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What Americans don’t know about the distribution of wealth in their own country

Posted on November 30th, 2016 in Capitalism,Culture,Economy,Education,Politics,Religion by Robert Miller

Originally Posted on August 17th, 2011 in Culture,Economy,Government,Politics by Robert Miller | Edit

Fig. 1 Quartile divisions of wealth accumulation: Country A is fictional, Country B is Sweden and Country C is the United States

I am reissuing this posting, all attributed to the election of Donal J. Trump. I expect his administration to be the most corrupt adminstration in history. I am sure we will see many clowns as members of his administration. Perhaps there is some sunshine that will illuminate his administration, because I expect that he will offer no rewards for the people that elected him, and if the Democrats are smart, they will make inroads into the people who elected Trump, by recognizing LABOR UNIONS, once the center point of FDR’s New Deal.

If you were hoping that Americans were well informed about the increasing disparity in wealth distribution in America, this posting will disappoint you. Perhaps you’ve heard the story already. A few nights ago on the PBS News Hour, financial correspondent Paul Solman gave a little quiz as he walked through Times Square, interviewing different people and asking them questions based on the pie chart illustrated in Fig. 1. The three pie charts are divided into quintile (5 x 20%) sectors based on the percentage of total wealth of the country by each quintile (see wealth definition below); yellow is the top 20%, blue the next 20% followed in order by red, green and orange at the bottom 20%). Three different countries are represented by the three different pie charts. The first of two different questions Solman posed was: suppose the country’s wealth was divided into the quintiles represented by the colors–in which country would you prefer to live? The majority pointed to either Country A, which is a fictitious country, with total wealth shared equally among the five different sectors, or the Country B, which is represented by Sweden. Among those interviewed, very few selected the bottom pie chart, Country C, which is in fact the wealth distribution for the United States, in which the top 20% of the wealthiest Americans own 84 percent of the total wealth. That question by itself suggests that the majority of Americans in Solman’s sample would prefer to live in a country that has a more equitable distribution of wealth, which for them, doesn’t exist. But then the more obvious question was put forward when Solman asked, which among these three countries do you live in–which one is America? The majority of those interviewed pointed to Country A or Country B and very few selected Country C. Yet when Solman presented the pie charts to nearby entry level workers, they had no difficulty identifying the United States as  Country C.                                                                                                                                                                                          

Solman’s little quiz would hardly stand the test of statistical scrutiny because his limited sample was certainly skewed, undersized and biased in many different ways. He was actually interviewing the crowd waiting to get into the Dave Letterman Show (except the entry level workers didn’t seem to be in that line). But in fact, he was merely echoing a more complete and extensive  study carried out by two academics, Michael I. Norton and Dan Ariely, professors from, respectively,  the Harvard Business School and the Psychology Department at Duke University. The title of their paper “Building a Better America–One Wealth Quintile at a Time” was published on-line in Perspectives on Psychological Science.They had carried out a larger study asking similar questions, but with a nationally representative  online sample size of 5522, with 51% female (mean age 44.4), randomly selected from a panel of more than 1 million Americans and completed in 2005. Median household income in their sample was $45,000, similar to that reported in the 2006 U.S. census data; in the 2004 election; 50.6% voted for Bush and 46% for Kerry, which was close to the actual outcome. All respondents had the same working definition of wealth which was read to them at the time: “wealth, also known as net worth is defined as the total value of everything someone owns minus the debt that he or she owes. A person’s net worth includes his or her banking account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.” Each respondent was told about Rawl’s expression of a just society: imagine if you joined this nation, you would be randomly assigned to a place in the distribution, so that you could end up anywhere in this distribution, from the very richest to the very poorest. So that instruction makes the study a little different than the simple interview that Solman carried out. Not surprisingly people overwhelmingly selected Country A or Country B. The actual numbers from their paper are shown in the shade covered pie charts of Fig. 2 ; equal distribution got 43%, Sweden got 47% and the U.S. got 10%; the comparisons between individual countries was Sweden 51/49 over equal; Sweden 92/8 over USA and equal was favored over the USA 77/23. These differences were robust across gender lines, political affiliations and personal income. The slight preference for Sweden over the equal distribution country implied that Americans wanted at least some inequality in the distribution of wealth. So the Norton & Ariely study was based on the idea that you had to decide which country you would join, when the economic strata you would occupy was randomized and you could be at the top or anywhere in between, but the decision would not be yours. When asked in this way, Americans chose a more equitable distribution than that found in the United States today.                                                                                                                                                                   

