A common trope for conservative policy intellectuals is that they want to “means test” the welfare state – reduce its availability for those with high wealth and income and focus it on those with the least wealth and income. But the Tea Party base wants the opposite – they are opposed to a welfare state for the poor, young people, undocumented workers and other groups they think are undeserving. The welfare state is ok for people like themselves, but for people they think that don’t make the cut it should be a nonexistent or a burdensome affair.

From the latest research on the Tea Party we learn that “Tea [...]]]> Mike Konczal has an interesting interpretation of the recent rise of Gingrich in GOP polling:

A common trope for conservative policy intellectuals is that they want to “means test” the welfare state – reduce its availability for those with high wealth and income and focus it on those with the least wealth and income. But the Tea Party base wants the opposite – they are opposed to a welfare state for the poor, young people, undocumented workers and other groups they think are undeserving. The welfare state is ok for people like themselves, but for people they think that don’t make the cut it should be a nonexistent or a burdensome affair.

From the latest research on the Tea Party we learn that “Tea Partiers judge entitlement programs not in terms of abstract free-market orthodoxy, but according to the perceived deservingness of recipients…The fundamental distinction for them is not state vs. individual, it is the division of the United States into ‘workers’ vs. ‘people who don’t work.’” This is welfare as private charity, charity conditional on fitting certain expectations, not as an unconditional right. . . .

[T]he conservative mind doesn’t see the economy as something that is defective when involuntary unemployment shoots up or something that should work to the advantage of those who have the least. To them, the threat of people going hungry for failing in the market is what creates the ability to thrive in that market. The market doesn’t just reward the successful, it punishes those who fall behind. Food stamps deny people of that experience[.]

So, too, might burial money intended for the poor. Gingrich has not yet elaborated on the bracing effects of dying without enough money for a funeral. But he does have hard-edged answers for those near the beginning of life, repeatedly urging a repeal of “outdated” child labor laws. Remember, you heard it on this blog first.

To get a better sense of why the “animals” may be complaining, be sure to listen to Mike Daisey’s extraordinary report on his trip to Shenzhen, home of a massive Foxconn factory. Here’s one excerpt:

N-hexane is an iPhone screen cleaner. It’s great because it evaporates a little bit faster than alcohol does, which means [...]]]> Among the billionaires at the vanguard of global capital, Terry Gou of Hon Hai (also known as Foxconn) deserves special recognition for his honesty. “Hon Hai has a workforce of over one million worldwide and as human beings are also animals, to manage one million animals gives me a headache,” said the chairman. His company has also begun building “an empire of robots” to replace a whining workforce.

To get a better sense of why the “animals” may be complaining, be sure to listen to Mike Daisey’s extraordinary report on his trip to Shenzhen, home of a massive Foxconn factory. Here’s one excerpt:

N-hexane is an iPhone screen cleaner. It’s great because it evaporates a little bit faster than alcohol does, which means you can run the production line even faster and try to keep up with the quotas. The problem is that n-hexane is a potent neurotoxin, and all these people have been exposed. Their hands shake uncontrollably. Most of them can’t even pick up a glass.

I talk to people whose joints in their hands have disintegrated from working on the line, doing the same motion hundreds and hundreds of thousands of times. It’s like carpal tunnel on a scale we can scarcely imagine. And you need to know that this is eminently avoidable. If these people were rotated monthly on their jobs, this would not happen.

But that would require someone to care. That would require someone at Foxconn and the other suppliers to care. That would require someone at Apple and Dell and the other customers to care. Currently no one in the ecosystem cares enough to even enforce that. And so when you start working at 15 or 16, by the time you are 26, 27, your hands are ruined. And when they are truly ruined, once they will not do anything further, you know what we do with a defective part in a machine that makes machine. We throw it away.

When workers are already treated as machines, perhaps their replacement by robots should be a cause for celebration. But the question then becomes: what do the displaced do for a living? Is there an alternative to exploitation?

Writers in the more rarefied precincts of technology studies tend to praise the fading boundaries between man, machine, and beast. However, it’s by no means a foregone conclusion that animals’ interests will be vindicated by the legal order, or robots treated with the simulacrum of respect that their simulacrum of humanity merits. To the extent the bulk of humanity is being recognized as “dependent rational animals,” those in authority tend to agree with Gou’s approach more than Alasdair MacIntyre’s.

Expect more speed-up in the developed world, as thought leaders decree that Americans must become “ten times more productive” if they dare demand wages ten times higher than those prevailing among the bullied and battered workers at the bottom of the supply chain. That’s our future, unless we can continue to rally around a sense of social minimums due to each person qua person. That motivates my interest in positive rights, and the fantastic discussion that followed this post on the topic. Richard Posner once said that “Most of us would think it downright offensive to give greater rights to . . . computers than to retarded people, upon a showing that . . . [they have] a greater cognitive capacity than a profoundly retarded human being.” Similarly, global priorities are troublingly scrambled if the construction of a “robot empire” is more pressing than the establishment of humane and secure living conditions for those whose work created the wealth that makes the “empire” possible.

Sharing the Gains from Automation

Of course, we all know the Davos elite’s response to such dark premonitions: get educated and hustle. The bard of flatworld, Tom Friedman, helpfully applauds “race to the bottom” online auctions for talent as one more “opportunity.” He ignores the vast literature on these systems’ potential to eviscerate the last vestiges of legal protections for employees. Friedman’s too busy jet-setting to worry about anyone’s slavery footprint. Thinking about how to get health care or housing to the newly “liberated” global workforce is beneath him.

While Friedman’s Panglossian outlook is au courant, this plain talk from FDR appears ever more a relic of the 20th century:

To those who say that our expenditures for Public Works and other means for recovery are a waste that we cannot afford, I answer that no country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order. Some people try to tell me that we must make up our minds that for the future we shall permanently have millions of unemployed just as other countries have had them for over a decade.

What may be necessary for those countries is not my responsibility to determine. But as for this country, I stand or fall by my refusal to accept as a necessary condition of our future a permanent army of unemployed. On the contrary, we must make it a national principle that we will not tolerate a large army of unemployed and that we will arrange our national economy to end our present unemployment as soon as we can and then to take wise measures against its return. I do not want to think that it is the destiny of any American to remain permanently on relief rolls.

We can count on Friedman and other sophisticates to claim that times have changed. Globalization and automation have made many US jobs obsolete, they say. FDR may have had an answer to the first Great Depression, but not the second.

Is the answer really to put everyone on a hamster wheel of digital labor auctions and scrambles for gigs? I don’t think that’s correct. The question for a future economics (and morals) is how to set a baseline “social minimum” for workers in an utterly precarious and unpredictable work environment.

We have the resources to do this. There have been enormous gains in productivity over the past few decades. But the gains are going disproportionately to those at the very top. In the last economic expansion, the top 1 percent of U.S. households captured two-thirds of income gains. Yes, that’s 67% going to the top 1%. During the expansion, “the inflation-adjusted income of the top 1 percent of households grew more than ten times faster than the income of the bottom 90 percent of households.” The thought that the gains from automation will be shared equally among social classes is about as quaint as this personal robot envisioned in 1961.

Now I’m sure that, among that top 1%, there were some incredibly hard-working geniuses. Maybe some produced productivity gains that were actually worth 200 times more than what the average member of the bottom 99% contributed.* But power drives economic outcomes at least as often as productivity. Being able to slash all your workers’ pay (or work them to exhaustion in an 110-degree warehouse) simply because there is high unemployment is not exactly a valuable skill. Any fool could improve the bottom line at “a highly profitable company” by “demanding large-scale concessions” from its employees.

As a whole host of commentators have suggested, automation and technological change is threatening to wipe out whole industries, and to create far fewer jobs than they destroy. If software and hardware are making jobs in fields ranging from medicine to retail to science to law obsolete, it doesn’t make sense to continue giving the lion’s share of gains to the top 1%. A longshoremen’s union provided one model here:

In modern times, far more than other unions, the longshoreman have used technological change to their advantage. In 1960, the West Coast longshoremen agreed to far-reaching automation that replaced inefficient break-bulk cargo, which relied on hooks to move the cargo, with containerized cargo, which relies on cranes. In accepting automation, the union recognized that productivity would soar and the number of longshoremen needed would plunge; there are now 10,500 West Coast longshoremen, down from 100,000 in the 1950′s.

In exchange, the union received an unusual promise: port operators pledged to share the fruits of the new automation. Management promised all longshoremen a guaranteed level of pay, even if there was not work for everyone. Management also promised to share the wealth.

I found this example via Peter Frase, who offers the following gloss:

Basically, I think this is the deal we need to strike throughout the economy: automation (and relatedly, free trade) in exchange for compensating the displaced. However, the longshoremen were only able to achieve this victory because they occupy an unusual strategic choke-point in the economy. Shutting down the ports can cripple wide swaths of business, and this gives dockworkers a kind of negotiating leverage that isn’t available to, say, supermarket checkers. Which is why I think that the demand to compensate workers for technological change now has to be fought out politically and electorally, at the level of the state, rather than in the individual workplace. That’s the essence of my argument for the Basic Income: just like the dockworkers’ agreement, it ensures a level of pay whether or not there is work for everyone, only it generalizes the principle to encompass the whole economy.

You can dismiss that as utopianism if you like. Certainly the call for work reduction and the decoupling of income from employment has been made many times through the generations, from Paul LaFargue to André Gorz to Stanley Aronowitz. But the left does itself no favors by remaining in a defensive crouch, clinging to nostalgia for a political order that was rooted in a very different political economy–and which wasn’t even all that great to begin with. . . . The modern right provided an offensive strategy and a grand vision of what was wrong with the society that existed and what had to be done to turn it into something better: one market under god.

Pace economists like Goldin & Katz, we can’t guarantee livelihoods by promoting employment by educating everyone more. When robots are in line to replace some of the most highly educated people in society, that’s a recipe for disappointment. The real question is how to divide the spoils from societal advancement and automation fairly. Alperovitz and Daly have demonstrated that “up to 90 percent (and perhaps more) of current economic output derives not from individual ingenuity, effort, or investment but from our collective inheritance of scientific and technological knowledge: an inheritance we all receive as a “free lunch.”" The real motivation for calling workers “animals” or “machines” is to deny them their share in the the “universal destination of goods,” which “remains primordial, even if the promotion of the common good requires respect for the right to private property and its exercise.”

*My back of the envelope calculation: If there were 100 units of gain in this time period to be distributed to 100 people, that means that the top person would get 67 units. The 99 persons remaining would share the remaining 33. That average would be one third of a unit for each of the 99. That’s 200 times less than 67.

1) Nicholas K. Peart, Why is the NYPD After Me?

Less than two years later, in the spring of 2008, N.Y.P.D. officers stopped and frisked me, again. And for no apparent reason. This time I was leaving my grandmother’s home in Flatbush, Brooklyn; a squad car passed me as I walked down East 49th Street to the bus stop. The car backed up. Three officers jumped out. Not again. The officers ordered me to stand, hands against a garage door, fished my wallet out of my pocket and looked at my ID. Then they let me go. I was stopped again in September of 2010. This time I was just walking home from the gym. It was the [...]]]> To mark the day, a few reflections:

1) Nicholas K. Peart, Why is the NYPD After Me?

Less than two years later, in the spring of 2008, N.Y.P.D. officers stopped and frisked me, again. And for no apparent reason. This time I was leaving my grandmother’s home in Flatbush, Brooklyn; a squad car passed me as I walked down East 49th Street to the bus stop. The car backed up. Three officers jumped out. Not again. The officers ordered me to stand, hands against a garage door, fished my wallet out of my pocket and looked at my ID. Then they let me go. I was stopped again in September of 2010. This time I was just walking home from the gym. It was the same routine: I was stopped, frisked, searched, ID’d and let go. . . .

[L]ast year, the N.Y.P.D. recorded more than 600,000 stops; 84 percent of those stopped were blacks or Latinos. Police are far more likely to use force when stopping blacks or Latinos than whites. In half the stops police cite the vague “furtive movements” as the reason for the stop. Maybe black and brown people just look more furtive, whatever that means. These stops are part of a larger, more widespread problem — a racially discriminatory system of stop-and-frisk in the N.Y.P.D.

2) MLK’s Legacy: The Charleston Hospital Workers’ Strike of 1969:

During the year after her husband’s assassination, Coretta Scott King made several visits to Charleston, S.C., where hospital aides at what was then the Medical College of South Carolina were involved in a protracted fight for decent wages. After a 113-day strike, the union won an agreement that led to wage increases and new grievance procedures.

The campaign was led by Mary Moultrie, a South Carolina native . . . In Moultrie’s telling, the gains that the union won lasted only for a few years. Because South Carolina is a right-to-work state, the union couldn’t manage to maintain much strength. But Moultrie didn’t give up: She was still organizing as recently as 2008.

3) Adam Kotsko, On the commemoration of Martin Luther King

Above all, they say: we gave you formal equality and canonized the man who forced us to do so — now can we please not talk about this any more? Yet things are not quite so fargone as that. Despite their formidable power, despite all the efforts of domestication and neutralization they’ve devoted to it, they can’t fully control the meaning of such a powerful symbol. We should be glad that this date is on the calendar, not so that we can passively honor that symbol but so that we can continue to struggle over its meaning.

4) Glenn Loury, Ghettos, Prisons, and Racial Stigma (Tanner Lectures, 2007)

[O]ne can see from the table[s] that the experience of incarceration for poorly educated black men is estimated to be four times more prevalent in the later than in the earlier cohort – 58.9% as compared to 17.1%. The massive scale of this policy shift is stunning. To repeat: there is a nearly three-fifths chance that a black male with less than HS diploma born between 1965-69 will have gone to prison or jail at least once prior to reaching age 35.

