Fertile ground for demagogues

September 1, 2011 9:39 PM

Robert Reich talks at Google about the biggest problem facing the US economy. [SLYT, 57min]
posted by knave (98 comments total)

I just came across this really interesting discussion with Jaron Lanier on edge.org where he discusses this middle-class crisis. His conclusion is interesting, that computation and leveraged knowledge across a global scale are eliminating externalities, creating a kind of stagnation and endemic inequality. He lays blame at the feet of Google (interesting given Reich's venue) and the new industrial/technological elite.
posted by kuatto at 10:03 PM on September 1, 2011 [5 favorites]

Reich is a smart person. Too smart. He doesn't really communicate well. It took him almost an hour to explain what Upton Sinclair wrote in one paragraph in 1933:

"There is no greater economic delusion in the world than that of the benefit in the process of shipping goods all over the earth. It is sheer waste, justified only in cases where the country has not the raw materials to make that particular product. Why, for example, should we buy from Japanese bulbers? We have all the material and the skilled labor to make our own. But the Japanese undersell us you say! How? For one reason and one only, because the Japanese workers have a lower standard of life than ours, will work longer hours and eat less food. So it appears that the purpose of international trade is to bring the advanced people down to the coolie standard."

- Sinclair, The Way Out, 1933, p. 37

By "bulbers" he means the manufacture of electric lamps.

My dad said it even more succinctly in the 1970s - after Nixon's visit to China. "China is 1/3 of the world's population, but they are not part of the world's economy. When they do start trading, there can only be one of two results: either their standard of living will come up to ours, or ours will move down to theirs."

All of these economists, with their high-falutin' way of explaining things, can't seem to put it simply and clearly so that average people get it. This is exactly what has been happening. Because of "free trade" the American standard of living is moving down to the Chinese standard of living.

The iPhone "Designed in California, Assembled in China" - but sold in America at American prices with the difference in production costs going into the hands of investors has made investors insanely wealthy, it has raised the standard of living for millions of Chinese and impoverished American workers.

It is really no more complicated than that, but economists certainly make it appear so.
posted by three blind mice at 10:34 PM on September 1, 2011 [159 favorites]

As to how to fix things?

Unions = middle class

When you betray a union, you betray the middle class. Whether you're a TV or Radio demagogue or a corrupt union insider.

When you betray a union, you betray the middle class.
posted by SirOmega at 10:45 PM on September 1, 2011 [33 favorites]

That's not really Reich's argument, though, three blind mice. Nor is it exactly what Lanier is talking about. The key is the unequal distribution of the economic gains from shipping those lamps from China and paying Americans "coolie" wages. There are those who like to portray the labor market as flat, with individual workers in one country competing directly with individual works in other countries, and while that's true in a sense, it's also a very indirect and inelastic relationship that is distorted by middlemen, profiteers, and arbitrageurs.
posted by dhartung at 10:46 PM on September 1, 2011 [8 favorites]

(FYI, if you're tempted to skip it, Reich talks for half the hour and answers questions for the other half. You can get through his talk and main points in roughly 30 minutes.)
posted by dhartung at 10:47 PM on September 1, 2011

Am I the only person who finds Lanier borderline incoherent? He's supposed to be such a bright guy but several of the things he says in that article seem completely wrong-headed.
posted by CheeseDigestsAll at 10:51 PM on September 1, 2011 [5 favorites]

I read this link as "Google [being] the biggest problem facing the US economy" and admiring Reich, I was looking forward to his pragmatic rationale on that.
posted by CNNInternational at 11:02 PM on September 1, 2011 [1 favorite]

Reich, among others, simply doesn't understand that the value created by labor is not the same as the value created by application of capital, nor the change in the balance of labor to capital in the post-WWII period he so often tries to analyze. He has distrusted capital nearly all his working life; perhaps, on a charitable reading/hearing, that's because he thinks he understands both capital and the people who direct it, as well as labor, and the people who direct labor, when those people directing either are not one in the same. The evidence of his continued arguments, however, is that he understands neither labor or capital very deeply, nor those who direct either, or both, at all.

But he has a nice voice, and some eloquence in his presentation, along with an occasional flash of dry, if not self-deprecating humor. I have liked the guy, and have hated whatever he's said, for nearly 40 years. But his presentation, as always, is soothing. If I must listen to progressive prayers and sermons that claim to be fact, at least his are generally politely worded.
posted by paulsc at 11:10 PM on September 1, 2011

CheeseDigestsAll, no, you aren't the only one. I kind of felt like I was reading a transcript of my former roommate rambling about his view of the Systems of the World while higher than Tommy Chong.

A lot of it seemed to just start from an incorrect assumption trying to relate something built upon logic (a computer network) to something based upon an irrational system (economics). They don't relate. He seems to be trying to say that "if only the economy would work more logically like , we'd all be rich."
posted by daq at 11:12 PM on September 1, 2011

In that case, what is your analysis, paulsc, of what has caused our current financial situation and what should be done to ameliorate it?
posted by Wyatt at 11:14 PM on September 1, 2011 [1 favorite]

Reich says correctly identifying the problem is 90% of solving it (a good bit of general wisdom). So what is the problem? Middle class wages have been stagnant since the early 80s. He then goes on to explain the Rube Goldberg machine on why this one fact is the wellspring from which everything begins. He blames a number of things from technological innovation, financial deregulation, globalization, greed. He says is happening parallel in other countries as well.
posted by stbalbach at 11:19 PM on September 1, 2011 [3 favorites]

His only real solution in this talk is that Americans must focus even more on innovation (and some how the productivity results must be retained by workers), and the only practical advice he gives is provide better education, earlier.
posted by KokuRyu at 11:26 PM on September 1, 2011

"In that case, what is your analysis, paulsc, of what has caused our current financial situation and what should be done to ameliorate it?"

I'll be somewhat surprised if there is a solid response to that question.
posted by bz at 11:34 PM on September 1, 2011 [2 favorites]

"His only real solution in this talk is that Americans must focus even more on innovation"

Um, no. He states quite clearly that the answer is tax reform. When Warren Buffett is only paying 17% taxes, about half the percentage of what a mailman pays, the system needs to be reformed. The top earners must pay their fare share.
posted by bardic at 11:43 PM on September 1, 2011 [5 favorites]

paulsc, "I don't like the guy" isn't the best argument but I'm pretty sure you're aware of that.
posted by bardic at 11:44 PM on September 1, 2011 [4 favorites]

The thing that I think Lanier is missing is that even under the Marxist analysis, it doesn't require the state to own everything. Rather, you could have non-state entities that were worker owned, therefore giving the employees direct control over the means of production. They could exist within the matrix of a non-total state, and provide balance against the other elements of society, such as private equity owners, etc.
posted by wuwei at 11:46 PM on September 1, 2011 [3 favorites]

"In that case, what is your analysis, paulsc, of what has caused our current financial situation and what should be done to ameliorate it?"
posted by Wyatt at 2:14 AM on September 2

What has caused our current financial situation.

"... The number of Problem Banks has increased steadily since 2007 and now totals 888 banks or almost 12% of all FDIC insured institutions. With the economy weakening and property values declining, most Problem Banks find it impossible to raise the additional capital required to meet minimum regulatory capital ratios. It would not be surprising to see the list of Problem Banks continue to expand in the future. ..."

What Should Be Done to Ameliorate It?

Much, much harder question. In the first place, given the scale of the problems created by the massive internationalization of the real estate bubble, I'm not sure that "ameliorating" the Great Unwinding is either feasible, or possible. Japan's 1990 bubble remained, relatively, isolated, and yet cost that economy more than a decade of growth, and individual investors around the world, trillions. And the Japanese government tried desperately to cushion the fall, by allowing zombie banks to continue operating with government support for years and years, and by intervening directly to manipulate the yen.

