Why Don’t the Unemployed Get Off Their Couches?

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By Peter Van Buren, who blew the whistle on State Department waste and mismanagement during Iraqi reconstruction in his first book, We Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the Iraqi People. He writes at his blog, We Meant Well and has a new book Ghosts of Tom Joad: A Story of the #99Percent has just been published. Cross posted from TomDispatch

Last year eight Americans — the four Waltons of Walmart fame, the two Koch brothers, Bill Gates, and Warren Buffett — made more money than 3.6 million American minimum-wage workers combined. The median pay for CEOs at America’s large corporations rose to $10 million per year, while a typical chief executive now makes about 257 times the average worker’s salary, up sharply from 181 times in 2009. Overall, 1% of Americans own more than a third of the country’s wealth.

As the United States slips from its status as the globe’s number one economic power, small numbers of Americans continue to amass staggering amounts of wealth, while simultaneously inequality trends toward historic levels. At what appears to be a critical juncture in our history and the history of inequality in this country, here are nine questions we need to ask about who we are and what will become of us. Let’s start with a French economist who has emerged as an important voice on what’s happening in America today.

1) What does Thomas Piketty have to do with the 99%?

French economist Thomas Piketty’s surprise bestseller, Capital in the Twenty-First Century, is an unlikely beach read, though it’s selling like one. A careful parsing of massive amounts of data distilled into “only” 700 pages, it outlines the economic basis for the 1%-99% divide in the United States. (Conservative critics, of course, disagree.)

Just in case you aren’t yet rock-bottom certain about the reality of that divide, here are some stats: the top 1% of Americans hold 35% of the nation’s net worth; the bottom 80%, only 11% percent. The United States has such an unequal distribution of wealth that, in global rankings, it falls among the planet’s kleptocracies, not the developed nations that were once its peers. The mathematical measure of wealth-inequality is called “Gini,” and the higher it is, the more extreme a nation’s wealth-inequality. The Gini for the U.S. is 85; for Germany, 77; Canada, 72; and Bangladesh, 64. Nations more unequal than the U.S. include Kazakhstan at 86 and the Ukraine at 90. The African continent tips in at just under 85. Odd company for the self-proclaimed “indispensable nation.”

Piketty shows that such inequality is driven by two complementary forces. By owning more of everything (capital), rich people have a mechanism for getting ever richer than the rest of us, because the rate of return on investment is higher than the rate of economic growth. In other words, money made from investments grows faster than money made from wages. Piketty claims the wealth of the wealthiest Americans is rising at 6%-7% a year, more than three times as fast as the economy the rest of us live in.

At the same time, wages for middle and lower income Americans are sinking, driven by factors also largely under the control of the wealthy.  These include the application of new technology to eliminate human jobs, the crushing of unions, and a decline in the inflation-adjusted minimum wage that more and more Americans depend on for survival.

The short version: A rising tide lifts all yachts.

2) So why don’t the unemployed/underemployed simply find better jobs?

Another way of phrasing this question is: Why don’t we just blame the poor for their plight? Mention unemployment or underemployment and someone will inevitably invoke the old “pull yourself up by your bootstraps” line. If workers don’t like retail or minimum-wage jobs, or if they can’t find good paying jobs in their area, why don’t they just move? Quit retail or quit Pittsburgh (Detroit, Cleveland, St. Louis) and…

Move to where to do what? Our country lost one-third of all decent factory jobs — almost six million of them — between 2000 and 2009, and wherever “there” is supposed to be, piles of people are already in line. In addition, many who lost their jobs don’t have the means to move or a friend with a couch to sleep on when they get to Colorado. Some have lived for generations in the places where the jobs have disappeared. As for the jobs that are left, what do they pay? One out of four working Americans earn less than $10 per hour. At 25%, the U.S. has the highest percentage of low-wage workers in the developed world. (Canada and Great Britain have 20%, Japan under 15%, and France 11%.)

One in six men, 10.4 million Americans aged 25 to 64, the prime working years, don’t have jobs at all, a portion of the male population that has almost tripled in the past four decades. They are neither all lazy nor all unskilled, and at present they await news of the uncharted places in the U.S. where those 10 million unfilled jobs are hidden.

Moving “there” to find better work isn’t an option.

3) But aren’t there small-scale versions of economic “rebirths” occurring all over America?

Travel through some of the old Rust Belt towns of this country and you’ll quickly notice that “economic rebirth” seems to mean repurposing buildings that once housed factories and shipping depots as bars and boutiques. Abandoned warehouses are now trendy restaurants; a former radiator factory is an artisanal coffee shop. In other words, in a place where a manufacturing plant once employed hundreds of skilled workers at union wages, a handful of part-timers are now serving tapas at minimum wage plus tips.

In Maryland, an ice cream plant that once employed 400 people with benefits and salaries pegged at around $40,000 a year closed its doors in 2012. Under a “rebirth” program, a smaller ice cream packer reopened the place with only 16 jobs at low wages and without benefits. The new operation had 1,600 applicants for those 16 jobs. The area around the ice cream plant once produced airplanes, pipe organs, and leather car seats. No more. There were roughly 14,000 factory jobs in the area in 2000; today, there are 8,000.

General Electric’s Appliance Park, in Louisville, Kentucky, employed 23,000 union workers at its peak in 1973. By 2011, the sputtering plant held onto only about 1,800 workers. What was left of the union there agreed to a two-tier wage scale, and today 70% of the jobs are on the lower tier — at $13.50 an hour, almost $8 less than what the starting wage used to be. A full-time worker makes about $28,000 a year before taxes and deductions. The poverty line for a family of four in Kentucky is $23,000. Food stamp benefits are available to people who earn up to 130% of the poverty line, so a full-timer in Kentucky with a family still qualifies. Even if a worker moved to Kentucky and lucked out by landing a job at the plant, standing on your tiptoes with your lips just above sea level is not much of a step up.

Low paying jobs are not a rebirth.

4) Can’t people just get off their couches and get back to work?

There are 3.8 million Americans who have been out of work for 27 weeks or more. These are the country’s long-term unemployed, as defined by the Department of Labor. Statistically, the longer you are unemployed, the less likely it is that you’ll ever find work again. Between 2008 and 2012, only 11% of those unemployed 15 months or more found a full-time job, and research shows that those who do find a job are less likely to retain it. Think of it as a snowball effect: more unemployment creates more unemployable people.

And how hard is it to land even a minimum-wage job? This year, the Ivy League college admissions acceptance rate was 8.9%. Last year, when Walmart opened its first store in Washington, D.C., there were more than 23,000 applications for 600 jobs, which resulted in an acceptance rate of 2.6%, making the big box store about twice as selective as Harvard and five times as choosy as Cornell.

Telling unemployed people to get off their couches (or out of the cars they live in or the shelters where they sleep) and get a job makes as much sense as telling them to go study at Harvard.

5) Why can’t former factory workers retrain into new jobs?

Janesville, Wisconsin, had the oldest General Motors car factory in America, one that candidate Obama visited in 2007 and insisted would be there for another 100 years. Two days before Christmas that year and just before Obama’s inauguration, the plant closed forever, throwing 5,000 people out of work. This devastated the town, because you either worked in the plant or in a business that depended on people working in the plant. The new president and Congress quickly paid for a two-million-dollar Janesville retraining program, using state community colleges the way the government once used trade schools built to teach new immigrants the skills needed by that Janesville factory a century ago.

This time around, however, those who finished their retraining programs simply became trained unemployables rather than untrained ones. It turned out that having a certificate in “heating and ventilation” did not automatically lead to a job in the field. There were already plenty of people out there with such certificates, never mind actual college degrees. And those who did find work in some field saw their take-home pay drop by 36%. This, it seems, is increasingly typical in twenty-first-century America (though retraining programs have been little studied in recent years).

Manufacturing is dead and the future lies in a high-tech, information-based economy, some say. So why can’t former factory workers be trained to do that? Maybe some percentage could, but the U.S. graduated 1,606,000 students with bachelor’s degrees in 2014, many of whom already have such skills.

Bottom Line: Jobs create the need for training. Training does not create jobs. 

6) Shouldn’t we cut public assistance and force people into the job market?

At some point in any discussion of jobs, someone will drop the nuclear option: cut federal and state benefits and do away with most public assistance. That’ll motivate people to find jobs — or starve. Unemployment money and food stamps (now called the Supplemental Nutrition Assistance Program, or SNAP) encourage people to be lazy. Why should tax dollars be used to give food to people who won’t work for it? “If you’re able-bodied, you should be willing to work,” House Majority Leader Eric Cantor said discussing food stamp cuts.

The problem with such statements is 73% of those enrolled in the country’s major public benefits programs are, in fact, from working families — just in jobs whose paychecks don’t cover life’s basic necessities. McDonald’s workers alone receive $1.2 billion in federal assistance per year.

