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The Wrongologist

Geopolitics, Power and Political Economy

Sunday Cartoon Blogging – May 26, 2019

In another “elections have consequences” story, The Economic Policy Institute (EPI), has a new report about how states can blunt the 2018 Supreme Court decision in Epic Systems v. Lewis. In that case, the court ruled that employers can use forced arbitration clauses to strip workers of their right to join together in court to fight wage theft, discrimination, or harassment. The EPI forecasts that by 2024, more than 80% of private-sector, nonunion workers will be covered by forced arbitration clauses.

They argue that, given the current very conservative Supreme Court, it will be up to individual states to pass “whistleblower enforcement” laws like those introduced in Massachusetts, Maine, New York, Oregon, Vermont, and Washington, to empower workers who need to sue law-breaking employers, including those covered by arbitration clauses.

On to cartoons. Here’s a look at abortion from the GOP white male perspective:

Trump won’t (can’t?) deal:

GOP’s accomplishments are transparent, even if they are not:

The Parties see things differently:

Summer replacement series doesn’t get raves:

Graduation speakers aren’t created equal:

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Monday Wake Up Call – January 28, 2019

The Daily Escape:

Bell Island, Franz Josef Land with Eira Lodge in foreground. The lodge is a remnant of Benjamin Leigh-Smith’s expedition in 1880 – 2017 photo by Ilya TiminCC BY-SA 4.0.

The largest gathering of billionaires in the world took place last week at the World Economic Forum’s annual conference in Davos. Vanity Fair reports that they:

“…consume $55 Caesar salads and shark canapés, rub shoulders with Matt Damon, and attend parties that involve “endless streams of the finest champagne, vodka, and Russian caviar, dancing Cossacks, and beautiful Russian models…”

Bloomberg added: (emphasis by Wrongo)

“UBS and PwC Billionaires Insights reports show that global billionaire wealth has grown from $3.4 trillion in 2009 to $8.9 trillion in 2017…The fortunes of a dozen 2009 Davos attendees have soared by a combined $175 billion, even as median US household wealth has stagnated…”

And there was this report from Davos in the NYT by Kevin Roose: (emphasis by Wrongo)

“They’ll never admit it in public, but many of your bosses want machines to replace you as soon as possible. I know this because, for the past week, I’ve been mingling with corporate executives at the World Economic Forum’s annual meeting in Davos. And I’ve noticed that their answers to questions about automation depend very much on who is listening.”

Roose goes on to say: (emphasis by Wrongo)

“In public, many executives wring their hands over the negative consequences that artificial intelligence and automation could have for workers. They…talk about the need to provide a safety net for people who lose their jobs as a result of automation.

But in private settings, including meetings with the leaders of the many consulting and technology firms…these executives tell a different story: They are racing to automate their own work forces to stay ahead of the competition, with little regard for the impact on workers.”

Roose quotes Mohit Joshi, president of Infosys, an Indian technology and consulting firm: (emphasis and brackets by Wrongo)

“Earlier they [large businesses] had incremental, 5 to 10% goals in reducing their work force. Now they’re saying, ‘Why can’t we do it with 1% percent of the people we have?’”

And American executives have come up with new buzzwords and euphemisms to disguise their intent. Workers aren’t being replaced by machines, they’re being “released” from onerous, repetitive tasks.

Companies aren’t laying off workers, they’re “undergoing digital transformation.” They’re being “reskilled”.

A 2017 survey by Deloitte found that 53% of companies had already started to use machines to perform tasks previously done by humans. That figure is expected to climb to 72% by next year. As an example, Terry Gou, the chairman of Foxconn, the Taiwanese electronics manufacturer, who makes iPhones, has said his company plans to replace 80% of its workers with robots in the next five to 10 years.

And Wisconsin just gave Foxconn $4.5 Billion to build a plant and employ 13, 000 workers. Can Wisconsin’s soon-to-be laid-off workers be “re-skilled”, and find employment?

A January 2019 report by the very same World Economic Forum estimates that the 1.37 million workers who are projected to be displaced fully out of their roles in the next decade according to the US BLS, may be reskilled to new viable (similar skill set) and desirable (higher wages) jobs:

“The report shows that, in the US alone, with an overall investment of US$4.7 billion, the private sector could reskill 25% of all workers in disrupted jobs with a positive cost-benefit balance. This means that, even without taking into account any further qualitative factors or the significant indirect societal benefits of reskilling, for 25% of at-risk employees, it would be in the financial interest of a company to take on their reskilling.”