Eventually, like it or not, we will "mark to market," however much that hurts, over however long we can stretch the pain out. But pain there will be, for years, if not decades, given the still widely unrecognized problems in the banking industry, and the greater than ever internationalization of capital.
posted by paulsc at 11:50 PM on September 1, 2011 [2 favorites]

Banks defaulting were a symptom of radical deregulation and outright criminal behavior on the part of bankers (CDS's, for example), not the cause of this recession.

Regan gutting unions in the 80's also led to a thirty-year stagnation of middle-class wages.

Nice red herring with Japan though.
posted by bardic at 11:55 PM on September 1, 2011 [8 favorites]

Am I the only person who finds Lanier borderline incoherent?

I just recently read You Are Not a Gadget and I'm confident Lanier couldn't find his way to the borderline of coherence with a GPS. It's remedial-comp-level writing, often practically incomprehensible word salad, and I'm amazed that anyone besides its author treats it as a plausible set of arguments about the world.
posted by RogerB at 12:02 AM on September 2, 2011 [6 favorites]

In a downward spiral, bardic, symptoms become causes, particularly when you can't or don't recover early losses from those responsible for early symptoms, in time to stop the spiral, as Japan certainly learned the hard way. Any banker knows that confidence is the primary key to monetary system operation, and capital some distant second, which is why they came up with CDSs and other derivative risk instruments, like MBSs; the bankers instincts about risk were correct, but overwhelmed by the amount of risk they took on in a short term, and by the fact that those who bought the risk, couldn't, themselves, lay it off sufficiently.

But pull enough capital, and no amount of confidence can indefinitely replace it. And we're approaching 4 years, now, after the initial credit markets lockup of late 2008. The first big lawsuits going to trial/settlement are not likely to put back even all that has been lost, so far, much less what will still be lost in the near future.
posted by paulsc at 12:06 AM on September 2, 2011

His comparison with Japan is a very good one -- rampant speculation leading to a monster bubble, subsequent pop, and desperate attempts to bail everyone out. Japan's government went from one of the richest in the world to one of the most heavily indebted over a span of about twenty years, simply because they refused to let bad players in their economy fail.

The same thing will happen here. We have deployed trillions of dollars to tell the economy to keep doing what it was already doing, to continue the pathological behavior that got it in trouble originally.

This will have far more dire consequences than just letting the bad players fail ever could have. We STILL have to clean up that mess, plus now we have a gigantic set of loans to pay back.
posted by Malor at 12:08 AM on September 2, 2011 [4 favorites]

I like Harvey's point that what we're seeing is in many ways the ongoing crisis of the 1970s, at least in so far as the measures taken to deal with that created the conditions for our current situation. Capitalism never resolves crises, it just shifts them geographically or between sectors. Capital in the core economies lucked out in that it sought new opportunities overseas just as the reform process was about to begin in China. But we're increasingly running out of places to go.
posted by Abiezer at 12:11 AM on September 2, 2011

"Any banker knows that confidence is the primary key to monetary system operation"

What utter bullshit.

Banks "work" in the good times because they generate wealth in a way that benefits many people, not just the ultra-wealthy. People can buy houses and cars with reasonable amounts of credit, for example.

When banks develop systems to privatize gains and socialize losses, the system isn't just broken -- it's actively rigged against the middle class.

America needs higher taxes on the wealthy, and more regulation of Wall Street. Simple as that.
posted by bardic at 12:18 AM on September 2, 2011 [10 favorites]

Oh, and more unions.
posted by bardic at 12:18 AM on September 2, 2011 [5 favorites]

"... America needs higher taxes on the wealthy, and more regulation of Wall Street. Simple as that."
posted by bardic at 3:18 AM on September 2 [+] [!]


"Oh, and more unions."
posted by bardic at 3:18 AM on September 2

I get it; you're not a Sam's Club member, a Target shopper, or an Exxon stockholder. Good luck with your program for revitalizing America.
posted by paulsc at 12:32 AM on September 2, 2011

Here's some vintage (~2009) Krugman saying pretty much exactly the same thing as Reich.

His two points:
1. Reagan's illegal union busting was the first cause of this terrible inequality
2. Southern White Males voting republican are the cause of the republican success.
posted by Chekhovian at 12:37 AM on September 2, 2011 [2 favorites]

There are those who like to portray the labor market as flat, with individual workers in one country competing directly with individual works in other countries, and while that's true in a sense, it's also a very indirect and inelastic relationship that is distorted by middlemen, profiteers, and arbitrageurs.

Here again, this only complicates (with invectives) what is essentially a very simple relationship.

Manufacturing costs in America (the result of wages, regulations, environmental standards, etc.) are comparatively high as compared to China. Free trade allows one to bypass all of that yet still have unfettered access to the American market.

Manufacturing costs set a baseline price in America. Since the Clinton Administration (with Reich as labor secretary) American companies have been able to enjoy that price - which is apparently rather inelastic - whilst dramatically cutting their costs of production. Modern logistics, shipping, and distribution do not amount to anything like the difference in manufacturing costs.

The difference between the (obviously inelastic) retail price and the cost of production has been pocketed by investors and while the American consumer has enjoyed some small benefit, the American worker has been screwed. If the money went to pay Chinese workers American wages, and impose American-style health and safety and environmental rules in China, then this would not be so bad. Instead the difference has been used to enrich Wall Street and the Chinese worker is on average not much better off than before "free trade."

Reich would perhaps like for us to forget that it was the Clinton Administration - where he was secretary of labor - that made MFN with China permanent and opened the door for all of that "outsourcing."

Reich and the Clintons are no friends of the working man.

Reich says correctly identifying the problem is 90% of solving it (a good bit of general wisdom).

Not true. Sinclair, whilst not an economist, understood very clearly what the problem was in the 1930s: America didn't have a production problem, it had a consumption problem. Unemployed people have no money to buy things. Similarly today, American businesses are flush with cash and are making the highest profits since the 1950s. The stock market is strong - even undervalued. The reason American businesses are not hiring Americans is that there are not enough Americans with the money to buy their products.

Sinclair understood the problem, unfortunately his solution (i.e., The Way Out) was a North Korean style Stalinism which in the 1930s appeared more promising than it turned out to be.

I don't think Unions are necessarily the answer - what is the point if the company can anyway procure labor in non-union countries?

I have no idea actually of what the solution is, but it seems to be very clear that for many Americans the only thing in their future is a lower standard of living. That's the new normal.
posted by three blind mice at 12:46 AM on September 2, 2011 [8 favorites]

Reich and the Clintons are no friends of the working man. This has been thrown around for a while, and I've even believed it in the past. We could rehash NAFTA I guess, but wouldn't that be boring?

If what he said in his talk is what he actually believes, then its clear to me that he is a true patriot and has the best interests of the nation at heart. If you base your judgement solely on the content of the talk, do you disagree?

I don't think Unions are necessarily the answer. I think the particular mechanism of unions as they currently exist does not work. We need some alternative scheme that accomplishes the same ends most effectively.

Does anyone out there have any experience with these worker-owned cooperative things? My naive view would be that such a scheme would be the optimal mixing of capital and labor, but I've never really studied it.
posted by Chekhovian at 1:01 AM on September 2, 2011

"... The stock market is strong - even undervalued. ..."

The S&P 500 lost 6.4% of its value last month, and is down, as of close of trading September 1, 2011, -4.23% YTD. But if you loved the market at 2007 levels (S&P 500 index of 1576.09 on October 11, 2007), yeah, I guess you could say it was, now, "undervalued."
posted by paulsc at 1:20 AM on September 2, 2011 [1 favorite]

I got the gist of his talk to be, "You wanna fix the economy? We gotta tax the rich."

