Economy

When Shareholder Capitalism Came to Town

The rise in inequality can be blamed on the shift from managerial to shareholder capitalism.

Jason Schneider

It was only 20 years ago that the world was in the thrall of American-style capitalism. Not only had it vanquished communism, but it was widening its lead over Japan Inc. and European-style socialism. America’s companies were widely viewed as the most innovative and productive, its capital markets the most efficient, its labor markets the most flexible and meritocratic, its product markets the most open and competitive, its tax and regulatory regimes the most accommodating to economic growth.

Today, that sense of confidence and economic hegemony seems a distant memory. We have watched the bursting of two financial bubbles, struggled through two long recessions, and suffered a lost decade in terms of incomes of average American households.

Cuomo's Wedge

AP Images, Mike Groll

On Monday, Mary Fallin, Oklahoma’s Republican governor, signed legislation forbidding her state’s cities from enacting ordinances that set their own minimum wage standards or that entitle workers to paid sick days. Even in hard-right Oklahoma, citizens were collecting signatures to put initiatives raising the minimum wage and mandating sick-day on the Oklahoma City ballot. Fallin has now put an unceremonious end to such egalitarian frippery.

Karl Polanyi Explains It All

Tim Bower

In November 1933, less than a year after Hitler assumed power in Berlin, a 47-year-old socialist writer on Vienna’s leading economics weekly was advised by his publisher that it was too risky to keep him on the staff. It would be best both for the Österreichische Volkswirt and his own safety if Karl Polanyi left the magazine. Thus began a circuitous odyssey via London, Oxford, and Bennington, Vermont, that led to the publication in 1944 of what many consider the 20th century’s most prophetic work of political economy, The Great Transformation: The Political and Economic Origins of Our Time.

Yes, Being a Woman Makes You Poorer

AP Images/Susan Walsh

Senate Republicans blocked the Paycheck Fairness Act yesterday, a bill that would make it illegal for employers to punish workers for discussing wages and would require them to share pay information with the Employment Opportunity Commission. President Barack Obama has already signed an executive order prohibiting federal contractors from punishing employees who talk about their pay. These two actions were pegged to the somewhat made up holiday called “Equal Pay Day” celebrated Tuesday, and were discussed by many in Washington in merely political terms: evidence of attempts by Democrats to woo women voters and a continuing sign of Republicans “difficulties” with them.

Workers on the Edge

AP Images/Amy Sancetta

One of the most significant contributing causes of the widening inequality and insecurity in the American workforce is the accelerating shift to what economists call contingent employment. That means any form of employment that is not a standard payroll job with a regular paycheck. It can take the form of temps, contract workers, part time jobs, or jobs with irregular hours. A study by the GAO found that fully one-third of the U.S. workforce, or 42.6 million workers, was contingent, meaning in a work arrangement that is “not long-term, year-round, full-time employment with a single employer. “

How Should Liberals Feel About the Mozilla CEO Getting Pushed Out Over Marriage Equality?

By now you may have heard the story of Brendan Eich, who was named the CEO of the Mozilla corporation, which runs the Firefox web browser, then resigned ten days later after it was revealed that he donated $1,000 to the campaign for California's Proposition 8, which outlawed same-sex marriage in the state and was later overturned. Eich's resignation came after the company came under pressure from many directions, including the dating site OKCupid, which put a message on its site asking its users not to use Firefox. This is something of a dilemma for liberals: on one hand, we support marriage equality, but on the other, we also support freedom of thought and don't generally think people should be hounded from their jobs because of their beliefs on contentious issues. So where should you come down?

In order to decide, there are a few questions you need to ask, some of which are easier to answer than others:

Wall Street’s Subsidy Safety Net

AP Images/Mary Altaffer

Financial reformers in both parties have insisted for years that the largest banks remain too big to fail, and that Dodd-Frank did not cleanse the system of this reality. You can mark down this week as the moment that this morphed into conventional wisdom. In successive reports, two of the more small-c conservative economic institutions, without any history of agitating for financial reform—the Federal Reserve and the International Monetary Fund—both agreed that mega-banks, in America and abroad, enjoy a lower cost of borrowing than their competitors, based on the perception that governments will bail them out if they run into trouble. This advantage effectively works as a government subsidy for the largest banks, allowing them to take additional risks and threaten another economic meltdown. With institutional players like the Fed and the IMF both identifying the same problem, Wall Street grows more and more isolated, setting up the possibility of true reform.

Soldiering on an Empty Stomach

AP Images/Keith Srakocic

Since the start of the Recession, the dollar amount of food stamps used at military commissaries, special stores that can be used by active-duty, retired, and some veterans of the armed forces has quadrupled, hitting $103 million last year. Food banks around the country have also reported a rise in the number of military families they serve, numbers that swelled during the Recession and haven’t, or have barely, abated.

