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David F. Ruccio

David F. Ruccio

I am now Professor of Economics “at large” as well as a member of the Higgins Labor Studies Program and Faculty Fellow of the Joan B. Kroc Institute for International Peace Studies. I was the editor of the journal Rethinking Marxism from 1997 to 2009. My Notre Dame page contains more information. Here is the link to my Twitter page.

Articles by David F. Ruccio

What, us worry?

1 day ago

David Ruccio

Ed Wolff is right:
For the vast majority of Americans, fluctuations in the stock market have relatively little effect on their wealth, or well-being, for that matter.

That’s because, as his research shows (and as I illustrate in the chart above), the bottom 90 percent of Americans own (either directly or indirectly) a tiny share—16 percent—of total stock value in the United States.* The rest is owned by the top 10 percent: 40.3 percent by just the top one percent (with a net worth in 2016 of $10,257,000 or more) and 43.6 percent by the next nine percent (who have a net worth between $1,143,200 and $10,257,000).
The fact is, the only real wealth owned by the vast majority of Americans is their principal residence. Otherwise, they’re forced to have the freedom to get by on

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We’re #2! – Financial Secrecy Index 2018

7 days ago

From David Ruccio

According to the Tax Justice Network, the United States ranks second in the 2018 Financial Secrecy Index. This is based on a secrecy score of 59.8, which is practically unchanged from 2015. The only country ahead of the United States is Switzerland, with a secrecy score of 76. The rise of the United States continues a long-term trend, as the country was one of the few to increase their secrecy score in the 2015 index.  

The continued rise of the United States in the 2018 index comes on the back of a significant change in the U.S. share of the global market for offshore financial services. Between 2015 and 2018, the United States increased its market share by 14 percent. In total, the United States accounts for 22.3 percent of the global market in offshore financial

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Utopia and the economics of control

13 days ago

From David Ruccio
I have often argued—in lectures, talks, and publications—that every economic theory has a utopian dimension. Economists don’t explicitly talk about utopia but, my argument goes, they can’t do what they do without some utopian horizon.
The issue of utopia is there, at least in the background, in every area of economics—perhaps especially on the topic of control.
Consider, for example, the theory of the firm (which I have written about many times over the years), which is the focus of University of Chicago finance professor Luigi Zingales’s lecture honoring Oliver Hart, winner of the 2016 Nobel Prize for economics, at this year’s Allied Social Science Association meeting.
One of the many merits of Oliver’s contribution is to have brought back the concept of power inside

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What goes up. . .

16 days ago

From David Ruccio
Must come down. . .
I’m not referring to karma or the application of Newton’s law of universal gravitation. No, it’s just the way capitalism works.

Take the stock market, for example. Last Friday, the Dow Jones Industrial Average closed down 666 points, or 2.5 percent, its biggest percentage decline since the Brexit turmoil in June 2016 and the steepest point decline since the 2008 financial crisis. 
The large decline is really no surprise, since the U.S. stock market—a thoroughly speculative institution within contemporary capitalism—has been on the rise, based on soaring corporate profits, since 2009.
Rising stock values are related to corporate profits in two ways: First, they are bets on corporate profits, in the sense that stock speculators expect future prices

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Utopia and populism

20 days ago

From David Ruccio
Much has been made of the rise of populism in recent years and the threat it poses to liberal democracy.
My view is that liberal critics of populism, standing on their heads, get it wrong. If made to stand on their feet, they’d have to admit that populism actually represents the failure of liberal democracy.
Populism has experienced a resurgence of late—in Hungary, Britain, France, Turkey, the United States, and elsewhere—especially the form of populism variously characterized as right-wing, nationalist, or authoritarian. It has attracted increasing support and achieved notable political victories within the institutions and procedures of liberal democracy.
The problem is that liberal democracy has failed to confront, much less solve, the problems that have led to the

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Dystopia and global poverty

23 days ago

From David Ruccio

And as Angus Deaton reminds us, those struggling to survive in conditions of extreme poverty aren’t just “over there,” in the Third World. Notwithstanding the focus of the World Bank-sponsored campaign to eradicate extreme poverty and the ubiquitous appeals on behalf of the needy in poor countries, a large portion—approximately 14 million people—live in wealthy countries—some 5.3 million in the United States alone.
Is there any more damning condemnation of contemporary economic institutions, in both the North and the South?
But wait, there’s more.
We’re talking about hundreds of millions of people living—barely—on less than $1.90 a day!
That’s the official World Bank number, updated in recent years from the original $1 a day and then $1.25 a day. But let’s put that