Why do so many of the employed need food stamps? It’s not complicated. Workers in the minimum-wage economy often need them simply to survive. All in all, 47 million people get SNAP nationwide because without it they would go hungry.

In Ohio, where I did some of the research for my book Ghosts of Tom Joad, the state pays out benefits on the first of each month. Pay Day, Food Day, Mother’s Day, people call it. SNAP is distributed in the form of an Electronic Bank Transfer card, or EBT, which, recipients will tell you, stands for “Eat Better Tonight.” EBT-friendly stores open early and stay open late on the first of the month because most people are pretty hungry come the Day.

A single person with nothing to her name in the lower 48 states would qualify for no more than $189 a month in SNAP. If she works, her net monthly income is multiplied by .3, and the result is subtracted from the maximum allotment. Less than fifty bucks a week for food isn’t exactly luxury fare. Sure, she can skip a meal if she needs to, and she likely does. However, she may have kids; almost two-thirds of SNAP children live in single-parent households. Twenty percent or more of the child population in 37 states lived in “food insecure households” in 2011, with New Mexico (30.6%) and the District of Columbia (30%) topping the list. And it’s not just kids. Households with disabled people account for 16% of SNAP benefits, while 9% go to households with senior citizens.

Almost 22% of American children under age 18 lived in poverty in 2012; for those under age five, it’s more than 25%. Almost 1 in 10 live in extreme poverty.

Our system is trending toward asking kids (and the disabled, and the elderly) to go to hell if they’re hungry. Many are already there.

7) Why are Walmart and other businesses opposed to SNAP cuts?

Public benefits are now a huge part of the profits of certain major corporations. In a filing with the Securities and Exchange Commission, Walmart was oddly blunt about what SNAP cuts could do to its bottom line:

“Our business operations are subject to numerous risks, factors, and uncertainties, domestically and internationally, which are outside our control. These factors include… changes in the amount of payments made under the Supplemental Nutrition Assistance Plan and other public assistance plans, [and] changes in the eligibility requirements of public assistance plans.”

How much profit do such businesses make from public assistance? Short answer: big bucks. In one year, nine Walmart Supercenters in Massachusetts received more than $33 million in SNAP dollars — more than four times the SNAP money spent at farmers’ markets nationwide. In two years, Walmart received about half of the one billion dollars in SNAP expenditures in Oklahoma. Overall, 18% of all food benefits money is spent at Walmart.

Pepsi, Coke, and the grocery chain Kroger lobbied for food stamps, an indication of how much they rely on the money. The CEO of Kraft admitted that the mac n’ cheese maker opposed food stamp cuts because users were “a big part of our audience.” One-sixth of Kraft’s revenues come from food stamp purchases. Yum Brands, the operator of KFC, Taco Bell, and Pizza Hut, tried to convince lawmakers in several states to allow its restaurants to accept food stamps. Products eligible for SNAP purchases are supposed to be limited to “healthy foods.” Yet lobbying by the soda industry keeps sugary drinks on the approved list, while companies like Coke and Pepsi pull in four billion dollars a year in revenues from SNAP money.

Poverty is big business.

8) Should We Raise the Minimum Wage?

One important reason to raise the minimum wage to a living one is that people who can afford to feed themselves will not need food stamps paid for by taxpayers. Companies who profit off their workers’ labor will be forced to pay a fair price for it, and not get by on taxpayer-subsidized low wages. Just as important, people who can afford to feed themselves earn not just money, but self-respect. The connection between working and taking care of yourself and your family has increasingly gone missing in America, creating a society that no longer believes in itself. Rock bottom is a poor foundation for building anything human.

But won’t higher wages cause higher prices? The way taxpayers functionally subsidize companies paying low-wages to workers — essentially ponying up the difference between what McDonald’s and its ilk pay and what those workers need to live via SNAP and other benefits — is a hidden cost squirreled away in plain sight. You’re already paying higher prices via higher taxes; you just may not know it.

Even if taxes go down, won’t companies pass on their costs? Maybe, but they are unlikely to be significant. For example, if McDonald’s doubled the salaries of its employees to a semi-livable $14.50 an hour, not only would most of them go off public benefits, but so would the company — and yet a Big Mac would cost just 68 cents more. In general, only about 20% of the money you pay for a Big Mac goes to labor costs. At Walmart, increasing wages to $12 per hour would cost the company only about one percent of its annual sales.

Despite labor costs not being the most significant factor in the way low-wage businesses set their prices, one of the more common objections to raising the minimum wage is that companies, facing higher labor costs, will cut back on jobs. Don’t believe it.

The Los Angeles Economic Round Table concluded that raising the hourly minimum to $15 in that city would generate an additional $9.2 billion in annual sales and create more than 50,000 jobs. A Paychex/IHS survey, which looks at employment in small businesses, found that the state with the highest percentage of annual job growth was Washington, which also has the highest statewide minimum wage in the nation. The area with the highest percentage of annual job growth was San Francisco, the city with the highest minimum wage in the nation. Higher wages do not automatically lead to fewer jobs. Many large grocery chains, including Safeway and Kroger, are unionized and pay well-above-minimum wage. They compete as equals against their non-union rivals, despite the higher wages.

Will employers leave a state if it raises its minimum wage independent of a nationwide hike? Unlikely. Most minimum-wage employers are service businesses that are tied to where their customers are.  People are not likely to drive across state lines for a burger. A report on businesses on the Washington-Idaho border at a time when Washington’s minimum wage was nearly three bucks higher than Idaho’s found that the ones in Washington were flourishing.

While some businesses could indeed decide to close or cut back if the minimum wage rose, the net macro gains would be significant. Even a small hike to $10.10 an hour would put some $24 billion a year into workers’ hands to spend and lift 900,000 Americans above the poverty line. Consumer spending drives 70% of our economy. More money in the hands of consumers would likely increase the demand for goods and services, creating jobs.

Yes, raise the minimum wage. Double it or more. We can’t afford not to.

9) Okay, after the minimum wage is raised, what else can we do?

To end such an article, it’s traditional to suggest reforms, changes, solutions. It is, in fact, especially American to assume that every problem has a “solution.” So my instant suggestion: raise the minimum wage. Tomorrow. In a big way. And maybe appoint Thomas Piketty to the board of directors of Walmart.

But while higher wages are good, they are likely only to soften the blows still to come. What if the hyper-rich like being ever more hyper-rich and, with so many new ways to influence and control our political system and the economy, never plan to give up any of their advantages? What if they don’t want to share, not even a little more, not when it comes to the minimum wage or anything else?

The striking trend lines of social and economic disparity that have developed over the last 50 years are clearly no accident; nor have disemboweled unions, a deindustrialized America, wages heading for the basement (with profits still on the rise), and the widest gap between rich and poor since the slavery era been the work of the invisible hand. It seems far more likely that a remarkably small but powerful crew wanted it that way, knowing that a nation of fast food workers isn’t heading for the barricades any time soon. Think of it all as a kind of “Game of Thrones” played out over many years. A super-wealthy few have succeeded in defeating all of their rivals — unions, regulators, the media, honest politicians, environmentalists — and now are free to do as they wish.

What most likely lies ahead is not a series of satisfying American-style solutions to the economic problems of the 99%, but a boiling frog’s journey into a form of twenty-first-century feudalism in which a wealthy and powerful few live well off the labors of a vast mass of the working poor. Once upon a time, the original 99% percent, the serfs, worked for whatever their feudal lords allowed them to have. Now, Walmart “associates” do the same. Then, a few artisans lived slightly better, an economic step or two up the feudal ladder. Now, a technocratic class of programmers, teachers, and engineers with shrinking possibilities for upward mobility function similarly amid the declining middle class. Absent a change in America beyond my ability to imagine, that’s likely to be my future — and yours.

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88 comments

  1. MikeNY

    Seattle passed the $15 min wage; a similar proposal has a good chance in SF. I’m beginning to think this is the way the movement starts — with progressive cities tired of waiting for our paralyzed, ossified Federal Government to act, and changing the laws themselves. Next Portland or Burlington or Boston, then a couple of states, etc. etc. I hope so.

    1. Ben Johannson

      That’s how the progressive movement of the 20th century was born, in places like Kansas.

      1. MikeNY

        Thanks for the link. I knew that there was a phase-in period (which I think does address a legitimate concern of small businesses), but I also agree that i) it is a first step and not the final goal, and ii) that advocates need to be vigilant to ensure that the measure isn’t further watered-down or deferred.

