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.

From David Ruccio 
A specter is haunting the United States—the specter of Medicare for All. All the powers of old America have entered into a holy alliance to exorcise this specter: Wall Street and Big Pharma, Trump and McConnell, Fox News and the American Enterprise Institute.
Now, “coincident with the 200th anniversary of Karl Marx’s birth—and, more important, on the cusp of the 2018 elections—the Council of Economic Advisers has joined the alliance:
socialism is making a comeback in American political discourse. Detailed policy proposals from self-declared socialists are gaining support in Congress and among much of the electorate.
The fact is, socialism is on the rebound in the United States. And healthcare is the top issue for voters in the midterm elections (with 71 percent of

From David Ruccio

Last month, Philip Alston, the United Nations Special Rapporteur on extreme poverty and human rights (whose important work I have written about before), issued a tweet about the new poverty and healthcare numbers in the United States along with a challenge to the administration of Donald Trump (which in June decided to voluntarily remove itself from membership in the United Nations Human Rights Council after Alston issued a report on his 2017 mission to the United States).
The numbers for 2017 are indeed stupefying: more than 45 million Americans (13.9 percent of the population) were poor (according to the Supplemental Poverty Measure*), while 28.5 million (or 8.8 percent) did not have health insurance at any point during the year. 
But the situation in the United

From David Ruccio
No, the stock market is not predictable. And no one knows the exact causes of last week’s carnage on Wall Street—with the Dow down 4.2 percent, the S&P 4.1 percent and the Nasdaq 3.7 percent, representing their worst weekly performances since March.
But the precipitous fall in all major indices, which many analysts blamed at least in part on the earnings blackout period, did serve to highlight one of the factors that has been driving the bull market: corporations purchasing their own stock.
As Matt Phillips explained,
When companies have more cash than they believe they can use productively, they typically return it to shareholders either with cash payments—known as dividends—or by repurchasing shares in the market. Buybacks raise demand, putting upward pressure on

From David Ruccio
Two giants of mainstream economics—Joseph Stiglitz and Lawrence Summers—have been engaged in an acrimonious, titanic battle in recent weeks. The question is, what’s it all about? And, even more important, what’s at stake in this debate?
At first glance, the intense, even personal back-and-forth between Stiglitz and Summers seems a bit odd. Both economists are firmly in the liberal wing of mainstream economics and politics—as against, for example, Gene Epstein (an Austrian economist, who accuses Stiglitz of regularly siding with left-wing populists like Hugo Chávez) or John Taylor (a committed supply-sider, who has long been suspicious of “demand-side discretionary stimulus packages”). Both Stiglitz and Summers have pointed out the limitations of monetary policy,

From David Ruccio
Last month, Alexander Beunder, the editor of Socialist Economist, asked a handful of “expert economists from around the world”—including Johanna Bockman, Prabhat Patnaik, Andrew Kliman, and myself—two key questions concerning the problems and prospects for socialism, economics, and the Left in the world today. Beunder requested that we keep our answers to two hundred words.
Our answers are now posted on-line, which can be read by clicking on the links below. Here are mine:
What economic obstacles is the Left facing in the 21st Century? 
The spectacular failures of capitalism in the United States have provided fertile ground for a renewed interest in socialism. These include the punishments meted out by the Second Great Depression, the lopsided nature of the current

From David Ruccio
The warnings about the consequences of global warming are becoming increasingly dire. And with good reason.

Just last month, a report by a multidisciplinary research team published in the Proceedings of the National Academy of Sciences made the case that even fairly modest future carbon dioxide emissions could set off a cascade of catastrophic effects, with melting permafrost releasing methane to ratchet up global temperatures enough to drive much of the Amazon to die off, and so on in a chain reaction around the world that pushes Earth into a terrifying new hothouse state from which there is no return. Civilization as we know it would surely not survive. 
Climate change during the Capitalocene (in its last stage?) has also spawned a new genre of science fiction

From David Ruccio
Everyone, it seems, is writing their version of the lessons to be learned after the crash of 2008. And most of them are getting it wrong.
Here, for the record, are some of the lessons I’ve taken from the crash:
What has changed—and, equally significant, what hasn’t—during the past decade?
Mainstream economists got globalization wrong
The policy consensus on economics has not fundamentally changed
Mainstream economics has fallen in the eyes of the public—and for good reason
Little has changed in terms of the teaching of economics
Mainstream economists reject the new populism, which they helped to create
The normal workings of capitalism created, together and over time, the conditions for the most severe set of crises since the first Great Depression
Mainstream

From David Ruccio

Almost 30 thousand people joined the ranks of the global super-rich last year, as booming global stock markets and corporate profits boosted the fortunes of the already very-rich and bumped them up into the ultra-high-net-worth bracket.
The global population of ultra-high-net-worth people, classed as those with more than $30 million in assets, increased by 12.9 percent last year to a record 255,810 people,  while their combined wealth surged by 16.3 percent to $31.5 trillion, according to a report by research firm Wealth-X.

Not surprisingly, most of the gains were captured by those at the very top of the global wealthy pyramid. While all six tiers recorded double-digit growth in ultra wealthy numbers of between 13 and 15 percent, the fastest- growing tier was

From David Ruccio

I have long argued (e.g., here, here, and here) that capitalism involves a kind of pact with the devil: control over the surplus is reluctantly given over to the boards of directors of corporations in return for certain promises, such as just deserts, economic stability, and wage increases for workers.
In recent years, as so often in the past, we’ve witnessed those at the top sabotaging the pact (simply because they have the means and interest to do so) and now, once again, they’ve undermined their legitimacy to run things.

First, they broke their promise of just deserts, as the distribution of income has become increasingly (and, to describe it accurately, grotesquely) unequal and the tendency toward high concentrations of wealth has returned, threatening to

From David Ruccio
We’re ten years on from the events the triggered the worst crisis of capitalism since the first Great Depression (although read my caveat here) and centrists—on both sides of the Atlantic—continue to peddle an ahistorical nostalgia.
Fortunately, people aren’t buying it.
As Jack Shenker has explained in the case of Britain,
one of the most darkly humorous features of contemporary British politics (a competitive field) is the ubiquity of parliamentarians, pundits and business titans who wail and gnash at our ceaseless political tumult but appear utterly incurious about the conditions that produced it. . .
Such stalwart defenders of a certain brand of “common sense” capitalism have watched in horror as ill-mannered upstarts — on both the right and the left — build power

From David Ruccio
In a 1999 interview with Fortune, legendary investor Warren Buffett coined the term “economic moats” to sum up the main pillar of his investing strategy. He described it like this:
The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.
The idea of an economic moat, with Buffett’s endorsement, has picked up steam since the article. Morningstar, an investment research firm, created an index that tracks companies with a wide economic moat in order to see if Buffett’s theory holds