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Jamie Galbraith on Inequality and Instability

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Real News Network interviewed Jamie Galbraith on his new book, Inequality and Instability, in which he argues the two phenomena are linked. This extract will give you a flavor of the discussion. Per Galbraith:

There has been a prevailing doctrine, a dogma in Europe, which holds that Europe, which has suffered from relatively high unemployment since the early 1970s compared to the United States, was suffering that unemployment because it was holding on to strongly egalitarian policies, strongly social democratic or even socialist economic institutions.
And we looked at that problem from a couple of different perspectives. One was to look at the relationship between unemployment and inequality inside the European countries. And what we found is that in fact there’s just no basis for the claim that I just described….And the fact on the ground is that countries which are more unequal in Europe have higher unemployment, much higher unemployment than the more egalitarian countries…

And then the question was: well, what about the comparison between Europe as a whole and the United States? The Europeans have been lectured for decades by their orthodox economists that what they need is a more flexible labor market like the United States and then they will have lower unemployment. And what we found, in contrast, is that this overlooks the fact that Europe has been integrating and has been coming together as a single continental economy. And when you do that, when you take what had been isolated labor market situations and bring them into direct interaction with each other, you have to measure the inequality on the new basis, on the new foundation. And nobody had done that. And what we found was that in fact when you do that, European inequality, taking into account the differences that exist between, let’s say, Germany and Poland or between Norway and Portugal, is actually larger in wages than it is in the United States. And that was a very interesting, striking finding, which then basically said that the data between the United States and Europe further support the argument, the basic argument that I would make, the basic argument that we would come to, which is that the more egalitarian system measured at the right level will tend to have lower unemployment.


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24 comments

  1. Chunga's Revenge

    I’ve been told that if you count the USA’s burgeoning prison population as “unemployed” (something that’s not done now), we are in virtual lockstep with eurozone unemployment levels.

    1. Jim Haygood

      Good point. Not only are those in the 2.5 million-strong Gulag unemployed, they are also several times more costly to maintain than those receiving unemployment benefits.

      Spend another 5% of GDP on the military — most of it wasted on global domination — and after a few decades, you’re frickin’ poor, not to mention more unequal.

      The Washington D.C. metro area sports the most educated and affluent urban population in the country. But they just ain’t very damned smart.

      1. Tyranny of Consumption

        Prisoners are also being used to turn out office furniture, in other words, “Justice” has created an underclass of slaves.
        “Sweatshop labor is back with a vengeance. It can be found across broad stretches of the American economy and around the world. Penitentiaries have become a niche market for such work. The privatization of prisons in recent years has meant the creation of a small army of workers too coerced and right-less to complain.” Needless to say Banksters like Wells are ‘all over that’. – fraser/freeman

      2. Crazy Horse

        The analysis of the role of the imperial military in distorting both national priorities and employment should be brought to the forefront. Go to San Diego, Norfolk, Bremerton and a hundred other cities and you will find one dominant employer– the war machine– which supports the fast food restaurants and shopping malls that spread out from it.

        If the US had a military system the size of Canada’s, rather than as big as the entire rest of the world it would certainly be a different society. Why, we might even have to spend money on infrastructure that is sustainable rather than designed to blow up,create dead bodies and Shock & Awe, and be instantly obsolete.

        1. scraping_by

          Reading Andrew Bracevich’s The Limits of Power, and he makes much the same point. The cost of the military to support the American Empire is a drain on the economy, though his view is it’s the cost of the American economy. That is, America’s outsized use of world resources, especially oil, is supported and defended by the military, who drain the American economy.

          Others have noticed the Empire is a self-referential system, since the resources to fight the foreign wars come from foreign countries. The rest of us just have to pay for the round trip.

          It’s not easy to say if this large-scale armed robbery is a net gain or not. The costs are, indeed, more than those measured in dollars.

          1. Brian T Carliver

            Unfortunately, the owner/ruler class, their foundations and think tanks have decided that this is the best way ta’ go. Even “Liberal Lion” Sanders has protected Vermont from dangeous maple syrup thieves, with a base stocked with F35s.