          1. MikeNY

            Not my understanding, but I’m not in Seattle. From a CNN report:

            “Seattle’s city council on Monday unanimously approved an increase in the city’s minimum wage to $15 an hour, making it the nation’s highest by far.
            The increase was formally proposed by Seattle Mayor Ed Murray, and his spokesman said he intends to sign the ordinance on Tuesday.”

            http://money.cnn.com/2014/06/02/news/economy/seattle-minimum-wage/

            1. CB

              Yesterday. Can’t wait to see how this garbage barge of a bill works out. Dazzle and baffle.

              1. MikeNY

                Don’t really understand all your negativity. Would it be better for Seattle to stay at $9.37 / hour until a universal, no exceptions $15.00 / hour is legislated for the entire nation by the US Congress? Hell, why not reject everything until you get $30 / hour, a real “living wage”?

                You would have the perfect be the enemy of the good.

                http://www.nytimes.com/2014/06/05/nyregion/higher-minimum-wage-gains-support.html?action=click&module=Search&region=searchResults&mabReward=relbias%3Ar&url=http%3A%2F%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%3Faction%3Dclick%26region%3DMasthead%26pgtype%3DSectionFront%26module%3DSearchSubmit%26contentCollection%3Dus%26t%3Dqry592%23%2Fseattle%2Bminimum%2Bwage%2F7days%2F&_r=0

                1. CB

                  Stop, already. I detest the mediocre as the enemy of the good. And read the damn article. $15.00 an hr WHEN?!

                  1. washunate

                    This is a really interesting exchange. I think it demonstrates the treadmill of our faux Red vs Blue system in action.

                    Democrats make passing a subpar minimum wage take lots of time and energy. In the meantime, problems are not fixed – the system continues giving huge amounts of money to the national security state and corporate welfare. Then by the time a minimum wage increase passes, the already too small amount and been made smaller yet in real terms. Then repeat the cycle.

                    Minimum wage was a big deal in 2006. It’s 8 years later, and things are worse, not better. So by the time this is fully implemented in the 2020s, it will be time for another push…

                2. CB

                  http://www.nakedcapitalism.com/2014/06/robert-pollin-dean-baker-discuss-anemic-recovery-economists-dont-recommend-real-remedies.html

                  “Both economists then turn to the elephant in the room: the lousy state of labor, and how real wages have stagnated. One telling factoid is that if you adjusted the minimum wage from its peak in real terms (1968) and gave workers their share of productivity gains (and they were shared until the mid 1970s, when the old capital/labor model started being restructured by weakening labor bargaining power), the minimum wage would now be $26 an hour. (Another appalling, related tidbit in a must-read analysis by David Stockman is that there has been no growth in private labor hours since 1998).”

                  $10.00 an hr, how paltry, how stingy, how neoliberal.

                  1. MikeNY

                    I would love to see a $27 minimum wage. That is a “living wage” as best as I can tell. The question is, how do we get there? Does a journey of a thousand miles begin with a single first step, or is there a transporter room to beam us there? You seem to think there’s a transporter room available. OK, maybe there is. I’m all for it.

    2. bluntobj

      This article had me up until the minimum wage commentary.

      Increasing minimum wages will not bring about a positive outcome, just as Obamacare did not lower costs, increase freedom of choice, or ultimately lead to better healthcare. The advertized promise will not come true, as reality and human economic behavior will prove.

      Seattle will be a wonderful experimental hothouse. I imagine that you will see the minimum wage employers expand outwards to suburbs that have no such ordinance, and that prices for minimum wage produced goods and services will rise. It must, as the cost of that worker just increased about 7 dollars over what it had previously been.

      I have a daycare as a tenant/business, a minimum wage employer, who will have to add $20+ a day to the cost of childcare ($55 now, would have to be $75+ per child per day). The average cost would be about $150 a day at current staff levels for 8 children. This does not include follow on taxes such as FUTA that I don’t care to calculate here. For someone looking for childcare 22 days of the month, that would add $440 to their bill, or about $1650 per month. The rational thing to do would be for the mother to stay home, unless her job brought in a higher NPV for her time. Let me be clear as well, this is a private care, not state pay. State pay is around $400, which is not an economically feasible rate in our situation.

      I’d close it, in a heartbeat.

      Think of all the women that could no longer have it all, because her new $15 an hour job was consumed completely by childcare costs. For that matter, please note that raising the minimum wage would DESTROY assistance. The poor would suffer a massive decrease in assistance because they made too much, if they were working. Their costs for childcare would go up, every service that they used would increase in price, and if they managed to keep that job they would not economically be better off.

      I must conclude that supporters of the minimum wage increase are sexist, misogynist dinosaurs that hate the poor and women, and desire to see them fully in the grip of poverty where they can be firmly controlled by public assistance.

      1. Min

        “I imagine that . . . prices for minimum wage produced goods and services will rise. It must, as the cost of that worker just increased about 7 dollars over what it had previously been.”

        Sure, they will. But proportionally the incomes of the minimum wage workers will have increased more. If they are a substantial part of the customers for those goods and wages, they will be able to afford the price increases. In fact, they may become new customers.

        Remember, minimum wage workers cannot save much, if at all. That means that nearly all of the minimum wage increases will quickly be spent in the local community. Businesses will reap their fair share of those increases.

        IIUC, the effects of minimum wage increases have neither been as dire or as beneficial as predicted.

        1. bluntobj

          This is marginally true with small increases.

          Now discuss $7.25 to $15, or in the case of Washington, $9.21 to $15.

          Not the same thing as what has come before, not at all.

      2. Carla

        I quite agree that raising the minimum wage could hurt poor people by simply raising them up a rung, while stripping away whatever stingy benefits our society currently sees fit to bestow upon them. We live in a hard world. The solution might be a Universal Basic Income, say, $25,000 per adult per year, indexed to increase with inflation. Health care, including birth control of course, would be available at no cost to the individual. Then people could choose whether to work serving fast food or wiping old peoples’ rear ends, or not. And society could decide how much labor is worth (with automation, less and less each day — maybe a robot can take care of the bodily needs of nursing home patients).

        Oh– we don’t have the money? Of course we do: https://www.youtube.com/watch?v=vvBKR5GPCWc

        1. bluntobj

          Erm, universal basic income? Sure, for the whole world! And why stop at $25,000? Make it 100,000 SDR’s and poverty will be solved!

          Where is my grumpy cat jpeg to eloquently say “No”?

      3. ProfessorK

        “, just as Obamacare did not lower costs, increase freedom of choice, or ultimately lead to better healthcare. ”

        Strange, it did ALL that for me. It allowed me to get a lower cost, better policy through the New Hampshire state exchange then my COBRA from my last place of employment. Unlike my COBRA it also won’t run out.

        Before Obamacare my wife and I were, to use the proper industry term, “uninsurable” as individuals. She has serious pre-existing conditions that no plan would cover.

        I would guess you have never actually *needed* Oabamacare. Your POV will likely change radically when you do.

  2. abynormal

    “Rock bottom is a poor foundation for building anything human.”
    i’ve yet to meet anyone that hasn’t hit a few personal ‘bottoms’. a majority of us hitting a ‘bottom’ at the same time…the majority becomes sub-human and treats each other accordingly.

    “Welfare reforms and the whole “happy” exploitation movement are not “baby steps.” They are big steps–in a seriously backward direction.”
    Gary L. Francione

    1. rich

      self meet rock….scorched class policy…globally.

      Carlyle Going after European Trailer Parks

      FT reported:

      US private equity investor Carlyle has entered into exclusive negotiations to take control of Homair Vacances, a French operator of camping and mobile homes that seeks to expand across southern Europe.

      The Washington-based buyout house is buying a 75 per cent stake in the Paris-listed company from French firm Montefiore Investment, which will be reinvesting as a minority shareholder.

      The move comes after Homair on Monday said it had agreed to buy its main competitor, Eurocamp, from UK-based Holidaybreak to expand in Europe in a deal that will double its size.

      The combined group will operate more than 15,000 mobile homes across nearly 300 campsites, mainly in France, Italy and Spain. It will generate about €180m in revenues.

      The logic for private equity underwriters (PEU’s) in investing in trailer parks is:

      An increasing number of customers have been drawn to mobile homes and self-catering holidays as they sought budget holidays during the downturn.

      As PEU’s decimate the middle class in Europe, as they did in the U.S., demand for budget holidays should soar. Whatever money the people have left, PEU’s want it. It’s the PEU way.
      http://peureport.blogspot.com/2014/06/carlyle-going-after-european-trailer.html

      1. Carla

        Oh, God. PE has already bought up mobile home parks in the US and here, they are where people LIVE:
        http://www.nytimes.com/2014/03/16/magazine/the-cold-hard-lessons-of-mobile-home-u.html

        Although I’m posting the link (no doubt it was posted on NC at the time), I couldn’t bear to read it when it was published, and I still can’t. I kept that issue of the Times magazine around the house for a couple of weeks. Every time I looked at it, I muttered, “I can’t stand to read that.” Finally, I threw it out. Sometimes, reality is just too damned bitter and we have to get through the day via denial and avoidance. So I’ll just pass the ugly details of life in these United States on to our brothers and sisters in Europe, whose fate is probably not this bad yet. And for whom I hope it doesn’t get this bad.