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Utopia and the right to be lazy (3 charts)

28 days ago

David Ruccio
Students are much too busy to think these days. So, when a junior comes to talk with me about the possibility of my directing their senior thesis, I ask them about their topic—and then their schedule. I explain to them that, if they really want to do a good project, they’re going to have to quit half the things they’re involved in.
They look at me as if I’m crazy. “Really?! But I’ve signed up for all these interesting clubs and volunteer projects and intramural sports and. . .” I then patiently explain that, to have the real learning experience of a semester or year of independent study, they need time, a surplus of time. They need to have the extra time in their lives to get lost in the library or to take a break with a friend, to read and to daydream. In other words,

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42 people vs. 3.7 billion people

January 22, 2018

From David Ruccio

According to Oxfam’s analysis of data produced by Credit Suisse (which I analyzed in a different manner late last year), 42 billionaires now own the same wealth as the bottom half—3.7 billion people—of the world’s population. 
Together, those 3.7 billion people own only one half of one percent (0.53 percent) of the world’s wealth, a figure that rises to just about one percent (0.96 percent) when net debt is excluded.
In 2017, 42 billionaires on the Forbes billionaires list had a cumulative net worth of $1,498 billion—more than the wealth of the bottom 50 percent. When debt is excluded, that figure rises to 128 billionaires, who had a net worth of $2,694 billion.
Over the last decade, ordinary workers have seen their incomes rise by an average of just 2 percent a

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What’s the matter with America?

January 17, 2018

From David Ruccio

Last week, Thomas Frank welcomed Paul Krugman to the ranks of those who believe that the American working-class in recent decades has often voted against its fundamental economic interests by supporting conservative Republicans.  
Appropriately enough, Frank then chastises Krugman for having repeatedly used his New York Times column to argue exactly the opposite, denying the idea that working-class Americans had defected to the Republican Party.
Frank, the author of What’s the Matter with Kansas? then draws the appropriate conclusion: that the tendency on the part of Krugman and other liberals to underestimate working-class conservatism, in both southern and northern states, prepared the way for Donald Trump’s victory in the presidential election of November 2016.
To

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The elephant in the world

January 12, 2018

From David Ruccio

One of the most important stories I read, but did not write about, while I was away was the launch of the World Inequality Report 2018.*

The authors of the report confirm what Branko Milanovic and others had previously discovered: that a representation of the unequal gains in world economic growth in recent decades looks like an elephant. Thus, the real incomes of the bottom 50 percent of the world’s population (except the poorest, at the very bottom) have increased, the incomes of those in the middle (especially the working-class in the United States and Western Europe) have decreased, and the global top 1 percent has captured an outsized portion of world economic growth since 1980.**
As I explained back in 2016, the “elephant curve” makes sense of some of the

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It’s the profits, stupid!

January 2, 2018

From David Ruccio

There’s no real mystery behind the spectacular gains in the stock market over the course of 2017. Much of it can be explained by the rise in U.S. corporate profits. 
But, as is clear from the chart above, the relationship between corporate profits (after tax, in red, measured on the right-hand side) and the stock market (the Dow Jones Industrial Index, in blue on the left) actually goes back almost a decade. Corporate profits have increased, from their low in the fourth quarter of 2008, some 176 percent. Meanwhile, the stock market has risen 182 percent from its own low in the first quarter of 2009.
Corporate profits are, of course, a signal to investors that their stocks will likely rise in value. Moreover, increased profits allow corporations themselves to buy back

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Body parts—from gifts to exchanges

December 31, 2017

From David Ruccio
Over the course of the last two days, I’ve discussed mean gifts (which promise significant tax relief only to a small group of corporations and wealthy individuals) and mean exchanges (which leave middle-class Americans with a declining share of national income).
Now, thanks to recently completed Reuters investigation, we’re forced to confront the reality in the United States of mean exchanges that transform generous donations into desperate, mean gifts. I’m referring to the largely unregulated trade in body parts.
The selling of body parts—heads, knees, feet, torsos, and entire bodies—actually begins with the gifting of the bodies of deceased Americans, who have decided to donate their bodies to science. But in many cases it’s a mean gift, not because of the

