May 22, 2015

May 22, 2015: Response from the White House, Shroud of Secrecy, Deep Suspicions

On April 19th I sent an email to the White House registering my displeasure with both the ‘leaked’ content of pending multilateral trade agreements and the processes by which the products of these negotiations are being presented to the Congress and the American people.  This afternoon I received a reply in which the administration is, predictably, defending its position.

Dear Joseph:
Thank you for writing.  My Administration is pursuing a trade agenda that will place our workers, farmers, manufacturers, and businesses at the center of the 21st-century global economy—one that promotes both our interests and our values.  Trade done right is a critical part of my strategy to create jobs, spur growth, and strengthen the middle class.

With 95 percent of the world’s customers living outside our borders, our ability to access new markets is vital to our economic well-being.  The export of American-made products supports millions of jobs here at home that pay up to 18 percent more than non-export-related jobs.  And, 98 percent of the more than 300,000 companies that export are small businesses.  However, even though more American businesses are exporting than ever before, most businesses still don’t export anything—leaving an incredible amount of opportunity that can be unlocked for our middle class.  To take advantage of that opportunity and level the playing field for our workers and businesses, we’re moving forward with the most ambitious trade agenda in American history, including the Trans-Pacific Partnership.

In the Asia-Pacific region, the Trans-Pacific Partnership will knock down barriers that block American made goods and services while promoting high standards in the fastest-growing region in the world, including the strongest enforceable labor and environmental provisions of any trade agreement.

To protect our workers, the trade agreement will require countries to set a minimum wage, protect the freedom to form unions and collectively bargain, and work to end child and forced labor.  To preserve the environment, it will require countries to take tangible steps to curb wildlife trafficking, crack down on illegal logging, and prevent overfishing.  That’s why conservation organizations like the World Wildlife Fund and The Nature Conservancy agree that the enforceable provisions in the Trans-Pacific Partnership are a critical step forward for environmental protection.

Some prior trade agreements, like the North American Free Trade Agreement, or NAFTA, have not lived up to their promise.  The Trans-Pacific Partnership addresses these problems through strong enforcement mechanisms, including for the labor and environmental standards.  This means that if our trading partners, including Canada and Mexico, aren’t playing by the rules, we can hold them accountable.  The agreement also includes new rules that make sure our businesses and property owners are protected from having property taken by foreign countries, while making sure that foreign corporations can’t undermine or get around our own laws and regulations.  Because we know that unfair currency practices by some governments hurt our workers, businesses, and farmers, we are working with Congress on new tools and standards that will make it easier for us to protect American workers and firms from unfair competition.

The Trans-Pacific Partnership is also America’s opportunity to lead in the Asia-Pacific.  The alternative to this agreement is to let other powers, like China, carve up the region and drive down standards through bad trade agreements.  We cannot stay on the sidelines while China and other countries write the rules of the road.  We have to seize this opportunity to help American workers and businesses compete on a level playing field in the world’s largest markets in the decades to come.

To help us secure the benefits of the Trans-Pacific Partnership, we are working with Congress to enact Trade Promotion Authority, which allows Congress to put forward its priorities for negotiating trade agreements.  The new version of Trade Promotion Authority Congress is considering guarantees that future trade agreements, including the Trans-Pacific Partnership, will have progressive, pro-worker, and pro-environment standards.  This gives us the leverage to bring home the best possible agreements for the American people.
The new Trade Promotion Authority mandates unprecedented transparency by requiring that any trade agreement be published online for 60 days before I sign it, and Congress will then have months to review, debate, and hold hearings on the details of the agreement before they vote on it.  And while we have not yet finalized the Trans-Pacific Partnership, the current agreement is available for all members of Congress to read and review, and we have conducted over 1700 regular briefings with members of Congress on the status of the negotiations and have provided full similar briefings for labor groups, environmental groups, and other interested parties.

With a highly educated workforce, an entrepreneurial culture, strong rule of law, and abundant sources of affordable, clean energy, the United States has what’s required to be the world’s manufacturing hub.  My Administration is working every day to help businesses locate, grow, and hire here so that our businesses ship goods all over the world stamped with "Made in the U.S.A." The good news is that this is already beginning to happen—over the last few years, our manufacturers have been steadily creating jobs in the U.S. for the first time since the 1990s.  Good trade deals like the Trans-Pacific Partnership will continue that trend and ensure that jobs are not outsourced, but rather are created here at home.  We will continue to push forward on these efforts because we know that when the playing field is level, American workers and businesses don’t just compete, they win.

Again, I appreciate your message.  I am confident we can support job growth at home and boost exports while promoting our values and raising standards around the globe.

