economics: capitalism

In 1956 sociologist C. Wright Mills published a book titled The Power Elite.  In it, he argued that our democracy was corrupt because the same people exercised power in business, the military, and politics.  This small group, with so many important roles and connections, had an influence on our society that was far out-of-proportion with their numbers.  This, he concluded, was a dire situation.

Fast forward to 2012 and Lambert Strether posted a series of Venn diagrams at Naked Capitalism.  Strether writes:

[This] nifty visualization… shows how many, many people, through the operations of Washington’s revolving door, have held high-level positions both in the Federal government and in major corporations. To take but one example, the set of all Treasury Secretaries includes Hank Paulson and Bob Rubin, which overlaps with the set of all Goldman Sachs COOs. The overlapping is pervasive. Political scientists and the rest of us have names for such cozy arrangements — oligarchy, corporatism, fascism, “crony capitalism” — but one name that doesn’t apply is democracy.

UPDATE: I’ve included a criticism of the methodology after the diagrams; the overlap portrayed here is almost exclusively among Democratic politicians and the diagrams were explicitly intended to point out connections among progressives.

See for yourself:

On the methods for putting together these diagrams, Strether writes about the person who’s behind the diagrams:

Herman’s honest: Her goal is to “expose progressive corporatism,” and — assuming for the sake of the argument that D[emocrat]s are progressive, and that “progressives” are progressive — her chart does exactly that, and very effectively, too.

But what her data does not do is expose corporatism as such; there are very, very few Rs listed; it strains credulity that Hank Paulson was the only high-level GS operative in the Bush administration, for example, and if GS isn’t the R[epublican]s’ favorite bank, there’s surely another.

Hence, Herman’s chart, if divorced from context[2], might lead somebody — say, a child of six — to conclude that the only corporatists in Washington DC are D[emocrat]s.

Thanks to Carolyn Taylor for pointing out the methods bias.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Cross-posted at Reports from the Economic Front.

It’s election season and Republicans and Democrats are working hard to demonstrate that they support dramatically different policies for rejuvenating the economy.

While the Democratic Party’s call for more government spending makes far more sense than the Republican Party’s call for cuts in government spending (see below), the resulting back and forth hides the far more serious reality that our existing economic system no longer appears capable of supporting meaningful social progress for the great majority of Americans.

The chart below helps to highlight our economy’s worsening stagnation tendencies.  Each point shows the 10 year annual average rate of growth and the chart reveals a decade long growth trend that is moving sharply downward.

As David Leonhardt explains:

The economy’s recent struggles arguably began in late 2001, when a relatively mild recession ended and a new expansion began. The problem with this new recovery was that it wasn’t especially strong. From the fourth quarter of 2001 through the fourth quarter of 2007 (when the financial crisis began), the economy grew at an average annual rate of only 2.7 percent. By comparison, the average annual growth rate of both the 1990s and 1980s expansions exceeded 3.5 percent.

This mediocre expansion was followed by the severe recession and weak recovery brought on by the financial crisis. The combined result is that, in recent years, the economy has posted its slowest 10-year average growth rates since the Commerce Department began keeping statistics in 1947.

In fact, the economic growth figures for the period 1995 to 2007 were artificially propped up by a series of bubbles, first stock and then housing.  Once those bubbles popped, average growth rates began steadily falling.

The weakness (and unbalanced nature) of our current weak recovery is well captured in the following chart from Catherine Rampell, which compares the percent change in various indicators in the current recovery (which began in June 2009) with previous post-war recoveries.  The first point to stress is that the current recovery lags the average in all indicators but one: corporate profits.  The second is that government spending has actually been falling during the current recovery, no doubt one reason that the percent increase in so many indictors remains below the average in previous recoveries; the public sector is actually smaller today than it was three years ago.

The relative strength in the performance of corporate profits helps to explain why the two established political parties feel no real pressure to focus on our long term economic problems; corporations just don’t find the current situation problematic despite the economy’s weak overall economic performance.

Even more telling of the growing class divide is the explosion in income inequality over the last thirty years, which is illustrated in the following chart.

In other words, while corporations have succeeded in raising profits at the expense of wages, those in the top income brackets have been even more successful in raising their income at the expense of almost everyone else.  Notice, for example, that median household income in 2010 is roughly where it was in the late 1980s while the median income of the top households racked up impressive gains. Thus, the very wealthy have every reason to do what they are currently doing, which is using their wealth to ensure that candidates restrict their economic proposals to reforms that will do little to change the existing system.

