The life cycle of labor unions is predictable, the late economist Sylvester Petro once wrote. Because they are born not out of mutual exchange, but out of state-backed coercion, American unions inevitably face eventual demise triggered by their own corruption.
from which point the editors proceed by chronicling the enormous amount of corruption infecting the United Auto Workers union. The editors may or may not be correct in their attribution of the source of the problem but the corruption is obvious.
But why stop there? So many of our institutions are hopelessly corrupt. Our government at all levels. Both political parties. Unions. Organized religion. Universities. Corporations. Not-for-profits. Newspapers. Hospitals and the practice of medicine. It might actually be easier to list the institutions that are free of corruption (“abuse of entrusted power for private gain”) that to try to catalog the corrupt ones. If I could think of any.
I think that all human institutions are prone to corruption and that the larger, more pervasive, more entrencyed, and more powerful they become the more inevitable and pervasive the rot. There is no remedy. It is an inherent condition. There isn’t even a mitigation other than constant vigilance and a willingness to prune back the dead and putrid sections to allow healthy new growth. That takes so much work and care it is no wonder it is done so rarely. Especially since the dead and putrid sections fight back with all of their not inconsiderable power.
It genuinely distresses me that so many journalists and pundits can’t find it in themselves to admit that maintaining a low profile is the best policy for the United States with respect to Hong Kong. Don’t give the Chinese authorities any excuses for cracking down on the protesters.
Bottom line, there’s a whiff of the 1930s in the air in East Asia today.
Of course there is. What you smell is fascism and it’s made a tremendous recovery.
Let me start by defining my terms. “Fascism” is tricky to define. People are inevitably moved to define it so as to exculpate themselves. If there is such a thing as generic fascism, I would say that it has the following characteristics:
Although generally characterized as “authoritarian”, I would say it is not merely authoritarian but totalitarian, ultimately seeking state control over every aspect of life—politics, the economy, religion, you name it.
Underscore: state control
State socialism and state capitalism
It tends to oppose both liberal democracy and conservatism.
It is frequently accompanied by strong nationalism, even ultranationalism.
It is also frequently accompanied by an appeal to modernism, science, etc.
It is also frequently millennialist or apocalyptic.
There is also frequently an emphasis on a charismatic leader.
I would also say that the expression of fascism varied from country to country, i.e. German fascism was not identical to Italian, Russian, American, or Japanese.
When I look at the 1930s what I see is that the dominant political thrust was fascistic, not just in Germany and Italy but in the Soviet Union and here in the United States as well. Naziism was the expression of fascism in Germany, Stalinism in the Soviet Union, but the New Deal was the expression of fascism in the United States.
I recognize that many if not most Americans would bitterly reject that characterization but I think they’re making distinctions without differences and looking at it backwards. That the expression of fascism in the United States would be the New Deal is not a condemnation of the U. S. or Roosevelt. It shows how much more benign our institutions are than Germany’s or Russia’s.
Now fast forward to the 21st century. It is patently obvious that what has materialized in China is fascism with Chinese characteristics: it is totalitarian, fosters both state socialism and state capitalism, opposes liberal democracy and conservatism, is nationalistic, and is increasingly focused on the person of its leader, President Xi.
That leads, naturally enough, to an examination of whether Trump is a fascist and whether Trumpism is fascism? The factors that say “yes” are the cult of personality surrounding him and nationalism. Maybe I’m seeing things through rose-colored glasses but I don’t think those are enough for fascism.
However, the likelihood of increasing fascism in East Asia is concerning and not limited to Xi and Kim. There’s also Duterte in the Philippines, Prayut Chan-o-cha in Thailand, even Modi in India.
There is a passage in Joel Kotkin’s post at newgeography that caught my attention:
But even if the Democrats go off into a Marxist fantasyland, Trump could still lose a large portion of working class voters, notably women turned off by his boorish behavior. Latinos, heavily represented in blue collar professions, notably in the service fields, construction, logistics and manufacturing, have done better under President Trump but his nativist tendencies — however exaggerated by a hostile media — may prevent him from harvesting these gains. Latino voters may be most hurt by progressive policies that inflate the cost of housing and energy, but may have a hard time supporting someone who seems to consider their entire community a burden to the nation.
That’s a good, succinct description of the choices we seem to have. Decades of terrible decisions have left us in the situation that we may not be able to bear the level of risk we see before us. There are no really good alternatives left.
Before we take a look at Robert Samuelson’s latest Washington Post column, musing over the loss of dynamism in the U. S. economy and how that can possibly have happened, let’s take a look at the chart above. The chart, graciously provided in an excellent post at Evonomics, illustrates mergers and acquisitions as a percentage of fixed asset investment and the 100 biggest companies as a percentage of the “corporate universe”. As you can see, right now big companies have a larger footprint in the economy that at any time previously in the post-war period other than, possibly, in the run-up to the financial crisis of 2008 which should tell you something.
