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Everything I have been talking about RE: economy / middle class

Discussion in 'BBS Hangout: Debate & Discussion' started by Sweet Lou 4 2, Oct 13, 2011.

  1. Sweet Lou 4 2

    Sweet Lou 4 2 Contributing Member
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    If there is one thing I'd ever ask of the righties on this board to read regarding "class warfare" taxes, growth, and all that stuff, it is this article. I know you'll probably dismiss it but if you just read it and actually consider it, I would be happy never to post on this subject ever again. There's nothing more for me to say about what is happening here and abroad than what is captured below.

    http://www.slate.com/articles/busine...dents_and.html

    World Class Warfare

    Why almost every continent on Earth is experiencing social and political turmoil.

    By Nouriel Roubini|Posted Thursday, Oct. 13, 2011, at 3:28 PM ET

    Social and political instability has gone global. This year alone, masses of people have poured into the real and virtual streets: the Arab Spring; riots in London; Israel’s middle-class protests against high housing prices and an inflationary squeeze on living standards; protesting Chilean students; the destruction in Germany of the expensive cars of “fat cats”; India’s movement against corruption; mounting unhappiness with corruption and inequality in China; and now the Occupy Wall Street movement in New York and across the United States.

    While these protests have no unified theme, they express in different ways the serious concerns of the world’s working and middle classes about their prospects in the face of the growing concentration of power among economic, financial, and political elites. There is high unemployment and underemployment in advanced and emerging economies. There is resentment against corruption, including legalized forms like lobbying. Young people have inadequate skills and education to compete in a globalized world. And income and wealth inequality is sharply rising in advanced and fast-growing emerging-market economies.
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    This malaise cannot be reduced to one factor. For example, the rise in inequality has many causes. Some 2.3 billion Chinese and Indians are now in the global labor force, reducing the jobs and wages of unskilled blue-collar and off-shorable white-collar workers in advanced economies. Skill-biased technological change, winner-take-all effects, and less progressive taxation all have an impact.

    The increase in private- and public-sector leverage, and the related asset and credit bubbles, are partly the result of inequality. Mediocre income growth for everyone but the rich in the last few decades opened a gap between incomes and spending aspirations. In Anglo-Saxon countries, the response was to democratize credit—via financial liberalization—thereby fueling a rise in private debt as households borrowed to make up the difference. In Europe, the gap was filled by public services—free education, health care, etc.—that were not fully financed by taxes, fueling public deficits and debt. In both cases, debt levels eventually became unsustainable.

    Firms in advanced economies are now cutting jobs, owing to inadequate final demand, which has led to excess capacity and uncertainty about future demand. But cutting jobs weakens final demand further, because it reduces labor income and increases inequality. Because a firm’s labor costs are someone else’s labor income and demand, what is rational for one firm is destructive in the aggregate.

    The result is that free markets don’t generate enough final demand. In the United States, for example, slashing labor costs has sharply reduced the share of labor income in GDP. With credit exhausted, the effects on aggregate demand of decades of redistribution of income and wealth— from labor to capital, from wages to profits, from poor to rich, and from households to corporate firms—have become severe, owing to the lower marginal propensity to spend.

    The problem is not new. Karl Marx oversold socialism, but he was right in claiming that globalization, unfettered financial capitalism, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct. As he argued, unregulated capitalism can lead to regular bouts of over-capacity, under-consumption, and the recurrence of destructive financial crises, fueled by credit bubbles and asset-price booms and busts.

    Even before the Great Depression, Europe’s enlightened bourgeois classes recognized that, to avoid revolution, workers’ rights needed to be protected, wage and labor conditions improved, and a welfare state created to redistribute wealth and finance public goods—education, health care, and a social safety net. The push toward a modern welfare state accelerated after the Great Depression, when the state took on the responsibility for macroeconomic stabilization. This was a role that required the maintenance of a large middle class by widening the provision of public goods through progressive taxation and fostering economic opportunity for all.

    Thus, the rise of the social welfare state was a response (often of market-oriented liberal democracies) to the threat of popular revolutions, socialism, and communism as the frequency and severity of economic and financial crises increased. Three decades of relative social and economic stability then ensued, the so-called “Great Compression” from the late 1940s until the mid-1970s, when inequality fell sharply and median incomes grew rapidly.

    Some of the lessons about the need for prudential regulation of the financial system were lost in the Reagan-Thatcher era, when the appetite for massive deregulation was created in part by the flaws in Europe’s social-welfare model. Those flaws were reflected in yawning fiscal deficits, regulatory overkill, and a lack of economic dynamism that led to sclerotic growth then and the eurozone’s sovereign-debt crisis now.

