Wednesday, January 31, 2018

The Rowboat (Wages) and the Yacht (Assets)

As I keep saying: the status quo has divested the working and middle classes.
The reason why the status quo has failed and is fragmenting is displayed in these three charts of wages, employment and assets: wage earners (labor) are in a rowboat trying to catch the yacht of those who own assets (capital).
Here is a chart of weekly wages of those employed fulltime: up a gargantuan $4/week in the 18 years since 2000. Let's see, $4 times 52 week a year--by golly, that's a whole $208 a year. Brand new Ford F-150, here we come!
If we go back 38 years to 1980--an entire lifetime of work--we find real (adjusted for official inflation, which seriously understates big-ticket expenses such as rent, healthcare and college tuition/fees) wages have notched higher by $10/week--a gain of $500 annually.
If we adjusted wages by real-world income, we'd find wages have declined since 1980 and 2000.
Here's employment by age group since the year 2000. THose who can't afford to retire are still dragging their tired old bones to work while employment for the under-55 cohort hasn't even returned to the levels of 2000.
Meanwhile, asset valuations have soared. Those who own capital (assets) have done very, very well, those who trade their labor for dollars--they've gone nowhere.
Households with two regular jobs could afford to buy a house in Seattle, Brooklyn, or the San Francisco Bay Area in 1995. By 2005, they were priced out. Can a household with median income ($59,000 annually) afford a crumbling shack in any of the white-hot housing markets? You're joking, right?
The cold reality is wage-earners are tugging on the oars of a water-logged rowboat, trying to catch up with the sleek yacht of asset owners. The system has been rigged to reward those who own assets (capital) or who can borrow immense sums of nearly-free money (credit) to buy assets.
Can we be bluntly unpolitically correct for a moment and observe that the rowboat is never going to catch the yacht? No wonder the nation's savings rate is near-zero; most households don't earn enough to save much, and those that do are caught up in a nightmarish Red Queen's Race in which they save $10,000 a year but the asset they hoped to buy rose by $50,000.
In other words, trying to save enough by pulling on the oars of a rowboat for 10 years while the yacht has accelerated and is now on the dim horizon is a fool's game.
As I keep saying: the status quo has divested the working and middle classes.The laboring classes have no stake in America's status quo except their entitlements and whatever assets they bought 20+ years ago around 1994-97. Those who weren't able to buy assets 20 years ago have been in the wallowing rowboat watching the yacht pull farther away every day.
Even households making double or triple the median annual income ($120,000 to $180,000) are struggling to keep up in high-cost regions. This reality is driving social discord that will morph into social disorder.
Gordon Long and I discuss social disorder in Part 3 of our series 2018: Year of Accelerating Social Change (15 minutes):



My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.
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Monday, January 29, 2018