The next part of the survey will surprise no one. The general strategy is displayed in Fig. 3. The upper horizontal bar graph shows the actual distribution of wealth in America. Notice that on this scale, the fourth and fifth bottom quintiles (purple and light blue) are so small that they cannot be represented adequately using the graph scale.  If you find this shocking, then you should read Barbara Ehrenreich’s excellent book Nickel and Dimed: About (Not) Getting by in America to see how problematic it is for people who do not have sufficient stability in income to keep afloat in America. We do not pay enough for entry level positions, such as maids, janitors, waitresses and WallMart employees. Today, one in six Americans gets food stamps. But, back to the graph.

The middle bar shows the estimated wealth distribution in America, projected by averaging the results of all those surveyed, as they attempted to gauge the wealth distribution of America.  For this bar, each person had to estimate the relative wealth distribution for each of the quintiles. It is apparent that the group way underestimated the amount of wealth owned by top quintile  You will also notice that on this bar, all quintiles have representation, meaning that the average American doesn’t know that the lower 40 percent of Americans do not have enough wealth to have representation on the scale of the bar graph. The relative wealth of the lower 40 percent of Americans is invisible graphically as well as invisible to most Americans. The very bottom bar, shows what those polled would like to see in a “perfect America.” In that non-existent state “perfect America” looks very balanced, with a progressively smaller percentage of wealth assigned to lower quintiles of the wealth scale, but every quintile as a more robust presence. So, here too Americans want to see the “wealthy” better off, but compared to the society we currently have (top bar), they would like to see a far healthier America, with wealth distribution more equitable.

There were other small differences in the outcome Of Norton and Ariely’s study, depending on whether they looked at the results by groups, based on salary differences, gender, Republican vs Democrat, but these differences were small compared to average, indicating that most Americans had similar views when making these kinds of judgements. My conclusion from this  study is that American citizens don’t know how skewed the wealth curve distribution is in their own country, but if they could design a different country, they would generate a more equitable society. So, in terms of wealth distribution, social policies, including health care and social security, the formation of unions and the value of public education, Americans consistently support a view that is to the left of the current President or most members of Congress. The reason why this view does not dominate our political and social philosophy is because our political system is not based on an equitable distribution of representation (imagine how utterly skewed it is that California and Wyoming get the same number of Senators) and the financial costs of running an election are so great that every candidate at the national level needs support from a sugar daddy who is generally from from big business and is always far to the right of where most people are with respect to social policy and income equity. And, thanks to the Supreme Court ruling of three years ago, corporations can throw unlimited funds to sway our political system so that it subserves the interests of corporations–the bigger the better. Whether these problems can be politically solved or not, whether America can reach for a sense of economic justice remains to be seen, but so far the polarization in America, which is now being accelerated by paranoia and demagoguery, has yet to reveal any hint that we can avoid a train wreck in our future. The best we can do is keep plugging away, keep arguing as rationally as we can and hope that the quality of our drinking water improves so that a rational society can re-emerge some time in the near future. American business has failed the country. Perhaps we could rationalize their huge paychecks, if in return they met their responsibilities and provided good paying jobs for all Americans. But in fact the evidence is clear–the interests of big business is to remove more wealth from the middle and lower income classes and make additional profits for themselves. This cannot continue. Many have argued that the wealth distribution in America  was not created by the wealthy, but was in fact a transfer of wealth from the Middle Class and the poor through their failure to keep wages growing with prosperity.


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What might have been

Posted on September 15th, 2016 in American Hegemony,Books,Capitalism,Climage Change,Economy,Education,War by Robert Miller
Children with gas masks 1941 in Great Britain

