Thursday , November 23 2017
Home / David F. Ruccio
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

At the bottom of the wealth pyramid in the United States

1 day ago

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

Read More »

Monopoly men*

3 days ago

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

Read More »

Desperately seeking a link between wages and productivity

7 days ago

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

Read More »

Where has all the surplus gone?

8 days ago

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

Read More »

Conspicuous tax evasion

11 days ago

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

Read More »

Waiting for Godot

14 days ago

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

Read More »

Global rentier capitalism

17 days ago

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

Read More »

Haunted by surplus

20 days ago

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

Read More »

The gilded age: a tale of today*

21 days ago

From David Ruccio

The timing could not have been better, at least for me. It just so happens I’m teaching Thorsten Veblen’s Theory of the Leisure Class this week. It should become quickly obvious to students that, as I have argued before on this blog, we’re now in the midst of a Second Gilded Age.  
This is confirmed in a new report by UBS/PwC, according to which, after a brief pause in 2015, the expansion in billionaire wealth around the world has resumed.
Thus, billionaire wealth rose 17 percent in 2016 (up from $5.1 trillion to $6 trillion), far more than the 5.8-percent nominal GDP growth figure and double the rate of the MSCI AC World Index.** There was also a 10-percent rise in the number of billionaires globally to 1,542. Despite a period of heightened geopolitical uncertainty,

Read More »

Reconcile this!

24 days ago

From David Ruccio

The world joined most South Africans in cheering when Nelson Mandela was finally released from prison, the apartheid regime was largely dismantled, and multiracial elections were eventually held.

Then, of course, the really hard work of restorative justice began, under the aegis of the Truth and Reconciliation Commission. To avoid victor’s justice, no side was exempt from appearing before the commission, which heard reports of human rights violations and considered amnesty applications from all sides. In the end, the commission granted only 849 amnesties out of the 7,112 applications.
The problem is, while the commission exposed human rights abuses, it never took up the issue of economic abuses. And, as is clear from the chart above, the high levels of inequality

Read More »

Growing old unequally

26 days ago

From David Ruccio

Social Security may have decreased the rate of poverty among retirees in the United States.* But it certainly hasn’t solved the problem of inequality.
As is clear from the chart above, from a recent report from the Organisation for Economic Co-operation and Development, old-age inequality among current retirees in the United States is higher than in all other OECD countries, except Chile and Mexico.
But wait, it’s probably going to get worse. That’s because, within each generation of workers, inequality has been rising. For example, researchers tracked U.S. income inequality for four different generations—people born in 1920, 1940, 1960, and 1980. For each group, inequality has been more extreme than the previous generation.

The inequalities among people of working

Read More »

Balance this!

28 days ago

From David Ruccio

Both Donald Trump and Eduardo Porter would have us believe the U.S. trade deficit is a serious problem—and that, if it can brought back into balance, jobs for American workers will be restored.
Nonsense!  
Yes, I know, Trump’s attacks on free trade did in fact resonate among working-class voters. And, as I have argued, there is clear evidence that that a tiny group at the top has captured most of the benefits of trade agreements and other measures that have allowed U.S. corporations to engage in increased international trade, both importing and exporting commodities that have boosted their bottom-line.
It’s possible then to make the case (as I did here) that mainstream economists, in their zeal to push globalization forward, ignored those problems and concerns, thus

Read More »

Laughter is the best medicine

October 22, 2017

From David Ruccio
Sometimes we just have to sit back and laugh. Or, we would, if the consequences were not so serious.
I’ve been reading and watching the presentations (and ensuing discussions) at the Rethinking Macroeconomic Policy conference recently organized by the Peterson Institute for International Economics.
Quite a spectacle it appears to have been, with an opening paper by famous mainstream macroeconomists Olivier Blanchard and Larry Summers and a closing session—a “fireside chat” without the fire—with the very same doyens of the field.
The basic question of the conference was: does contemporary macroeconomics, in the wake of the Second Great Depression, require a few reforms or does it need a wholesale revolution? Blanchard lined up in the reform camp, with Summers calling

