politics: the state

My colleague and co-author, Lisa Wade (you’d know her better as one of the people behind SocImages), gave a seven-minute speech at an Occupy Teach-In at our shared institution, Occidental College.  She said I could post it for you.

In the video she says she’s optimistic about the movement because it’s deeply sociological, drawing our attention to the way we organize our society, not just the individuals in it.  She contrasts this ability to critique the system with the early years of the Great Depression, during which many of the unemployed felt like they had failed their families because of personal faults (leading to a rise in the suicide rate).  Then, using the truly inspirational story of the 1955 Montgomery bus boycott (in which people walked to work and rode carpools for over a year!), she warns students that the movement is about to stop being fun and require real commitment. She ends by asking the the audience whether they can rise to the occasion and make the sacrifices needed to move Occupy forward to achieve specific demands.

Also see the three-minute bit on hook up culture that she did for MTV Canada.

Cross-posted at Family Inequality.

Americans about my age and older all seem to have stories about how we survived our school playgrounds without today’s cushy soft surfaces, safety-oriented climbing structures, and running water.

Here is a picture of the playground at my elementary school. I myself survived a fall off one of those seesaws onto the broken-glass-strewn asphalt, with nothing but a scrape to show for it (attended to by the school secretary — there was no “school nurse” back then either).

In the safety craze in recent decades, sadly, real seesaws were one of the first things to go.

Go back another few generations, and you’ll find stories like this — about 200 children killed in the streets of New York in 1910 (from the NYT Jan. 1, 1911):

Most of those kids weren’t in cars or wagons; they were playing in the streets, doing work for their families, or just wandering around unattended — there were no public playgrounds. In contrast, in 2009 there were about 10 pedestrian or cycling children killed by vehicles in New York City. Ah, the good old days.*

Nowadays

As things have gotten safer for America’s children, of course, parents have become ever more concerned with their safety, as well as with their learning and development. Somewhere in America on a Sunday a few weeks ago, in an affluent community, a public playground was bubbling with activity. Every child seemed to be enjoying a rollicking good time on the latest safety-designed play equipment, cushioned by a luxuriously deep bed of mulch.

Also, each child seemed to be within a few feet of a parent or other adult caretaker — coaching, encouraging, spotting, supervising.

In recent years, concern about the physical fitness of children has increased, especially among poor children. Some researchers have asked whether the proximity of safe neighborhood playgrounds is one cause of the social class disparity in obesity rates. That would make sense because obesity rates are lower among children who play outdoors. But the relationship between social class and playing outdoors is not clear at all. Rich children have more access to some kinds of facilities, but poor children have more free time — and, where there is public housing, it usually includes playgrounds, like this one photographed in the 1960s:

In Annette Lareau’s analysis of family life and social class, Unequal Childhoods, children of middle class and richer parents spend more time in organized activities, and poorer kids spend more time in unstructured time (including play and TV). But as these pictures show, there’s play and there’s play. Are middle class parents hovering more than poorer parents do, and with what effect?

Consider a recent article by Myron Floyd and colleagues (covered here), which attempted to assess the level of physical activity among children in public parks by observing 2,700 children in 20 public parks in Durham, NC:

[The] presence of parental supervision was the strongest negative correlate of children’s activity… the presence of adults appears to inadvertently suppress park-based physical activity in the current study, particularly among younger children… This result should be used to encourage park designers to create play environments conducive to feelings of safety and security that would encourage rather than discourage active park use among children. For example, blending natural landscapes, manufactured play structures, and fencing in close intimate settings can be used to create comfortable environments for children and families. Such design strategies could encourage parents to allow their children to freely explore their surroundings, providing more opportunities for physical activity.

Interestingly, park in the pictured above has a fence around it so that parents can hang around at a distance with little fear for their children.

Under social pressure

In Under Pressure, one of many books bemoaning the excesses of over-parenting, Carl Honoré wrote:

Even when we poke fun at overzealous parenting… part of us wonders, What if they’re right? What if I’m letting my children down by not parenting harder? Racked by guilt and terrified of doing the wrong thing, we end up copying the alpha parent in the playground.