Rising Social Disorder Is Inevitable: Here's Why

We can do better, and if we don't, the only possible output of such an unequal system is increasing social disorder.
We are in a very peculiar point in history. On the one hand, we're reassured that all is well because Every One of the World’s Big Economies Is Now Growing. (NY Times)
Yet at the same time, we read that "Something Is Very Wrong With The Global Economy": Richest 1% Made 82% Of Global Wealth In 2017 and are asked, Can the World Survive a Winner-Take-All Global Economy?
Even the authors of the rah-rah NY Times piece on the wonderfulness of the global economy expressed concern that this "growth" may not be distributed any more equally than the previous 10 years of "recovery."
We already know absolutely nothing will change because neither the inputs nor the feedback loops in the economy have changed. As Donella Meadows explained in her seminal paper Leverage Points: Places to Intervene in a System, the only ways to change a system's outputs (in this case, widening income and wealth inequality and rising social disorder) is to change the inputs or add a new feedback loop.
The status quo has not changed the inputs or added any new feedback loops, so the output of the system--extremes of widening income and wealth inequality--cannot possibly change.
The portmanteau word "precariat" (precarious + proletariat) describes much of the modern work force--those in the less specialized sectors of the gig economy, informal/black market economy or in the traditional corporate-employment economy but with irregular work hours and little in the way of benefits.
Since the corporate media (MSM) is largely a haven for well-educated bourgeois with some family wealth and upper-middle class social circles, media coverage of the slow drip of financial anxiety in the lives of precariats is sparse.
If you talk to people working in the lower-pay service sector, you get a snapshot of a great many people living paycheck to paycheck, worrying about any unexpected expense (car repair, dental work, etc.) and mundane things that don't vex a "protected" upper middle class employee like scraping up the cash to buy their child a new pair of shoes for his/her birthday.
If we compare this reality with financiers and their technocrat worker bees skimming millions from what Adam Taggart calls "the river of money" (mostly credit, of course), we have to wonder why the US hasn't already exploded in class warfare.
The fuse is lit, as "fixes" like Universal Basic Income (UBI) that are embraced by the likes of Mark Zuckerberg don't actually re-enfranchise precariats, i.e. offer a real stake in the nation's productive capital. As a result, they're just Band-Aids over a sucking chest wound.
Much of my work is focused on explaining the intrinsic limits of the two "solutions" offered by conventional ideologies, think tanks, pundits, etc.: the market (i.e. the neoliberal fix for everything) and the state (government can fix everything). As I have explained, our problems are now exacerbated by markets and centralized power, not fixed by these dynamics.
I've endeavored to lay out a Third System that is decentralized, democratic and not dependent on either the financialized, globalized marketplace or the centralized Savior State in my books A Radically Beneficial World and Money and Work Unchained.
The core dynamic of my system is the universal opportunity to acquire productive capital in all its forms. The core dynamic driving the current extremes of wealth/income inequality is the system's rewards go almost exclusively to owners of capital and those closest to the central bank credit spigots.
The conventional solutions ("tax the robots," UBI, more job training, etc.) don't actually change the reward structure or the opportunity to acquire capital. This is why they have failed and why they cannot do anything but fail: they don't grasp the problem and they don't actually change any inputs, incentives or add new feedback loops.
There are solutions, but they lie beyond the status quo of stale, failed ideologies that have lost touch with the real economy and those being left behind by a system that radically favors owners of capital and those closest to central bank credit spigots.
We can do better, and if we don't, the only possible output of such an unequal system is increasing social disorder.
Gordon Long and I discuss social disorder in Part 2 of our series 2018: Year of Accelerating Social Change (15 minutes):
This essay is drawn from Musings Report 4, the weekly email sent exclusively to patrons, contributors and subscribers who pledge $5/month or more. Thank you for financially supporting my work.


My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.
Read the first section for free in PDF format.