The rest presumably will need to fend for themselves. They will likely rely on your taxpayer dollars to be “reskilled”, or go on government assistance.

The real question isn’t how to stem the tide of automation, it’s inevitable. The question for capitalists and our government is how the financial gains from automation and AI will be distributed, and whether the excess profits corporations reap as a result of layoffs will go in part, to workers, or solely to bigwigs and their shareholders.

Will we create a shared prosperity, or just a greater concentration of wealth?

Time to wake up America! This Fourth Industrial Revolution is underway, and estimates are that it will impact as many as 40% of American workers.

It’s time to understand that the 21st Century American corporation isn’t our friend, as constituted and rewarded. It is the enemy of our society, as they quietly work to eliminate your jobs.

We constantly reduce their taxes. We look the other way when they pollute our environment. We allow them to disproportionately finance our elections.

It’s time for a new Capitalism.

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We’re Too Short to be on This Ride

The Daily Escape:

Lion’s Head, Capetown South Africa, viewed from Tabletop Mountain – 2012 photo by Wrongo

A WaPo report said that Donald Trump discussed giving Janet Yellen another term as head of the Federal Reserve, but was concerned that she was too short. He thought that at 5 feet, 3 inches, she just wasn’t tall enough to get the job done.

Wrongo thinks Yellen’s performance was about the same as her predecessor, Ben Bernanke, and her successor, Jerome Powell. Shouldn’t the real question be: Do we know what’s wrong with our economy, and do we have people in place with enough strength and/or courage to fix it? They can also be short, as long as they have ability and vision.

And it isn’t only in the US: (brackets by Wrongo)

Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1% of earners have…[garnered] twice as much of the global growth as have the poorest 50%.

More from the World Inequality Report: (emphasis by Wrongo)

Such acute economic imbalances can lead to political, economic, and social catastrophes if they are not properly monitored and addressed….Governments need to do more to keep society fair…Public services, taxation, social safety nets – all of these have a role to play.

We’re seeing a slow-rolling social catastrophe in the US. We’re seeing alienation across class, race, age and gender. We’re divided as never before, with the possible exception of the pre-Civil War period.

Aren’t we all too short to be on this ride?

Central banks play an integral part in the global economy, and their performance (including the Fed’s) during the 2008 Great Recession was for the most part, admirable.

But central banks can only use monetary policy to partially solve issues of economic inequality. The most robust solutions lie in fiscal policy. Fiscal policy is how Congress and other elected officials influence the economy using spending, taxation and regulation.

Take student loans. Many of our university students are simply being led to the debt gallows. Currently, 44.5 million student loan borrowers in the US owe a total of $1.5 trillion. Student loans are the fastest growing segment of US household debt, seeing almost 157% growth since the Great Recession.

From Bloomberg:

Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

Student loan debt has the highest “over 90 days” delinquency rate of all household debt. More than 10% of student borrowers are at least 90 days delinquent. Mortgages and auto loans have a 1.1% and 4% 90-day delinquency rate, respectively,

And if the student loan can’t be repaid, it isn’t expunged by bankruptcy. In fact, students can’t outlive their debt. The feds can garnish social security payments to repay a student’s outstanding debt.

As young adults struggle to pay back their loans, they’re forced to make financial choices that create a drag on the economy. Student debt has delayed marriages. It has led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4% from 10 years earlier.

We are only beginning to understand the social costs of our politics. We are in the midst of a brewing social disaster. And these are self-inflicted wounds, fixable with different government policies. But, most of today’s politicians are too short to get on that ride.

So, how to solve the simultaneous equations of high poverty rates, income inequality and an impending social disaster?

It won’t be easy, and it starts with politicians admitting that our economy doesn’t work for everyone, and that it must be reformed. Then, we can move beyond the tired rallying cries of “more tax cuts” to a capitalism which incorporates a social consciousness that can get people on the track to better paying, and more secure jobs.

An April 2018 study of survey data from 16 European countries found that economic deprivation increased right-wing populist tendencies. Sam van Noort, a co-author of the report said:

Individuals who “feel economically less well-off” were more likely to be attracted by the far right…and radical right respondents are more likely to be male, subjectively poorer, less educated [and] younger.

This will also happen here, unless the voters have determination, and even the short politicians have courage.

