Excursion to Perversions – I

This blog-journey was inspired by and liberally borrowed from a classic book and well-known 19th century American writer you may recognize. I’ve added my modernized twists.

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The Programme and Bombastic Hubbub

The travel itinerary had been released months earlier. The 163-day voyage would make port in The Azores, Britain’s Gibraltar, Marseilles, Rome, Athens, Constantinople, Odessa, Smyrna, Beirut, Jerusalem, Alexandria, Tangiers, Bermuda, and home to New York harbor. Only a few select passengers would be chosen for this fashionably grand journey across the Atlantic. It was to be a who’s who list of celebrities to far away places that most could only dream. Quickly the trip was the talk of the country as much as the names to be offered tickets of passage.

“It was a novelty in the way of excursions—its like had not been thought of before, and it compelled that interest which attractive novelties always command. It was to be a picnic on a gigantic scale. The participants in it, instead of freighting an ungainly steam ferry—boat with youth and beauty and pies and doughnuts, and paddling up some obscure creek to disembark upon a grassy lawn and wear themselves out with a long summer day’s laborious frolicking under the impression that it was fun, were to sail away in a great steamship with flags flying and cannon pealing, and take a royal holiday beyond the broad ocean in many a strange clime and in many a land renowned in history!”

Victorian picnic

So how does one finagle himself past the stringent bowelless “Committee On Applications” and onto a prestigious vessel with numerous notable travelers? Voilà! Utilize a popular Shakespearian tactic known as inflated nothingness:

“I referred to all the people of high standing I could think of in the community who would be least likely to know anything about me.”

Having miraculously been selected as one of the traveling “select,” a supplemental programme arrived in the postal box. It informs the passengers boarding, the Quaker City will be graced by the celebrated Plymouth Collection of Hymns for heavenly song. A more joyous activity can scarcely be found. There were more pragmatic items to be addressed:

“This supplementary program also instructed the excursionists to provide themselves with light musical instruments for amusement in the ship, with saddles for Syrian travel, green spectacles and umbrellas, veils for Egypt, and substantial clothing to use in rough pilgrimizing in the Holy Land. Furthermore, it was suggested that although the ship’s library would afford a fair amount of reading matter, it would still be well if each passenger would provide himself with a few guidebooks, a Bible, and some standard works of travel. A list was appended, which consisted chiefly of books relating to the Holy Land, since the Holy Land was part of the excursion and seemed to be its main feature.”

Pilgrims excursionWith such acclaimed fanfare and America’s social prominents and acolytes, surely there was more ornation to be done! A renown physician and reverend upon the passenger list perhaps? Someone from the Ben Carson and Billy Graham family lines would conflate this voyage nicely and return America To Greatness in the eyes of the world, yes?

“Reverend [Carson] was to have accompanied the expedition, but urgent duties obliged him to give up the idea. There were other passengers who could have been spared better and would have been spared more willingly. Lieutenant General [Rex Tillerson] was to have been of the party also, but the [Russian deals and collusion] compelled his presence on the plains [of Siberia]. A popular actress had entered her name on the ship’s books, but something interfered and she couldn’t go. The “Drummer Boy of the Potomac” deserted, and lo, we had never a celebrity left!”

Alas, the August proportions of wonderous pomp and circumstance and snazzy names were pruned down or rescued despite the vivacious programme to the City of Amour, the Sultans of Constantinople, the enlightened Greek culture of Smyrna, the hallowed martyrs of Jerusalem and Jericho, concluding with native Bermudians. With such effervescent destinations, nay, what chance there be for any fuss?

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Final Preparations and Bon Voyage

Curious about the goings on at the slip where the Quaker City underwent some refitting, questions about the additions and non-additions were about and murmurings of why. As departure loomed the details of the steamer, amenities, and personalities of the “select” versus the unselective rattled ears and out of mouths. It seemed the adventure had already begun and the great ship had no more cargo than it had when her builders laid the keel, let alone cast off from port. What more could possibly add to the anticipation?

“I was glad to know that we were to have a little printing press on board and issue a daily newspaper of our own. I was glad to learn that our piano, our parlor organ, and our melodeon were to be the best instruments of the kind that could be had in the market. I was proud to observe that among our excursionists were three ministers of the gospel, eight doctors, sixteen or eighteen ladies, several military and naval chieftains with sounding titles, an ample crop of “Professors” of various kinds, and a gentleman who had “COMMISSIONER OF THE UNITED STATES OF AMERICA TO EUROPE, ASIA, AND AFRICA” thundering after his name in one awful blast!”

Clearly I have found myself outclassed and outgunned. If I hadn’t so little to offer, I would reconsider my risks among such company, but the allure and majesty of a Mediterranean excursion complete with all possible luxuries, history, spirit and drink had transfixed my compass beyond reason or caution. Why was this particular organic cargo necessary? How many enemies has this gaudy, trumpish man bred?

“I fell under that titular avalanche a torn and blighted thing. I said that if that potentate must go over in our ship, why, I supposed he must—but that to my thinking, when the United States considered it necessary to send a [trum-pity] dignitary of that tonnage across the ocean, it would be in better taste, and safer, to take him apart and cart him over in sections in several ships.