The takeaway: without a mass movement demanding change, election debates are unlikely to seriously address our steady national economic decline.

Cross-posted at Reports from the Economic Front.

The Pew Research Center recently published a report titled “Pervasive Gloom About the World Economy.” The following two charts come from Chapter 4 which is called “The Causalities: Faith in Hard Work and Capitalism.”

The first suggests that the belief that hard work pays off remains strong in only a few countries: Pakistan (81%), the U.S. (77%), Tunisia (73%), Brazil (69%), India (67%) and Mexico (65%). The low scores in China, Germany, and Japan are worth noting. This is not to say that people everywhere are not working hard, just that many no longer believe there is a strong connection between their effort and outcome.

The second chart highlights the fact that growing numbers of people are losing faith in free market capitalism.  Despite mainstream claims that “there is no alternative,” a high percentage of people in many countries do not believe that the free market system makes people better off.

GlobeScan polled more than 12,000 adults across 23 countries about their attitudes towards economic inequality and, as the chart below reveals, the results were remarkably similar to those highlighted above.  In fact, as GlobeScan noted, “In 12 countries over 50% of people said they did not believe that the rich deserved their wealth.

It certainly seems that large numbers of people in many different countries are open to new ways of organizing economic activity.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Cross-posted at Reports from the Economic Front.

The Supreme Court has ruled favorably on the legality of the Affordable Care Act.  Actually, despite its name, the Act has more to do with extending and attempting to improve private health insurance coverage than it does with improving care or reducing its cost.

Unfortunately for us, the effort to improve our health care system has remained within bounds set by the needs of private health care providers and insurers.  As President Obama made clear from the start of his push for health care reform, there would be no consideration of a universal system.

Critics of such a universal system are always quick to argue that only market forces driven by the private pursuit of profit can ensure an efficient health care system.  Of course, in determining whether this is true, we need to recognize that efficiency is a complex term and that our health care system, like all systems, produces multiple outcomes.  The most obvious ones are private profit as well as the quality and cost of the relevant health care.

In terms of private profit there can be no doubt that our health care system functions well.  However, the story is quite different if we evaluate it in terms of quality and cost.  The fact that we continue to embrace a private health care system makes clear which measures of efficiency are considered most important and by whom.

The following map shows the countries, colored green, that have adopted a universal health care system.

As Max Fisher explains:

What’s astonishing is how cleanly the green and grey separate the developed nations from the developing, almost categorically. Nearly the entire developed world is colored, from Europe to the Asian powerhouses to South America’s southern cone to the Anglophone states of Australia, New Zealand, and Canada. The only developed outliers are a few still-troubled Balkan states, the Soviet-style autocracy of Belarus, and the U.S. of A., the richest nation in the world.

The handful of developing countries that provide universal access to health care include oil-rich Saudi Arabia and Oman, Latin success story Costa Rica, Kyrgyzstan, and, famously, Cuba, among a few others. A number of countries have attempted universal health care but failed, such as South Africa, which maintains a notoriously inefficient and troubled public plan to complement the private plans popular among middle- and upper-class citizens…

That brings us to another way that America is a big outlier on health care. The grey countries on this map tend to spend significantly less per capita on health care than do the green countries — except for the U.S., where the government spends way more on health care per person than do most countries with free, universal health care. This is also true of health care costs as a share of national GDP — in other words, how much of a country’s money goes into health care.

The OECD just published a major study on the health care systems of its 34 member nations.  It found that:

 Health spending accounted for 17.6% of GDP in the United States in 2010, down slightly from 2009 (17.7%) and by far the highest share in the OECD, and a full eight percentage points higher than the OECD average of 9.5%. Following the United States were the Netherlands (at 12.0% of GDP), and France and Germany (both at 11.6% of GDP).

The United States spent 8,233 USD on health per capita in 2010, two-and-a-half times more than the OECD average of 3,268 USD (adjusted for purchasing power parity). Following the United States were Norway and Switzerland which spent over 5,250 USD per capita. Americans spent more than twice as much as relatively rich European countries such as France, Sweden and the United Kingdom.