        1. abynormal

          geezlouise no wonder you shy from reading it:
          “One in five households, he told the class, lives on less than $20,000 a year. A significant portion of the 10,000 Americans who turn 65 every day are facing life on a fixed monthly income of $1,200 or less. He is an admitted profiteer thriving on the collateral damage caused by our winner-take-most economy, but he also is a zealous student of the constantly changing landscapes of American poverty. “The bottom line is Americans as a group are getting poorer,” he told his students — and while that’s bad news for those living on the economic fringes, it also means opportunities for those willing to take advantage of the trend.”

          By heaven forsaken,
          By Justice o’ertaken,
          He saved his bacon
          By cutting a single slice of it;
          For ’twas cut from the throat,
          And we venture to quote
          Death, hel and the grave as the price of it.
          S. F. Journal of Commerce/Devils Dic.

  3. BigRed

    Sorry for pushing this into a tangent a bit but while the post rightfully paints a dismal picture of the US, I’d like to warn against the tendency to compare against Europeans countries and claim that those do better.

    At 25%, the U.S. has the highest percentage of low-wage workers in the developed world.

    for instance, should be followed up with:

    Data from the Organisation for Economic Co-operation and Development shows low-wage employment accounts for 20 percent of full-time jobs in Germany compared to 8.0 percent in Italy and 13.5 percent in Greece.
    […]
    Low wage workers earn less relative to the median in Germany than in all other OECD states except South Korea and the United States.

    lest anybody thinks that German policies are anything else but a reenactment of the policies pioneered in the US.

    In the same way that

    Almost 22% of American children under age 18 lived in poverty in 2012; for those under age five, it’s more than 25%.

    should be contrasted with:

    During the last decades the number of people living in poverty has been increasing. Children are more likely to be poor than adults. There has been a strong increase in the number of poor children. In 1965 only one in 75 children lived on welfare, in 2007 one in 6 did.

    The US is not the exception – it is, as it has been for most of the post-war period, a trend setter.

    1. Seamus Padraig

      A lot of people may not be aware of this, but Germany has no official minimum wage. From Wikipedia (https://en.wikipedia.org/wiki/List_of_minimum_wages_by_country):

      “None; except for construction workers, electrical workers, janitors, roofers, painters, and letter carriers. Minimum wage is often set by collective bargaining agreements in other sectors of the economy and enforceable by law.

      “The law states that paying a worker an ‘immoral wage’ is illegal. There is no general consensus what constitutes ‘immoral’ payment. One judge at a court in Krefeld, Germany, ruled that a cashier at a supermarket has to earn the equivalent of approximately 7USD per hour. The federal courts in Germany ruled that any wage lower than 75% of the average wage or salary for a specific occupation constitutes illegal payment. However, since there is no well defined legal minimum wage as of February 2013, courts are usually the ones who have the final say and will only rule for individual cases.”

  4. Ben Johannson

    That’s a very important point, BigRed. Contrary to the smug attitudes of Merkel voters, Germany remains a net exporter avoiding the worst of the GFC because it has spent the last fifteen years doggedly crushing the living standards of the voters enabling these policies. For them it isn’t so bad as in the U.S. due to state-subsidized education and health care, but it’s only a matter of time until these come under sustained attack. America is a template for the future of eight billion people.

    1. EoinW

      Agreed! One need only look at the attacks that have been made on Canada’s social safety net for the past 20 years. Where America leads, the rest of the West shall follow.

      Solutions? Raising minimum wage comes to mind because it seems like the only option that could be passed and there appear to be clear short term gains possible. The problem is that the 1% control everything, therefore they have many options to turn a minimum wage rise into another way to make themselves more money. if minimum wage goes up 10% but the cost of basic items goes up 11%(after all, the corporations can dictate whatever price they like) then spending power is actually lost. Even worse, people not earning minimum wage will face the 11% increase while seeing no wage gain. Thus a minimum wage increase becomes another occasion where the government determines winners and losers – in this case losers and bigger losers. Naturally the 1% are continually moving towards higher prices anyway, to boost their ever increasing profit margins, thus raising minimum wage blunts the blow for some for a short period of time. In that sense it’s a good thing – short term wise.

      Bottom line: so long as the 1% control everything there are no solutions they can’t water down or manipulate to their own advantage. I wonder if it is not better to give them enough rope to hang themselves, like cut minimum wage. In a way minimum wage serves to give them time to maintain the status quo and keep on plundering. Debt has the same effect. Should we be hoping for a gradual decline, with the 1% remaining firmly in control, and no chaos. Everyone given time to adapt to the neo-feudal order being imposed? Or should we be hoping for a total collapse, the 1% losing control, and hoping that something better will come out of the chaos? In the late 18th century a generation of frenchmen sacrificed themselves and a century later France was a much better place to live in. Does our generation need to make the same sacrifice? Not consciously choose to do so as we’ve been doing the exact opposite to date – sacrificing the future for our own benefit now.

      Horrible solutions! Awful choices. It may simply be too late. One final problem I see with raising minimum wage is that it will extend the lie in the minds of many that the government exists to look after the interest of the 99%. Meanwhile the 1% will conclude they did something good thus they can continue plundering away with a clear conscience. it’s such lies and dishonesty that created this mess in the first place. Just like the fraud of debt allows the 1% to steal with less people noticing it. This is why I lean towards hoping the debt bubble pops tomorrow and all credit seizes up. Clear the decks with one good sweep then maybe the 99% will finally be able to see what’s going on then act in their best interest. Muddy water is an environment that suits the parasite very nicely.

      1. Mark Martin

        In Gregory Clark’s book The Son Also Rises published a month before Piketty concerning the myth of upward mobility, the author implies the solution in most cases like this is the Romanov solution , to take the 1 per cent to the basement. I say this not because the 99 per cent need fear but the 1 per cent need to avoid the coming tragedy for themselves

      2. susan the other

        For some reason I always see the 1% as the boiling frogs and all the frantic maneuvering to save their system is just the water heating up. Just look at all the corporations in unsustainable industries, like coal and soda pop and cars, that are goin’ down. The whole damn thing is coming down. And speaking of food stamps – how else will our great American agricultural industry sell its products? Global warming has increased food production – not restricted it. At least so far. And the rest of the world is not as reliant on fossil fuel to raise their crops. Is there another nation of fools on the planet that is in bigger trouble than we are?

        1. Carla

          “Is there another nation of fools on the planet that is in bigger trouble than we are?” Hope not.

  5. tongorad

    Every morning I wake up and thank my lucky stars that I was able to find a new job at age 49. A miracle, really, that probably has more to do with so-called connections (I call it solidarity) than merit. Thank goodness that there still are institutions in the US with institutional memory of working class values, such as public education. How long this will last, who knows, as everything seems to be under attack from the billionaires and their cronies.

    Speaking of cronies, it seems the tea-party stereotype is of old white people, but I wonder…
    I think a big part of me getting the job was that my interviewer/eventual boss was older and wiser of the ways of the world, and possessed memories of the way things used to be.
    On the other hand, most younger people I work with, no of what ethnicity/background, seem to take positions and attitudes to the right of Atilla the Hun.
    I wouldn’t hold your breath regarding the likelihood of a youth-led revolution in this country, IMO. Despite the hoopla about such issues as gay rights, our culture, and especially our youth culture, still idolizes hardness and cruelty.

    1. hunkerdown

      Seems the field is being prepped for something, no? A year or two back, the Archdruid expected that a color revolution might come around to the USA sometime around 2015, courtesy of Russia, China and/or some other power of similar stature. The supposed social-justice debates seem to be growing more inane, dogmatic, sophomoric and Manichean (oh, and more vicious) a bit more quickly than usual, but maybe that’s me burning out. If I pledge allegiance to first principles instead of constructed ideologies, I may as well be invisible in their worldview. It’s as if nobody is interested in unpacking anything without a step-by-step diagram from their betters.

      I half wonder if The Party expects the same (or has intelligence to that effect), and is rebalancing constituencies in a counter effort to either stave off or march in front of it.

      1. sufferin' succotash

        Local is good. So is State. So is Federal. Whatever redresses the balance between capital and labor is good, regardless of the means or the venue. I haven’t noticed the Right having a problem with operational flexibility in recent years. Why can’t the Left go and do likewise?