Ah, if I had only known then that he was only a common mortal [posing as an orange Zeus], and that his mission had nothing more overpowering about it than the collecting of seeds and uncommon yams and extraordinary cabbages and peculiar bullfrogs for that poor, useless, innocent, mildewed old fossil the Smithsonian Institute, I would have felt so much relieved.”

Soon enough the call went out, the Quaker City was ready to receive her illustrious seafaring men and women and those higher ranked. The pier was congested with carriages, luggage, porters, and hats of every sort all scurrying to unload, load, and embark. The traveling costumes were quite the unattractive sight as the rain and drizzle fell revealing molty wigs and toupees not even a Wall Street umbrella could hide. Even the glorious Stars-n-Stripes was limp along the ship’s flag pole. Yet, the time was nearer for casting the ties off the pier, the gangways retracting…

“Finally, above the banging, and rumbling, and shouting, and hissing of steam rang the order to “cast off!”—a sudden rush to the gangways—a scampering ashore of visitors—a revolution of the wheels, and we were off—the pic-nic was begun! Two very mild cheers went up from the dripping crowd on the pier; we answered them gently from the slippery decks; the flag made an effort to wave, and failed; the “battery of guns” spake not—the ammunition was out.”

USS_Quaker_City

USS Quaker City

Apparently, while threatening the North Korean leader with never before seen fire and fury, someone forgot to first check the inventory of gunpowder and shot. It was too late. All bark and show, but no bite or brains. And if that shouldn’t clamp a bigly Chihuahua yap closed:

“We steamed [ten minutes?] down to the foot of the harbor and came to anchor. It was still raining. And not only raining, but storming. “Outside” we could see, ourselves, that there was a tremendous sea on. We must lie still, in the calm harbor, till the storm should abate. Our passengers hailed from fifteen states; only a few of them had ever been to sea before; manifestly it would not do to pit them against a full-blown tempest until they had got their sea-legs on. Toward evening the two steam tugs that had accompanied us with a rollicking champagne-party of young New Yorkers on board who wished to bid farewell to one of our number in due and ancient form departed, and we were alone on the deep. On deep five fathoms, and anchored fast to the bottom. And out in the solemn rain, at that. This was pleasuring with a vengeance.”

Pleasuring with a vengeance indeed. All the steamy, drippy expectations of a grand exit, a phenomenal finale had all the pow and distance of a little trum-pity cap-gun. So much hoopla for hasty idleness. You might imagine how utterly relieved I was to hear the ring and hail for the prayer meeting and hymns to soothe our drab, wanting souls — like intestinal gaseouness sitting on a Buloke-wood seat atop a trotting donkey — I was thrilled.

Lulled by the to-and-fro sway of the ship, and the wavering chatter of voices outside my cabin hallway…

“I soon passed tranquilly out of all consciousness of the dreary experiences of the day and damaging premonitions of the future.”

Would tomorrow hold more tantalizing surprises, more peculiar intrigue? Was more even possible and of what recipe, what flavor? Sweet or sour?

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To be continued…

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A Collective Imperative

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If a free society cannot help the many that are poor,
it cannot save the few who are
rich.
— John F. Kennedy

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[This is the fourth and final segment of a series continuing from part 3 – Unveiling Incentive-Opportunity Fallacies] (paragraph separation)

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What is excessiveness?  The dictionary defines it this way:  exceeding a normal, usual, reasonable, or proper limit.  Historians have sometimes defined it as out Herod Herod.  Lord Salisbury in Shakespeare’s King John perhaps described it better as painting the lily:

Therefore, to be possess’d with double pomp,
To guard a title that was rich before,
To gild refined gold, to paint the lily,
To throw a perfume on the violet,
To smooth the ice, or add another hue
Unto the rainbow, or with taper-light
To seek the beauteous eye of heaven to garnish,
Is wasteful, and ridiculous excess.

Every single human being requires a handful of necessities:  water, food, climate-control, and shelter.  To what extent or elaboration those four basic needs are fulfilled, can be averaged at any location, and thus a global standard can be determined.  One and perhaps a minimum of two of these basic life-needs are in finite supply and crisis on our planet.

Fair warning for those who are sensitive to or bothered by grim facts of nature, our planet, and other human groups, self-discretion should be considered.  What follows, in my opinion, needs to be at least made aware and considered by everyone on Earth.

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What do you think would happen if when you turned open your faucet and nothing came out?  How long could you survive without water?  Now, what do you think would happen if your entire city was without water or operating sewage?  What would happen if a nation lost its water and sewage?  There is no water to feed crops or gardens; no clean water to drink.  Are you getting the picture?  If not, let’s hear the alarming projections some scientists, scholars, and professional experts are reporting.  Sorry this alarming documentary is an hour-and-a-half long, but it needs to be shared:

If you still feel this is not a problem for you and your children and grandchildren, you should have your ears examined.  If you feel resource conservation is a form of socialism or communism, then you are in delusional denial.

Excessive opulence or resource hoarding is no different a global footprint than spending or consuming recklessly; they both accomplish the same singularity:  proportionate risk.  The more excessive, the more risk; the more risk, the more excessiveness to avoid it.  As a species, if not as Americans, we need to…no, we must greatly refine our life-ambitions and the education of those ambitions and their purpose.

But let’s pause a moment and analyze where most Americans have headed since 1870 and are currently heading.