    But the laissez-faire Anglo-Saxon model has also now failed miserably. To stabilize market-oriented economies requires a return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of unregulated markets and the continental European model of deficit-driven welfare states. Even an alternative “Asian” growth model—if there really is one—has not prevented a rise in inequality in China, India, and elsewhere.

    Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare.
     
    1 person likes this.
  2. meh

    meh Contributing Member

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    I think America will never have to fear any uprising from the masses. Because there's a buffer between the rich and the poor called democracy.

    The masses will never have a voice in the government because they can't get enough elected to office. And they can't possibly rise against those in office which they elected through mind-numbing propaganda. It is the perfect system to keep people in their places because there is no accountability unlike true dictatorships or oligarchies.
     
  3. StupidMoniker

    StupidMoniker I lost a bet
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    Read it. Don't really agree with the analysis or the recommendations. Am I enough, or do you need everyone right of you to comment before not posting about this stuff anymore.
     
  4. Don FakeFan

    Don FakeFan Member

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    Carl Marx was right all along.
    He did give the solution though it was not pretty.
     
  5. DaDakota

    DaDakota If you want to know, just ask!

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    The thing is that all people are voluntarily governed, if it gets too oppressive, they will rise up and topple the ruling class.

    Even in the USA, it can be economic, it can be human rights, it can be just about any major inequality.

    The people that have the most are not safe unless the people that don't have as much have enough to be satisfied themselves.

    DD
     
  6. YallMean

    YallMean Member

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    Nouriel Roubini needs to sit down with tea partyer to have some tea while discussing the solution to current economic crisis. Over-regulated or under-regulated, which one is it? :grin:

    I am reading Road to Serfdom since the tea partyers have made it the gospel of their movement. Acutally, I am re-reading it, which I didn't take too seriously some 15 years ago in econ my history class.

    Well, one doesn't need to look far. Was the post-war Britain run as a welfare state and failed miserably? Roubinis is quick to build on the current crisis with some big pretty big argument as credible as those of tea partyers IMHO and along with a a shot at Thatcher.

    I think Keynes hit the nail on the head when he reviewed Friedrich Hayek's work - that is the hard part is line drawing, which we need to know desperately.
     
  7. glynch

    glynch Contributing Member

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  8. Sweet Lou 4 2

    Sweet Lou 4 2 Contributing Member
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    What parts of the analysis do you not agree with?
     
  9. Deckard

    Deckard Blade Runner
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    The radical right-wing Roberts Court decided that a corporation was a person, so now they can make pretty much unlimited donations to their favorite charity, the Republican Party, a political party that spent the entire two terms of Bush larding it up for their corporate benefactors. In fact, my guess is that the largess exceeded their wildest dreams of avarice. The Roberts Court is like the cherry on top of their sundae, a bonus they dreamed of, but probably doubted they would ever receive. So what does that have to do with this? I can see how at some point in the future the general public comes to see the country as being ruled by the big corporations, that their votes have no real meaning, that the deck is so stacked against them that they feel as if they have no real voice.

    Should that day arrive, and some think it is here already, yeah, people could become seriously pissed off, to the point of violence. We aren't there now, but unless the current direction of the country, politically, is changed, and changed to a significant degree, I could see it happening, and it scares the hell out of me. I have two kids, one a young adult, the other three years from starting college, and their future is indeed frightening. We should be worried and not take our generally peaceful country for granted. Certain people in Washington certainly do take it for granted, thinking they can get away with anything, and the country will just keep keepin' on. Well, suck on it, fellas.
     
  10. YallMean

    YallMean Member

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    Well, that has been said for 200 or so years, but capitalism is still well and alive. The problem is the alternatives are much worse. I believe in rule of law.

    That said, I share your concerns. That's why I am pissed at tea partyers and republican politicians complaining about over-regulations. If you listen carefully, all these GOP hopefuls at some time in their speech must quack about cutting corporate taxes, deregulate wall street, etc as if they are the cures rather than the source of current crisis. This is beyond self-serving promoting, as all politicians do, but rather some dubious moral ethics. Didn't we get into this freaking mess because the greed of wall street and corporate American ran wild?

    On the other hand, the problem with the welfare state argument is that it can be dangerous. As Roubini put it himself "
    Those flaws [of Europen's social welfare model] were reflected in yawning fiscal deficits, regulatory overkill, and a lack of economic dynamism that led to sclerotic growth then and the eurozone’s sovereign-debt crisis now." In another word, do we want to go down the road to become Ireland, Greece? Certainly not. The question is still balance, which is obvious, but nobody knows how to draw the line.
     