Read More »

Pie in the sky

October 21, 2017

From David Ruccio
Kevin Hassett and the other members of the president’s Council of Economic Advisers are just like the long-haired preachers Joe Hill sang about more than a century ago. They come out every night to tell us what’s wrong and what’s right. But when asked about something to eat, they answer in voices so sweet:
You will eat, bye and bye
In that glorious land above the sky
Work and pray, live on hay
You’ll get pie in the sky when you die.
That’s a lie
With one notable exception: according to the Council (pdf), that “glorious land above the sky” lies just on the other side of the Trump administration’s proposed tax reform. And workers, whose real wages have stagnated for decades now, won’t have to die to receive their pie in the sky.
Reducing the statutory federal corporate

Read More »

Pie in the sky

October 19, 2017

From David Ruccio
Kevin Hassett and the other members of the president’s Council of Economic Advisers are just like the long-haired preachers Joe Hill sang about more than a century ago. They come out every night to tell us what’s wrong and what’s right. But when asked about something to eat, they answer in voices so sweet:
You will eat, bye and bye
In that glorious land above the sky
Work and pray, live on hay
You’ll get pie in the sky when you die.
That’s a lie
With one notable exception: according to the Council (pdf), that “glorious land above the sky” lies just on the other side of the Trump administration’s proposed tax reform. And workers, whose real wages have stagnated for decades now, won’t have to die to receive their pie in the sky.
Reducing the statutory federal corporate

Read More »

Tackle this!

October 16, 2017

From David Ruccio

The latest IMF Fiscal Monitor, “Tackling Inequality,” is out and it represents a direct challenge to the United States.

It’s not just a rebuke to Donald Trump, who with his allies is pursuing under the guise of “tax reform” a set of policies that will lead to even greater inequality—or, for that matter, Republicans in state governments across the country that have sought to cut back on programs targeted at poor Americans. It also takes to task decades of growing inequality in the United States, under both Democratic and Republican administrations.
As is clear from the chart above, the distribution of both income and wealth in the United States has become increasingly unequal since the mid-1970s. The share of income captured by the top 1 percent has more than

Read More »

Nobel economics: the behaviorism of economic decisions and its secret

October 12, 2017

From David Ruccio
Lots of folks have been asking me about the significance of the so-called Nobel Prize in economics that was awarded yesterday to Richard Thaler.
They’re interested because they’ve read or heard about the large catalog of exceptions to the usual neoclassical rule of rational decision-making that has been compiled by Thaler and other behavioral economists.
One of my favorites is the “ultimatum game,” in which a player proposes an allocation of an endowment (say $5) and the second player can accept or reject the proposal. If the proposal is accepted, both players get paid according to the proposal; if the proposal is rejected, both players get nothing. What Thaler and his coauthors found is that most of the second players would reject proposals that would give them less

Read More »

Inequality and immiseration (4 graphs)

October 9, 2017

From David Ruccio
It’s clear that, for decades now, American workers have been falling further and further behind. And there’s simply no justification for this sorry state of affairs—nothing that can rationalize or excuse the growing gap between the majority of people who work for a living and the tiny group at the top.
But that doesn’t stop mainstream economists from trying.

Look, they say, American workers are clearly better off than they were before. Both real weekly earnings (the blue line in the chart) and the median household income (the red line) are higher than they were thirty years ago.  
There’s no denying that, on average, the absolute level of worker pay and household income has gone up. That’s proof, mainstream economists argue, that workers are enjoying the fruits of

Read More »

Promises, promises (3 graphs)

October 5, 2017

From David Ruccio
They keep promising, ever since the recovery from the Great Recession started more than eight years ago, that workers’ wages will finally begin to increase. But they’re not.
Sure, profits continue to rise. And so is the stock market. But not wages. And mainstream economists can’t come up with an adequate explanation of why that’s the case.