1870 – 1900:  The Gilded Age
Mark Twain

Mark Twain

Much pride and boasting has been made of America’s age of industrialization, that it was the catalyst that put the nation in the same discussion of the world’s greatest empires.  Yet of our nation’s 12-million families then, 11-million earned less than $1,200 per year; of this group the average annual income was $380, well below the poverty line.  In today’s CPI dollars (the purchasing power of goods and services produced in the 1890 economy) that is $9,890 per year per household.  In his book The Gilded Age: A Tale of Today, Mark Twain wrote of the day’s barons and tycoons, What is the chief end of man?—to get rich.  In what way?—dishonestly if we can; honestly if we must.

Though pre-1920 U.S. economic reports are less comprehensive as post-1920, Benjamin Schwarz of the World Policy Institute and Executive Editor of World Policy Journal writes in his 1995 New York Times article By 1890, the richest 12-percent of households owned about 86-percent of the country’s wealth.

1890 – 1920:  Progressive Era
The Roaring Twenties

The Roaring Twenties

In 1910 the average annual household income was $574 per year.  In today’s CPI dollars that is $14,300 per year per household.  During this era America’s top 1-percent owned about 40-50 percent of the nation’s wealth and the top 10-percent fluctuated around 70-percent until President Theodore Roosevelt began his anti-trust legislation and wealth redistribution via progressive taxation.

1920 – 1929:  The Roaring Twenties

The average annual household income was $1,407 per year in 1920.  In today’s CPI dollars that is $16,100 per year per household.  In 1922 America’s top 1-percent owned 37% of the nation’s wealth; a slight change in years following Teddy Roosevelt’s administration.  America’s middle-class indeed experienced a relative age of prosperity during the Roaring Twenties due to the automobile industry which fed industries such as oil, road-construction, tourism, manufacturing, and electric-power.

1929 – 1941:  The Great Depression

the-great-depressionThe average annual household income in 1930 was $1,388.  By 1940 it had dropped to $1,315.  In today’s CPI dollars that is $19,100 and $21,500 per year per household respectively.  America’s top 1-percent in 1933 owned 33% of the nation’s wealth and 36.4% in 1939 demonstrated the upper-upper class comfortably rode out the stock market crash of ‘29.  Unemployment for the nation’s middle class was at 25% and especially higher in heavy industries such as lumbering and agricultural exports in cotton, wheat, and tobacco.  Fortunately, from a purely economic standpoint, another world war was on the horizon ready to put Americans, particularly women, back to work on a road to bigger prosperity than the Roaring Twenties.

1945 – 1973:  Postwar Prosperity – The Golden Era

The average annual household income was $3,180 in 1950 ($30,300 in 2012 CPI) and $4,816 in 1960 ($37,300 in 2012 CPI), a significant increase in just 10-years.  Middle-class Americans also enjoyed a bigger piece of the nation’s wealth:  70.2% in 1945 and 73% in 1949 while America’s top 1-percent saw their portion drop again to 29.8% and 27% respectively.  Yet, it is this Golden Era that firmly placed the United States as a world power and dominant economy.  As more and more Americans gained more wealth and more income, the nation experienced its most prolific prosperity to-date.  How it happened will be examined shortly.

The American Dream

The American Dream

When Dwight Eisenhower took office (1953-1961) the nation was going through another recession post-Korean War causing a decline in the nation’s GDP.  This resulted in middle-America having less of the nation’s wealth over a 16-year period down to 65%, while America’s top 1-percent relished in increases back up to 34.4% of the nation’s total wealth in 1965.

By 1970 the average annual household income was $7,494 or about $44,300 in today’s CPI dollars; another notable increase in 10-years.  As the Golden Era drew to a close and the Cold War and Vietnam festered, President Lyndon Johnson’s Great Society programs increased lower and middle-America’s wealth to 71% while America’s top 1-percent saw theirs fall to 29% of the nation’s wealth.  However, hard times were just around the corner for most Americans.

1970 – 1976:  Age of Stagflation
Image Time Warner

Image Time Warner

In 1973 the average annual household income was $9,037 or approximately $46,700 per household in today’s CPI dollars.  The nineteen-seventies became known economically as the Age of Stagflation.  The 25-year U.S. economic growth post-WW2 had stagnated to a crawl, and prices in goods and services rose annually in the double-digits from 10% in 1973 to 18% in 1979.  Due to poor performances on Wall Street, America’s top 1-percent saw their share of the nation’s wealth drop to the lowest in history:  19.9%.  Yet, middle-America enjoyed the highest ever share of the country’s wealth at 80%.

The eras of suburbanization in the 50’s and 60’s, however, had significant consequences in the 70’s.  The migration of tens of millions of middle-Americans (most of them White), moving to newly developing suburban towns meant getting to work in cities went from public transit to private vehicles.  This in turn caused America to become heavily dependent on foreign oil.  The long-term varied ripple effect of suburbanization cannot be overemphasized, one of which is our bigger footprint on environmental and global issues.

Wolff Table 1 Wealth

1976 – 1992:  Gilded Age Returns and Reaganomics
Reagan addresses Congress 1981 (Wikipedia)

Reagan addresses Congress 1981 (Wikipedia)

From 1976 to 1988 the average annual household income was $11,080 or about $44,700 in 2012 CPI dollars – yes, a $2,000 drop from the previous 3-years – to $25,167 or about $48,800 in 2012 CPI dollars; just above break-even from 1976.  To combat the stagflation of the 70’s, government deregulation along with personal and business tax cuts gained popularity.  As it turned out most of the tax breaks, along with deregulating helped America’s upper-classes.