Which is not as catchy as "Eat the Rich" but could probably find a wider audience.
posted by From Bklyn at 1:25 AM on September 2, 2011

Reich is a smart person. Too smart. He doesn't really communicate well. It took him almost an hour to explain what Upton Sinclair wrote in one paragraph in 1933: ... My dad said it even more succinctly in the 1970s

TL;DR: I didn't really listen to what Reich had to say and I'm just going to assume he meant whatever it is I think is encapsulated in these two quotes.

But but this is ridiculous. The problem isn't international trade. Even though Japan's standard of living is arguably higher then ours for the middle class and it's been that way most likely for decades, people in the US still buy things made in Japan. Same thing with Germany.

Why is that? Well, Krugman goes into the reasons why you have geographic concentrations in various industries. You have cars made in Detroit because that's where all the talent and machinery are. Same thing with Silicon Valley and startups. Germany and Japan are both countries that specialized in high tech manufacture and now export around the world. China is trying to do the same thing, but they have so much population that the wages are still low overall. And most of their population is still rural and doing agriculture, actually.

This is a totally different problem then "global trade is bad" or whatever.

But pull enough capital, and no amount of confidence can indefinitely replace it. And we're approaching 4 years, now, after the initial credit markets lockup of late 2008. The first big lawsuits going to trial/settlement are not likely to put back even all that has been lost, so far, much less what will still be lost in the near future.

So the answer is no, you don't have any solution, right?

I get it; you're not a Sam's Club member, a Target shopper, or an Exxon stockholder. Good luck with your program for revitalizing America.

I'm sure as hell not a fucking Exxon stockholder. What exactly is the argument here anyway? Only Exxon and Target can save us? What?
posted by delmoi at 1:36 AM on September 2, 2011 [3 favorites]

you're not a Sam's Club member

Costco is the same or better as Sam's and from what I understand doesn't treat its employees like chattel slaves. We don't need whip carrying overseers running everything for the economy to work well.
posted by Chekhovian at 1:55 AM on September 2, 2011 [14 favorites]

"... So the answer is no, you don't have any solution, right?"

The comparatively fast, but horrifically unpalatable solution is to take the hits of as orderly an unwinding as we can still manage in the financial world, even if that means a significant worldwide depression, on the premise that once we've cried our puddle of tears, and know what is real and what is smoke, economically, we can move forward with some confidence, rebuilding as needed from the smoldering ruin. But that's politically impossible, worldwide.

And nobody is going to go for that. They'd rather have zombie banks, underwater mortgages (even as homeowners!), shrinking pension plans, high unemployment, slow or no economic growth, and Quantitative Easings up the wazoo, to manage future inflation, so long as the worst wolves can be kept from the their doors another day, and some hope for tomorrow, without the pain of the past, preserved. Understandable at a human level, but that's the way to lost decades of economic performance. And there is no guarantee that the world, as a whole, can whistle that loud or long, past this particular graveyard. That's the delicate dance of confidence and halting, minimalist actions that government and finance leaders around the world are now engaged in dancing.

"I'm sure as hell not a fucking Exxon stockholder. What exactly is the argument here anyway? Only Exxon and Target can save us? What?"
posted by delmoi at 4:36 AM on September 2

The argument is that if you can't find worthwhile, low risk deployments for your capital in today's quasi-zombie economic climate, good luck and God speed if the world does slip into deep recession, or even depression, despite the best plans of governments and central bankers, the speeches of leading politicians, and the pronouncements of Reich.
posted by paulsc at 2:16 AM on September 2, 2011 [2 favorites]

You have cars made in Detroit because that's where all the talent and machinery are.

And you used to have Rubbermaid products made in Ohio, but machinery can be crated up and moved and "talent" is available over-rated. Anyone with access to books can learn everything you know.

As an example, Frontline had a nice program on the demise of Rubbermaid's US operations a few years ago. Is Walmart good for America?

HEDRICK SMITH: Wal-Mart's pull-back was a body blow to Rubbermaid. Coupled with lax management at Rubbermaid, it plunged the company into deep trouble. In 1999, Rubbermaid sold out to Newell, a major competitor. By the time I arrived in Wooster five years later, it had come to this, Rubbermaid auctioning off its birthright.

[on camera] Where're the buyers from?

AUCTIONEER: They're from all over. We've got guys from all over the 50 states. We've got two guys in from South America, two guys from Italy, a guy from Spain, two guys from over in Japan or China area. We've got a guy from Austria–

HEDRICK SMITH: A couple of guys from China?

AUCTIONEER: Yeah.

HEDRICK SMITH: And they're buying here?

AUCTIONEER: They're buying. They bought the one big machine today, yeah.

HEDRICK SMITH: The Chinese guys bought the big machine?

AUCTIONEER: Right. It's an injection machine. They bought it, I believe, for $850,000.

HEDRICK SMITH: [voice-over] So Rubbermaid's original plant was closing shop, and countries like China were picking up the pieces.

AUCTIONEER: You know, when you think of Wooster, you think of Rubbermaid. And you think of Rubbermaid, you think of Wooster. I mean, this is what this town is all about.

HEDRICK SMITH: [on camera] So what's it going to be without– when you move all this stuff out, you know, you've got a carcass here.

AUCTIONEER: Exactly. There's a–

HEDRICK SMITH: Is the town a carcass, too?

AUCTIONEER: Well, there's about 1,000 jobs that were lost here.

Walmart, of course was not able, to replace 1000 union manufacturing jobs. What happened to Rubbermaid is a microcosm of what has been happening in the United States for the past few decades.

The problem isn't international trade.

No. The problem is free trade amongst unequal partners. Water flows downhill. And it always will.
posted by three blind mice at 2:22 AM on September 2, 2011 [9 favorites]

The problem is free trade amongst unequal partners. That's the big question of the next ten years. What about China? My strong suspicion is that they are going to have to start experiencing the terrible consequences of the environmental, social, and demographic shortcuts they've taken to get where they've gotten. But that doesn't mean any near term relief for us in the US.

Something like the American equivalent of a Tahir square seems like the only option left. I don't see a political solution on the horizon.
posted by Chekhovian at 2:56 AM on September 2, 2011 [1 favorite]

Oh, and more unions.

If we're going to do this, can we get some better unions, please? Collecting the voice of millions of workers into one unified opaque leadership structure sitting on a pile of cash without oversight is almost as optimistic in its ignorance of human corruptibility as Stalinism. I know, almost every organization tends to decay into a job security package for its leadership and an inheritance for the children thereof -- governments, corporations, kleptocracies, HOAs, scout troops, religions... but unions as they were run (into the ground) from the 1970s to today are not a workable model for future productive relations between labor and management.

More unions, maybe. But new unions. You'd need a new structure: transparent leadership, driven more by individual workers with more autonomy at the local level, and minimization of the number of career positions in the organization, simply to take away the corruptible power. (I have no idea how to balance this. Small enough to be a boring prize for those in it for the money, but still big enough to provide credible representation...)

(Holy crap; fifteen minutes of Google research on _any_ allegations of union corruption prior to 1970 yielded no useful results -- everything is SEO'd-to-the-hilt Koch-sponsored echo chamber sockpuppet bullshit. We have a real problem as a culture and a species if we allow the loudest marketers of bad ideas to control the quill of current history. No idea how to solve this problem without creating bigger ones (i.e. prior restraint) but goddamn if that ain't annoying as hell...)