We’ve all heard or read the story. According to mainstream economists, as the unemployment rate falls (the blue line in the chart above), a labor shortage will be created and workers’ wages (the red line) will begin to rise.  
That’s the promise, at least. But the official unemployment rate is now down to 4.4 percent (from a high of 9.9 percent in 2009) and yet wages (for production and nonsupervisory workers) are only increasing

Read More »

Mo’ better inequality blues

October 4, 2017

From David Ruccio

The latest Federal Reserve Board’s triennial Survey of Consumer Finances (pdf) is out and the news is not good—at least for the majority of Americans. They’re falling further and further behind those at the top.
Sure, on the surface, the results for the latest period of recovery from the Second Great Depression appear to be positive. Between 2013 and 2016, real gross domestic product in the United States grew at an annual rate of 2.2 percent, the civilian unemployment rate fell from 7.5 percent to 5 percent, and the annual rate of inflation averaged only 0.8 percent.  
However, data from the 2016 Survey also indicate that the shares of income and wealth held by affluent households have reached historically high levels—and, for the bottom 90 percent, they continue to

Read More »

From highway to master

September 28, 2017

From David Ruccio
Adam Smith’s Wealth of Nations makes for uncomfortable reading these days. That’s because, as my students this semester have learned, the father of modern mainstream economics—who has become so closely (and mistakenly) identified with the invisible hand—held a narrow theory of money and advocated extensive regulation of the banking sector.
This is contrast to the obscene growth of banking in recent decades, which Rana Foroohar reminds “isn’t serving us, we’re serving it.”
According to Smith, the “judicious operations of banking” did nothing more than convert dead stock into active and productive stock—”into stock which produces something to the country.”
The gold and silver money which circulates in any country may very properly be compared to a highway, which, while

Read More »

Golden Age for American workers?!

September 26, 2017

From David Ruccio

We’ve been hearing this since the recovery from the Second Great Depression began: it’s going to be a Golden Age for workers!  
The idea is that the decades of wage stagnation are finally over, as the United States enters a new period of labor shortage and workers will be able to recoup what they’ve lost.
The latest to try to tell this story is Eduardo Porter:

the wage picture is looking decidedly brighter. In 2008, in the midst of the recession, the average hourly pay of production and nonsupervisory workers tracked by the Bureau of Labor Statistics — those who toil at a cash register or on a shop floor — was 10 percent below its 1973 peak after accounting for inflation. Since then, wages have regained virtually all of that ground. Median wages for all full-time

Read More »

Protest this!

September 23, 2017

From David Ruccio
Back in 2011, thousands of Chilean students participated in protests against the high cost of higher education. The most famous took place in front of La Moneda, the president’s palace, dancing to Michael Jackson’s “Thriller.”
According to the latest statistics from the OECD report, “Education at a Glance 2017,” the costs of a college education in Chile were still very high in 2015-16.
But they’re still not as high as in the United States, where it costs more to go to college than anywhere else in the world.
Of the 35 member countries in the OECD, the United States has the highest average tuition at both public and private colleges, for Bachelor’s as well as Master’s degrees.

Average public tuition in the United States for a Bachelor’s degree is $8,202 annually,

Read More »

Break this!

September 20, 2017

From David Ruccio

David Brooks should have left well enough alone.

Middle-class wage stagnation is the biggest economic fact driving American politics. Over the past many years, so the common argument goes, capitalism has developed structural flaws. Economic gains are not being shared fairly with the middle class. Wages have become decoupled from productivity. Even when the economy grows, everything goes to the rich.
But then Brooks spends the rest of his column trying to convince us that there aren’t any really structural flaws, that “the market is working more or less as it’s supposed to.”
Well, maybe it’s working “more or less as it’s supposed to” for those at the top. But it’s certainly not working for everyone else, for those who actually have to work for a living.
The

Read More »

“Profits above morals and humanity”

