March 17, 2017

Everyone I respect is disgusted and frightened with the early actions of the Trump presidency. But, the bigger problem than the Trump presidency is what’s next. Trump’s promises will certainly fail to be met, and not by a narrow margin. Will the voters stubbornly cling to their champion, who will undoubted tweet a litany of excuses and fictitious obstacles, others to blame? Or, is this experience a necessary step leading to an opportunity to redesign our society?

Professor Roberto Unger, here at Harvard, where I have the privilege of studying for the year 2017, reviewed the long history of populism with my economics class. It goes back to Roman times. The periodic rise of populism around the world can be viewed in two phases. The first phase is “liquification,” according to Unger–the breaking down of established institutions. I felt a bit of relief with this explanation–after all, we do need a shakeup. While things seem far worse in Trump’s first two months in office, things were not going so well before Donald Trump even emerged. A tearing down, at least in part,  is necessary before a new building can be built. This just turns out to be scarier than perhaps something like a Constitutional Convention to logically redesign our future society.

But, the nation is strong enough to survive this Stage (1). Humpty Dumpty is definitely going to be damaged, but not beyond repair. The important question is what happens next. What happens next will determine our advancement or fall. Stage 2 can be very good or very bad.

My friends and I don’t see a shred of long term (Stage 2) positive strategy in Donald Trump. He can’t possibly be the leader in the kind of Phase 2 that we hope for. If the betterment of our society of the future, as Unger proscribes, is one in which everyone has a good job, a future with shared prosperity, there isn’t a candidate visible yet on either side who has a clear plan to take us there in Stage 2.

In his opinion piece in today’s NY Times, David Brooks contrasts “new guard Trump populists,” (e.g., Bannon) and “old guard Republican libertarians” (e.g., Ryan, McConnell, and the Tea Party).  This is the combination we have ended up with in Congress and the White House. Brooks sees no hope here for the working class: “When these two plans fail, which seems very likely, there’s going to be a holy war between the White House and Capitol Hill. I don’t have high hopes for what’s going to emerge from that war, but it would be nice if the people who voted for Trump got economic support, not punishment.” The jobs and wages his supporters demand will certainly not be delivered by a wall, a bigger military, trade wars, or the end of Medicaid.

Stage 2 could be worse. Consider Putin in Russia, or Maduro in Venezuela. They retain enough supporters through nationalist rhetoric, crony capitalism, false promises, and blaming others, to stay in power far longer than economic reality would justify. History is replete with examples.

But how has the great superpower, the United States of America become exposed to these risks? One of the reasons is our failed education system. Education has been starved and poorly advanced. For example, the Pew Research findings of 2015 rate our 15 year olds reading ability now at 24th globally. We’d expect to be behind the Scandinavian countries, but we’re also behind France, the UK, Poland, Slovenia, and only slightly ahead of Russia. Our deficiency carries forward into college graduation rates failing to advance across the last 30 years. Part of that problem is jobs and wages stagnant vs. rising cost of higher education. Republicans like to say the answer can’t be “throwing” more money at education. Yet the the countries at the top do spend a lot more on education than we do. Are we just incapable of spending money wisely?

The educational failure on our part has led to two major problems at the heart of the populist uprising: (1) We have an excess of voters with high school degrees or less. They are vulnerable to easy solutions offered by charismatic demagogues. (2) Our system has failed to prepare our populace with the skills to steadily move forward in the knowledge economy so as to grow with our comparative advantage. Thus, Trump’s promise to return the manufacturing era rings positive for an excessive share of our voters. They don’t understand where we need to go, how they can participate, and we don’t provide the tools to give them the opportunity.

We are stuck with a chaotic Stage 1 with Donald Trump, assuming no impeachment comes our way, and assuming mid-term elections are too soon to give Trump supporters enough disappointment to change their allegiance. But it’s ironically to our political benefit that he doesn’t have a plan that even begins to address the needs of his constituency.

It’s painful to watch an old and treasured building being partially demolished to make way for progress. But what comes next can be better. In Stage 2 we have an opportunity to put Humpty Dumpty back together in a better way.