Barack Obama

While the prospects of trade agreements that benefit all parties are indeed a noble goal worthy of the support of all, such outcomes are difficult to achieve.  In principle there is nothing wrong with the goals or efforts to achieve these goals.  But the president, I fear, is being a bit disingenuous when he maintains that ‘fast track’ authority mandates ‘unprecedented transparency’, for the process has been anything but transparent.  Additionally citing the ‘1700 briefings’ of members of congress does not include the fact that members are brought into a room, alone, and given not only time limits on when they can read, but are presented with only select documentations.  For instance, documents concerning the shifting positions of other parties to the agreements are not part of the portfolio.  Additionally, they are not allowed to bring staff, take notes, nor speak with the press concerning the content of the agreements.  Several Senators, including Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts have loudly complained about the process, the secrecy and the difficulty in getting timely information that envelope this process.  The shroud of secrecy that has descended upon these proceedings only raises the suspicion that something untoward is in the works. 

What we have ‘learned’ about the content of these agreements have come through ‘leaks’ to select spokesman and from what critics have been able to glean from the proceedings.  It still begs the question: if these agreements are such a boon to America, and such a good deal for the manufacturing sector and the middle class, why then have the details not been forthcoming?  Why has such a shroud of secrecy been cast over the proceedings?  Lastly, why is it necessary to ‘fast-track’ these agreements?  The history, of which this administration is most assuredly aware, is that these kinds of agreements have proven bitter pills for Americans to swallow.  If the current agreements under discussion do in fact address the lingering rancor that previous trade agreements have engendered why then isn’t this administration releasing the draft agreements and speaking openly and honestly with the American people about the benefits contained therein?  Instead the Administration maintains a studied silence.

Perhaps this explains why it has taken nearly six weeks to send a pro forma response to a concerned citizen who harbors deep suspicions that no good will come of this.   I hope I am wrong; but I fear I am not.

May 18, 2015

May 18, 2015: There is no There, Ill-Suited for the Task, Nothing to Say

“…there is no there, there”.

                        ----Hillary Clinton reacting to questions about a possible investigation into the scandal surrounding her deletion of thousands of email messages while Secretary of State.

There is a scene in the motion picture “Bull Durham” in which, riding on a bus between minor league venues, ‘Meat’ tells his catcher ‘Crash’ about a dream he had the night before.  He dreamed, he said, about being out on the mound, all alone, pitching naked before the crowd.  “Yeah, I know”, replied Crash, “I’ve had that dream too.”

In the early hours of the morning I too had this dream.  I was approached by an operative of a political candidate to give the keynote address at a function honoring his service, his vision, and the work of his “foundation”.  I never met the Clintonesque candidate, but the inference was clear.  Instead I was led around by his entourage into the belly of the campaign, the “Spin Room” if you will, where very young and very busy operatives were plotting the next step or two, arranging newspaper coverage, talking with reporters, seeing to it that the headlines were favorable.  It occurred to me, rather awkwardly, while I was in tow, that I was naked from the waist down.  I found myself attired in an old wool sport jacket worn over, thankfully, an oversized sweater which I found myself constantly pulling down half way to my knees to cover my exposed extremities.  Clearly, I thought to myself, I am quite literally ill-suited for the task at hand.

“Why me?” I had asked, though the question was never answered.  An absolute nobody, a tired old curmudgeon cast adrift almost unnoticed in this sea of youthful energy and exuberance.  I represent no one, but for some reason called upon by the powers that be to play a central, albeit secondary role in the upcoming pageant.  As a young acolyte led me by the hand, I found myself wandering from work station to work station in search of some kind of narrative, some justification that I could later relate to the duly assembled.   As the clock wound down and the hour approached it was clear that I didn’t have anything to say.  I begged off, protesting that I had no time to become properly attired, which was only half the story, and awoke to greet the new morning in peaceful solitude. 

“Nothing is changed it’s still the same
I’ve got nothing to say but it’s OK” (1)

Dreams, as Freud and Dickens would tell you, are often revelatory.   The ‘Ghosts of Christmas’ make their occasional appearance conjuring images as they chant and circle one’s bed, sometimes revealing and sometimes making a mockery of revelation; one is always left to decide which it be.  What could this possibly mean?  Politics had always been my mistress; but I am now too old for flirtation, much less infatuations. This much is clear.

As I opened my eyes to the bright morning sun I searched for reflections.  It then came to me that it is all ‘blue smoke and mirrors’; and that Hillary revealed much more than she ever intended when she said: “There is no there, there.”

"I’ve got nothing to say but it’s O.K.
Good Morning."










May 16, 2015

May 15, 2015: Diminutive Trees and Aristocrats, The House of Bush, Confidence from Failures

“That no instruction should have been drawn from constant and adverse experience; that the same confidence should have repeatedly grown from the same failures”

         ------Edward Gibbon, “The Decline and Fall of the Roman Empire”

Gail Collins, writing in yesterday’s Op-Ed section of “The New York Times”, cited a week-old report from “The Washington  Post”  that John Edward Bush, known to all and sundry as ‘Jeb’, demonstrated that he too has failed to draw any instruction from constant and adverse experience.