        1. James Levy

          As someone who has officially been unemployed since last August 31st (that’s when the checks stopped coming) I can only say, “Amen.” But I have no illusions that the Democratic Party at the national and many state levels could imagine pissing off their donor base to the extent that raising the minimum wage to where it was, adjusted for inflation, 35 years ago. All the evidence I’ve seen since Dukakis is that they will lose rather than sever the connections they have with their paymasters. Their pollsters and spin doctors will never let them forget that the last Dem to run on a vaguely progressive platform (Mondale) got wiped out, as did the last real progressive to run (McGovern). They are stuck fighting the last war, and all their economic incentives are designed to keep them fighting that war. They’ll only turn to the masses when the rich are ruined by some disaster, natural or man-made (if there are elections after such a catastrophe).

            1. neo-realist

              In a bit of a defense for the dems, I don’t think we would have gotten right wing asshats like Roberts and Alito from John Kerry had he not had the election stolen from him. I’m not saying that Kerry would have been some sort of progressive saint; However, I don’t believe we would have gotten judges from him or other dems that are so against the individual when confronting the state power and institutions, nor so extremely in the tank for %1 power that they could bring down a decision that would allow unlimited spending on elections, nor so insensitive to the persistence of racism in america.

            2. bluntobj

              No difference. Government must expand to offer more power and more money, until it overreaches and collapses.

              It does not matter if it’s D or R at this point. It’s all a game in the stadium, and the owners are up in the owner’s box toasting with champagne and counting their gate receipts.

        2. so

          You have more faith in hierarchies and complexity then I do.
          I remember a saying from the American Revolution in grade school that is closer to how I feel.
          Violent context aside ,”Don’t fire until you see the Whites Of Their Eyes”.
          I can look into the whites of my local politician when they make a decision that affects us.
          To the Fed I’m nothing more than an abstract concept to be spied on.
          We need to find ways to create empathy, distance isn’t one of them.

      2. Benedict@Large

        “Local” must still exist in the macro environment.

        Consider the much touted Mondragon, who supposedly doesn’t lay off any employees. That’s fine, so long as the definition of “employees” doesn’t include the lower class, at will temp labor they bring on and off. It seems that Mondragon, competing in a world where a desperate unemployed reserve is available to other employers, has been forced by economic necessity to follow their ways.

        Seattle is fine; perhaps some other cites in isolated labor markets also, but will the “Seattle model” really translate over time to include the rest of the labor force, or even any substantial part of it?

    1. sufferin' succotash

      Another modest proposal–which goes to the question of worker organization: repeal Section 14b of the Taft-Hartley Act, the one that allows states to pass socalled “right to work” (anti-union shop) laws. Additional possibility: appoint an NLRB that won’t permit corporate bankruptcy as a way of getting out of union contract commitments.

    2. federalcash

      Controlling this federally is not a good idea. The difference in standard of living costs between SF/NY/LA, etc… is far different than any rural area in this country. Making 75,000 in San Francisco might sound like a lot to those who don’t live there but is likely equivalent to a 40,000 salary elsewhere.

      Because of this, wage increases should be controlled at some level of local control. Raising the whole country’s min wage to 15 would greatly benefit some areas much more than others, you literally cannot live in several US cities making the current minimum wage (SF, NY). In those places a $15 wage would make a lot of sense. In Harlington, TX (lowest cost city in the US), raising the min wage to $15 would bring a 40 hour worker to slightly below the MEDIAN income of the city. This is likely not necessary.

      That being said, we need to do something about the economic gap in the US. Hopefully raising the min wage on some level (whether it be state or local) can help alleviate that.

  6. /L

    From the latest ILO report:

    “Development doesn’t happen through such things as exports, open trade and foreign direct investment on their own,” said Guy Ryder, Director-General of the ILO.

    “Social protection, respect for core labour standards and policies that promote formal employment are also crucial for creating quality jobs that raise living standards, increase domestic consumption and drive overall growth. Decent work opportunities for women and men help trigger development and reduce poverty.”

    While Europe remains stuck in its sluggish economic recovery, the study finds that developing countries are catching up with the “advanced” ones by investing in quality jobs.

    In those countries where such investments took place since the early 2000s, notably Senegal, Peru or Vietnam, living standards improved more than in other developing countries that paid less attention to quality jobs, the study reads.

    “Countries that were particularly successful in reducing the incidence of vulnerable employment during the early 200s enjoyed significant economic growth after 2007,” the authors write.
    ……
    “We noted that there are two very different phenomena going on at the same time,” said Moazam Mahmood, Deputy Director of ILO’s Research Department and lead author of the report. “Many developing countries, notably in Latin America and Asia, are making efforts to tackle inequalities and improve job quality as well as social protection. By contrast, a number of advanced economies, notably in Europe, seem to be going in the opposite direction.”
    http://newseurope.me/2014/05/28/ilo-recovery-will-come-investment-high-quality-jobs/
    *********
    And Iceland shunning the neo-liberal orthodoxy wisdom fare better than Greece etc managing GFC. Just like Malaysia did in the Asia crisis, Argentina in its neo-liberal collapse. Guess we will here little about it in MSM.
    ____________

    Despite the pressures and threats elicited by Iceland’s heterodox policies – debt repudiation, capital controls and currency depreciation – the country is recovering well from the crisis (Krugman, 2012). It has regained access to international capital markets while preserving the welfare of its citizens, with support from the IMF. In 2012, Iceland’s credit rating was much higher than Greece’s.
    .
    As Iceland’s IMF Article IV Consultation stated:
    A key post crisis objective of the Icelandic authorities was to preserve the social welfare system in the face of the fiscal consolidation needed. Wage increases, agreed among the social partners in May 2011, led to a rise in nominal wages of 6 per cent and the unemployment rate fell to about 7 per cent in 2012. …
    .
    … In designing fiscal adjustment, the authorities introduced a more progressive income tax and created fiscal space to preserve social benefits. Consequently, when expenditure compression began in 2010, social protection spending continued to rise as a per cent of GDP, and the number of households receiving income support from the public sector increased. These policies led to a sharp reduction in inequality.
    *****************

  7. ambrit

    What’s funny is that people used to think that the Technocratic elite would supplant the Financial elite. It didn’t happen in the past. Why should it happen now? A French Revolution scenario is our optimal course.

    1. craazyboy

      Techies think they are sharp as a pair of scissors, and that’s what it takes! But Scissors didn’t beat Paper, and Scissors didn’t beat Rock. How stupid.

      But it doesn’t surprise me that no one wants to get off the couch. When you find out one guy is making more money for sleeping 8 hours than you will in your whole working career, this is mortally damaging to one’s self esteem, I would think.

      1. Reader

        “When you find out one guy is making more money for sleeping 8 hours than you will in your whole working career, this is mortally damaging to one’s self esteem, I would think.”

        Especially when that guy sleeping for 8 hours is dreaming of more ways to cut costs to increase profit without improving product. Which has been the nature of american capitalism since the 70’s. Forget the quaint idea of a better widget, just shitcan a few thousand people, take your bonus and then shitcan another few thousand. Do that a few times and you’ll be CEO and you can REALLY do some damage.

    2. Mel

      J.K.Galbraith père The New Industrial State. Peter Drucker too, I guess. What seems to have happened is that the entire industrial base got hived off. The technocrats are there, but they’re there in China. Some details are unclear: Galbraith argues supply and demand as, throughout history, different factors of production become the critical ones. Fifty years ago, it looked as though the scarce resource was the knowledge that could put capital resources to an effective use. With money all over the place now, I don’t understand why it’s getting the prestige granted to a scarce resource.

  8. Jim Haygood

    ‘…because the rate of return on investment is higher than the rate of economic growth’

    Ayyyy … this is what passes for logic at bubble peaks. We can agree to disagree about whether this claim is generally, empirically true. However, here is far more pointed, testable assertion: over the next decade, r will be less than g.

    Currently, 10-year T-notes yield 2.6%. Dr. Hussman’s projection of 10-year equity returns is 2.2% (see his weekly commentary for details). Average them, and you get 2.4% average annual return for a mixed portfolio. Returns for individual years will be all over the map, but their 10-year compounded average will converge pretty well to the forecasted 2.4%.

    Meanwhile, nominal GDP (before inflation adjustment) is currently growing at 3.42% over the past 12 months, after a weak report a few days ago. Likely nominal GDP will recover to 4.0% or 4.5% over the coming decade. Stocks would then have to deliver close to 6.0% annual growth for the mixed portfolio to keep up with nominal GDP growth. Not gonna happen: not for publicly-traded shares, and not for PE funds.

    Defined benefit plans are expecting not 6% returns from stocks, but 10%. They are delusional. They are gonna crash and burn spectacularly. Unfortunately, WE are the ones who will be obliged to indemnify their cupidity.

    Repeat after me: r less than g.

    1. sufferin' succotash

      You next-to-last sentence contradicts your last sentence. If we’re supposed to indemnify the Over-Entitled Overlords, then r will just keep chuggin’ along ahead of g. Need hardly add that whether to indemnify or not to indemnify is what we call a political decision, something markets have nothing to do with though some of us will do their best to argue otherwise.

