UA-43475823-1

The Wrongologist

Geopolitics, Power and Political Economy

About the American Dream

The Daily Escape:

Calf born on Tuesday, May 16, Kuiper’s dairy, Giessenburg, Netherlands – photo by Wrongo

Wrongo visited an artisanal cheese business in The Netherlands. The farm’s owners have worked and owned the land for six generations. Jan and Thera Kuiper, the current generation, have been running the business for 31 years, since shortly after they married. When they were just starting out, milk prices were falling, and there was a surplus of dairy cows in The Netherlands. They decided to move up the value chain, and begin producing cheese. Today the farm produces 4000 pounds of cheese a week, and sells throughout the EU. They have completed the preliminary work to sell their product in the US, and could begin exporting to America soon.

Because their roots are in a dairy farm, the main raw material cost for their product is quite low, particularly compared to many artisanal cheese makers in the US who have to purchase milk as they expand and become more successful.

Like all family businesses, a huge question is who from the next generation will take over the business when it is time for the current owners to retire. One of their three kids is interested and able to take over, while the others have assumed urban-based careers.

It was inspiring to talk with them about daily life in the business of artisanal cheese-making, and it is another lesson that fulfilling a version of the American Dream can happen anywhere.

Speaking of the American Dream, What’s Your American Dream Score? This Quiz Will Tell You (via Fast Company). The higher your score, the more difficult your time achieving the American Dream has been. Take the test here. Wrongo got a 60:

 Your score of 60 shows you’ve had more factors working in your favor, but still some you’ve had to overcome. To see what your score means compared to others, click here.

What about you?

With all of the news about a Special Counsel, this article about Mueller and Comey is a valuable insight. Forged Under Fire—Bob Mueller and Jim Comey’s Unusual Friendship is from the Washingtonian Magazine in May 2013. It is a longer piece, but well worth the time to understand Robert Mueller and why he might be sympathetic to Jim Comey.

Facebooklinkedinrss

Capitalism Is Past Its Sell-By Date

“This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations…” Rutherford B. Hayes (March, 1888)

Nearly 130 years ago at the height of the Gilded Age, President Hayes had it right. Capitalism then was an economic free-for-all. Today, capitalism again is rewarding too few people. And data show that the problem is worse than we thought. The WSJ reported on a study by economists from Stanford, Harvard and the University of California that found:

Barely half of 30-year-olds earn more than their parents did at a similar age, a research team found, an enormous decline from the early 1970s when the incomes of nearly all offspring outpaced their parents.

Using tax and census data, they identified the income of 30-year-olds starting in 1970, and compared it with the earnings of their parents when they were about the same age. In 1970, 92% of American 30-year-olds earned more than their parents did at a similar age. By 2014, that number fell to 51%. Here is a chart showing the results:

wsj-30-year-olds-make-less

And we know that real median household income in the US today is basically the same as in 1989. The paper doesn’t provide specific reasons for the decline in incomes for younger Americans, but it generally blames slower economic growth and, especially, the rapidly widening income gap between the top 20% and the rest of society.

They found that the inability of children to out-earn their parents is greatest in the Midwest. This underlines that those who voted for Trump have a point: The Midwest has been hit harder by import competition, especially from Japan and China, and by technological changes, than other regions of the US.

When looking only at males nationally, the decline is even starker: In 2014, only 41% of 30-year-old men earned more than their fathers at a similar age.

There are some issues with the study worth mentioning: Most kids born in the 1940s did well in their thirties, maybe because their parents were 30 during the Depression and WWII. By the 1960s, an industrialized economy brought significantly higher wages to 30 year olds. A high denominator in the ratio of parent’s income to child’s income (compared to the past) made it more difficult for succeeding generations to exceed their parents’ incomes.

The economy also has shifted in the past 30 years and is now service-based, as factories moved overseas, and automation became prevalent. This change swapped higher wage manufacturing jobs for mostly lower wage service jobs. That alone could make it all but impossible for young adults to hit the ratios that their parents did relative to their grandparents.