I personally think the solution must be a cultural one, not a political one. One thing that paulsc implies (even if he is a little bank-obsessed about it) is right: you simply cannot do this if you want a material standard of living equal to that of the last decade, or prices in the range Americans have enjoyed them for the last half century. But we are raised from a very early age to equate "more" with "better", and every signal in our marketing-dominated society impels us to trade whatever we have in terms of intellect, effort, time for generally poorly made but nicely priced crap. The American middle class traded its future for low-end McMansions filled with Chinese televisions, and big ass cars to drive to them in. You're simply not going to fix that problem by throwing unions and tariffs at it; in the best case all you're going to do is give people a little more money, but raise prices even higher. People will have less stuff, and I can't see most people being okay with that without a generation of material deemphasis.

(tl;dr, we need to regulate marketing as the munition that it is.)
posted by Vetinari at 3:23 AM on September 2, 2011 [7 favorites]

The comparatively fast, but horrifically unpalatable solution is to take the hits of as orderly an unwinding as we can still manage in the financial world, even if that means a significant worldwide depression, on the premise that once we've cried our puddle of tears, and know what is real and what is smoke, economically, we can move forward with some confidence, rebuilding as needed from the smoldering ruin. But that's politically impossible, worldwide.

Right, so in other words you have no solution other then "let's not do anything and wait for things to fix themselves" Especially not raise taxes on the rich!

The argument is that if you can't find worthwhile, low risk deployments for your capital in today's quasi-zombie economic climate, good luck and God speed if the world does slip into deep recession, or even depression, despite the best plans of governments and central bankers, the speeches of leading politicians, and the pronouncements of Reich.

What!??!?! Your statement was

I get it; you're not a Sam's Club member, a Target shopper, or an Exxon stockholder. Good luck with your program for revitalizing America.

So... it makes absolutely no sense at all that that statement means the same thing as the supposed "argument" you were trying to make.

And I don't even see how it's an argument at all. If you're saying it's hard to find something to invest in a recession, it will be harder in a depression seems like something that's both obviously true and kind of irrelevant to the discussion. Are you also claiming that raising taxes on the rich would somehow cause a depression?

---

And you used to have Rubbermaid products made in Ohio, but machinery can be crated up and moved and "talent" is available over-rated. Anyone with access to books can learn everything you know.

As an example, Frontline had a nice program on the demise of Rubbermaid's US operations a few years ago. Is Walmart good for America?

Way to miss the point. I was just talking about Krugman's theories about Economic geography and Agglomeration I was talking about how Detroit became a city for making cars compared to other cities in the US. NY is a financial hub, Silicon Valley is the tech hub. Making something like an airplane or silicon chips or startup companies can't exactly be learned from a book. It's not like running an injection molding machine to make rubber tubs. There are a lot of things that are just experience.

Germany and Japan are manufacturing nations. They both have standards of living -- for middle class people -- that that are better then the U.S. So if it were the case that capital just goes to the lowest.

So again, if you are going to claim that the whole problem is free trade, you need to come up with a plausible explanation for why Germany and Japan aren't suffering. In fact, the real irony of that quote was that Sinclare was totally wrong about Japan. Japanese not only reached our level, we've had such a deterioration in middle class quality of life that they're ahead of us. Of course rich Americans are way richer then rich Japanese people. The CEO of Toyota makes like $900k a year.

---

Anyway, I watched the whole video, and while Reich did talk about international trade as being one of the 'efficiencies' under discussion, it was only a small part. His central thesis was absolutely not that free trade takes away jobs because poorer people do them instead.

Instead his central argument was that the market has become more efficient over time, and while trade is part of that, so is automation and other technology. Part of his solution is education, especially early childhood education and higher teachers salaries. He also thought expanding the earned income tax credit was a good idea as well.

You might disagree with him but you can't just claim he said something else entirely. (My view is that we should just stop trying to make everyone work. We need to shift to a leisure society where people just spend less of their day and less of their life working)
posted by delmoi at 4:15 AM on September 2, 2011 [4 favorites]

I strongly disagree with the notion that outsourcing and offshoring have not created tremendous benefit for consumers. While that is not to say that those benefits should not be weighed against the costs to production workers or the loss of economic diversity, those benefits cannot be disregarded.

Classes of goods which are heavily outsourced are dramatically cheaper in real terms than they were before the major outsourcing and offshoring began 30 years ago. Ask your mom what a cheap dress cost her in 1981, ask your grandmother what a stack of toys under the Christmas tree cost at the same time. When you factor in hedonic changes (i.e., the fact that the same class and category of good are frequently better) it becomes even more dramatic.

By contrast, the things that have become significantly more expensive in real terms have in common that they cannot be outsourced or offshored -- housing, education, healthcare, most other services -- or are directly commodity based and thus have a single global price.

I would also tend to say that when trying to assess the state of the American worker you absolutely must consider immigration alongside the decline in private sector unions. Low- and low-medium skill jobs are dominated by immigrants in many regions of the United States. First-rung-on-the-ladder entrepreneurship is the same. Immigrants (and their children) are also a very large presence in the highest-skill jobs. While much of this new employment has been created by the incremental supply of motivated workers, and there's been dramatic positive economic contribution from immigrant innovation, there has been a measure of displacement as well.
posted by MattD at 4:51 AM on September 2, 2011 [1 favorite]

His only real solution in this talk is that Americans must focus even more on innovation...

An, the call to "innovation". The entreprenurial pablum equivilent of the "work smarter, not harder" pablum often shoved at workers. Meaningless babble meant to act as a rallying call, yet not supplying any actual, usable solution or direction.
posted by Thorzdad at 4:57 AM on September 2, 2011 [2 favorites]

I get it; you're not a Sam's Club member, a Target shopper, or an Exxon stockholder. Good luck with your program for revitalizing America.

Exactly. How can Sam's Club possibly keep their prices low if the Walton family has to revise their estate planning?
posted by moammargaret at 5:04 AM on September 2, 2011 [2 favorites]

I'm sure as hell not a fucking Exxon stockholder.

If you have a 401(k) you almost certainly are. I know I for one have gotten batshit rich off of XOM in the last 5 years. My solid gold house awaits.
posted by moammargaret at 5:12 AM on September 2, 2011

As a stopgap, I still favor taxing churches on the real value of their property. All churches.

That would have the added benefit of diminishing the religion scam that keeps so many people distracted from recognizing their real interests in the political process because they are stoked up to fight "cultural" battles while Rome burns.
posted by spitbull at 5:17 AM on September 2, 2011 [2 favorites]

This is "Tax the Rich"

The Rich are Americans/Developed economies, the poor are Chinese/Bangledeshi etc

Funny how people demand higher taxes until they are the ones paying them. Sure, the proportion being paid by the to 1% are out of what, and taxing them makes sense it's not goign to stop you having to pay too

There was a post on here recently about people distributing benefits up not down, if giving them to someone below you made you slip down ... this is it.

You know what your grandchildren are going to be, unless they are actually better at something than average?

Hungry.
posted by fistynuts at 5:18 AM on September 2, 2011 [2 favorites]

I think it is reasonable to think the global standard of living should converge. After all, it's not like Americans and Europeans are more deserving than Chinese or Somalians. It's also pretty clear that the standard of living in western countries is not ecologically sustainable. In this sense, I'm okay with a decline in the material wealth of people who are already consuming unsustainable levels of sneakers, beef, gasoline, etc.

I don't even think it should necessarily make people less happy to consume less materially, especially when digital technology and the internet have made it easier and cheaper to do things like communicate with friends and family, find art and entertainment, and pursue hobbies like photography. Today's three-year-olds just want to play with their parents' iPad, and while iPads are expensive, they may preclude the need to buy a wide variety of material things like books, games and toys, with the ability to purchase software versions at reduced cost.

