Comparing (Rotten) Apples and Oranges

Shadowstats.com contains several series of data about the US economy, including alternative measures to GDP, CPI, and unemployment. These revised statistics are based on maintaining the same definitions over time. For example, housing and fuel are today excluded from the Consumer Price Index, but they once were part of the formula. Using this alternative to CPI reveals an inflation rate of about 12%. The alternative measures also show a flat line in money supply, 13% unemployment rate and a declining GDP.

Betting on Misery

Steve Fraser and Tom Englehardt present a critical historical analysis of this Second Gilded Age in America, comparing the brutality and anti-democratic nature of the late 1800's to today. Some notable excerpts:

"Think of it as gilding the pain. Last year, hedge fund manager John Paulson of Paulson & Co. hauled in a nifty $3.7 billion. (Yes, you read that right.) Mainly, he did so, according to the Wall Street Journal, "by shorting, or betting against, subprime mortgage securities and collateralized debt obligations." And he wasn't alone. Hedge fund money-maker Philip Falcone of Harbinger Capital Partners raked in a comparatively measly $1.7 billion in 2007, also by shorting subprime mortgages. These are fortunes beyond imagining, made in no time at all by betting on the pure misery of others. Think of them as Las Vegas with a mean streak a mile wide."

...

"However, the wheel turns. The capitalism of the Second Gilded Age now faces a systemic crisis and, under the pressure of impending disaster, may be headed back to the future. Old-fashioned poverty is making a comeback. Arguably, the global economy, including its American branch, is increasingly a sweatshop economy. There is no denying that brute fact in Thailand, China, Vietnam, Central America, Bangladesh, and dozens of other countries and regions that serve as platforms for primitive accumulation. Hundreds of millions of peasants have become proletarians virtually overnight.

Here at home, something analogous has been happening, but with an ironic difference and bearing within it a new historic opportunity. One might call it the unhorsing of the middle class.

During the first Gilded Age, the sweatshop seemed a noxious aberration. It lawlessly offered irregular employment at sub-standard wages for interminable hours. It was ordinarily housed helter-skelter in a make-shift workshop that would be here today, gone tomorrow. It was an underground enterprise that regularly absconded with its workers' paychecks and made chiseling them out of their due into an art form.

Today, what once seemed abnormal no longer does. The planet's peak corporations depend on this system. They have thrived on it. True enough, it has also encouraged the proliferation of petty enterprises -- sub-contractors, consulting firms, domestic service companies -- fertilizing the soil in which our age of democratic capitalism is rooted. But the ubiquity of the sweated economy promises to alter the nation's political chemistry.

Many of the newly flexible proletarians working for Wal-Mart, for auto parts or construction company sub-contractors, on the phones at direct mail call centers, behind the counters at mass market retailers, earn a dwindling percentage of what they used to. Even new hires at the Big Three automobile manufacturers will now make a smaller hourly wage than their grandfathers did in 1948. So too, the relative job security such employees once enjoyed is gone, leaving them vulnerable to the "lean and mean" dictates of the new capitalism: double or triple work loads; or, even worse, part-time work, work always shadowed by indignity and fear; or, worse yet, no work at all.

Meanwhile, the white collar Tomorrowland of "free agent" techies, software engineers, and the like -- not to mention a whole endangered species of middle management -- lives a precarious existence, under intense stress, chronically anticipating the next round of lay-offs. Yet many of them were once upon a time members in good standing of the "middle class." Now, they find themselves on the down escalator, descending into a despised state no one could mistake for middle class life.

"Flexible accumulation" joins this dispossession of the middle class to the super-exploitation of millions who never laid claim to that status. Many of these sweated workers are women, laboring away as home health care aides, in the food services industry, in meat processing plants, at hotels and restaurants and hospitals, because the arithmetic of "flexible accumulation" demands two workers to add up to the livable family wage not so long ago brought home by a single wage earner.

Millions more are immigrants, legal as well as undocumented, from all over the world. They live, virtually defenseless, in a twilight underworld of illegality and prejudice. Thanks to all this, the category of the "working poor" has reentered our public vocabulary. Once again, as during the first Gilded Age, poverty seems a function of exploitation at work, not only the lot of those excluded from work."

Reason and Politics in These Times

Susan Jacoby has written a thought-provoking piece on reason and politics in today's LA Times. Jacoby notes that there have been times and spaces in American history where people were drawn to opposing views, and that this environment was a key component of intellectual progress and uplift. She laments that this ethos is largely invisible today.

Jacoby notes that "when Thomas Henry Huxley, the British naturalist who popularized Darwin's theory of evolution, came to the U.S. in 1876, he spoke to standing-room-only audiences, even though many of his listeners were genuinely shocked by his views."

While Jacoby's historical analysis is overly optimistic about the past, ignoring America's repression of voices, she does bring out an important point, and that is, to quote Jacoby, "This spirit of inquiry, which demands firsthand evidence and does not trivialize opposing points of view, is essential to a society's intellectual and political health."