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Monday Wake Up Call – December 3, 2018

The Daily Escape:

Boston Public Library – photo by joethommas

The NYT’s David Brooks:

We’re enjoying one of the best economies of our lifetime. The GDP is growing at about 3.5% a year, which is about a point faster than many experts thought possible. We’re in the middle of the second-longest recovery in American history, and if it lasts for another eight months it will be the longest ever.

So everything’s good, no? Not really. More from Brooks: (emphasis by Wrongo)

Researchers with the Gallup-Sharecare Well-Being Index interviewed 160,000 adults in 2017 to ask about their financial security, social relationships, sense of purpose and connectedness to community. Last year turned out to be the worst year for well-being of any since the study began 10 years ago.

And people’s faith in capitalism has declined, especially among the young. Only 45% of those between 18 and 29 see capitalism positively, a lower rate than in 2010.

Brooks’ conclusion? It’s not the economy, we all just need more community connections.

His is another attempt to dress up the now-failing neoliberal economics. Things look good today from some perspectives, but our economy is crushingly cruel from others. Brooks seems to think that millions of Americans are struggling to pay their rent or mortgage, education loans, health care insurance or buy groceries because they have failed to master the art of networking in their neighborhoods.

Alienation is behind the rise of Trumpism, and the rise of populism across the world. In that sense, Brooks is correct, but the leading cause of people’s alienation is economic inequality.

And the leading cause of economic inequality is corporate America’s free rein, supported by their helpmates in Washington. Last week, Wrongo wrote about the exceptional market concentration that has taken place in the US in the past few years. He suggested America needs a revitalized anti-trust initiative. In The Myth of Capitalism, authors Jonathan Tepper and Denise Hearns write:

Capitalism without competition is not capitalism.

For decades, most economists dismissed antitrust actions as superfluous, so long as consumers were not the victims of price-gouging. Monopoly capitalism is back, and it’s harmful, even if a company’s core product (like Google’s and Facebook’s) is free to consumers. As we wrote last week, there’s excessive corporate concentration in most industries, including air travel, banking, beer, health insurance, cell service, and even in the funeral industry.

All of this has led to a huge and growing inequality gap. That means there is little or no economic security for a large and growing section of the American population. People see their communities stagnating, or dying. They feel hopeless, angry, and yes, alienated.

One consequence is that we’ve seen three years of declining life expectancy, linked to growing drug use and suicides. We seem to be on the edge of a social catastrophe.

But our real worry has to be political. People could become so desperate for change that they are willing to do anything to get it. The worry then, is that few vote and a minority elects a strong man populist leader, simply because he/she tells them what they want to hear. That leader can then go out and wreak havoc on our Constitutional Republic.

After that, anything could happen.

Despite what Brooks thinks, we don’t have a crisis of connections. It’s a crisis of poorly paying jobs, job insecurity, and poverty. When people look at their economic prospects, they despair for their children. Doesn’t it matter that in America, health care, education, and transportation all lag behind other developed countries?

The unbridled ideology of free markets is the enemy. Our problem isn’t that individual entrepreneurs went out and took all the gains for themselves, leaving the rest of us holding the bag. It’s more about how neoliberal economics is used both by government and corporations to justify an anti-tax and anti-trust approach that has led to extreme wealth and income concentration in the top 1% of Americans.

The reality is that the nation’s wealth has become the exclusive property of the already prosperous.

We need to wake up America! We have to stop for a second, and think about how we can dig out of this mess. When America bought in to FDR’s New Deal programs 75 years ago, we entered an era we now think back on nostalgically as “great”.

And it isn’t enough to talk about how we can look to Sweden or Norway as economic models. Both have populations of under 10 million, and our society is far less homogeneous than theirs.

We need a uniquely American solution to this problem. It will involve reforming capitalism, starting with tax reform, and enforcing anti-trust legislation.

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America’s Divided by Illegal Immigration

The Daily Escape:

Fall at Mount Assiniboine, Mount Assiniboine Provincial Park, BC, Canada – photo by Daniel Kodan

Happy Halloween! The spooky caravan of migrants heading northward to the US-Mexico border has sparked much debate. We’ve always heard that the US is “a nation of immigrants,” and that we’re a better country because of migrants who came here to chase the American Dream. But now, the country is divided about letting immigrants into the country.