What's uncool, of course, is the massive shift in wealth from workers to investors. This makes the world worse in every conceivable way.
posted by snofoam at 6:15 AM on September 2, 2011 [4 favorites]

Not true. Sinclair, whilst not an economist, understood very clearly what the problem was in the 1930s: America didn't have a production problem, it had a consumption problem.

They funny thing is, the growth model, which is based on personal consumption, is also killing our planet.
posted by KokuRyu at 6:59 AM on September 2, 2011 [3 favorites]

I think it is reasonable to think the global standard of living should converge. After all, it's not like Americans and Europeans are more deserving than Chinese or Somalians.
I agree, but this is clearly not the way to go about it. It's worth recalling that this process has hardly been plain sailing for the new Chinese working class - not only the low wages (far lower than at comparable points in the development of other Asian 'newly industrialising countries'), but the massive increase in precarity, the loss of former benefits such as free healthcare and education and the shift from one of the flattest GINI indexes in the world to one of the most polarised by wealth of all societies in just thirty-odd years. If the rising tide floated all boats, the bulk of the fleet found themselves barely off the bottom and with all the lifeboats set adrift. That's not to mention the pollution associated with manufacturing, the social dislocation of the largest migration in human history (from Chinese countryside to city), the resource crises and the rest.
posted by Abiezer at 7:13 AM on September 2, 2011 [2 favorites]

> They funny thing is, the growth model, which is based on personal consumption, is also killing our planet.

Forgotten the moment times go sour. Then all of a sudden it's "Gotta get back to growth growth growth. More stumulus! Get those consumers spending again."
posted by jfuller at 7:33 AM on September 2, 2011

I thought the identification of the problem was brilliant, but the solutions had a huge hole.

Education can help some individuals - but it does nothing for the structural problems Reich so rightly focuses on. If you have 20 professional jobs and 40 service (cleaning, retail, etc) jobs, having 60 people with BAs just means you still have 40 underpaid people, but just more educated underpaid people.

that service work is not going away - we can't do without it. What we have to do is to decrease the inequality in pay between the top and the bottom - so that someone can work in a service job and still be a productive consumer. Historically, this has been achieved through collective bargaining (aka unions) and increasing the minimum wage.

It's a structural problem - and the solution can only be structural.

/on preview

Yes - Reich points out that economic growth isn't a zero sum game, buy forgets to notes that natural resources and our planet is very finite.
posted by jb at 7:47 AM on September 2, 2011 [2 favorites]

I don't think Unions are necessarily the answer - what is the point if the company can anyway procure labor in non-union countries?

Unions are a big part of the answer. They were at the turn of the last century and they are now. If for no other reason than to get Labor at seat at the table again. Workers have no voice anymore in the decision-making process. That hurts everyone.

Another big part of the answer is the second part of your sentence. Why, in any rational system, are American companies allowed to benefit from foreign labor with no penalty? No fair system- legal, philosophical, religious - allows people benefits without responsibilities. I've said it before, and I'll say it again: If you are an American company that willingly bypasses the American labor market to make a product that you turn around and sell here, you are, by choice, an importer. You are no different - and in many ways worse - than a foreign competitor. There should be a price paid - tariffs on the products brought back here and punitive taxes for the end-run around your own family.

Reich says redistribution is a hard-sell in America. Definitely so. But if we don't figure out a way of accomplishing exactly that, we're done.
posted by Benny Andajetz at 7:48 AM on September 2, 2011 [2 favorites]

Sure, he's not your typical ideal, but Robert Reich would be an *awesome* POTUS.
posted by markkraft at 7:49 AM on September 2, 2011

This conversation pretty much exemplifies my problem with the world of the realpolitik. I would like to think I am a pretty smart person and I could back that up with some evidence but it has been a very long time since I entertained the notion that I was the smartest person in most rooms. It may well be that the most certain and voluble participants in this discussion are all smarter than me. Robert Reich is certainly smarter than me.

And I can't make heads or tails of these arguments. I feel like I can understand the gist of them but I have no idea how to evaluate them, how I would come to prefer one over another. And yes, certainly you could say hey, you need to educate yourself so you can come to your own conclusions about these very important issues. But come on. Robert Reich was a Dartmouth summa cum laude, a Rhodes Scholar and a Yale Law J.D. who was in national government under three presidential administrations, and a brief example his thoughts on the economy generate nothing but a hammer and tongs rhetorical dust-up among what I gather to be a bunch of very smart people who are mostly broadly on the same general side of the main American political divide. I got a B.A. from a small Midwestern branch of the University of Minnesota. I could work at coming up with my own conclusions but what the hell sort of confidence could I rationally have in them?

It seems wrong to just disengage from the political questions of the economy but I'm having trouble seeing much of an argument for staying engaged. I tried to get a little involved in politics, round before last, and what what a waste of time and money is how I feel now. I backed Barack Obama because his speeches made me feel inspired, what the hell is point of even fronting about that? His presidency has made me feel substantially less inspired, when not outright disappointed, but what was I going to do, vote for John McCain? I could have backed Hillary Clinton in the primary but how different am I supposed to believe things would be now? I mean really. And what am I going to do this year, vote for Mitt Romney? Cast a protest vote for Ron Paul, or Ralph Nader, or maybe the ghost of Paul Wellstone? I don't have to pay a moments attention or one dollar to go to the polls and cast my vote for the crude sketch of "my kind of people" as represented by That One National Political Party. So why should I. Why should I bother developing an opinion about the economy. It feels like it is wrong but I have no confidence in any supposed right alternative behavior that I have come up with. So why bother? This is a serious question.
posted by nanojath at 8:17 AM on September 2, 2011 [6 favorites]

>So why bother? This is a serious question.

Because it might make a difference, even though you can't know for sure.
posted by the Real Dan at 8:45 AM on September 2, 2011 [1 favorite]

demoi: "We need to shift to a leisure society where people just spend less of their day and less of their life working."

This seems a useful thought which I've not seen hashed out anywhere. The usual answers to our malaise are innovation! education! more efficiency! consume more!

But we are much more efficient than ever. Isn't there some curve of diminishing returns that shows that trying to wring out another watt of innovation costs more jobs than its worth? That pushing everyone to take on educational debt creates 2 deeply indebted service-workers for every professional?

In other words -- why not redefine the working week from 40-50 hours down to, say, 28 hours (4 7-hr days)? It would mean less take-home pay for a worker, but likely a better quality of life, and more people working.
posted by slab_lizard at 8:50 AM on September 2, 2011 [2 favorites]

Sure, he's not your typical ideal, but Robert Reich would be an *awesome* POTUS.

Reich is a Judas goat for left economic policy in the US... He's someone who can give a speech in a room full of paper millionaires without really offending much of anyone...

Where did the capital come for building Google? By liquidating steel, rubber, paper, textiles.. etc.
posted by ennui.bz at 8:50 AM on September 2, 2011 [1 favorite]

And I can't make heads or tails of these arguments. I feel like I can understand the gist of them but I have no idea how to evaluate them, how I would come to prefer one over another.

Well I see your problem, but I have to say that his style of discourse in this context is not meant to be overtly scientific or rigorous--in any event economics is not a purely formal discipline. What he is doing is presenting some obvious facts and connecting them with a narrative. I think these are his beliefs, albeit grounded in his research and education.

I don't have to pay a moments attention or one dollar to go to the polls and cast my vote for the crude sketch of "my kind of people" as represented by That One National Political Party. So why should I. Why should I bother developing an opinion about the economy. It feels like it is wrong but I have no confidence in any supposed right alternative behavior that I have come up with. So why bother? This is a serious question.