Additionally, defeats of labor unions – unions made possible by Teddy Roosevelt reforms with long histories of keeping big-businesses from corruption and abuse of workers – also fattened the pockets of America’s top 1-percent by going from 19.9% ownership of the nation’s wealth to having 35.7% by 1989.  By 1992 the AAHI (average annual household income) was $28,870 or about $47,200 in 2012 CPI dollars; another drop from 1988.  While middle-America struggled, the top 1-percent in America owned a rising 37.2% of the nation’s total wealth.

Beginning in 1983 economist Edward Wolff has tracked America’s net wealth and financial (non-home) wealth distributions.  As Table 1 above and Figure 1 below show, it is an increasingly bleak outlook for the majority of Americans.

Figure 1 Net & Financial Dist

Click image for larger view

1990 – Present:  Globalization and World Superpower

The 1990’s will be compared to the prosperity of the 1920’s and the 1960’s.  But as a whole is that what the data reveals?  The AAHI was $32,558 in 1995 or about $49,000 in 2012 CPI dollars and America’s top 1-percent enjoyed another increase in the owned wealth of the nation at 38.5%.  For six brief years (1994-2000) the economy saw rises in the national debt, the stock market, and the GDP while inflation plateaued and unemployment dropped below 5% because of the Dot-com Boom.  Economist and civilians alike agree that the growth explosion was mostly a result of workplace computerization.  But the good times would come to an end in 2001.

Map of the world wide web

Map of the world wide web

A constant influx of immigrants seeking the American Dream, an American economy becoming one of the major players in a growing global economy, a false sense of security in the housing market, and numerous corporate scandals in the energy and finance sectors due to previous government deregulating, all contributed to the tipping-point by 2007.  The AAHI in 2000 was at $40,418 or $53,900 in 2012 CPI dollars and the top 1-percent in America saw their portion in the nation’s wealth drop to 33.4% due to a sharp declining stock market worsened by the attacks of 9/11.  There is another set of globalization dynamics that added to the plight of middle-America.

With the exodus of American jobs like cheaper electronics, fashion, shoes, and toys moving to developing nations, middle-Americans watched as their job and salary-leveraging also weakened with fewer lateral or upper employment positions.  Then jobs in TV, auto, steel, and home-furnishing manufacturing followed.  With those positions gone abroad, the American job-market went from high-paying management positions to simple service-industry low-paying positions which certainly need no college degree.  This move marked the boom of trade-school certifications for a growing electronic blue-collar job-market.

manufacturing_mexico

Why Mexico is becoming a global manufacturing power – Bloomberg Businessweek article

The domino-effect of American digitization, the snowballing Internet, and high-speed networks spreading to all corners of the globe have combined to gorge the growing socio-economic gap wider and deeper.  In 2007 the AAHI was $48,332 ($53,500 in 2012 CPI dollars) eaten-up by inflation and the cost-of-living.  Meanwhile, the top 1-percent owned a steady 34.6% of the nation’s wealth.  The lap of luxury doesn’t stop there.  With the creation of a connected more global economy today, along with new multiple global opportunities and substantially lower-wages to foreign workers, it should come as no surprise what sector of the American population currently enjoys the fruits-of-foreign-labor.

The World’s 200 Richest People(s):

The most industrialized developed countries in the world by population-size are in Europe according to the 2013 United Nations Human Development Report.  Of the top 10 nations with the highest Human Development Index (HDI), six of them are in Europe (see Report).  One might infer from that list then that many of the world’s wealthiest people reside in those countries or at least in Europe.  You would be wrong.

Of the 200 richest people in the world as of 2012, 61 of them (or 31%) are citizens of the United States.  What is perhaps unexpected is where the second richest group of people call home.  Of the next 139, 20 of them (or 10%) are Russian, ironically a former part of the old communist U.S.S.R.  The next 26 richest people come from Germany (13) and Brazil (13) at 7% and 6.5% respectively.  To see the world’s wealth and what portion of it is owned by the wealthiest 200, see the pie-chart below.  For the most current world ranking of the world’s wealthiest as ranked by Bloomberg click here.

Wealthiest 200 pie-chart

As the largest population of one of the most modern industrialized nations – currently 314 million and growing – the United States has the largest percentage of the population with the smallest percentage of the nation’s wealth.  Since 1983, as seen in Wolff’s two Tables above, it has decreased every single year.  To put this disparity succinctly, in terms of financial eggs-in-a-basket the top 1-percent own 35% of all privately held stock, 62.4% of all business equity, and 64.4% of financial securities in America.  Is it any wonder why middle-American taxpayers were held for ransom in 2008 to bailout our own mega-banks and financial firms, mega-auto companies, and integral government-sponsored entities?  The top 1 and 10-percent held the nation by the balls.  Sit down, it get’s more alarming.

largeextremeinequalitychartThe top 10-percent own 81% to 94% of all American bonds, trust funds, stocks, and business equity, and nearly 80% of all commercial real estate.  The real value of financial wealth is determined by control of income-producing assets; assets that can absorb recessions or devastating irreparable depressions.  Therefore, it is reasonable to conclude that 10% of Americans own the United States.  Talk about utter investment stupidity in placing the nation’s “eggs” in one or two baskets!  There is no way to sugar-coat it.  Perhaps Abraham Lincoln’s Gettysburg Address should be rewritten to reflect today’s socio-economic times:  Government of the 10-percent, by the 10-percent, for the 10-percent.