The point is not just that some parents have overzealous supervisory ambitions, driven by unequal investments in children and a threateningly competitive future. I think there is a supervision ratchet that feeds on the interaction between parents. In an article called “Playground Panopticism,” Holly Blackford summarized her observations:

The mothers in the ring of park benches symbolize the suggestion of surveillance, which Foucault describes as the technology of disciplinary power under liberal ideals of governance. However, the panoptic force of the mothers around the suburban playground becomes a community that gazes at the children only to ultimately gaze at one another, seeing reflected in the children the parenting abilities of one another.

This plays out in everyday interaction, whether one wants to engage it or not. If everyone else’s kid is closely supervised while yours is running around bonkers on her own, what is a parent to do? If the other parents insist that their kids not go “up the slide” and yours just scrambles past them, you feel the pressure. (You also put the other parent in the position of violating another taboo — supervising someone else’s child.) So it’s not just fear of underparenting that drives parents to hover — it’s also the cross-parent interactions. These are the moments when contagious parenting behavior spreads.

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*I started looking at this after reading about it in Viviana Zelizer’s Pricing the Priceless Child, in which she writes, “The case of children’s accidental death provides empirical evidence of the new meanings of child life in twentieth-century America.”

Reminder: This blog post does not constitute research, but rather commentary, observation and recommendations for reading and discussion. The description of my childhood playground, and of one recent afternoon at one park, are anecdotes, something that stimulates reflection on wider issues, not empirical evidence or data.

Our financial system is dominated by banks considered too big to fail.  And that is a problem for the rest of us.  As Time magazine explains:

“Too big to fail is opposed by the right and the left, though not apparently by the people drafting legislation,” says Simon Johnson, an MIT professor and the author of a recently published book on the subject, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. “The current financial-reform bills are effectively a wash on the issue.”

The question is how large banks ought to be allowed to become. When large banks run into trouble, regulators are often unwilling to let them fail, as bank failures can wipe out individual depositors. What’s more, banks often fund their operations by borrowing from other banks. The bigger the bank, the more likely it is to put other banks at risk if it fails. Mass bank failures, especially of big banks, means people can’t get loans. And no loans, no economy.

That’s why the government decided to bail out most of the nation’s largest banks at the height of the financial crisis. And here’s where the problem potentially gets worse. Once bankers understand that the government will bail out their firms when their loans or other financial bets go bad, they are likely to take riskier and riskier bets. That, of course, leads to more potential bank failures — and more taxpayer-funded bailouts.

Not only have attempts at reform largely failed, government regulators have often tried to paper over financial problems by encouraging our dominant banks to swallow smaller, less stable ones, thereby worsening the problem.

So, who are our ”too big to fail” banks and how did they get so big?  Here is a time line that charts the process and highlights the winners.

Of course there are answers to this “too big to fail” problem.  One is turning our banks into public utilities.  Here is Yves Smith talking about this solution:

Children are our most important resource.  Everyone says it, but we don’t really mean it.

Exhibit one: the percentage of children under the age of 18 that live in poverty. In 2007, at the peak of our previous economic expansion, the child poverty rate was 18%.  In 2009, it hit 20%.  The figure below provides a look at child poverty rates in each state.  New Hampshire had the lowest rate: 11%.  Mississippi the highest rate: 31%. According to a recently released Census Bureau study, the 2010 national child poverty rate was 22%.

How Do We Measure Poverty?

Children under the age of 18 are counted as poor if they live in families with income below U.S. poverty thresholds.  There are a range of poverty thresholds which are based on family size and number of children.  These poverty thresholds are far from generous.  The 2009 poverty threshold for a family of two adults and two children was$21,756.