Well I'll give this a shot. I think you should examine your notion of what the political process actually is. Democracy is an amalgam, a normative confusion, but politics begins with you and you are immersed in it. A cautious apprehension of economics and politics will inspire and motivate simple changes in the way you interact with the world. My friend, this is about becoming the great society--in other words, this is about becoming the society that we create.
posted by kuatto at 8:59 AM on September 2, 2011 [1 favorite]

We should definitely not subsidize our auto industry like Japan and the EU do, I mean just take a look at what a disaster that's been!
posted by The 10th Regiment of Foot at 9:18 AM on September 2, 2011 [1 favorite]

But come on. Robert Reich was a Dartmouth summa cum laude, a Rhodes Scholar and a Yale Law J.D. who was in national government under three presidential administrations, and a brief example his thoughts on the economy generate nothing but a hammer and tongs rhetorical dust-up among what I gather to be a bunch of very smart people who are mostly broadly on the same general side of the main American political divide. I got a B.A. from a small Midwestern branch of the University of Minnesota. I could work at coming up with my own conclusions but what the hell sort of confidence could I rationally have in them?

I've taught in the Ivy League -- getting your BA from a small college is no indication that you are not as smart. Even the smartest undergraduates in the Ivy League are about the same intelligence/education level as the very smartest at middle-tier colleges, there are just more of them (like 1/2 your class being A students, rather than only 5%).

Some of us in here have also studied economics, finance and/or history. I've studied economic history myself; I heard his Henry Ford story in my first year of undergrad, with the professor making exactly the same point -- that Ford paid his workers more than other factories with the intention that his workers could also be his customers, and I've been thinking about it a lot lately as well as the general history of wages, living standards and consumption. So most of what Reich said wasn't news to me, though it was nice to hear firmer numbers than I could have supplied on the income ratios between 1970 and now. (I could give you firm numbers on 17th-19th century British wages).

It's interesting, though, that I do immediately leap to issues of labour and class division, what with being a social historian, while people with more experience in finance immediately focus in on that to the exclusion of social structure. The truth is probably inbetween us. But I still hold the same opinion that income structures need to be changed if there is to be a continuation of an economy based on wide-spread consumption.
posted by jb at 9:34 AM on September 2, 2011 [1 favorite]

We should definitely not subsidize our auto industry like Japan and the EU do, I mean just take a look at what a disaster that's been!

The last thing we need is more fucking cars.
posted by adamdschneider at 9:35 AM on September 2, 2011 [2 favorites]

But if you're asking about how people who aren't specialists should get engaged? Well, I would say that really more of us need to know more about economics and economic history. In my highschool, I had 5 mandatory classes in literature analysis, but only 1 mandatory class in history and that didn't have any economic history. No required social science past age 13, no economics offered at my school (weird specialist place, though). It's like statistics -- that should be part of basic education as well.

As for the issue of consumption and the environment -- consumption doesn't necessarily have to mean literal consumption of goods and raw materials. It can also mean: having more time off because you don't need to work as many hours, consuming less resource intensive things like arts and entertainment, being able to afford to consume more expensive things like organic foods which are better for the environment. I agree that we have a serious over-consumption of fossil fuels and raw materials -- but I think we can work toward a more equal distribution of income while at the same time towards models of consumption which are more environmentally sustainable.
posted by jb at 9:44 AM on September 2, 2011 [1 favorite]

The last thing we need is more fucking cars.

Yeah, how silly of me. I'm sure if we just quit building cars we could just seamlessly switch over overnight to that massive alternative global transportation system we've all been building in secret for the last hundred or so years!
posted by The 10th Regiment of Foot at 9:44 AM on September 2, 2011

The last thing we need is more fucking cars.

Sorry, to say that with less snark, I agree with you, but you are providing a 50 year solution when what we need is a 5 year plan. To realign our infrastructure we need a shit-ton of money and we're not going to have shit for cash flow if we don't get our present economy rolling again on the infrastructure we've got.
posted by The 10th Regiment of Foot at 9:49 AM on September 2, 2011

I think it's reasonable that global standards of living should converge.

Deserving doesn't have anything to do with it. How productive are they? And how much productivity does their company/city/region/nation facilitate?

You can look at the issue and say, it's unfair that the USA is much richer than other countries. Well sure. But what if there was no trade at all? The USA would probably still be much richer than many other countries (or at least this would have been true at some point in the 20th century). Is that unfair? Maybe you could argue that we should share the world's resources, but otherwise it's not a matter of fairness so much as having your act together. (yes, the USA has caused many countries to NOT have their act together, but that's beside the point)

The real question as I understand it is how can we distribute wealth fairly given that productive power is not evenly distributed (and will probably be getting worse with advances in technology). Since the industrial revolution the main problem has been the tension between individuals' abilities to create something of value to society (i.e. something scarce) and society's gains from technological advances. This is a distribution question because previously distribution was maintained by scarcity. Of food, for example.

Now, workers in the USA are finding that what was previously scarce (factory labor, call center jobs, making apparel) is abundant, and they can't afford to lower their asking price down to the market price. They can find new scarcity or hope to maintain or create scarcity through government policies.

Another view is what is actually happening with corporate actors and how policies have shaped and created various abundances. Scarcity and abundance has everything to do with our physical distribution systems (transport) as well as our legal and social and political entities.
posted by ropeladder at 10:04 AM on September 2, 2011

And I can't make heads or tails of these arguments. I feel like I can understand the gist of them but I have no idea how to evaluate them, how I would come to prefer one over another.

it doesn't matter. his job is to stand in front making sympathetic noises while the men in the back car off the machinery.

That was his job during the Clinton presidency: touring "call-centers" in the midwest talking about the knowledge economy and retraining while in the back rooms Glass-Steagal was repealed and the money that could have gone to infrastructure and jobs was used to balance the budget to satisfy Wall Street?

Sound familiar?
posted by ennui.bz at 10:20 AM on September 2, 2011 [1 favorite]

his job is to stand in front making sympathetic noises while the men in the back car off the machinery.

I thought his job was to fight crime?
posted by The 10th Regiment of Foot at 10:52 AM on September 2, 2011

Can't we kneecap the banksters and other criminal rich? Not in a metaphorical, but actual sense. And then leave it there as a threat for the future. You can make your money, but understand that comes with a price for evil.
posted by X-Himy at 11:11 AM on September 2, 2011 [1 favorite]

"That was his job during the Clinton presidency: touring "call-centers" in the midwest talking about the knowledge economy and retraining while in the back rooms Glass-Steagal was repealed..."

Not so, and a slight on a good man's name.

Reich left his position in Nov. 1996, between Clinton's re-election and second inauguration... whereas Glass-Steagal was repealed on Nov. 2nd, 1999... three years after Reich left the administration.

Seriously... Reich was one of the good ones.

While Clinton was scooping up pollster Dick Morris' triangulated shift to the right and getting his economic queues from Robert Rubin, Lloyd Bentsen, and Ayn Rand's disciple over at the Fed, Reich was actually encouraging the POTUS to come up with new policies to create and sustain economic growth.
posted by markkraft at 11:22 AM on September 2, 2011 [9 favorites]

See also...
posted by markkraft at 11:25 AM on September 2, 2011

Now, workers in the USA are finding that what was previously scarce (factory labor, call center jobs, making apparel) is abundant

Manufacturing and apparel jobs are not abundant in the US right now. Whatever are you talking about?
posted by raysmj at 11:25 AM on September 2, 2011

Manufacturing Sector Since 1939*

*As of today. Sorry if it doesn't seem to want to go directly to the data set. Just pull down the dropdown on the top and hit "go" if it doesn't work for you.
posted by The 10th Regiment of Foot at 11:45 AM on September 2, 2011 [1 favorite]

Manufacturing Sector Since 1939*

So what you're saying is that another WWII would solve our problems?