5) John Paul Stevens review of William Stuntz, The Collapse of American Criminal Justice

While only 10 percent of the adult black population uses illegal drugs, as does a roughly equal percentage—9 percent—of the adult white population, blacks are nine times more likely than whites to serve prison sentences for drug crimes. “And the same system that discriminates against black drug defendants also discriminates against black victims of criminal violence.” As “suburban voters, for whom crime is usually a minor issue,” have come to “exercise more power over urban criminal justice than in the past,” police protection against violent felonies has disproportionately extended to suburban neighborhoods rather than the urban centers where more black individuals reside.

The “bottom line,” Stuntz explains, has been that “poor black neighborhoods see too little of the kinds of policing and criminal punishment that do the most good, and too much of the kinds that do the most harm.” In this sense and others, Stuntz concludes, our criminal justice system has “run off the rails.”

6) Ten OTHER things Martin Luther King said.

7) If you missed it last year; some commentary on Michelle Alexander’s The New Jim Crow.

Paul Krugman notes today that MLK would be “disappointed” in what the US has become since his death. I think the feeling of alienation and indignation would be much stronger than that.

It really is a war against the poor. The inequity that has existed in the past is going to continue unless civil society is informed, asks the right questions of its government, of its business leadership, and [...]]]> The past few years I’ve tried to find an inspiring quote for the New Year for the blog. There’s a rich vein of insight to be mined from the Carnegie Council podcasts, which I recently discovered on iTunes. One speaker I particularly enjoyed was Krishen Mehta, a former partner with PricewaterhouseCoopers who is now the co-chairman of Global Financial Integrity’s advisory board. Asked about what motivated him to try to stop the shocking abuse of tax havens and mispriced trade by oligarchs, he said the following:

It really is a war against the poor. The inequity that has existed in the past is going to continue unless civil society is informed, asks the right questions of its government, of its business leadership, and asks for more responsibility. One of my favorite writers is Blaise Pascal, who said that “justice and power must be brought together so that whatever is just may be powerful and whatever is powerful may be just.”

A recent study concluded that, “For a salary of between £75,000 and £200,000, tax accountants destroy £47 in value, for every pound they generate.” Mehta, by contrast, is not only creating value, but doing so for the most vulnerable people. How appropriate that a thinker admired by both mathematicians and philosophers would inspire him.

Image Credit: Augustin Pajou. As described on Wikimedia Commons: “Blaise Pascal (1623–1662) studying the cycloid, engraved on the tablet he is holding in his left hand; the scattered papers at his feet are his Pensées, the open book his Lettres provinciales.”

[A] one-strike clause . . . allows the public housing authority to evict [the tenant] if any member of her household or any guest engages in certain kinds of criminal activity. . . . Stories abound about the one-strike policy being wielded in seemingly egregious ways to evict “innocent tenants,” such as a disabled elderly man in California whose caretaker was caught with crack. . . .The Chicago Reporter wrote in September that 86 percent of Chicago’s one-strike evictions last year did not arise from criminal activity by the person named on the lease.

“These policies, the effect of them on children, families, women, families [...]]]> Most readers of this blog are already familiar with draconian treatment of the poor by various law enforcers and state bureaucracies. Here’s yet another example:

[A] one-strike clause . . . allows the public housing authority to evict [the tenant] if any member of her household or any guest engages in certain kinds of criminal activity. . . . Stories abound about the one-strike policy being wielded in seemingly egregious ways to evict “innocent tenants,” such as a disabled elderly man in California whose caretaker was caught with crack. . . .The Chicago Reporter wrote in September that 86 percent of Chicago’s one-strike evictions last year did not arise from criminal activity by the person named on the lease.

“These policies, the effect of them on children, families, women, families of color, were not thought through. And I think now a national conversation is beginning to rethink that,” said Ariela Migdal, a senior staff attorney with the Women’s Rights Project of the American Civil Liberties Union. Migdal pointed to a June 2011 letter from HUD Secretary Shaun Donovan to public housing directors, encouraging the directors to use their “broad discretion” to create a flexible set of standards for who will be admitted to and allowed to stay in public housing.

Certainly the Obama administration has ample experience deploying “discretion” and “mercy” in other areas.  For example, consider Barry Ritholtz’s summary of a shocking Reuters report by Scott Paltrow on foreclosure fraud:

There have been . . . “tens of thousands of fraudulent documents filed in tens of thousands of cases.” Sworn affidavits have been filed containing false information. This is easily prosecuted perjury. . . . The size and scope of the fraud on the U.S. court system is unprecedented in U.S. history.

NY State court judge Arthur Schack, ruled in 2010 that pleadings by the Baum Law Firm— who handle 40% of NY foreclosures — were “so incredible, outrageous, ludicrous and disingenuous that they should have been authorized by the late Rod Serling, creator of the famous science-fiction television series, The Twilight Zone.”  There has been no fraud prosecution to date. . . . [and banks] have routinely filed falsified mortgage promissory notes — in some cases, six different documents have been filed, all claimed to be the original. At the least 5 must be forgeries — an easy felony to prosecute.

 The administration slapped BofA/Countrywide on the wrist for massively discriminatory action.  Its OCC has initiated a program where “servicers agree[] to submit foreclosure fraud for review by ‘independent’ third-party companies” that is not credible.  Matt Stoller describes the dynamics that are now wrecking lives and neighborhoods around the country:

The attitude during the go-go days of the housing bubble was “here today, gone tomorrow,” as Joe Nocera and Bethany McLean make clear in their book “All the Devils Are Here.” This was a refinement of the financial deal makers’ code, “IBG-YBG,” meaning “I’ll be gone, you’ll be gone,” described by Jonathan Knee in “The Accidental Investment Banker.” In this environment, why bother getting your paperwork in order when the goal is to put someone into a predatory loan, reap fees and disappear tomorrow?

Now that these homes are in foreclosure, however, the lack of paperwork is a serious problem. And, since no one has yet been held accountable for the fraud perpetrated during the housing bubble, the business model of financial institutions is often still predatory. This fraud is now coming back to haunt our courts — for example, in the falsified foreclosure paperwork required to cover up the corner-cutting of the subprime lenders and the banks that funded them. . . .The [Obama] administration is now attempting to quash state-level officials by fiercely lobbying for a 50-state settlement to paper over the foreclosure fraud scandal. Obama may talk about his fealty to the “99 percent,” but his administration is engaged in an aggressive coverup of bank crimes.

 But wait, as they say in the infomercials, there’s more.  It would be bad enough if the wholesale campaign of primitive accumulation via predatory loans and sloppy foreclosures merely contributed to destitution and inequality.  But, as CBS’s 60 Minutes documents, the same banks evicting families are not exactly putting the empty houses to their “highest and best” use in many cities:

 Cuyahoga County ripped down 1,000 homes this year. And they have 20,000 more to go. That’ll cost about $150 million dollars. . . . In theory there shouldn’t be this many abandoned houses. When homeowners walk away, the bank is supposed to take responsibility. But one little known feature of the great recession is, that many banks are walking away too, unwilling to maintain a house whose value has crashed. “Very often a bank will take a property to the point of foreclosure, but won’t go to the sheriff’s sale, ’cause they don’t want that property. They don’t want the responsibility of the $8-$10,000 bill that comes with tearing this house down” [says Jim Rokakis, a former county treasurer].

There is no concern for communities, none for struggling families, none for the public treasury.  There is simply a Kafkaesque interlinkage of contracts and incentives that keep the foreclosure machine humming (along with Potemkin programs like HAMP), putting families on streets with dubious documentation for the paper gains of banks and servicers.  The law enforcement apparatus will hammer a disabled man for inadequately monitoring his caretaker, but moves slowly and ineffectively (if at all) against a wholesale abandonment of legality. Glenn Greenwald’s and Bernard Harcourt’s books on such discrepancies, already damning, appear to have understated the extent of our 2-tier justice system.

Banks’ Economic Impact

This is not simply a problem for lawyers, but for anyone concerned about the overall health of the US economy.  The foreclosure disaster is only one particularly pure example of a financial system prone to overcentalization,  bubble-blowing, opacity, and disregard for long-term productivity.  Henry Mintzberg has warned that the economy will never be “fixed” as long as problematic alliances between business and government consume such a disproportionate share of resources:

When economists boast about America’s great productivity, what they have in mind is exploration – finding ways to do things better, especially through superior processes. But much of this “productivity” has in fact been destructively exploitative. Think of all the corporations that have fired great numbers of people at the drop of a share price, leaving behind underpaid, overworked employees and burned-out managers, while the CEOs escape with their bonuses.  To see where this leads, imagine a company that fires all of its workers and then ships its orders from stock. Economic statistics would record this as highly productive – until, of course, the company runs out of stock. American enterprise is running out of stock.

There have been a number of recent studies on the productivity of the financial sector (see, e.g., here, here, here, and here). Many have asked whether it increases GDP, but perhaps the more telling question is how it raises GDP.  Mike Konczal recently evocatively compared the foreclosure crisis to an earthquake or storm affecting millions:

Imagine a natural disaster that hit the United States and internally displaced over 5 million families.  We’d understand that would require a major policy response.  But for the 5 million estimated foreclosures, and the millions more that are going to happen, there’s no response from the administration to match this challenge.

US GDP probably got some kind of “bump” in 2006 as some homes of Katrina victims were rebuilt.  But I’ve heard few people try to describe hurricanes as a form of “creative destruction,” or “information creators.”  Maybe the hurricane lobby just needs to donate to the right think thanks.

A New Way Forward?

Is there any solution to these problems? The Clinton administration diverted law enforcement resources from financial to health care fraud, and later Bush did the same thing in response to terror fears.  Health care fraud detection and deterrence has become extraordinarily sophisticated.  For instance, as Wheeler, Fuller, and Broussard have noted (in 4 J. Health & Life Sci. L. 1, 2011):

Recently, the number of Medicare- and Medicaid-affiliated government contractors charged with detecting fraudulent and abusive practices by enrolled providers has expanded dramatically. The contractors’ role has been to monitor and investigate providers rather than simply to administer these programs.   [T]he healthcare government contractor landscape continues its transformation with an increased number of contractors actively pursuing the recovery of erroneous payments and the identification of potential patterns of fraud and abuse.

There is a veritable alphabet soup of entities devoted to this goal, including Program Safeguard Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs).  They perform “auditing, data mining, and improper billing and fraud investigation.”  

In my next post on financial institutions, I will outline some potential lessons for financial fraud prevention from the realm of health care fraud.  The critical conceptual issue here is to begin to see the banks as a sector as permanently embedded in a web of state subsidy and support as health care, defense, and energy.  Mintzberg convincingly complains about “the energy companies with their cozy tax deals, the defense contractors that live off government budgets, and the pharmaceutical companies that buy their innovations and price what the market will bear, thanks to patents that governments grant, but without policing their holders.”  I also worry about all these sectors. But it may well be the finance sector that is the most menacing to economic growth, and the least accountable.  We cannot simply accept lawlessness in the sector as the status quo.  Creative and forceful responses are possible, and have precedents both historically, in other nations, and in other sectors in our own economy.

Image Credit: Keith Allison.

There are few (if any) “free markets” in the largest sectors of the US economy. The health care industry is a labyrinth of public and private payers. Sectors known as “guard labor” are also larded with subsidies.  The Departments of Defense and Homeland security contract with thousands of companies.  The communications industry enjoys various government “givings.” And at this point, everyone knows that our largest financial institutions are taxpayer supported entities. Without the implicit backing of the federal government, they would collapse.

Government subsidy to large industries is not, in and of itself, a bad thing. When wages are stagnant and capital gains are mainly enjoyed by the top thousandth of [...]]]> (Glenn Greenwald is having a fundraiser; link here.  I think his work is well worth supporting.)

There are few (if any) “free markets” in the largest sectors of the US economy. The health care industry is a labyrinth of public and private payers. Sectors known as “guard labor” are also larded with subsidies.  The Departments of Defense and Homeland security contract with thousands of companies.  The communications industry enjoys various government “givings.” And at this point, everyone knows that our largest financial institutions are taxpayer supported entities. Without the implicit backing of the federal government, they would collapse.

Government subsidy to large industries is not, in and of itself, a bad thing. When wages are stagnant and capital gains are mainly enjoyed by the top thousandth of the population, some entity has to spend for common provision. But the price of that spending should be higher standards for the propped-up industry. In health care, for instance, Medicare Conditions of Participation (and laws like the 1986 EMTALA) require many hospitals to provide care regardless of patients’ ability to pay. Tough fraud and abuse enforcement subjects providers’ bills to rigorous audits; privacy law will soon require audit-capability for digital medical records. Legislation passed in 2009 and 2010 creates many other requirements to channel private provision of health care toward more public ends. It’s certainly not a perfect system, but regulation is serious and purposeful. There are real consequences for many lawbreakers.

Glenn Greenwald tells a very different story about three other heavily subsidized industrial sectors.  He gives us serious reason to doubt that law has constrained banks, telcos, and the security sector when they posed critical threats to our economy, privacy, and liberty. His book With Liberty and Justice for Some is a passionate indictment of four distinct trends:

1) elites who violate laws with impunity,
2) retroactive immunity for acts unlawful at the time they were committed,
3) lobbyists’ power to influence legislators to render bad conduct lawful or even subsidized, and
4) a radical increase in punishment of those who fall outside the charmed circle of political and economic elites.

Greenwald has examined each area in his blog, as have other, lonely voices in corporate law (and a more robust chorus in communications & cyberlaw troubled by telecomms’ sweetheart deals). The vital contribution of With Liberty and Justice for Some is to show how the four trends mutually reinforce one another, contributing to a politics of wealth and privilege defense commonly known as oligarchy.