Fig 1  Children with gas masks 1941 in Great Britain

This is the story of what might have been, had FDR stayed alive to finish his fourth term as the President of the United States, he died just as his fourth term was beginning on April 12, 1945. This story begins in the more modern days of Global Climate Change and “Black Lives Matter.” Had FDR been around to finish his fourth term, things might have gone very differently: we might have avoided the Cold War. Let me say at the outset that I regard the Cold War as the most senseless, the most costly, the most wasteful thing that was ever perpetrated on the human soul. In addition to its cost [we are spending more than a trillion dollars every year] part of which is to support our nuclear capability. Now, Obama has recently announced that we will spend a trillion dollars to “modernize” our nuclear arsenal; creating in the process much smaller ‘bombs,’ the use for which has not yet been specified. Where is the logic in this? We should be putting all of our energy into getting rid of the Nukes, so at least some us can get some sleep. So far this news has not been contested by the American public, who will have to pay for this enhancement, while our roads and bridges continue to erode. We will miss the opportunity to invest in education and training to help advance our students and prepare them for better lives. We are still living with the dangerous aftermath of the nuclear arms race and no one knows if or when we will successfully mitigate the danger that these threats pose. World-wide I count the total number of lethal warheads at 15,493; the United States (7100), Russian Federation (formerly the Soviet Union, 7300), France (300), India (110), Great Britain (210), China (210), Israel (80), Pakistan (120), North Korea (8); [See Fig 2]

The number of Nukes still threatening the stability of our planet; based on national distribution

Fig 2. The number of Nukes still threatening the stability of our planet; based on national distribution

all of these nations have placed our civilization in a perilous future, one that has no guarantee that we will emerge from this nightmare with our bodies intact rather than be instantly  vaporized.   Should a single one of these be fired accidently or not, the whole array of these missiles might go off in some horrified, modified synchrony and in doing so eliminate all human life on this planet; perhaps we will go back to a state where only bacteria will survive and we will restart the life’s cycle all over again. Conceivably we might already have done this and we are currently enjoying life the second time around like Bill Murray’s rendition of Groundhog day.

The reader might ask, quite sensibly, why the author of this posting would wander back and revive interest in a President that has been dead for more than seventy years. But that is when the Cold War started and we have a special responsibility, because most of the blame for starting the Cold War falls on our shoulders:  we have to face the fact that We Started The Cold War.

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning

These are the words Churchill used when the Battle of Britain was safely concluded in November 1942 at which time Pearl Harbor had already taken place, so the Americans were in the war, alongside Great Britain. Although it didn’t seem so at the time, it proved to be prophetic projection to the end of WW II; even though there would be many more years of bloodshed and the final blow of WW II would not be struck by the British, or the French, or the Americans, but it would be the Russians, who, against all odds defeated the vaunted sixth German army at the battle of Stalingrad; from that moment on it would be the Red Army, including the tank battle of Kursk that further destroyed the German army’s capacity to make war, and allowed the Russians to march right into Berlin, though they would pay an enormous price along the way: the final tally was 27 million Russians dead [mostly civilians, I recently heard a professor of Russian history proclaim that the death toll for the Russians in WW II could be as high as 40 million]. I mention this because far to few Americans are aware of the fact that Russia won WW II. Hitler send upwards of 200 divisions into the war against the Russians, but the most the allies faced was 10-15 divisions in the wars in Africa and Sicily; event in Sicily was a bloodbath for the Americans and British.

What I really want to talk about

I will come back to WW II later, but first I want to paint the full panoply of the collective threats we face today.

It seems to me and to many others I know, that the world is on fire, not just because of our many failures related to war on “terror,” and there are many of these, but also plaguing us is the incomplete recovery from the Great Recession, that has introduced all of us to the deficiencies of globalization, which concentrates too much wealth into the hands of those that don’t need it and don’t spend it appropriately. The most recent data, released very recently suggests that improvements in median income rose 5.2 % in 2015, but we will need to see a steady progress of these years, before we get too excited.

This is one reason that Donald J. Trump has has staked out a claim to be the President of of the United States. With all the uncertainties in this race, and the fact that the polls seem to be narrowing, he just might win the election, even though right now he has a special talent for inducing people not to like him at all.

Krugman, Galbraith and Stiglitz say vote NO on Greek referendum

Posted on July 4th, 2015 in Economy by Robert Miller
Greek Finance Minister Yanis Veroufakis

Greek Finance Minister Yanis Veroufakis

This Sunday the Greek citizens will go to the polls and decide whether Greece will vote for continued austerity or break-free from the tyranny of the European Union. It is disheartening to see what has happened to the Greek Economy since the EU began its austerity program five years ago. The polls I have seen are mixed on whether the NO vote is favored by the majority of Greeks. I think many Greeks have not made their mind up as to which way they will vote. Eurozone leaders have made it clear that if Greece voted NO, it would be saying goodbye to the Eurozone. Three economists who have had no trouble making up their mind on this issue, include Nobel Laureates Joseph Stiglitz and Paul Krugman; they encourage the Greeks to vote NO and they are joined by James K. Galbraith.

