economics

One conventional explanation for our economic problems seems to be that our businesses are strapped for funds.  Greater business earnings, it is said, will translate into needed investment, employment, consumption and, finally, sustained economic recovery.  Thus, the preferred policy response: provide business with greater regulatory freedom and relief from high taxes and wages.

It is this view that underpins current business and government support for new corporate tax cuts and trade agreements designed to reduce government regulation of business activity, attacks on unions, and opposition to extending unemployment benefits and increasing the minimum wage.

One problem with this story is that businesses are already swimming in money and they haven’t shown the slightest inclination to use their funds for investment or employment.

The first chart below highlights the trend in free cash flow as a percentage of GDP.  Free cash flow is one way to represent business profits.  More specifically, it is a pretax measure of the money firms have after spending on wages and salaries, depreciation charges, amortization of past loans, and new investment.  As you can see that ratio remains at historic highs.  In short, business is certainly not short of money.

So what are businesses doing with their funds?  The next chart looks at the ratio of net private nonresidential fixed investment to net domestic product (I use “net” rather than “gross” variables in order to focus on investment that goes beyond simply replacing worn out plant and equipment).  The ratio makes clear that one reason for the large cash flow is that businesses are not committed to new investment.  Indeed quite the opposite is true.

Rather than invest in plant and equipment, businesses are primarily using their funds to repurchase their own stocks in order to boost management earnings and ward off hostile take-overs, pay dividends to stockholders, and accumulate large cash and bond holdings.

Cutting taxes, deregulation, attacking unions and slashing social programs will only intensify these very trends.  Time for a new understanding of our problems and a very new response to them.

Cross-posted at Reports from the Economic Front.

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

A majority of both Democrats and Republicans believe that economic inequality in the U.S. has grown, but they disagree as to its causes and the best solutions, according to a new survey from the Pew Research Center.  While 61% of Republicans and 68% of Democrats say inequality has widened, only 45% of Republicans say that the government should do something about it, compared to 90% of Democrats.  A study using the General Social Survey has confirmed the findings.

Republicans and Democrats also disagree about what the best interventions would be.  At least three-quarters of Democrats favor taxes on the wealthy and programs for the poor, but 65% of Republicans think that helping the poor does more harm than good.

The differences may be related to beliefs about the cause of poverty.  Republicans are much more likely to endorse an individualist explanation (e.g., people are poor because they are lazy), whereas Democrats are more likely to offer a structural explanation (e.g., it matters where in the class structure you begin and how we design the economic system).

Interestingly, answers to these questions vary much more by political affiliation than social class.  Using data from the survey, I put together this table comparing the number of percentage points that separated the average answers to various questions.  On the left is the difference by political party and, on the right, income (click to enlarge).

Clearly political affiliation drives opinions on the explanation for and right solutions to income inequality more so than income itself.

This is a great example of hegemony.  A hegemonic ideology is one that is widely supported, even by people who are clearly disadvantaged by it.  In this case, whatever you think of our economic system, it is pretty stunning that only there is only a six point gap between the percent of high income people saying it’s fair and the percent of low income people saying so.  That’s the power of ideology — in this case, political affiliation — to shape our view of the world, even going so far as to influence people to believe in and perhaps vote for policies that are not in their best interest.

Cross-posted at Pacific Standard.

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.

Officially our most recent recession began December 2007 and ended June 2009.  The following chart provides an important perspective on the recovery period.

Stocks and profits have enjoyed a remarkable recovery.  While income is slightly up over the period, it is critical to remember that this is average income and the increase largely reflects gains for those at the very top of the income distribution.  Jobs and housing have yet to recover.

So, with returns to capital booming, it is easy to understand why business leaders are relatively content with current policies and, by extension, political leaders are reluctant to rock the boat.

Unfortunately, current policies are unlikely to do much to improve the job prospects or income of most workers.  In fact, the rise in business profits owes much to our depressed labor conditions.  Unless something dramatic happens, we can expect the next few years to look very much like the past few years.

Cross-posted at Reports from the Economic Front and Pacific Standard.

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

If you’re looking for just one image that says a thousand words about what’s wrong with America, here’s a contender.  It is a screenshot of the website for the Silver State Schools Credit Union:

Yep, it’s an invitation to K-12 teachers to go into debt to do their job.

Speechless.

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.

This year marks the 40th anniversary of the Equal Credit Opportunity Act.  This granted women the right to have a credit card in her own name.  This translated into an unprecedented degree of independence for women.  Feminists and their allies fought for this new world and it’s a good thing because we love to buy things with our credit cards sooooooo muuuuuuuuch!