An Agenda-Setting Book

There is much in Greenwald’s book to interest legal scholars. The very concept of “retroactive immunity” militates against the rule of law, and I could find only twenty or so mentions of it in Westlaw’s database of journals and law reviews prior to 2005.*  While there have been 40 pieces addressing “retroactive immunity” since then, we need both research and activism on the topic. Whose rights are abrogated when retroactive immunity is granted? Is this a taking?

A note by Olivia Radin in the Columbia L. Rev. suggested that legal rights are a form of property. She argues that, “When a state confers retroactive immunity on a defendant, the [Supreme] Court understands that the plaintiff has suffered an injury to his existing legal rights.” Shouldn’t retroactive immunity be costlier, then? If the state entirely takes away a vested right of yours, to enrich another, why shouldn’t there be some sort of compensation? When Congress afforded retroactive to the telecoms for warrantless wiretapping, it should have at least acknowledged the cost of its actions, both to individuals and to the rule of law as a whole.  And it should have stepped in to pay the fines that it spared communications giants from suffering, directing them to future privacy enforcement efforts.

Another question is: how much worse have things gotten over the years? Bill Black has frequently noted that “In the Savings and Loan crisis, which was 1/70th the size of [the current] crisis, our agency made over 10,000 criminal referrals, and that resulted in the conviction on felony grounds of over 1000 elites in what were designated as major cases.” Why so few referrals now? Have priorities shifted so far in the direction of terrorism and homeland security that law enforcers aren’t even accepting criminal referrals? Or have staffers at financial regulatory agencies become so captured by the industry that they are terrified of alienating potential future employers, or exposing their own past deeds? What were the institutional safeguards that let people like Black do their jobs in the aftermath of the S&L crisis, and how can they be replaced? Why is the Nevada AG such an outlier in these matters?  And how have we come to the point where the yearly income of a hedge fund manager can easily be twice or three times the entire annual SEC budget?

Greenwald’s book is also a call to lawyers to “wake up” and try to do something about a legal regime whose deficiencies have been thoroughly documented and theorized. Greenwald doesn’t advance a detailed political program in the book. Rather, he mentions some suggestive historical precedents and principles. Many come from the Founding Fathers, including George Washington’s insistence that constitutional governance rests on “the denial of every preeminence.” Greenwald mentions the example of Theodore Roosevelt, recently revived in Osawatomie by President Obama.  Paine called equal application of the law “the true and only basis for representative government,” and Franklin worried about society divided between the “favored” and the “oppressed” if the rule of law were not applied fairly to all.

Paradoxes of Penality

What would Franklin, Paine, or Washington think of today’s great divide between the 1% and the 99%? Greenwald details case after case in which connected, wealthy individuals escape sanctions for transgressions costing millions or billions of dollars. But law enforcers turn from lamb to lion upon ordinary citizens.

Bernard Harcourt has both documented and theorized the “neoliberal penality” that lets Dick Fuld walk away with hundreds of millions of dollars from what was in essence a disastrous mix of gambling and misrepresentation, but unleashes new Inspectors Javert on food stamp recipients. (Or: sell a school system toxic investments, and retire rich; try to enroll your kid outside your district, and get arrested for a $15,000 theft.) Harcourt describes “two paradoxical tenets” that seem to rule contemporary politics: “government incompetence when it comes to regulating the economy and government competence when it comes to policing and punishing.”  Greenwald explores these tenets’ effects: incredible wealth for a connected “top 0.1%,” and untold misery for a bottom 1%—my conservative estimate of the number of now-jailed or stigmatized Americans who would not be in prison (or suffering from collateral consequences) if they lived in a country like Canada, which regularly gives sentences as third as long as US prison terms for the same crimes (235).

Greenwald’s chapter on “American Justice’s Second Tier” is a tour de force compilation of stories and stats: America’s spectacularly high level of incarceration, the 1 in 9 black children with a parent behind bars, the manifest failure of the War on Drugs.  These are depressingly familiar themes. However, they feel newly urgent in Greenwald’s hands.  Mass incarceration for drug possessors seems a far more disproportionate punishment when it’s contrasted with the coddling of politically connected torturers and perjurers.

Next time an apologist for the finance industry says that suits against the likes of Citi must be settled because the SEC lacks resources (after other apologists for the finance industry defunded them), we might wonder if the Florida foreclosure kangaroo courts provide a model for action:

The judges . . .  openly admit that their primary mission is not justice but speed. One Jacksonville judge . . . even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one [person] on the street every 2.4 minutes.

A society which “efficiently” dispossesses homeowners cannot long stand as a democracy if it fails to apply the same standards of “swift justice” to its largest debtors. As Loic Wacquant and Mike Konczal have argued, there is something essentially feudal in this logic of “rule by men,” not law.

Does Inequality Breed Instability?

Toward the end of the book, Greenwald concludes that “In the face of … massive financial inequality, the notion of equal legal treatment for everyone has crumbled away completely” (270).  With Liberty and Justice for Some is often bleak. By the last chapter, Greenwald predicts that “ever-greater inequality will result” from America’s 2-tiered justice system, and “the inevitable discord that such inequality provokes will come to threaten the country itself” by generating social unrest. He says that this could prove the “undoing” of American elites, an analysis that Bruce Judson has developed in more detail in his book It Can Happen Here. The Occupy Wall Street movement may seem to vindicate this perspective. However, as I noted about 2 weeks before OWS started, I have my doubts.

US authorities are getting more creative in defusing protests, deploying chemical agents, smear campaigns, and increasingly militarized police forces. Technologies of surveillance have made dissent more costly. Sarah Jaffe has explained the consequences of the application of military-grade technology on the homefront:

As a burgeoning international protest movement takes shape, opposing austerity measures, decrying the wealth gap and rising inequality, and in some cases directly attacking the interests of oligarchs, we’re likely to see the surveillance state developed for tracking “terrorists” turned on citizen activists peacefully protesting the actions of their government. And as U.S. elections post-Citizens United will be more and more expensive, look for politicians of both parties to enforce these crackdowns. Despite growing anger at austerity in other countries, those policies have been embraced by both parties here in the States.

Add into the mix the growing power of entities that secretly generate reputational data about individuals, and you have a variety of “chilling effects” on political activism that challenges inequality in the US. Meanwhile, the Bush-Obama war on whistleblowers has demonstrated the dangerous consequences of trying to publicize misuses of that technology. The end result is a mass “learned helplessness,” as the very idea of collective action becomes a bitter joke to a critical mass of the populace.

Is Disclosure the Answer?

But there are at least three ways out of that “doom loop.”  First, the punitive policing of the “99%” could be redirected toward corporate wrongdoing. As Bernard Harcourt has written,

What is required is constant vigilance of all the micro and macro rules that permeate our markets, our contracts, our tax codes, our banking regulations, our property laws — in sum, all the ordinary, often mundane, but frequently invisible forms of laws and regulations that are required to organize and maintain a colossal economy in the 21st-century and that constantly distribute wealth and resources.

A lot of what I’ve written in the past few years, in fields ranging from internet governance to health law, explores when and how such strategies work.  There is some hope here: agencies ranging from the SEC to the HHS are trying to entrench “audit trails” in order to create a digital record of suspect corporate behavior.  The FTC will be auditing the privacy practices of companies like Google and Facebook. Corporate actors may engage in better behavior once they understand their misdeeds can be exposed.

But there are many pitfalls to an “audit society.” Greenwald painstakingly documents a government revolving door in the national security and finance sectors that spins so fast it’s hard to know where critical officials’ “public service” begins and their private employ begins.  Both corporate and government leaders are fighting a “war against disclosure,” trying to assure that whatever monitoring happens is too episodic, fragmentary, and amateurish to deter bad behavior.

A passion to hide potential wrongdoing provokes a second strategy: extraordinary and possibly illegal disclosures, as exemplified by Bradley Manning and Wikileaks.  I am less of an enthusiast for this strategy than Greenwald is; I’ve worried both about backlash and unintended consequences.

But perhaps most dangerous is the possibility that disclosures will have no effect at all. Alastair Roberts’s book Blacked Out is one of the best recent treatments of government secrecy. After analyzing freedom of information movements around the world, Roberts considers in his closing chapter whether they actually can do any good. For example, Mark Danner lamented a near complete lack of action against high Bush administration officials who had authorized torture even after details of their chilling program became clear.  “Wrongdoing is still exposed; we gaze at the photographs and read the documents,” Danner observed, “and there the story ends.”  Indeed, exposure may just have made the US a more torture-accepting nation, as programs like 24 lionized “whatever-it-takes” law enforcement.

Resisting Elites’ Resistance to the Rule of Law

If disclosures can’t rouse the nation’s conscience, the third option is resistance.  There is a telling contrast between the lawbreaking along the securitization chain in foreclosure fraud, and the defiance of the subsequent dispossession that leads to homelessness and community decay.  A firsthand account of OccupyLA gets to the heart of the matter:

Each seated, nonviolent protester beside me who refused to cooperate by unlinking his arms had the following done to him: an LAPD officer would forcibly extend the protestor’s legs, grab his left foot, twist it all the way around and then stomp his boot on the insole, pinning the protestor’s left foot to the pavement, twisted backwards. Then the LAPD officer would grab the protestor’s right foot and twist it all the way the other direction until the non-violent protestor, in incredible agony, would shriek in pain and unlink from his neighbor. . . . My hands were then zipcuffed very tightly behind my back, where they turned blue. I am now suffering nerve damage in my right thumb and palm. . . . I spent most of my day and night crammed into an eight-man jail cell, along with sixteen other Occupy LA protesters. My sleeping spot was on the floor next to the toilet.

So that’s what happened to the 292 women and men were arrested last Wednesday. Now let’s talk about a man who was not arrested last Wednesday. He is former Citigroup CEO Charles Prince. Under Charles Prince, Citigroup . . . . spent years intentionally buying up every bad mortgage loan it could find, creating bad securities out of those bad loans and then selling shares in those bad securities to duped investors. And then they sometimes secretly bet *against* their *own* bad securities to make even more money. For one such bad Citigroup security, Citigroup executives were internally calling it, quote, “a collection of dogshit”. To investors, however, they called it, quote, “an attractive investment rigorously selected by an independent investment adviser”.

[Prince] received fifty-three million dollars in salary and also received another ninety-four million dollars in stock holdings. What Charles Prince has *not* received is a pair of zipcuffs. The nerves in his thumb are fine. No cop has thrown Charles Prince into the pavement, face-first. Each and every peaceful, nonviolent Occupy LA protester arrested last week has has spent more time sleeping on a jail floor than every single Charles Prince on Wall Street, combined.

To date, about 5,000 people have been arrested, and many of those jailed, for protesting Wall Street firms’ destructive and often illegal acts leading to the financial crisis.  Virtually no executives in critical firms have been prosecuted.  I cannot imagine a jurisprudence which could rationalize this asymmetry. And as Greenwald continues to chronicle the disparities in our two-tiered system of justice, arrested protesters start looking more and more like Lech Walesa and Vaclav Havel than the hippies or dilettantes the media loves to portray them as.  (Lest that seem overdramatized, Janine Wedel recently directly compared “the sense of helplessness, the gut-wrenching frustration and mounting anger” she felt at Bank of America to the desperation she felt in communist Poland in the early 1980s.) The “power of the powerless” begins when they realize that the playing field truly isn’t level, that there is one set of rules for elites and another for everyone else.

Greenwald has eloquently and passionately documented the failures of American justice for years.  When future historians explore the tenor of our time, they will turn to With Liberty and Justice for Some for a powerful account of ideals betrayed, elites run amok, and the terrible human toll left in their wake. After reading Greenwald, one truly understands why Occupy Wall Street began on September 17—America’s Constitution Day.

* Many had to do with the Truth in Lending Act Amendments of 1995, which “gave retroactive immunity to creditors for certain violations”—one more bank error in their favor.

Images: 1) Picture of the copy of the book that was part of the Occupy Wall Street People’s Library.  The police trashed the library when they cleared the park in November. 2) Pepper Spray Liberty, via Michael Shaw and Bag News Notes.

Maybe it is the time of year when food feasts like Thanksgiving and the season of holiday giving make me think about simple, direct need and especially hunger. Whatever the reason, today that fundamental issue is upon [...]]]> Recent readings and the time of year lead me to two lessons. First, for those of us who can, let’s give to those in need. Second, let’s use science, data, and reason to guide policy. Extreme views for or against modes of farming and issues of the environment lead to mistrust, failures, and, in this case, starvation. Starvation should not be an issue on the table for the 21st century. Questions of efficacy and safety can be addressed. The information is here. The time to use it is now.

Maybe it is the time of year when food feasts like Thanksgiving and the season of holiday giving make me think about simple, direct need and especially hunger. Whatever the reason, today that fundamental issue is upon us more than ever. The Times reports “Millions of American schoolchildren are receiving free or low-cost meals for the first time as their parents, many once solidly middle class, have lost jobs or homes during the economic crisis, qualifying their families for the decades-old safety-net program.” The numbers are stark: “The number of students receiving subsidized lunches rose to 21 million last school year from 18 million in 2006-7, a 17 percent increase, according to an analysis by The New York Times of data from the Department of Agriculture, which administers the meals program. Eleven states, including Florida, Nevada, New Jersey and Tennessee, had four-year increases of 25 percent or more, huge shifts in a vast program long characterized by incremental growth.” More than 3 years ago I wrote about the problems of a stigmatized school lunch program. I don’t know whether that system has evolved, but “apparently many of these formerly middle-income parents have pleaded with school officials to keep their enrollment a secret.” Society’s tendency to look down on the less fortunate is absurd. I am not sure what can be done about that. But perhaps we can reconnect with efforts to provide food across the world. The hard part could be the tensions between industrial farming and the organic movement. Yet, good science and data could show us a way out.