On October 18th, the Kaiser Family Foundation published a survey that focused on the most important issues to voters. They found a significant difference between the parties on immigration:

Republicans rated immigration as their most important issue at 25% vs. 9% for Democrats, and Independents ranked it third at 15%. The sample included 396 Democrats, 309 Republicans and 399 Independents for a total of 91.8% of the overall respondents.

The differences were more pronounced in battleground states. Republicans in battleground states ranked immigration highest at 29% while Democrats rated it at 16% and fourth overall:

We say we are a nation of immigrants, but what that means is no longer clear. Trump and many Republicans running this fall have made the caravan seem like a powerful enemy army that we are at war with, albeit one that is unarmed, without funds and leaderless.

The Kaiser survey shows that this is working with Republicans in battleground districts/states. Whether it will prove helpful across the country will be determined on November 6th.

This anti-immigrant viewpoint has been with us for a very long time. After the Civil War, Congress realized that Blacks were going to be able to obtain citizenship just by being here, and then having children who would become citizens by birth. That ended when the 14th Amendment legitimized those children.

In the late 19th Century, there was another strong push to restrict immigration in order to maintain the whiteness of the country. It started with the restrictions against the Chinese and Japanese. Then it was extended even to those Europeans who were not considered to be white enough. People like the Irish, the Italians, the Greeks, the Poles, had their immigration quotas drastically cut back from 1917 through the 1920s.

We have always expressed our anti-immigrant bias explicitly in racial terms, even making up races, like the Irish and Poles. And today, it’s the Mexicans and Central Americans.

Even the term “illegal alien”, or “illegal immigrant” that we apply to those crossing the southern border has almost replaced race. It’s no longer legitimate to openly discriminate on the basis of race, but we’ve allowed one political Party to replace race with legal status.

So now it is legitimate again to discriminate against people. They are illegals, not a racial category, like they were in the 1800’s and 1900’s.

Today’s Republicans play to our fears: These less-than-worthy illegals want in, so that they can take a shot at the American Dream. If they get in, they may take jobs away from poorly educated, low skilled Americans. Therefore, we must be vigilant, and insure we protect our economy and the citizens who are already here.

There is some truth to that view.

America’s economy is predominantly service-based, and immigrants are over-represented in low skill, low-paying service occupations. They are in elder care, food services, in fact, they are hugely involved in the farming, harvesting and processing of most of our food as well.

These low-end jobs are going to grow, and it is highly questionable if low-skilled Americans will be lining up to take them.

And nobody’s talking about population growth as a reason to implement more restrictive immigration policies. By 2050, the US is projected to have 400 million people. Now it’s about 320 million. That’s a 25% increase in 32 years.

We need to ask: where will the jobs come from for all these people?

The division needs to stop. It’s a toxic stew of nativist, xenophobic ideas that must be sent back underground, and we have to end the rhetoric about “birthright citizenship” once and for all.

Let’s start by granting the DACA people citizenship. Second, those who came into our country illegally, and have not committed serious criminal offenses, should be offered a rigorous path to citizenship, one that does not give them an advantage over those who have complied with the law and are waiting their turn. Third, employers who have knowingly hired and exploited undocumented immigrants should be prosecuted, and not simply fined.

Fourth, we need clearer immigration rules, and better methods of processing of asylum requests. And we need more border security.

And if Trump’s wall is included, (as repugnant as that may seem), so be it.

 

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Monday Wake Up Call – June 4, 2018

The Daily Escape:

The Blue Grotto, Malta – photo by SingularET. Not to be confused with THE Blue Grotto on Capri, the hangout of the Roman emperor, Tiberius.

NewdealDemocrat over at Angry Bear raised a few excellent points about historically low unemployment and stagnant wage growth: (emphasis by Wrongo)

As I noted several weeks ago, even though we are at least closing in on full employment, the percentage of employers not raising wages at all has gone up in the last year:

(The blue line is the percentage of employers who have not increased wages. The grey shaded areas are recessions.)

There was more bad news from Axios , reporting on a meeting with the Dallas Federal Reserve about how big companies aren’t planning on raising wages at all:

The message is that Americans should stop waiting for across-the-board pay hikes coinciding with higher corporate profit; to cash in, workers will need to shift to higher-skilled jobs that command more income.

Troy Taylor, CEO of the Coke franchise for Florida, said he is currently adding employees with the idea of later reducing the staff over time “as we invest in automation.” Those being hired: technically-skilled people. “It’s highly technical just being a driver,” he said.