September 17, 2017

From David Ruccio

Back in June, Kim Hemphill, in her letter to the editor of the Washington Post, challenged pharmaceutical industry claims that it must charge high prices on lifesaving drugs to recover research and development costs.
The case detailed in the June 11 Business article “Max’s best hope costs $750,000” was yet another example of how the pharmaceutical industry continues to put profits above morals and humanity. . .
Research and development costs are a part of the business pharmaceutical companies are in and should have little, if any, bearing on the ultimate price of a drug. What they charge for these specialty drugs is profit-motivated price gouging, plain and simple.
The fact is, as is clear from the chart above, pharmaceutical prices (at the wholesale level) have

Read More »

How do you like them facts?

September 14, 2017

From David Ruccio

Apologists for mainstream economics (such as Noah Smith) like to claim that things are OK because good empirical research is crowding out bad theory. 
I have no doubt about the fact that the theory of mainstream economics has been bad. But is the empirical research any better?
Not, as I see it, in the academy, in the departments that are dominated by mainstream economics. But there is interesting empirical work going on elsewhere, including of all places in the International Monetary Fund (as I have noted before, e.g., here and here).
The latest, from Mai Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian, documents two important facts: the decline in labor’s share of income—in both developed and developing economies—and the relationship between the fall in the labor

Read More »

Economics and the new history of capitalism

September 13, 2017

From David Ruccio
As I tell my students, nothing gets a mainstream economist frothing at the mouth quite like mentioning Karl Polanyi.
Or at least it used to, when mainstream economists actually knew who Polanyi was and grasped—however dismissively—what he wrote about the history of capitalism.
To his credit, Eric Hilt (pdf) appears to know something about the author of The Great Transformation and how his work influenced the new history of capitalism. And his review of ten recent books, including Edward Baptist’s The Half Has Never Been Told and Sven Beckert’s Empire of Cotton: A Global History, is not as dismissive as those of other mainstream economists, such as Alan L. Olmstead.
Much of the research of economic historians focuses on questions originating in economic theory, which

Read More »

Who’s working for Facebook?

September 11, 2017

From David Ruccio
There are plenty of reasons to be interested in—and, even more, concerned about—Facebook. Many of them are raised in the recent review of Facebook-related books by John Lanchester [ht: db]: the fragmentation of the polity (via the targeting of posts), the dissemination of “fake news” (which played an important role in the 2016 U.S. presidential election), the undermining of other livelihoods (such as journalism and music), the level of surveillance of users (much more than any national government), the violation of anti-monopoly rules (via individualized pricing), and so on.
All of them are important—and they get at what the Facebook business model is all about:
For all the talk about connecting people, building community, and believing in people, Facebook is an

Read More »

Beyond the trinity formula

September 7, 2017

From David Ruccio

John Hatgioannides, Marika Karanassou, and Hector Sala are absolutely right: mainstream macroeconomists and policymakers never venture beyond the “holy trinity” of economic growth, inflation, and unemployment.* Everything else, including the distribution of income and wealth, is relegated to the fringes. 
This problem, while always serious, has been magnified in recent decades as inequality has grown to obscene levels, particularly in the United States. The labor share (the blue line in the chart above) has been falling since 1960 and, in the past decade and a half, it dropped an astounding 10.2 percent. Meanwhile, the share of income captured by the top 1 percent (the red line in the chart) has soared, rising from 10.5 percent in 1976 to 19.6 percent in 2014.
In

Read More »

Stocks and wages

September 6, 2017

From David Ruccio

The new jobs report is out and, once again, little has changed—including wage growth (the blue line in the chart above), which for production and nonsupervisory workers was only 2.3 percent. 
That may not be good for workers but their employers and stock-market investors couldn’t be happier. The Dow Jones Industrial Average (the red line in the chart above) continues to soar, on the expectation of higher future profits.

Just in the first couple of hours of trading, the average was up more than 58 points.

Read More »