From David Ruccio
Economic inequality in the United States and around the world is now so obscene, and has convinced more and more people to do something about it, that the business press has initiated a campaign to deny its very existence.
They and the folks they represent are losing the battle of public opinion. And they’ve decided to do something about it.
First up was the Economist, the “newspaper” of record for liberal capitalism [ht: sk], claiming that new research undermines the pillars of the seemingly universal belief that “inequality has risen in the rich world.” Yes, as I have documented from the very beginning on this blog (e.g., here, here, and here), there are plenty of mainstream economists who have attempted to prove that inequality isn’t really a problem—either because

From David Ruccio

The idea that GDP numbers don’t tell us a great deal about what is really going on in the world is becoming increasingly widespread.

David Leonhardt, in reflecting the emerging view, has argued that GDP doesn’t “track the well-being of most Americans.”
Now, we’d expect that someone like socialist Democratic candidate Bernie Sanders would question the extent to which the low unemployment numbers, associated with economic growth, hardly tells the whole story about the condition of the American working-class.
Unemployment is low but wages are terribly low in this country. And many people are struggling to get the health care they need to take care of their basic needs.
But even centrist candidates Joe Biden and Pete Buttigieg are making the case that the headline

From David Ruccio

There is a specter haunting capitalist development around the globe.
In fact, the latest Human Development Report begins by naming that menacing apparition:
The wave of demonstrations sweeping across countries is a clear sign that, for all our progress, something in our globalized society is not working.
Different triggers are bringing people onto the streets: the cost of a train ticket, the price of petrol, political demands for independence.
A connecting thread, though, is deep and rising frustration with inequalities.
If anything, that’s an understatement. It’s not just “something” that is wrong; contemporary capitalism as a whole is not working, except for a tiny—but quite powerful—group at the top. The rest of us are being subjected to what can only be called

From David Ruccio

There aren’t many ways ordinary Americans have a say in what happens to the surplus that determines their fate.
Most of the surplus in the United States is appropriated by the boards of directors of large corporations. But most employees are excluded from the decisions in their workplaces about what’s done with that surplus. Their local communities, where the corporations operate, don’t have much of a say either.
That leaves federal taxes. Corporate income taxes are pretty much the only way the nation—and therefore its citizen-workers—can lay claim to a share of the surplus, which it can then use to finance government programs.
Given the tremendous growth in corporate profits in recent decades—including in recent years, during the recovery from the Second Great

From David Ruccio
If there ever was an argument in support of Medicare for All it’s this: despite spending more on health care than any other country, the United States has seen increasing mortality and falling life expectancy for people ages 25 to 64, who should be in the prime of their lives.
A new report published in the Journal of the American Medical Association paints a bleak picture: overall life expectancy in the United States, which had increased for most of the past 60 years, has actually fallen for three consecutive years. But this is not just a recent trend. U.S. life expectancy began to lose pace with other countries in the 1980s, and, by 1998, had declined to a level below the average life expectancy among Organisation for Economic Cooperation and Development

From David Ruccio
Well that didn’t go so well. . .
Still, Elon Musk’s new Cybertruck would appear to be the perfect design for America’s contemporary dystopia. Its bullet-proof stainless steel alloy panels and transparent metal glass are tailor-made to keep its elite occupants safely guarded from attack. And even though the windows obviously need considerable improvement before production begins, and “despite ‘no advertising & no paid endorsement’,” Tesla has already received almost 150 thousand orders for the truck.
Clearly, there’s a lot of surplus available—in cash and loans—to the small group at the top of the U.S. wealth pyramid to purchase such vehicles.

In fact, as we can see from the chart above, auto loans comprise more than 50 percent of the installment loan debt of the top

From David Ruccio
Emmanuel Saez and Gabriel Zucman begin their new book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, with the moment in 2016 during the first presidential election debate between Donald Trump and Hillary Clinton when the former Secretary of State challenged the reality-show celebrity about how little he had paid in federal income taxes over the years. Trump proudly admitted it: “That makes me smart.” And Clinton, for all her carefully crafted technocratic proposals to fix the tax code, failed to effectively respond to Trump.
Jump ahead three years, and the issue of wealth inequality in America has risen to the top of the political agenda. Clinton lost the election, Trump is probably not worth what he has claimed, but the nation’s wealth

From David Ruccio
Obscene levels of economics inequality in the United States are now so obvious they’ve become one of the main topics of public and political discourse (alongside and intertwined with two others, the climate crisis and the impeachment of Donald Trump).*
Most Americans, it seems, are aware of and increasingly incensed by the grotesque and still-growing gap between a tiny group at the top—wealthy individuals and large corporations—and everyone else. And this sense of unfairness and injustice is reflected in both the media and political campaigns. For example, Capital & Main, an award-winning nonprofit publication that reports from California, has launched a twelve-month long series on economic inequality in America, “United States of Inequality: 2020 and the Great

From David Ruccio

Across American universities, corporations, and financial institutions, researchers are honing computer models designed to predict the winner in the November 2020 presidential election in which Donald Trump will face a Democratic candidate still to be determined.

