Wednesday, October 12, 2011

The Opinion Pages

To be clear, it's not as if the protesters are friendly toward the financial industry. But asked what's driving them, many go far beyond Wall Street, and bring up the widening gap between rich and poor, and the increasing stress being placed on America's middle- and working-classes, not to mention the plight of the roughly 26 million Americans who are now out of work. "There's an incredible imbalance of wealth and power in the world," a man who called himself Ox told me in Zuccotti Park last week, adding that he planned to stay there "as long as it takes to develop a system of democracy that can endure."

This broader worry over economic inequality is a response to real developments. As we've reported, since 1979 most groups have seen their incomes barely budge, while income for the top 1 percent of earners has nearly quadrupled. A host of similar statistics tell the same basic story. That growing imbalance is what protesters are getting at with the slogan "we are the 99 percent"--and it's why they'll march uptown today to demonstrate outside the homes of some of the city's richest people, including several who aren't players in the financial industry.

Here’s a short (2 minute 30 second) effort to rebut the seven biggest whoppers now being told by those who want to take America backwards. The major points:

1. Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans’ wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke.

2. Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since. (Don’t believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)

3. Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody’s economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.

4. Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They’ll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.

5. Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that’s because the nation’s health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid’s bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.

6. Social Security is a Ponzi scheme. Don’t believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800.

7. It’s unfair that lower-income Americans don’t pay income tax. Wrong. There’s nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.
Demagogues through history have known that big lies, repeated often enough, start being believed — unless they’re rebutted. These seven economic whoppers are just plain wrong. Make sure you know the truth – and spread it on.

The paper’s central premise is something I’ve been hearing from Alpert for more than a year now: this time, it really is different. What he and his co-authors mean by that is that the bursting of the debt bubble three years ago was not just a severe example of the ups and downs that are an inevitable part of American capitalism. Rather, it was the ultimate consequence of the modern global economy. Chief among the changes that have taken place is the integration of China, Russia, India and other countries into the global economic mainstream. The developed world once had maybe 500 million workers. Today, say the authors, we’ve added another two billion people to the global work force.

That change alone has had a great deal to do with the stagnant wages, income inequality and the oversupply of labor in America that was masked by rising home prices and access to credit. The bursting of the bubble exposed how much the American economy depended on cheap credit. Now that the curtain has been pulled back, cheap credit alone can’t fix our problems. The country is in a deflationary cycle that is very difficult to get out of: as wages decrease (or more workers become unemployed), people become afraid to spend. Assets like homes drop in value. Businesses react by lowering prices and laying off yet more workers — which only triggers a new round of deflation. The only thing that doesn’t change is the unsustainably high debt that was accrued during the bubble.

Paul Gilding, the Australian environmentalist and author of the book “The Great Disruption,” argues that these demonstrations are a sign that the current growth-obsessed capitalist system is reaching its financial and ecological limits. “I look at the world as an integrated system, so I don’t see these protests, or the debt crisis, or inequality, or the economy, or the climate going weird, in isolation — I see our system in the painful process of breaking down,” which is what he means by the Great Disruption, said Gilding. “Our system of economic growth, of ineffective democracy, of overloading planet earth — our system — is eating itself alive. Occupy Wall Street is like the kid in the fairy story saying what everyone knows but is afraid to say: the emperor has no clothes. The system is broken. Think about the promise of global market capitalism. If we let the system work, if we let the rich get richer, if we let corporations focus on profit, if we let pollution go unpriced and unchecked, then we will all be better off. It may not be equally distributed, but the poor will get less poor, those who work hard will get jobs, those who study hard will get better jobs and we’ll have enough wealth to fix the environment.

“What we now have — most extremely in the U.S. but pretty much everywhere — is the mother of all broken promises,” Gilding adds. “Yes, the rich are getting richer and the corporations are making profits — with their executives richly rewarded. But, meanwhile, the people are getting worse off — drowning in housing debt and/or tuition debt — many who worked hard are unemployed; many who studied hard are unable to get good work; the environment is getting more and more damaged; and people are realizing their kids will be even worse off than they are. This particular round of protests may build or may not, but what will not go away is the broad coalition of those to whom the system lied and who have now woken up. It’s not just the environmentalists, or the poor, or the unemployed. It’s most people, including the highly educated middle class, who are feeling the results of a system that saw all the growth of the last three decades go to the top 1 percent.”

Not so fast, says John Hagel III, who is the co-chairman of the Center for the Edge at Deloitte, along with John Seely Brown. In their recent book, “The Power of Pull,” they suggest that we’re in the early stages of a “Big Shift,” precipitated by the merging of globalization and the Information Technology Revolution. In the early stages, we experience this Big Shift as mounting pressure, deteriorating performance and growing stress because we continue to operate with institutions and practices that are increasingly dysfunctional — so the eruption of protest movements is no surprise.

