Don't Worry, Be Happy - Poverty is Going Away - or so says Mr. Gates

A friend pointed me to this piece in the WSJ. I don't usually read that rag - but this is kind of interesting. It is an excerpt from the upcoming Annual Letter of the Bill and Melinda Gates Foundation.
  Gates Letter in WSJ

Now I have friends who will positively NOT read or touch anything with Bill Gates' name on it, including any version of Windows OS. But this letter is interesting.

Bill and Melinda get around a lot more than I do. They are traveling the world, and they are trying to do something about poverty and all of that. If you have been reading along here, I have been pushing the idea that developing nations are somewhat held back by their prevailing world views. I would contend that this "world view" thing is why Europe and the US and mostly Northern countries are somewhat more advanced than those we call "developing".

Turns out, according to Mr. Gates, it may not matter much. It appears that things everywhere are definitely getting better. Of course, there are lots of people working on this - so hopefully we are making some progress. But Mr. Gates' hopes are much higher than mine. He predicts that by 2035, a mere 20 years, there may be NO poor countries left.

Well, I hope he's right. And I also hope I live to see it - that is just within the realm of possibility! One thing is for sure, as Howard Zinn was wont to say, things have sure been a lot worse in the past. We are making some headway here.

What think you?

Sugar, Central America, CAFTA and Economics

I am writing “Scheider’s Simplifed Rules for Economics”. The product would be similar to my “Rules for Life”, or my “Rules for Managers”, or even “Rules for Politicians”.

This economics stuff fascinates me, and I am sure that there is a way to simplify the mess and make it comprehensible – but it is taking longer than I want. And my document keeps growing!

Our local paper recently had a nice short piece on sugar subsidies. Instead of a total overview of economics – why not a story at a time? No one is going to read a long thing on “economics” anyway.  This piece in the Wisconsin State Journal is very well done, nice and short, and makes all the key points. SugarSubsidy yields a bitter harvest  I just want to add a bit of framing to it.

When CAFTA was originally proposed, the ONLY benefit that economists in Central America could identify for that region was about 140 added jobs in the sugar industry. Sugar is one of the things that Central America can produce more cheaply than the US. After CAFTA was passed, the sugar industry lobbied our fearless elected leaders to provide them a subsidy. End of the benefit for Central America.

The American farmer can produce rice and corn and beans more cheaply than anyone can in Central America, ship them there, and still sell them for less than the local producers. But sugar – not so.

The way trade works is that when someone can do it better or more cheaply than you can – you should buy it from them. That increases our wealth – all of our wealth. Of course, there may be some people doing this for a living – and this causes a modest disruption in their lives. But for the good of the whole, and to grow wealth for all of us, you should focus those people on doing something else. Help them grow corn, or figure out how to get energy from wind. Subsidizing something that can be done more cheaply elsewhere is called “destroying” wealth.

Any time we restrict trade like this, we all pay for it – all of us – including the people in Central America, or Africa, or elsewhere on the planet. Most directly, of course, you and I in this country are paying a lot more for sugar - $3.5 Billion per year. I would have preferred to have put that money into research into better anything that would help grow the economy and facilitate wealth creation – not wealth destruction. We would have gotten more miles out of subsiding college educations for all of the displaced workers and their kids! And it would also have rewarded those Central American farmers for their productivity.

Do you see how this works? Yes, it costs us something in jobs, yes we need to adapt to that – but NOT doing that would put us back to subsidizing pin manufacturers, or buggy whip makers, or cotton spinning. With that approach, we would all still be farming, just as 97% of us did when this country was founded. Now we can feed the world with 0.7% of us actually farming. With that approach, all of your clothing and fancy gadgets would also cost you a small fortune, because virtually all of them are made elsewhere – increasing OUR wealth. ALL of us.

We are, after all, all in this together. Thank you, Red Green.
--------------------
N.B. As my good friend Pat Patten pointed out to me after this was posted, we cannot actually feed the world - we cannot even actually feed ourselves - but you get the point. The American farmer is amazingly productive - which generates wealth for ALL of us.

