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Does Capitalism Cause Poverty?
Does Capitalism Cause Poverty?
Capitalism gets blamed for many things nowadays: poverty, inequality, unemployment, even global warming. As Pope Francis said in a recent speech in Bolivia: “This system is by now intolerable: farm workers find it intolerable, laborers find it intolerable, communities find it intolerable, peoples find it intolerable. The earth itself – our sister, Mother Earth, as Saint Francis would say – also finds it intolerable.”
But are the problems that upset Francis the consequence of what he called “unbridled capitalism”? Or are they instead caused by capitalism’s surprising failure to do what was expected of it? Should an agenda to advance social justice be based on bridling capitalism or on eliminating the barriers that thwart its expansion?
The answer in Latin America, Africa, the Middle East, and Asia is obviously the latter. To see this, it is useful to recall how Karl Marx imagined the future.
For Marx, the historic role of capitalism was to reorganize production. Gone would be the family farms, artisan yards, and the “nation of shopkeepers,” as Napoleon is alleged to have scornfully referred to Britain. All these petty bourgeois activities would be plowed over by the equivalent of today’s Zara, Toyota, Airbus, or Walmart.
As a result, the means of production would no longer be owned by those doing the work, as on the family farm or in the craftsman’s workshop, but by “capital.” Workers would possess only their own labor, which they would be forced to exchange for a miserable wage. Nonetheless, they would be more fortunate than the “reserve army of the unemployed” – a pool of idle labor large enough to make others fear losing their job, but small enough not to waste the surplus value that could be extracted by making them work.
Read more at http://www.project-syndicate.org/commentary/does-capitalism-cause-poverty-by-ricardo-hausmann-2015-08#ZHmOTir0drCVm34s.99
That 70s Show – Episode 2
That 70s Show – Episode 2
In Episode 1 we showed how the US labour market changed dramatically from the 1970s on back of excess money printing which allowed Americans to buy tradable goods on the international market, hollowing out its own manufacturing base, and essentially creating an unsustainable consumer driven economy where the broad masses get their employment within service sector.
We will now take that a step further and look at what this has meant for the US worker. As our first chart shows, non-supervisory real wages stagnated in the early 1970s and has essentially remained flat ever since.
Measured labour productivity on the other hand continued upward, but its rate of growth shifted down. More on this in our next blog post.
Source: Bureau of Labor Statistics (BLS), Bawerk.net
The American middle class, i.e. the non-supervisory workers, managed to grow their consumption in the midst of stagnating wages through
- moving to two income households (women constitute almost 50 per cent of the labour force today)
Source: Bureau of Labor Statistics (BLS), Bawerk.net
- by increasing debt
Source: Federal Reserve – Flow of funds Z.1, Bawerk.net
It should be clear that when the share of women in the labour force has reached 50 per cent and further leverage of a shrinking household income has become counterproductive the end-game has started. The only way to increase living standards from here will be the old fashioned way; consume less than you produce and productively invest the surplus.
…click on the above link to read the rest of the article…
ZIRP——The Monetary Trick Which Killed Wages
ZIRP——The Monetary Trick Which Killed Wages
Stupid Fed Trick Number 1
The Fed thinks that keeping interest rates low spurs inflation. It was probably happy to see the purported uptick in wage inflation in the just released May jobs report. It wants to see wages start rising to create a bit of inflationary pressure.
That would be a real trick.
See, it doesn’t work that way. In fact, it’s just the opposite.
For the past 35 years, every time the Fed reversed monetary policy, wage rates immediately followed…in the same direction! When the Fed eased, the wage inflation rate fell. When the Fed tightened, wages rose faster. Not just a couple of times. Every single time!
If you want to know what’s killing workers wages in the US there it is. ZIRP.
If the Fed wants to get a little wage inflation, all it needs to do is start raising interest rates.
The above chart shows the annual rate of change in the average hourly wages of production and nonsupervisory employees, which comes from the BLS.
The same data reveals the second stupid trick. It’s not really a Fed trick, it’s a Wall Street economist, financial media trick. But trust me, the Fed will use it.
By now you’ve heard the G-R-R-REAT news that wage gains are heating up! Here’s how the Wall Street Journal put it a few minutes after the jobs report was released on Friday:
“At $24.96, average hourly earnings for private-sector workers were up 2.3% in May from a year earlier. That’s the biggest increase since the summer of 2013 a modest acceleration over the past four months and a little faster than the 2% average during the latest economic expansion.”
