I’ve got it really easy (financially), and it’s been that way for many years. I work if, when and on what I want to. I was not born wealthy, far from it. This is all just background, a way to say I know both sides of the 99%/1% divide as well as anyone might. While I was moving up the economic ladder, for the average American family the last 30 years have consisted of a disastrous backward movement across any measure of a modern society. Here’s what I think’s been going on and why and what to do about it below the fold.
I’ve got it really easy (financially), and it’s been that way for many years. I work if, when and on what I want to. I have the luxury of giving away more money to charity than I earn, and have happily given over $25 million to the IRS for the privilege of working in this country. I recognize my fortunate circumstances, some due to nature’s gifts, some due to family upbringing, some of it due to dumb luck, and I’m proud to say that a good part of my situation is also due to what I’ve created and sacrificed for along the way.
I was not born wealthy, far from it. I come from an inner city, inter-racial family whose earnings never exceeded the poverty level by very much. I grew up in my older brothers’ clothes and didn’t get a new pair of pants for school until the 12th grade. My toy soldiers were toothpicks and I killed rats for fun. That kind of poverty.
This is all just background, a way to say I know both sides of the 99%/1% divide as well as anyone might. I also bring the analytical talents of a top business school graduate to help make sense of what’s going on.
I earned my wealth between 1980 and 2010. But while I was moving up the economic ladder, for the average American family those 30 years have consisted of a disastrous backward movement across any measure of a modern society.
Here’s what I think’s been going on and why and what to do about it.
SYMPTOMS:
1. Loss of income mobility (the Income gap per se is not the problem – the social contact works, and its ok to be rich, as long as everyone else has had a fair chance as well) – trickle down is not working in America – giving money to “job creators” has only created low paying service jobs in America, real jobs abroad and more money in top management’s pocket. Only 6% of those born into poverty reach the top level of earners compared to 39% of the children born to that level. Said differently, if you are born rich you have seven times the chance of attaining that level yourself compared to someone born poor. That is not the meritocracy this country is supposed to be.
2. A separate issue is the attack by Republicans against the progressive income tax and inheritance tax , – In addition to raising revenues, they were imposed for the specific purpose of lessening the impact of raw capitalism by keeping the very highest earners from becoming effectively a ruling class. Guess they want those royal purple robes.
3. Poor education – our education system rates just above Kenya’s on one scale, and generally mediocre compared to most advanced countries. I’m not kidding. This isn’t a racist point, with me having a fair amount of African blood in me. But Kenya? Really? Poor education = poor job prospects = limited upward mobility. My inner city education in the 1970’s was superior to public suburban schools today. WTF?
4. Poor health - The US is the only advanced country without a comprehensive public health system. Our mixed public/private system is twice as expensive as the next most costly country. Our life expectancy is only 36th in the world. Enuf said.
5. Economic stagnation, high deficits, high unemployment, high debt –the hard truth that everyone is in denial about is that economic growth in this country over the past 30 years has been more mirage than reality for all but the economic elite.
Inflation-adjusted income for the lower 95% of earners has shown almost no growth in 30 years. No economic growth = no income growth = limited upward mobility. While incomes were flat, consumption increases could only come from increased consumer debt – which, of course is exactly what happened. And, not surprisingly, consumer demand fell off a cliff when the reality of the debt load hit home. Demand will stay suppressed as consumers pay down their debt loads. Debt driven demand is also the cause of large boom and bust cycles – cycles that have put homeowners under water on their mortgage and workers unable to retire on their 401k.
6. Wars of aggression under the oxymoronic term “preemptive war ”. How can you stop war by starting a war? Yes, we were attacked and were justified and tracking down and killing (what everyone really means when they say “bring to justice”, lets be honest with ourselves) those responsible. That half-justifies one of the wars (we could have stuck with a war-by-proxy) but the second was pure folly at best, at worst an extreme example of everything that is wrong with today’s society.
ROOT CAUSES:
1. Why have we taken such a large step backward on so many important dimensions for a modern society? If we were to go back to 1980, surely people from all sides of the political spectrum would want something better for our country? Surely, if government and business leaders were looking to the future, this is not the one they would have picked. No one wants 85% of people hating them like the public hates politicians and Wall street titans. So, how do you end up in an awful place that anyone with any sense would plan to avoid?
The answer to this paradox is simple – those decision makers did not make their decisions based on the long-term results of their policies. Quarterly profits have driven business decisions instead of managers positioning the company for the long term. The next news cycle has become the driver of politics, with points scored for tactical decisions that have nothing to do with policy and everything to do with politics. If you plan only for the short term, you are very likely to end up in a bad place in the long term.
A typical example of short-term thinking is the decision by corporate America to start offshoring jobs in large numbers during this period. How can it possibly make sense to undermine your primary consumer base to save a little on operating costs? Even those cost savings are probably an illusion. I personally tried to start a business to convert jobs to work-at-home ones in America for less than offshoring to India, but corporate America had already given up on Americans for much of its work force.
Pure capitalism was never envisioned as the fight to the economic death that modern conservatives claim. Adam Smith, considered the Father of Capitalism, coined the term “the invisible hand of capitalism” to indicate the need for capitalists to choose local labor over apparently cheaper foreign labor, and he wrote that hundreds of years ago. Guess we lost that wisdom.
