I once spent a day during a general election campaign going round the UK in a helicopter. It was a fascinating experience, but not one I’d like to repeat. Choppers seem to me to be ludicrously primitive machines — a bit like steam-powered automobiles. They are also, of course, vanity toys for the very rich. And they are incredibly noisy. So this Bloomberg video brings a welcome dose of reality to chopper-worship.
Brad de Long is one of my favourite bloggers — and economists. Here he is brooding on a problem that once preoccupied Keynes and is likely to surface again, if we do crack the problem of increasing productivity with robotics — and displacing employment. Sample:
There is no shortage of problems to worry about: the destructive power of our nuclear weapons, the pig-headed nature of our politics, the potentially enormous social disruptions that will be caused by climate change. But the number one priority for economists – indeed, for humankind – is finding ways to spur equitable economic growth.
But job number two– developing economic theories to guide societies in an age of abundance – is no less complicated. Some of the problems that are likely to emerge are already becoming obvious. Today, many people derive their self-esteem from their jobs. As labor becomes a less important part of the economy, and working-age men, in particular, become a smaller proportion of the workforce, problems related to social inclusion are bound to become both more chronic and more acute.
Such a trend could have consequences extending far beyond the personal or the emotional, creating a population that is, to borrow a phrase from the Nobel-laureate economists George Akerlof and Robert Shiller, easily phished for phools. In other words, they will be targeted by those who do not have their wellbeing as their primary goal – scammers like Bernie Madoff, corporate interests like McDonalds or tobacco companies, the guru of the month, or cash-strapped governments running exploitative lotteries.
Problems like these will require a very different type of economics from the one championed by Adam Smith. Instead of working to protect natural liberty where possible, and building institutions to approximate its effects elsewhere, the central challenge will be to help people protect themselves from manipulation.
The thing about neoliberalism is that the poverty and inequality that it produces are not regrettable side-effects of a basically sound engine, but the whole purpose of the exercise. In programming terms, they are features, not bugs. This point is nicely made by Benjamin Selwyn in a blog post in Le Monde diplomatique – English edition.
In his film Inequality for All, Robert Reich, who was Bill Clinton’s labour secretary between 1993 and 1997, documents the collapse of US wages over the last four decades. In the late 1970s the typical male US worker was earning $48,000 a year (inflation adjusted). By 2010, the average wage had fallen to $33,000 a year. Over the same period the average annual income of someone in the top 1% of US society rose from $390,000 to $1,100,000.
Neoliberal policies aim to reduce wages to the bare minimum and to maximize the returns to capital and management. They also aim to demobilise workers’ organisations and reduce workers to carriers of labour power — a commodity to be bought and sold on the market for its lowest price. Neoliberalism is about re-shaping society so that there is no input by workers’ organisations into democratic or economic decision-making. Crises and austerity may not be intentionally sought by most state leaders and central bank governors, but they do contribute significantly towards pursuing such ends. Consequently, these politicians and leaders of the economy do not strive to put in place new structures or policies that will reduce the recurrence of crisis.
Well, well. Hot on the heels of the English translation of Thomas Piketty’s magnum opus comes this report of a new study by Martin Gilens and Benjamin Page from Princeton. Excerpt:
Money buys power.
That’s the bottom line of a new study from Princeton University political scientist Martin Gilens, who looked at 1,779 U.S. government policy decisions between 1981 and 2002. Gilens found that the preferences of the median earner had no impact on whether policies are adopted — but that politicians march in lockstep with what the top earners wanted.
You may think you’ve heard that conclusion before, but Gilens’s approach is unique, and that makes his findings all the more important. Gilens didn’t take one theory of who has political influence and test it with data, as does almost all of the research on this topic. He tested the power of the rich, middle class, and interest groups simultaneously, allowing for any theory to win or lose. That is new.
And here’s the real danger of what Gilens finds: It means that the U.S. political system is set to transform the dramatic rise of income inequality into entrenched differences in political power — and there’s very little the middle class can do to stop it from happening.
There is, in other words, an inequality feedback loop built into the U.S. political system — and America may be spiraling into it. A policy that enriches what Gilens calls the “economic elite” will command its support. Their support, Gilens shows, means that the political system is likely to make it happen. And the ever wealthier become the ever-more powerful. Policies that undermine the elite become ever more difficult to pass as economic inequality buys political obedience.