Land of the Few, Home of the Lavish

Listed at $190-million, Copper Beech Farm in Greenwich, Connecticut is the most expensive home in America.  Built in 1896 and previously owned by the Greenway family of U.S. Steel with Andrew Carnegie as well as timber tycoon John Rudey, it has over 13,000 square feet on 50 waterfront acres with spectacular views of Long Island Sound.  As a French Renaissance style home with 12 bedrooms, wine cellar, a 75-foot outdoor pool, a grass tennis court, a large formal arboretum, two greenhouses, and private apple orchard, accessible by a 1,800-foot private driveway.  Oh, and the property includes two offshore islands.

Copper Beech - Greenwich, CT

Copper Beech – Greenwich, CT

Copper Beech Farm is simply one home of over 100 homes priced above $10-million.  From 2005 through 2012 Greenwich, CT has been ranked as the best wealthiest place to live in the U.S., the “Biggest Earner” per household in the U.S., and #1 wealthiest residents per capita in the nation.  Many of the residents are Wall Street hedge fund managers, writes Nina Munk of Vanity Faire Magazine, and “of the $1.2 trillion currently invested worldwide, approximately one-tenth, or $120-billion, is now managed out of Greenwich alone, according to Hedge Fund Research, Inc.”  Munk also reports that four of the richest 400 Americans live in Greenwich and three of those are hedge fund managers.  One Greenwich real-estate broker reported these four residents will drop five to eight-million dollars without a second thought.  Some even a lot more.

Almost As Big as the Taj Mahal –
To judge by the number of swollen, over ambitious mansions rising from lots in Greenwich these days, you’d almost think we were back in the 1910’s and 20’s – except that this time round the lots are small, and the houses are almost on top of one another.  “Years ago, wealthy houses were hidden in the rear of properties after long driveways…and no one ever built to the maximum allowable square footage,” remarked Diane Fox, long time director of Greenwich’s Planning and Zoning Department, in an e-mail to me.  “Today all big houses want to be seen from the road.””

Munk’s article of Greenwich’s rich and lavish also mentions that one interior designer installed broadloom carpet at $74,000 for one bedroom, and drapes and curtains at $20,000 to $25,000 for one bedroom.  You read it right, one bedroom.

Why is this level of wealth and excessive opulence worth mentioning?

Because today American legislation, political campaigns, and economic policies resemble little of what they did six decades ago.  In 2010 the U.S. Supreme Court allowed American corporations, including those owned by the top 1 and 10-percent of the nation, the opportunity of donating vast financial resources for political candidates and their election campaigns; “resources” with millions of dollars beyond what any individual voters could organize.  Remember, 80 to 90 percent of Americans hold or own just 4.7% of the nation’s financial wealth.  The political phrase in the 1940’s and 50’s “one person, one vote” means today “one dollar, one vote.”  That 2010 decision sets the stage for a class of super-wealthy political campaigners to push (as if a majority of individual voters) their one-dimensional political-economic interests:  enhancing their profits and revenues.

A Communal America is Imperative

This four-part series has not been about political, economic, or social envy.  It seems the bottom 99% or 90% are for the most part not jealous of America’s gazillionaires or their social contributions and hard-earned incomes.  What this four-part series has been about though is political fairness, representation, and efficiency.  As discussed in part two Productive Inequality, rent-seeking moves wages and wealth from the bottom and middle classes to the top 10 and 1-percent while distorting the “free market” in favor of some and to the detriment of most.  More “efficient” policies of the market matter for a more equitable distribution of national wealth.  Improper policies (e.g. of the last 32-years) lead to a less efficient economy and a growing divide between socio-economic classes.

Strength in lots of Einsteins!

Strength in lots of Einsteins!

It is a fairly simple overall concept.  When our society is sufficiently (even abundantly) funded in infrastructure, education, research, and technology, these vital areas of a thriving economy offer hope and security to ordinary citizens.  The majority of Americans, the bottom 90%, will actually SEE and experience for themselves what the U.S. Constitution, the Statue of Liberty, and all other symbols of democracy, equality and fairness are really made of… not just “promised” or rhetorically talked about on TV.  Those principles would be available to a vast number in society in an efficient dynamic economy.  Even the top 1-percent would benefit when the capabilities of so many quality workers and citizens are not wasted but fully utilized.  It’s a concept of not just strength in numbers, but strength in well-educated, ingenious, motivated Einstein numbers!  There is a huge difference between the two.  The difference is not just inclusive, but very alien to exclusive.

In his superb book The Price of Inequality:  How Today’s Divided Society Endangers Our Future, Nobel Prize winner in economics Joseph Stiglitz gives a superbly educated agenda on exactly how American government and her 314-million citizens can avoid falling into the same death-trap history’s great empires and their leaders fell into.  If you would like to read an outline of his proposed extensive agenda, click here.