Now back to Mr. Samuelson. He considers a recent study:
Consider a new study by economist Joel A. Elvery of the Federal Reserve Bank of Cleveland, who examined how workers’ occupations had altered from 1860 to 2015.
He placed all workers in one of 23 large occupational groupings (examples: farmers, laborers, engineers and managers) and then monitored what happened to the various groupings over time. The sharp decline of some occupational groups and the rise of others gauged the magnitude of economic disruption.
Some changes, though familiar, were stunning. Farming (including fishing and forestry) dropped from 43 percent of employment in 1860 to 1 percent in 2015. In an interview, Elvery credited mechanization (tractors and the like), better seeds, more fertilizers and more irrigation for the shift. Over the same period, the number of non-farm laborers fell from about 10 percent of employment to about 4 percent. The bulldozer was a crucial cause, Elvery noted. “One bulldozer could do the work of 50 people,†he said. The impact was enormous.
The study’s overall conclusion, however, was surprising and counterintuitive. Americans have been conditioned to think that present economic disruptions are at, or near, historical highs. Markets are cruel, hardhearted and volatile; job insecurity is on the rise. But that’s not what the study found. Instead, it concluded: “After 100 years of dramatic change, the mix of occupations has been more stable since 1970.†Occupational disruption is about half the level of the peak decades, the 1900s and the 1940s.
In theory, the stability of the occupational structure can be reconciled with rising economic insecurity. As Elvery pointed out, people can lose their jobs without switching occupations. For example: Unemployed journalists can — perhaps — find other journalism jobs, as opposed to becoming rocket scientists. But, again, this does not seem to be what’s happening.
A more likely possibility is that, in many different ways, the U.S. economy is becoming less dynamic. The most significant evidence of this is “The Rise and Fall of American Growth,†by economist Robert J. Gordon of Northwestern University, an encyclopedic overview of technological change since the Civil War. Greatly simplified, Gordon’s thesis is that the innovations up to 1970 (cars, airplanes, telephones, indoor plumbing, television, air conditioning, modern pharmaceuticals and more) dwarf the Internet as a source of rising living standards.
Other indicators point in the same direction. The business start-up rate has declined. Workers are moving less frequently to find new jobs. Productivity growth (a.k.a. overall efficiency) has lagged. Large firms are returning sizable amounts of cash to their shareholders, arguably because they can’t find attractive investment opportunities or, possibly, because they have become more risk-averse.
To me this is obviously true. Back to the graph at the top of the page. Big companies are more dominant than ever before. Big companies don’t take risks. They mitigate them. They are able to manipulate the forces in the society, whether financial, legal, or regulatory to their advantage and the return on investment of doing that is orders of magnitude better than doing it the old-fashioned way—by earning it. They acquire companies that have already taken the risks and subsume them into smothering, risk-averse corporate cultures. I cannot tell you how many business plans I have seen that amount to “do something that will get my company acquired by Microsoft, Google, or Facebook”.
How does this relate to my “theme of the day”? Increasing the barriers to entry into a sector of the economy or jobs, imposes risks on the company or individual. A perfect example of that is requiring a college degree for jobs that don’t pragmatically require one. That imposes thousands or even hundreds of thousands of dollars of cost and months or years of elapsed time on individuals seeking to enter the field. Those are risks and the effect is to transfer risks from companies to workers.
There is also a risk to the entire society. An economy is like an ecosystem. Dynamism and variety are a form of hedging your bets. When you’re afraid to let a big company collapse because of the run-on effects on the economy, which is exactly what happened in 2008-2009, there has been too much consolidation. That company should never have been allowed to exist in the first place.
The theme that I see that joins the news stories of the day is risk. What are the risks? Who bears them?
One of the many ways in which George W. Bush made me uncomfortable was that his views of risk were completely foreign to me. Any risks he had taken in his entire life were risks he had sought on his own. He lived a live highly insulated from external risks. I see that in the Kennedys, too. They were insulated from risk but, perhaps because they were so cosseted, thirsted for it.
That, too, is one of the reasons I’m uncomfortable with Donald Trump and even with Democratic presidential front-runners. They have practically no experience outside of government or with government handmaiden industries. Naturally, they look for government-based solutions. The reality for most people is that they bear a lot more risk in their lives than that.
One of the ways of telling the story of the U. S. economy over the last 50 years is that risks have been shifted from employers to employees. That’s true except in the government sector in which neither politicians nor government employees bear risks. All of the risk is borne by the taxpayers.