Conscious Capitalism

I’ve been laboring along here in this blog with issues relating to economic development, and also touching on economics issues. Along the way, I have also been reading a lot about economics. It seems complicated enough – there are all these different schools, and all these economists who never seem to agree with each other. As Harry Truman famously said, I want a one armed economist. They keep saying, on the one hand, and then, on the other hand!  http://www.iwise.com/tFhbr

But as you read more broadly, it becomes clear that there really are some simple things that make up our economic system. I keep thinking it should be possible to reduce this “economics of capitalism” to a few simple concepts that we could teach in grade school, that would help overcome the erroneous ideas most of us are walking around with, which lead to lousy decisions. The lousy decisions happen on a personal level, and most importantly, on the global and national level. Our fearless elected officials are not immune to the errors of the common man in this arena, any more than they are in any other arena. We have lots of lousy economics preconceptions driving national policy all the time.

Along the way, I have found some excellent books and authors that have greatly simplified the ideas of economics for me. The history is almost fun to read in the right light. It is amazing how we got to where we are. And the principles that underlie our economic world do appear to be amenable to human understanding. I’m working on my own “10 rules of economics” – but the publication of that will have to wait a bit.

But I just stumbled on an interview with the CEO of Whole Foods – John Mackay. The company always impressed me, but his ideas are even more impressive. You can watch the video here, and there is also a transcript:
   http://bigthink.com/videos/four-principles-for-successful-conscious-capitalism

What follows is an attempt to reduce his words to an outline format. It helps me to understand it better, and it might also help you. If nothing else, it might persuade you to listen to the talk.

Principles of Conscious Capitalism

He asks us to become aware (conscious) of the principles that support the Capitalistic system. It is not a “free market free for all”, where anything goes, and the strong prevail while the weak perish. Without some basic principles, supported by laws and custom, we have no capitalistic system. You can see the effect in countries that do not support one or more of these principles. Their economies tend to suffer compared to others.

1 The Right to Own Property. Our system is built on this basic principle. People can own property, they can own wealth. It is one of the prime motivators of our system for creating wealth.
2.      The Right to Trade. We must be able to exchange property, or labor, for other property. We enhance wealth by means of trade. The more we can trade, the greater wealth we can create overall. Restrictions on trade restrict our wealth creation. There are short term problems with free trade, and we often resist it because of that. For example, we enact laws which restrict trade in order to try to preserve jobs. But that is really short sided and self defeating. He is right there, but he would need to explain that a bit more to get general acceptance.
3.      The Rule of Law. Just and predictable laws are a basic requirement for any society, but they are especially important in the capitalistic world. They support the basic process of wealth creation.

Personally, I would add my favorite mantra to these basic principles, but he includes it in the next section: “We are all in this together”.

Principles of a Conscious Business

Given the basics of a stable economic system, the next thing is to understand or be conscious of is how a business really works.

1. 1.      A Business Has a Transcendent Purpose. I like the way he does this. No human lives just to eat or breathe. We do need to eat and breathe – but that is not what life is about. Just so, a business does not exist just to make money, or to maximize profits. That is not a HUMAN goal. If making money is the whole deal, then we have a real problem. The purpose of a doctor, or lawyer, or teacher, is not to make money. The profession has a purpose, a goal in society to fulfill. Just so, any business has to fulfill a role in its society. And of course, it has to make money, or at least break even. But that is NOT its PURPOSE! 
2. 2.      A Business Has Many Interdependent Stakeholders. These are its customers, employees, investors, communities, suppliers, etc. There are other, more remote stakeholders as well – unions, government, the world economy, the environment, etc. And they are all interdependent. Focusing on just one of them is not enough. The win / win business model is to seek to maximize the benefits to ALL stakeholders. This is my "we are all in this together". When one of us benefits, the others do as well. When one is hurting, the rest of us pay the price as well. Some are more remote, some nearer - but we are all interconnected in this economic reality. 
3. 3.      A Business Has Servant Leadership. The leaders of an organization are not there to maximize their own personal gain – but the return of all of the stakeholders. They are there to serve the enterprise, not themselves. That is what higher purpose is about. That is what enables a complex, interdependent society to thrive.
4. 4.      A Business Must Create a Culture that supports these principles. All of this does not happen by itself, or by accident. This conscious culture provides the background and the structures that support the higher business purpose.
   

And what do you think?

Poverty, Development and the Future - Garment Industry

Planet Money on Cotton and T-Shirts

OK, I give up. I know that what I write here will have minimal effect on poverty and development opportunities around the world. But sometimes, I come across things that I simply MUST share. This is one. NPR's Planet Money just published a series of videos and articles on how T-shirts are made. It is simply amazing.  You HAVE to watch it, and read the notes.