In an interview with Faux News host Megyn Kelly Bush responded that “knowing what we know now” he would have done precisely what his brother did and invaded Iraq.  After claiming that Hillary Clinton would do the same thing, if she could go back in time, one would think that he misheard the question.  Apparently not”, wrote Collins.  “He then went on: ‘I mean, so just for the news flash to the world if they’re trying to find places where there’s big space between me and my brother, this might not be one of those.”’ (1)

Realizing that he had indeed stepped into some ‘deep doo-doo’ as his Yankee patrician father would say, Bush went into immediate damage control appearing on Sean Hannity’s radio talk show saying “I was talking about given what people knew then, would you have done it, rather than knowing what we know now. And knowing what we know now, you know, clearly there were mistakes.”  Seeking to extricate himself from this emerging quagmire he finished by declaring that asking ‘hypothetical’ questions were a disservice to our fighting men and women. 

Collins summed it up pretty well: “We had now learned” she wrote “that: 1) Jeb Bush still thinks invading Iraq was a good idea; and 2) he has inherited more of the family syntax issues than we knew.”   She also alluded to a third: ‘Jeb’ is here displaying the prevailing family trait of gross incompetence. But it isn't simply the amateurish miscues of his nascent campaign that is troubling, it is that ‘Jeb’ should retrench to the position of ‘given what we knew then...’ The point is that his brother should have known better back then.  Any acquaintance with the history of the region or with any history at all, would have counseled caution.  Anyone, except the band of yahoos who surrounded George would have known better, even a maintenance man working in an apartment complex in Athens, Georgia.     

Bush, of course, was wrong to try to involve Hillary in this muddle, but as he struggled with the ‘tar-baby’ that is Iraq and the Middle East he did bring attention to one of the central issues in the upcoming campaign for the presidency; and that is the question of lineal succession.  Already Bill’s former team is in the process of decamping from the Obama administration and taking up residence again with the Clintons in preparation for the coming restoration.   So, too, is the host of Neo-Con fools who piloted the administrations of ‘Ol Two-Cows’ into the morass of Middle East conflict.  The same faces, the same policies, the same probable outcomes.

As Clinton operative James Carville is wont to ask: “When did the Republicans last win a presidential election without having a Nixon or a Bush on the ticket”?   The answer: 1928 with Hoover and Coolidge.  With this in mind, the “Eastern Establishment”, that is the moneyed interests within the party, will not look long or hard at the clown band currently boarding the bus.  Instead all eyes will turn to the “House of Bush” in order to effect a restoration of their own. 

If one were to pose the same question to the Democrats it would be: “when last did the Democrats win a presidential election without having a Clinton or a candidate not backed by Clinton operatives?”  The answer: 1976 with Jimmy Carter and Walter Mondale.  Hillary, it will be recalled, loudly complained in one of the debates that most of her husband’s former advisors had deserted her in favor of Obama. They are now flocking back to the roost. 

This is troubling on several levels.  It is not a coincidence that ‘Jeb’ would reach out to the other perceived ‘front-runner’ for validation.  He is not here establishing credibility by demonstrating a deep understanding of the complexities of foreign affairs. He is, however, attempting to establish credibility by associating himself with the country’s other ruling family. Diminutive trees and aristocrats behave like this. The same confidence repeatedly grows from the same failures.   

















May 13, 2015

May 13, 2015: Where Is Hillary? On the Sidelines, Terms Of Debate

“Hillary Clinton is Wall Street’s least objectionable Democratic alternative.”

                        -----from “The Quotations of Chairman Joe”

 Yesterday the United States Senate by a vote of 52-45 declined to take up debate on granting the president the so-called ‘fast-track’ trade authority needed to expedite two looming trade deals, the details of both of which are currently a guarded secret.  On a near party-line vote with a couple of troubled Republicans joining nearly all the Senate’s Democrats the Senate balked in the first attempt by this administration to ram through the trade agreements.  The vote was a victory for senators Elizabeth Warren of Massachusetts, Vermont’s Bernie Sanders, Sherrod Brown of Ohio, and Al Franken of Minnesota, the most vocal critics of both the trade agreements and the ‘fast-track’ authorization. 

Bernie Sanders, the self-avowed “Democratic-Socialist” independent Senator from Vermont has recently declared himself to be a candidate for the Democratic Presidential Nomination.  A harsh critic of Wall-Street manipulations, the concentrations of power in the financial and telecommunications markets, the maldistribution of wealth, and the savaging of the social safety net, Sanders stands out as a critic of all things Republican and most things Clintonian promising to make the upcoming contest for the party’s nomination an interesting one.  The results of last week’s first Senate vote was a victory for Bernie and will enhance his stature as a bona-fide challenger to the Clinton juggernaut. 

