Category Archives: The destruction of the middle class

Young and Under Pressure – Europe’s Lost Generation

Yves here. Even though this post hews to the convention of a describing the labor market conditions in Europe in clinical terms, the data reveals deeply troubling conditions, such as a high and in some countries rising level of families with no wage earner, which sets the stage for the continuation of poverty, as well as putting them in danger of becoming homeless. “Lost generation” is too kind a term to depict the conditions facing the young. Instead of being able to make choices and at least to a degree, shape their future, they are desperately trying to find a foothold of any kind.


Are Immigrants Bad for Government Budgets?

Yves here. One of the major charges leveled at immigrants in the US is that they use public services (the stereotype is that they show up in emergency rooms, which are not a taxpayer expense,* as well as send children to school) and don’t provide anywhere near the contribution to the economy in terms of tax contributions relative to what they extract.

Notice that that charge is implicitly made of illegal immigrants, who presumably don’t pay income taxes (although I personally know one who does, by virtue of being in an immigration Schrodinger’s cat uncertainty state and having a Social Security card and meticulously paying taxes for 15 years while no longer having a visa and not having become a citizen. Will not bore you whit his shaggy dog story). But their incomes are often so low that it’s not clear they’d pay much even if their taxes were reported, save regressive FICA taxes. Yet they do pay other taxes: sales taxes, gasoline taxes, and property taxes embedded in their rents.

There is a separate public policy argument about immigration and foreign guest workers on H1-B visas, which is that at least the way it is conducted in America, that in combination with an anti-labor-bargaining policies, cheap immigrant labor gives employers even more leverage against workers. This post focuses narrowly on the “are they worse than natives in terms of impact on the public purse?” The study focuses on the UK. One of the striking revelations is how little decent data there is on this topic, particularly in a country that has no where near the number of unofficial immigrants as the US.


That Shrinking Slice of a Barely Growing Pie: Why the Glorious Economy of Ours Feels so Crummy

ves here. There’s one thing to add to Richter’s useful recap of what the supposedly sparkling 3Q GDP results mean for those of us who live in the real economy. The GDP deflator fell from 2.1% in the second quarter to 1.3% this quarter, so some of the rosiness of the results was due to the swing in the deflator.


Tech Underbelly: Indentured Servitude and Bonded Labor in the US

A labor collusion pact with the aim of suppressing pay levels among Apple, Google, Microsoft, Pixar, and others, demonstrated that the idea that Silicon Valley plays fairly is an illusion. But even more unsavory abuses occur further down the food chain. H1-B visa workers, who are generally held in low esteem in the US since they compete with Americans, take a risk when they sign up with labor brokers, even seemingly legitimate ones like Tata Consultancy, part of the giant Tata Group in India.

As the NBC video below, part of a joint investigation with the Center for Investigative Reporting, explains, the most abusive recruiters are body shops, who abuse the H1-B program by bringing in technology graduates when the firm in fact has no job lined up. The Indian immigrants are hostage, kept in guest houses where they are told not to go outside until they find work.


Exploding Wealth Inequality in the United States

Yves here. This is a particularly important post on the state of inequality since Emanuel Saez, working with Thomas Piketty, was for over a decade tracking the rise in inequality in the US, particularly the way that the top 1% and 0.1% were pulling away from the rest of the population. Gabriel Zucman has made a recent important contribution to the analysis of wealth disparity by sizing the impact on global figures of the funds stashed in tax havens. A full 6% goes unrecorded, which by his estimates is enough to make the US less of a net debtor, Europe a net creditor, and of course, the rich in those regions even richer.

Saez and Zucman are particularly concerned that this level of wealth inequality is on its way to becoming entrenched.


Class Traitors: How Ideological Brainwashing Gets Rich and Ordinary Americans to Undermine Their Economic Interest

Linda Beale, of ataxingmatter, has written forcefully and persuasively about some of the propagandizing-accepted-as-gospel that the well-heeled use to advocate policies that advance their economic interests. For instance, as most Naked Capitalism readers appreciate, but a remarkably large swathe of the US population does not, tax cuts for big corporations are simply a transfer to the rich. From a post last year:

I’ve argued frequently in the past that there is no there there–i.e., that lowering corporate tax rates will do nothing to create jobs. Instead, I’ve said, it will simply deliver an even higher profit margin to be skimmed off by the highest paid executives and, possibly, shareholders. The higher profit margins are unlikely even to be used to increase workers’ shares of the corporate revenues through higher wages, a place where they could most help the economy other than new jobs created. Thus, the drive for “revenue neutral” corporate tax reform (cut corporate taxes, cut expenditures elsewhere to make up for the decreased corporate tax revenues) is just another example of corporatism as an engine of the modern form of US class warfare

Beale takes up a different theme today: how the rich and poor act against their economic interest. For many in middle and lower income strata in red states, hostility to the government is an article of faith even though those states (and many of those same govement-hating citizens) are significant beneficiaries of Federal programs.

But less well recognized are the ways that the wealthy are undermining themselves. They’ve taken the “increase our distance from everyone else” experiment well beyond its point of maximum advantage, not just to the society around them but also in terms of the costs to the class warriors.