Yet, the Big Shift also unleashes a huge global flow of ideas, innovations, new collaborative possibilities and new market opportunities. This flow is constantly getting richer and faster. Today, they argue, tapping the global flow becomes the key to productivity, growth and prosperity. But to tap this flow effectively, every country, company and individual needs to be constantly growing their talents.

“We are living in a world where flow will prevail and topple any obstacles in its way,” says Hagel. “As flow gains momentum, it undermines the precious knowledge stocks that in the past gave us security and wealth. It calls on us to learn faster by working together and to pull out of ourselves more of our true potential, both individually and collectively. It excites us with the possibilities that can only be realized by participating in a broader range of flows. That is the essence of the Big Shift.”

Yes, corporations now have access to more cheap software, robots, automation, labor and genius than ever. So holding a job takes more talent. But the flip side is that individuals — individuals — anywhere can now access the flow to take online courses at Stanford from a village in Africa, to start a new company with customers everywhere or to collaborate with people anywhere. We have more big problems than ever and more problem-solvers than ever.

So there you have it: Two master narratives — one threat-based, one opportunity-based, but both involving seismic changes. Gilding is actually an optimist at heart. He believes that while the Great Disruption is inevitable, humanity is best in a crisis, and, once it all hits, we will rise to the occasion and produce transformational economic and social change (using tools of the Big Shift). Hagel is also an optimist. He knows the Great Disruption may be barreling down on us, but he believes that the Big Shift has also created a world where more people than ever have the tools, talents and potential to head it off. My heart is with Hagel, but my head says that you ignore Gilding at your peril.

You decide.
Okay, I'll decide. Gilding is correct, John Hagel III is full of shit. Somehow, I'm skeptical about the opinions of a Harvard-educated financial advisor with a number after his name. He shares the same myopia as most of the "opinion makers" incuding Friedman himself - he lives in the priviliged bubble, so he sees everything coming up roses. The only connection to ordinary people is read in econometrics journals. His idea of the Brave New World is based on abstract theory that can easily be shown to be untrue. Jared Diamond in Collapse notes that one of the hallmarks of collapse is how isolated the leaders are from the impact of their decisions. I don't think we've ever had leaders and opinion makers more isolated than they are now. If nothing else, the occupy Wall Street protests have shown these people that there are millions of peasants outside the gates carrying torches who are not happy with the way things are going, and that their theories are not working out as planned. See Reich's commentary for details.

But don't take my word for it, look around you. So you can take classes from Stanford in sub-Sahran Africa. And then what? Probably head to a slum to look for work. People go to Stanford more for connections and credentials than education. I mean, come on, does anyone besides people in the investor class bubble like Mr. Hagel beleive this shit anymore? Most of these individuals starting "innovative" companies are already wealthy and priviliged. The race to the bottom does not improve class mobility. Look, all he's talking about doing is what's already been going on for the past couple decades. How's it turned out? Let's ask the unemployed in Athens, or check in with Chinese villagers losing their farmland, Israelis protesting the cost of living, Indian farmers committing suicide, youths rioting in London, Indignados occupying public squares in Spain, and Mexicans slaughtered in drug violence. I'm sure more growth and internet connections will make that all go away, right? Information has always been readily available to the Third World; remember something called books? Delivering it on a computer doesn't make it any better. As one commenter puts it:

I'm tired of the "a villager in Africa can now attend Stanford" anecdote that corporatists love to use ... It highlights one favorable new aspect -- more broadband access (which is still less than 30% in most of Africa, I believe) -- and ignores the many obstacles that still exist as real barriers, namely poverty, education, social instability, etc. As if the only thing holding these villagers back was an internet connection. That's such a delusional view of the world it's almost laughable -- if these same people weren't trying to convince the rest of us it were true. am I wrong? Check with Stamford to find out how many poor African residents are currently enrolled remotely ...

I could go on shredding this pablum, but, as usual, the commentors toThe Times do it as well as I could:

Some highlights:

See, this is what the protesters are protesting: the top 1% are hoarding money, but out of ideas. So Friedman's idea of enlightenment (and earning his paycheck) involves spinning out 2 divergent ideas, presenting evidence for neither, and letting the public decide?

FWIW, the idea that we are all equally interconnected, divided only by our ability to use the system with our wits, is absurd. Many people in the inner cities (and rural areas) of our own country are cut off from easy access to information. The "best informed" are not often running things (take a look at Congress), but the best connected in the sense of cronyism. We are in the midst of a great awakening from complacency, from the peasants being told what's good for them, and hopefully, from the theft of our future. Thomas Friedman has no idea whatsoever.