A Long Now Foundation seminar by Pamela Ronald and Raoul Adamchak Organically Grown and Genetically Engineered: The Food of the Future shows that rather than combat, we can sue data and reflection to marry these efforts. Sustainable food should: Provide abundant safe and nutritious food…. Reduce environmentally harmful inputs…. Reduce energy use and greenhouse gases…. Foster soil fertility…. Enhance crop genetic diversity…. Maintain the economic viability of farming communities…. Protect biodiversity…. and improve the lives of the poor and malnourished. (He pointed out that 24,000 a day die of malnutrition worldwide, and about 1 billion are undernourished.)

That is a tall order. As the speakers noted organic farming works well and mitigates the problems of pesticides, (Data point: “Every year in the world 300,000 deaths are caused by the pesticides of conventional agriculture, along with 3 million cases of harm.”). But organic techniques can’t address all the diseases and pests out there and “Its yield ranges from 45% to 97% of conventional ag yield. It is often too expensive for low-income customers. At present it is a niche player in US agriculture, representing only 3.5%, with a slow growth rate suggesting it will always be a niche player.” Genetic engineered plants (often not allowed under current regulation) can fill the gap.

According to the report of Dr. Ronald’s part of the talk, “One billion acres have been planted so far with GE crops, with no adverse health effects, and numerous studies have showed that GE crops pose no greater risk of environmental damage than conventional crops.” Examples include, cotton, papayas, and rice. “About 25% of all pesticide use in the world is used to defeat the cotton bollworm. Bt cotton is engineered to express in the plant the same caterpillar-killing toxin as the common soil bacteria used by organic farmers, Bacillus thuringiensis. Bt cotton growers use half the pesticides of conventional growers. With Bt cotton in China, cases of pesticide poisoning went down by 75%. India’s cotton yield increased by 80%. Other pest management techniques are needed but genetics can do much work. Hawaiian papaya was going extinct from ringspot virus, but a GE solution inoculated the fruit and the saved the industry. As I have written, basic food supply is a huge problem and rice is a key example of that. Dr. Ronald’s work on rice is impressive. The data: “Half the world depends on rice. In flood-prone areas like Bangladesh, 4 million tons of rice a year are lost to flooding—enough to feed 30 million people.” Her work developed “a flood-tolerant rice (it can be totally submerged for two weeks) called Sub1. At field trials in Asia farmers are getting three to five times higher yield over conventional rice.”

Seems compelling to me.

“I feel thrown away,” Miriam Angeles says. “Before, I worked hard and willingly for QPP, but after I got sick and needed restrictions, they threw me away like trash.”

Rest assured, many other employers may be planning to emulate that example.  Sickness and exhaustion are apparently a common problem at the plant. As the article notes, “The line speed at QPP had increased from 750 heads per hour in 1989 to 1,350 per hour in 2006, while the workforce barely grew.”  It’s the “They Shoot Horses, [...]]]> I highly recommend Ted Genoways’s shocking investigative report on the impact of a leading factory meat processor.  The piece focuses on Quality Pork Processors Inc. (QPP), in Austin, Minnesota.  One worker alleged that the workers in the plant felt nearly as disposable as the animals:

“I feel thrown away,” Miriam Angeles says. “Before, I worked hard and willingly for QPP, but after I got sick and needed restrictions, they threw me away like trash.”

Rest assured, many other employers may be planning to emulate that example.  Sickness and exhaustion are apparently a common problem at the plant. As the article notes, “The line speed at QPP had increased from 750 heads per hour in 1989 to 1,350 per hour in 2006, while the workforce barely grew.”  It’s the “They Shoot Horses, Don’t They” model of management.  Few parts of the production process, from cutting and slicing legs and other parts to vaporizing swine brains, are easy.  Health effects are dramatic:

Workers say nearly everyone suffered from carpal tunnel syndrome or some repetitive stress injury, but by October 2007, there were signs of something else. Workers from QPP’s kill floor were coming to . . . the plant’s occupational health nurse, with increasingly familiar complaints: numbness and tingling in their extremities, chronic fatigue, searing skin pain. Bower started noticing workers so tender that they struggled with the stairs to the top-floor locker rooms, high above the roar of the factory line.

A neurologist suspects a rare autoimmune disorder, and decides it’s “time to contact the Minnesota Department of Health.” The article is a great glimpse at a model of production at the heart of industrial food systems.

For another perspective on the corrupt relationship between megabanks and our central bank, consider John Kay’s recent description of the [...]]]> What are we to make of Bob Ivry, Bradley Keoun and Phil Kuntz’s blockbuster report on the Fed’s bailouts? The three journalists conclude that “taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.” Yves Smith argues that “banks lied” and grabbed $13 billion in profit. She also notes that their favorite water carrier, Timothy Geithner, “told Congressmen they were too stupid to be able to shrink banks, and they should leave those questions to the Basel Committee (which has no interest in making big banks smaller).”

For another perspective on the corrupt relationship between megabanks and our central bank, consider John Kay’s recent description of the “martingale” strategy among bettors:

Each time you lose, you increase your stake: to the point at which a win on the next game would recoup all your losses and leave you ahead. Since you will win sooner or later, you are certain to come home with a small profit. Provided you are infinitely rich before you start. Otherwise, if you regularly engage in martingales, you will eventually go bankrupt – and the richer you are, the larger the scale of bankruptcy.

Since anyone who studies the problem knows that ruin is the outcome, your bank, or your bookmaker, will probably call a halt to the game while the shirt remains on your back. Such capitulation will leave you with a large loss, and an enduring grievance that others have deprived you of a great coup.

As financial instability continues, we can count on a few things. Some will lose, and some gain, a great deal. Troubled companies are going to gamble on resurrection. As long as they have an infinite backstop from a central bank, they may well succeed. Peter Boone and Simon Johnson describe how a “doomsday cycle” of privatized gains and socialized losses continues to this day:

[M]ajor private sector firms (banks and nonbank financial institutions) have a distorted incentive structure that encourages eventually costly risk-taking. Unfortunately, the measures taken in various US and European bailout rounds during 2008-2009 (and again in 2010 for the eurozone) have only worsened, and extended to far more entities, these underlying moral hazard incentive problems. . . .

This cycle of boom followed by bailouts and bust amounts to a form of implicit taxpayer subsidy that encourages individual institutions to become larger – and the system as a whole to swell. Our preparation to bail out their creditors means systemic institutions are able to raise finance cheaply in global markets. The implicit subsidy to creditors encourages greater debt, which makes the system ever more precarious.

As various economists contest the value of the financial sector, the critical role of “too big to fail” (TBTF) status needs to be front-and-center. Paul Krugman recently concluded that the economic crisis “showed . . . the apparent value created by modern finance was a mirage.” I would say that it was not the crisis, but the response, that confirmed this. A system that socializes losses, but privatizes gains, is not free enterprise. As Dean Baker observed of the bailout of A.I.G. in particular, the policy “ensure[s] that [financial institutions] suffer[] no consequences from their mistake[s].”

As I noted back in the summer, the US must choose between guns, butter, and continuing to support the gambling that keeps too-big-to-fail banks flush. Many of those who made great fortunes from that gambling are bankrolling an anti-revenue movement that pledges never to allow their taxes to rise. The guns are called essential due to arms races, terror threats, and humanitarian missions, real and imagined. The butter is on the chopping block. Abandoned homes and crumbling roads and bridges are the rubble left by the martingales of a self-aggrandizing elite. They would rather see mass homelessness than suffer a tiny financial transactions tax that could address that problem (and many others).

A final note: I’m not saying here “fiat justitia, ruat caelum.” A lender of last resort must, on occasion, lend as a last resort. All I am saying is that it is deeply troubling for anyone to reconcile themselves to the Fed’s (and the Treasury’s) vast emergency powers without simultaneously demanding that those powers are used to sharply limit the pay and prerogatives of those at TBTF institutions, and to help ameliorate the economic devastation they’ve caused.

Photo Credit: Melissa Gray.

It’s difficult to answer these questions without understanding the past and present tactics of the groups OWS is protesting. We can learn something about those tactics from Jeffrey A. Winters’ book Oligarchy and his recent articles. In Winters’ treatment of America’s politics of wealth defense, we can discern a transition from high-stakes defiance of government tax authority [...]]]> The OWS protests have provoked reflection on the morality of direct action and civil disobedience. How far should the police go to spy on, disrupt, or punish peaceful protesters? Is pepper spray a dangerous chemical agent or “a food product, essentially?” Does current American inequality merit a direct action follow-up to the Civil Rights Movement, whose mass-arrestees and water-cannoned marchers are now viewed as heroes?

It’s difficult to answer these questions without understanding the past and present tactics of the groups OWS is protesting. We can learn something about those tactics from Jeffrey A. Winters’ book Oligarchy and his recent articles. In Winters’ treatment of America’s politics of wealth defense, we can discern a transition from high-stakes defiance of government tax authority to an established position “inside the system.”

Winters recounts how Congress passed a tax on the top 0.1% in 1894, only to be slapped down by a Supreme Court “which struck it down in a 5-4 decision.” After the 16th Amendment effectively repealed that Supreme Court decision, Congress had the novel idea of actually helping pay for a war (WWI) with revenue from those best able to fund it. As Winters notes, “the highest rate [leapt] from 7 percent in 1915 to 77 percent in 1918,” and “the number of brackets went from seven to 56 over the same period.” This provoked direct action from the wealthiest “through tax avoidance and outright evasion.” At this point, Winters writes,

The government faced a difficult choice. Basically, it could either beef up law enforcement against oligarchs and design better systems to track and tax their incomes to force them into compliance, or abandon the effort and instead squeeze the same resources from citizens with far less material clout to fight back.

Within a few years, the government chose to back down. By 1926, “the single most progressive economic policy ever enacted in U.S. history—–an income tax exclusively on the rich—–was slowly inverted into a mass tax that burdens oligarchs at the same effective rate as their office staff and landscapers.”

New Deal policies helped level the playing field, as the gains from economic growth were spread relatively evenly between income groups between 1947 and 1974. But by the early 1970s, income and wealth gaps skyrocketed once again. Here, Winters adds evidence to the Pierson/Hacker and Bartels theses that the power (not the productivity) of the wealthy is the most important engine of our sky-high inequality. Winters describes the symbiotic and mutually reinforcing effects of legal, political, and cultural power here, coordinated by an “income defense industry:”

The income defense industry is comprised of lawyers, accountants, wealth management consultants, revolving-door lobbyists, think-tank debate framers and even key segments of the insurance industry whose sole purpose is income defense for America’s oligarchs. . . . In the 1970s, oligarchs paid an average effective tax rate of about 55 percent, which was almost 80 percent of the top published rate. By 2007, the top 400 income earners in America paid an effective tax rate of 16.5 percent, which was barely 50 percent of the top published rate.

Navigating through the almost 72,000 incomprehensible pages of tax code they had helped draft, industry specialists today structure complex partnerships and tax shelters that few IRS auditors can disentangle, or in some cases even fully understand. . . . The U.S. Senate estimates that the income defense industry helps America’s oligarchs avoid paying about $70 billion in taxes a year through what the IRS calls “abusive offshore tax avoidance schemes” alone. This is a sum equal to the boon the Bush tax cuts give to the entire top 2 percent of income earners (a group twenty times as numerous as America’s oligarchs). . . .

The top 0.1%’s share of society’s wealth and power is a critical political issue. This top thousandth takes about half of all capital gains, taxed at a delightfully low rate. Although some academics in the wealth defense industry may explain that rate as “economically efficient,” we can also see it as a direct result of plutocrats’ defiance of the law. Tax evaders of the roaring 20s were the 0.1%’s Rosa Parks.

Image Credit: Moderate Voice is trying to find source.

If you pair the basic message of Segal’s piece (“law students and professors aren’t doing enough to raise corporate profits”) with that of Ed Glaeser’s anti-retirement musings in the same pages (“work into your 90s”), the ideology starts to emerge. Labor economist Mark Price pithily suggested it:

Law schools couldn’t possibly teach the wide range of firm specific skills that law firms need . . . . And yet you have a writer [pushing] propaganda that the big law firms are tired [...]]]> Jason Mazzone has already addressed the main shortcomings of the latest N.Y. Times article by David Segal on law schools. I’d like to situate it as part of a neo-liberal ideology developing at the Times and other scriveners for the powerful.

If you pair the basic message of Segal’s piece (“law students and professors aren’t doing enough to raise corporate profits”) with that of Ed Glaeser’s anti-retirement musings in the same pages (“work into your 90s”), the ideology starts to emerge. Labor economist Mark Price pithily suggested it:

Law schools couldn’t possibly teach the wide range of firm specific skills that law firms need . . . . And yet you have a writer [pushing] propaganda that the big law firms are tired of paying for on the job training.

On the other hand it is at least comforting to know that law firms are not that different from firms in Manufacturing or Health Care[;] that is[,] they would prefer that somebody else pay for the skills that make them profitable.

This is a classic problem of uneven bargaining power familiar since the 1920s.* Why are wages falling while productivity is rising? Because firms realize they can fire current workers, shift their duties (unpaid) to frightened current employees, and reap the profits of having one person do the work of many. It’s another form of “shadow work” that contributes to the time bind so many Americans find themselves in. When 65% of economic gains go to the top 1% of the population, it’s not too hard to discern this dynamic.

Of course, a firm can only pile so many unbillable hours onto existing employees. So what’s the next step? Start calling beginning work an “unpaid internship.” Complain that “kids these days” don’t know a thing; they’re “zero marginal product” workers; they don’t deserve to be paid till they’re truly experienced. (At the end of a long line of traineeships, some may find themselves discarded as “too old” or “overqualified” for what is now defined as an “entry-level” position.) This is a wonderful strategy for cutting the budgets of corporate legal departments. But it only spells doom for attorneys caught up in the corporate games once reserved for blue collar labor.