Every part of the United States has its own risks. In St. Louis, where I grew up, there were risks from tornados, thunderstorms, hurricanes, drought, earthquakes, flood, and even the occasional blizzard. Living in Southern California carries substantial risks from earthquakes, fires, drought, and mudslides. There’s either too much rain or not enough. Living anywhere along the coast carries risks of sea and storm. In the North there are nor’easters; in the South hurricanes.
Who should bear the risks? I think that people who make the choices should also bear the risk. I shouldn’t be asked to indemnify Californians against the risks of earthquakes; Californians shouldn’t indemnify Chicagoans against snowstorms. In the case of emergency we should offer assistance but such assistance should always be limited in scope and duration.
When the well-to-do move to the coast, they assume not only their own risks but also those of the less-than-well-to-do who serve them. That’s a practical necessity. If they don’t like it, they shouldn’t move to the coast. It’s a lesson that anyone who grows up in sight of the Mississippi understands: don’t build in the flood plain and for goodness sake don’t encourage people to build in the flood plain.
What about other countries? Again, in the case of emergency we should offer assistance. It’s the right thing to do but that assistance should be limited in scope and duration. There’s a simple reason for that. Permanent assumption of risks conveys ownership including ownership of future risks.
At Bloomberg Justin Fox argues that most people are better off in Canada than they are in the U. S.:
Defenders of the U.S. approach can point, though, to the fact that per-capita gross domestic product has remained higher in the U.S. than in all but a few small nations with unique characteristics (Qatar, Luxembourg, Singapore, Switzerland, Norway, etc.) — so much higher that even with the less-equal income distribution here, most Americans continue to have higher incomes than their peers in other large, affluent countries.
Times may be changing, though, and international income comparisons are definitely getting more precise. Five years ago, David Leonhardt and Kevin Quealy of the New York Times showed using numbers from the Luxembourg Income Study Database that the median income in Canada had caught up with that of the U.S. as of 2010, and speculated that Canada had probably passed the U.S. since. (The median is the income of a person in the middle of the income distribution, with as many people earning more as earning less.)
Now there’s more evidence. A report released this summer by the Centre for the Study of Living Standards, an Ottawa nonprofit, contends that as of 2016 Canada had in fact pulled ahead of the U.S. in median household income, with a $59,438 to $58,849 advantage in U.S. dollars if (and this is a reasonably big if) you use the Canadian government statistical agency’s formula for converting Canadian dollars into U.S. ones. The study also compares incomes in every percentile of the income distribution, and finds that up through the 56th percentile Canadians are better off than their U.S. counterparts.
I wouldn’t be surprised if that were correct. Canada has one tremendous advantage over the United States: it has the U. S. to act as backstop and buffer. Our high defense spending means that Canada’s may be less than it would otherwise be. Canadians who are dissatisfied with what their domestic health care system provides for them can always come here. The reverse is not true. If Americans started seeking treatment in Canada in numbers, they would quickly overwhelm the Canadian system. The Canadians have convince me of that. Just look into their arguments against allowing Americans to purchase their pharmaceuticals in Canada.
Maybe we should emulate Mexico and, rather than blocking migrants across our southern border, facilitate the movement of those migrants into Canada. Look how much better off they could be!
At Medium Peter Leyden says that there is only room in the United States for one political party, that party is the Democratic Party, and calls for bipartisanship are at the best misguided and more frequently malicious. He has seen the future and it is California:
California is the future. That’s the best way to understand the way forward for America, and ultimately the world. California is roughly 15 years ahead of the rest of America in confronting the very different realities of the 21st century. A world of transformative new technologies with capabilities that we are only just beginning to fully comprehend and harness. A polyglot world of diverse mixes of races and ethnicities that are both super-creative and periodically combustible. A world that increasingly is shaped by climate change and the immense challenges it poses for all of us.
California not only has faced up to the 21st-century challenges, but it’s begun to seriously adapt to them. Californians saw waves of new technologies early, then got a jump on leveraging and accommodating them, and occasionally constraining them. They began integrating a massive influx of Latino and Asian immigrants, coping with diversity in schools and work, and coming to terms with whites being the minority. Californians took a beating in climate-related catastrophes like the recent drought, and have aggressively moved forward with some of the most ambitious clean energy and sustainability measures in the world.
California is the future of American politics as well. The once Red and now deep Blue state has largely figured out a new political way forward for itself and by extension for America — as well as for other democracies — that’s up to the new realities and immense challenges of the 21st century. This is the most important insight for this historical juncture, this time of despair. It’s also the most difficult point for Americans on the east coast and the heartland to accept. But there is a compelling case to be made, based on data and an understanding of history, that what’s happening right now in California is going to come to the rest of America much sooner than almost anyone thinks.
