economics

Cross-posted at Montclair SocioBlog.

The equation of wealth and virtue seems to come almost naturally, at least among the wealthy.  The logic is simple:  Virtue leads to success, therefore wealth is evidence of one’s virtue.  Virtue, in this case, means the Protestant Ethic – hard work and a willingness to forgo or postpone pleasures.  It follows then that those who are not wealthy must have turned their back on virtue.

David Brooks, in his Friday column (here),  applies this explanation to the wealth of nations.

Why are nations like Germany and the U.S. rich? . . . It’s because many people in these countries believe in a simple moral formula: effort should lead to reward as often as possible.

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not.

The US, Germany, and the Netherlands are Brooks’s exemplars of these virtues (Brooks uses the word ethos).  The bad countries, the ones whose economies are teetering on the brink, are the grasshoppers to our ant.  There they were – Brooks points his finger at Greece, Italy, and Spain – fiddling and dancing the summer away, refusing to live within their means or “reinforce good values.”

This seems accurate, doesn’t it – the dolce far niente Italians and other Mediterraneans, taking hours at midday for meals and siestas while the industrious Americans, Germans, and Dutch are working away, wolfing down a sandwich at their desks.

Just to be sure I downloaded some OECD data from 2007 – the last year before the big crash – on the number of hours people in different countries work. (Brooks’s three “ant” countries are red, the “grasshoppers” dark blue.)This is puzzling.  The US is slightly above the OECD average, but workers in Greece and Italy spend more hours at work than do Americans, while the Dutch and Germans are down at the low end of the scale.  (I do not know why the OECD still gives data for West Germany as well as Germany.)

I noticed that the OECD also had a measure of “employment protection,” which is basically how hard it is to fire someone.  I figured that workers in non-virtuous countries would be highly protected.  Since it’s nearly impossible for them to be fired, they know they can slack off on the job.  By contrast, virtuous countries would foster Brook’s ethos of “effort, productivity and self-discipline”  in workers, rewarding the industrious, firing the lazy and self-indulgent.I wasn’t surprised that the US anchored the low end of the scale.  Workers here have less job-protection than those in any of the other countries.  And Greece and Spain are above the average.  But so are Germany and the Netherlands, though only slightly, while Italy is slightly below the average.  There’s really not much difference between these three.  And if you look at the array of countries, there seems to be no strong connection between job protection and how well the country is weathering the current long recession.  I’m not sure what the best measure of the overall economy is, but the OECD has composite figure made up from ten main economic indicators.* I just wish we had better measure of Brooks’s “ethos.”

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*  “The Labour Force Survey (MEI) dataset itself covers countries that compile labour statistics from sample household surveys on a monthly or quarterly basis. It is widely accepted that household surveys are the best source for labour market key statistics. In such surveys, information is collected from people living in households through a representative sample. Surveys are based on standard methodology and procedures used all over the world. The 10 subjects available cover labour force, employment, unemployment (including harmonised unemployment), and employees.”

Sara P. sent in a video from The Economist that highlight women’s economic opportunities worldwide. It is based on the results of an economic index ranking of 113 nations, focusing on issues such as workplace policies (for instance, access to paid maternity leave), education, access to the financial system, and the legal and social status of women  in the economy (such as the right to work and social attitudes about women working for pay). The index also attempts to differentiate between official policy and actual practice to provide a better idea of the actual economic environment facing women in each country. The analysis is necessarily limited by the inclusion of only 113 countries (especially for Oceania, where only Australia and New Zealand were included), but it’s a worthwhile watch for a general overview:

You can read the full report here.

Cross-posted at Reports from the Economic Front.

The deficit commission, better known as the “Super Committee,” failed to produce a plan to cut deficit spending by $1.2 trillion over the next ten years.  According to the ground rules of the agreement that created the commission, its failure is supposed to trigger approximately $1 trillion in “automatic” spending cuts that will go into effect beginning January 2013.

The agreement included the following stipulations for guiding the automatic cuts:

• Approximately 50% of the required reduction is to come from the so-called security budget (national security operations and military costs).
• Approximately 32% is to come from non-defense discretionary programs (health, education, drug enforcement, national parks and other agencies and programs).
• About 12% is come from Medicare (reduced payments to Medicare providers and plans).
• The rest is to come mostly from agricultural programs.