Sadly our poverty rates understate the seriousness of our poverty problem, for children and adults.  The history of how we developed and calculate our official poverty thresholds provides perhaps the clearest proof of the inadequacy of current statistics.  First introduced in 1965, the thresholds were based on previous work by the Department of Agriculture (DOA).  The DOA created an “economy” food plan in the 1950s that was designed for “temporary or emergency use when funds are low.”  DOA surveys had also established that families of three or more persons spent approximately one-third of their after tax income on food.  Our initial thresholds were set by multiplying the cost of the economy food plan (adjusted for family size) by three.

From 1966 to 1969, these poverty thresholds were revised annually by the yearly change in the cost of the items contained in the economy food plan.  After 1969, and still today, the poverty thresholds were adjusted by the rise in the consumer price index.

Our poverty rates are calculated by comparing pre-tax family incomes to these thresholds.

Why the Poverty Threshold is Deficient

This methodology has produced a poverty standard and estimates of poverty that are deficient for several important reasons:

First, our knowledge of nutrition has significantly changed since the 1950s.

Second, families now spend approximately one-fifth of their after-tax income on food, not one-third.  That correction alone would mean that the food budget should be multiplied by 5 rather than 3, thereby producing higher thresholds and poverty rates.

Third, poverty is best thought of as a relative condition, which means that it should not be measured by comparing incomes to an unchanging standard based on the cost of a 1950’s economy food plan.

Fourth, poverty rates should be calculated using after-tax family income adjusted to include the value of government support programs like food stamps (which are also fluctuating and often cut in hard times), not unadjusted pre-tax family income.

A Better Measure

Researchers, drawing on the work of the National Academy of Sciences Panel on Poverty and Family Assistance Economists, have developed an alternative experimental approach to measuring poverty.  They start with a reference family, two adults and two children.  Then, using Consumer Expenditure Surveys, they calculate the dollar amount of spending on food, clothing, shelter, utilities and medical care by all reference families in a given year.

The poverty threshold for the reference family is set at the midpoint between the 30^th and 35^th percentile of the spending distribution for all families with two adults and two children.  Small multipliers are then used to add spending estimates for other needs, such as transportation and personal care, slightly raising the poverty threshold.   This threshold is adjusted for families of other compositions.

The chart below shows national poverty rates for the years 1996 to 2005.  We see that the rates produced by this experimental methodology are significantly higher than the official rates.

Strikingly, while the official poverty rate is lower in 2005 than in 1996, the 2005 experimental poverty rate is the highest in the period.  The difference is largely explained by the fact that the experimental measure incorporates changes in the availability of social programs and the relative importance of non-food goods and services in family spending.

Returning to the issue of child poverty, the table below highlights the difference between the two measures for specific demographic groups.  Notice that the child poverty rate calculated using the experimental measure is always higher than the official rate.  As previously stated, the official 2010 child poverty rate is 22 percent.  The experimental rate would no doubt be several percentage points higher, closing in on 25 percent.

What can one say about a situation where between one-fifth and one-fourth of all children in the United States live in poverty?  Language like “outrageous,” “unacceptable,” and “indicator of a flawed economic system” comes to mind.  What also comes to mind is the fact that these poverty statistics rarely get the attention they deserve, as does the question of why that is so.

The media likes to talk about markets as if they were just a force of nature.  In fact, markets and their outcomes are largely shaped by political power.  In a capitalist system like ours, that power is largely used to advance the interests of those who own and run our dominant corporations.

Thanks to Bloomberg News we have yet another example of this reality.  In brief, as a result of Congressional and media pressure the Federal Reserve was recently forced to reveal its lending activity for the period August 2007 through April 2010.   Bloomberg News examined these Federal Reserve records and found that the Fed secretly provided selected banks, brokerage houses, and even non-financial firms (such as General Electric and Ford) with at least $1.2 trillion in loans, often with minimal collateral required and at below market interest rates.