Clinton has been campaigning for over a month now and the press has, as yet, not been allowed a single question.   Assuming a ‘low-profile’ she is at once attempting to appear as ‘one of the folks’ showing up at fast-food restaurants and similar venues to rub elbows with the ‘huddled’ masses; and, assuming the nomination if not the election, she is attempting to simultaneously be ‘above the fray’ not condescending to go down into the trenches by getting into nasty political squabbles.  This is not a sound strategy.

First, as noted in previous posts, assuming the nomination and the inevitable elevation to the presidency is a dubious path to the White House.  Ask Ed Muskie, Robert Taft, or any one of a number of presidential wannabees.   Ask Hillary Clinton herself, for she should have learned that lesson 8 years ago when the inevitability of the ‘once and future Queen’ was given rude treatment by a young upstart named Barrack Obama.  As any philosophy student will tell you, assuming one’s own conclusions is the ultimate tautology.

Secondly, Clinton’s behavior in the battle over the terms of the looming trade agreements begs the central question: just what has she ever championed? Name one piece of legislation with her name on it when she was in the Senate?  Name one policy initiative that she was able to achieve?  Once again, as a presidential campaign begins to heat up in which she figures to be a central player, we find her silently sitting on the sidelines.  She could have easily come to the support of her president in his squabble with Senators Warren and Sanders, or she could have sided with the president’s Democratic critics.  To do that she would have to chose, side with the president, Wall Street, and the national and multinational corporations driving these deals—or side with the liberal critics, labor unions, and their Democratic constituencies.  Instead she has chosen, to date, to do neither of the above but instead to remain silent in the hopes that she will not have to say anything even remotely critical of her financial backers bankrolling her campaign, in the end counting on the notoriously short memory of the electorate.  This is not leadership, by any standard definition.

2016 is obviously not 2008, nothing remains the same and, as they say two years in politics is an eternity.  But a strategy that didn’t work eight years ago is, in this observer’s view, much more likely to fail this time around.  Basing a campaign on ‘inevitability’ is bad enough, but to support it with vague bromides and platitudes about the need to ‘invest in our economy’ and ‘support the middle class’, rings hollow after the nation has witnessed Washington make a complete hash of the country’s hopes and dreams.  Hope and Change ring hollow in our ears because Washington has made a mockery of hope and change. 

Despite all the millions, indeed billions of dollars spent every election cycle, things change only on the margins.  What is remarkable is that whatever each party says about what is at risk in every election we end up, no matter who wins, with much the same thing.  Bill Clinton not only ratified Reagan but improved upon his very bad ideas.  It was under Clinton that not only were the banks freed from the last of the New Deal firewalls by repealing Glass-Steagall and allowing banks to invest in speculative markets, but Bill also signed off on the telecommunications bill that created “Faux News”, as well as the conglomerates controlled by Rupert Murdock and Clear Channel Communications.  In short, the so called ‘achievements’ of the Clinton years were classic Republican politics: deregulation, mergers and acquisitions, and an ever growing economic disparity between the top 10 percent and the rest of the country.  In this context, Obama has fit right into the pattern.  Employing Bill’s old advisers from Rubin, and Gueitner, to Summers and Rahm Emmanuel, Obama has continued the legacy of Republican economics in Democratic administrations.  The trade deals now pending before Congress are more of the same.

As stated in previous posts Hillary, in order to be successful, must break with this past.  She must put some distance not only between herself and Obama (for American’s are loath to vote in a 3rd term in any case), but by extension between herself and the policies of her husband’s administration.

Bernie Sanders is already claiming the territory and, by so doing, is moving to control the terms of the debate.  He is doing it not only by critiquing previously failed policies but by fighting breathtakingly stupid new initiatives—these pending trade agreements—and leading the fight for raising the minimum wage, breaking up the big banks, reversing the Supreme Court decision in ‘Citizen’s United’, taxing wealth, enacting environmental regulations, regulating Wall Street, helping workers to organize, and a host of liberal alternatives to the mess the conservatives have made of this country.   

Lastly, the tenor of the debate has changed in this country from one of optimism to increasingly one of desperation, frustration and anger.  “Yes, We Can!” is being replaced by“Kick Some Ass”, and until Hillary can demonstrate that she can lead the fight she risks becoming irrelevant.  The Middle Class is longing for a champion; at this early date this looks to be the old curmudgeon from Vermont.