…click on the above link to read the rest of the article…
Rise of the ‘precariat,’ the global scourge of precarious jobs
Barely one in four of the global workforce has a stable job, UN reports
With relatively little notice, the world passed a modern milestone recently, one that makes any yearning for more stable times seem very farfetched — the global jobless total passed 200 million.
To help put that in perspective, that’s 30 million more without work than at the height of the global recession in 2008, according to the UN report that crunched the numbers.
This is a shocker on its own. But even more ominous is the growing precariousness of the job situation for those that have them, according to the UN study, “The changing nature of jobs.”
- Watch The National: More Canadians facing part-time jobs, lower wages
- Secure jobs in short supply in Canada’s tough labour market
It warns of “widespread insecurity” spreading as momentum shifts from societies with full-time jobs to shaky short-term employment across much of the globe.
Another scary fact the study unearths is how many people these days have stable work contracts of any kind. That’s barely one in four of the globe’s workforce.
The overwhelming majority of people on the planet struggle with temporary work, informal or illegal jobs, long spells of unemployment and unpaid family work.
In other words, most are caught in a disadvantageous spiral where exploitation is a real risk.
Wave of refugees
Want more perspective on how today’s world works? Much of temporary work simply can’t sustain families anymore and one quarter of the world’s workforce earns around $2 a day.
As the UN report notes, mass unemployment and underemployment puts steady downward pressure on wages — along with increasing child labour, estimated conservatively at 73 million, many working in near slave conditions.
…click on the above link to read the rest of the article…
U.S. Households Under Pressure: Stagnant Incomes, Rising Basic Expenses
U.S. Households Under Pressure: Stagnant Incomes, Rising Basic Expenses
How do you support a consumer economy with stagnant incomes for the bottom 90%, rising basic expenses and crashing employment for males ages 25-54? Answer: you don’t.
Frequent contributor B.C. passed along a sobering set of charts that provide context for How The Average U.S. Consumer Spends Their Paycheck. The basic story is well-known to the bottom 90%: most of the household income goes to taxes, housing, food and transportation, with healthcare and insurance, pensions and retirement contributions rounding out the big-ticket items. (Higher education is, as we all know, paid with student loans by all but the top-tier of families.)
Here’s the question this raises: is the sliver that’s left enough to support a $17 trillion consumer economy? The answer is obvious: no.
Stagnant household income has a number of systemic causes, including the generational decline of full-time employment (A Rising Share of Young Adults Live in Their Parents’ Home) and the concentration of wage gains in the top 10%. These dynamics are not easily addressed, for the simple yet profound reason that the amount of human labor that generates a meaningful profit in a stagnant, over-indebted, financialized economy is declining.
The only way most enterprises can sustainably earn a profit is to offload costly human labor (with its immense burdens of healthcare, pensions, workers compensation, disability insurance, etc., and the heavy regulatory burdens of workplace rules) and replace it with networked software and smart machines.
The types of human labor that generate hefty profits are increasingly scarce, and as a result entry-level pay and employment are both capped by the high costs of human labor (even at minimum wage) and the relatively meager profits generated by conventional labor.
…click on the above link to read the rest of the article…
We need a new economic system
We need a new economic system
As the 2016 election begins to come into focus, economic populism appears to be the order of the day. The Center for American Progress, the Campaign for America’s Future and National People’s Action,Hillary Clinton, Bernie Sanders, Bill de Blasio and the Roosevelt Institute have all in the last few months released programmatic calls to action highlighting the need to tackle economic inequality. This is, of course, laudable — it’s not every day that virtually the entire spectrum of Democratic Party insiders and outsiders concurs that our increasingly unequal distribution of income and wealth is a central problem to be addressed. But are calls for reform and redistribution enough?
I am opposed to very little of what is being presented in these various platforms and proposals. They are, for the most part, perfectly sensible ideas — such as financial transaction taxes, increases to the minimum wage and using government funds to build and repair infrastructure such as roads and railways — that would be, for the most part, noncontroversial if we were living in an era of sensible politics. But the fundamental fact is that we are not.