The moderator asked the panel whether there would be broad-based wage gains again. “It’s just not going to happen,” Taylor said. The gains would go mostly to technically-skilled employees, he said. As for a general raise? “Absolutely not in my business,” he said.

John Stephens, chief financial officer at AT&T, said 20% of the company’s employees are call-center workers. He said he doesn’t need that many. In addition, he added, “I don’t need that many guys to install coaxial cables.”

The Civilian Non-Institutional Population (those who the government tracks for jobs analysis), grew 21.3% between April 2000 and April 2018, yet, full-time jobs grew only 11.7%. This means that we can’t possibly be at full employment, despite the government’s headline unemployment rate of 3.8%, the lowest since 2000.

And if most employers are thinking like those at Coke and AT&T, wages won’t increase, despite the country’s nine-year economic recovery. If wages will not be increasing, where do employers think increased demand will come from? And, if companies are freezing wages during the supposed good times, what will happen when times turn bad?

Corporate policies are designed primarily to respond to the requirements of its management and its institutional shareholders, not employees. Employers’ profits have been increasing steadily, but the wealth keeps getting transferred upwards. And it’s the employers who are responsible for layoffs, and who use other methods to increase profits, such as automation, which leave the surviving workers in an increasingly poor negotiating position when it’s time for the annual raise discussion.

Do workers “deserve” an annual increase? By performing their jobs, workers produce value for the company. If a company is profitable, workers should get a cut, and if profits go up, so should their share.

If a particular individual isn’t performing well, then in an efficient/well-managed company, they’ll be replaced. If the job itself is not structured to produce effectively, in an efficient/well-managed company, the job will change. And if the company fails to do either, then in an efficient/well-managed company, the company will change, or it will fail.

It appears that with their paltry increases, workers are losing ground. Rents are rapidly rising in most cities. Wrongo saw a story about a New York City couple who moved from Brooklyn, NYC to Westport, CT for cheaper housing. It wasn’t many years ago that Westport was substantially more expensive than Brooklyn. In fact, it was once the home town of Paul Newman and Martha Stewart.

Many workers are fighting for a 2% raise. (Remember, 2.6% is the average, which means many workers are getting less than that). Factor in the rising rents, food costs, and health care insurance, and you can see that the average hourly worker has little chance of upward mobility.

Is this an inevitable outcome caused by Mr. Market? Not really. Our government has its thumb on the scale via tax benefits to corporations, combined with a Federal minimum wage that is impossibly low.

Time to wake up, America! We must stop letting corporations hoard the profits! Capitalism is institutionalized avarice. Its purpose is concentration of power. And one outcome is the spreading of economic misery.

To help you wake up, here is the Soup Nazi who, says, “No soup for you! Come back 1 year!” Just like many employers say when hourly employees ask for a raise.

Those who read the Wrongologist in email can view the video here.

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It’s Past Time To Make Changes To Our Economic System

The Daily Escape:

2011 Art piece by Steven Lambert

Does capitalism work for you? Well, you certainly work for capitalists. The real question is whether capitalism still provides economic security to all of us.

Steve Lambert, the artist who designed the sign, engaged with people across America over a three-year period about whether capitalism was still working. He learned that people were split about 50/50 on the premise:

People usually first react to the piece by falling back on the comfort of abstractions and repeating popular myths. For example, the true/false dilemma is much easier to resolve when the only alternatives to capitalism are presumed to be failed communist dictatorships. It’s also much easier to pretend that the only “true” definition of capitalism is the kind of free-market extreme idolized by thinkers like Ayn Rand and Friedrich Hayek

Or thinkers like Paul Ryan, Mitch McConnell and Donald Trump. Lambert learned that people generally agreed with the concept, assuming “you are willing to work hard, or work smarter”:

I’ve always found the formulation “work hard, work smart” disturbing. When you invert the expression, it implies: if capitalism doesn’t work for you (that is, if you’re poor, out of work or have a demeaning job), it’s your fault. To put it more bluntly, you are lazy and stupid.

If we ignore the fact that until recently, wages have stagnated for decades, and that what most people earn in a lifetime is insufficient to cover a modestly comfortable retirement, maybe you can say that capitalism is working.