And, thankfully, credit card companies like Banif know just how to make us comfortable, by combining feminism and infantilization and kissing our asses because We. Are. So. Special. “Every day is women’s day!” Wheeeee!

The husband in this ad, though, likely thinks he would have been better off if his wife wasn’t allowed to make financial decisions without his approval.  Stupid women and their stupid financial decisions. Ruining everything.

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.

Since 1958, the North American Aerospace Defense Command (NORAD) has entertained kids with an annual Christmas-themed Santa-tracking program.  Kids keep an eye on where in the world Santa is delivering his gifts and everyone thinks it’s jolly.

Well, not this year.  Earlier this month we learned that Santa will be joined by two military fighter jets.  Some objected to the new twist on the tradition, arguing that it militarized Santa, essentially brainwashing kids into romanticizing the ugly necessity of defense and the aggression of war.

Is it pro-U.S. military propaganda?

If it is, it’s nothing new.  Ben Ostrowsky sent us this World War II-era propaganda poster. It was part of a series produced by the labor union and corporation-led War Production Board in 1942.  The aim was to engage as many civilians and companies in weapon production as they could.  “Santa Claus has gone to War!” it exclaims.  Maybe he needs those fighter jets along for the ride after all.

P.S. In case anyone is still debating: this proves not only that Santa Claus is white, but that he’s an American too.  Team America!

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 Pew Research Center data collected earlier this month, only 4% of respondents said that the thing they liked best about Christmas was the gift exchange. Only 1% said they most liked shopping or good deals and only 2% said it was the food.  Instead, the majority (69%) said it was the family and friend time that they most appreciated, followed by religious reflection (11%), and general happiness and joy (7%).  My pet suspicion, that people really like it for the vacation, came in at only 3%.

What do they like the least?  Commercialism and materialism top the list (33%), the expense comes in second (22%), and shopping comes in third (10%).

There may be some response bias here — that’s when people say what they think the researcher wants to hear instead of the truth — but, if the data are good, it reveals why marketers have to try so damn hard every season to convince us that the gifts, decorations, and food are what make the holiday special.  What would happen to spending if we all decided to do Christmas the way we wanted instead of the way it is in toy and jewelry commercials?  There are lots of monied forces that don’t want us to find out.

All images from a Google search for “Christmas marketing.”

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.

Princeton sociology professor Viviana Zelizer wrote a wonderful succinct editorial for the New York Times about the idea of giving money as a gift.  Money, she explains, is used in the most impersonal of transactions (even antagonistic ones, as someone who recently paid a parking ticket recalls), so giving money to loved ones can be seen as crass, tasteless, or thoughtless.

Zelizer explains that cultural elites have been worrying about this since the early 1900s.  The solution: “camouflage money inside a traditional gift.”  Offering some examples, Zelizer writes:

In the December 1909 Ladies’ Home Journal, for instance, the writer Lou Eleanor Colby said she had found a way to “disguise the money so that it would not seem just like a commercial transaction.” She explained how she had incorporated $10 for her mother into artwork. She inserted dollar bills into two posters; one showed five sad bills not knowing where to go, and the other depicted the happy ending: “five little dollars speeding joyfully” toward her mother’s purse.

Housewives hid gold coins in cookies and boxes of candies; dollar bills could decorate belt-buckles or picture frames. Women boasted when the recipient failed to realize that the actual present was money. Men also disguised the money they gave to their wives as gifts, to distinguish it from their allowances. If you give her a check, The Ladies’ Home Journal advised, “put it in an embroidered purse, or a leather sewing basket or a jewel box which will be a little gift in itself.” The better the disguise, the more successful the gift.

Today these tokens are probably familiar to many of you.  One site suggests making the money into a gift basket. Another suggests that you give the gift of (money) origami.

Soon, Zelizer explains, companies figured out how to cash in on this cashing out, inventing the idea of decorated money orders and telegrams:

…in 1910, American Express began advertising money orders as an “acceptable Christmas gift.” Western Union improved on the idea by creating distinctive telegrams for sending money for special occasions, while greeting card companies started selling decorative money holders for birthdays and holidays.

Thus the “money holder” card and the “gift card” was born.

While it may seem obvious to many of us now that gift certificates and money holders exist, Zelizer shows that these objects have a cultural history, devised to solve a particular problem that emerged with the spread of a wage-based economy.

Via Kieran at OrgTheory; photo by Chris Palmer flickr creative commons. Originally posted in 2010.

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.