John Hagel, a/k/a John Hagel III, evidently sees the world through the narrow lenses of his own limited experience; that is, he doesn't know anybody outside the business world & he can only conceive of society in terms of some ideal business model. Another way to put it: he just doesn't get it.

The vast majority of us live in the real world, a world where opportunities are shrinking for us and our children, where our own "portfolios" are slimmed way down from what we anticipated, and where our best efforts are never going to get us out from under.

What Hagel really doesn't get, though, is that we have real lives outside the economy. "Work" is a place we go; it is something we do as responsible members of society and as members of a family group. It is not the be-all and end-all of our lives. It is usually kind of a pain, in fact. We go to our cubicles or our assembly plants not because that seems like fun but because what we do in those little boxes and plants is supposed to make the rest of life pretty satisfying. We can go out to dinner, watch a game on a big ole teevee, buy a nice house and a shiny car, take an occasional swell vacation, save for the kids' college.

Only that isn't happening today. Work used to be a means to make our real lives -- our lives with our family and friends -- better. Not anymore. Today work is drudgery with too little payoff. Our hours are longer, our pay is lower, our bosses and meaner (and richer). But if work becomes intolerable, that's too bad -- we know there's nothing else out there but the unemployment line.

That is what people are protesting. In the U.S., whether Tea Partiers or Occupy Wall Street, people know that work was seldom its own reward; now it no longer provides for outside rewards. Work has turned us into serfs of the powerful and sapped us of hope for escape.

So, yeah, Gilding gets it right. Hagel -- he needs to take a walk in our shoes.

The Great Shift? For 99 percent of Americans, and for that matter,for the vast majority of all the occupants of Planet Earth, it's more like The Great Shaft.

For an historic perspective on what happens when the bulk of a society's wealth is concentrated at the very top, read "The Great Collapse: How Societies Choose to Succeed or Fail". Author Jared Diamond outlines case after case of the crumbling of civilizations in which the wealth is not equitably distributed. Norse Greenland failed because settlers failed to adapt to their environment and spent all their resources and manpower in sending tribute to their church and king. The Mayans bit the dust when all the worker bees spent every living hour enriching their overlords to the detriment of all else, even to the point of neglecting themselves. Leaders of these doomed societies also died, although they were probably the last ones standing. Being rich and separating oneself from society can be a lonely business, ultimately.

One fallacy being bandied about in this time of American economic depression is that if we only have faith, "technology" and "entrepreneurship" will solve all our problems. We need to consider that such vaunted technology has a tendency to create problems even as it solves them. Example: gas extraction through "fracking" can solve our energy problems, yet contaminate our drinking water. The proposed tar sands pipeline from Canada has the potential of poisoning a vast underground aquifer, just for the sake of profiting corporations.

Luckily for us, the disenfranchised and unemployed Occupiers also happen to be educated. Let the Great Disruption begin, because any shift seems destined to benefit only those few at the top. Perhaps this disruption is not too late to halt the decline of humanity -- not only in America, but wherever people are oppressed. The common people are usually a lot more resourceful than their leaders give them credit for.

Having worked for decades for big four accounting firms, I would like to caution Mr. Friedman and his readers that there is a difference between insightful, well researched intellectual content and Consultant's Marketing Blurbese designed to sell high priced strategy implementation contracts to over paid corporate executive professionals who have little hands on work experience in the industry from which they are currently charged with extracting short term cash flow at the expense of long term growth.

If we are all lucky, this is the beginning of the great enlightenment. People may finally be coming aware of the fact in a world of 6.5 billion people fewer than a couple of million are dictating banking, government, business and industry and essentially controlling much of what transpires around the globe. Wars are good for business and industry, profits are high. Fossil fuel controlled by less than 100 companies worldwide controlling energy earning obscene profits while they partake in environmental destruction. People being ruled by minorities through the use of force and violence. This day was inevitable, that people would rise, stand up and scream I'm mad as ---- and I'm not going to take it anymore. Except now they are doing it. Capitalism brought it to themselves, dictators did the same, religious fundamentalist do it to themselves, all hypocrites with no moral or ethical fiber in their soul. What goes around comes around, those guilty of the abuse and taking advantage of others for profit are about to see their world come tumbling down all around themselves. Karma kid!

Thomas McMahon

Millis Ma

The problem in this piece is summarized in one sentence: ""... individuals — individuals — anywhere can now access the flow to take online courses at Stanford from a village in Africa." Really? That seems optimistic indeed. It also places the onus squarely on the shoulders of the "have-nots." It is entirely up to them to better their lot. Nowhere in the piece does Mr. Friedman address the behavior of the "haves." They are fighting to the death (sometimes literally) to preserve their privileges, even if it means killing unarmed demonstrators or ruining the larger economy to keep their favorable tax breaks and their fat portfolios. I, for one, am not optimistic. Inequality of this sort can (and has) become entrenched in many societies throughout history.