Maybe the American Dream didn’t die; it just never really existed in the sense of broadly-based income mobility. Have another look at the chart, upward mobility (as measured by making more than your parents) has been declining since the mid-1940s.

Why? Between rising globalization and rapid advances in automation, we now have more people than jobs. And no matter whom we elect, this trend will continue. Those manufacturing jobs are never coming back. Even in China, robots are now displacing workers in factories.

We don’t need “good paying manufacturing jobs”; we need good paying jobs.

This is the most serious challenge capitalism has faced in the US. Without improving personal income, there will be fewer who can afford college, or afford to buy the things that capitalism produces. Low personal income growth puts sand in the gears of our economy.

The left offers a critique of contemporary global capitalism but no real practical alternative. Neither does the right, but their memes of America First, nostalgia for a golden (gilded?) age, and more tax cuts seem like less of a stretch than a Bernie Sanders-like frontal assault on capitalism.

No one in either party has a plan for a world in which robots displace the demand for labor on a large scale. And the under-30 cohort is now spending at least 4 times more (in the case of Wrongo’s university, 10 times) for a college education than what their parents paid, and they are earning less.

If people matter at all to our leaders, and if 90+% of them lack the means to live without working, America must make employment our top priority, despite the fact that many have been deemed redundant by capitalists in the private sector.

Surplus labor drives the price of labor down; allowing the employer class to afford a pool boy, or a nanny, or another cook.

And it makes the waiters more attentive to Mr. Trump.

Facebooklinkedinrss

Friday Music Break – December 12, 2014

Today is the birthday of both of the Wrongologist’s parents, born on the same day in different years. Dad was 2 years younger than Mom, they were married for more than 50 years, and both died at 85. They were born during WWI, were teenagers during the depression, and thus missed out on the education that today, we think of as necessary to get ahead.

They lived through WWII, Korea, and Vietnam, and through the greatest expansion of the middle class in our country’s history. They went from horse-drawn vehicles on the streets of Brooklyn to owning cars and consumer electronics. They were Republicans who voted for Dewey and saw Nixon resign.

Their world view was that hard work brought continuous economic improvement. They didn’t feel tied to one job − there was another one out there that paid better, that held greater responsibility, which would pay off your house, send your kids to college and provide for your retirement. They were the last of the majority stay-at-home mom generation. Dad never made more than $40k per year, but they saved enough to buy a waterfront home in Florida, and to live there until just before the time when their money ran out.

Fast forward to 2014, and people have little reason to be so optimistic. On Thursday, the NYT released a poll that found that only 64% said they still believed in the American dream, the lowest result in 20 years. The American Dream for depression-era adults was not about becoming rich, it was about being able to move upwards, to reach a greater level of prosperity, something that, from the 1950s through the 1970s, everyone believed was possible.

Now, that optimistic vision is dying for Americans like my mom and dad, and Washington doesn’t care.

Onward to music. Today we feature Tom Waits, 2011 inductee into the Rock & Roll Hall of Fame. Those who have heard Waits’s work know that he’ll never have to cancel a concert due to laryngitis. We start with a tune that shows how Americans were fools for the advertising of the 1970s. That’s probably an eternal condition in America, one that reflects the continuing (and wildly successful) effort on the part of corporations to sell us shit we don’t really need. Here is “Step Right Up”:

The key lyric is a thought for the ages:
The large print giveth and the small print taketh away

We close with “Jersey Girl”. Most people think that this song is by Bruce Springsteen, but it was written by Waits. He wrote it with is soon-to-be wife, Kathleen Brennan. This is a long video for a short tune. You can go to 3:51 where Waits says “this is for Kathleen” and just hear his version of the song, or you can listen from the beginning to his extended shtick with the audience:

See you Sunday.

Facebooklinkedinrss