One such set of models, developed by Moody’s Analytics, which focuses on the electoral college (and not the national popular vote), predicts a convincing victory for Trump. Moody’s based its projections on how consumers feel about their own financial situation (the so-called pocketbook model), the gains the stock market has achieved during Trump’s time in office (the stock-market model), and the prospects for unemployment (the unemployment model).*
As I see it, there are two fundamental problems with

From David Ruccio
I cringe when I listen to or watch these interviews. But here it is, with the Real News Network.
The interview was based on my recent blog post, “Economics of poverty, or the poverty of economics.”

[embedded content]
I also want to recommend a recent piece by Ingrid Harvold Kvangraven [ht: ms], who argues that

The interventions considered by the Nobel laureates tend to be removed from analyses of power and wider social change. In fact, the Nobel committee specifically gave it to Banerjee, Duflo and Kremer for addressing “smaller, more manageable questions,” rather than big ideas. While such small interventions might generate positive results at the micro-level, they do little to challenge the systems that produce the problems.
For example, rather than challenging

From David Ruccio
Yesterday, the winners of the 2019 winners of the so-called Nobel Prize in Economics were announced. Abhijit Banerjee, Esther Duflo, and Michael Kremer were recognized for improving “our ability to fight global poverty” and for transforming development economics into “a flourishing field of research” through their experiment-based approach.
The Royal Swedish Academy of Sciences declared:
This year’s Laureates have introduced a new approach to obtaining reliable answers about the best ways to fight global poverty. In brief, it involves dividing this issue into smaller, more manageable, questions–for example, the most effective interventions for improving educational outcomes or child health. They have shown that these smaller, more precise, questions are often best

From David Ruccio

On behalf of millions of young people striking on behalf of climate justice, 15-year-old Greta Thunberg excoriated world leaders for “moving forward with the same bad ideas that got us into this mess.”
Our civilization is being sacrificed for the opportunity of a very small number of people to continue making enormous amounts of money. . .
Until you start focusing on what needs to be done rather than what is politically possible, there is no hope. We cannot solve a crisis without treating it as a crisis.
We need to keep the fossil fuels in the ground, and we need to focus on equity. And if solutions within the system are so impossible to find, maybe we should change the system itself.
Much the same applies, of course, to the economic system that generates such

From David Ruccio
The American Dream is dead. Long live the American Dream!
Let me explain. The official American Dream, the one that has been produced and disseminated at least as far back as the transition from the farm to the factory (in other words, since the late-nineteenth century), lies in tatters. Americans have long been encouraged to believe that everyone gets what they deserve—and, with equal opportunity, those who start at the bottom have a real chance of working their way to the top. Within generations, all workers had a chance to “make it.” And, between generations, children would likely be better off than their parents.
That promise—let’s call it the capitalist American dream—is now in tatters. It is dead and (almost) buried.
It’s not the first time, of course, that the

From David Ruccio

From David Ruccio
The same day I wrote that capitalism was coming apart at the seams, indicated by the shocking disparity between the compensation of corporate CEOs and workers, the Business Roundtable published its new statement of purpose of a corporation.* The 180 or so corporate executives who signed the statement declared that all their stakeholders, not just owners of equity shares, were important to their mission.
Many business pundits, such as Andrew Ross Sorkin, greeted the new statement as a sign that the era of shareholder democracy (what he refers to as “shareholder primacy”) had finally come to an end and that a “significant shift” in corporate responsibility to society would be ushered in. Readers, however, had their doubts, most of them echoing JDK’s response to Sorkin’s

From David Ruccio

American capitalism is coming apart at the seams.
Truth be told, it’s been coming apart for decades now—and that trend has only continued during the recovery from the worst crash since the 1930s.