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Mean exchanges

December 29, 2017

From David Ruccio

Yesterday, I discussed the mean-spiritedness of the Republican tax cuts—which are being sold as a gift to the middle-class but, in reality, represent a massive transfer to a small group of large corporations and wealthy individuals.
But, of course, the real violence associated with the tax-cut gift occurs before federal taxes are even levied, in the pre-tax distribution of income.
As is clear from the chart above, since the mid-1970s, the share of income captured by the top 1 percent (the red line, measured on the right-hand side) has almost doubled, rising from 10.6 percent to over 20 percent. Meanwhile, the share of income going to the middle 40 percent (the blue line, on the left) has eroded, falling from 45.2 percent to 40.4 percent.

But that’s not enough for

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Don’t worry?!

December 16, 2017

From Daivd Ruccio
Liberal mainstream economists all seem to be lip-synching Bobby McFerrin these days.
Worried about automation? Be happy, write Laura Tyson and Susan Lund, since “these marvelous new technologies promise higher productivity, greater efficiency, and more safety, flexibility, and convenience.”
Worried about the different positions in current debates about economic policy? Be happy, writes Justin Wolfers, and rely on the statistics produced by government agencies and financial firms and the opinions of mainstream economists.
Me, I remain worried and I have no reason to accept mainstream economists’ advice for being happy.
Sure, new forms of automation might lead to higher productivity and much else that Tyson and Lund find so alluring. But who’s going to benefit? If we go

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How low can it go?

December 8, 2017

From David Ruccio

The United States is now more than eight years out from the end of the Great Recession and the one-side nature of the recovery is, or at least should be, clear for all to see.  
Even as unemployment has dipped below the so-called “natural rate,” workers are far from recovering all they’ve last in the past decade.
According to the official data illustrated in the chart above, the labor share of national income remains just above the lowest level it reached in the entire postwar period. Using 100 in 2009 as the index value, the current labor share has fallen to 96.5—down from 110.24 in 2001 and 114 in 1960.
The question is, how low can the labor share go?
Update

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Whose recovery?

December 7, 2017

From David Ruccio

If you read the business press in the United States (e.g., the Wall Street Journal), you’ll find something along the lines of the following argument: the fact that U.S. worker productivity rebounded in the third quarter while hourly wages rose moderately is a sign “the economy is strengthening.”
But look at the numbers. Nonfarm business sector productivity (the blue line in the chart above) rose 1.5 percent (from the same quarter a year ago) while real hourly compensation (the green line) fell 1.1 percent.* The result is that unit labor costs (the red line) fell 0.7 percent. 
According to Stephen Stanley of Amherst Pierpont Securities,
lighter regulation under the Trump administration and the prospect of a $1.4 trillion tax-cut package being passed by Congress are

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How low can they go?

December 6, 2017

From David Ruccio

One of the rationales for the great Republican tax heist of 2017 is that American corporations desperately need tax relief. 
However, as is clear from the chart above, the current corporate tax rate is already very low—not absolutely (since it was in fact lower in 2009, when corporate profits fell during the Great Recession), but certainly in comparison to the rest of the postwar period.*
Today, the effective corporate tax rate in the United States is only 20.4 percent, lower almost by half than the much-ballyhooed statutory rate of 38.91 rate.
One can only imagine, then, how low the effective rate will be if and when the statutory rate is reduced according to the tax bills passed through the U.S. House of Representatives and the Senate. They both cut it 20 percent,

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Lines

December 4, 2017

From David Ruccio
How bad have things gotten in the United States? Nitin Nohria [ht: ja], the dean of Harvard Business School, is sounding the alarm that “class lines. . .have become far more distinct and visible in recent years.”
Nohria published his essay at the end of the same week that the U.S. Senate passed its version of the “Tax Cuts and Jobs Act,” which is nothing more than an enormous boon to large corporations and wealthy individuals under the guise of trickledown economics,  and Philip Aston, the United Nations monitor on extreme poverty and human rights, has embarked on a coast-to-coast tour to investigate the widespread existence of extreme poverty in the United States.
The inspiration for Nohria’s reference to class lines is Arlie Hochschild’s Strangers in Their Own