America's Class System Across The Life Cycle

I am not usually one for a long charticle, but occasionally it's worthwhile to step back and summarize what we know. Here, I tackle America's class system, across the life cycle.

The GOP's Racial Dog Whistling and the Social Safety Net

AP Images/J. Scott Applewhite

You've no doubt heard the famous quote about race in politics spoken by the late Lee Atwater, the most skilled Republican strategist of his generation. Liberals have cited it for years, seeing in it an explanation, right from the horse's mouth, of how contemporary Republicans use "issues" like welfare to activate racial animus among white voters, particularly in the South. Race may be an eternal force in American politics, but its meaning and operation change as the years pass. It's time we took another look at Atwater's analysis and see how it is relevant to today, because it doesn't mean what it once did. Atwater may have been extraordinarily prescient, though not in the way most people think.

How to Raise Americans' Wages

AP Images/Paul Beaty

Once upon a time in a faraway land—the United States following World War II—workers reaped what they sowed. From 1947 through 1973, their income rose in lockstep with increases in productivity. Their median compensation (wages plus benefits) increased by 95 percent as their productivity increased by 97 percent. Then, abruptly, the rewards for greater productivity started going elsewhere—to shareholders, financiers, and top corporate executives. Today, for the vast majority of American workers, the link between their productivity and their compensation no longer exists.

Tesla, Car Dealers, and Anti-Competitive State Laws

Shoppers at a Tesla showroom in Amsterdam, where such things are legal. (Flickr/harry_nl)

You may not realize it, but car dealers wield an unusual amount of political power in this country. That's partly because they're located in or near pretty much every community everywhere, and also because they're highly organized and clever about using their influence. One of the ways they've done so is get laws passed in state after state making sure that the model under which they operate—one in which independent dealers sell cars, but car companies themselves don't—is the only thing allowed by law. In fact, laws making it difficult or downright illegal for car companies to sell their products directly to customers are on the books in 48 states. This absurd state of affairs hasn't gotten much attention until recently, when Tesla decided it wanted to open its own dealerships to sell people cars.

Among the places it has done this is New Jersey, where the company had opened two stores. But earlier this week, the New Jersey Motor Vehicle Commission passed a rule requiring that all auto sales be done through franchises, making Tesla's stores illegal. Their option now is to either test the rule in court, or convert the stores to "showrooms," where you can look at a car but not actually buy one.

You'd think that if conservatives really believed all their rhetoric about the value of unfettered free markets, they would be all over this issue, advocating for Tesla's side of the controversy and campaigning to break up the anti-free-enterprise car dealer oligopolies. But of course, we're talking about Tesla, and liberals like electric cars, and therefore conservatives feel obligated to hate electric cars, so that probably won't happen.

What Is Left?

A response to Harold Meyerson

I was not surprised by the substance of Harold Meyerson’s criticisms of my recent Harper’s essay (“Nothing Left: The Long, Slow Surrender of American Liberals,” March 2014). I have known for some time that he and I disagree fundamentally on the reasonable scope of a political left in the United States and, correspondingly, whether one actually exists and/or how to go about building one as an effective social and political force. I was somewhat disappointed, however, at the tired hook to which he tethered his criticism.

The Inequality Puzzle

A new study shows there's been no decline in intergenerational poverty in the last 30 years, but it doesn't tell the whole story.

Flickr/DonkeyHotey

In January, a team of prestigious economists published an authoritative study showing that there had been no decline in intergenerational mobility during the past three decades. The paper, by Harvard’s Raj Chetty and three colleagues, using some 40 million Internal Revenue Service records, found that if you were born in the bottom fifth of the income distribution in 1980–1982, you had about the same chance of moving to the top quintile (about 1 in 12) as someone born at the bottom 30 years earlier.

Piketty’s Triumph

Three expert takes on Capital in the Twenty-First Century, French economist Thomas Piketty's data-driven magnum opus on inequality.

Courtesy of Fondation Jean Jaurès

In the 1990s, two young French economists then affiliated with the Massachusetts Institute of Technology, Thomas Piketty and Emmanuel Saez, began the first rigorous effort to gather facts on income inequality in developed countries going back decades. In the wake of the 2007 financial crash, fundamental questions about the economy that had long been ignored again garnered attention. Piketty and Saez’s research stood ready with data showing that elites in developed countries had, in recent years, grown far wealthier relative to the general population than most economists had suspected. By the past decade, according to Piketty and Saez, inequality had returned to levels nearing those of the early 20th century.

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