The Political Roots of Rising Un- and Underemployment in the Legal Industry

Mazzone has complained that Segal doesn’t know enough about legal education. He’s also too narrowly focused on it. There is no question that, in many sectors, there are fewer positions for attorneys. Many journalists have attributed the decline to the creeping influence of “skill-biased technological change” and outsourcing: e-discovery can be done by computer or by the asymmetrically open Indian legal market. These trends do undermine some firm business models. But James K. Galbraith has already demonstrated the weaknesses of the “skill-biased technological change story” in many contexts. Moreover, the biggest driver of legal unemployment is political: the wholesale dismantling of tort, contract, and administrative remedies for corporate wrongdoing.

As I observed back in 2008, it would be shocking if an ideological movement to shut the courthouse doors to the injured failed to threaten lawyers’ livelihood. To build on that: maybe there are less jobs for finance lawyers because the Justice Department has systematically failed to prosecute egregious white-collar crime. A “tort reform” movement has made the price of violating the law a mere cost of doing business for thousands of companies. When banks can get away with robo-signing and foreclosure fraud, why should they hire attorneys to ensure that their paperwork is actually valid? Even an ostensible regulator, the OCC, isn’t bothering to launch a serious investigation in areas where deeply troubling practices have already been documented.

Corporate promotion of tort reform, deregulation, and arbitration has saved businesses many costs, including legal fees. But it has also increased the fragility of our food and drug supply chains, accelerated a financial crisis that has already cost the US trillions in lost output, and reduced opportunities for attorneys to fight to assure that business is conducted in a fair and societally beneficial way.

To ignore the political roots of the decline of both law and the rule of law in the US (and its obvious impact on attorney employment) is to fail to even begin a serious analysis of young lawyers’ problems. Segal acts as if corporate defense is the heart and soul of legal work. He never considers how legal education works to prompt legal challenges to corporate wrongdoing. No one will have a job defending corporations if there aren’t well-trained attorneys applying old law to new corporate wrongdoing. That takes creative thought, a chance to learn the policy behind law, and engagement with current industry trends. It’s not something to be drilled into people by projecting bar prep rote back into law school.

Law as a Cost

Throughout Segal’s article, another pair of assumptions creeps in. Law is presented as a cost, a series of niggling and none-too-important hoops to jump through to get down to the real business of mergers and deals. Law professors’ research is dismissed as pure self-indulgence, as we are once again treated to Justice Roberts’ witty dig at articles devoted to Kantian Bulgarian evidence law.

Segal never stops to ask: Why might a Justice like Roberts want to discredit the legal academy? Maybe it’s because, while colleagues of mine were trying to nip the housing crisis in the bud, a phalanx of deregulators on the Supreme Court came up with a politicized preemption decision that let the good times roll for America’s most predatory banks? Maybe it’s because law professors actually have the time to document how radically Roberts and his allies have diverged from precedent? Perhaps it’s because Roberts, after long years in corporate practice, sees law profs’ efforts to reinterpret old statutes and doctrines in light of new harms (a far larger part of legal scholarship than the high theory he laments) as one more nuisance for the clients who made him a rich and powerful man?

But we need not even engage with these politically sensitive questions. Rather, we might wonder: why does philosophy stand in for Segal as archetypical legal scholarship? When I first heard Justice Roberts lament the tragic dearth of practical articles, I marveled: has he ever taken a look at Sharona Hoffman’s or Nicolas Terry’s cutting edge work on digital medical records? This emerging field raises critical questions about the balance between privacy and innovation. We cannot permit our digital health infrastructure to be constructed solely according to the corporate interests of whatever vendors and providers happen to be most powerful at the time. We desperately need more work like Hoffman’s and Terry’s to guide us through the thicket of administrative and technical issues raised by electronic medical records.

I can think of figures as eminent and important-to-practitioners as Terry and Hoffman in five areas of health law and four areas of intellectual property law off the top of my head. (Ever heard of Pam Samuelson, Mr. Segal?) Yet Segal is apparently ready to write off the entirety of legal scholarship because someone, somewhere had the temerity to write about Kant.

I can understand why a writer at the New York Times might want to lash out at maladaptive institutions. Segal is daily subjected to his paper’s opinion pages, which peddle one irrelevant or stereotypical piece after another from their tenured moderates. (You learn more from Dean Baker’s critiques of them than from the articles themselves.) Thursday Styles reports on the 0.1%’s lifestyle intently, breathlessly tracking the price of Birkin bags as if it’s news the rest of us can use. The Gray Lady is becoming less the paper of record than a chronicler of the conventional wisdom and consumption of the wealthy.

What Next?

Law students, like many others today, face a grim job market almost without precedent. But I think proposals like Segal’s—making students start corporate-type work earlier and earlier—will only exacerbate the problem by providing an ever-larger pool of free labor for firms. We need a bigger picture view of an economy where professional and rentier incomes in general must deflate to match the diminished buying power of strapped lower and middle classes.

Debt is the critical financial issue of our age. Mortgage debt, student debt, credit card debt, medical debt, sovereign debt—–all are causing social upheaval. Debt often seems like a standalone menace, a black hole sucking money (and thus time and opportunity) from the indebted. But behind every mortgage statement is a servicer, distributing those funds to buyers of income streams. Debt is the shadow side of wealth, as Margaret Atwood memorably portrayed it. You don’t have to immerse yourself in the accounting equivalences of Modern Monetary Theory to figure this out.

Congress addressed two major sources of debt recently. The credit card provisions in the 2009 CARD Act and Dodd-Frank offered some weak disclosure provisions. Look at your statements, and you’ll see exactly how many years it will take you to pay off the balance if you stick to minimum payments. Basic consumer protections are in place, but there is not much substantive relief for debtors.

However, the ACA addressed medical bills much more comprehensively. I think its provisions can be a model for balancing obligations of the individual and society in other essential areas, like housing and education. In brief: for unemployed individuals (or those who are not offered affordable insurance by their employer), health insurance exchanges will offer various health plans. Thus the notorious “individual mandate:” these persons will need to get insurance or pay a fine. But the government will offer help, in two ways.

First, to help pay for the premium, advanceable tax credits will ensure that no one pays too much of their income for insurance. How much is too much? A family of four with earnings under $40,000 should not be paying more than around 6.3% of income for premiums; for those making around $85,000, the rate rises to 9.5%. (Here is a calculator with rough estimates of how much individuals and families need to pay at certain levels of income.) This is essentially an income-based payment scheme, for people making up to 4 times the federal poverty level. Moreover, “those with incomes below 250 percent of the poverty line will also receive cost-sharing assistance” on the other side of medical bills: the copays, coinsurances, and deductibles not covered by an insurance policy. The formula is complex, but the bottom line is that the federal government assists in paying these costs based on income, as well.

Income-based repayment schemes are a part of education financing now, though many have complained that they are not sensitive enough to other costs of living. Making income-based repayment more fair, and considering other legal changes in this area, are very important political issues. Housing policy should also be more open to income-based payment of mortgages, offering options ranging from “rights to rent” to direct principal modifications.

The key point here is that the owners of the income streams from student debts, mortgages, and other sources are playing a dangerous game if they think rights to payments are as sacrosanct, as, say, the AIG bonuses. They may think that they can continue to squeeze the indebted to pay 60 or 70% of their income each month for housing, insurance, and loan debts (and for the dubious right to claim as an asset something that will eventually be worth far less than what was paid for it if current debt deflation continues). But the larger economic implications are disastrous. Consider Steve Keen’s diagnosis, as related by George Monbiot. Keen believes that both the Great Depression and the current crisis “were triggered by a collapse in debt-financed demand:”

Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. . . . In the 1920s, private debt rose by 50%. Between 1999 and 2009, it rose by 140%. The debt-to-GDP ratio in the US is still much higher than it was when the Great Depression began.

We are in the midst of a great readjustment. For decades we’ve been told that our economic model, as persons, was to act like corporations do, accumulating assets and rights to payment. In fact, this “ownership society” was a mirage, providing great wealth to a few at the very top and precarity to the rest. There is no way to guarantee a secure future all on one’s own. Social structure, norms, and bargaining power matter.

Neither law students nor law schools can preserve their own future simply by better learning how to serve the corporate interests that would like to eliminate all profit-menacing regulation and tort claims. Economic security is an inevitably political question, which requires a coordinated political response—not one more effort to legitimize corporate wage-slashing with a simple story about “unskilled” workers. Before the Times treats us to another “what’s wrong with law schools” story, it might want to investigate the forces of deregulation and volatile financialization that kneecapped not only the legal job market, but employment prospects generally. No one needs another piece legitimizing the “young people don’t deserve to be paid” meme of the radical right, in the guise of snide snark about out-of-touch law professors.

*I’ve addressed these imbalances many times in posts on Law & Inequality. See, for instance, Power & Productivity After the Great Recession; Inequality and the Great Recession).

Image Credit: Kevin Drum.

Some have praised OWS and the Tea Party for challenging ossified and corrupt institutions. Others dismiss the two groups as mere “primal screams,” uninformed by a realistic sense of policy.

I’d like to step beyond the rival narratives of “what does OWS do for the left” and “how does OWS relate to the Tea Party.” These are important questions, but I think they miss a deeper feature of the movement: its conservatism. Sure, Bill O’Reilly and Rush Limbaugh are portraying the protesters as druggies, socialists, and hippies. But millionaire media [...]]]> Occupy Wall Street has continued to hold Liberty Plaza, and has inspired hundreds of other protests. It’s usually interpreted as a leftish populist complement to the Tea Party, ala this diagram:

Some have praised OWS and the Tea Party for challenging ossified and corrupt institutions. Others dismiss the two groups as mere “primal screams,” uninformed by a realistic sense of policy.

I’d like to step beyond the rival narratives of “what does OWS do for the left” and “how does OWS relate to the Tea Party.” These are important questions, but I think they miss a deeper feature of the movement: its conservatism. Sure, Bill O’Reilly and Rush Limbaugh are portraying the protesters as druggies, socialists, and hippies. But millionaire media moguls do not define modern conservatism; principles do. Some of the most appealing ideals of modern conservatism have found a home in the OWS movement. Gregory Djerejian has put it well:

While I will readily confess I find it odd as something of a Burkean that I am sympathetic to these protesters, they are not looking to trot out the guillotines, in the main (although I did spot a “Behead the Fed” sign!), but rather, they have smelled the radicalism of the blows dealt the integrity of a representative democratic system poised by the almost unfettered oligarch-like behavior among too many elites wholly disconnected from, yes, the 99% they speak of. They are acting to secure conservative aims of re-balancing a society that is becoming dangerously unmoored and increasingly bent asunder.

In the rest of the post, I’ll explain the conservative values behind OWS and the larger wave of economic discontent it reflects.

1) Belief in Free Enterprise

Bruce Judson says that “the kids camping on Wall Street are the capitalists, not the people in the buildings.” Sure, you’ll find a few signs for Socialist Workers at OWS, just as you’ll find Ron Paul supporters. Between those extremes, there is a broadly centrist sentiment. Government shouldn’t be bailing out megabanks. Corporations should play by the rules and avoid destroying the natural environment. We need to live within our means, both as households and as a nation. Everyone deserves a shot at success.

These may sound like uncontroversial bromides. But they lead to some strong conclusions about the worth of various enterprises. As Frida Ghitis writes,

You never hear anyone complain that Steve Jobs became a multi-billionaire. That tells us something important about what motivates the protests growing on Wall Street and in many other places on both sides of the Atlantic. The anger of demonstrators is not the result of envy or of politically-motivated hostility against the rich. Instead, it is the understandable expression of frustration with a system that has richly rewarded people who, quite simply, do not deserve it.

Incredibly, in 2008, despite hundreds of billions in taxpayers’ bailouts and trillions in losses for investors, that year also ended with huge bonuses for Wall Street. That year, Wall Street firms paid $18 billion in bonuses, according to the New York State Controller. . . . Some European countries have instituted huge tax rates for large bonuses. In Israel, the board of Bank Leumi has introduced “negative bonuses,” taking compensation away from underperforming managers. In the U.S. , there is no penalty for failure. No penalty for those who cause it, that is: Everyone else has to pay.

Nicole Gelinas of the conservative Manhattan Institute further explains the distinction:

[T]he protesters’ affection for Jobs isn’t necessarily a sign of bad faith or ignorance. Rather, it could be a healthy discernment . . . . The point is not that Jobs was “this different, quiet billionaire,” as one protester put it, but that he lived by the rules through which free-market capitalism should work. . . .

Contrast the capitalist world in which Jobs lived with “capitalism,” as the U.S. government has applied it to the big banks against which the Zuccotti Park crowd is—imperfectly—protesting. If you’re a bank or an insurance firm, and you create a product that your investors and your regulators can’t understand in a crisis, you aren’t punished, as Apple was when it released products too complex for its customers. Instead, you get rewarded with bailout money. It’s hard to argue with the Zuccotti protesters’ manifesto on this point: “They have taken bailouts from taxpayers with impunity.”

Unlike many of the OWS protesters, I don’t find Jobs a very appealing figure. His contractors would rather silence than address the working conditions at their plans, and he aspired to bring those conditions to the U.S. Nevertheless, OWS points to a fundamental problem in today’s economy: a finance class that has used connections and power, rather than hard work and productivity, to make a fortune. As Matt Taibbi explains, Wall Street gets favors the rest of us only dream of. It is crony capitalism at its worst, a mockery of the ideals that supposedly animate its defenders.

2) Belief in Law & Order

Our “if it bleeds, it leads” media is morbidly fascinated by violence at the protests, ranging from pepper spray to beatings to tear gassing. The law & order question is always framed episodically: did the occupation go too far, or did police engage in brutality? Few ask why OWS arose in the first place. Protesters object to seeing destructive activity not merely escape prosecution, or investigation, but leave its perpetrators fantastically wealthy (as I explained in point 3 of my last post). Bill Black’s analysis of the belated FHFA suit demonstrates what many of us suspected all along. There are ample opportunities to investigate fraud in an episode that was 70 times as costly as the S&L crisis.