A good indicator of the shredding of the U.S. economic and social fabric is the difference in the level of compensation of Chief Executive Officers of major American corporations compared to that of the average worker. While they labor, workers create value, some of which they receive back in the form of compensation; the rest of what they produce is the surplus, which is appropriated by the boards of directors of the enterprises that hire the workers. The boards also hire CEOs, to supervise the production of the surplus, who in turn get a cut of the surplus. In other

From David Ruccio

Richard Reeves is right about one thing: time is crucial to capitalism’s legitimacy. The premise and promise of capitalism are that the future will be better than the present. And “if capitalism loses its lease on the future, it is in trouble.”
The fact is, things are not getting better for the vast majority of American workers. They’re falling behind. For example, as is clear in the chart above, the labor share in the U.S. nonfarm business sector has fallen more than 13 percent since early 2001—and there’s no indication that trend will be reversed anytime in the foreseeable future.
Time is clearly running out on capitalism.
It’s not as though Americans are unaware of this and other related trends, such as the looming climate crisis.*

Back in 2014, most Americans

From David Ruccio
It’s time to get back to blog writing—after a 6-month hiatus during which I taught my final two courses at the University of Notre Dame (A Tale of Two Depressions and Marxian Economic Theory) and prepared for my retirement (which involved, among other things, sorting through, packing up, and moving decades of “stuff”). Now, after 38 years of teaching, I am officially Professor of Economics Emeritus. But, rest assured, I plan to continue this blog and other writing projects. 
For the first time in almost four decades (aside from a few research sabbaticals), I don’t face the prospect of returning to campus and teaching economics. But, I can’t help it, I still worry about what millions of students in the United States and around the world will learn—or at least be

From David Ruccio

They keep promising, ever since the recovery from the Great Recession started more than eight years ago, that the share of national income going to American workers will finally begin to increase. But it’s not. 
Sure, profits continue to rise. And so is the stock market. But not what workers receive.
In fact, as is clear from the magnified section of the chart above, the labor share has actually been declining in recent quarters—even as the unemployment rate has fallen about as far as it’s going to go.*
But you don’t have to believe me. Even the Wall Street Journal has noticed this trend.
Labor’s share of domestic income has been declining since 1970 and has barely recovered in this expansion from lows last seen when the U.S. was pulling out of the Great

From David Ruccio

Mainstream economists continue to insist that workers benefit from economic growth, because wages rise with productivity.
Here’s the argument as explained by Donald J. Boudreaux and Liya Palagashvili:

Firms cannot afford a misalignment of their workers’ pay and productivity increases—the employees will move to other firms eager to hire these now more productive workers. Higher economy-wide productivity, after all, means that workers add more to the bottom lines of employers throughout the economy. To secure the services of these more-productive workers, firms bid up worker pay. This competition for labor services is what links pay to productivity.
Except, of course, the link between wages and productivity has been severed for decades now, going back to the

From David Ruccio

It should perhaps come as no surprise that, as capitalism has been called into question and socialism generated increasing interest during the past decade, capitalism’s defenders have resorted to a long historical view. Look, they say, how capitalist growth has decreased poverty and led to improvements in people’s lives around the globe. Just stick with it and all will eventually be well. 
That’s why, as Jason Hickel points out, the above infographic, based on sketchiest of data going back to 1820, is one of Bill Gates’s favorites. Or why Deirdre McCloskey never tires in scolding the critics of capitalism that “the Great Fact of modern life, the most surprising secular news since the domestication of plants and animals, is the rise of real income per head.”
The past

From David Ruccio
 
How else to put it? The levels of economic inequality in the United States are obscene. 
According to the latest data from the World Inequality Database, the share of pre-tax income captured by the top 1 percent of Americans is an astounding 20.1 percent, while the bottom 50 percent are forced to make due with only 12.6 percent. And the distribution of wealth is even more unequal: the top 1 percent own 37.2 percent but the bottom 50 percent of Americans hold no net wealth at all.
And, if present trends continue—with corporate profits growing and the Trump administration in power—economic inequality is only going to get worse.
It’s no wonder, then, that Dani Rodrick argues that the Democratic Party will face a critical test in the next U.S. presidential election:

From David Ruccio
If you listened to or read the text of President Trump’s State of the Union speech Tuesday night, you might have been surprised by the explicit mention of socialism.
Here, in the United States, we are alarmed by new calls to adopt socialism in our country. America was founded on liberty and independence — not government coercion, domination, and control. We are born free, and we will stay free.
Or maybe not—since just last year the Council of Economic Advisers apparently found it necessary to issue a report, on the cusp of the midterm elections, to push back against the fact that “socialism is making a comeback in American political discourse.” And Fox News is engaged in its own campaign against socialism, since “support for Karl Marx’s collectivist ideas is steadily