Instead, we are living in the era in which the corporate institutions at the core of our politics, along with the radical financial inequalities our system now produces, have undermined the power relationships that once allowed for traditional reforms. The labor union — the fundamental institutional power base for tempering the excesses of a corporate economy — is regrettably in terminal decline, down to 6.6 percent of workers in the private sector. Long-term structural shifts in the political economy have rendered the program of regulation and reform more or less inoperative.
…click on the above link to read the rest of the article…
Are You Ready for the Coming Debt Revolution?
Are You Ready for the Coming Debt Revolution?
Gualfin (“End of the Road”), Argentina
Dear Diary,
There is a specter haunting America… and all the developed nations of the world.
It is the specter of a debt revolution.
We left off yesterday talking about how the economy of the last 30 years – and especially that of the last six years – has favored the old over the young.
“Rise up, ye young’uns,” we as much as said, “you have nothing to lose but your parents’ debts.”
We showed how the value of U.S. corporate equity, mainly held by older people, had multiplied by 28 times since 1981.
That was no honest bull market in stocks; it was a market sent soaring by an explosion of credit.
But what did it do for young people whose only assets are their time and their youthful energy?
Alas, the real economy has increased by only five times over the same period.
A Grim and Menacing Specter
And when you look more closely at work and wages, the specter grows grimmer and more menacing.
Average hourly wages have barely budged in the last 30 years. And average household incomes have fallen – from $57,000 to $52,000 – in the 21st century.
But as our fingers came to rest yesterday, there was one question hanging in the air, like the smoke from an exploded hand grenade: Why?
Was this huge shift – of trillions of dollars of wealth from young working people to old asset holders – an accident?
Was it just the maturing of a market economy in the electronic age?
Was it because China took the capitalist road in 1979?
Or because robots were competing with young people for jobs?
Nope… on all three counts.
First, old people, not young people, control government.
…click on the above link to read the rest of the article…
A Generational Storm Is Coming
A Generational Storm Is Coming
Dear Diary,
Yesterday, we began our high-minded graduation speech to the Class of 2015.
We explained how the young graduates were not only the most heavily indebted in history, but also the least likely to be able to pay their debts.
Median wages have been going down since these graduates were about five years old… So have economic growth rates.
Today, we continue the speech no one wants us to give…
You are heirs to claptrap, nonsense, bogus theories, and trillions of dollars in debt.
The systems, programs, and institutions your parents set up are mostly worthless scams. Worse, they produce outcomes contrary to their stated goals.
Welfare programs do not help people escape poverty; they keep them mired in it.
Health care programs do not make them healthy; they make them dependent on the drug industry.
Defense industry spending doesn’t make us safer; it funds drones, bumbling interventions, and assassinations… and it creates more foreign enemies.
We end up not only poorer, but also less secure.
All of those assertions take more time to explain and prove than we have time for now. But here’s a little example that you will appreciate…
25 Years of Poverty
Under President Johnson, the government set up the Federal Direct Student Loan Program to provide “low-interest loans” (back then, “low” meant 8%) to students.
Private lenders make the loans, but they receive the full backing of the feds.
The idea was to help you afford higher education… and earn larger salaries as a result. And with your increased earnings you were supposed to be able to pay off the loan.
But at over 11% of outstanding debt, the Student Loan Program now has the highest delinquency rate of all forms of household debt (mortgage loans, auto loans, credit cards).
…click on the above link to read the rest of the article…
In Most Countries, 40 Hours + Minimum Wage = Poverty
In Most Countries, 40 Hours + Minimum Wage = Poverty
Last week, we noted that Democratic lawmakers in the US are pushing for what they call “$12 by ’20” which, as the name implies, is an effort to raise the minimum wage to $12/hour over the course of the next five years. Republicans argue that if Democrats got their wish and the pay floor were increased by nearly 70%, it would do more harm than good for low-income Americans as the number of jobs that would be lost as a result of employers cutting back in the face of dramatically higher labor costs would offset the benefit that accrues to the workers who are lucky enough to keep their jobs.
Regardless of who is right or wrong when it comes to projecting what would happen to low-wage jobs in the face of a steep hike in the minimum wage, one thing is certain: many working families depend on government assistance to make ends meet, suggesting it’s tough to persist on minimum wage in today’s economy and indeed, a new study by the OECD shows that in 21 out of the 26 member countries that have a minimum wage, working 40 hours per week at the pay floor would not be sufficient to keep one’s family out of poverty.