Walking Wounded

The LA Times reports a recent Rand Study estimating 300,000 US vets from Iraq and Afghanistan are suffering from depression or PTSD.

From the LA Times:

In addition to current PTSD rates, the Rand study found that 19.5% of people who had served in Iraq or Afghanistan suffered a concussion or other traumatic brain injury during their combat tour, a number similar to Army estimates.

Taken together, the study shows that 31% of those who have served in combat have suffered from brain injury, stress disorder, or both.

Combat-related mental ailments and stress can lead to suicide, homelessness and physical health problems. But more mundane disorders can have long-term social consequences.

"These conditions can impair relationships, disrupt marriages, aggravate the difficulties of parenting, and cause problems in children that may extend the consequences of combat trauma across generations," the study said.

According to Rand:

"Many service members said they do not seek treatment for psychological illnesses because they fear it will harm their careers. But even among those who do seek help for PTSD or major depression, only about half receive treatment that researchers consider "minimally adequate" for their illnesses."

Declining Interest in Joining the US Military

NPR reports that interest in joining the Army has declined significantly since 2001, and that to meet quotas, the US military has allowed more waivers. According to a Department of the Army survey, interest in joining the military between November 2001 and June 2007 dropped from 37% to 15% in Hispanics, and from 20-22% to less than 10% in Blacks and Whites. According to the report, the impact on granting moral and health waivers is mixed. Because there is no recent data, the impact of the economic downturn and the so-called success of the surge on recruiting have not been documented.

Poverty and Welfare (for the rich)

Bill Moyers has three interesting pieces on the April 11, 2008 edition, the first on the increasing number of Americans going to food banks, the second on the use of farm subsidies for rich people who, in some cases, do not even farm. The third piece, an interview with David Beckman, puts the first two into context.

From The Journal:


An economist and minister, he [Beckman]spent 15 years at the World Bank overseeing projects to end poverty. For the last 15 years he's been president of Bread for the World, a Washington based coalition that advocates changing farm policies for the purpose of eliminating hunger. Welcome, David, back to The Journal.


BILL MOYERS: We've just seen in this broadcast two different reports. One on hungry people lining up for food stamps, going to the food pantries. Then we saw this report done with the Washington Post on abusive farm subsidies. How do you explain that contradiction?

DAVID BECKMANN:The main thing is that the people who are getting- who have their hands in the cookie jar are well organized. And according to the Wall Street Journal, they spent eighty million dollars last year lobbying Congress to defend those subsidies to affluent people.

DAVID BECKMANN: Commodity growers, the corn growers, the cotton growers.

BILL MOYERS: Rice growers. We saw rice growers in that film.

DAVID BECKMANN: Absolutely. So they're well organized. A group of church and environmental groups went to see Senator Reid, the majority leader of the Senate, about this issue. He came in and the first thing he said is, "Look, I've been here 35 years." He said, "I think the two best organized interests in the United States are the insurance companies and the commodity groups." He said they have very powerful friends on both sides of the aisle. It's going to be very difficult for us to do anything about this.


BILL MOYERS: But you're saying our system is so fouled up, it can't do the right thing?

DAVID BECKMANN: Is that a surprise?

More Corporate Welfare

Time magazine reports that the Federal Reserve is loaning $50 million to "cash-strapped banks." Since December 2007, the Fed has "pumped $310 billion in short-term loans into the nation's banking system." According to the Asia Times this scheme called "the New Term Auction Facility (TAF) has allowed large banks to borrow massive amounts of cash against collateral that can't be sold for close to face value."

Shills

Should citizens trust public officials to work in their interests? Dana Milbank (The Washington Post) presented some important information on the Senate Banking Committee's investigation of the investment banking meltdown. Milbank noted that Banking Committee members had received more than $20 million in campaign contributions from this sector, including:

Chris Dodd (D-$5,796,000)
Evan Bayh (D-$1,582,000)
Chuck Schumer (D-$6,162,000)

Inter Press Service (4-7-08) also reported that:

"Members of Congress invested nearly 196 million dollars of their own money in companies that receive hundreds of millions of dollars a day from Pentagon contracts to provide goods and services to U.S. armed forces, say nonpartisan watchdog groups." Congressional investors included John Kerry and Joe Lieberman.

and the Rich Get Richer

The Congressional Budget Office is projecting all-time high numbers of people using food stamps by 2009.

Not an April Fool

Marketplace has a short radio spot on Credit Default Swaps, a derivative in the relatively unregulated shadow economy. In 2003, Warren Buffet called these speculative derivatives "financial weapons of mass destruction (BBC 3-14-03)." Although Credit Default Swaps are a $45 Trillion market, few people understand how they work. Investment expert Christopher Whalen states that JP Morgan's buyout of Bear Stearns was made because Bear Stearns had $2.5 Trillion in these derivatives, and JP Morgan, another big investor in Credit Default Swaps, could not afford to let its fellow investment bank go down.

Listen to minutes 8:00 to 12:09 for Whalen's analysis.