My own meek semi-educated ideas of how not to follow, for instance, the Roman Empire’s demise or the former Soviet Union’s, or the more recent countries of Egypt, Tunisia, and Syria… are this:

What is the reading on your/our Collective-Goodness-Gauge?  What is the health of your/our common welfare, our passion for civic responsibility and the well-being of the persons near us?

These are NOT just social questions!  More importantly they are political and economic questions too.  As the French political philosopher Alexis de Tocqueville noticed about the nature of American society in 1835, freedom (or individualism) can be a tricky balancing act within democracy.  Some “individualized” Americans independent of a majority often have the pragmatic realization that looking after the welfare of others is not only good for the soul, but is equally good for business and wealth.  Stiglitz elaborates on this truth wonderfully:

“The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought:  an understanding that their fate is bound up with how the other 99 percent live.  Throughout history, this has been something that the top 1 percent eventually do learn.  Often, however, they learn it too late.”

Americans together

…no matter class or status

The Roman Empire, Egypt, Tunisia, and Syria are just four examples to what Stiglitz refers.  The former Soviet Union is an example of no individualism when no single “part” is allowed to reach its full brilliance and potential for the benefit of the whole; the other extreme.  Both ends of the economic-socio-political spectrum REQUIRE resource investments and management from every single citizen.  The stable “middle” if you will, has a steady balanced, efficient, fair, and equal flow of civic investment.  Any one mechanism cannot efficiently coexist without the other efficient mechanisms.  So…

If the United States wishes to return as one of the best symbols of freedom, liberty, democracy, and equality for all, then reaching that efficient balanced middle is an imperative collaborative, collective return to a well-managed, well-governed, wealth-balanced cause.

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Further information —

Inside Job

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Unveiling Incentive-Opportunity Fallacies

[This post is a continuation of the article-blog Productive Inequality]

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As I watched one night the 6-part series “The Men Who Built America” on the History Channel, I kept saying to myself What has changed  in our socio-economic America today?  The answer is a lot…and not much.  Watch the two following video clips in order:

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Resting on Star-Spangled Laurels

Ask most Americans on the streets today who Cornelius Vanderbilt, John Rockefeller, Andrew Carnegie, J.P. Morgan, and Henry Ford were and what they meant to America and you will get a variety of answers – although many could describe briefly some connection to Ford Motor Company, Chase Morgan, and Carnegie Hall in New York City.  Beyond those mutterings, the depth and accuracy might be in question.  However, ask the same question to Donald Trump, Jerry Jones, the Waltons of Walmart, Bill Gates, or Sumner Redstone and they will give you a hyper-patriotic narrative of how these progenitors founded and built the greatest economic nation in the world.  In the annals of Western capitalism, Carnegie, Ford, Morgan, Rockefeller, and Vanderbilt are the founding demigods.

John D. Rockefeller, 1888

John D. Rockefeller, 1888

By the age of retirement all five of these 19th century business-moguls’ fortunes made up anywhere between 1-3% of America’s GDP by a single person.  Those five net worth’s have been adjusted for today’s 2000 dollars, but the amounts are incomprehensibly staggering.  Vanderbilt’s estimate:  $140 – $180 billion dollars.  Rockefeller’s estimate:  $392 – $663 billion dollars.  Carnegie’s estimate:  almost $300 billion.  Ford’s estimate:  $188 billion.  Morgan’s final net worth was divided between several holdings but his estate was estimated to be worth about $68 million at death.  If 1-3% of the economy of America – one of the world’s richest nations – consisted of five men, then that is perhaps the truest definition of oligarchy not democracy.  J.P. Morgan’s wealth was so vast that during the economic panic of 1893, President Grover Cleveland borrowed from him in order to restore the nation’s treasury.

How was it possible for a handful of entrepreneurs to accumulate such epic wealth during sixteen national recessions (1865 to 1933) as well as the Great Depression of 1929?  I will attempt to answer this question simply.

Do not mistake this web blog as promoting Karl Marx or Vladimir Lenin economics.  There is nothing inherently wrong with making and earning money for quality work.  What is under question, however, is how efficiently and fairly that economy — which provides the wealth — is working as a whole and perpetuating itself.  Despite the great success of these five American entrepreneurs, the “machine” from which they profited broke-down sixteen times.  Those failures in a long line of many failures as recently as 2008, are what is in question.  Why does our “strongest nation in the world” economy and government keep failing?

I am a lifetime sports fan.  One way to answer the question is to use a sports analogy.  Pick your favorite sports team, the team you grew up watching with family or friends.  The team’s performance should elicit some level of passion inside.  You’ve always wanted them to perform well, maybe even win several championships.  When your team is playing say in the playoffs, do you feel that referees or umpires are necessary?  Why are they necessary?  No fans, or for that matter no team players or coaches on the competing rosters cheer for the referees or umpires.  Why is that?  We like them when they punish or discipline our opponent, but we dislike them when they punish or discipline our favorite team.  Why are the referees and umpires needed for the games?

From a biased point-of-view the answer is obvious:  we want them there so that our opponents won’t cheat or win the game unfairly.  But from an objective standpoint, we need them there to ensure a “fair or level playing field” for both teams, correct?  Imagine what the games would be like if there were no referees or umpires.  Cheating, even intentional maiming would no doubt take place.  Whether we like referees and umpires or not, we need them so the games can be won or lost fairly.  Well, in economics and social policy the government is no different:  we need a strong government to ensure that the game of economics and social policy are fairly played.