Here’s more from Bloomberg:
A global ranking out Wednesday by the Paris-based Organization for Economic Cooperation and Development painted a grim picture of the situation in member countries straddling continents. The 34-member organization found that a legal minimum wage existed in 26 countries and crunched the numbers to see how they compared.Forget taking a siesta in Spain. There, you’d have to work more than 72 hours a week to escape the trappings of poverty. Turns out that is the norm, not the exception. In the 21 countries highlighted with blue bars in the chart below, a full 40-hour work week still won’t lift families out of relative poverty. This list includes France, home to the 35-hour work week, which almost met the threshold. Minimum wage workers there who are supporting a spouse and two children need to work 40.2 hours to get their families out of poverty. (The poverty line is defined as 50 percent of the median wage in any nation.)
Canadian Families’ Debt Jumped By 64 Per Cent In Just Over A Decade
Canadian Families’ Debt Jumped By 64 Per Cent In Just Over A Decade
The amount owed by indebted Canadians grew by 64 per cent to $60,100 in just over a decade, according to a new Statistics Canada study.
The StatsCan report released Wednesdayfound that between 1999 and 2012, the median debt held by indebted families increased by $23,000. The number of households with debt — including mortgages, car loans, lines of credit, personal loans and student debt — also rose, from 67 per cent in 1999 to 71 per cent in 2012. The median figure is the middle number separating the top half of families with the most debt from the bottom half.
However, the government agency also points out that the value of assets held by Canadians families grew over the same period by an even greater 80 per cent, or $179,800, to $405,200. The value includes both financial assets like investments and pensions, and non- financial assets such as real estate.
Both phenomena can partially be attributed to rising real estate price tags, especially in the past few years. As homes become more expensive, many Canadians must take out bigger mortgages to afford them. But as they pay down those carrying costs, the value of their biggest asset, their home, also rises.
Economists and government officials have been warning Canadians for years about the perils of sky high debt loads, which rose to 110 per cent of median incomes in 2012 from 78 per cent in 1999. More than one-third of families had a debt load of 200 per cent of after-tax income.
But the situation for families when comparing debt to assets is much more stable as debt loads rose alongside the value of assets such as real estate. The median Canadian family had debt loads about one-quarter the size of their assets in both years.
For some groups of Canadians, debt loads rose much more significantly than assets.
Those groups include non-homeowners, single people and families whose major income earner was between 15 and 34 years old.
“Surviving Or Thriving” – What Canada’s 40% Surge In Meat Prices Means For Ordinary People
“Surviving Or Thriving” – What Canada’s 40% Surge In Meat Prices Means For Ordinary People
On the surface, Canada’s 1.2% inflation is negligible, and barely enough to keep up with the pace of overall growth as mandated by a few central bank academics. It is below the surface, however, that one finds the scary truth. Because when stripping away the sliding energy prices (which at the recent pace of short covering among oil speculators are about to surge) some scary numbers emerge, such as a 3.8% monthly jump in food prices, primarily as a result of a whopping 30-40% increase in select meat prices in the last 8 months.
How do ordinary people – which excludes those who work in central banks and have taxpayers fund their everyday purchases, which allows them to fully ignore soaring food and rent costs – survive in an environment of soaring food prices?
As the following brief documentary by CBC’s The National reveals, food inflation means people have no choice but to eat “far less beef” than they used to, “or chicken.” Others are ok with the runaway food inflation: “it doesn’t matter to me, I buy the meat at the price it is and that’s fine with me” say a gentleman who likely works for a hedge fund and BTFD for a living.
It is not just meat: prices of Canadian fruits and vegetables have also surged, driven almost entirely by the plunge and the loss of purchasing power of the Canadian dollar.
And, as a vendor of meat observes: “there doesn’t seem to be an end to it.”
So soaring food prices, flat wages, tumbling currency, and a generally deteriorating standard of living. In short: something Japan’s prime minister Abe would call a smashing success.
Full CBC documentary below:
…click on the above link to view the video…
What Happens After A Mega Corporation Raises Its Workers’ Wages
What Happens After A Mega Corporation Raises Its Workers’ Wages
Earlier today, McDonalds announced that it would become the latest company to raise hourly pay for 90,000 workers by more than 10% and add benefits such as paid vacation for its restaurant workers. Specifically, starting in July, MCD will pay at least $1 per hour more than the local legal minimum wage for employees at the roughly 1,500 restaurants it owns in the U.S. The increase will lift the average hourly rate for its U.S. restaurant employees to $9.90 on July 1 and more than $10 by the end of 2016, from $9.01 currently. Finally, McDonald’s also will enable workers after a year of employment to accrue up to five days of paid time-off annually.