This money was given through more than a dozen lending programs.  Many firms tapped multiple programs through multiple subsidiaries. Bloomberg arrived at its total by focusing on the seven largest programs, which included the Fed’s discount window and six temporary lending facilities (the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; the Commercial Paper Funding Facility; the Primary Dealer Credit Facility; the Term Auction Facility; the Term Securities Lending Facility; and so-called single- tranche open market operations).

If you like visuals, here is a 5 minute video that provides a good summary of what Bloomberg gleaned from its examination.

UPDATE: Embedding was disabled, but you can watch it here.

Bloomberg also has an interactive site that allows you to chart who got what and over what period.

Some of the highlights are as follows:

The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion . . .

Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG, which got $77.2 billion. . . .

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The Federal Reserve fiercely resisted making its records public, arguing that doing so would stigmatize those institutions that received loans.  A group of the largest commercial banks actually petitioned the Supreme Court in an unsuccessful effort to keep the loan information secret.

Perhaps one reason that the Federal Reserve and the banks were reluctant to have these records made public is that they raise significant questions of conflict of interest.  According to a statement by Vermont Senator Bernie Sanders:

…the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

Another reason may be that the Federal Reserve didn’t want it known that it was deviating from its past practice of requiring borrowers to provide secure collateral, which was normally either Treasuries or corporate bonds with the highest credit rating, and never stocks.  For example:

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

Moreover, as Bloomberg News also reported, many Fed loans were made at below market interest.

On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

These loans were absolutely critical to the survival of our leading companies.  A case in point:

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

These loans are also a key reason that our post-Great Recession economy remains largely unchanged in structure.  In other words, it was the exercise of political power, rather than so-called market dynamics or efficiencies, that explains the financial industry’s continuing profitability and economic dominance.

Now imagine if we had a state that engaged in transparent planning and was committed to using our significant public resources to reshape our economy in the public interest.  As we have seen, state planning and intervention in economic activity already goes on.  Unfortunately, it happens behind closed doors and for the benefit of a small minority. It doesn’t have to be that way.

Cross-posted at Montclair SocioBlog.

A  picture – or a graph without data – is like anecdotal evidence.  It can be very persuasive, but unless it’s based on systematic evidence, it’s just misleading.  Case in point:

The FBI is teaching its counter-terrorism agents that Islam is an inherently violent religion.  So are the followers of Islam.  Not just the extremists and radicals, but the mainstream.

There may not be a ‘radical’ threat as much as it is simply a normal assertion of the orthodox ideology… The strategic themes animating these Islamic values are not fringe; they are main stream.

Wired got hold of the training materials.  The Times has more coverage, including a section of the report that describes Muhammad as “a cult leader for a small inner circle.” (How small? Twelve perhaps?)  He also “employed torture to extract information.”*

An FBI PowerPoint slide has a “graph” to support its assertions.

The graph, really just a drawing, claims to show that followers of the Torah and the Bible have gotten progressively less violent since 1400 BC, while followers of the Koran flatline starting around 620 AD and remain just as violent as ever.

Unfortunately, the creators of the chart do not say how they operationalized “violent” and “non-violent.”  But since the title of the presentation is “Militancy Considerations,” it might have something to do with military, para-military, and quasi-military violence.  When it comes to quantities of death, destruction, and injury, these overwhelm other types of violence.

I must confess that my knowledge of history is sadly wanting, and I was educated before liberals imposed all this global, multicultural nonsense on schools, so I know nothing about wars that might have happened among Muslims during the period in question.  What I was taught was that the really big wars, the important wars, the wars that killed the most people, were mostly affairs among followers of the Bible.  Some of these were so big that they were called “World Wars” even though followers of the Qur’an had very low levels of participation.  Some of these wars lasted quite a long time – thirty years, a hundred years.  I was also taught that the in the important violence that did involve Muslims – i.e., the Crusades** – it was the followers of the Bible who were doing most of the killing.

Perhaps those with a more knowledge of Muslim militant violence can provide the data.

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* To be fair, the FBI seems to have been innocent of any of the torture that took place during the Bush years.  That was all done by the military and the CIA – and by the non-Christian governments to which the Bush administration outsourced the work.