May 8, 2015

May 8, 2015: Work of Nations, Political Will, General Welfare

Former Labor Secretary Robert Reich, writing in an article published in the spring issue of “The American Prospect”, had these observations concerning the growing maldistribution of income in the United States.  Author of several books including “Work of Nations”, “Aftershock” and “Beyond Outrage”, Reich has also produced and narrated a film entitled “Inequality for all” wherein he graphically walks us through the changes wrought on the American economy transforming what he refers to as the ‘virtuous’ business cycle into an emerging, and terrifying, ‘vicious’ cycle.  The former Harvard economics professor and current professor of Public Policy at the University of California, Berkley in his own words:

“The Political Roots of Widening Inequality”

Friday, May 1, 2015

For the past quarter-century I’ve offered in articles, books, and lectures an explanation for why average working people in advanced nations like the United States have failed to gain ground and are under increasing economic stress: Put simply, globalization and technological change have made most of us less competitive. The tasks we used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.

My solution—and I’m hardly alone in suggesting this—has been an activist government that raises taxes on the wealthy, invests the proceeds in excellent schools and other means people need to become more productive, and redistributes to the needy. These recommendations have been vigorously opposed by those who believe the economy will function better for everyone if government is smaller and if taxes and redistributions are curtailed.

While the explanation I offered a quarter-century ago for what has happened is still relevant—indeed, it has become the standard, widely accepted explanation—I’ve come to believe it overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs. And the governmental solutions I have propounded, while I believe them still useful, are in some ways beside the point because they take insufficient account of the government’s more basic role in setting the rules of the economic game.

Worse yet, the ensuing debate over the merits of the “free market” versus an activist government has diverted attention from how the market has come to be organized differently from the way it was a half-century ago, why its current organization is failing to deliver the widely shared prosperity it delivered then, and what the basic rules of the market should be. It has allowed America to cling to the meritocratic tautology that individuals are paid what they’re “worth” in the market, without examining the legal and political institutions that define the market. The tautology is easily confused for a moral claim that people deserve what they are paid. Yet this claim has meaning only if the legal and political institutions defining the market are morally justifiable.


Most fundamentally, the standard explanation for what has happened ignores power. As such, it lures the unsuspecting into thinking nothing can or should be done to alter what people are paid because the market has decreed it.

The standard explanation has allowed some to argue, for example, that the median wage of the bottom 90 percent—which for the first 30 years after World War II rose in tandem with productivity—has stagnated for the last 30 years, even as productivity has continued to rise, because middle-income workers are worth less than they were before new software technologies and globalization made many of their old jobs redundant. They therefore have to settle for lower wages and less security. If they want better jobs, they need more education and better skills. So hath the market decreed.

Yet this market view cannot be the whole story because it fails to account for much of what we have experienced. For one thing, it doesn’t clarify why the transformation occurred so suddenly. The divergence between productivity gains and the median wage began in the late 1970s and early 1980s, and then took off. Yet globalization and technological change did not suddenly arrive at America’s doorstep in those years. What else began happening then?

Nor can the standard explanation account for why other advanced economies facing similar forces of globalization and technological change did not succumb to them as readily as the United States. By 2011, the median income in Germany, for example, was rising faster than it was in the United States, and Germany’s richest 1 percent took home about 11 percent of total income, before taxes, while America’s richest 1 percent took home more than 17 percent. Why have globalization and technological change widened inequality in the United States to a much greater degree?

Nor can the standard explanation account for why the compensation packages of the top executives of big companies soared from an average of 20 times that of the typical worker 40 years ago to almost 300 times. Or why the denizens of Wall Street, who in the 1950s and 1960s earned comparatively modest sums, are now paid tens or hundreds of millions annually. Are they really “worth” that much more now than they were worth then?

Finally and perhaps most significantly, the market explanation cannot account for the decline in wages of recent college graduates. If the market explanation were accurate, college graduates would command higher wages in line with their greater productivity. After all, a college education was supposed to boost personal incomes and maintain American prosperity.

To be sure, young people with college degrees have continued to do better than people without them. In 2013, Americans with four-year college degrees earned 98 percent more per hour on average than people without a college degree. That was a bigger advantage than the 89 percent premium that college graduates earned relative to non-graduates five years before, and the 64 percent advantage they held in the early 1980s.

But since 2000, the real average hourly wages of young college graduates have dropped. The entry-level wages of female college graduates have dropped by more than 8 percent, and male graduates by more than 6.5 percent. To state it another way, while a college education has become a prerequisite for joining the middle class, it is no longer a sure means for gaining ground once admitted to it. That’s largely because the middle class’s share of the total economic pie continues to shrink, while the share going to the top continues to grow. 


A deeper understanding of what has happened to American incomes over the last 25 years requires an examination of changes in the organization of the market. These changes stem from a dramatic increase in the political power of large corporations and Wall Street to change the rules of the market in ways that have enhanced their profitability, while reducing the share of economic gains going to the majority of Americans. 

This transformation has amounted to a redistribution upward, but not as “redistribution” is normally defined. The government did not tax the middle class and poor and transfer a portion of their incomes to the rich. The government undertook the upward redistribution by altering the rules of the game.