I would follow if we're in the midst of another great depression and this is ripe time for demagogues to stoke anger.
posted by Chekhovian at 12:12 PM on September 2, 2011

*It would follow, sorry
posted by Chekhovian at 12:12 PM on September 2, 2011

I was wondering who the "vast middle class" is in this case, and what they have been spending their borrowed money on since 1981. There is the assumption that middle class folks have been using their houses as ATMs to purchase consumer goods, but I also wonder if the reason why people are going into debt is because of increasing healthcare and retirement costs
posted by KokuRyu at 12:17 PM on September 2, 2011

"It's nice to have the power of a dictator, and not use it." Warren Buffet
posted by eggtooth at 12:19 PM on September 2, 2011

Robert Reich is doing an IAMA over on Reddit right now.
posted by Mr. Palomar at 12:28 PM on September 2, 2011

Seriously... Reich was one of the good ones.

He trots out the old "leaving to spend more time with his family" excuse and admits (or pretends) to being bullshitted by Clinton in the '92 election i.e. 'Clinton changed once he was in office.' The DLC and the New Democrats were always about putting the Democratic party on friendly terms with Wall Street. This was abundantly clear in the primary and crystal clear with the appointment of Rubin as treasury secretary.

The roots of the current financial world order go back to the Mexican default crisis in '94 and the Asian crisis in '97: the journeyman work of Rubin, Summers, and Geithner. The repeal of Glass-Steagal was just the last piece, with welfare reform and NAFTA, of the digging of a grave for the New Deal. If Reich wanted to have any impact he would have resigned in '94 when all of this was clear.

But the thing is, for all of his being a "good guy," he's always bought into the idea that the collapse of US manufacturing employment is just a necessary outcome of increasing technological efficiency and the free market. It's really one of the core "neoliberal" canards. As if, arguing for industrial policies that prevent bankers and investors from liquidating industries and reward actual investment, is arguing against the "free market."

Job retraining was never going to change the flow of capital out of the manufacturing centers of the midwest and Reich is smart enough to know it. He never had any influence on policy that mattered in the Clinton administration and served mainly to keep the illusion that the party of Clinton had much to do with the party of Roosevelt... an illusion that persists today with Obama. He's a clown with an oversized ego: he actually thought he could run for president? he couldn't even make a credible showing for governor of blue massachusetts.
posted by ennui.bz at 12:29 PM on September 2, 2011

ennui.bz...but his point about increasing precision manufacturing, necessitating education reform,
does sound like a good direction.
posted by eggtooth at 12:35 PM on September 2, 2011

Manufacturing Sector Since 1939*

*As of today.

I throw up my hands. Why are you using all data since 1939 as part of a discussion re what has happened to the American middle class of late, and using the word "Now" with it? Manufacturing jobs and textile jobs and whatnot are not in abundance now.
posted by raysmj at 12:39 PM on September 2, 2011

There is the assumption that middle class folks have been using their houses as ATMs to purchase consumer goods, but I also wonder if the reason why people are going into debt is because of increasing healthcare and retirement costs..."

Reich was pretty clear in one section of his presentation in distinguishing spending from consumption. Yes, consumers were in debt because of spending, but a lot of that spending was on things such as healthcare, education, etc. He did point out the big growth in healthcare costs, but also pointed out that some costs have gone down, relative to inflation.

That said, the biggest problem was a lack of actual economic growth. To fix that, you need to have both stimulus for things like education and infrastructure, but also have a system in place that equitably distributes the gains from economic growth.

Constantly increasing the share of the pie for those on the top just isn't a sustainable system.
posted by markkraft at 12:48 PM on September 2, 2011 [1 favorite]

I agree with you, but you are providing a 50 year solution when what we need is a 5 year plan. To realign our infrastructure we need a shit-ton of money and we're not going to have shit for cash flow if we don't get our present economy rolling again on the infrastructure we've got.

I don't see how we're ever going to get to the 50 year solution in 50 years or 100 years if we go in the exact opposite direction, though, no matter how you justify it.
posted by adamdschneider at 12:48 PM on September 2, 2011

Robert Reich AMA on Reddit?
posted by futz at 1:03 PM on September 2, 2011

Oops. Sorry.
posted by futz at 1:30 PM on September 2, 2011

Robert Reich: Jobs Not Cuts
posted by homunculus at 1:42 PM on September 2, 2011

Those labor stats are mindblowing:

1) employment is now lower than anytime since the Great Depression
2) It wasn't WWII, it was the postwar period (I'm thinking the Marshall Plan and credits for overseas sales of wheat) that ended the Depression.
3) Reagan fucked this country but good (though George Meany and his asshole buddy Nixon did a lot of damage first)
4) The graph is scarier when you realize that these are raw numbers and population has grown steadily, so it's actually much worse than it looks.
5) GW Bush and his asshat buddies really screwed this country worse than Warren G. Harding. They pretty much did Bin Laden's work for him. The inflection point at 2001 started in the Spring, showing that 9/11 is more of a lame excuse than a cause.

The turning point was when policy put finance back in control of the economy, something that brought on the Great Depression and was turned around as a result of postwar planning and a mixed economy. That was really the legacy of the New Deal, putting a visible hand in control of the banksters. 1968 was when the reversal of the economy in control of finance began and the upward transfer of wealth really hit the tipping point around 2001, but you can see the effect of deregulation starting in the 1970s.
posted by warbaby at 1:42 PM on September 2, 2011 [1 favorite]

GW Bush and his asshat buddies really screwed this country

From the stats his terms are sort of like a reverse WWII.
posted by Chekhovian at 2:49 PM on September 2, 2011

There is the assumption that middle class folks have been using their houses as ATMs to purchase consumer goods, but I also wonder if the reason why people are going into debt is because of increasing healthcare and retirement costs

Economically speaking, those are consumer goods. Consumption in economics includes the stuff you need to live, not just frivolous crap that people have in mind when they speak of 'consumer culture' - although people buy a lot of that too, because they want to signal their economic fitness. Things that are bought for their show value are called Veblen goods, and they have value insofar as they demonstrate that a person or family is worth respecting/ doing business with/ marrying into/ whatever. People on the left seem to think consumption is synonymous with waste.

I don't see how we're ever going to get to the 50 year solution in 50 years or 100 years if we go in the exact opposite direction, though, no matter how you justify it.

You don't know what the right direction is, exactly, or that producing cars is the exact opposite direction of what's right. I have never owned a car at all (I like cities, and a car doesn't make good economic sense for me), but cars, trucks etc. are still a necessity for many people. I love public transportation, but it's not an economic miracle drug that just makes everything else fall into place.

We need to invest far more in public transit, education, and other kinds of economic and societal infrastructure, but we also need to make money in the present and immediate future. It's like if you're homeless, your top priority should be to get shelter and some sort of stable living situation any way you can, but you still need to eat, poop, and sleep every day despite the time and energy these take away from your goal of finding a home.

Talking about where you want to be is not the same thing as actively planning or pursuing it. I'd like world peace, an end to hunger, and freedom, dignity and economic security for everyone. Should I be President? Of course not, because talk is cheap and I have not advanced any concrete explanation of how I intend to achieve those goals. I'd like a zero-carbon economy, but shutting down all fossil fuel plants and internal combustion vehicles tomorrow won't advance that agenda because now I have no easy way to build windmills/solar arrays/whatever clean power generators I need. You can't just stop everything and redirect all economic resources towards some new goal and expect it to work. Mao tried that in the Great Leap Forward and it was a horrendous disaster.

It's important to have some big collective goals, not least so that everyone has a clear idea for where the economy is headed and what the key drivers of supply and demand will be. But it's also important to have some less ambitious medium- and short-term goals, and to not micromanage the economy too much, or you end up introducing new and wasteful inefficiencies.
posted by anigbrowl at 2:57 PM on September 2, 2011

We need to invest far more in public transit, education, and other kinds of economic and societal infrastructure, but we also need to make money in the present and immediate future.

