Teatopia

I read an interesting article written by Elias Isquith in Salon entitled “Tea Party’s embarrassing irony: How it’s ideal nation rejects basic American Beliefs”, much of which is commentary on a piece written by Reihan Salam, a conservative pundit who in his article coins the term “Teatopia”. What he describes is essentially a childish pipedream of a Federalist America where power is shifted from the federal government to state governments. States would put in place structures that are requested by their populace and corporate lobbyists would now look to the states instead of a central government to bestow favors upon them. The beauty of this system, from a conservative standpoint, is that states would evolve populated by people sharing values and ideas of how their children should be brought up and taught. If you live in a state whose policies do not align with your values, you can just move to another state. In time, California and Vermont can become even more liberal and the Carolinas more conservative. One could offer public pre-K and K-12 or even publicly funded college education, whereas another could provide vouchers for charter, internet or religious schools. Politics would be a friendly affair because everyone in the states avows the same ideologies. The role of the federal government becoming minimal, federal taxes would shrink and state taxes rise. In such a world we would become “50 mini states where everyone agrees”. The issue Mr. Isquith has with this (Reihan Salam does not propose this structure but just describes it as the Tea Party dream) is that it is anathema to the notion of democracy. “Democracy, it should go without saying, is not a system designed to tackle the problem of what to do when everyone is on the same page. You don’t need to venerate and inculcate the principles of compromise, pluralism and cooperation in a land where nobody questions what to do or how to do it.” Unfortunately the dream described by Salam, though maybe unattainable and impractical, is real. A segment of the population has convinced themselves (or been convinced) that it must be “their way or the highway”. Sharon Engels, when she ran for the Senate said that if we can’t get what we want at the ballot box, we will have to resort to 2nd amendment remedies. Another Tea Party Republican lamented that “the reason we are where we are is because we did not hold to our principles and were willing to compromise”. There is no sense of needing to live within a community of people with varied priorities , values and cultures and figuring out how to accommodate as many of the diverse interests as possible. That, after all is successful governance. Not bunching people with common interests together and providing only for a segment of the community aligned with you. I would like to expand on this a bit. Setting the issue of democracy aside, to make progress and to improve anything, there need to be countervailing forces at play. To invent the lever there needed to be a desire to move a rock and an inability to move it adequately. Here the two forces are the desire and the inability. Lacking one or the other, there is no lever. In our political system, there has been a pull from the left and one from the right. One wanting change, the other to stand still. These countervailing forces acting together, allows us to progress yet within cautious restraints. Our system works. The Soviet Union lacked any opposition and thus collapsed as in time also do all other dictatorships. Today much is written about the advantages of divergent points of view developed through varied experience, education or discipline, in solving problems, developing systems and creating new stuff. This variety could reside in an individual who has been exposed to varied cultures, socioeconomic conditions and a range of occupations. Or it can exist in a team made up of individuals, each with their differences along these lines from other members. Even if not for the issue of democracy as described by the author, I would expect that a Teatopia, made up of pockets of like thinking people, would stagnate at best, or wither and die or more likely be taken over by a foreign power. Fortunately neither of the authors expects Teatopia to go beyond the stage of a pipedream, however real it is, and I agree. We survived the pull from the Left in the 60s and will survive the pull from the right in the early part of the twenty first century and be stronger for having felt these pressures.