From David Ruccio
We’re all done singing to “days gone by” (even though no one really knows the lyrics). But, unless we change our tune and resolve to fundamentally alter the way the economy is organized, we’re going to have to face up to the problem that’s been haunting the United States for decades now: growing inequality.
And it’s only getting worse.
Part of the problem stems from the increase in market concentration in the United States. According to a recent research paper by Joshua Gans et al., the rise in mark-ups by large U.S. corporations is a two-edged sword: it increases the prices consumers pay but, at the same time, rewards shareholders. The problem is, the ownership of corporate stocks is more unequal than consumption—and it’s been getting more unequal in recent decades.

From David Ruccio
No matter how we measure it, most Americans are falling further and further behind the tiny group at the top.
  
That’s not at all surprising. Whether we compare the growing gap between average wages and Gross Domestic Product per capita (as in the chart on the left) or real median household income and real Gross Domestic Product per capita (as in the chart on the right), it’s clear the average American has been losing out. A growing proportion of what workers produce hasn’t been going to them but to the richest households for decades now.
That does not mean, contra Robert Samuelson, that “the incomes of most Americans have stagnated for decades.” That’s a canard. No one makes that argument.
No, the real issue is that American workers have been producing more and more

From David Ruccio

The United States is increasingly becoming dollarized. That’s because, for decades now, those at the bottom have been left behind, forced to attempt to get by in ever more precarious conditions. 
If you asked mainstream economists what dollarization means, they would immediately define it as a country officially adopting the currency of another for financial transactions. Often, of course, that currency has been the U.S. dollar, as was the case for Ecuador in January 2000. Recently, mainstream economists, such as John Cochrane, have been suggesting that Argentina today should follow the same policy in order to “insulate the private economy from government fiscal troubles.”
While that kind of dollarization comes up in the context of macroeconomic crises, generated by

From David Ruccio

Mainstream economists continue to discuss the two great crises of capitalism during the past century like the pillars of society in the brothel—a “house of infinite mirrors and theaters”—in Jean Genet’s The Balcony.* The order they represent is indeed threatened by an uprising in the streets, and the only question is: can they reestablish the illusion of control?

The latest version of the absurdist economic play opens with Brad DeLong, who dons the costume of the liberal mainstream economist and argues that, while the Great Depression of the 1930s was far deeper than the Great Recession (what I have long referred to as the Second Great Depression), the recovery from the crash of 2007-08 was so mishandled that it casts a shadow over the U.S. economy in a way the

From David Ruccio
The historically low black unemployment rate is one of Donald Trump’s favorite applause lines. Even Reuters [ht: ja] declares that Trump is right.
It doesn’t seem to matter that most of the decline in the unemployment rate for African American workers (from a high of 16.5 percent in the beginning of 2010 to a low of 6.3 percent today) occurred before Trump was ever elected.

What does matter is that, even as the rate has dropped (the purple line in the chart above), black workers’ pay (the green line) has barely changed. After falling precipitously (by 10 percent, from the end of 2009 to the middle of 2015), it has only increased slightly (by 3.8 percent). Overall, the real wages of black workers have actually declined (by 6.5 percent, between the end of 2009 to

From David Ruccio
Teaching critical literacy.
That’s what professors do in the classroom. We teach students languages in order to make some sense of the world around them. How to view a film or read a novel. How to think about economics, politics, and culture. How to understand cell biology or the evolution of the universe.
And, of course, how to think critically about those languages—both their conditions and their consequences.
I’ve been thinking about the task of teaching critical literacy as I prepare the syllabi and lectures for my final semester at the University of Notre Dame.
Lately, I’ve been struck by the way mainstream economics is usually taught as a choice between markets and policy. Whenever a problem comes up—say, inequality or climate change—one group of mainstream

From David Ruccio

Those aren’t my words. The quotation that forms the title of this post is from a recent Federal Reserve Bank of St. Louisblog post.
And they’re important to keep in mind in light of the news coverage (e.g., by the New York Times) of last week’s Labor Department report on hiring and unemployment. Yes, 250 thousand jobs were added in the U.S. economy last month and average earnings did rise by 0.2 percent and are up 3.1 percent over the past year. 
But. . .

The rate of growth of American workers’ wages (the blue line in the chart above) is only a hair above the increase in consumer prices (the red line). So, for all intents and purposes, real wages remain stagnant.

Meanwhile, the profits captured by American corporations continue to grow, reaching new record highs.