Glenn Greenwald puts it forcefully in his new book, With Liberty and Justice for Some:

It is now clearly understood that, rather than apply the law equally to all, Wall Street tycoons have engaged in egregious criminality—acts which destroyed the economic security of millions of people around the world—without experiencing the slightest legal repercussions. Giant financial institutions were caught red-handed engaging in massive, systematic fraud to foreclose on people’s homes and the reaction of the political class, led by the Obama administration, was to shield them from meaningful consequences.

OWS breaks the stale paradigm of state vs. market, and criticizes a troubling fusion of government and business, especially when it subverts normal legal processes.

3) Respect for the Military

Disgusted by repeated exploitation of soldiers, Pentagon officials asked the Senate to use financial reform to crack down on shady car dealers. Holly Petraeus, the wife of Gen. David Petraeus, has spearheaded efforts to protect military families from predatory banks. When an industry is so out of control that it begins to undermine national security, it’s time for a coordinated response. Unfortunately, thousands of potential violations of the Servicemembers Civil Relief Act (involving banks which were “accused of overcharging on interest rates for active duty military members and attempting to foreclose on them while they served overseas”) have provoked only a slap on the wrist settlement. (I wonder if any banker responsible for this policy has even been fired for it.)

On a darker note, during a violent dispersal of the Occupy Oakland protest, an Iraq War veteran (Scott Olsen) was critically injured. Sgt. Shamar Thomas, having earlier shamed overreactions to crowds, has called on fellow marines to join OWS and has joined a vigil for Olsen. Has the US learned nothing from the shameful treatment of the Bonus Army? As Frank Rich observes:

[In] June 1932, desperate bands of men traveled to Washington and set up camp within view of the Capitol. The first contingent journeyed all the way from Portland, Oregon, but others soon converged from all over—alone, in groups, with families—until their main Hooverville on the Anacostia River’s fetid mudflats swelled to a population as high as 20,000. The men, World War I veterans who could not find jobs, became known as the Bonus Army—for the modest government bonus they were owed for their service. . . .

The men were mostly middle-class, patriotic Americans. They kept their improvised hovels clean and maintained small gardens. Even so, good behavior by the Bonus Army did not prevent the U.S. Army’s hotheaded chief of staff, General Douglas MacArthur, from summoning an overwhelming force to evict it from Pennsylvania Avenue late that July. After assaulting the veterans and thousands of onlookers with tear gas, ­MacArthur’s troops crossed the bridge and burned down the encampment.

The first person I talked to at OWS was an army reservist, who discussed with me the plight of unemployed veterans. It’s time for the nation as a whole–and especially the top 1%, who benefit disproportionately from the work of our soldiers—to guarantee these vets health care, jobs, and housing.

4) Religious Faith

During one march, clergymen carried a golden calf through Liberty Plaza in Manhattan. David Graeber, one of the chief theorists of “Occupy,” frequently refers to Biblical attention to social justice. Vincent J. Miller, the Gudorf Chair in Catholic Theology and Culture at the University of Dayton, has stated that, “It’s clear the Vatican stands with the Occupy Wall Street protesters and others struggling to return ethics and good governance to a financial sector grown out of control after 30 years of deregulation.” E.J. Dionne does not go that far, but does observe the enduring resonances between Catholic Social Thought and the empowerment of the poor. As Pope Benedict stated in Caritas in Veritate:

Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. . . . What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development.

In my visits to OWS, I’ve been struck by the corporal works of mercy at them: feeding the hungry, clothing the cold, aspiring to some healing of a broken economy and an increasingly ravaged planet. I also spoke to some individuals who participated in a moving service, before Yom Kippur, on the Old Testament prophets’ denunciation of vast and irresponsible wealth, teachings on “gleanings,” and jubilees. If St. Francis of Assisi were around today, I have little doubt that he’d feel at home in such a place.

5) Suspicion of Big Government

Of course, not all conservatives are religious, or all that concerned about military prerogatives. There are plenty of agnostic or atheist libertarians at places like Cato. What does unite these conservatives is a deep-rooted suspicion of “big government.” And that’s a major theme of OWS as well. The various occupations raise difficult questions about how far law enforcement and surveillance can go to disrupt and demobilize dissent. The Supreme Court will be hearing a number of cases this term on similar issues, as Dahlia Lithwick relates:

[T]he court will face an array of questions about whether government is too crazy powerful: Can the cops stick a GPS device on your car without a warrant? Can the feds force Arizona out of the immigration-law game? Can the government force you to buy health insurance if you are hellbent on a slow and painful death? It will also face a host of questions about whether corporations can further immunize themselves against ordinary people: Can consumers sue credit repair companies for excessive fees? Can investors bring securities fraud suits for insider trading? Can oil and gas workers injured on the job sue to receive workers’ compensation?

And once we turn back to finance, it’s ever clearer that the “Wall Street vs. Washington” narrative of the mass media is Kabuki theater. Realistically speaking, Bank of America is a state actor. Much the same can be said of its rival megabanks, and those who profit from sweetheart deals with them. OWS realizes that much of the top 1% is not simply the beneficiary of impersonal forces like technology and globalization. Rather, modern wealth is increasingly based on state support. The FIRE (finance, insurance, and real estate) industries could not last for a week in their current form without constant state succor. Nor could many others in the top 1% maintain their fortunes without extensive investments in the drafting and interpretation of key legislation. (For those who’d like to see a case study from a field outside finance, check out my post on the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC)).

Bernard Harcourt’s excellent piece on the concept of “political disobedience” explains how OWS revitalizes the classic conservative suspicion of government:

Occupy Wall Street is best understood . . . as a new form of what could be called “political disobedience,” as opposed to civil disobedience, that fundamentally rejects the political and ideological landscape that we inherited from the Cold War.

Civil disobedience accepted the legitimacy of political institutions, but resisted the moral authority of resulting laws. Political disobedience, by contrast, resists the very way in which we are governed: it resists the structure of partisan politics, the demand for policy reforms, the call for party identification, and the very ideologies that dominated the post-War period. Occupy Wall Street . . . is politically disobedient precisely in refusing to articulate policy demands or to embrace old ideologies.

This “political disobedience” is a logical outgrowth of watchdogging activism on both left and right.

Must a conservative suspect all government, or merely the ossified and corrupt Washington of today? Perhaps the former view is a hallmark of actually existing conservatism. But to consign government programs like Medicare, Social Security, and the EPA to the scrapheap of history would itself be more the province of radicalism than conservatism. Thus one final sense of the conservatism of OWS is the protesters’ insistence on the endurance of a social contract that emerged in the New Deal. If conservatism is to be more than a categorical rejection of collective action, it has to articulate something worth conserving. OWS, at its best, does that.

Conclusion

After Mike Konczal “created a script designed to read all of the pages and parse out the html text on the” We are the 99% tumblr, he analyzed the concerns expressed. He found:

[N]o demands for cheap gas, cheaper credit, giant houses, bigger electronics . . . under the cynical “Ownership Society” banner. The demands are broadly health care, education and not to feel exploited . . . and the desire to not live month-to-month on bills, food and rent and under less of the burden of debt at the practical level.

The people in the tumblr aren’t demanding to bring democracy into the workplace via large-scale unionization, much less shorter work days and more pay. . . . The 99% looks too beaten down to demand anything as grand as “fairness” in their distribution of the economy. There’s no calls for some sort of post-industrial personal fulfillment in their labor – very few even invoke the idea that a job should “mean something.”

To be sure, a wide range of people—from Ron Paul fans to anti-nuclear activists—have been joining OWS, and their concerns go way beyond the politicization of personal problems on We Are the 99%. But the broader OWS coalition unites around concerns about a rigged economic game. Whether your bete noire is Solyndra or Halliburton, you can sympathize with that.

Of course, another conservatism is possible: one that merely exalts today’s “winners,” however they acquired their wealth, and despises “losers.” This is the vein of conservative thought Corey Robin traces in his book The Reactionary Mind. Robin quotes this von Mises letter to Ayn Rand to exemplify it: “You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the effort of men who are better than you.”

Whenever I hear media commentators putting down the “dirty hippies” in Liberty Plaza, I think of that letter. I don’t think it reflects modern conservatism; only a small and callous faction within it. As a truly great conservative, Adam Smith, once observed:

[D]isposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition…is…the great and most universal cause of the corruption of our moral sentiments.

By fighting that corruption of the state and the soul, OWS promotes conservatism’s enduring ideals.

1) “They’re just spoiled hippies who can’t get a job.” A quick glance at the “We are the 99%” tumblr could easily dispel this notion. The economic suffering in this country is deep and broad. As one news story put it, “one in three Americans would be unable to make their mortgage or rent payment beyond one month if they lost their job.” Even if the most down-and-out people are [...]]]> The Occupy Wall Street protests continue to grow, and to gain support from public intellectuals. Joe Stiglitz, Anne Marie Slaughter, and Paul Krugman are the latest luminaries to praise the cause. The movement has also provoked derision. Let’s consider the latest Norquist/Limbaugh memes as the protest nears the one-month mark:

1) “They’re just spoiled hippies who can’t get a job.” A quick glance at the “We are the 99%” tumblr could easily dispel this notion. The economic suffering in this country is deep and broad. As one news story put it, “one in three Americans would be unable to make their mortgage or rent payment beyond one month if they lost their job.” Even if the most down-and-out people are too poor or busy to get to Wall Street (or the hundreds of other actions now taking place), many of them think of the OWS crowd as speaking for them.

There is so much needless suffering going on now, and so much wealth accumulating at the very top. It is hard to understand how critics dismiss the protesters so cavalierly. I used to find the Biblical passage about God hardening Pharaoh’s heart one of the more mysterious parts of the Book of Exodus; now I feel like I’m witnessing it firsthand.

2) “They should be in Washington, not Wall Street.” Never fear, OccupyKStreet is here. More seriously, this criticism misses the entire point of the protest. Wall Street and Washington have fused. Both politicians and the Fed gave enormous subsidies to large Wall Street firms, while asking almost nothing in return. You can read Larry Lessig’s Republic, Lost, or Kwak & Johnson’s Thirteen Bankers for all the gritty details. For now, let’s just say that entities that borrow at close to zero percent, lend at 4.5 to 20+%, and pay top managers billions in salary and bonuses, are not exactly Steve Jobs-level entrepreneurs. Rather, they’re part of a corrupt revolving door system that sends a favored group back and forth between government and business. We’d do better simply to pay off this shadow elite directly than to subsidize the trillion dollar schemes that maintain the illusion that our banking system is independent.

This is not a partisan critique. Like the OWS protesters, I have focused on the role of the Democratic party in covertly supporting a system that is openly applauded by establishment GOP figures. As Matt Stoller observes, “Rubinites still dominate Democratic policymaking — Larry Summers, Jason Furman, Treasury Secretary Timothy Geithner, Gene Sperling are all Rubin acolytes. Jack Lew, the current Office of Management and Budget director, is from Citigroup; Peter Orzag, the former OMB director, went to Citigroup. White House chief of staff Bill Daley is a JP Morgan man.”

Principled libertarians have also offered Hayekian critiques of the “Government Sachs” nexus. Russ Roberts at the Mercatus Institute has perceptively recognized the close ties between the US state and Wall Street. Amar Bhide has offered a brilliant Hayekian critique of the concentration of power in large financial institutions. From the opposite end of the political spectrum, Michael Hudson pithily observes that “economic planning has passed from government to the financial sector.” Individuals with a wide range of political commitments want to break up megabanks, or engage in more fundamental reform than contemplated in Dodd-Frank. OWS is protesting a form of corporatism that privatizes gains and socializes losses. Anyone who opposes welfare for the poorest should be passionately committed to a program that would cut off the richest from the trough of implicit and explicit subsidy that is at the core of our financial system.

3) “They’re breaking the law.” Were we back in the 1960s, I could perhaps understand how a claque of law-and-order Archie Bunkers could fulminate against the Yippies trying to levitate the Pentagon. If order is your highest social goal, the spontaneous transformation of a soulless, stone-covered city block in Lower Manhattan into a festive site of music and education may spark a frisson. But what’s different today is that the targets of the protest are so clearly lawbreakers themselves. In a 1993 article, economists Akerlof and Romer proposed that “an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success).” They called this “bankruptcy for profit,” and its main features have a depressingly familiar ring.

As William K. Black explains in his theory of “control fraud,” the key to business success on Wall Street has been speculative ventures implicitly or explicitly backed by the government or the Fed. As Black has argued repeatedly, to make the scheme work, there must be some form of insurance—–such as public deposit insurance or private policies—–that promises to “make whole” those whose funds are lost in a speculative endeavor. Second, there must seem to be, on paper, some valuation that makes the entity’s investments seem worthwhile. Insurers are not stupid; they demand some evidence that the firm has an overall net worth sufficient to permit it to meet future obligations. These demands lead to the third element: a systematic subversion of the normal tools used to assess the stability and soundness of going concerns. Accountants and auditors are supposed to impose transparency on a firm’s accounts, but can easily be coopted into “aggressive” statements of positions. The looting leadership has a variety of mechanisms at its disposal. Accounting frauds can vastly overstate the value of current holdings. Opacity hides transfers of favors that justify contracts that are irrational on their face.

In a long series of posts, I have described the shady dealings—the special purpose entities, the accounting fraud, the daisy chain of favors leading to CDO sales, the fake insurance (aka AIG-underwritten CDS’s), the epidemic of foreclosure fraud—that generated countless Wall Street fortunes over the past decade. Wall Street’s winners are now trying to leverage those gains into permanent political victories, both to entrench the system of favors that helped them succeed and to cut the “entitlements” that generate rival claims to the public weal. OWS is trying to stop the illicit gains of the past decade from permanently deforming our economy.