To be clear, these are reductions to be made in projected budget lines.  In other words, the cuts to the security budget will not produce an actual decline in security spending, only a slowdown in the projected increase previously agreed to by Congress.

As I previously argued, the failure of the commission is a good thing.  The commission was actively considering structural changes to a number of key social programs.  One was to change the formula for calculating social security payments so as to reduce them.  Another was to raise the age at which people could access Medicare. The automatic cuts, if enacted, will reduce spending on important programs, but at least they do not include steps towards their dismantling.  In fact, Social Security and Medicaid are exempt.

The next stage of the budget battle has now begun.  Political forces are maneuvering to change the formula for the automatic cuts mandated by the budget agreement.  In fact, this maneuvering began weeks before the commission formally announced its failure to agree on a deficit cutting plan.  According to a November 5, 2011 New York Times report:

Several members of Congress, especially Republicans on the House and Senate Armed Services Committees, are readying legislation that would undo the automatic across-the-board cuts totaling nearly $500 billion for military programs, or exchange them for cuts in other areas of the federal budget.

I believe that we need to enter the fray with a different plan, one that includes blocking further cuts to non-defense discretionary programs and Medicare.  It is worth recalling that the agreement that established the deficit commission already included approximately $1 trillion in cuts to non-defense discretionary programs.

It is the security budget that we need to focus on.  And we need to be clear that our aim in demanding cuts to that budget, as well as tax increases on the wealthy and corporations, is to help generate funds to support an aggressive federal program of economic restructuring not deficit reduction.

The table below makes clear just how important it is to target the security budget. It shows the pattern of  federal spending on discretionary programs, defense and non-defense, over the years 2001 to 2010.  The big winner was the Department of Defense, which captured 64.6% of the total increase in discretionary spending over those years.  It was still the big winner, at 36.9%, even if one subtracts out war costs.

While the defense gains are staggering, they do not include spending increases enjoyed by other key budget areas dedicated to the military.  For example, many costs associated with our nuclear weapons program are contained in the Energy Department budget.  Many military activities are financed out of the NASA budget.  And then there is Homeland Security, Veteran Affairs, and International Assistance Programs.  It would not be a stretch to conclude that more than 75% of the increase in spending on discretionary programs over the period 2001 to 2010 went to support militarism and repression. No wonder our social programs and public infrastructure has been starved for funds.

There is no way we can hope to reshape our economy without taking on our government’s militaristic foreign and domestic policy aims and the budget priorities that underpin them.

Cross-posted at Montclair SocioBlog.

I don’t know the sociological research on auctions — surely it must exist — but auctions seem like a wonderful illustration of how value is socially constructed. I didn’t really need to be convinced that people don’t always live up to economists’ ideals of rationality, but I was reminded of it on Saturday when I watched the auction of items from my mother’s “estate” (i.e., stuff in her apartment). I wasn’t in the actual auctiion room; nowadays you can watch — and bid — online.

As someone who is relatively ignorant about art, I of course was puzzled as to why one piece was worth several hundred dollars while another might fetch only a $50 or no bids at all. But I thought that potential buyers would have an idea of how much something is worth — the objects and information about them are all available beforehand — and they would bid and stop bidding according to these prior valuations. But look at this lithograph, which graced my parents’ wall for as long as I can remember.

The opening asking price was $20.* None of the people at the auction house or online would offer that much. For the potential bidders, the picture was not worth $20.

The auctioneer then lowered the opening bid to $10. Someone offered the ten bucks. A bargain. But then someone else bid $20. The picture which had not been worth $20 suddenly was. And then it was worth $30. You can see the bidding history to the right of the lithograph. The bidders were reluctant — twice someone came in just as the gavel was about to come down — but in the end, the picture that nobody thought was worth $20 eventually sold for twice that much. In the interval of a few minutes, this minimal interaction between bidders had quadrupled the value of the picture.

There’s also a cognitive-dissonance explanation. If I bid $10 for the item, I’m not just telling myself, “I think this picture is worth $10.” Instead, the message is more general: “I want this picture.” Once we decide to buy something, our subjective valuation of it goes up – we’re more comfortable thinking that we got a good deal than thinking that we wasted our money. Most transactions end there; we buy something at a price, and we are happy with it. But an auction encourages us to turn that subjective valuation into hiigher and higher cash bids.