          2. Nathanael

            The funny thing is how much of the military is pure pork, like the airplanes in Vermont. It’s gonna be like the stuff which Saudi Arabia is stockpiling because the royal family is afraid to let its own military have them (for fear of a coup). (Incidentally, there’s a time bomb waiting to go off.)

      3. LeonovaBalletRusse

        JH, Hannah Arendt is quoted in YouTube video: “A Brief History of Neoliberalism by David Harvey 1/5″ (ProFreeSpeech on Jul 17, 2007) — 2007! —

        “Imperial adventures abroad and tyranny at home go hand in hand.”

        David Harvey remained perplexed after writing “The New Imperialism.” He followed through with “A Brief History of Neoliberalism.”

        So, Hannah’s Totalitarianism “by any other name smells as sweet” to the global 1%? Obama “knows his place” as “Commander in Chief” of the Global Imperial Military and Polizei. As for “pepper spray” table to face, think TABASCO Empire profits from salt to peppers to oil in a Closed DNA System at AVERY Island, Louisiana; together with the Global Oil/Oil Services “Trust” and BP/Shell in the Gulf of Mexico paving the way for Louisiana’s de-population in favor of O&G profits unencumbered–a long-term goal of BIG “All your land is belong to us” privateers). The RUIN of water/land the People’s livelihood are INTENTIONAL, from drilling to fracking, making “Lebensraum” for the .01%.

        The People and Land of the Gret Stet of “Resource-Cursed” Louisiana are but SACRIFICES to the gods of private profit and their high priests in the “Privatized States of America.” Louisiana Land is their Inner Temple. Next?

        As a British professor has said of Sociopaths/Psychopaths in Power: They don’t care about us. Why should we care about them?

        William K. Black, Michael Hudson, Steve Keen point the way to go in reality, if civilization for the 99% is to continue to exist. The complete capture, via financial “coup d’etat” (Joseph Vogl at INET 2012), of NationState Governments by the 1% (.01% + .99% Agents du jour) — in order to seize Global “Lebensraum” (of land, water, air, energy, human energy) for .01% DNA in perpetuity — must come to a dead stop.

        The Mad DNA Wars for Private Possession of Finite Resources on Earth, following the model of Infinite Growth/Resource Extraction Capitalism by the !%, must end by deliberate human choice. That is, if the “unintented consequences” of Fukushima Fallout don’t accomplish the mission of the 1% first. Are we waiting for the denouement?

  2. james hogan

    This has gotten so rotten that even the man in the street can see it quite clearly. Obviously, having all the wealth stuck at the top of the pyramid isn’t helping anyone but those at the top of the pryamid! The economy at large is suffering because of a lack of customers, and that is caused by a maldistribution of wealth. No money for the customers, no money for the merchants. Long time no good, that.

    And here’s another rattle for the establishment: The “Big Bang” just went kaput. Not only is their take on the economy wrong, but their take on the cosmos is wrong also!

    How did this happen? Well, in order for the “Big Bang” to have credence it must account for all the mass in the Universe. Gravity, it was said, held the Universe together. Gravity is a function of mass, and there wasn’t enough mass to make the theory work, so the cosmologists cobbled together a theory–a guess, really–involving some mystical “dark matter” to account for the missing mass. Now a new study has found that this mass isn’t there at all.

    In short, the establishment is still totally wrong, on almost every count. Why do we put up with this?

    1. jake chase

      The system survives because most people believe its corruption and dysfunction can be overcome by their own individual effort. By the time they realize that it can only be overcome by good luck, they are too old for collective effort. Propaganda and celebrity are the keys to keeping the whole thing going. Television pumps out nothing else 24-7. Had television existed in the Nineteenth Century there would never have been a union movement.

      1. polistra

        Jake: There isn’t an award for “Explaining The Universe In 73 Words”, but if it existed, you would have won it!

        Most concise statement of our current problems I’ve ever read.