Intellectual property rights—patents, trademarks, and copyrights—have been enlarged and extended, for example. This has created windfalls for pharmaceuticals, high tech, biotechnology, and many entertainment companies, which now preserve their monopolies longer than ever. It has also meant high prices for average consumers, including the highest pharmaceutical costs of any advanced nation.

At the same time, antitrust laws have been relaxed for corporations with significant market power. This has meant large profits for Monsanto, which sets the prices for most of the nation’s seed corn; for a handful of companies with significant market power over network portals and platforms (Amazon, Facebook, and Google); for cable companies facing little or no broadband competition (Comcast, Time Warner, AT&T, Verizon); and for the largest Wall Street banks, among others. And as with intellectual property rights, this market power has simultaneously raised prices and reduced services available to average Americans. (Americans have the most expensive and slowest broadband of any industrialized nation, for example.) 

Financial laws and regulations instituted in the wake of the Great Crash of 1929 and the consequential Great Depression have been abandoned—restrictions on interstate banking, on the intermingling of investment and commercial banking, and on banks becoming publicly held corporations, for example—thereby allowing the largest Wall Street banks to acquire unprecedented influence over the economy. The growth of the financial sector, in turn, spawned junk-bond financing, unfriendly takeovers, private equity and “activist” investing, and the notion that corporations exist solely to maximize shareholder value.

Bankruptcy laws have been loosened for large corporations—notably airlines and automobile manufacturers—allowing them to abrogate labor contracts, threaten closures unless they receive wage concessions, and leave workers and communities stranded. Notably, bankruptcy has not been extended to homeowners who are burdened by mortgage debt and owe more on their homes than the homes are worth, or to graduates laden with student debt. Meanwhile, the largest banks and auto manufacturers were bailed out in the downturn of 2008–2009. The result has been to shift the risks of economic failure onto the backs of average working people and taxpayers.

Contract laws have been altered to require mandatory arbitration before private judges selected by big corporations. Securities laws have been relaxed to allow insider trading of confidential information. CEOs have used stock buybacks to boost share prices when they cash in their own stock options. Tax laws have created loopholes for the partners of hedge funds and private-equity funds, special favors for the oil and gas industry, lower marginal income-tax rates on the highest incomes, and reduced estate taxes on great wealth.

All these instances represent distributions upward—toward big corporations and financial firms, and their executives and shareholders—and away from average working people.


Meanwhile, corporate executives and Wall Street managers and traders have done everything possible to prevent the wages of most workers from rising in tandem with productivity gains, in order that more of the gains go instead toward corporate profits. Higher corporate profits have meant higher returns for shareholders and, directly and indirectly, for the executives and bankers themselves.

Workers worried about keeping their jobs have been compelled to accept this transformation without fully understanding its political roots. For example, some of their economic insecurity has been the direct consequence of trade agreements that have encouraged American companies to outsource jobs abroad. Since all nations’ markets reflect political decisions about how they are organized, so-called “free trade” agreements entail complex negotiations about how different market systems are to be integrated. The most important aspects of such negotiations concern intellectual property, financial assets, and labor. The first two of these interests have gained stronger protection in such agreements, at the insistence of big U.S. corporations and Wall Street. The latter—the interests of average working Americans in protecting the value of their labor—have gained less protection, because the voices of working people have been muted. 

Rising job insecurity can also be traced to high levels of unemployment. Here, too, government policies have played a significant role. The Great Recession, whose proximate causes were the bursting of housing and debt bubbles brought on by the deregulation of Wall Street, hurled millions of Americans out of work. Then, starting in 2010, Congress opted for austerity because it was more interested in reducing budget deficits than in stimulating the economy and reducing unemployment. The resulting joblessness undermined the bargaining power of average workers and translated into stagnant or declining wages.

Some insecurity has been the result of shredded safety nets and disappearing labor protections. Public policies that emerged during the New Deal and World War II had placed most economic risks squarely on large corporations through strong employment contracts, along with Social Security, workers’ compensation, 40-hour workweeks with time-and-a-half for overtime, and employer-provided health benefits (wartime price controls encouraged such tax-free benefits as substitutes for wage increases). But in the wake of the junk-bond and takeover mania of the 1980s, economic risks were shifted to workers. Corporate executives did whatever they could to reduce payrolls—outsource abroad, install labor-replacing technologies, and utilize part-time and contract workers. A new set of laws and regulations facilitated this transformation.

As a result, economic insecurity became baked into employment. Full-time workers who had put in decades with a company often found themselves without a job overnight—with no severance pay, no help finding another job, and no health insurance. Even before the crash of 2008, the Panel Study of Income Dynamics at the University of Michigan found that over any given two-year stretch in the two preceding decades, about half of all families experienced some decline in income.