We have been told that federal budget deficits impair our ability to grow the economy, or to put food on our individual tables. In fact the opposite is true. This idea makes us believe that our ability to earn a living requires some degree of suffering by other Americans.

As Claire Connelly says: (emphasis by Wrongo)

“We can’t afford it” has been the proverbial comforter of opponents of the welfare state harking back to the Clinton / Blair days….This argument has been used as an emotional crutch for people who don’t want to admit that they’re comfortable with homelessness and unemployment….If their bottom line is stable.

This lie sets us against each other, implying that the well-being of everyone else is a direct threat to our own. And who wins? The beneficiaries of the newly lowered taxes, corporate America and its management teams. More from Connelly:

Do we really want to live in a world….Where most people will be lucky to earn minimum wage, or wait for months to get paid. If at all. A world where we are not entitled either to a job, or an education, or affordable health care or a social safety net?

We are likely to see a $1.3 Trillion budget pass both houses of Congress this week. It is deficit spending run wild. Wrongo knows that both parties believe that deficits don’t matter, and to a great extent, he agrees.

But these deficits are larger than they had to be, due to the massive corporate and wealthy individual tax cuts the Republican House and Senate just passed. And it’s not only the size of the deficits, it’s the mis-allocation of funds by our neo-con overlords.

This is what capitalism has delivered for America: More than 45 million of us (14.5%) live in poverty. In 2016, another 49.5 million Americans were age 65 and older, and half of them (24.75 million) had yearly income of less than $23,394.

That adds up to about 70 million (22%) of Americans.

One idea that is gaining attention is a Jobs Guarantee program. The Center on Budget and Policy Priorities (CBPP) recently released a paper arguing for a national jobs guarantee through a national infrastructure bank. The CBPP plan envisions an infrastructure bank that would fund vital projects and ensure that jobs are well-paid. The government would use this job-creating ability to expand jobs in sectors where the market won’t currently invest, like a national high-speed internet network.

Government guarantees of employment aren’t radical. They aren’t communism, or socialism. We did it before with the New Deal. It reinforces traditional American values around work, and it builds the tax base by taxation on the jobs created. Here’s a final quote from Steve Lambert:

My favorite response to the sign was from a 17-year-old high school student in Boston. She said: “Capitalism can’t work for everyone. If it did, it wouldn’t be capitalism.”

This is where the conversation needs to go: We have to change an economic system that fails so many.

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Places That Don’t Matter

The Daily Escape:

Maroon Bells, CO in winter – photo by Glenn Randall

America’s forgotten masses used the ballot box in 2016 to ram home a message to their betters. The message was that we shouldn’t ignore the places that don’t matter, those places that once had middle class jobs, and now have few options. The Trump election was one way to signal all was not well in the America’s decaying small towns.

We long ago retreated from the idea that the central government has a responsibility to look after the lagging places. It isn’t an invisible, unstoppable force that directs all the wealth generation to cities: It’s a system of deliberate centralization, by individuals who control capital, to concentrate productive efficiency and thus, wealth. The left-behinds are on their own.

The reality is that regional or town regeneration is very hard, once the original reason for the town’s existence is lost. Places that don’t matter have to find ways to build wealth locally, and then keep that money local. Locally produced goods and services keep regions alive.

Most solutions are based on the usual arm waving that says: “let them have training” or, “they really need to move where the jobs are”. These ideas have largely failed. Figuring out how to revive these communities requires better policies.

The revenge of the places that don’t matter is the rise of local populism, the increasing opioid use, and declining longevity. The stakes are high, but maximizing the development potential of each town has got to be the answer.

Here is one solution. The WaPo has a long read about how a liberal DC entrepreneur set out to help West Virginians. And for a very long time, Joe Kapp’s help was refused. He was the object of a vicious online campaign, targeted by homophobia, and maligned as a carpetbagger.

When Kapp, 47, an entrepreneur decamped to a West Virginia cabin in 2012 with his partner, he’d come to take a sabbatical. The town is Wardensville, pop. 256. From WaPo:

Those who do work locally gravitate toward poultry processing, furniture manufacturing and agriculture, but the numbers aren’t good. In 2015, the unemployment rate…was 7.5%, compared with 6.7% statewide and 5.3% nationally. The per capita income…was just under $28,000 a year, compared with about $37,000 for the state, and $48,000 nationwide.

The basics are lacking. The area doesn’t have Internet. Kapp says:

You’ve got kids doing their homework in McDonald’s parking lots. People in most of the country just have no idea.