What does all of this mean in terms of health outcomes?  According to the OECD report:

Most OECD countries have enjoyed large gains in life expectancy over the past decades. In the United States, life expectancy at birth increased by almost 9 years between 1960 and 2010, but this is less than the increase of over 15 years in Japan and over 11 years on average in OECD countries. As a result, while life expectancy in the United States used to be 1½ year above the OECD average in 1960, it is now, at 78.7 years in 2010, more than one year below the average of 79.8 years. Japan, Switzerland, Italy and Spain are the OECD countries with the highest life expectancy, exceeding 82 years.

One possible explanation for this lagging performance, highlighted in an earlier OECD report, is that the U.S. ranked 26th in terms of the number of practicing physicians relative to its population, 29th in terms of the number of doctor consultations per capita, 29th in terms of the number of hospital beds per capita, and 29th in terms of the average length of hospital stay.  At the same time, the “U.S. health system does do a lot of interventions… it has a lot of expensive diagnostic equipment, which it uses a lot. And it does a lot of elective surgery — the sort of activities where it is not always clear cut about whether a particular intervention is necessary or not.”

Private health care providers and insurers are clear about how they measure health care efficiency.  And as long as we rely on them to set the terms of the debate we will continue to suffer the consequences.

Cross-posted at Jezebel.

I’ve been watching the response to Anne-Marie Slaughter’s Why Women Still Can’t Have It All roll out across the web.  Commentators are making excellent points, but E.J. Graff at The American Prospect sums it up nicely:

Being both a good parent and an all-out professional cannot be done the way we currently run our educational and work systems… Being a working parent in our society is structurally impossible. It can’t be done right… You’ll always be failing at something — as a spouse, as a parent, as a worker. Just get used to that feeling.

In other words, the cards are stacked against you and it’s gonna suck.

And it’s true, trust me, as someone who’s currently knee-deep in the literature on parenting and gender, I’m pleased to see the structural contradictions between work and parenting being discussed.

But I’m frustrated about an invisibility, an erasure, a taboo that goes unnamed.  It seems like it should at least get a nod in this discussion.  I’m talking about the one really excellent solution to the clusterf@ck that is parenting in America.

Don’t. Have. Kids.

No really — just don’t have them.

Think about it.  The idea that women will feel unfulfilled without children and die from regret is one of the most widely-endorsed beliefs in America.  It’s downright offensive to some that a woman would choose not to have children.  Accusations of “selfishness” abound.  It’s a given that women will have children, and many women will accept it as a given.

But we don’t have to.  The U.S. government fails to support our childrearing efforts with sufficient programs (framing it as a “choice” or “hobby”), the market is expensive (child care costs more than college in most states), and we’re crammed into nuclear family households (making it difficult to rely on extended kin, real or chosen).  And the results are clear: raising children changes the quality of your life.  In good ways, sure, but in bad ways too.

Here are findings from the epic data collection engine that is the World Values Survey, published in Population and Development Review. If you live in the U.S., look at the blue line representing “liberal” democracies (that’s what we are).  The top graph shows that, among 20-39 year olds, having one child is correlated with a decrease in happiness, having two a larger decreases, and so on up to four or more.  If you’re 40 or older, having one child is correlated with a decrease in happiness and having more children a smaller one.  But even the happiest people, with four or more children, are slightly less happy than those with none at all.

Don’t shoot the messenger.

Long before Slaughter wrote her article for The Atlantic, when she floated the idea of writing it to a female colleague, she was told that it would be a “terrible signal to younger generations of women.”  Presumably, this is because having children is compulsory, so it’s best not to demoralize them.  Well, I’ll take on that Black Badge of Dishonor.  I’m here to tell still-childless women (and men, too) that they can say NO if they want to.  They can reject a lifetime of feeling like they’re “always… failing at something.”

I wish it were different. I wish that men and women could choose children and know that the conditions under which they parent will be conducive to happiness.  But they’re not.  As individuals, there’s little we can do to change this, especially in the short term.  We can, however, try to wrest some autonomy from the relentless warnings that we’ll be pathetically-sad-forever-and-ever if we don’t have babies.  And, once we do that, we can make a more informed measurement of the costs and benefits.