13 workers in a single cotton farm in the US, generate enough cotton to make 9.4 million T-shirts. That is an amazing story of US productivity. But it is much more than that as we learn where that cotton goes. Watch the videos, but also read the details, please.  Follow the 5 links to see the whole Planet Money story.
 http://apps.npr.org/tshirt/#/title

Planet Money funded this research by selling the T-Shirts! Push the "Begin" button and watch the video. Then read the bit below the video - it has some amazing information. Then - go to the next one. The series follows the cotton from the farm, through all the steps making it into yarn and then t-shirts. There is good and bad - but all thought provoking.

Watch it, read it, and then come back here, please.  Or read this and then go watch it - whatever works.

My thoughts:

The People Part of This is the Best
I hope you watched that part. If not, go back and check it out. You will recall that thousands of workers were killed not long ago when a garment factory in Bangladesh collapsed. And thousands of workers in Nicaragua travel many miles a day for this same kind of opportunity.

US Farming Productivity is Amazing
Not just cotton, but virtually everything. And much of it comes from mechanization and from genetically modified seeds. Virtually all cotton is GMO. And the quality is very high and very consistent.

US Manufacturing Needs Help
You may have noticed that all of the big cotton machines have either German or Japanese names. The tractors on the farm might have been US made - not sure. But not much else was.

Government Agricultural Subsidies Seem Crazy
And you will also note that the cotton industry is subsidized, just as is most of US agriculture. I have a very good friend who is a farmer. He is also amazingly productive. But I really doubt that this amazingly productive part of our economy needs government support to compete with the rest of the world. The rest of the world does it too - but that is no excuse. But  . . . that's another whole story. I would spend the money on research for new industries, new ideas, which see below.

It could be worse.
As noted in the piece, the US was about here in the early 1900s. The minimum wage helped solve some of the problems. We had lots of women working in terrible conditions for a meager living. Bangladesh factories are terrible - but they are better than no work, no added income. Columbia's are a clear step up. All of that used to be done here - until the cost of labor went up.

Race to the Bottom
I thought it was interesting that Jockey does not think that there is another part of the world that can make the garments any cheaper! And the current cost of the labor in a $12 shirt is only about $1. So they may be able to raise their wages and not lose the business. But . . . I would bet a dollar that parts of Africa will eventually get some of this. All they need is a bit more education, and a more stable political world. We can bemoan the low wages, but that is not likely to change until the poorest of the poor are making a living wage. That will change everything. We really are ALL in this together. Our consumer economy is constrained and helped by the poorest of the poor.

There is Hope
Watch the last segment. Look at the people who work in this world. We were there too - we can all do better.

Ultimately - NO labor, NO Wages.
As the cost of producing T-shirts does eventually go up - what is the next logical step? That garment factory is not the major cost of the T-shirt. But even so, the wage will eventually rise. The other parts are already highly automated: the cotton, the shipping, the cloth making. Those things are about as automated as they can get - albeit I am sure there will be more improvements. What would it take to build an intelligent gadget that could cut and sew and assemble T-shirts without a single human hand involved? I am quite sure that the technology is very doable at this very moment. It is just waiting for the cost of production to rise to the point that the shirts can be made completely by machines. Lots of T-shirts - but very few people able to buy them!

The Solution?
I don't have one.  But I do have some thoughts.

I think we have to get past the idea that the wealth which we generate can only be shared by those who invest their capital or labor to produce it. Eventually, our automation, our ingenuity, our productivity will reach the point where there will not be enough jobs to go around. We will still create the wealth, the products - but very few people will be able to buy them. We have to let go of the idea that participation in our wealth generating engine has to be based on employment. The wealth that our world creates really does belong to ALL of us - not just those fortunate enough to get the education, the job, or to live in a stable society where things actually work.

But we still want a competitive, capitalistic based economy. We still want the best and the brightest to to generate wealth, to solve the problems of health and disease, and to create new engineering, etc. As they continue to do this, we are all enriched - so let's keep motivating them.

BUT . . . let us also create the mechanisms needed to really SHARE that wealth. We need better education, we need arts, we need scientific research, we need people to be able to buy food and clothing and gadgets! A guaranteed minimum income seems to me to be the natural outcome. This year, Switzerland is voting on a measure to guarantee $2,800 / month to every citizen. They plan to pay for it by reducing government programs for the poor. Both progressive and conservative politicians support it, but for different reasons. Imagine that!
 http://hereandnow.wbur.org/2013/11/27/swiss-guaranteed-income

A minimum basic income has been supported over the years by both the left and the right. See here for a bit more history of the idea and current programs. http://www.basicincome.org/bien/index.html.