  11. StupidMoniker

    StupidMoniker I lost a bet
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    As an example, where they determined that free markets do not result in enough aggregate demand. I disagree with the conclusion as well as the fact that they have so ill articulated the argument that it is meaningless. What is "enough" aggregate demand? When they say "free markets" are they talking about totally free markets, which have not recently been seen in the US and thus no conclusions could be drawn about them as relates to current events; are they talking about the conditions that exist currently as "free markets"? Overall it seemed more like a BBS post than a published article. I also take issue with the author's statement of a conclusion (that inequality is the source of the cited unrest) without any attempt to provide evidence in support. Instead we get a statement that there is unrest, an unbacked assertion that the cause of this unrest is income/wealth inequality, a list of alleged causes (also with no supporting evidence), and then another assertion that the government must be more redistributive.

    Put more succinctly, my biggest problem with the analysis was its absence.

    You didn't answer my question, BTW.
     
  12. AroundTheWorld

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    The article is not so bad, but New Yorker's thread title is idiotic. He is desperately trying to pat himself on the back, undeservedly.
     
  13. Invisible Fan

    Invisible Fan Contributing Member

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    Yes, it seemed more like a blog post to me. Slate is sometimes good at providing numbers. I enjoy reading Mother Jones for social commentary and analysis. Great reporting.

    I also don't agree with emulating Europe's social entitlement model. They've reached a point where riots are possible in order to cow politicians from reducing spending yet are as apathetic as we are regarding other policies.

    i think we had a great model 60 years ago and the flaws we're facing now have been structural due to our inability to adapt to current realities and because that 1950's model was so great in sustaining our dominance that it was hard to reform, change course, and take risks politically.

    it seems like we're living in a fairy land where despite the fact that we're living with social changes unseen before in stable times we're still pinning our nostalgia for the good old days on politicians who can sell the best snake oil. The best trick has been to make curves and trickle downs into simplistic jingles that people can dance to.

    That was bit of an off topic rant. If we're going to the ****ter financially, we should double down on our infrastructure so we can drive our way to the poor house rather than shoot and bomb our way through
     
  14. Sweet Lou 4 2

    Sweet Lou 4 2 Contributing Member
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    Are you saying these protests are not because of a perceived sense of inequality? A lot of the protesters are using that language.

    As for the free markets not generating enough demand - is it not true to say that demand has weakened in the past few years? And that is a result of a loss of wealth because of the mortgage crisis, because of consumer debt, static increase in wages, and because of job losses?

    So you are saying people don't feel disenfranchised from the American dream, that people who aren't succeeding is because? why? Why is that you could work hard and get a house in the 60's but today it is much much harder? Why is it that a factory worker could get a home back then but not now? Even though his wife works too? Or he could send his kids to school then but now it's much harder? How do you explain that today the rich make more then they ever did? That today luxury goods is the only sector of the economy flourishing? Bentley is having a great year - did you know that?

    I want to make sure you are actually thinking through these things, otherwise my job isn't done.
     
  15. Sweet Lou 4 2

    Sweet Lou 4 2 Contributing Member
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    I think he is just saying you need gov't spending to stimulate the economy and inject wealth back into the middle class. You can't just allow free markets to move all the wealth into the hands of the few, or the system will eventually collapse.

    That is what happened in greece, and that can happen here or any where.
     
  16. Rocket River

    Rocket River Member

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    hasn't the argument against the right to bear arms
    is that the government has better weapons.

    I think Most americans are keenly aware of the threat

    Rocket River
     
  17. Invisible Fan

    Invisible Fan Contributing Member

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    It doesn't sound like he's calling for temporary stimulus. He wants to restructure our current entitlement system without giving any details. I think anyone can agree things need fixing, but entitlement costs already look daunting with more and more boomers retiring.
     
  18. Deckard

    Deckard Blade Runner
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    Damn! Was I supposed to read it? I was responding to the title! ;-)-
     
  19. YallMean

    YallMean Member

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    These are obvious problems with current economy and nobody will deny them. The flaw with Roubini's article is that he has an ambitious title, points out the obvious, which even the tea partyers will agree, and then falls very short of supporting his conclusion. It's kinda weird if you read carefully that he anticipates criticism and concludes by telling us there needs to be balance. Duh, we all know that, but how? Very unsatisfactory.
     
  20. Sweet Lou 4 2

    Sweet Lou 4 2 Contributing Member
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    I don't think it is obvious to our conservative friends here or to large swaths of America - and that's the problem.
     

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