Income Inequality

I read an article written by Robert T. McGee, Director of Macro Strategy and Research, US Trust, which I found interesting. It appeared in issue 26. 2014 of a US Trust publication entitled Capital Acumen under the title “Income Inequality: U. S. Versus the World. He starts out agreeing that income inequality has increase in the developed world over the last three decades. Included in his article is a chart showing the Per Capita GDP, the GINI (%) coefficient and the ratio of the richest 10% Average income to the Poorest 10%. (The GINI coefficient measures income inequality. 0% is the case where all households earn the same income and 100% if one household has all the income and the all the others have none. So the lower the coefficient the smaller the income inequality) He sites globalization and technology, changes in policies and institutions, and differences in education among the reasons. He points out that “the average person in the rich world would be among the best off with the same income in a poor country”. This fact draws immigrants from poor countries who take low paying jobs, into the US. He concludes that inequality is overwhelmingly caused by inequality between rich and poor countries rather than inequality within countries suggesting that inequality should be judged on an absolute rather than a relative scale. By the absolute measure, poverty is minimal in the rich world. He ends his opening salvo with “Other than the corrosive effects of envy, there is less reason to care if income inequality is high as long as the bottom decile has adequate income”. Following is a list of the top ten economies giving their Per capita income, GINI (%) and the ratio of the Richest 10% average income to the poorest 10%. United States, $ 51.7, 45, 15; China, $9.2, 47.4, 21.8; Japan, $35.9, 37.6, 4.5;Germany, $38.7, 27, 6.9; France, $35.3, 32.7, 8.3; United Kingdom, $36.6, 40, 13.6; Brazil, $11.7, 50.8, 37.1; Russia, $17.5, 41.7, 12.8; Italy, $29.8, 31.9, 11.7; India, $3.8, 36.8, 8.6l WORLD, $12.2, 39, 12. I have some real issues with his logic. Poverty is not an absolute. The idea of being poor goes beyond just do you have a roof over your head and some food in the stomach. By that standard, homeless guys sleeping in Shinjuku under the L in large cardboard boxes and begging for their meals are not poor. They have a roof over their heads and are not starving. Reality is that we humans have needs beyond these two and most of those are relative. The absolute argument is weak. The same logic says that by absolute measures a poor man today is better off than a rich man thousands of years ago. The cardboard box is more comfortable than a cold, damp cave; their life expectancy is much greater; they can see and be more aware of the world around them, read and write, flush their toilets, and of course they can watch TV. That being said, I would bet that a rich man then, as a rich man now, would be smiling more often than a poor man. In fact I saw a compelling argument (I think it was from the right) on TV supporting poverty in relative terms. It talked about the relatively low cost of living, specifically in Texas, where a poor man by national poverty standards could live quite well compared to someone with the same income in New York. The argument went further, justifying low wages, again because the cost of living is low. (I have some sympathy for that position.) I am also not sure about the point of immigrants from poor countries taking low paying jobs significantly contributing to the inequality. Where I live, I see many more Indian immigrants working as doctors, engineers and businessmen than I do bagging groceries in the Piggly Wiggly. I don’t know if this is still the case, but after the large expansion of land was finished, US emigration policy, (unless one was seeking asylum or had other unique circumstance only allow more educated and higher skilled immigrants into the country. I believe the lower skilled labor primarily entered through illegal means. As to the causes of inequality, Robert McGee, said “research at the Organization for Economic Co-operation and Development (OECD) found “trends in technology, policies and education”, were the key drivers of changes in wage inequality and employment in the United States, Germany, Norway and other countries”. “Policies and institutional effects such as declining unionization, product market deregulation, declining tax wedges and reduced unemployment benefit replacement rates were found to raise inequality, but also to increase employment.” He then goes on to says that growth in education not only reduces inequality but increases employment. “Shifting demographics have substantial effects on income inequality. These include increased female participation, smaller household structures (single parents), increased part time work versus full time work and an increased disparity in men’s earnings. Assortative mating, an increased tendency of comparably compensated partners to form households, can add to inequality in a society.” I can’t disagree with that except to give some possible explanations for these factors. Increased female participation was brought about by rising costs and stagnating family income pushing women into the workforce. This exacerbated the situating, with women’s increased participation the labor pool grew further driving down the market price for labor. I don’t believe the smaller household structure is primarily attributed to single parents. As a society advances, the marrying age increases and young people don’t immediately move from their parent’s home into a family, but spend some time living alone. With two members of a household forced to work, there is a willingness, if not a desire, for one member to work part time and part time work pays less and provides fewer benefits. I think that more and more people are living in homogeneous communities thus limiting the opportunity to meet people in different socioeconomic conditions. Mr. McGee goes on to write about income mobility citing a study by Raj Chetty, a professor of economics at Harvard which says that the odds of a young person staying in the bottom decile today are not much different than they were 30 and 50 years ago. I would add that given the larger gap between the bottom and top 10%, when they move up from the bottom, they are not moving into quite as nice a spot. Also I think a more significant measure of mobility would be the odds of moving from the bottom 10% to the top 10%. My guess is that the odds would not be the same today. Ho goes on to say that in northern European countries it is easier to move from the bottom to the top, because of the smaller difference. My comment here is a “well duh”. He goes on to say the it is more appropriate to compare the United States, which has the largest income inequality of the 10 largest economies, to world inequality rather than the other large economies because we have the greatest diversity in our population, an unusually large share of the world’s richest most educated and entrepreneurial people. I’m not sure what he is saying here except maybe that “them that’s got, git”. The author concludes that “America’s income inequality is the natural outcome of being the land of opportunity” and ends with the right wing mantra: “The real issue is raising living standards and making opportunity for advancement as accessible as possible, It’s important that envy and resentment of success not stymie the effort to grow the economy, because the evidence is overwhelming that regardless of inequality trends, it takes a rising tide to lift all boats.” While the tide has risen and the yachts are at ever greater heights, I think it would be hard to convince the bottom decile that they are any better off in their dinghies.