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Sunday, January 28, 2018

The Pie Is Shrinking for the 99%

The ensuing social disunity and disruption will be of the sort many alive today have never seen.
Social movements arise to solve problems of inequality, injustice, exploitation and oppression. In other words, they are solutions to society-wide problems plaguing the many but not the few (i.e. the elites at the top of the wealth-power pyramid).
The basic assumption of social movements is that Utopia is within reach, if only the sources of the problems can be identified and remedied.  Since inequality, injustice, exploitation and oppression arise from the asymmetry of power between the few (the financial and political elites) and the many, the solution is a reduction of the asymmetry; that is a tectonic realignment of the social structure that shifts some power—economic and/or political—from the few to the many.
In some instances, the power asymmetry is between ethnic or gender classes, or economic classes (for example, labor and the owners of capital).
Social movements are characterized by profound conflict because the beneficiaries of the power asymmetry resist the demands for a fairer share of the power and privileges, while those who’ve held the short end of the stick have tired of the asymmetry and refuse to back down.
Two dynamics assist a social, political and economic resolution that transfers power from those with too much power to those with too little power: 1) the engines of the economy have shifted productive capacity definitively in favor of those demanding their fair share of power, and 2) the elites recognize that their resistance to power-sharing invites a less predictable and thus far more dangerous open conflict with forces that have much less to lose and much more to gain.
In other words, ceding 40% of their wealth-power still conserves 60%, while stubborn resistance might trigger a revolution that takes 100% of their wealth-power.
History provides numerous examples of these dynamics.  Once the primary sources of wealth-generation shifted from elite feudal landowners to merchants and industrialists, the wealth (and thus the political power) of the landed elites declined. As the industrialists hired vast numbers of laborers drawn from small farms and workshops, this mass industrialized labor became the source of the wealth generation; after decades of conflict, this labor class gained a significant share of the wealth and political power.
The civil rights and women’s liberation movements realigned the political and economic power of minorities and females more in line with their productive output, reducing the asymmetries of ethnic and gender privileges.
In broad-brush, progressive social movements seek to broaden opportunities and level the playing field by reducing the asymmetric privileges of dominant classes defined by power and privilege.  The core mechanism of this transition is the recognition and granting of universal human rights: the right to vote, the right to equal opportunity, and rights to economic security, i.e. entitlements that are extended universally to all citizens for education, healthcare, old-age pensions and income security.
Again in broad-brush, these movements have largely been categorized as politically Left, though many institutions deemed conservative (for example, various churches) have often provided bedrock support for progressive movements.
Social movements which seek to limit the excesses of state power tend to be categorized as conservative or politically Right, as they seek to realign the asymmetry of power held by the state in favor of the individual, family and the traditional social order.
The Expanding Pie Fueled Expanding Entitlements
Writer Ugo Bardi recently drew another distinction between Left and Right social movements: “Traditionally, the Left has emphasized rights while the Right has emphasized duties.
As rights manifested as economic entitlements rather than political (civil liberty) entitlements, rights accrue economic costs. As Bardi observes: “Having rights is nicer than having duties, but the problem is that human rights have a cost and that this cost was paid, so far, by fossil fuels. Now that fossil fuels are on their way out, who's going to pay?”
I would argue that the cost was also paid by higher productivity enabled by the technological, financial and social innovations of the Third Industrial Revolution, roughly speaking the interconnected advances of the second half of the 20th century.
These advances can be characterized as expanding the economic pie; that is, generating more energy, credit, technological tools, opportunities, security and capital (which includes financial, infrastructural, intellectual and social capital) for all to share in a socio-political-financial allocation broad enough to make everyone feel like they were making some forward progress.
This long-term, secular expansion of the pie naturally generated more demands for additional entitlements and rights, as the economy could clearly support the extra costs of allocating additional wealth and resources to the many.  From the point of view of the few (the elites), their own wealth continued expanding, so there was little resistance to expanding retirement, education and healthcare entitlements.
But in the 21st century, the expansion of the pie stagnated, and for many, it reversed. Adjusted for real-world inflation many households have seen their net incomes and wealth decline in the past decade.
Despite the endless media rah-rah about “growth” and “recovery,” it is self-evident to anyone who bothers to look beneath the surface of this facile PR that the pie is now shrinking. This dynamic is increasing inequality rather than reducing it.
The Shrinking Pie And Stagnant Productivity
It is a truism of economics that widespread increases in productivity are required to generate equally widespread increases in income and capital, i.e. productive wealth. To the consternation of many, productivity has stagnated since 2010; no wonder household income for all but the upper crust has gone nowhere.
If we glance at a chart of productivity, we see a strong correlation with speculative investment bubbles (the dot-com and housing bubbles 1995-2005) and speculative spikes fueled by central bank monetary stimulus (2009-10).  Absent bubbles and monumental excesses of central bank stimulus, productivity quickly sinks to its secular trend line: downwards.
Chart of US productivity growth since 1980
This next chart depicts the long-term trend line of productivity through all four industrial revolutions. Note the decline concurrent with the 4th Industrial Revolution (mobile telephony, the Internet, AI, robotics, peer-to-peer networks, etc.) and the depletion of cheap-to-access-and-refine oil:
Chart of declining GDP per capita over the past 2 centuries
The unwelcome reality is that the economy is changing in fundamental ways that cannot be reversed with policy tweaks, protests or wishful thinking.
Consider the percentage of the gross domestic product (GDP) that goes to employee compensation (wages and salaried). Labor’s share of the GDP has been in a downtrend since 1970, which not coincidentally was the peak of secular productivity:
Chart showing wages becoming a smaller percentage of GDP over time
In this below chart of the distribution of wealth in the U.S., we find the same correlation to the downtrends in productivity and labor’s share of the economy.  The bottom 90% of households' (the many) share of the wealth pie topped out in the early 1980s and has declined precipitously since, while the wealth of the top 0.1% (the few) has more than tripled since the late 1970s:
Distribution of Wealth In the US since 1917
This next chart depicts the remarkable (and recent) spike income growth the few have recently enjoyed, at the expense of everyone else:
Chart showing Soaring Income Inequality
The increase in wealth and income inequality and the decline of productivity and labor’s share of GDP are the result of structural changes in the economy, changes with far-reaching consequences.
While it’s appealing to identify policies endorsed by self-serving insiders and elites as the source of these changes, that is far from the whole story. Much of this growing asymmetry stems from profound changes in the global economy that depreciate labor (as conventional labor is no longer scarce) and increase the gains of the top few in a “winner take most” allocation that benefits speculation, leverage and new ways of organizing labor and capital that reward the organizers far more than the users/participants.
In this new era of a steadily shrinking pie, the sources of inequality and related social problems have also shifted.  As a result, the social movements that were effective in the past are no longer effective today. Attempts to address rising inequality with the old tools are fueling frustration rather than actual solutions.
In Part 2 — Social Unrest: The Boiling-Over Point, we examine why our existing models for social change have slipped into ineffectual symbolic gestures that fuel fragmentation and frustration -- and why that will lead to a dangerous boiling over of the 99% against the elites controlling the system.
When that happens (inevitable on our current trajectory), the ensuing social disunity and disruption will be of the sort many alive today have never seen.
Click here to read Part 2 of this report (free executive summary, enrollment required for full access)
This essay was first published on peakprosperity.com, where I am a contributing writer.