Stiglitz writes:

“We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.

But, again, it’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies.

It is hard to advise Greeks how to vote on 5 July. Neither alternative – approval or rejection of the troika’s terms – will be easy, and both carry huge risks. A yes vote would mean depression almost without end. Perhaps a depleted country – one that has sold off all of its assets, and whose bright young people have emigrated – might finally get debt forgiveness; perhaps, having shriveled into a middle-income economy, Greece might finally be able to get assistance from the World Bank. All of this might happen in the next decade, or perhaps in the decade after that.

By contrast, a NO vote would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands. Greeks might gain the opportunity to shape a future that, though perhaps not as prosperous as the past, is far more hopeful than the unconscionable torture of the present.

I know how I would vote.

Krugman writes:

“To understand why I say this, you need to realize that most — not all, but most — of what you’ve heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes.Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.

So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.

And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.

It’s easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years.

This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can’t accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.

But they shouldn’t, for three reasons. First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.

Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.

So it’s time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.

Galbraith writes:

What does Tsipras gain by a “no” vote? Apart from political survival, only this: it is his way of proving, once for all, that he cannot yield to the conditions being demanded. So then the onus will be back on the creditors, and if they choose to destroy a European country, the crime will on their hands for all to see.

That said, there is no guarantee that Tsipras will win on Sunday. In the January elections, his party only won 40 percent; now he needs a majority. Fear and confusion abound. The Greeks are, in effect, voting for a choice of unknowns, which can never be a sure thing.

If the Greeks vote “no,” there is obvious uncertainty over the economic future. Perhaps the banks will stay shut, the deposits will be lost and the creditors will carry through their threats. The uncertainty is amplified, unavoidably, by the fact that the government cannot campaign to stay in the euro and also explain how it would handle the trauma of being forced out. If there have been preparations, they are a well-kept secret so far.

If the Greeks vote “yes,” on the other hand, the uncertainty is political. SYRIZA may split and its government may fall. What then? There is no credible alternative government in Greece. Moreover, it is hard to think that any government formed to accept the surrender and deepen the depression would last very long.

And it seems certain that after a “Yes,” a surrender, and a deeper depression, the official Opposition would no longer be the pro-European Left that is today’s government in Greece. Europe will have destroyed that. The new Opposition, and someday the government, will be either a Left or a Right party opposed to the euro and to the Union. It could be Golden Dawn, the neo-Nazi party. The lesson of Greece also will not be lost on Oppositions elsewhere, including the rising far right in France.

The irony of the case is that the true hope—the only hope—for Europe lies in a “No” vote on Sunday, followed by renewed negotiations and a better deal. “Yes” is a vote for fear, against dignity and independence. Fear is powerful—but dignity and independence have a way of coming back.”

What has kept Greece under continued austerity is the fear of uncertainty should Greece leave the euro. It is understandable why a NO vote this Sunday may or may not pass. Meanwhile the Greeks have been made to suffer like no modern nation should suffer, especially a member of the euro. The basic fault of this system lies within the formation of the Eurozone itself. Capitalism is an unstable system, undergoing a financial crisis periodically. When the euro was formed it was during a relative boom in the global economy and as a result it was never structured to encounter a serious economic downturn. So, guess what? The first serious economic downturn, the worst since the Great Depression has found the euro completely incapable of dealing with it. What should have happened is massive investment in the countries that needed it: when businesses shut down and economic activity slows, the government needs to pick up the slack. This is basic Keynesian economics. As a result of this failure the European  Union gets an F for its management of the first major fiscal crisis since its inception. A NO this Sunday will likely have its biggest impact in reforming the Eurozone.

The feisty Greek Finance Minister, Yanis Varoufakis, has pledged to resign if his country votes yes to the bailout plan proposed by international lenders. Varoufakis insisted that a no vote would relaunch the Greek government’s negotiations with its international creditors. He wants an end to five years of rolling over Greece’s bailouts and “pretending” its debts can be repaid.



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