And even community college enrollments suffer. Only 10% of West Virginia high school students enroll in community college, compared to 50% nationwide.

Kapp soon befriended the president at the local community college. From there, it wasn’t long before he was helping the college launch an innovative project, the Institute for Rural Entrepreneurship and Economic Development (IREED), aimed at helping to diversify the regional economy.

Kapp initially failed to gain traction, but things have gradually turned around. He thinks this demographic has more potential than the coastal elites give them credit for. He is certain that by harnessing local knowledge, like agriculture, they can start businesses, and put their own people back to work.

Every town wants its own Amazon, but in rural communities, that’s not an option. They need to create an ecosystem that promotes a small-business culture and entrepreneurship. So Kapp’s assistance in establishing the IREED with the community college got the idea off the ground. No community college in the state had anything of the kind.

The goal of the IREED is to help the local agricultural community think of itself as entrepreneurial.

He is developing a program that will allow community colleges to offer low- or no-interest micro-loans, around $5,000, to aspiring entrepreneurs. These individuals would then take entrepreneurship and business-development courses at the lending college. Kapp:

A bank might say, ‘This guy’s too risky,’ But a community college can say, ‘I know this guy. We work with him. I am vetting and validating his ability to be able to pay back the loan.’

In other words, it’s development banking on a community level. Today, most community banks mainly fund real estate, and they still follow the model where the borrower needs to pledge collateral to get the loan. In a world where services are the business’s primary asset, collateral has no meaning.

So the micro-loans by schools may be a perfect first step to bootstrapping these persistently poor towns.

This is a tentative step. It may not be scalable, but if we are looking for the greatest “social impact indicators”, it is the degree to which people feel secure economically, and safe in their community.

Always has been, always will be.

(The concept of this column, although not the solutions, is taken from “Revenge of the Places That Don’t Matter” by Andrés Rodríguez-Pose, Professor of Economic Geography, London School of Economics. Originally published at VoxEU)

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Saturday Soother – January 27, 2018

The Daily Escape:

Two Harbors, Lake Superior, MN – 2018 photo by Fhallopian

You may have missed the Op-Ed in the NYT by 2015 Nobel Laureate Angus Deaton, entitled “The U.S. Can No Longer Hide From Its Deep Poverty Problem”. In it, Deaton says this:

According to the World Bank, 769 million people lived on less than $1.90 a day in 2013; they are the world’s very poorest. Of these, 3.2 million live in the United States…

That’s $1.90 per DAY. Deaton asks:

Surely no one in the United States today is as poor as a poor person in Ethiopia or Nepal?

Well, only 3.2 million of us. That’s one percent of the American population. Deaton analyzes the World Bank’s study, and concludes that the minimum level per day should be higher in rich countries like the US. He quotes a study that says that the needs-based absolute poverty line should be more like $4/day in rich countries:

When we compare absolute poverty in the United States with absolute poverty in India, or other poor countries, we should be using $4 in the United States and $1.90 in India.

If we do that, there are 5.3 million Americans who are absolutely poor by global standards.

The time has come to ask a truly uncomfortable question: Will our society provide a role for people who for reasons of reduced mental or physical capacity, cannot contribute enough to earn their keep? There are millions of Americans who, by virtue of incapacity, or other challenges, are unemployable. They have no place in the workplace, and never will.

Most likely, you wouldn’t hire them, and neither will anybody else.

If the answer is we cannot provide them with a job to do, what is society’s responsibility to them? What is our individual responsibility?

Ponder that while you think about which beer you are going to buy for the Super Bowl party next Sunday.

Speaking of poverty (the intellectual kind), the State of the Union speech is next Tuesday. CNN tells us that Massachusetts Congressman Joe Kennedy will give Democrats’ response to Trump’s State of the Union:

Kennedy, 37, is seen as a rising star in a party that has many in the senior ranks well into their 70s.

So, prepare for your back to the future moment when another young Democrat named Kennedy spends a moment on the national stage. Americans trying to live on the same amount per day as Ethiopians, and Trump getting standing ovations from one side of the House on Tuesday; both can make you sick.