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Trickledown economics—then and now

December 2, 2017

From David Ruccio

Robert McElvaine, premier historian of the first Great Depression (whose books we have used to teach A Tale of Two Depressions), argues that Republicans today are repeating the same mistakes as the Republicans who were in charge during the 1920s, whose trickledown policies led to the spectacular crash of 1929. 
As a historian of the Great Depression, I can say: I’ve seen this show before.
In 1926, Calvin Coolidge’s treasury secretary, Andrew Mellon, one of the world’s richest men, pushed through a massive tax cut that would substantially contribute to the causes of the Great Depression. Republican Sen. George Norris of Nebraska said that Mellon himself would reap from the tax bill “a larger personal reduction [in taxes] than the aggregate of practically all the

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The poor and unequal die younger

November 29, 2017

From David Ruccio

source
According to a new report on inequality in the Brazilian city of São Paulo, compiled by Rede Nossa São Paulo (pdf, in Portuguese), the gap in the average age of death between the poorest and richest districts of the city is almost 24 years. Thus, for example, the average age of death in Jardim Paulista is 79.4 years while that of residents of Jardim Ângela is only 55.7 years.
This should come as no surprise since Brazil is one of the most unequal countries on the planet.

However, lest we forget, the United States is also characterized by levels of inequality that are comparable to those in Brazil: in 2014, the top 1 percent of Americans captured 20.2 percent of pre-tax income, while their Brazilian counterparts managed to take home 27.6 percent. Perhaps even

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The arc of (pre)history bends towards greater inequality

November 27, 2017

From David Ruccio

The United States, as I have shown over the past week (e.g., here, here, and here), has an obscenely unequal distribution of wealth.

How do we put that grotesque level of inequality into perspective? One way is by taking a historical perspective; the other is by looking across the world today.
As it turns out, Nature (unfortunately behind a paywall) has just published a study in which the authors attempt to estimate the degree of wealth inequality in ancient societies for which we do not have written records.* What they did is collect data from 63 archaeological sites or groups of sites, used the distribution of house sizes as a proxy for wealth, and assigned Gini coefficients to each society.**
What they are able to show is that wealth disparities generally

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U.S. Wealth Pyramid

November 25, 2017

From David Ruccio

On Wednesday, I referred to the wealth pyramid in the United States. But I didn’t really represent that pyramid in the chart I provided.  
Here it is, above, with the wealth share of the bottom 50 percent (in red), the middle 40 percent (in blue), and the top 10 percent (in green)—a wealth pyramid for each year, from 1962 to 2014.

Or, here’s another, if you prefer a three-dimensional version of the latest year for which data are available. In 2014, the wealth share of the top 10 percent was 73 percent, while the middle 40 percent had 27 percent of net personal wealth. And the bottom 50 percent? It was exactly zero.
Now that is a real wealth pyramid!

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At the bottom of the wealth pyramid in the United States

November 22, 2017

From David Ruccio

Yesterday, I looked at the enormous wealth of U.S. billionaires and the growing gap between them and the rest of the American people.
Today, I want to examine what’s happened in recent years at the bottom of the wealth pyramid.

We know that, for decades, the share of net personal wealth owned by the bottom 90 percent has been declining. It peaked at 38.5 percent in the mid-1980s and, by 2014, it had fallen to 27 percent—more or less where it started in the early 1960s.
As is clear from the chart above, most of the change occurred for the middle 40 percent (the blue area), since the bottom 50 percent in the United States has owned very little personal wealth. Its share (the red area), which reached a peak in 1987 (2.4 percent), has since fallen below zero (-0.1

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Monopoly men*

November 20, 2017

From David Ruccio
Wealth inequality in the United States has reached such extreme levels it is almost impossible to put it into perspective.
But the folks at the Institute for Policy Studies (pdf) have found a novel way, by comparing the fortunes of the 400 wealthiest Americans to the meager assets of everyone else.