      1. Jim Haygood

        Indemnification (a/k/a ‘bailout’) is a transfer of ownership of resources. But the return ‘r’ on those resources, regardless of who owns them, is going to be less than ‘g’ in the next decade.

        Another way to view this is in terms of market cap to GDP, currently at a stratospheric 125%. If it holds at this nosebleed level until 2025, stock investors will earn the dividend yield, currently 2.0% — NOT ENOUGH!

        For stocks to produce 6.0% return is going to require 4.0% in annual capital gains, which by 2025 would push market cap to GDP beyond the Bubble I “clicks ‘n eyeballs” record of 153%. Here is the market cap to GDP chart, in full-color horror:

        http://www.advisorperspectives.com/dshort/updates/Market-Cap-to-GDP.php

        1. sufferin' succotash

          So assuming you’re correct that r eventually trails g, the Overlords will finally opt for at least acquiescing in policies that aim at full employment, high wages, and strengthened demand. In other words, all the financial hustling can’t substitute in the end for a real economy that works. Even if that means accepting such otherwise highly undesirable outcomes as a labor movement with the sort of muscle that Big Labor possessed some 60 years ago.
          That’ll do for a generation or so and then it’ll be back to another Gilded Age.

  9. Jesper

    The Swedish unemployment office (the translation has a different meaning but the function is to handle the unemployed) has recently provided a report to the Swedish government with part of a solution:
    If the unemployed applied to more jobs then unemployment would be lower. Presumably handling the additional applications would create more jobs…

    & they have also expressed regret that the unemployment office can only indirectly affect wages downwards.

    A link to the report:
    http://www.arbetsformedlingen.se/Om-oss/Var-verksamhet/Rapporter/Arbetsmarknadsrapport/2014-05-05-Arbetsmarknadsrapport-2014.html (in Swedish)

    Makes me long for the days when the right-wingers moved to the US, the communists moved to the USSR. Now both groups stay and the right-wingers have managed to get into power.

    1. /L

      to be boss at The Swedish unemployment office is a political appointed position, of course the agency is trumpeting present gov. ideology.

      “If the unemployed applied to more jobs then unemployment would be lower”

      Of course the unemployed have chosen leisure because they thought the compensation at their previous job wasn’t adequate and now refuse to take another. On could see that in Greece now and in Sweden around 1991/92 almost simultaneously hundreds and hundreds of thousands suddenly realized that their compensation was inadequate and they choses leisure instead of work. As a result of this voluntarily choice of leisure by individuals 60 to 100 thousand small and medium sized companies did go bankrupt. A hard blow to them but just market forces at work.

      Of course there is no real unemployment just a lot of people chosen leisure instead of a job. Otherwise Says Law had worked; supply creates its own demand.

      1. Mel

        “If the unemployed applied to more jobs then unemployment would be lower”

        Well, that’s pretty stupid. In the experience I recounted we had one job to offer. The number of applicants directly affected the number we turned down and that was it:
        number_turned_down = number_of_applicants – 1

        Maybe it’s a twisted version of the Market Delusion: that greater demand evokes greater supply. That’s a chancy business even in cases where it applies. It will not apply here unless the unemployed are putting up money to pay for getting jobs. Without money their desire for jobs can’t be called demand.

        In the U.S., it would probably have the opposite effect. Applying for jobs would move people out of the not-seeking-work category, and would increase unemployment.

        1. /L

          Take a wild guess.
          hint I’m not a neo-liberal believer. :-)
          they believe this stuff.

  10. Generalfeldmarschall von Hindenburg

    Maybe it should be thought of more as, “If the 99% would only get off their couches and revolt?”

  11. Crazy Horse

    As we bemoan the triumph of the vampire capitalist class perhaps we should pause and look at the underlying causes of impoverishment: Fairer income distribution and breaking the power of finance capital are worthwhile reformist goals, but are far from the solution to the real problems facing humanity.

    —Global population has doubled in one generation.
    —Fossil fuel energy — the true currency of industrial civilization– is at or near its peak supply and being finite, can only contract in the future. If the remaining reserves are burned using the same technologies the result will be drastic alteration of the planet’s climate and even the possibility of pushing it toward a condition of uninhabitability.
    —No alternative with similar energy density, transportability, and low cost exists.
    —Agriculture has transitioned from resilient peasant subsistence and family farms to aquifer mining and industrialized processes of converting fossil fuel into food.
    —Mega-cities have grown up that have just-in-time life support systems (water, electricity, transport, & food) that can collapse into chaos and starvation in a matter of a few weeks if they are withdrawn.
    —The economic systems that organize commerce and production are dynamically unstable and irrational, and inevitably serve to concentrate wealth and power in a small ruling class who want only to build impregnable barriers between themselves and the rabble they view as their inferiors.

    How will this end well?

    1. Vatch

      Crazy Horse, you have provided us with an excellent summary of the state of the world. Thank you. Of course this won’t end well; it will end in collapse. I don’t know whether the collapse will occur 5 years or 40 years from now, but it will happen, unless we make some truly radical changes in our world. I doubt our political, business, and religious leaders have the fortitude or wisdom to make the necessary changes.

    2. davidgmills

      I concur that the only real currency is energy: a barrel of oil, a btu or a kwh. Hence most of my stock is in Exxon. Not that I like that much, it is simply a matter of self preservation.

      But there is hope in energy in liquid fluoride thorium reactors, the power we should have had, that we developed at Oak Ridge in the 60’s and 70’s, was clean and safe, (we would have never had the likes of Chernobyl, Three Mile Island or Fukushima, had we used this technology), cheap, and not useful for bombs, but its proponents lost out to the military who wanted nuclear power that could make bombs as well as nuclear power. China is committed to have our liquid fluoride thorium reactor technology online by 2020.

      I was a doom and gloom guy about the future until I learned about these reactors and their potential.

      1. American Slave

        “I was a doom and gloom guy about the future until I learned about these reactors and their potential.”

        So is doom and gloom the title they give to people who are smart enough to see that things are wrong and that we could be living in a much better world than the crap system we have now.

        What a crazy world we live in.

      2. Crazy Horse

        If you explore Kirk Sorensen’s efforts to commercialize the LFTR reactor you will find that his target market is the US military and its worldwide network of bases. Reasonable enough in a society where the Military and the Warfare State is the only remaining viable industry. (unless you count Banksterism as an industry). I don’t notice Bill Gates, or Warren Buffet stepping up to the plate to invest— and certainly not the Federal Gov.

        How is this going to end well?

  12. ep3

    Yves, i often mention this in other posts but here’s my antidote for #3:
    Lansing (insert Flint, Saginaw, Detroit, etc.) Michigan had 6 GM plants and numerous supplier businesses pumping money into the capital city economy. In 1980, GM employed over 30,000 persons at their plants in Lansing. At the time, the population was 130k. Today, the employment is grossly overstated at 6,200 employees. hundreds of acres of empty land remain where manufacturing plants once stood. And GM will not rebuild or sell the properties because over the course of 100 years they so polluted the Earth that the results of environmental surveys will make the 2009 bankruptcy look like a speck of dirt on a sales chart. I have heard stories of GM dumping waste leaded paint down the sewers and into the mighty Grand River that the plants were built next to.
    Today, Lansing barely floats along. If the state capitol were to be moved (as advocated by the Devos’s and other wealth in Grand Rapids, a strong Republican city), Lansing would become an abandoned ghost town. Silly things like a casino, a baseball team, new bars, and expensive condos (former factories transformed into “urban upscale living”) are attempts at tricking ppl into feeling good so that they are more likely to part with the little bit of money they have. As Yves says, the “confidence fairy” works it’s magic in the former auto capital of the world. Lansing has become a “mini-Detroit”; the city’s center is “rebuilding” with new stores and other consumption businesses, while the outsides are decaying poverty stricken slums, and surrounding the city limits are white upper class towns that try to shine brighter than the rot that the city suffers.

  13. Yesac13

    There are no easy answers or solutions.

    That said, I think Basic Income is the best solution. Fire at least half of the government workers then pay everybody a Basic Income based on a sliding formula. If making half a million a year, no Basic Income. If making 100k, get maybe 20k Basic Income. If making zero, get 50k Basic Income. Something like that. No tiers – just a sliding formula.

    I think Basic Income will work better than the current system. Yes, it is a sort of super-welfare. I consider at least half of the government workers to be welfare queens. Think about the paperwork! People have to qualify for this and that in order to receive benefits. Many government workers are needed to approve or deny the benefits – plus more workers to “manage” the lower level workers – these are useless people in my opinion. Way too many of these people. Automate these paper pushing jobs!