This is not a pipe dream - we will eventually realize it.

What do you think?

Culture – Economics – Development – Psychology – Sociology – Behavioral Economics

Culture – Economics – Development – Psychology – Sociology – Behavioral Economics

Introduction 
OK – if that doesn’t drive the Google search engine crazy, nothing will. If you have been following along here at all, you would know by now that I am fascinated by all of the topics above. A few years ago, I did a little piece on how the culture of a nation affects its economic development.
 http://carlscheider.blogspot.com/2011/01/culture-and-developing-nations.html

I continue to pursue this topic, because, much to my utter amazement, everyone does NOT agree with this thesis – that culture, or better, the way people think about the world, has any effect at all on their prospects for economic development.  The biggest problem is that people are generally using the word “culture” as a large, very inclusive concept including history, dance, food, language, etc.  When I am using it in terms of its impact on economic development, I am speaking of the “world view” that one carries around in one’s head as a part of one’s cultural heritage.  Simply by failing to make this distinction, folks get lost in this discussion. For clarity, for the future, when I am talking about “culture” and economic development, I will use the term “culture or world view”.

There are a multitude of examples where the failure to make this distinction utterly confuses the discussion.  I refer to this article by Amartya Sen from 2010.  He is a Nobel Prize winning economist, and he is describing the utter failure of this “grand” theory of development as influenced by culture.  Culture and Development by Amartya Sen:
http://info.worldbank.org/etools/docs/voddocs/354/688/sen_tokyo.pdf.

The Sen article is from 2000, so it may be a bit dated. Generally I like the way Dr. Sen thinks.  His book Development as Freedom is an excellent exposition of how a good social infrastructure supports development. In that book, he also explores in depth the real human benefits that come with economic freedom, far beyond our propensity to acquire more things. BUT it appears to me that he really fails to grasp the real power of culture. He tends to equate culture with the broader concept of dance, religion and history of a people – not to HOW people think. How we view life governs what we do in a very powerful way. That “how” is formed by our history and language and other cultural components, but it is itself the key thing. And it does not change easily. If we want to deal with people immersed in a cultural world view, we will be a lot more successful if we understand that world view and work within it. Trying to change theirs to ours is a recipe for failure. Most economists and sociologists and the like do not GET it. Most do not understand just how powerful the world view is. So I continue to pursue the idea and search for additional proof.

A similar “misconception” of the idea of culture and development is found in this larger summary of the literature:  http://www.unesco.or.kr/eng/front/programmes/links/6_CultureandDevelopment.pdf

Well, I have found a few more things that indicate to me that this is the right way to think about this stuff, thank you very much.  That is the purpose of this entry.

Research and the Convergence of Ideas via the Internet
This is a bit of a digression.  If you want to see the new research, just skip ahead.

This search for interesting things on culture and development is greatly facilitated these days thanks to some tools available on the Internet. One in particular has proven to be very useful – Zite. It’s an “APP”, available on iPhone and Android. You prime it a bit, and it goes off and finds information that it thinks will be of interest to you. You score the articles it finds – thumbs up or thumbs down. It notes that, stuffs it into its Bayesian probability engine, and next time, it presents things that are closer to your interests. It is a highly personalized daily magazine! It’s just like Pandora – the personalized radio station. You tell Pandora if you like a song or not, it notes the attributes of that song and adds it to your profile. It then searches for things with similar characteristics. It’s a big Bayesian probability engine. Google’s translation engine is the same. It was primed with as many translations as they could find, and it just runs the probabilities. It works pretty well.

When I was in graduate school and later in law school, ALL research was done the hard way. I went to libraries, explored printed magazines and books and indexes. If it was not printed on paper, I would never see it. In a few instances, I found a reference to an unpublished work – someone’s doctoral dissertation on a topic – and I could order a printed copy of that – at no small expense. But today, ALMOST everything is available on line. And there is this wonderful probability analysis available so I do not have to actually look at all this stuff. As I find things that are related to my interests, they conspire together to push more things at me.

I think this holds out great prospects for the advancement of human kind. In the past, some ONE person might know ONE important thing – but it was extremely hard to relate that thing to everything else we know. Now – it happens all the time.