Some of us will choose to spend our lives doing something else instead.  We’ll learn to play the guitar, dance the Flamenco (why not?), get more education, travel to far away places, write a book, or start a welcome tumblr.  We can help raise our nieces and nephews, easing the burden on our loved ones, or focus on nurturing our relationships with other adults.  We can live in the cool neighborhoods with bad school districts and pay less in rent because two bedrooms are plenty.  We can eat out, sleep in, and go running.  We can have extraordinary careers, beautiful relationships, healthy lives, and lovely homes.  My point is: there are lots of great things to do in life… having children is only one of them.

Just… think about it.  Maybe you can spend your extra time working to change the system for the better.  Goodness knows parents will be too tired to do it.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

During college I spent a season selling fireworks at a roadside stand in South Dakota.  As you can see on the map below, posted at Buzzfeed, South Dakota is one of the few states where you can buy serious fireworks.  We sold some pretty hard-core stuff, but I mostly liked working there because the packages were so pretty.

In any case, if you haven’t lived in any of the dark blue states, you may not have seen the roadside stands that pop up this time of year.  Some are elaborate seasonal operations, but others are rather ramshackle.  Fireworks for sale end up getting crammed into all manner of places.  Lucky for us, in 2010 photographer Bill Vaccaro drove across the country snapping shots of these retailers.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

In capitalism, owners of the “means of production” (things like land, factories, technologies, and natural resources, or the money to buy these things) employ labor to do the work of actually producing things.  If the system is working correctly, the value of the labor that goes into making something is worth less than the value of the thing.  This way the capitalist can sell the thing, pay the worker, and skim some profit off the top.

But how much profit?  In a less exploitative system, the worker is paid close to what his work is worth (after accounting for the expenses of maintaining the means of production). In a more exploitative system, the capitalist takes a larger chunk of the enhanced value for himself and gives less to the worker.

What kind of system do we have in the U.S.?  Let’s take a look at some data.

Over at Reports from the Economic Front, Martin Hart-Landsberg posted this graph. It shows that  workers have become increasingly productive since 1948 (i.e., they have created more and more surplus value).  Employers largely shared the increase in profitability with their workers… until the mid-1970s.  Since then, wages have remained stagnant even as worker productivity has continued to rise.  “In other words,” Hart-Landsberg writes, “the owners of the means of production have basically stopped sharing gains in output with their workers.”

You wonder why the middle class is shrinking?  This is one reason.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Yesterday I posted about the extraordinary number of people in Louisiana prisons.  The rise in imprisonment mirrors the U.S. growth that began with the so-called war on drugs, but was also triggered by a crisis in the early 1990s, after two decades of growth.  A federal court ordered Louisiana to reduce overcrowding in prisons, which had risen to an inhumane level.  They  had to either let criminals out or build more prisons.  They did the latter.

Instead of building more state-funded prisons, though, for-profit prisons were built by sheriffs and residents of local parishes.  Today there are more inmates housed in local, for-profit prisons than in state prisons (left) and Louisiana has more inmates in private prisons than any other state in the U.S. (right):

Why should we care if so many prisoners are housed in private, for-profit institutions?

The conditions in these prisons are worse than those in state prisons, especially when it comes to quality of life (like the opportunity to develop hobbies or practice their religion) and rehabilitative services (like high school equivalency classes and job training). These are desperately needed services; the average Louisiana prisoner has a 7th grade education and nearly a 3rd read below a 5th grade level:

State facilities simply spend more money, while for-profit prisons skim as much off the top as possible.  Writes reporter Cindy Chang:

An inmate at the Angola state penitentiary costs $63.15 a day, compared with the $24.39 sheriff’s per diem. State facilities house the sickest and oldest, but [Department of Corrections] Secretary Jimmy LeBlanc admits part of the differential is the lack of educational offerings.

In fact, Louisiana spends less on its prisoners (in state and private facilities combined) than any other state in the U.S.:

Law enforcement officials and parish residents may not like what’s happened in Louisiana, but many feel trapped.  For-profit prisons are sustaining local communities: they fund police departments and employ residents. Often they are the only local jobs with decent wages and benefits. Those residents support the local economies and keep small towns alive.

In this short video, an employee talks about the occupational opportunity the prison provides:

Many Louisianans, then, see the harsh sentences and high imprisonment as a price worth paying.  Says Sheriff Charles McDonald: “I know it sounds crazy and impersonal… but we’re stuck with this jail. We can’t walk away. We’ve got investors, employees.”

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.