During the era of Vanderbilt, Rockefeller, Carnegie, Morgan, and Ford there were weak referees or umpires, and in several cases no referees or umpires at all.  Even though the United States grew into the most powerfully economic and productive nation on the globe after 1870, doing it inside an unrestrained ungoverned free-market economy it eventually led to the worst economic and social collapse in modern history:  the Great Depression and two world wars.  Is that performance really deserving of grande boasting and fan-fare?  Resting on the laurels of post-1870 Wild West growth is at the same time condoning unfettered greedy oligarchists and market manipulation.  Domestic and global economics today are much more complex and dynamic than antiquated 19th and 20th century philosophies can manage and diluting the power of the referees and umpires (i.e. our government) is a sure way of returning to another Great Depression.

Let’s look more closely at what outdated economic systems, still pushed today by some American parties, nurture over several generations.

Fallacies of Incentive-Opportunity Economics

REAGANMONEYSPEECH2Some political parties and economists today swear by and blow their Reaganomics bugle, or trickle-down economics as the best economic system.  Another more modern name for this system is incentive economics.  Within this philosophy its adherents proclaim that inequality is a natural product of its efficiency:  some will produce more than others.  Proponents of incentive economics (primarily those from the political right) argue that if programs and policies redistribute wealth, then it will deconstruct incentives and motivation toward efficiency.  They also argue that if we focus too much on disparity of outcomes, i.e. a growing gap between socio-economic classes, especially over one year or a four-year presidential administration, then the public is missing the bigger better picture.  What is more important, they proclaim, is only lifetime inequality and how much more opportunity is created.  In other words, there is a natural trade-off of the-haves and the-have-nots based on efficiency as if it is “natural selection” of the strongest over the weakest or genius over ignorance.  They add that private wealth created by opportunity and perfect competitive economies will soon feed or trickle-down into social returns for the less fortunate.  But for the last four to five decades this simply hasn’t been the case.

Remember the definition of rent-seeking from the earlier post Productive Inequality?  It said when a company, organization, or individual uses their resources to obtain economic gain from others without reciprocating any benefits back to society through wealth creation…this is called rent-seeking.  For the last several decades declining public investment, declining support for public education, distortions of the true health of our economy, declining worker morale and labor fairness, have all contributed to a widened gap between the top 1% and 10% from the middle and bottom economic percentile.  Redistributing wealth and opportunities would reduce inequality and increase efficiency, the exact opposite of what the Right contends.

Both the lack of wealth and minimization of risk available to the lower 99% – 90% are two major market failures of our capital economy.  Consequently, this lays the burden of upward economic mobility on parental wealth; in other words, what their parents can or cannot provide through digressing public education and their work income.  And too often in the lower economic third both parents are working for wages that hardly keep up with inflation.  The Right consistently underestimates these failures.

Stronger or weaker team?

Stronger or weaker team?

The Right also consistently overestimates the benefits of incentive pay.  Before revealing the true risks of incentive pay, what does the term mean?  Barron’s Business Dictionary states it is a wage system that rewards a worker for productivity above an established standard and within a defined time period.  It is often called pay for performance.  Many incentive pay schemes are used by corporations each with varying success rates, or resulting in higher worker productivity.  However, history has repeatedly shown that the schemes can also come with many counterproductive results.  Take for instance the program at Hewlett-Packard in the 1990s (click here for the CBS News article).  After setting up pay-for-performance schemes across thirteen or more American production sites, most of the HP worker-teams outperformed management’s projections costing the corporation excessive payouts.  As a result, HP management made the goals higher and harder to achieve.  This move had the exact opposite effect.  Teamwork within the nationwide teams declined, primarily because self-interest dominated over corporate gains.  Why do you think this happened?

Another example of failed incentive pay schemes but using instead a disciplinary fine, or negative reinforcement, to stimulate better results as told by Joseph Stiglitz:

“…a cooperative day center had a problem with certain parents’ picking up their children in a timely way.  It decided to impose a charge, to provide an incentive for them to do so.  But many parents, including those who had occasionally been late, had struggled to pick up their children on time; they did as well as they did because of the social pressure, the desire to do “the right thing,” even if they were less than fully successful.  But charging a fee converted a social obligation [teamwork] into a monetary transaction.  Parents no longer felt a social responsibility, but assessed whether the benefits of being late were greater or less than the fine.  Lateness increased.”

This begs the question, why is an extrinsic monetary reward scheme imperfect?  Because it is human nature to be socially connected; it is a primal instinct…for most, and in the end it often outweighs individual, secluding self-interest.  What is the point of an opulent palace with opulent toys on a grossly opulent island, if there is no one at all to enjoy it with?  Stiglitz goes on to write:

“The reason that [incentive pay] economic theory failed to gauge accurately the effectiveness of team incentives is that it underestimated the importance of personal connectiveness.  Individuals work hard to please others in their team – and because they believe it is the right thing to do.  Economists overestimate, too, the selfishness of individuals (though there is considerable evidence that economists are more selfish than others, and that economics training does make individuals more selfish over time) [particularly when resources, opportunities, and rewards are scarce/hoarded; ala the 2012 film The Hunger Games].  It is thus perhaps not surprising that firms owned by their workers – and who therefore share in the profits – have performed better in the crisis and laid off fewer employees.”