A Google Opportunity
I am still amazed that Google has not jumped on this with both feet. The Google eReader service used to gather together all of the feeds to which I subscribe. (I use Feedly these days). But it did not let me score the articles which I choose to read. Zite does that, and goes beyond my subscriptions to find new sources. It frequently serves up something that was just published a few hours ago.

Books – limited availability
There is also the problem that a lot of really good information is in books – and they are NOT searchable. Authors have to make a living, so the books cannot simply be available for free. BUT, if the contents were searchable, we could find things we might be willing to buy. I know Google is working on that, but the publishers are still resisting. For the moment, I have to depend on reviews or summaries of books and unpublished papers. This has given me a whole library of books that I am going to read eventually. I am trying to return the favor by posting comments that point to books that I have read with enough detail that someone else can find the key ideas.

Sociology and Psychology and Economics and Geography – a journey
The problem with the scientific method is that it tends to divide and conquer, but it rarely integrates. To get a doctorate, you focus on one small area, and end up knowing more about that than anyone else on the planet. It’s like climbing this big mountain, and when you get to the top, you look up and realize that you are just at the top of a tiny foothill, and the whole of human knowledge is that mountain range ahead of you. When you do research, you focus on a small area so that you can really understand it well. But that has a tendency to myopia. It is hard to step back and see the big picture, and how your area of expertise relates to other fields.

For example, a number of years ago, I had the good fortune to stumble on a series of books which led me to On Human Nature by Edward O. Wilson. He is a biologist, famed for his studies of ants. His book is a work in Socio-Biology, a nice integration of the two. He uses his biological knowledge to identify traits in humans that he believes are rooted in our biology by evolution. Things like – we are hierarchical, social, we like strong leaders, we are black and white thinkers, etc. I found those things fascinating to help understand just how people operate.

Then I had the good fortune to travel to Africa, and meet some people who pushed me to read Guns, Germs and Steel by Jared Diamond. He is a geographer. The book explains how parts of the world developed differently based on the availability of small grains, animals that could be made beasts of burden, etc. The African experience also pushed me to research “culture” a bit more, and I stumbled on Cultures and Organizations, by Geert Hofstede – a sociologist. This led me to Harrison, Culture Matters, and other works. These people are sociologists for the most part, but they have discovered that the inner workings of human brains, or our culture or world view, influences the way our world of economics and politics works.  Did you ever wonder why Latin America’s experience with democracy is so different than that of the US or Western Europe?  And if you think the Arab states are going to be free market democracies any time soon, I have news for you.

More recently, I happened on Thinking, Fast and Slow by Daniel Kahneman, a psychologist! He won the Nobel Prize in Economics for explaining how people really make economic decisions! This has moved economics as a science from purely abstract theories, to an experimental approach that studies how people really do make decisions. It’s called behavioral economics. This goes hand in glove with a fine little book, Poor Economics which is really a sociological / behavioral economics look at poverty in developing nations!

Back to Psychology
If you are still following along here, I have found yet another integration (thank you Zite), from the field of psychology. This study makes it VERY clear that people raised in different cultures really do think very differently. The authors of this study do not draw any conclusions with respect to their economic systems or forms of government – but the implications are pretty clear to me.

This work summarizes many psychological experiments across different cultures – after the pattern of Kahneman’s book, Thinking, Fast and Slow. It concludes that our thinking and decision making varies widely across different cultures. You can find a summary article on the research here: http://www.psmag.com/magazines/pacific-standard-cover-story/joe-henrich-weird-ultimatum-game-shaking-up-psychology-economics-53135/ (Ethan Waters).

The entire study can be found here: http://www.psmag.com/magazines/pacific-standard-cover-story/joe-henrich-weird-ultimatum-game-shaking-up-psychology-economics-53135/. I do not recommend reading this – it is long and scientific, you know.  The summary cited above is a lot more readable.

The primary point of this paper is that while most psychological research is done with Western graduate students, it turns out that these subjects are “WEIRD” – Western Educated Industrialized Rich and Democratic. These attributes are fairly rare in the rest of the world. Most of human kind do not work this way at all, yet most psychological research tries to draw absolute rules about behavior from this small pool.