We (on the Left) do not yet have a plan for Stage 2. And we haven’t yet found the way to communicate with the Trump voters to help them see reality. These are our challenges and our opportunity.

February 10, 2016

The United States has the highest level of income inequality in the developed world. Economists think our wealth inequality is even greater. It is inherently unfair, even immoral, for me and many others to live in opulence while millions of Americans struggle just to get enough to eat.

Morality aside, there is abundant evidence that the rise in economic inequality the U.S. has experienced in the last half century has led to health problems, environmental problems, rising crime and other negative consequences, all of which has exacted an enormous economic and humanitarian toll.

Some degree of inequality is inevitable, even desirable. The key questions today are how much inequality are we willing to tolerate and what can we do to reverse, or at least stem, the rise of inequality? History shows that extreme inequality invariably leads to political and social instability, the seeds of revolution.

The purpose of this post is to start a discussion of where we want our nation to be–just what level of inequality can we agree to as our ideal destination? Only when we have come to such a consensus, at least to a range, can we then debate policies best suited to get us there. Without that we are flailing in the wind.

As eminent health economist Victor Fuchs said, “For me the key word is balance, both in the goals that we set and in the institutions that we nourish in order to pursue these goals. I value freedom and justice and efficiency, and economics tells me that I may have to give up a little of one goal to insure the partial achievement of others.”

The “Gini coefficient,” often used to measure income inequality, can illustrate the deepening of inequality in the U.S. since 1965. This can be seen visually by looking at the “Lorenz curve.” Below are four Lorenz curves, starting to the leftmost with a graph depicting Gini equal to zero, where everyone is equal. To the far right is the graph depicting a Gini of 1, where one person owns everything. In between are two “curves” visually depicting two different states of inequality. #2 is reflective of the US inequality of 1965 (about .37). #3 is reflective of the state of inequality in the US today (about .46).

The numerator is the yellow area between the Lorenz curve of the distribution and the 45 degree straight line; the denominator is the area under the red distribution line. It was developed by the Italian statistician Corrado Gini and published in his 1912 paper “Variabilità e mutabilità” (“Variability and Mutability”). The Gini index is the Gini coefficient expressed as a percentage, and is equal to the Gini coefficient multiplied by 100. (The Gini coefficient is equal to half of the relative mean difference.

I argue that the current Gini of the US is dangerously high, that a Gini coefficient like the US had in 1965 is far better–for everyone. Others will argue that .46 is not dangerously high and that we can comfortably allow more inequality. And others will argue 1965’s Gini coefficient was not sufficiently equal. But at least, now we have a basis for intelligent debate.

In 1965, the U.S. was moving toward greater economic equality. This was the era of Lyndon Johnson’s “Great Society,” during which Medicare and Medicaid were developed, civil rights were being championed, unions had rights to collective bargaining, and most Americans not only had jobs but saw their wages increasing. Yes, there were Rockefellers, Abercrombies, and Astors, but the top tax rate was 70%, and plenty of investing still was taking place. Most Americans were sharing in prosperity in a healthy growing economy.

Perhaps most importantly, there was abundant opportunity for economic and social mobility. Young people could expect to earn more than their parents. No more. Studies by Chetty showing that mobility as measured by a child earning more than his father, has fallen from a 90% chance for children born in the 1940s to only 50% for children born in the 1980s.

Where is our ideal Gini for the future? And how do we get there?

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.

September 22, 2016

I’m disappointed with the US election results. I’m also disappointed with most of the announcements by the President-elect since the election. I fear we are in for worse times as a result of this election and the developments around the US and the world, leading up to the Populist revolts.

On the other hand, it is Christmas and I want to point out a few possible positives with the new administration, depending on how these unfold. I hope influences along these lines can move our new leader to a more rational position than he has taken to get elected.