Yes, but if any of these investments add net value to the economy (and they would, otherwise why would we want them?) then they are "making money" (by which I presume you mean creating wealth, rather than issuing currency). This is why these household metaphors which tend to dominate pop economic discourse are more trouble than they're worth, they obscure rather than illuminate economic issues, because the economy does not function like a household. Unlike a household it is self-contained, unlike a household money does not have value outside of it (hello fiat currency). As you rightfully note, consumption is not always about iPhones; infrastructure initiatives could just as easily encourage consumption. It's amazing that NA policymakers have forgotten this after the railroad, electricity, telecommunications, the Internet, highway system, public education, etc. but here we are, deathly afraid of the "socialism" inherent in a single-payer healthcare system, and unable to comprehend its economic benefits. Even those deluded Friedmanites worrying about confidence fairies should be able to wrap their heads around the market confidence granted by the state promise of healthcare for all citizens, but, alas.

Ultimately I sympathize with nanojath's apathy, as globally, we've been crippled by a sort of macroeconomic nihilism. Krugman rails against this often: we know what the problems are, we know what the solutions could be, but policy makers have decided to believe the opposite of what is true. Our takeaway from warbaby's labor stats, above, is somehow "collectivism and central planning are failed ideologies of the 20th century! regulation is onerous and hinders job creation! monetary policy can cure all ails!" Despite massive quantitative easing and chronically low interest rates, we need austerity and can't afford infrastructure initiatives? You can't argue away that kind of make-believe. It's not ignorance, it's beans-in-your-ears lemming behavior.
posted by mek at 3:22 PM on September 2, 2011 [1 favorite]

"collectivism and central planning" are bugaboo phrases out of The Road To Serfdom. In fact, mixed economies (private capitalism with state direction and regulation) are the only success story of 20th century economics.

Laissez-faire capitalism and gold standards led directly to the Great Depression, the worst failure of capitalism since Adam Smith. Few remember that the attraction of totalitarian systems was that Soviet Communism and Fascism were short term economic successes when the liberal democracies were trapped in a deflationary depression with no recovery in sight.

The neo-liberalism return to "free market" economics looks now like it is failing harder than the 1930's. In both instances, the conservative wisdom is that what cause the global economy to sink into a depression is also the cure. So hold on to your socks, because this mess is going to last until war or social disorder force the pharaohs off the top of the pyramid.

We're going to be stuck in deflation until we have political leadership that can say "plutocrat" and "malfactors of great wealth" without flinching. Not because taxing the hyper-rich is a panacea, but getting the greedheads out of regulatory policy is absolutely necessary to restoring a healthy economy.
posted by warbaby at 3:42 PM on September 2, 2011 [4 favorites]

here we are, deathly afraid of the "socialism" inherent in a single-payer healthcare system
Don't you mean: "keep the government out of my medicare!!!!!!!!!"

we've been crippled by a sort of macroeconomic nihilism
I think the psychological origin of the "belt tightening" that the average joe demands does start from a good moral foundation. Those Bush years of easy credit and the glamorization of the celebrity life style have left people feeling like we need some sort of reset on the whole system. Unfortunately those initial good impulses have been co-opted by the worst sort of assholes to favor the worst sort of bad economics.

Remember just after 9/11 when the whole nation wanted to create some sort of shared sacrifice to really fix things, and W. said "go out and shop". We are repaying that moral deficit now, except somehow its become shared sacrifice among the poor to make the rich richer.
posted by Chekhovian at 3:51 PM on September 2, 2011

"collectivism and central planning" are bugaboo phrases out of The Road To Serfdom. In fact, mixed economies (private capitalism with state direction and regulation) are the only success story of 20th century economics.

You're feeding exactly the mentality I'm criticizing. State direction is central planning; public healthcare is collectivism, and both are necessary for the improvement of human welfare. Supposed Soviet implementations of these policies were really Fascism with a friendly face, and this "bugaboo" attitude is exactly what's paralyzing the American economy. By rejecting these terms we accept the neoconservative outlook, at least in part.
posted by mek at 3:55 PM on September 2, 2011

May I suggest The Dark Continent: Europe's Twentieth Century ?

The period of "collectivism and central planning" roughly postwar to 1970 is the bright spot. The only people I know who use "collectivism" in conversation are a bunch of reactionary asshats, white supremacists and neo-confederates, some of whom I had the great pleasure of watching their trial and conviction on federal terrorism charges.
posted by warbaby at 4:50 PM on September 2, 2011

I'm sorry your understanding of the term is so warped by your personal experience. It's still a term, though - you can start here.
posted by mek at 5:00 PM on September 2, 2011

Yes, but if any of these investments add net value to the economy (and they would, otherwise why would we want them?) then they are "making money" (by which I presume you mean creating wealth, rather than issuing currency).

Yes, but they don't pay off immediately. Have you ever built a house? You have to do a lot of work before you can put the roof on, so to speak. There's a large up-front cost that you can't capture any benefit from for a while, because you can't live inside the house at the same time you're building it. Likewise, long-term economic infrastructure doesn't produce straight away, so you finance it with government debt. But you want your treasury notes and currency to retain some of their value in the present for the food and supplies you need today, whereas the payoff from your large investment is necessarily somewhat uncertain - how uncertain depends how far out in time your payoff is scheduled to begin. You're ignoring the passage of time in your calculations of net value, because we can't just put all our consumption on hold while we restructure the economy.

Printing more money is fine within a country, as long as the government remains stable. But since you have to trade, other people's expectations of your economic stability matter as well because otherwise they won't take your money. Hence the need for some short-term cash flow from some other source besides government. Confiscating money from rich people also works up to a point, but do too much of that and everyone will rush out of your currency because they're afraid to leave their assets within your control and suddenly you're living in Venezuela.
posted by anigbrowl at 5:30 PM on September 2, 2011

I don't disagree with your general macro analysis, I just think it has zero relevance for 2011 America. (The government has to pay for food? Could you point that out in the federal budget for me? Anyway, America is a HUGE net exporter of food and wouldn't starve even if the USD collapsed. Which it won't.) What we're looking at now is a deflationary economy with record low interest rates: Japan, not Venezuela. Unless you honestly believe hyperinflation is a possibility despite net debt (public + private) remaining steady, which you'd have to explain to me. In my opinion this is exactly the time America should be borrowing heavily to make long-term infrastructure investments. The market would line up for those bonds all right, but they're not on offer.
posted by mek at 5:47 PM on September 2, 2011 [2 favorites]

The market would line up for those bonds all right, but they're not on offer. Remember when our credit was degraded and everyone panicked so they bought a bunch of treasury bonds...hahahahaha

Where else should investors put their money?
Japan - Radioactive
Eurozone - P.I.G.S. a plenty
China - And you thought our real estate market was crazy before the crash?

So Brazil I guess?
posted by Chekhovian at 11:32 PM on September 2, 2011 [1 favorite]

That is why gold is volatile right now. People don't know where to put their money!
posted by zia at 11:52 PM on September 2, 2011

His talk is reminiscent of Elizabeth Warren's talk on the collapse of the middle class.

If you find this talk from Reich interesting, you'd probably like Warren's as well. Same subject, a bit more detail, and a different perspective.
posted by heathkit at 12:25 AM on September 4, 2011

GOP Smear Machine Targets Elizabeth Warren: The progressive favorite hasn't even officially launched her Senate campaign, but the mud is already flying.
posted by homunculus at 9:20 AM on September 4, 2011

Jobs Will Follow a Strengthening of the Middle Class: When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt.
posted by homunculus at 9:57 AM on September 5, 2011