For myself, the key thing is that culture, or world view, changes the way people make decisions – decisions about what to buy, how to make a business deal, what is fair, ethical, etc.  I am not making this up.  People from different cultures have very different results.  If your language has a distinct future tense, you tend to save more. See this PDF paper:
  http://www.anderson.ucla.edu/faculty/keith.chen/papers/LanguageWorkingPaper.pdf

Your native tongue tends to influence a LOT of things about how you think about the world. A popular SF author, Ian M. Banks, envisioned a very advanced human culture into the distant future, called “The Culture”. One of the key things this society did was to create a completely new language. They consider any “evolved” language to be dangerous, fraught with emotions and irrational perspectives. I think he is on to something. For some detailed discussion of this, see: The Player of Games.

If you are raised in the US, you are more tolerant of risks than almost anyone else on the planet. You also think you are in charge of the planet, but that is a different problem.  We tend to think that our understanding of “fairness” is a universal truth.  But that is simply not the case.  Other peoples see fairness as a very different problem.  They are much more community oriented than our individualistic or competitive approach to the problem.

The authors provide some nice balance in terms of the “good and bad” about culture. Most people, including people in other cultures, assume that people from this “weird” culture have a positive advantage when it comes to economic and social development. It does appear that there are parts of this particular world view that are well adapted to democracy and market based economics. But there are other parts of this Western culture that are seriously deprived when compared to other cultures.

• "In their paper the trio pointed out cross-cultural studies that suggest that the “weird” Western mind is the most self-aggrandizing and egotistical on the planet: we are more likely to promote ourselves as individuals versus advancing as a group. WEIRD minds are also more analytic, possessing the tendency to telescope in on an object of interest rather than understanding that object in the context of what is around it. "
  "The WEIRD mind also appears to be unique in terms of how it comes to understand and interact with the natural world. Studies show that Western urban children grow up so closed off in man-made environments that their brains never form a deep or complex connection to the natural world." (Ethan Waters)

I love it –westerners are the ones with the “weird” way of looking at things.

Insights
This approach has some great insights, such as:

• "Henrich suggests that his research about fairness might first be applied to anyone working in international relations or development. People are not “plug and play,” as he puts it, and you cannot expect to drop a Western court system or form of government into another culture and expect it to work as it does back home. Those trying to use economic incentives to encourage sustainable land use will similarly need to understand local notions of fairness to have any chance of influencing behavior in predictable ways." (Ethan Waters)

I would certainly agree. Another great insight:

• "Markus and Kitayama suggested that different cultures foster strikingly different views of the self, particularly along one axis: some cultures regard the self as independent from others; others see the self as interdependent. The interdependent self—which is more the norm in East Asian countries, including Japan and China—connects itself with others in a social group and favors social harmony over self-expression. The independent self—which is most prominent in America—focuses on individual attributes and preferences and thinks of the self as existing apart from the group". (Ethan Waters)

Community Based Development
At this point, you are saying – “So What!”

These authors have used specific experiments that clearly document how people think differently. So it turns out I am not making this up, as Dave Berry would say! What is not clear is just how this impacts economics or politics. The key insight is that one cannot simply import your own culture’s system of incentives or checks and balances and expect it to work someplace else. The only viable approach is to work within the culture, with the people, and help them discover what it is that they can accomplish that will work for their world. That would be called community based development, I believe. For which, see this older post: http://carlscheider.blogspot.com/2011/12/community-based-development.html

Thanks for reading this far. I doubt many of you did, but  . . . that’s part of life and clearly my major problem. Too darned many words.
Take care. Now if I can just get Amartya Sehn to read this. I wonder if he has a Google search on his name like I do?

Inequality - AGAIN

Did you ever have one of those periods where everything seems to come together on one idea? I've been sitting here in the North Woods of Wisc., reading and perusing the Internet. I've come across some very interesting things about inequality in our society. You might also find them of interest. These are TED talks, but I have found that the YouTube version is a bit more consistent - and the commercials less annoying!

The Disparity Problem is BAD
This first talk, by a Canadian, Chrystia Freeland, explains how great the inequality is these days. The top 1% have bunches of stuff, mostly, it seems, at the expense of the bottom 10 to 20% and the rest of us in the middle class.  We are growing wealth and productivity - but that wealth is NOT being spread about. It is captured by the very top. She makes the point very well.

   http://youtu.be/d6NKdnZvdoo

She also talks about the risk of instability in our society if this is not addressed.