** Followers of the Bible crusading to “take back our city” from a Muslim-led regime may have familiar overtones.

The Census Bureau just published new data revealing trends in living standards as of 2010.  The trends are troubling to say the least. Median household income (adjusted for inflation) fell to $49,445.  That means that the median household now earns less than it did a decade ago.  This marks the first decade since the Great Depression without an increase in real median income.

According to Lawrence Katz, a labor expert and Harvard economist:

This is truly a lost decade.  We think of America as a place where every generation is doing better, but we’re looking at a period when the median family is in worse shape than it was in the late 1990s.

The percentage of Americans living in poverty hit 15.1 percent, the highest percentage since 1993.  There are now 46.2 million people living below the poverty line, the greatest number ever recorded by the Census Bureau. Child poverty stood at 22 percent.

Things are unlikely to get better this year.  State and local governments are slashing employment and programs and the federal government is now moving into cutting mode itself.

This depressing situation is not simply a recession phenomenon.  As the New York Times reports, the expansion period of 2001 to 2007 “was the first… on record where the level of poverty was deeper, and median income of working-age people was lower, at the end than at the beginning.”

Of course, while the great majority of people are struggling, a small minority have been doing very well.  One consequence, as the chart below highlights, is a strong growth in inequality (as measured by the Gini coefficient with higher numbers reflecting greater inequality).  As I noted in a previous post, over the years 2002 to 2007, the top 1% of households captured 58% of all the income generated.

In brief, there is a small minority that is doing very well and a great majority that is struggling, with a significant number in free fall.

A longer version is cross-posted at Montclair SocioBlog.

Long before the Freakonomics guys hit the best seller list by casting their economic net in sociological waters, there was Gary Becker.  If you want to explain why people (some people) commit crimes or get married and have babies, Becker argued, just assume that people are economically rational.  Follow the money and look at the bottom line.  You don’t need concepts like culture or socialization, which in any case are vague and hard to measure.*

Becker wrote no best-sellers, but he did win a Nobel.  His acceptance speech: “The Economic Way of Looking at Behavior.”

In a Wall Street Journal op-ed Friday about the recession, Becker started off Labor Day weekend weighing in on unemployment and the stalled recovery.  His explanation: in a word, uncertainty.

These laws [financial regulation, consumer protection] and the continuing calls for additional regulations and taxes have broadened the uncertainty about the economic environment facing businesses and consumers. This uncertainty decreased the incentives to invest in long-lived producer and consumer goods. Particularly discouraged was the creation of small businesses, which are a major source of new hires.

There’s something curious about this.  Becker pushes uncertainty to the front of the line-up and says not a word about the usual economic suspects – sales, costs, customers, demand.  It’s all about the psychology of those in small business, their perceptions and feelings of uncertainty.  Not only are these vague and hard to measure, but as far as I know, we do not have any real data about them.  Becker provides no references.  The closest thing I could find was a small business survey from last year, and it showed that people in small business were far more worried about too little demand than about too much regulation.

Compared with Regulation, twice as many cited Sales as the number one problem.  (My posts on uncertainty from earlier this summer are here and here.)

In addition, the sectors of the economy that should be most uncertain about regulation – finance, mining and fuel extraction, and medical care – are those where unemployment is lowest.

More, as David Weidner writes in the Wall Street Journal, taxes, interest rates, and regulation at an all-time low.

[The uncertainty-about-taxes-and-regulation argument] would make more sense if, say, taxes were already high and might be going higher or regulatory burdens were heavy and might be getting heavier. But when taxes are at a 60-year low and the regulations are pretty much the same as they were in the 1990s boom, the argument makes no sense at all (Mark Thoma quoting an e-mail from Gary Burtless).

If it’s really uncertainty caused by these things that causes a reluctance to hire, the time to invest and hire should be now.

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* This is an oversimplified version, but it will do for present purposes.