As the protesters watch megabanks grab thousands of properties via foreclosures, often through processes that are utterly lawless, they think it equitable and just that they get to claim some small parcel of lower Manhattan as a center for their own deliberative processes. Giving them this space is the least that New York’s increasingly plutocratic and petulant Mayor Bloomberg can do.

4) “They should be thankful for what they have. Real poverty means living on $1 a day.” Rush Limbaugh recently praised a report by one of his advertisers, the Heritage Foundation, which details how good the US poor have it. A full 99% have refrigerators! But of course, selling that refrigerator would only buy about 8 days of food for most families.

The relative inequality point initially intrigued me. As Jared Diamond has noted, “The average rates at which people consume resources like oil and metals, and produce wastes like plastics and greenhouse gases, are about 32 times higher in North America, Western Europe, Japan and Australia than they are in the developing world.” But I no longer see a rational connection between the vast fortunes made by those at the top and a process of globalization that either balances consumption or creates rising living standards for all.

Yes, there are serious moral questions raised by global inequality that renders the average American better off than 90% of the population in poorer countries. As I noted earlier, a soi-disant Green Tory might advocate for more money circulating in the economy’s stratosphere: a luxury handbag costing $80,000 may have less of a carbon footprint than, say, 32 Tata Nanos.

But for anyone truly concerned about the environment, it would be far better to see the handbag consumption turned to sustainable energy investment, rather than continuing as a diversion of spending power away from the poor. Moreover, if domestic and international inequality continues at current levels, it will reinforce the US recession. Even for those who think the average US citizen is too rich anyway, the probable political consequences of perpetual stagnation are frightening. Money is being drained away from an ordinary economy into an economic stratosphere whose denizens appear increasingly out-of-touch with the workers who feed, defend, and otherwise serve them.

5) “They have no demands!” This is the most bizarre criticism of OWS as a social movement. As one organizer puts it, ‘We haven’t had a shortage of demands and solutions. We’ve had a shortage of mass movements.’ Moreover, it’s pretty predictable what will happen once demands get issued officially. If they’re too ambitious, the movement will be dismissed as socialism. If they’re moderate, it will be dismissed as stealth Obamaism, and the protesters will be condescendingly asked “why can’t you just participate in the political system as it is?”

The protesters’ deliberation about what demands to make (or goals to set) is laudable. It also reflects successful aspects of the pro-life movement. As Mike Konczal notes, “Beliefs about abortion are often underdeveloped, incoherent, and inconsistent until individuals become actively engaged with the movement. The process of conviction is the result of mobilization, not a necessary prerequisite for it.” Deciding how to exercise political power in a distributed and democratic way in the 21st century is a huge challenge. I am certain there will be divisions over what issues to prioritize, and how to balance global and local claims. Certainly that process is closer to a democratic ideal than a unified Jacobin cry to drown government in a bathtub.

The protesters realize that they, like much of the bottom 90% of society, are on an economic playing field that is tilted against them. They feel that normal channels of political change are blocked (especially given corporate influence over the Democratic party, the usual target of egalitarian reformist energy). Addressing these issues will take a lot of thought, reflection, and debate.

In conclusion, I just want to quote from a comment of the always thoughtful Patrick S. O’Donnell:

The protesters are participating in a “social movement,” defined as “a summary expression for a variety of collective efforts by the relatively powerless to exercise historical power.” (Richard Flacks) In protesting, social movement actors “break with, step out of, stop complying with, the terms and conditions of their accustomed daily lives.” In doing so, they attempt to influence their life circumstances and the life circumstances of those similarly situated, and this often entails considerable risks and costs. In a sclerotic democracy, we should give thanks to those willing to assume such risks and costs. These protests are in part and for some democratic forms of resistance in dramatic and urgent response to grave threats to accustomed, shared patterns of everyday living (even if some of the preconditions and conditions of such living were, and are, as we saw above, disturbing). Existing ways of life and cherished values are being undermined or threatened such that protests by social movements are the only political means available for bringing the attention needed to appreciate the gravity of such threats.

In many chilling ways, old social contracts are being broken, with nothing provided in their place. Old models of cooperation between the state and the market are breaking down, as incidents ranging from prescription drug shortages to food safety failures show. The global financial system teeters on the brink of meltdown thanks to a potential “Lehman style event” that regulators still have not managed to adequately monitor, let alone circumvent. These are urgent problems that an entrenched business-government elite has addressed listlessly, if at all. (This is not meant to criticize many well-intentioned front-line personnel, just to note that revolving door dynamics for political appointees and woefully inadequate funding often render their work a mere pantomime of effective enforcement action.) Occupy Wall Street has moral authority because it is addressing these problems. Its critics ought to be joining that process.

PS: A final reflection on the system of justice OWS is commenting on:

Image Credit (top image): Waywuwei.

Mark Engler, Five Things That #OccupyWallStreet Has Done Right

Micah Sifry, #OccupyWallStreet: There’s Something Happening Here, Mr. Jones.

Mike Konczal, Understanding the Theory Behind Occupy Wall Street’s Approach

Doug Henwood, The Occupy Wall Street non-agenda

Glenn Greenwald, What’s behind the scorn for the Wall Street protests?

Not surprisingly, the mainstream media has been condescending and dismissive. I recommend the alternative sources above because of [...]]]> In previous posts, I’ve worried that a large-scale effort to protest inequality in the US would spark a backlash. But the Occupy Wall Street movement has carefully and skillfully built up a network of alliances (from local community groups and unions). As news outlets and citizens consider how to react to the hundreds of arrests made yesterday, they should be aware of these sources:

Mark Engler, Five Things That #OccupyWallStreet Has Done Right

Micah Sifry, #OccupyWallStreet: There’s Something Happening Here, Mr. Jones.

Mike Konczal, Understanding the Theory Behind Occupy Wall Street’s Approach

Doug Henwood, The Occupy Wall Street non-agenda

Glenn Greenwald, What’s behind the scorn for the Wall Street protests?

Not surprisingly, the mainstream media has been condescending and dismissive. I recommend the alternative sources above because of the people I met on Thursday evening when I went to see the protest for myself.

Overall, I was impressed. I talked for about a half-hour with an Army reservist who had traveled from Indiana to take part in the protest. He told me that unemployment for returning troops from Iraq was near 35%. He said that, where he lived in Indiana, frustration with politicians from both parties had never been higher. He had slept in the plaza for a couple nights, but had to get back for reserve duty by the weekend.

Another protester had recently lost her job in New Jersey. She told me that she came to visit Zuccotti Park when it didn’t interfere with her job search too much. She said that a a friend of hers who worked for a Wall Street firm as an accountant for $40,000 per year also plan to join the occupiers. According to her, he has been stuck in the same job at a stagnant pay level for years because more senior employees are too anxious to retire.

At 6PM there was a teach-in called “How to Tax Millionaires.” A woman of about 25 gave a brief speech about how 136 millionaires in Congress were opposing the “Buffett Rule,” and she urged us to sign fax forms to demand that they at least allow the legislation to be considered. We also had a good discussion about tax havens, UK Uncut, and the need to equalize taxation on labor and capital gains.

The atmosphere was both positive and serious-minded. A band played music or drums that could be heard throughout the plaza. A group manned laptops on stone blocks. Dozens of beds and cots, covered in plastic, spread diagonally from southeast to northwest. I didn’t catch the “church” vibe that Matt Stoller describes, but I did find this description of his spot-on:

Many of the organizers were inspired by Wisconsin and Egypt, by attacks on teachers, by corruption on Wall Street, by money in politics, and are just happy to be out in the streets after a long period of absence of formal protest. . . [U]ltimately, the energy of just having a bunch of people in one place for a long period of time is very different, and much more interesting, than just a march. The protesters are creating a public space for the discussion of economic justice, just by showing up. Some told me they are planning teach-ins.

And you can sort of tell that this protest really bothers the community on Wall Street, stirring up deep existential questions for the people that work there, many of whom know there is a spectacle going on in the streets below. I don’t think anyone knows where and how this ends, or if it does. . . . But perhaps success and failure isn’t the right way to think about what’s going on in downtown New York, any more than thinking about a church as successful or failed based on its political objectives is the right way to think about how those in the pews satisfy their thirst for spiritual vigor. What these people have found in themselves, and created for each other, is meaning.

For some, the question is how to channel the meaning into concrete demands. (Mike Konczal suggests three: create a financial transaction tax, investigate Wall Street, and forgive bad mortgage debt.) I have heard that OWS is working toward a list of demands now. The right to formulate these demands, express them, and petition government in a way that can actually get results is at the core of the First Amendment the framers gave us. I hope the NYPD remember this as they watch the protest—and that, as Jamie Kilstein tweeted, “NYPD, when your benefits get cut, these were the kids that were trying to save them.”

Contemporary legal thinking is in the thrall of a cult of flexibility. We obsess about avoiding decisions without all possible relevant information while ignoring the costs of postponing decisions until that information becomes available. We valorize procrastination and condemn investments of decisional resources in early decisions.

Both public and private law should be understood as a productive activity converting information, norms, and decisional and enforcement capacity into outputs of social value. Optimal timing depends on changes in these inputs’ scarcity and in the value of the decision they produce. Our legal culture tends to overestmate the value of [...]]]> Cornell Law Review just published Professor David Super’s article Against Flexibility, a forceful and engrossing indictment of flexibility and legal procrastination at its core.  Here is the abstract:

Contemporary legal thinking is in the thrall of a cult of flexibility. We obsess about avoiding decisions without all possible relevant information while ignoring the costs of postponing decisions until that information becomes available. We valorize procrastination and condemn investments of decisional resources in early decisions.

Both public and private law should be understood as a productive activity converting information, norms, and decisional and enforcement capacity into outputs of social value. Optimal timing depends on changes in these inputs’ scarcity and in the value of the decision they produce. Our legal culture tends to overestmate the value of information that may become available in the future while discounting declines over time in decisional resources and the utility of decisions. Even where postponing some decisions is necessary, a sophisticated appreciation of discretion’s components often exposes aspects of decisions that can and should be made earlier.

Disaster response illustrates the folly of legal procrastination as it shrinks the supply of decisional resources while increasing the demand for them. After Hurricane Katrina, programs built around flexibility failed badly through a combination of late and defective decisions. By contrast, those that appreciated the scarcity of decisional resources and had developed detailed regulatory templates in advance provided quick and effective relief. 

[Dr. Polak] has focused on creating devices that will improve the lives of 2.6 billion people living on less than $2 a day. But, he insists, they must be so cheap and effective that the poor will actually buy them, since charity disappears when donors find new causes.

His greatest success has been a treadle pump that lets farmers raise groundwater in the dry season, when crops fetch more money. He has sold more than two million, he said. He also helped develop a $25 artificial knee and a $400 hospital lamp to save newborns with [...]]]> The New York Times has an excellent section on “low-cost innovations that can save thousands of lives.” A conversation today focuses on Dr. Paul Polak, a 78-year-old former psychiatrist.

[Dr. Polak] has focused on creating devices that will improve the lives of 2.6 billion people living on less than $2 a day. But, he insists, they must be so cheap and effective that the poor will actually buy them, since charity disappears when donors find new causes.

His greatest success has been a treadle pump that lets farmers raise groundwater in the dry season, when crops fetch more money. He has sold more than two million, he said. He also helped develop a $25 artificial knee and a $400 hospital lamp to save newborns with life-threatening jaundice.

Dr. Polak’s work reminded me of an inspirational conference in Boston, organized by Kevin Outterson, the Ewing Marion Kauffman Foundation, the Rhode Island College of Pharmacy, Universities Allied for Essential Medicines & Mind the Health Gap. Una Ryan, President & Chief Executive Officer of Diagnostics for All, gave a powerful presentation on her company’s quest to bring tests to individuals for pennies. Developments like these indicate that conditions for the world’s poorest can actually improve.

The more disruptive the disenfranchised become, the more they provoke harsh responses from authorities, thus worsening their already marginal position. By contrast, finance and government elites have positioned themselves to gain from whatever risks they shift onto society at large, via bailouts, emergency powers, and the revolving door. As Ross Douthat observed, [...]]]> Bernard Harcourt has analyzed new forms of radicalism adopted by the most and least privileged. Umair Haque at the Harvard Business Review has also identified dispositions shared by street looters and certain elites. As the chief political commentator at London’s Daily Telegraph has observed, “The moral decay of our society is as bad at the top as the bottom.” Yet there are very different consequences for each group’s transgressions.

The more disruptive the disenfranchised become, the more they provoke harsh responses from authorities, thus worsening their already marginal position. By contrast, finance and government elites have positioned themselves to gain from whatever risks they shift onto society at large, via bailouts, emergency powers, and the revolving door. As Ross Douthat observed, “The economic crisis is producing consolidation rather than revolution, the entrenchment of authority rather than its diffusion, and the concentration of power in the hands of the same elite that presided over the disasters in the first place.”

Rather than being grateful for public subvention, Wall Street demands even lower tax rates and less monitoring. At least in the US, this “revolt of the elites” is more of a menace to social order than the type of mass protests against inequality and corruption now sweeping India, Israel, Spain, Chile, and many other countries. Whereas the poor are swiftly punished for disruptions, the worried wealthy‘s initiatives for not-so-creative destruction are self-reinforcing.

1) From risk shift to capital strike: Jacob Hacker’s book The Great Risk Shift described forty years of policies designed to shift risk away from corporations and government and onto individuals. For millions of workers, 401(k) plans replaced defined benefit pensions. In 1979, 82% of impoverished families got TANF benefits; thirty years later, only 27% do. During the Bush Administration, there was even a vogue for “health savings accounts” to replace defined health benefits. Current GOP presidential contenders are upping the ante, attacking Medicare and Social Security, and proposing the replacement of traditional unemployment insurance with “personal accounts.” These policies and proposals all shift the risk of sudden accidents, a frail old age, child poverty, and economic slumps onto the vulnerable themselves, rather than their employers, or the larger polity.