Why do our leaders focus so much on the short term? I could lead you through some tortured analyses, but at one level it’s very simple – they’re simply doing what we’re asking them to do. Huh? Say again. Let me demonstrate by example: how many of you shop at Walmart to save a few dollars instead of that local market that’s probably out of business by now? Buying decisions made purely on economic terms will inevitably result in large scale entities whose connection to its customers’ lives is a shallow reminder of the relationship offered by a smaller, local entity.
Second example: the Republicans won big in 2010 only because of the bad economy, even though the state of the economy was clearly the Republicans fault by any rational analysis. Again, WTF? This paradox happened because President Obama felt the need to promise an unrealistic level of short-term improvement from a very limited stimulus program to try and cure economic fault lines that took decades to form. He never had a chance on delivering on that promise. But he probably thought he needed to put the economy behind him to get to health care and few at the time understood the depth of the economic hole we were falling into.
When you come to recognize the problem you will come to recognize the solution. Ayn Rand was wrong, greed and selfishness are not virtues.
2. Due to a lack of restraints on industry concentration and lax enforcement of other key regulations, especially in the financial sector, economic and political power has been concentrated in a few individuals in opposition to popular policies. Examples:
• Citizens United ruling giving corporations status as people with First Amendment rights– Romney didn’t make that up – companies are people right now.
• Medical Marijuana – big Pharma has cleared the way to take over despite growing evidence that botany-based decentralized approaches to refining the medication may have more promise than chemical approaches cooked up in Pharma labs.
3. Powerful forms of propaganda that blind the inattentive person to what’s going on behind the curtain. Everyone should watch some Fox News – they really are very good at propaganda. Talk radio continues to exaggerate and enhance and the divide between poor and middle class conservative whites and less conservative people of all colors at the same income levels. I’d also point out that MSNBC is also a propaganda outfit, albeit a little more balanced than the other side.
SOLUTIONS
If our problem is the search for short-term gratification and willingness to be led around by others promising such, then the solution is to take charge of our lives, and plan from here to death and beyond accordingly. As a country we can debate the size and role of government in those plans, but we will surely continue to fall short of our expectations if we continue to make decisions based on what we get out of it now.
Given we are in a hole that took 3 decades to dig, it is unrealistic to assume that the problems we face can be solved in less than a generation. Yes, as a country we’ve lost a generation to progress we could have otherwise have had. Accept it and start planning based on the reality of our current situation. To wit:
1. We really do have too much debt, although we’re in pretty good shape compared to the rest of the world. Reducing that debt to manageable levels is important so that we have government funds available for health, education and infrastructure. Fortunately, we can solve much of our debt problem by getting back on a normal growth curve for the country without devastating our social safety nets.
2. Drive the major party behavior with coalitions with right leaning groups around common issues. If we on the left were to just stop and take a breath, we’d realize that some of the most strident voices on the right are saying very similar things to #OWS. Opposition to wall street and big Pharma might be just the ticket to open eyes to other progressive issues. We need to reach out and make new friends.
3. We must fix education or all other efforts will fail. To succeed we’re probably going to need to kill sacred cows on both the right and the left. Teachers need to be trained more, paid more and fired more, and in that order. Parents need to be involved more. The community needs to be involved. If we on the left were to offer up our sacred cows on education, I really think there’s a deal here.
4. Start an aggressive campaign to break up the real Axis of Evil consisting of Big Pharma, Big Defense and Big Banks. We need as aggressive a trust busting approach as was taken early in the 20th century to break up these bastions of a failed status quo. All three of these industries extract multi hundred-billion dollar monopoly rents while driving political decisions that fly in the face of consumer (voter) interests:
• Big Military is the worst of a bad bunch. Our non-war defense spending has doubled since 9/11, so that now the US represents over half the world’s military spending and six times the spending of the next largest country. We could cut this 33% and still be the preeminent world military power.
• Big Pharma bankrupts us with its prices, kills us with its side effects and stifles us by limiting competition from alternative solutions.
• Big banks have been, well, big banks. We really don’t need them in their current structure and are foolish if we don’t force restructuring to reduce the systemic risk large diversified banks pose to the whole financial system.
5. Stop asking our leaders for immediate results. This more than anything will change their behavior.:
• Invest in a company you’ve researched carefully because you think it’ll be good in 5 or ten years, not because some analyst rates it a buy based on forecasted quarterly earnings. Then believe in your decision and hold your investment.
• Buy from the company that hires your neighbor at a fair wage.
• Support the politician that will accept elective defeat to achieve legislative victories.
6. Look within for change. While last on the list, it’s the most important factor you can have the most effect on. Yes, there are lots of systemic problems from rampant corruption to not so benign neglect of long-term problems. However, YOU can do the most to help lift the society out of the hole its in by changing your expectations and focusing on real priorities, not ones promoted by popular culture. So you can:
• Delay personal gratification – plan for future leisure based on the work you have to do today to get there. Stop consuming non-essential products and services without the means to pay for them and before you have secured your long-term financial health. Live with less so that you and your children will have a brighter future.
• Invest in the future of society– In addition to investing in your own future security, we all owe society some contribution to its future – a contribution that previous generations have bequeathed to us resulting in much of our good fortune. This includes paying a fair tax, contributing through volunteering and being engaged and involved in the political process.
If we could only muster the political will to slay a few sacred cows we’d be on the way to a society that is fairer, healthier and presents a bright future for all of our children.
5:47 PM PT: Rec list - thank you very much. i'm just hoping to stimulate some conversation and offer some structure to the chaos around us. #OWS lives this every day.