All four must be equally balanced

All four must be equally balanced

Many incentive pay schemes will never be able to fully ignite the best of human-worker performance because often monetary rewards, extrinsic gains, fall short of a greater good.  Why?  Because all four types of human motivation (table on right) must be as closely balanced as possible for a person to be peacefully satisfied.  This is just as true in economic and political laws and policies.

As a result of the Right’s shortsightedness, i.e. underestimating the real costs of socio-economic inequality and overestimating the costs of fixing it through progressive taxation and public spending, America needlessly spins its congressional and executive wheels in gridlocked hyper-partisanship  eventually invoicing her 90 percentile taxpayers.  President Reagan pushed for a less progressive tax system, lowering taxes on the top 1 and 10 percent, claiming that would raise more funds due to increased saving and worker productivity.  He was incorrect:  tax revenues plummeted.  H.W. Bush’s cuts had the same effect:  an increased deficit.  During President Clinton’s administration, taxes were raised on the top percentile and the United States enjoyed a brief time of rapid growth and a minor decrease in economic inequality.  Then George W. Bush entered office and…well, we had the 2008 financial crisis in which the majority of Americans, indeed the lower poorer classes, are still suffering.  Naturally, the Right contends that if the marginal Americans paid 100% of their taxes, then “incentives” for the public would be harmfully weakened.  But this claim is really nothing more than crying wolf.  Stiglitz points out:

“…University of California professor Emmanuel Saez, Thomas Piketty of the Paris School of Economics, and Stefanie Stantcheva of the MIT Department of Economics, carefully taking into account the incentive effects of higher taxation and the societal benefits of reducing inequality, have estimated that the tax rate at the top should be around 70 percent – what it was before President Reagan started his campaign for the rich.”

What many on the Right fail to recognize in their economic, social, and political theories and/or systems is that no one succeeds on their own.  They fail to recognize that a more level playing field, a more fair game if you will, almost always produces more efficiency, more brilliance, and a higher quality of life for a greater number, which in turn nurtures itself.  A healthier “team” is a more productive successful team; and when these healthy teams are playing other healthy teams on a fair game-field with strong powerful referees or umpires, the “game”…the economy is brilliant!  Therefore in return, the players, the coaches, the fans, everyone benefits and is more motivated to excellence.

On the other hand, an economic theory/system of scarcity and hoarding, i.e. weak public spending and regressive taxation for the strong/resourceful, is actually the antithesis of motivation-for-excellence; it too often maligns individual behavior to succeed-at-all-costs.  Survival-of-the-Fittest economics does not encourage unity, particularly in times of severe crisis, and does not encourage real democracy.  Thank the good stars that most human beings need MORE than just extrinsic rewards and require equally intrinsic rewards, if not more.  But oh dear, that would mean less egocentrism, less arrogance, less consumption, and more community, more intimate connectivity, more humbleness, and a more permeable comfort zone to name a few life-changes.  I feel there are many who are simply terrified of this idea, unfortunately, but I can hope.

Retrieving the American Dream

Joseph Stiglitz and those economists inside his camp have several profound ideas, policies, and reformations that will return America to its former collective glory.  To share these here would extend this blog series by two or three more; a length I have no time to carry out and likely readers and visitors here will have no patience with.  Hence, I will only recommend strongly that everyone purchase The Price of Inequality and read it, study it, and digest it.  If you wish to better understand what has happened and will continue to happen to our American economy and social classes, and avoid being a naïve puppet in a oligarchial corporate capitalist show in a failing free-market economy, then it is a must read!

class_saying_pledgeHere is the pressing question:  Is the American dream still alive?  Is the American dream still available?  More importantly, is the American dream available to all as our “pledge of allegiance” implies?  The present fifth version, which Congress passed in 1954, states in the last half “…one nation, under God, indivisible, with liberty and justice for all.”  How accurately does this pledge reflect America today?  How does one measure its accuracy?

Surprisingly perhaps to most, measuring America’s success of “…with liberty and justice for all” is quite easy.  In modern statistical tables, polls, experiments, or graphs all mathematicians will say that the greater the data collected, the more accurate the results.  Take for example a simple school student-poll on say thermostat comfort of the buildings.  Of a student body of 700 students, would the pollers achieve an accurate reflection of their student body if they obtained 150 student opinions?  Of course not; a poll of exactly 700 students would be the most accurate.  This statistical truth is always the case whether one is measuring ten people or elements, or whether measuring 314 million.

This statistical truth therefore applies to larger numbers or polls, like the world (see earlier post The Land of Opportunity? for a comprehensive indicator of America’s global standing).  In order to get a truly accurate and objective reflection, we must include the rest of similar industrialized nations, and to be most accurate all other non-industrialized nations.  But this raises more complex dynamics that in some cases go beyond economic, social, and political elements I have covered in this series of three web-blogs.  Fortunately, this formula…this gauge of happiness, justice, and liberty for all is not exclusively owned by one person, one group, or even one nation.  It is collective and shared.  The discouraging reality is that on the American horizon – and maybe the world horizon too – this Collective Goodness Gauge, if you will, is constantly threatened.  My next and last web-blog in this series, A Collective Imperative, will examine these threats and how to fight its extinction.

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