Today, nearly one out of every five working Americans is in a part-time job. Many are consultants, freelancers, and independent contractors. Two-thirds are living paycheck to paycheck. And employment benefits have shriveled. The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent today. In MetLife’s 2014 survey of employees, 40 percent anticipated that their employers would reduce benefits even further.

The prevailing insecurity is also a consequence of the demise of labor unions. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker earned $35 an hour in today’s dollars. By 2014, America’s largest employer was Walmart, and the typical entry-level Walmart worker earned about $9 an hour. 

This does not mean the typical GM employee a half-century ago was “worth” four times what the typical Walmart employee in 2014 was worth. The GM worker was not better educated or motivated than the Walmart worker. The real difference was that GM workers a half-century ago had a strong union behind them that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they would be unionized if they did not come close to matching the union contracts.

Today’s Walmart workers do not have a union to negotiate a better deal. They are on their own. And because less than 7 percent of today’s private-sector workers are unionized, most employers across America do not have to match union contracts. This puts unionized firms at a competitive disadvantage. Public policies have enabled and encouraged this fundamental change. More states have adopted so-called “right-to-work” laws. The National Labor Relations Board, understaffed and overburdened, has barely enforced collective bargaining. When workers have been harassed or fired for seeking to start a union, the board rewards them back pay—a mere slap on the wrist of corporations that have violated the law. The result has been a race to the bottom. 

Given these changes in the organization of the market, it is not surprising that corporate profits have increased as a portion of the total economy, while wages have declined. Those whose income derives directly or indirectly from profits—corporate executives, Wall Street traders, and shareholders—have done exceedingly well. Those dependent primarily on wages have not.



The underlying problem, then, is not that most Americans are “worth” less in the market than they had been, or that they have been living beyond their means. Nor is it that they lack enough education to be sufficiently productive. The more basic problem is that the market itself has become tilted ever more in the direction of moneyed interests that have exerted disproportionate influence over it, while average workers have steadily lost bargaining power—both economic and political—to receive as large a portion of the economy’s gains as they commanded in the first three decades after World War II. As a result, their means have not kept up with what the economy could otherwise provide them. 

To attribute this to the impersonal workings of the “free market” is to disregard the power of large corporations and the financial sector, which have received a steadily larger share of economic gains as a result of that power. As their gains have continued to accumulate, so has their power to accumulate even more.

 Under these circumstances, education is no panacea. Reversing the scourge of widening inequality requires reversing the upward distributions within the rules of the market, and giving workers the bargaining leverage they need to get a larger share of the gains from growth. Yet neither will be possible as long as large corporations and Wall Street have the power to prevent such a restructuring. And as they, and the executives and managers who run them, continue to collect the lion’s share of the income and wealth generated by the economy, their influence over the politicians, administrators, and judges who determine the rules of the game may be expected to grow.

The answer to this conundrum is not found in economics. It is found in politics. The changes in the organization of the economy have been reinforcing and cumulative: As more of the nation’s income flows to large corporations and Wall Street and to those whose earnings and wealth derive directly from them, the greater is their political influence over the rules of the market, which in turn enlarges their share of total income. 

The more dependent politicians become on their financial favors, the greater is the willingness of such politicians and their appointees to reorganize the market to the benefit of these moneyed interests. The weaker unions and other traditional sources of countervailing power become economically, the less able they are to exert political influence over the rules of the market, which causes the playing field to tilt even further against average workers and the poor.

Ultimately, the trend toward widening inequality in America, as elsewhere, can be reversed only if the vast majority, whose incomes have stagnated and whose wealth has failed to increase, join together to demand fundamental change. The most important political competition over the next decades will not be between the right and left, or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground, and economic elite that refuses to recognize or respond to its growing distress.”

[This article is from the spring issue of “The American Prospect.”] (1)

Two important points emerge from any study of economics.  The first is that all wealth is socially produced.  One simply cannot create wealth in a vacuum.  As an example if Bill Gates’ “Microsoft” corporation consisted of one employee—namely Bill himself—working out of the back of his garage the chances are near certain that he would find his business as being a part-time affair.  Certainly its net value would be measured perhaps in the thousands rather than the billions of dollars.  For real wealth to accumulate requires an infrastructure from which one can draw a skilled labor force and through which one can deliver goods and services.  Foremost it requires a society to which one can deliver the goods.  Wealth, accordingly, is recognition by that society of the value of the goods produced or the services rendered and the entrepreneur is, accordingly, recognized and rewarded with a economic and social medium called money.  Money being nothing more than a medium of social exchange, value for value.  It can be measured in gold (worthless to beings other than humans), oil (likewise) or some other commodity as in a barter system or, in more advanced economies in currency.  The very term ‘currency’ implies a social medium by definition.  Economists ranging from Adam Smith to Karl Marx are in agreement on these points; wealth is created by labor and distributed via social means.