Optimistically, I hope it will be the "Big Shift," but not exactly the one that Hagel and Brown, or Friedman, have in mind. We've tried laissez faire capitalism and international free markets, and while they can bring immense wealth to a few, without some kind of regulations, government oversight, and spreading of the wealth, the many are generally being left behind. In the U.S. at any rate, the quality of life is decreasing for the 90 percent and barely holding its own for the next 9 percent. Is this the kind of society we want, where the top one percent come out way,way ahead?

I think we should instead aim for a society where everyone can have a decent standard of living and not be ground down for the sake of a few. This is what the Occupy Wall Streeters and other are saying: they want a life with dignity and are tired of seeing banks, corporations, and the very rich buying politicians and abusing power while the many become their unwilling victims. In other words, we need a just society where everyone is treated fairly. Not everyone is born or grows up with the same advantages, and the role of government is to give the least among us a reasonable chance in the game of life.

So I'm hoping that there will be a Big Shift not only toward more global connection and innovation, but also toward more truly democratic government with progressive ways to care for the needs of society. That means more jobs with dignity, a decent social safety net, more concern about the longer-term health of our increasingly populated planet, and a government that is not owned by the powerful few but listens to the voices of the many.

Another angle is to ask, "Why haven't people been doing this protesting for years?" The answer is, "toys."

The last couple decades have been the "New toy" decades, whereby people have been satiated by their tricky new cars, electronics, and most of all nearly free-for-the-taking new homes. The cars have become passe', the electronics taken for granted, and the homes have become balls & chains.

It is up to the powers that be to either come up with a set of fresh new toys to distract the public, or suffer their wrath. I suggest single payer health care, but anything out of Star Trek would work just as well.

The historian Jacque Barzun predicted a future where the elite and the small managerial class who manage the technology will rule over an underclass that is provided basic needs and sensationalist entertainment. So if you think of it that way, both of your authors are right. One focuses on the future of the underclass, and the other focuses on the upper class that is able to tap into and manage "the flow."

In other words - capital, technology, and the oversupply of labor that is globalization results in a wealthy elite and a small managerial class lording it over cheap labor. To keep cheap labor from rioting, they are fed bread and circuses.

Jobs, jobs, jobs, jobs, jobs. That is all we ever hear.

You might be onto something, Tom. I believe the "job paradigm" we have been living under for generations during the industrial age may have finally run its course. A job is an incredibly inefficient mechanism for a person to do useful work for society and to spend one's life. But it has become THE all important thing in our lives. The job is an essential part of the consumption treadmill. Jobs require commuting and the fuel that consumes. Jobs require work clothes, time to prepare for them, time to unwind from them, not to mention the disruption and psychological stress they cause to people every day.

And we are told to "get any job!" hold onto it till for awhile you find something better. In this world, "for awhile" usually turns into "for ever". The USA is becoming a nation of serfs.

I look forward to a world where there are no jobs and no unemployment with people are doing useful work that suits them in a balanced way that respects natural rhythms. But unfortunately, society, especially in the USA, lacks the imagination to see that.

I saw a headline this week that read: "CEO Who Eliminated Thousands of Jobs Gets $37 Million Retirement Package." I can't tell you the name of the CEO or the company, let alone those of any of the thousands of American workers that he financially liquidated, because I didn't have the heart to read the article. Yeah, yeah, same old story, was what I thought. That's how it goes in the capital of finance capitalism, "free trade", obscene CEO compensation, and the further enrichment of the 1%. I'm with Gilding.

Tom don't worry so much about which model fits. Instead think in terms of which model serves society best.

If you go further back, to John Locke, you will uncover the social contract. Yes, it's the same contract that you and I signed, tacitly, when we agreed to be productive citizens. Some of us, i.e., the greedy on Wall Street and those leading corporations --- the rich--- have forgotten the contract. They take from the best minds in America and apply them for profit. In manufacturing, the trunk of any successful industrial society, sell back the products while manufacturing in China and elsewhere. WE nurtured those minds in our schools and in our society providing the infrastructure that allowed them eventually to produce in corporate laboratories. In return, corporations have horded money overseas.

Instead of worrying about models, we need to strike a path that best serves our society. The Germans have worked it out. Let’s study successful societies, like theirs, and adapt a system that promotes the best in individual growth while maintaining a safety net that protects the unfortunate.

For my country, I hope the shift is not toward Fascism, even though the conditions seem woefully fertile: a widespread and growing dissatisfaction with our existing economic and apparently crippled political institutions; massive unemployment with an exploding financial disparity between the super-rich and the rest; an increased willingness to trade civil rights for a functioning and stable environment; and a yearning for a charismatic father figure who, with dictatorial powers, could avoid the inevitable tides of change.

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