    I don’t want to stop robotics or automation at all. I think it will benefit society as a whole but not without Basic Income. With Basic Income, you can live ok with it and have no job. Many will never work for the rest of their lives but a goodly proportion will use Basic Income to work on projects that may benefit all of humankind. Basic Income allows automation to occur and you can keep up on the consumption without wrecking the economy. Seriously, there’s more much money to be had if the 99% had MORE MONEY. This kind of 1% getting everything while the 99% gets poorer makes zero sense other than power plays. Its not good for the economy in the long run.

    The only problem with Basic Income is that it never have been tried before (the welfare we have is not quite the same) so there may be unforeseen problems. Inflation is possible. I no longer care about deficits like I did before – it doesn’t matter as long the money is used productively. Money is NOT used productively these days.

    Sorry for the wall of text but the more time goes on, I really think Basic Income is the way to go. Ditch all of the current government assistance programs like Medicaid, Social Security, etc and go with Basic Income. That way the Government transfers money more efficiently and the private market is allowed to thrive. Having half government and half private is a disaster – witness the current healthcare system or college system today for a good example.

    Any comments for and against Basic Income? I’ll like to hear all points of views.

    1. hunkerdown

      Look out, everyone! Some Third Waye think tank has apparently found the basic income guarantee an Alternative, and as we all know There Is (And Must Always Be) No Alternative. The guarantee must be written out of the basic income so that it can be threatened, slaughtered, bled and butchered whenever it’s needed to keep the little people in line.

      Most elementary literature on the BIG is very clear about the guarantee as a distinction of kind. Without it, we have just another expendable cash-assistance program for the rich to whine about and eventually ruin, same as the others. What’s your reasoning for eliminating that protection?

    2. jonboinAR

      I’m not sure if it really would make a difference in how BI would work out, but unlike the Utopian dreams that people who talk about this envision, that is, of motivated-but-relaxed-at-the-same-time citizens going about improving their world, myself, having inhabited the lower to lower-middle class all my life and having seen a lot of unemployment and “disability”, and experienced many individual’s level of motivation, including, at times, my own, I must say I envision a significant population of long-term couch potatoes forming, not contributing much of anything.

      1. jonboinAR

        I work at a strangely dysfunctional company where a few of us bust our butts to keep it going while a significant proportion of our fellow workers just sponge, because they’re allowed to. I fear something similar to that occurring with the BI thing, if implemented.

        1. Yesac13

          Its possible that BI will allow people to just sponge away. I think that WILL happen.

          Even then, with people becoming couch potatoes, they will still need services! I think the way things are going, the consumption model will implode. BI gives it a life extension (not forever) and automation can go onward without much of a bad effect because the masses get BI. With BI, you can have lots of automation and many people will not care because they get BI already. With no BI, there will be artificial limits set everywhere and history suggest artificial limits implode eventually. BI is more honest, in my opinion than taxi medallions or mandated minimum wages for example.

          BI is not ideal. I think it will fail over the long run. But for at least 50 years, it will buy us enough time to change society itself. If the masses are unable to keep buying or go bankrupt, the whole economy blows up. Right now, people are buying new cars for 72 month notes. That is not sustainable. More debt isn’t the answer! Yet people are taking on more and more debt makes the whole system unstable.

        2. Carla

          Right now we have 485 billionaires in this country and 50 million people living in poverty. Are the 50 million really sponging off the 485, or might it be the other way around? How come Walmart fights SNAP benefits so hard? How come JP Morgan Chase, Bank of America, et al own pay-day lending subsidiaries? How come people are being thrown in jail because they can’t pay court costs for minor offenses, despite laws against debtors’ prisons in this country?

          I think we should try comprehensive, improved free Medicare for All, free birth control for everyone (men and women), and a Basic Income of $25,000 per year per adult, indexed to inflation.

          Or we could just institute interest and inflation-free money:
          http://kennedy-bibliothek.info/data/bibo/media/GeldbuchEnglisch.pdf

          1. jonboinAR

            No, I’m not saying that poor people are sponging. I just know in my own experience of a significant number of people who will find an excuse to loaf for a long time if they have the opportunity, even when they can easily see those around them having to pick up THEIR slack. The possibility that my experience and similar experience of others represents an actual problem with the BIG, that it plays to a bad streak in human nature, that there could be a significant proportion of the population who won’t be at all interested in finding something useful to do, but will milk a BIG for all it’s worth, needs to be allowed to be discussed without the fear of being accused of being prejudiced against poor people.

            Me, I’ve been borderline poor most of my life, my friends, for the most part, the same way. I make the claim, then, to know somewhat whereof I write.

            Also, it’s been well established, and encouraged to be discussed, that rich people have a propensity to take advantage. My contention is that more-or-less everyone shares that propensity. What does this mean with regards to the BIG?

            Intuitively, I find the JG more practical, but that’s strictly my intuitive response, with no study whatsoever.

  14. Lafayette

    YS: Overall, 1% of Americans own more than a third of the country’s wealth.

    Here is Piketty’s history time-line of Wealth Ownership in the US since 1810.

    Since that year, the percentage has never been lower than a quarter of total wealth. Is anyone surprised that we Yanks are so fixated on Wealth Accumulation?

    I suggest that it has become our foremost Cultural Attribute. Moreover, of late, all means necessary to that end are not only desirable but any hindrance is “undemocratic” …

  15. Noni Mausa

    1% holding 35% of all wealth is bad enough. But a third measure, ( after income and wealth ownership) would be called control ownership. Over a certain threshold of wealth ownership, I believe it transmutes into an ability to control ones society beyond the raw ability to buy or hire. Kind of a halo of possibilities spread around the hugely wealthy, who MIGHT hire, MIGHT fire, MIGHT withdraw or extend funding, and so on.

    I wonder if anyone has ever calculated where that threshold might be? I imagine it would be a combination of fraction of wealth held, over the number of steeply wealthy persons, modified by the extent to which the masses had access to independent resources like land, family support, cultural strength and so on.

    Wherever that threshold is, I think we can safely assume that the US is near it, though maybe not yet beyond it.

    Noni

    1. McMike

      .. and more concretely: “control ownership” means that when you own 51% of the stock in a company (more like just 20%) all the other retail investors become owners only in name and (sometimes) dividends – the owner of the larger shares controls all of it.

      Add to this the elite control of pension funds, major nonprofits & endowments, and control of banks and corporate boards, and you have an example of how the rich can own 35% of the wealth, but in effect control nearly all of it.

    2. hidflect

      This halo effect of the wealthy is very real. I knew a super-wealthy guy who would get an almost endless stream of blowjobs from girls he never met in a nightclub he owned. “How much do you pay them?”, I inquired. “Nothing”, he said. “So why do they do it?”, I asked again. “I dunno, I’m rich. They’re stupid.”, he laughed.

  16. washunate

    “Overall, 1% of Americans own more than a third of the country’s wealth.”

    Yep, and the top 20% own nearly 90% of the country’s wealth. That’s the difficulty – the combination of superwealth at the very top and a technocratic elite whose outsized privileges depend upon keeping the rest of the country in line.

    The soft corruption of careerism in law, medicine, academia, journalism, politics, banking, and other public pursuits is the heart of the matter, the perspective from which we can best frame questions about how to reclaim these institutions.

    1. Lafayette

      Yep, and the top 20% own nearly 90% of the country’s wealth.

      The top 20%, according to the Domhoff study shown here, own 93% of the Wealth but 77% of Net Worth (which is Wealth minus Debt).

      1. washunate

        FYI, the chart in that link shows top 20% owning 89% of net worth and 95% of financial wealth as of 2010.

        We’re so far into the looting that the exact numbers aren’t even that important. I’d say 77% is no more sustainable and just than 89%.

  17. Gerard Pierce

    It’s hard to argue against increasing the minimum wage, but few of those cheering have given any thought to what happens next. Unfortunately, the ones who profit most are the rentiers. More money means higher apartment rents. It means that those who can raise their prices will do just that.

    Anyone still receiving a defined benefits pension takes it in the shorts. In theory, social security payments are increased thru COLA – someday, somewhere, somehow.

    What I am afraid of is that those behind increasing the minimum wage will pull the usual political trick – declare a victory and move on to the next attractive issue while ignoring the bodies left behind.

    1. Boom! Roasted

      Yes, I’m still not sure why it isn’t understood that other prices will adjust to the increased minimum wage, thereby diluting or eliminating the newly gained purchasing power. You make a good point regarding collateral damage to those who don’t share in the free gains.

      I definitely don’t buy the fantastical figures thrown out under question #8. Also the “20%” link directly contradicts the “68 cents” link so I’m not sure why he cited both.

  18. kevinearick

    Death & Taxes, Again

    You cannot effectively tax the unwilling. In an extortion economy based upon the assumption of tax control, the best you can do is tax the participants. If you attempt to extort labor, the workforce disappears and is replaced by slaves falling out of the middle class, creating a positive feedback loop between and among the various debt classes.