  3. Aquifer

    Last part of part 3 says it in a nutshell – Dems, as well as Reps, are now controlled by finance and “old” Dem constituencies go along because finance has means to defeat Reps!

    What a trip – anything to defeat Reps, including shooting yourselves in your feet and other parts of your anatomy (which is why I suppose, Viagara has taken off – it’s natural counterpart has been put in the shredder ….)

    Amazing to me how easy it is to distract folks from the real issue – finance, and refocus it on a political party – when both major parties are tools of the self same finance industry …. Never underestimate the power of team sports …

    Well, folks, to me the answer is a bit obvious, altogether now:

    http://www.jillstein.org/

    1. okillbite

      Read her Green New Deal. Her Economic Bill of Rights is a nice restatement of universally recognized obligations of the state. Except her successor will demolish it all. To preserve those rights you need binding state duties and independent expert review, like you get from the CESCR. So – if she gets in, is she going to submit the CESCR for ratification?

      Her defense plan is nice, except JSOC will blow her brains out if she wins. Nobody is going to get the war machine under control without tackling impunity for criminal aggression. That means the International Criminal Court. So is she going to sign the Rome Statute?

      Good luck with financial or democracy reform. Her only shot at that is to criminalize abuse of function and trading in influence under international review in accord with the Convention Against Corruption. So, will she criminalize abuse of function and trading in influence?

      She’s right, the executive branch does not have much of a role in constitutional reform. But that doesn’t matter, since the constitution’s been set aside. Lucky for her, she has the CCPR, that’s still binding and it anyway beats hell out of the bill of rights. How is she going to execute the CCPR, as required by what remains of the supreme law of the land?

      If she answers those questions, We’ll know whether to take her seriously. However, if she answers those questions, JSOC will blow her brains out next day as a threat to this criminal regime.

      1. LeonovaBalletRusse

        okillbite, recall the Louisiana Way of Politics, gone global:

        1. First they woo you to make you their agent. If that doesn’t work:
        2. Then they buy you to make you their agent. If that doesn’t work:
        3. Then they eliminate you. If that doesn’t work:
        4. Then they ruin you. If that doesn’t work:
        5. Then they kill you.

        As William K. Black knows, perverse incentives work, Gresham’s law applies: the criminogenic environment and perverse incentives have created the .99% Global Crime Agency for the .01%. As George Walker Bush claimed: “We create our own reality.” And so they did. The political and financial Agents of Leverage for the global .01% have blown a bubble of “perfect crime” over the Earth, a bubble they are certain can never rupture. Is this reality for real?

        1. Nathanael

          Here’s the thing: the Lousiana Way of Politics only works when you’re trying to get rid of a small group of people.

          It is a mistake to create a sufficiently large group of angry people.

          Anyway, historically, assassinating the President is insanely good for the President’s agenda, the assassination of McKinley excepted.

          1. redleg

            McKinley’s assassination shows what happens when you have a VP with a pair of clanging brass ones. They didn’t want TR to be VP, but put him there to make him go away.
            A similar thing happened with VP Chester Arthur and the eventual reform of the US Civil Service (notably the US Customs and tax collection) once that president (I forget which one – Garfield?) was assassinated.

  4. bmeisen

    “…the world’s one remaining solvent class, American households.”

    With all due respect I’d like to know how he measures solvent here. It may have been wiser to say

    “…the world’s one remaining solvent and vulnerable class, American households.”

    While much of the vulnerablility arose via de-regulation the cultural default of Disney-individualism did it’s part in debilitating the lovely victim.

  5. Chuck Roast

    Hey, I love Jamie, but why can’t he just talk about the Gini-coefficient. It’s widely accepted, and to the extent that it continually puts the US as an outlier in inequality in the advanced economies – it’s accurate.

    1. Calgacus

      His point is that this widely accepted belief is inaccurate, misleading.

      “European inequality, taking into account the differences that exist between, let’s say, Germany and Poland or between Norway and Portugal, is actually larger in wages than it is in the United States.”

      In other words, look at Gini for Europe as a whole, and it is a worse outlier than the USA!

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