The second point is the one the professor is here addressing and that is that how this wealth gets distributed is determined by the rules of the ‘game’, which, in turn, is determined by who writes the rules.  As noted above for the last 40 years the rules have been and are now being rewritten to favor wealth over work and to reward the most well-to-do at the expense of the larger society.  This is not happenstance it is intentional and just as was done in the heyday of the ‘Gilded Age’ the laws are increasingly bent to favor corporations who manage the wealth and punish the workers who create the wealth.

It wasn’t always this way, as Professor Reich reminds us in several of his publications.  Previously, during era’s of reform the country achieved a much more ‘balanced’ distribution of wealth so that it was really true when John Kennedy reminded us that a “rising sea raises all boats”.  Today, paraphrasing Kennedy, one would amend his observation to read “a rising sea raises all yachts”, everything else is disappearing beneath the waves as the middle class goes under.  

It follows from this that the way we distribute wealth is a consequence of Political Will; and as the Professor has pointed out the current obscenity that confronts America today could not be possible without changing the rules of the game, so it is clear that in order to restore the middle class the people must rise, organize and through political action rewrite the laws under which our economy will operate.  Until we organize politically and change the laws to enable workers to unionize, tax wealth at a greater rate than work (since work produces wealth in the first place), establish a strict regimen of economic and environmental regulations we will continue the headlong process of hollowing out not only the national economy but our very republic in the bargain; for a republic that does not serve the greatest needs of the greatest number fails in one of its most cherished goals.  That is why in the preamble to the Constitution our founding fathers charged this government with the task of, among other things, to ‘promote the general welfare’.    No republic worth the name can survive unless it meets the needs of its people. 









May 4, 2015

May 4, 2015: Commitment to Folly, Experience Powerless to Instruct, In all the Papers

“That no instruction should have been drawn from constant and adverse experience; that the same confidence should have repeatedly grown from the same failures”

          ------Edward Gibbon, “The Decline and Fall of the Roman Empire”

As noted in the previous post, Gibbon’s observations concerning Europe’s persistent commitment to failure and folly reveal a truly troubling aspect of human nature.  The internal logic governing every conflict in which sacrifice must be vindicated by more sacrifice quickly assumes command of the commanders.  The conflict in short order assumes its own justification often pushing the conflict past the ‘sublime’ into the ‘ridiculous’, conflicts that can transcend years, decades, even centuries.  What is remarkable is that so little instruction is drawn from the experience.  Experience, it appears, does not teach; lessons go unlearned.

A few brief recent examples may be instructive concerning the changing nature of war and the lessons unlearned.  The American Civil War was a bloody affair, killing nearly 600,000 men as a result of poor sanitation and treatment of wounds, but also because the tactics of war were not equal to the innovations in weapons and armament.  With the introduction of the mini-ball and later the repeating rifle weapons became much deadlier at longer ranges producing horrendous casualties whenever a general ordered a frontal assault on an entrenched defensive position.  The Federals suffered great loss at Fredericksburg, Lee and his Confederates were to do the same a few months later at Gettysburg.  Yet as late as 1864 we find General Sherman making just such an assault at Kennesaw Mountain, Georgia with the wholly predictable results. 

One would think that lessons would be learned.  But even though the European powers had observers on both sides of the line during the American Civil War, as well as the British engagements in the Boer conflict in South Africa later in the century, the lessons went unheeded.  Accordingly throughout the First World War the commanding Generals could think of no better strategy than to amass thousands of men and have them walk in tight formations into the teeth of machine gun fire.  One would assume that one or two encounters would be sufficient to teach a lesson that should have been learned decades earlier by simple observation.  Experience, it appears, proved powerless to instruct, and the world was left to witness attack after attack for four long years.  At the Battle of the Somme alone the British suffered 60,000 casualties on the first day, but the battle raged on for another two months.  Repeatedly employing the same tactics both sides suffered losses of over a million men before it was over, with very little ground gained or lost.  As late as 1917 at Ypres, the British force advanced again this time gaining only a few miles at a cost of a quarter of a million men before they were driven back.  In the end it wasn’t the military that found a solution but the civilian leadership that demanded the introduction of tanks and mortars in a last ditch effort to break the stalemate.  Such is the folly of war.

April 30 marked the 40th anniversary of the fall of Saigon.  From the beginning of the recent conflicts in the Middle East we have been assured by our leadership, citing the examples of Algeria and Viet Nam, that we will win these ‘wars’ against an ever growing insurgency throughout the region.  From Afghanistan to Iraq to Yemen and Syria the Middle East is exploding before our very eyes as the insurgent forces gather strength.  Still we employ many of the same tactics, losing in the bargain the hearts and minds of those in the region.  Not only have we failed to learn the military lessons, but we failed to learn the more important historical lesson: that as is in the case of the Crusades so it was with Algeria and Viet Nam.  We lost those conflicts, it was in all the papers. Experience has proven powerless to instruct.