Here’s what they found:  
The three wealthiest people in the United States—Bill Gates, Jeff Bezos, and Warren Buffett—now own more wealth than the entire bottom half of the American population combined, a total of 160 million people or 63 million households.
America’s top 25 billionaires—a group the size of a major league baseball team’s active roster—together hold $1 trillion in wealth. These 25 have as much wealth as 56 percent of the population, a total 178 million

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Desperately seeking a link between wages and productivity

November 17, 2017

From David Ruccio

Everyone, it seems, now agrees that there’s a fundamental problem concerning wages and productivity in the United States: since the 1970s, productivity growth has far outpaced the growth in workers’ wages.*
Even Larry Summers—who, along with his coauthor Anna Stansbury, presented an analysis of the relationship between pay and productivity last Thursday at a conference on the “Policy Implications of Sustained Low Productivity Growth” sponsored by the Peterson Institute for International Economics.
Thus, Summers and Stansbury (pdf) concur with the emerging consensus,  
After growing in tandem for nearly 30 years after the second world war, since 1973 an increasing gap has opened between the compensation of the average American worker and her/his average labor

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Where has all the surplus gone?

November 15, 2017

From David Ruccio

Thanks to the release of the so-called Paradise Papers, and the additional research conducted by Gabriel Zucman, Thomas Tørsløv, and Ludvig Wier, we know that a large share of the surplus captured by corporations is artificially shifted to tax havens all over the world. This, of course, is on top of the conspicuous tax evasion practiced by the individual holders of a large portion of the world’s wealth.  
Thus, for example, U.S. multinational corporations now claim to generate 63 percent of all their foreign profits in six tax havens, the most prominent being the Netherlands, Bermuda and the Caribbean, and Ireland. This is 20 points more than in 2006.*
What this means is that, in the tax havens themselves, low tax rates can generate large tax revenues relative to the

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Conspicuous tax evasion

November 12, 2017

From David Ruccio
The release of the so-called Paradise Papers confirms, with additional names and more salacious details, what we already knew from the Panama Papers and other sources: the world’s wealthy increasingly use offshore tax havens to engage in conspicuous tax evasion.
That’s on top of their participation in conspicuous consumption, conspicuous philanthropy, and conspicuous productivity.
According to Annette Alstadsæter, Niels Johannesen, and Gabriel Zucman, in a study published before the release of the Paradise Papers, the equivalent of 10 percent of world GDP is held in tax havens globally—and that’s only counting bank deposits, not the portfolios of equities, bonds, and mutual fund shares that wealthy individuals entrust to offshore banks.
And, as it turns out, offshore

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Waiting for Godot

November 9, 2017

From David Ruccio
The official unemployment rate continues to fall in the United States. And everyone, at least among top policymakers and the business press, has been promising that workers’ wages will finally break out.
As it turns out, the unemployment rate (the red line in the chart above) in September was 4.1 percent, far below the high of 10 percent in October of 2009 and a new low for the so-called recovery from the Second Great Depression. However, hourly wages (for production and nonsupervisory workers, the blue line) rose only 2.5 percent on an annual basis, even less than the 2.7 percent workers were gaining at the height of the depression.
The only possible conclusion is that, in the United States, expecting workers’ wages to finally begin to catch up is like Vladimir and

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Global rentier capitalism

November 7, 2017

From David Ruccio
Mainstream economics lies in tatters. Certainly, the crash of 2007-08 and the Second Great Depression called into question mainstream macroeconomics, which has failed to provide a convincing explanation of either the causes or consequences of the most severe crisis of capitalism since the Great Depression of the 1930s.
But mainstream microeconomics, too, increasingly appears to be a fantasy—especially when it comes to issues of corporate power.

Neoclassical microeconomics is based on a set of models that assume perfect competition. What that means, as my students learned the other day, is that, while in the short run firms may capture super-profits (because price is greater than average total cost, at P1 in the chart above), in the “long run,” with free entry and

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Haunted by surplus

November 4, 2017

From David Ruccio
  
Inequality in the United States is now so obscene that it’s impossible, even for mainstream economists, to avoid the issue of surplus.  
Consider the two charts at the top of the post. On the left, income inequality is illustrated by the shares of pre-tax national income going to the top 1 percent (the blue line) and the bottom 90 percent (the red line). Between 1976 and 2014 (the last year for which data are available), the share of income at the top soared, from 10.4 percent to 20.2 percent, while for most everyone else the share has dropped precipitously, from 53.6 percent to 39.7 percent.
The distribution of wealth in the United States is even more unequal, as illustrated in the chart on the right. From 1976 to 2014, the share of wealth owned by the top 1

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