I’m not sure how to respond to that. Maybe one way would be to point out that of the states in the worst fiscal shape, four of the five worst (Kentucky, Massachusetts, New Jersey, Connecticut, and Illinois—the absolute worst) are Blue states while four of the five best (Nebraska, South Dakota, Tennessee, Florida, and Oklahoma) are Red states. Or to point out that California’s circumstances are unique or nearly so. Its benign climate and other amenities draws well-heeled foreigners to the state and absent that its model would have collapsed long ago. Of the five biggest municipal bankruptcies, three have been in California.
But I think he may well be right and I take no solace from that. California has a very large degree of income inequality—the state with the biggest gap is New York; California is #4. The states with the lowest income inequality are New Hampshire, Wyoming, Utah, and Alaska.
Also, the same factors he points to in California have been the case in Illinois as well and Illinois is rapidly beginning to circle the drain. The main difference that I can see between the two states is that Illinois’s population is decreasing in absolute terms.
Today marks the 80th anniversary of the beginning of World War II. On September 1, 1939 the Germans invaded Poland. France and the United Kingdom declared war against Germany; Germany proceeded to invade its neighbors ultimately conquering and occupying France in 1940. The Italians had invaded Ethiopia long since in 1935; Japan had invaded China in 1937. Today is actually the anniversary of the beginning of the war in Europe.
World War II is now nearly as distant as the American Civil War when I was a kid. Now as then a few doddering, ancient veterans of that war remain but it’s in the distant past. In a very real sense it’s even more distant since so few young people today know much history. For most people nothing of any significance happened before they were born and precious little since.
Most of what we know or think we know comes from motion pictures made during the war and those promote a number of misconceptions. Chief among them is that the war began in 1941 when Japan attacked Pearl Harbor which is when it began for us. The second misconception is that, watching old war movies, you look at them with the knowledge of what would actually happen. Those living at the time did not. The Germans had gone through the armies of Europe like paper; the Japanese had done much same thing in Asia. They were formidable opponents—the greatest military organizations the world had known up to that time.
Another misconception is with the age of the soldiers. The average age of an American soldier at the end of World War II was 25. John Wayne was in his mid-30s in 1941 when the war began for the United States. Spencer Tracy and Clark Gable were both over 40. That experienced middle-aged sergeant in the war movies? He was actually in his 20s. Our generals were, in fact, old men. MacArther was over 60; George Patton nearly as old; Dwight Eisenhower was over 50. They were all veterans of World War I. I wouldn’t be surprised if World War II saw the oldest general officer corps in our history. I wonder if it’s been studied?
Yet another misconception is the role of the Russians. They think they won the “Great Patriotic War” and we just stood around holding their coats while they fought. They’re not entirely wrong.
The one thing the movies get right is that we are right to be proud of our accomplishments during the war. I wonder if the people of today can understand that?
It’s been obvious for decades what was going to happen to Chicago and also obvious what would have to be done about it: some combination of pension trims, spending cuts and tax increases. But that’s budget-scold math. The political arithmetic was much simpler: Everyone thought that 100 percent of the cost of adjustment ought to be borne by someone else.
And so, Chicago politicians kept opting for “later†whenever possible, turning to a series of one-time tricks to cover shortfalls. With each delay, the problem got worse as they borrowed even more money from the future to keep taxpayers and workers happy.
Compound interest is your friend when you’re saving and your mortal enemy when you’re borrowing. Every day you delay the reckoning means that tomorrow, you’ll have to run even farther just to stay in place. Chicago is now approaching the point where the growth of its obligations will outpace the growth of any possible revenue stream it might use to cover them. It’s a few steps from there to municipal bankruptcy.
Of course, Chicago politicians aren’t the first ones to say “laterâ€; they certainly won’t be the last. In fact, we’re all saying it right now, except for those tiresome budget scolds.
I disagree with this observation of hers:
There’s nothing inherently wrong with paying generous pensions, if that’s how workers prefer to take their compensation. But that sort of compensation is actually quite expensive. To fund even a modest guaranteed pension benefit decades in the future, you have to invest a big chunk of money in assets right now. Over time, those assets will grow, and generate the cash to pay out the benefits you’ve promised —
I think there is something inherently wrong with defined benefit pensions for public employees. There is no way to compel politicians to put enough money to pay for them into the pension funds. Unless they do, future voters who had nothing to do either with the commitments that were made or the inability to pay them are bound by them. That is unjust.
I also think that Chicago voters have been the victims of a certain amount of unfair criticism and unseemly glee at our plight. I doubt that one voter in 100 voted to short-change the public employees’ pension funds. The blame for that lies squarely on elected officials, many of whom flee the city (and the state) when their terms of office are over. We have really had very limited choices. Many elected officials here run without serious opposition from anyone who would do much differently than they would. So, for example, there has not been a serious Republican challenger running for mayor of Chicago in a very long time.
