitz. And, I admit the same distrust when I see “facts” quoted by ultra-Conservative economists–I admit I look carefully to see if the facts are correctly calculated. When studying in London in 2012/3, I learned a lot about data–how it can be chosen and manipulated to reflect the bias of the writer. So, I respect all of that. So, please challenge these facts!

Here is a little of the color behind these facts: CEO/pay of average worker has risen from 20:1 in 1965 to 354:1 in 2012. Financial executives took some of the greatest advantage. The top five C level Wells Fargo executives made $9 million to $11 million each in 2015, and the CEO made $19 million. While the average Wells Fargo bank teller’s salary was $12.40 per hour, the top consumer banking executive left the bank with a stock package of $125 million. Can there really be any argument that pay is in accordance with performance for these execs, when that particular executive oversaw a multi year performance of creating fake accounts, costing 5,300 lower level people their jobs (and probably their reputations and careers) and disgracing the bank, costing millions in correction and lost shareholder value. For a patient reader, Stiglitz has a much deeper analysis to disprove the theory that this kind of exorbitant executive pay is correlated with performance.

So, these are some of the facts. If you dispute the overall picture, explain why. For example, some have argued that inequality should be measured based on consumption, not on income (e.g., costs of some goods have declined). However, recent studies show the two measures produce about the same result–an alarming widening of inequality. So, show me where there is an accurate picture of a more egalitarian nation, such as we were in 1960.

For a good example of how data can be chosen and interpreted as it relates to inequality see this short treatise provided by Inequality.org, objectively explaining the many ways in which the “Gini index” of inequality can be calculated. However, the conclusion to the explanation gets to the bottom line, no matter how you calculate it: “So we’re right back to the haves and have-nots. That we’re a society of haves and have-nots may not be literally true, but it’s more than just a metaphor. America is suspended roughly half-way between full equality and a situation in which all of the country’s income is concentrated in one person’s hands.”In other words, we’re half-way between a socialist utopia and an absolute monarchy. America in 1968 was hardly a socialist country, but it was much closer to the utopia. Maybe it’s time to turn back the clock on income inequality. Utopia doesn’t sound so bad.” Our Gini index of .46 is back to that of the Robber Baron Era early in the 20th century.

There are at least three compelling reasons we must: One is that we will face the prospect of a revolution, with blood on the streets if we don’t do something, start to reverse the trend now.

Another is that a more egalitarian society is now thought to be able to grow faster than an unequal society, and all can benefit financially. After all, who’s going to buy the products if the lower classes have no income?

Finally, it is a moral imperative that we continuously work to create opportunity for all, food, shelter and health for all, education for all.

I have two requests: Show me how these facts present the  wrong picture, if they do. Show me a radically more attractive set of historical facts. I’m open to learning. And, if the Stiglitz picture is a fair picture, tell me why we should live with this, or what we can do about it, so that it doesn’t persist, or worsen as seems likely to be the outcome with the new administration.

Show me or tell me.

January 3, 2016

1-Four years is only a blink of the eye in the history of time, why trouble myself?

2-How much damage can one person do in 4 years?

3-He won’t be able to do the things he proposed.

4-Knowing his executive orders can be reversed on day 1 of the next presidency.

5-Remembering I never enjoyed watching national news on TV anyway.

6-I could occupy myself by learning Chinese, watching only Chinese news for 4 years, then if things don’t work out….

7-By substituting sports for politics and economics for 4 years.

8-There is great comedy to enjoy for this four years—Stephen Colbert, Alec Baldwin, Seth Myers, etc., and of course, Donald Trump himself.

9-There are lots of good alcoholic drinks I haven’t yet explored.

10-Marijuana is now legal in California

I’m only half-joking. The scene that is unfolding is disquieting to say the least–the people he’s selecting, the continued crazy tweets, the distrust for national intelligence identifying Russian hacking, the seemingly unavoidable conflicts of interest with his businesses, etc., etc.

True, there is a certain sense of initial optimism in the US. The stock market appears to be reacting to the prospect of lower corporate taxes and reduced regulation. Trump supporters rally behind his rescue of 800 jobs at Carrier, with little note of the tax breaks with which he bought Carrier off, or the sheer reality that this is only  a grain in the eroding sands of manufacturing job losses.

So, as I see it, the euphoria is essentially (a) an accurate reflection of truly increased prospects for wealth–but only for the already wealthy–the owners of capital; and (b) misplaced optimism for jobs prospects among Trump’s core supporters.

Seriously, the greatest consolation I can find so far is summarized in writings such as this article in Politico Magazine, Jan. 3, 2017. This is a series of short paragraphs by highly respected political writers, each identifying a different obstacle to Trump’s governance and accomplishment. There are 20 of them listed here, enough to sink his Presidency. I’ll list here only a few of the most significant: “Revolutionary States and Islamic Extremist Organizations; Washington’s deep capacity to resist change; the major cleavage within his coalition; the next recession; Vladimir Putin; a serious replacement for Obamacare; US China relations; Donald Trump, himself.” I.e., maybe he won’t be able to do too much damage.

To be fair, rescuing the jobs in the US is beyond the capacities of the very best leaders we have, in the short  run, meaning across the next 4 years, probably the next 10-20. There are huge forces, forces of resistance which are beyond the control of politicians in any practical sense. The greatest of these is thought to be technology, which is rapidly replacing workers with robots and software systems. Another is globalization. Notwithstanding Trump’s chest thumping against Mexico and China, he is a Republican and he will not end up desiring nor politically able to damage US industry by significantly slowing globalization, with foreign sales and production accounting for a significant part of US corporate earnings. We have had 40 + years of an advancing neoliberal political legacy which now has roots through our entire system of law and government. The loss of good jobs and wages will take a long time to fix, if ever possible.

But this doesn’t mean we can afford to write off the next four years. It could have been (and still could be) a big step into foundational policies that would pay off for the next generation. Alas, there is not yet even a hint of anything tangible that will move us in the direction of reduced inequality and better opportunity for all. See the new report produced by NBER scholars on income mobility–a measure of whether the next generation can hope to earn more than their parents. The summary in two sentences: “We find that rates of absolute mobility have fallen from approximately 90%for children born in 1940 to 50% for children born in the 1980s. What can be done? These scholars found that “….increasing GDP growth rates alone cannot restore absolute mobility to the rates experienced by children born in the 1940s….These results imply that reviving the “American Dream” of high rates of absolute mobility would require economic growth that is spread more broadly across the income distribution.”

Put simply, improving the growth rate of the economy (the Trump promise) will not create significant improved mobility (opportunity to exceed one’s parents in real income). To do that, we will need redistribution–measures that assure the fruits of economic growth are “spread more broadly.”

We wouldn’t need to kill motivation and incentive with tax rates so high as to do so, in order to start the move in the right direction.  Modest increases could be significant. Revised allocations of government expenditures are another way to redistribute–e.g., less on military, more on education for all. Public/private investment in not only infrastructure, but also in innovation can help. A Federal minimum wage indexed to income growth by locality can help.

I don’t blame the Democrats for this election outcome, nor credit the Republicans. Republicans rode in on the coattails of a demagogue few of them wanted. And the demagogue simply capitalized very cleverly on resentment to the effects of policies of the last 40 years, policies which he proposes essentially to continue under different names, with a few nasty twists.

It is truly distressing to see continued adherence to “trickle down” economics, when the reality of the last 40 years has so clearly disproven it.