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* It can be a bit daunting, depressing even, to think that a picture so familiar that it feels like a part of your life turns out to be worth so little to other people.

In the three-minute video below, Kate Pickett talks about why life life expectancy, happiness, and the variable that links them, stress, aren’t strongly related to national income averages within different developed countries.

See more at Equality Trust.

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 Capital, Karl Marx discusses how the products we buy are separated from any recognition of the people who produced them. If I want to buy a TV, I’m unlikely to be involved in any kind of interaction with the people who made it. I don’t see the factory where they worked, I don’t have any idea what the conditions were like, I have no specific idea where it was made, outside of “Made in  _____” written on the box. Instead, I exchange money for the TV at a store that almost certainly had nothing to do with manufacturing the TV; no one at Best Buy or Wal-Mart could tell me any more about the specific conditions of production than what I can figure out from reading the package.

Marx referred to this as commodity fetishism. The social relations embedded in products — the fact that someone made that TV, under particular conditions, making a certain amount of money for their labor while producing profit for their employer — are obscured and workers become invisible. Instead, we focus on how much we pay for it, and which store charges the least. Marx argues that relationships between workers, employers, and consumers are presented to us simply as relationships between things; we exchange paper money (an abstract measure of our labor) for commodities, and we rarely pause to think about how the price of a TV is determined by the worth placed on workers in a particular place at a particular time.

Social activists concerned with working conditions, environmental impacts, and a range of other concerns often push back against commodity fetishism, attempting to make the social relations of production visible to consumers again. Craig Martin of Religion Bulletin provided an example from South Africa’s Apartheid Museum. This poster, produced during the struggle against apartheid, calls for a boycott on South African fruit (UPDATE: A reader found a larger image so you can see more detail; via):

The visual of workers soldiers superimposed on the fruit, with workers and protesters in the background, and the phrase “Every bite buys a bullet!”, remind consumers that items they buy having meaning for the world around them, and that they aren’t just exchanging money at a grocery store in return for that fruit; they are buying into a system of production that provides profits for a racist government, which uses those profits to buy military supplies used to enforce its brutal, unequal racist policies.

As Martin says,

In Capital Marx says that commodity fetishism presents relations between men as relations between things — and this poster is a powerful example of an attempt to demystify commodities and reveal that they are in fact relations between human beings.

According to the Farm Bureau, Thanksgiving dinner will cost American families 13% more than it did last year.  They estimate an average of $49.20 for a family of 10.

Here are the details:

Farm Bureau economist John Anderson says the rise in prices is due, in part, to retailers “…being more aggressive about passing on higher costs for shipping, processing and storing food to consumers…”

Via Gawker.

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 on Reports from the Economic Front.

The Occupy Movement has clearly transformed conversations about the economy.  It is now inequality — in particular, the gap between the top 1% and everyone else — rather than the national debt that dominates the news.

To review, this gap is real, as the following charts from the Economic Policy Institute make clear.  This chart shows the percentage increase in household income over the period 1979 to 2007 by income group.  While the top 1% enjoyed income gains of 224% over the period, the gains enjoyed by the bottom 90% were far more modest: 5%.  Equally striking is the fact that the household income of top 0.01% shot up an astounding 390%.

Unfortunately, there is another income gap that has not received nearly as much attention.  It is the white-nonwhite gap.  The Portland, Oregon based Coalition of Communities of Color recently published a report on the socioeconomic situation of people of color in Multnomah Country (which includes Portland).

As the chart below reveals, the mean income of families of color in the top decile (10%) actually declined by $6,002 over the years 1979 to 2007.  By contrast, the mean income of white families in the top 10%  rose by $122,591.  White families and families of color in the bottom half of the distribution all suffered losses.

The following two charts show the mean earnings of each group by decile and their change between 1979 and 2007.

Portrait in 1979:

Portrait in 2007:

This last chart shows poverty rates by color.  Clearly, as we work to create a more equitable society, our efforts must also be guided by awareness of the existence of serious racial and ethnic inequities.