Streamlining regulation: Carl Icahn will be leading a review of regulations. While there will certainly be legitimate disagreement over which ones to eliminate, there can be no dispute that we are over-regulated. I encourage an aggressive review of our regulations. If done thoughtfully, retaining appropriate protections which restrain the excesses of capitalism, this can be a big benefit–both to our daily lives and to the growth of our economy. See The Economist February, 2012. On the other hand, if we cavalierly jettison important democratic protections, we could be inviting chaos in our marketplace and citizens running wild.

Saving waste in government: I’m not persuaded that Donald Trump is a great businessman, when all is considered, but if he does use business skills and those of his Cabinet to reduce the costs of the F 35 and the F 18 fighter jets being built by Lockheed and Boeing, and aggressively to reduce other waste in military and elsewhere in government, I will praise him. Now, we may see whether a kind of personalized version of Singapore’s highly effective governmental management will work for us–where business leaders take periodic stints in government.

Talking and acting tough: If better “deals” can be made with our trading partners, I’m all for that. If we can persuade our allies to pay a larger share of the cost of global governance, that’s good. If we can reduce the impact of foreign trade in displacing US workers, that’s wonderful. One the other hand, there are two major risks if getting tough goes awry: (1) We can ignite trade wars and end up with higher US costs as well as fewer jobs, as our exporters lose business; and, (2) We also run the risk of making life better in the US at the expense of the rest of the world. That development will certainly come home to hurt us in the form of increased enmity, more illegal immigration, and more terrorism. From a moral standpoint, I oppose “America First.” How about “people of the world” first, (vs. business and capitalism)?

Friends and Foes:  Here, I remind that we all start with a bias: Do you believe the citizens of the world are mostly good, like we are, with a few bad leaders; or, do you believe we should fear all Russians, Chinese, or Iranians, because they happen to be dangerous and largely seek to hurt us? I am in the former camp. I’ve travelled in about 35 countries. Talking to people around the world generally leaves me thinking that at their essence, everywhere, they are like me. They are mostly honest, want opportunity, want best for their families, do not hate Americans. So, I distrust Putin, the Ayatollah, and a few other leaders, who, not unlike Donald Trump, have managed to persuade followers, with agendas which may not be in our best interests. Starting there, I “hope” that the outcome of a friendlier approach to Russia will result in increased cooperation there, reduced nuclear proliferation, a more peaceful world. I also hope our new President will soon approach Iran, China, and Mexico with the same friendly approach that he seems determined to extend only to Russia. BTW, I love Jews, but I don’t love Jews any more than Arabs. I regret our new administration’s seemingly favoring Russia and Israel at the expense of other peoples and other nations.

In the meantime, I would love to support our elected President, but I cannot. There is too much to fear at this time–from his speeches, his arrogance, his tweets, his positions on issues, and his choices for key government jobs.

I want to close with a key theme I have explained in a variety of ways in previous posts here. This issue is the absolute key to the possible success of the new administration: We must create more jobs, better jobs, and we must, must, MUST significantly reduce inequality. If he can do this, I will apologize for my misunderstanding and give him my full support.

I encourage efforts to increase our economic growth rate. But, if our President-elect is to succeed with his promise of jobs and wages and prosperity for all, he must come to understand that our growth rate will never reach the level to create much trickle down. The ultimate barriers include the maturity of our economy, global population growth rates declining, technology reducing need for human labor, and globalization. Creating jobs, wage growth and reducing inequality will require redistribution. It just won’t happen without the owners of capital being made to share some of the income and wealth with the lower economic classes. Donald Trump has offered no understanding whatsoever of that fundamental economic truth.

This is the ultimate “Possible good” that the new administration could deliver. At Christmas time, let us hope that this understanding will soon come to pass. If so, the Trump Presidency, which I have opposed, could become the most successful administration in my lifetime!

November 19, 2016

It’s been 10 days, and no one knows how this is going to turn out. Some are pursuing a “not my President” campaign, including hoped for electoral college vote influencing which might overturn the expected election results–a very long shot. Some are already  planning for the impeachment of the President-elect. Supporters are fighting over the 1,200 Government positions only requiring the President’s nomination and a majority of the Senate–seemingly “in the bag.” The news about his choice of advisors and Cabinet members from among the cronies who vocally supported his campaign is discouraging–people like Guiliani, Christy, Sessions, Flynn, and others.