    Of course the landlords feel compelled to raise rents due to the tax consequences of inflate-it-or-lose-it. That’s what happens when you walk into the casino, assuming that ownership in a printed tax base is anything other than a myth.

    Tax control is tribute. The idea that anyone pays taxes on debt as income is ludicrous. The tribute rate is a penalty for social non-compliance. SCOTUS just reaffirmed that with Hillarycare. “I pay taxes” means that you help grow the slave ponzi and you want your entitlement, relative to the slaves.

    The entire tax base is printed, debt controlling debt. In the middle class, you are paid in debt to make others, in the middle class, work more for less, on the assumptions that script making is somehow more valuable than ignorant labor, there is an inexhaustible pool of stupid labor, and that the planet is just as stupid as the participants.

    Seems like just a couple of generations ago, before the medical / education complex, Americans widely recognized what a bumbling fool government was, and funded it anyway. That changed with Kissinger & Kids, and now you see why. The ‘conflicts’ were about moving the shop to China, on favorable terms to the participants, to grow the consumption ponzi under totalitarian conditions.

    All three bedroom homes are not built alike. Of course the corporations are not going to hire anyone ‘out of work’ for social non-compliance. Of course your peers are going to vote you off the island for not buying that Coke, car or house. Why do you suppose employers make non-work inquiries on the application, to the credit bureaus, and in your Internet history? What is the purpose of gossip, other than to eliminate privacy?

    The empire hangs by the thread of demographic control, increasing the duration mismatch, which is why the HS graduation rate is what it is, and why a university diploma isn’t worth the paper it is printed on. University is about the rule for establishing networks beyond the borders they impose upon others, not enlightenment. Politics is a child’s game, reproducing the moron psychology, for morons to rule morons into planned obsolescence.

    It seems like just yesterday the VA was a model for healthcare. If the Canadian model works so well, why is Canada destroying its environment and real estate market to feed China? Why is China and Germany cutting deals with Russia again? Why is America moving its occupation back to Europe again? What do the Europeans hope to gain by charging rent on deposits? Why is Israel fueling the neo-Nazis with a proposal to eliminate cash?

    As the Bay Area Rockstars are paid in other people’s lost purchasing power, to seam the ponzi across the entire planet, the planet is responding. The more global market rotation feeds legacy, which is getting further behind the curve, the more climate variability increases. Now, the critters are all looking for a better technology to process what remains, the green shoots, and the economist are hunting down every last source of bubble leakage.

    Yes, natural resources are the real limit, but that’s not even the limit, because you have an entire unexplored universe. Scarce resources is not the problem. The problem is that all the theories require someone else, to be found, to do all the work, assuming that those unfound workers are stupid enough to need someone else to organize their work. The crap coming out of China, France and Germany doesn’t work because it doesn’t get you anywhere you need to go.

    Specialization distributes wealth to legacy and the middle class, to efficiently remove the spoil pile. Intelligent labor can drill anywhere. Just because extortion is shutting down the global economy, and legacy has middle class eyes everywhere, does not mean that other economies cannot exist, beyond their false assumptions, in broad daylight.

    Labor doesn’t have to watch legacy or the middle class, because they are derivative of capital adaptation, whether capital comes from natural resources or is recycled back into natural resources. If you want to implode an economy just stop recycling it, and trash will block all the exits, creating a reach for yield, on trash.

    The ivory tower morons watch labor, from a comfortable distance, steal what they can, and distribute it across the empire, expecting labor to invest its time in a poor derivative of its own work. Meanwhile, the middle class is rapidly disappearing, testing one hypothesis of dependency after the other, all trying to prove labor can be replaced with technology, replacing itself. Intelligent labor doesn’t need a bank, and it can fully discount any bank regulation.

    Empires can only follow the path of diminishing returns, lower quality at higher price, because each succeeding generation is subject to a higher hurdle rate. A $13/hr job is not going to support a million dollar hole in the wall. Whether you see it as America following Japan or vice versa is irrelevant. They exist in a positive feedback loop, children as debt slaves to their grandparent’s stupidity.

    Civil marriage between legacy and the middle class doesn’t work. Legacy issues the specifications, ruling out the future, and the programmers copy code for debt, to maintain the status quo, buying junk from a catalogue, built and processed by robots. That is a threat to labor how?

    Take a look at the SAT. You can teach your child the math in a year. That’s why the banal side exists, to disassemble logic into compliance. Keeping up with the banal side is easy, because your kids can identify any developments far quicker than the peer groups can develop them. Proprietary systems have the same problem, arbitrary assignment. The solution is simple. Leave them to efficiently compute themselves and they blow up.

    Don’t deny your children equity in work. Farmers pad the peddles, increase the throttle and throw their kids in the seat. Electricians teach their kids to calculate distance and probabilities in their heads. If you are going to look on the bright side, make sure you are driving the truck, not waking in front of it.

    You learn about life in birth and death, which the manufactured majority avoids in codependency with ‘modern’ medicine. You are not going into a white light. Funny, the looks on the critters faces when they realize that they have imprisoned themselves, in purgatory. Time is relative. You might want to put it to work.

    Work, an offering of your time, is a much higher and broader standard than anything you will find in the contrived empire. Peer pressure is an extremely weak force relative to the planet. You learn by doing, turning mistakes into blessings. That’s life, that’s death and that’s marriage.

    There is no plan. There are a relatively infinite number of plans. Taxes are just the misdirection. With talent, to see what others do not, from birth, and skills developed over a lifetime for the purpose, the middlemen disappear, like flies at the end of season.

  19. ChrisPacific

    Given how closely the unemployment rate seems to be correlated with macroeconomic booms and recessions, we must unavoidably conclude that some of those salt-of-the-earth individuals (building a living through the sweat of their brows) and lazy shiftless ones (unwilling to get off their couch and make something of themselves) are in fact the same people at different points in their lives.

    So unless we want to postulate some kind of cyclical variation in human nature, in which laziness lies dormant during prosperous periods but breaks out like an epidemic during recessions, we are left with one of two possibilities. Either some of the lazy shiftless good-for-nothings unaccountably end up in paid employment somehow during economic booms (as TV remote control testers perhaps?) or some of the salt-of-the-earth types end up unable to find work during recessions even though they have the motivation and temperament to perform it successfully.

    As far as I can tell, neoclassical economists accept neither of these as possible explanations, so presumably they are in the “laziness as chronic disease” camp. Maybe we could get the architects of the GFC charged under bioterrorism laws.

  20. RanDomino

    http://libcom.org/history/daybreak-dark-times-origins-vicissitudes-village-commune-municipality-nobility-urban-oli
    “Daybreak in dark times: the origins and vicissitudes of the village commune, the municipality, the nobility and the urban oligarchy in Catalonia”
    A short history of the class struggle in Catalonia since the fall of Rome, presented as a counterpoint to the assertion that the middle ages consisted of the poor being ruthlessly exploited at all times with no avenue of resistance. People have always resisted, and sometimes won and sometimes lost. There is nothing particularly unique about the current era… except that today we are better equipped than ever to win, if we decide we want to.

    1. Carla

      Re:
      http://libcom.org/history/daybreak-dark-times-origins-vicissitudes-village-commune-municipality-nobility-urban-oli

      Unfortunately, because I was really interested, I found this incomprehensible:
      “One could not even speak of private property at all beyond the houses with their nearby hay-ricks or gardens; at most, one could speak of fields or enclosures for temporary private use, concerning which various modalities of use existed: emprius, camps oberts, boïges, orris…. The care and maintenance of the animals were also mostly communal, as were the pastures. Communal usufruct was just as important for these agrarian societies as the goods themselves. We are not referring to such practices as the construction and maintenance of roads, bridges, irrigation ditches, mills or ovens, the collective purchase of wheat or moneyless exchange in settlements or vicus. The assemblies of neighbors rendered decisions on lawsuits, sanctions, defense and other questions of common interest, in accordance with orally transmitted customs.”

      It’s the “We are not referring to such practices as the construction”, etc., passage where I got completely lost. Could it possibly be a typo? Did the author, using the royal “we” mean to say “We are NOW referring?”

      Sometimes proofreading counts. I did try to skip that passage and read on in the article, but things didn’t get better. Am I the only one? Is this simply a bad translation or something? Please advise.

  21. MRW

    Why Don’t the Unemployed Get Off Their Couches?

    Ah. My brother-in-law. He objects specifically to the Black ones.

    My anger is deep, white-hot, and silent. I don’t want to lose my sister. I wonder what it’s going to look like when the bands around me release.

  22. ProfessorK

    Blame the victim is an absolutely classic American dodge to avoid responsibility.

    Ask any rape survivor older then about 35

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