With this announcement, McDonalds joins the following companies which have likewise raised minimum wages in recent months:
- WalMart
- Aetna
- Gap
- Ikea
- Target
- TJ Maxx
Surely this is great news for the workers of these above companies, as some of the massive wealth accrued by corporate shareholders may be finally trickling down to the lowliest of employees, right? As it turns out, the answer is far from clear.
As the following WSJ story released overnight, here is what happens when mega-corporations such as WalMart and McDonalds, whose specialty are commoditized products and services and have razor thin margins, yet which try to give an appearance of doing the right thing, raise minimum wages. They start flexing their muscles, and in the process trample all over the companies that comprise their own cost overhead: their suppliers and vendors.
Take the case of WalMart: the world’s biggest retailer “is increasing the pressure on suppliers to cut the cost of their products, in an effort to regain the mantle of low-price leader and turn around its sluggish U.S. sales.”
…click on the above link to read the rest of the article…
The American Dream – Moonshine and Scam
The American Dream – Moonshine and Scam
Infection
When we left you yesterday, we were trying to connect the bloated, cankerous ankles of the US economy to the sugar rush of its post-1971 credit-based money system.
Today, we look at the face of our government. It is older… with more worry lines and wrinkles. But whence cometh that pale and stupid look?
That is also the result of the same advanced diabetic epizootic that has infected American society.
Soft and Mushy
After real money and real savings left the economy circa 1971, GDP growth rates fell. Wages atrophied. And now, for the first time in 35 years, American business deaths outnumber business births. The body economic grew soft and mushy – unable to hold itself erect or to stand on its own two feet. Thenceforth, it needed the crutch of increasing credit.
The new credit-based monetary system meant that Americans had less real wealth. But until 2007, they could still get what they wanted by borrowing. Few noticed that they were borrowing from the company store and becoming slaves to their credit masters.
No one ever figured out how to create gold. So, Washington insiders changed the money system in two steps. In 1968, LBJ asked Congress to end the requirement for the dollar to be backed by gold. And in 1971, “Tricky Dicky” ended the direct convertibility of dollars to gold.
With the new dollar, unbacked by gold, they could create all the money they wanted. After the 1970s, instead of earning more money, or borrowing from the savings of his neighbors, the typical American had to grovel to the elite who controlled the credit machine.
…click on the above link to read the rest of the article…
Europe Has A Modest Proposal For Greece: “Don’t Pay Wages For One Or Two Months”
Europe Has A Modest Proposal For Greece: “Don’t Pay Wages For One Or Two Months”
The Greek liquidity, pardon “cash flow” problems are so bad, not only Zero Hedge, but also Bloomberg has launched a daily maturity tracker of how much money Greece has to pay either to the IMF or to prefund T-Bill rollovers. This is what Bloomberg blasted out earlier today:
Greece is preparing for another week of hurdles that ends with a ~EU2b repayment on March 20. Most economists say that it will be difficult for Greece to get past end of March without fresh EU funds. Here’s a timeline of the most important events scheduled this week:
- Monday, March 16: Greece to repay about EU577m in IMF loans
- Wednesday, March 18: Greece’s debt agency PDMA to sell 13- week treasury bills
Which explains why as we reported yesterday, Greece passed a law to plunder pension funds, one which would allow the government to fully invest reserves of pension funds and other public entities kept in Bank of Greece deposit accounts in Greek sovereign notes.
None of this is news: that Greece will run out of cash absent another check from the Troika, pardon Instituions, pardon creditors, is clear. The only question is what happens after, if Europe indeed leaves Greece hanging.
Today, the Greek media is ablaze with just what Europe’s proposed solution to this issue may be. As Protothema and Capital report, the Troika proposed that Athens halt the payment of salaries and pensions for one to two months. This, according to Europe, would promptly tackle the problem of liquidity and find a solution to Greek problem of how to pay back bailout loan tranches to creditors when suffering from liquidity problems.
…click on the above link to read the rest of the article…