But We Can Fix it

She closes with some words about what we might do to correct this problem. Taxation, investment, etc. But the key thing she is looking for is a major social innovation.  We solved these problems once - after the industrial revolution - although it took us 100 years and the pits of the Great Depression. We need to do it again! Hopefully we will get to it before the wheels totally come off this time.

 

Disparity Correlates Negatively to Health and Wellbeing in the Society

The other talk is even more interesting. This fellow, Richard Wilkenson, uses data - statistics - to show that societies with large income disparities have worse health, higher murder rates, etc., Income inequality is divisive and corrosive. It threatens the stability of the society.

 http://youtu.be/cZ7LzE3u7Bw

Some surprises in there.

The speaker starts with the surprising fact that income inequality ACROSS nations by GNP does not correlate with any human health factors. But within a nation, income inequality correlates very closely with every measure of human health and social well being.  Even more surprising, it does not seem to matter HOW a society gets to a lower income disparity. Norway does it through taxation, and Japan in a totally different fashion. Both have the benefits of a healthier society in all categories. The speaker cites 200 different studies.

At the end of this talk, he makes the point that I have been wont to repeat - we are all in this together. In a society with great income disparity, the folks at the very top, the very richest, suffer as well. They are less healthy than the comparable level in a society with a lower level of disparity.

He makes a conjecture as to the causation - the stress of the society, the class structure, the lack of respect drives the health and behavior. I think he is on to something there. The frustration of the American Dream denied is a big problem in our world. We are healthier and better off where that disparity is not so obvious.

I know it's a lot of stuff. Let me know what you think.

Inequality is a Choice - Joseph Stiglitz

This is an interesting article by Joseph Stiglitz.

http://opinionator.blogs.nytimes.com/2013/10/13/inequality-is-a-choice/?ref=opinion&_r=0

If you are not familiar with the author, he is a world renowned economist –  Noble prize winner, and one of the founders of the approach called “behavioral economics”.
 https://en.wikipedia.org/wiki/Joseph_Stiglitz
My point, he is a wise and learned fellow among economists, and we would do well to pay attention to what he says.

I have been reading a bit in economics of late. If you have been following along here at all, you would know that I tend to think that economic disparity is the result of our cultural mindset – our world view. Dr. Stiglitz differs on that. In this little piece, he makes it clear that a large part of our economic disparity comes from the actions of our government. Given that our form of government is drawn from our cultural world view – that makes some sense. But  . . . the problem is that the once champion world view that dominates the US culture, seems to have led us to a situation where our government is now inhibiting wealth creation, and fostering rent seeking. Our sense of “individualism” has finally triumphed over our “commonality”, and we are heading down the path to increased poverty comparable to that of many developing nations.

I have despaired of changing world views, but there is no reason we can’t change our government. We have to get back to the sense of commonality, the common good. And let go of this protection of the richest and most powerful.

As he points out in this article, although income inequality had been falling around the globe and in the US, that trend has stopped and reversed. The US, in particular, is leading a new wave of greater and greater income inequality. In virtually all developed nations – there are a few exceptions – income inequality has grown enormously, with the top 10% benefiting immensely, and the bottom 10% become even worse off. Global poverty and US poverty is growing.

Some would argue that the trend is automatic. They would say it is the result of globalization and free movement of capital and services. But Stiglitz points out that it is the result of conscious choices of our government. In the US, it is the result of tax breaks for the rich, easing of regulations on the financial sector, and the lack of adequate investment in our education and health care infrastructure. This inequality is eroding our democratic system. It is the root cause of our “recession” – the lack of investment, and the lack of disposable income in our middle class. And the touted “austerity” programs are only making the problem worse.

American “rent seeking” has gone global. That is where those who can seek to benefit by manipulating the system, by getting a larger share, not by making the system work better, or the pie larger – truly growing wealth. Avoiding taxes is one modest example – as even the best and brightest do in major ways. Apple’s tax avoidance is legendary. While they benefit enormously from government programs which create the technology they use, they pay as little as possible in taxes, using all the tax avoidance schemes created by our fearless leaders.

The worst outcome is the poverty of our children. In the US, 1 in 4 children live in poverty. In Spain and Greece, it is 1 in 6. In Australia, Britain and Canada, 1 in 10. We are a disgrace among developed nations!

Bottom line – we have chosen this path, and the outcome will not be a place where any of us want to live – even those at the top. As Red Green says, we are all in this together. If we do not increase our investment in ourselves, the few rich at the top will have to find someplace else to live. They won’t like it here anymore than the rest of us.