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.
Read the first section for free in PDF format.

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Thursday, January 25, 2018

Can We Finally Have an Honest Discussion about the Opioid Crisis?

The economy no longer generates secure, purposeful jobs for the working class, and so millions of people live in a state of insecure despair.
The opioid epidemic is generating a lot of media coverage and hand-wringing, but few if any solutions, and this is predictable: if you don't face up to the causes, then you can't solve the problem. America is steadfastly avoiding looking at the causes of the opioid crisis, which is soberly reflected in these charts of soaring opioid-caused deaths:
If we are going to have an honest conversation about the opioid epidemic, then we need to recognize the real causes of the epidemic:
1. The Pharmaceutical industry falsely claimed synthetic opioids were non-addictive, and a complicit, toothless regulatory system did nothing, egged on by politicians who were bought off by mega-bucks campaign contributions from Big Pharma.
2. Our sickcare system is very good at over-prescribing painkillers as a substitute for treating the source of the pain, which is often complex. Our "healthcare" system, much of which consists of endless TV adverts promoting one costly medication after another, is basically a conduit from Big Pharma to poorly informed "consumers" (quaintly referred to as "patients" to mask the actual dynamic).
This system has trained "consumers" to expect a magic pill for every ailment or pain, and any doctor who refuses to over-prescribe is risking blowback from the "patients" and the rest of the system. Americans have been trained to avoid treatments that require effort and changing their lifestyle; they demand a magic pill that works right away, with no effort required.
3. The economy no longer generates secure, purposeful jobs for the working class, and so millions of people live in a state of insecure despair, a state devoid of purpose, meaning, and ways to contribute to their families and communities. People stripped of meaningful livelihoods are prone to finding escape in destructive addictive drugs and habits.
4. The counterproductive War on Drugs has effectively outlawed cannabis for decades, depriving the public of a pain-reducing natural product. While the law-enforcement status quo, exemplified by Attorney General Jeff Sessions, still makes factually false claims about the dangers of cannabis, the truth is that if cannabis were legal, affordable and easily available, tens of thousands of Americans would still be alive, because cannabis doesn't kill people and you can't overdose on it.
Go ahead and do your own research: I couldn't find a single verified instance of a cannabis-caused death in the U.S. when I sought verifiable statistics on cannabis-caused deaths a few years ago.
So while law enforcement got helicopters and other toys to play with and the War on Drugs Gulags filled up with citizens who should never have been imprisoned, the War on Drugs has killed tens of thousands by outlawing a safe pain-killer and legalizing deadly, highly addictive pain-killers because those deadly, highly addictive pain-killers reaped Big Pharma billions of dollars in profits.
It doesn't have to be this way. We have the means to generate meaningful work in our communities--I've laid out one system to accomplish this in my book A Radically Beneficial World.
We should legalize cannibis immediately at the federal level. While law-enforcement bureaucracies will mourn the slashing of their bloated War on Drugs budgets, the nation will finally put the destructive, failed, counter-productive War on Drugs in the ash heap of history.
You can't just give people and communities a subsistance entitlement like Universal Basic Income (UBI) and expect them to thrive. If we look deeply into the opioid epidemic, we find a crisis of purposelessness fueled by a lack of meaningful work and ways to contribute and earn financial security by serving others in the community.
If we don't face up to the essential role of meaningful work in human fulfillment and security, then we'll never solve our addicition epidemic and all the related social ills.
I explore these issues in my new book Money and Work Unchained.


My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.
Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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