As we’ve pointed out, highly unequal societies have lower lifespans, even among the rich; the shallower social networks of stratified societies and the high cost of losing one’s perch, in terms of loss of friends and status, creates an ongoing level of stress that has a longevity cost. Beale points out something we’ve mentioned occasionally in the past, that creating an underclass with inadequate access to medical services is a great breeding ground for public health problems. The fact that many low income Americans can’t afford to take sick days and health plans generally have high deductibles, which discourage individuals from getting treated until they are sure they are really sick, isn’t a great program design if you want to reduce the spread of infectious diseases.


The Financialization of Life

Yves here. One of the efforts the Naked Capitalism community has been engaged in is trying to understand and map our emerging political and economic order. Over the last four decades, massive changes have taken place in social values, in job security, in the importance of communities relative to other networks, like professional associations, and in the role of the state. Economists, social scientists, and laypeople have used various frameworks for describing this period. Understanding the driving process is important not merely for the purposes of description, but also for analysis, since a major question remains open: is this a last gasp of large-scale industrial capitalism, or is this the starting phase of a new economic order? We’ve tended to see this period as a self-limiting finance-led counter-revolution against the New Deal, but that may prove to be too optimistic a reading.

This Real News Network interview with Costas Lapavitsas, a professor in economics at the University of London School of Oriental and African Studies, takes a different perspective. Lapavitsas contends that financialization itself constitutes a new form of capitalism, which is supported by neoliberal ideology.

Independent of whether you fully agree with Lapavitsas’ framing, this talk gives a good overview of the major economic and political changes since 1970. His summary would be useful for those who could use a historical perspective on these shifts, or want a high-level understanding of the restructuring of modern economies without having to get too deep into the weeds. But even though this interview is designed to go down easily, it offers a lot of grist for thought.


The Mixed International Picture on Poverty and Inequality

Yves here. As much as readers may already have an intuitive grasp of the story told in this post, data can help define its contours better. Here we see that the rising tide of global growth has not lifted all boats. The gains of the once-poor in China and India have come at the expense of the what used to be the middle class in more developed countries. Reducing poverty has not been a zero sum game. This post also omits another key piece: the rise and rise of an uber-wealthy class.


A Picture Worth 1000 Words: A Sighting from the McJobs Market

One of the complaints too often taken seriously by the business press is employer claims that they can’t find workers with the right skills for open job slots. We’ve looked at some of these stories in the past, and when employers complained, it pretty much without exception reflected that because the economy is slack,they expect to be able to hire workers cheaply, which often includes not being willing to spend time to train someone. In fact, there has been a perverse trend starting more than a decade ago of employers putting out incredibly narrow job specifications. They were effectively saying they were willing only to hire someone who had been in precisely the same role at a similar company.

But even as McJobs look to be the fastest growing employment sector, just because they want to hire workers for as little as possible does not mean that prospective employees will hit their bid.


Michael Hudson: Piketty vs. the Classical Economic Reformers

Yves here. This post by Michael Hudson is one entry from an issue of a journal critiquing Thomas Piketty’s Capital in the 21st Century. Hudson argues that even though Piketty’s findings about wealth accumulation over the centuries are useful, he nevertheless has done a great disservice by treating “wealth” as an undifferentiated lump. By contrast, classical economists differential between rentier behavior (such earning income from economically unproductive activities such as land ownership), financialization, and leveraged speculation on asset prices. Hudson argues that Piketty’s failure to probe the types of wealth and the impact of income-generation strategies for various types of wealth, as well as his failure to incorporate legal and political arrangements means his book tacitly supports the status quo. Inequality for him is a state of nature, not a function of how our economy is organized.


Rob Johnson on the Uber Rich: Top 400 US Billionaires’ Wealth Equals Brazil’s GDP

Yves here. Real News Network features a vivid discussion between Rob Johnson, Director of the Economic Policy Initiative at the Franklin and Eleanor Roosevelt Institute and a member of the UN Commission of Experts on Finance and International Monetary Reform, and Paul Jay on the short-sightedness of the uber-rich.

Although many of the themes of this talk will be familiar to Naked Capitalism readers, Johnson, who is also a long-standing political insider, is blunt.


Masaccio: The Shaky Foundation of Neoliberal Economics – Life-Cycle Savings

ves here. Readers may know that we regularly savage neoliberal economics, which we often refer to as “mainstream economics.” For instance, that’s why we so often take aim at Paul Krugman, who despite his leftist inclinations, never takes them very far because he is intellectually hostage to a flawed, destructive orthodoxy.

Here masaccio makes a point that the many enthusiastic reviewers of Piketty’s Capital in the 21st Century have skipped over, namely, that his book indicts orthodox approaches and conclusions. Masaccio then focuses on a glaring example of where neoliberal economic theory does not match up with real-world behavior, in its life cycle savings theory.


Mark Ames: Why Finance is Too Important to Leave to Larry Summers

Welcome to the world of running a small website. The estimable Mark Ames, who is as much a litterateur as journalist, promised, promised, promised us a fundraising post, but told us he just can’t deliver the piece. I know Mark didn’t do this casually; he was a publisher himself, at The eXile in Russia and then with its US incarnation, The eXiled.

But Mark did give us a hard-to-beat post three years ago, and it deserves being reprised. So enjoy!