Even a preliminary view depends on how he chooses his closest advisors and how the specifics of his policies emerge–policies which on the surface are wholly objectionable to my friends and I–such as having trade wars (see Edoardo Campenella’s description of how a trade war with China would backfire) and shipping 11 million people back to Mexico. But it is already evident that these promises will be “broken” before he even gets started–thanks for that! Not sure how his supporters will feel about that.  But hey, they didn’t care about any of the other negatives that emerged about their idol, so it’s likely they won’t bat an eye at failure to deliver–at least not for a year or two. They will all wait to see the “greatness,” in good paying jobs with increasing wages that he promised to bring back. This is the key promise–the rest will be forgotten or forgiven by most if he can deliver this. But that’s not going to happen, as I have been trying to explain in previous posts.

It should be apparent to everyone that this President has a mandate. He has won the election with a rabid group of supporters from across America, and his party controls both houses of Congress. Numerous pundits have identified the global forces which are behind the “Trumpism” which is spreading across the globe, evidenced by the British Brexit and populist parties gaining power throughout the developed world. So, the longer term view depends on his effectiveness in working with the American system of government, with which he has no experience and would appear to have little patience. But, beware– Congress has taken down men far better than Donald Trump. Republicans have control of both chambers, but there are many Republican members of Congress who are wise, and do not like Trump.

In an enlightening article in the  issue of Foreign Affairs, Mark Blyth explains that the “debtor’s paradise” of the 1970s (characterized by increasing wages and high inflation reducing the cost of debt) was transformed by neoliberal policies beginning in the 80s. Ultimately, we have become a creditor’s paradise (characterized by increasing returns to capital and stagnant wages to the middle and lower classes).  Neoliberal policies have been developing for more than 30 years, and are now spread throughout our entire system of government–regulations, policies, practices, law, etc. Robert Reich, Joseph Stiglitz, and others have written extensively to argue that an entire “re-do” of our American system of government is in order, to truly re-establish a more egalitarian America.

For me, the epiphany came in my MSc program in 2012 at the School of Oriental and African Studies in London, where I studied Globalization and Development–which is the study of the global forces which have led to the current economic and political condition of the countries of the world. In this program,  going back from 50 years to the present, I began to understand the impact of “neoliberal” policies which emerged around 1980, and have steadily taken increasing control of political and economic power since. Some of those policies were justified at the inception, a response to cost plus inflation which had been like a pendulum swung too far by the 70s. But now we have let the (opposite) neoliberal policies run their course without (most of us) realizing the pendulum was swinging too far in the other direction, not controlled or moderated. These policies emphasized the benefits to capital over labor.

Furthermore, we allowed the strengthening of these neoliberal economic policies while globalization and technological advances accelerated the advance of inequality–in wages and in wealth. So now we have inequality which has risen to peak levels, and in the US it is  worse than in any other developed country.

If Trump could deliver 6% economic growth, maybe we would experience just enough improvement in wages for the lower economic classes, to quiet some of their restiveness, even while the top eschelon of wealth and income continues to gain more share of the pie. But this would only stave off the crisis for a little while. 6% is not going to happen and the most increase in growth he can deliver will not be adequate to create even a minimum level of “trickle down.” Growth is necessary to rebalance inequality, but it is not sufficient–a clear economic principle.

Since London, I have been convinced that the most significant problem facing the world is inequality.

That’s why I am a member of Patriotic Millionaires. We believe that some thoughtful forms of redistribution are urgently needed to restore fairness to those who have been the losers in the advance of neoliberal policies, and who are likely to be keenly disappointed by the Trump administration. Patriotic Millionaires is mobilizing to fight for what is best for the American people.  We will work with the new administration if they will work with us. We can help the Trump administration deliver on the most critical of their essential mandate–shared prosperity.