So, try to take your mind off of Davos, immigration, and poverty for a few minutes and prepare for a soother. Kick back and brew a hot steaming cup of Café Cubano by Don Pablo Coffee Growers and Roasters. Café Cubano isn’t from Cuba, it’s from Florida. But it is bold & complex, with a very smooth cocoa-toned finish, and says the brewer, never a bitter aftertaste. (2lbs/$13.99)

Now, click on the video below and watch a snowboarder glide peacefully through the woods and down a mountain of perfect powder near Steamboat, CO. He is accompanied by a rendition of “Clair de Lune” (Moonlight) by Claude Debussy. There is no moonlight in the video, but it is very relaxing:

Those who read the Wrongologist in email can view the video here.

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Do Democrats Have a Winning Political Strategy?

The Daily Escape:

Frozen branch in Lake Erie, Cleveland OH – 2018 photo by Igorius

The Democrats’ demand of passage of DACA legislation, or they would block a Continuing Resolution (CR) to keep the government open, lasted 72 hours. No DACA legislation was passed, but Dems are touting a Republican promise of debate about DACA over the next three weeks.

That promise comes from Mitch McConnell, the guy who stole Merrick Garland’s Supreme Court seat, and got away with it.

Wrongo believed that dying on DACA hill was a bad political choice for Democrats. After all, there are 700,000 Dreamers, but 320 million Americans would be affected by a government shutdown. Their negotiating position shows how weak the Dems are today.

Those Dems who say that capitulation on the CR was worth it to secure the Children’s Health Insurance Program (CHIP) funding for six years, should remember that the CR runs out in three weeks. Then it will be up for discussion again.

So from the Dems viewpoint, if by February 8th, the Republicans have not dealt with DACA, the Dems can shut the government down again, this time using the narrative that Mitch McConnell is a liar, and that they gave Republicans a chance to fix the problem. Unfortunately, McConnell has been called a liar before.

But if February 8 comes, and Democratic Senators back off on another confrontation to protect the Dreamers, that will not only be terrible for Dreamers, it’s terrible for Democrats. They have a few weeks to pressure Republicans to get this done.

OTOH, it is difficult to see why Republicans would do anything different. Paul Ryan and Mitch McConnell will use these three weeks to tighten the screws, and finish the job. That would start with McConnell taking the House’s already passed Securing America’s Future Act (SAF) to a vote.

Once Senate Dems say “no” to that, McConnell can say “Well, we put a DACA bill on the table, and the Dems rejected it. I lived up to my promise.” There will be some tinkering by middle-of-the-road Dems around the edges of the SAF bill. Then it will be attached to the CR. How long do you think it will be before 10+ Dems cave, and pass it?

Fault lines exist. A dozen Senate Democrats broke with party leaders to vote against the bill, including a number of potential presidential candidates, a sign they knew exactly where their base is, even if the leadership doesn’t.

Democrats need to use their time in the minority to remake the Party. They should pursue and deliver programs that offer real benefits for middle and working class voters. They need a plan to deal with income inequality. Fundamental questions about what being a Democrat means in the 21st Century must be addressed.

FDR provides a great example for today’s Democrats. In the 1930s, FDR responded to a financial crisis with bold, creative policies that delivered massive, tangible benefits to working people. Because of what FDR did, the Republicans were forced to go in his direction to stay politically competitive. Republicans began to promise that they could improve the programs they once opposed.

Here is what Roosevelt said in a speech about Republicans at the time:

Let me warn you, and let me warn the nation, against the smooth evasion that says ‘Of course we believe these things. We believe in social security. We believe in work for the unemployed. We believe in saving homes. Cross our hearts and hope to die. ‘We believe in all these things. But we do not like the way that the present administration is doing them. Just turn them over to us. We will do all of them, we will do more of them, we will do them better and, most important of all, the doing of them will not cost anybody anything’

In the post-war period, the Republican Party looked more like Dwight Eisenhower than like Ronald Reagan.

And today, Democrats must emulate FDR: Move Republicans to the left, not move the Dems further to the right. This isn’t about finding someone to create an Obama third term. Democrats shouldn’t prioritize getting rid of a bad president, they need to build a serious alternative to Republican ideology.

The Democratic Party has failed many times to produce a political strategy which would force the Republican Party to change direction. And they look like they may fail once again. The Democratic leadership believes that the party needs to unify at all costs to present the strongest possible electoral challenge to Trump in 2020.

It’s counter-intuitive, but to secure a future Democratic majority, Dems must first decide to be a party with a plan that addresses income inequality.

They can knock out Trump without moving to the right.

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