Austerity for the poor and middle classes is only one half of the risk shift. It helps pay for lavish backing of connected companies. The same groups that benefit most from tax cuts financed by a gutting of the safety net are also pushing for “certainty” in their business ventures. Just as capital is taxed preferentially, so too must its owners’ ventures receive subsidies. Lionized on the pages of Forbes or Fast Company for “taking risks,” Wall Street’s favorite executives often avoid them at all costs. Derivatives are a favorite way of engineering away uncertainty. They do business with “too big to fail” banks, secure in the knowledge that taxpayers are on the hook if anything goes awry. Big investors, too, are keen on loan guarantees and other state “givings.” And that is just the beginning of the “certainty” they’ve been demanding, and getting, as Yves Smith argues:

Businesses have had at least 25 to 30 years near complete certainty — certainty that they will pay lower and lower taxes, that they will face less and less regulation, that they can outsource to their hearts’ content (which when it does produce savings, comes at a loss of control, increased business system rigidity, and loss of critical know how). They have also been certain that unions will be weak to powerless, that states and municipalities will give them huge subsidies to relocate, that boards of directors will put top executives on the up escalator for more and more compensation because director pay benefits from this cozy collusion, that the financial markets will always look to short term earnings no matter how dodgy the accounting, that the accounting firms will provide plenty of cover, that the SEC will never investigate anything more serious than insider trading (Enron being the exception that proved the rule).

As Smith notes, now many of the same corporations “have played their cost-focused business paradigm out.” It turns out that the same workers pressed to the wall for concessions happen to be customers, too, and they can’t pay for goods and services like they used to. (As the Wall Street Journal puts it: the same “lucky duckies” who are too poor to pay taxes can’t even go on their “dollar store splurges” any more.) The obvious macroeconomic prescription is for the state to tax those who are doing well, in order to pay for relief, recovery, and reform. But that isn’t happening, either.

Rather, the power groups that dominate the US Congress, Presidency, and courts believe that only private investment can lead to more growth. The problem is that most of those capable of investing now have so much money that they don’t need to earn anything from it. It’s a capital strike against anything but a “sure thing.” Many corporations are also cutting and hoarding. That’s a brilliant strategy for CEO’s, who may need just a few years at the top to accumulate a massive fortune.

The role of money in an economy is like that of blood in a body—it has to circulate to keep the entity that contains it alive. When a tremendous amount pools in one place, other parts suffer. Redistribution of income is vital to the health of American capitalism. Its decline presages a different type of economy on the horizon.

2) Doom Loops: So why isn’t anyone doing anything about this? Some brave protesters in India and Israel provide a model response to their own countries’ inequalities. As Rana Dasgupta notes, “taxpaying professionals working 70-hour weeks now compete unhappily for urban space with massively wealthier and more powerful businessmen and bureaucrats whose sources of wealth are opaque and, on the face of it at least, too effortlessly acquired.” “Opaque” turns out to be a bit of a euphemism:

After independence in 1947 . . . [f]ortunes were accumulated to be spent on property – in India and elsewhere – or stored abroad. The globalisation of the Indian economy in the 1990s only expanded the opportunities for this corrupt . . . entrepreneurial class. “Big-ticket” deals multiplied, much as they did in Russia during the same period: businesses became involved in a scramble for the ownership of basic resources previously controlled by the state – land, mines, oil, mobile telephony spectrums etc – and this only the political class could endow.

The seamless integration of political elites with executives in finance, real estate, extractive industries, and communications is a feature of many so-called “free market” economies. But, as Harcourt notes, social disturbances in the US, Spain, and Britain have too often been unmoored from any positive political vision for change. And the most aggressive protests have themselves become the target of popular ire, rather than the conditions that sparked them.

Meanwhile, at the top of society, reckless behavior is rewarded time and again. Looting is an established business strategy, unpunished by authorities who appear far more interested in getting their own opportunity to loot rather than exposing malfeasance. Peter Boone and Simon Johnson describe how a “doomsday cycle” of privatized gains and socialized losses continues to this day:

[M]ajor private sector firms (banks and nonbank financial institutions) have a distorted incentive structure that encourages eventually costly risk-taking. Unfortunately, the measures taken in various US and European bailout rounds during 2008-2009 (and again in 2010 for the eurozone) have only worsened, and extended to far more entities, these underlying moral hazard incentive problems. . . .

This cycle of boom followed by bailouts and bust amounts to a form of implicit taxpayer subsidy that encourages individual institutions to become larger – and the system as a whole to swell. Our preparation to bail out their creditors means systemic institutions are able to raise finance cheaply in global markets. The implicit subsidy to creditors encourages greater debt, which makes the system ever more precarious.

Years after the financial crash, the chief perpetrators—be they foolish, negligent, or purposefully fraudulent—are wealthier than ever. And they continue to push for liquidationist measures that force lower living standards onto workers and citizens, rather than investment in a positive-sum future for all. In case of peak oil, today’s smart investment is to buy oil futures, rather than invest in a green energy startup. If effortless grabbing of a larger share of a shrinking pie is a bit more profitable than long-term investment to shift out the production possibilities frontier, Mr. Market endorses it. Each year, our brightest business school graduates vote with their feet: thousands opt for the financial alchemy behind a quick buck, while far fewer take part in the hard work of creating a sustainable future.

3) Expect More Stability: Several analysts have argued that the resulting flow of incomes away from the bottom 90% (whose income has gone up 1% in real terms since 1980) and toward the top 1% (which has enjoyed a nearly fourfold increase in income, with much higher gains for those in the top 0.1 and 0.01%) will generate social unrest in the US. I doubt this. First, as Dan Ariely has shown, not many people actually understand how unequal our society is. Second, our media is profoundly uninterested in discussing issues of equity or opportunity. Rather, it has bought, hook, line, and sinker, the Pete Peterson-sponsored message of endless austerity for the middle and lower classes. Third, US authorities are getting more creative in defusing protests, in actions that even a leading libertarian advocate of the First Amendment applauds for targeting “the bad people.”

Finally, and most importantly, technologies of surveillance have made dissent more costly. Sarah Jaffe has explained the consequences of the application of military-grade technology on the homefront:

As a burgeoning international protest movement takes shape, opposing austerity measures, decrying the wealth gap and rising inequality, and in some cases directly attacking the interests of oligarchs, we’re likely to see the surveillance state developed for tracking “terrorists” turned on citizen activists peacefully protesting the actions of their government. And as U.S. elections post-Citizens United will be more and more expensive, look for politicians of both parties to enforce these crackdowns. Despite growing anger at austerity in other countries, those policies have been embraced by both parties here in the States.

Citron & I have discussed several aspects of this phenomenon, including domestic intelligence collection about political action, and problematic collaborations between state and corporate “law enforcers.” Add into the mix the growing power of entities that secretly generate reputational data about individuals, and you have a variety of “chilling effects” on political activism that challenges inequality in the US. Meanwhile, the Bush-Obama war on whistleblowers has demonstrated the dangerous consequences of trying to publicize misuses of that technology. The end result is a mass “learned helplessness,” as the very idea of collective action becomes a bitter joke to a critical mass of the populace.

I only mean to predict increased stability within the US. Elsewhere, food scarcity (including that induced by our own wasteful energy use) is likely to wreak havoc. Complexity theorists in MIT’s Technology Review predict that, “If we don’t reverse the current trend in food prices, we’ve got until August 2013 before social unrest sweeps the planet.” Fortunately, the food stamps program in the US appears to have enough support from large agricultural interests to preserve it here.

History teaches that the great change agents in our society lost dozens of times before finally making a positive and lasting mark in law. As Harcourt notes, we could stay in the eye of this storm for a long time. Electoral politics, our traditional venue for gradual and constructive public investment, has been deeply corrupted by mass distraction and targeted influence. It will take years, and perhaps decades, of work to restore a party system that rewards politicians for addressing the real economic and environmental needs of their constituents. The best public intellectuals can do is follow the example of the minds who brought us to the present impasse: namely, to develop a “Mt. Pelerin Society” for those who actually believe there is such a thing as society.

Note: Given my title, I should acknowledge that Christopher Lasch identified a “Revolt of the Elites” 15 years ago.

Photo Credit: SEIU Int’l.

There’s only one problem with those projections: it turns out that “moving Medicaid recipients into managed care ‘did not lead to lower Medicaid spending during the 1991 to 2003 period,’” according to a report published by the National [...]]]> The Washington Post has featured two interesting pieces recently on Medicaid managed care. Christopher Weaver reported on a battle between providers and insurers in Texas. Noting that “federal health law calls for a huge expansion of the Medicaid program in 2014,” Weaver shows how eager insurers are to enroll poor individuals in their plans. Each enrollee would “yield on average $7 a month profit,” according to recent calculations. Cost-cutting legislators see potential fiscal gains, too, once the market starts working its magic.

There’s only one problem with those projections: it turns out that “moving Medicaid recipients into managed care ‘did not lead to lower Medicaid spending during the 1991 to 2003 period,’” according to a report published by the National Bureau of Economic Research this month. Sarah Kliff is surprised to find that this is “the first national look at whether Medicaid managed care has actually done a key thing that states want it to do.”

I share the frustration that we don’t have enough information on key policy issues. On the other hand, I can see why economists and other social scientists would be reluctant to pronounce on the efficacy of Medicaid managed care.

The NBER study suggested that Medicaid rates are often already “low enough that private insurers couldn’t negotiate a similar payment” rate. When the managed care providers did manage to reduce overall spending, they usually did so in states with above-average compensation rates for Medicaid providers. So how would we judge a provider which managed to reduce spending in a state with average or below average rates for providers? Probably not that highly if the strategy focused on delaying or denying access to needed care. Discussing past problems in managed care, one health law casebook notes that an “HMO was accused of putting its enrollment office on the third floor of a building without an elevator, and another tried to attract healthy elderly subscribers by holding square dances.”*

There are a wide range of insurer activities that can add or reduce costs to a system. But how do we assure that we are measuring the effects of an intervention correctly? Some laudable innovations, for example, may be costly upfront, but will end up saving many times the initial spend years down the road. “Meat ax” rationing of pills or procedures may reduce spending now, but worsen health conditions that eventually become extremely expensive. And when we consider quotidian decisions about denying or approving care, value judgments become even more complex. Accurate coding of whether a certain denial of coverage was actually appropriate can be very difficult. Empirical facts can be subject to widely divergent interpretations.

This is not to say that more studies on Medicaid managed care, and other health system innovations, should not be done. (It would be interesting to add up how much study spending was commissioned by the ACA (and even Dodd-Frank), as compared with policies like ELSI (which mandated a certain percentage of grants for the Human Genome Project to study its ethical, legal, and scientific implications).) I am just flagging the difficulties in obtaining “hard,” “objective” proof of the value of certain policies. There is usually plenty of room to massage the numbers.

X-Posted: Health Reform Watch.

*Hall, Bobinski, and Orentlicher’s Health Law, citing Mary Crossley, Discrimination against the Unhealthy in Health Insurance, 54 U. Kan. L. Rev. 73 (2005).

Photo Credit: Quikbeam.

1) Barbara Ehrenreich on “How America Turned Poverty Into a Crime:” It’s hard to believe that Ehrenreich’s Nickeled and Dimed came out 10 years ago. As she’s written in the book’s re-issue, things have only gotten worse for the struggling families whose plight she chronicled in the book. Ehrenreich describes how officials at public assistance programs treat many beneficiaries with contempt.  One needy mom named Kristen says caseworkers “treat you like a bum. They act like every dollar you get is coming [...]]]> The fourth Class Crits conference will be held in DC in about a month. Titled “Criminalizing Economic Inequality,” it focuses on the US’s “increasing reliance on the criminal justice system to make and enforce economic policy.” A few recent items highlight the conference’s timeliness:

1) Barbara Ehrenreich on “How America Turned Poverty Into a Crime:” It’s hard to believe that Ehrenreich’s Nickeled and Dimed came out 10 years ago. As she’s written in the book’s re-issue, things have only gotten worse for the struggling families whose plight she chronicled in the book. Ehrenreich describes how officials at public assistance programs treat many beneficiaries with contempt.  One needy mom named Kristen says caseworkers “treat you like a bum. They act like every dollar you get is coming out of their own paychecks.”

Nationally, according to Kaaryn Gustafson of the University of Connecticut Law School, “applying for welfare is a lot like being booked by the police.” There may be a mug shot, fingerprinting, and lengthy interrogations as to one’s children’s true paternity. The ostensible goal is to prevent welfare fraud, but the psychological impact is to turn poverty itself into a kind of crime.

Another impact is to permanently estrange many of the temporarily needy from government. In Griftopia, Matt Taibbi interviews members of the US Tea Party. He reports that their views of government arise out of their interactions with officials at the IRS, DMV, TSA, zoning boards, or similar agencies: stressful, one-shot interactions with bored, inattentive, hostile, and/or underpaid bureaucrats. Is it any wonder why many so many of those in economic distress may want to turn their back on government altogether?

Dismissive attitudes from frontline bureaucrats end up corroding state action generally.  The worse they do, the less voters want to fund their agencies; and the more strapped agencies are, the less likely they are to retain qualified and motivated workers.  Corey Robin puts it well as he assesses the immense popularity of anti-tax movements:

Liberals often have a difficult time making sense of these movements – don’t taxes support good things? – because they don’t see how little the American state directly provides to its citizens, relative to their economic circumstances. Since the early 1970s, with a few brief exceptions, workers’ wages have stagnated. What has the state offered in response? Public transport is virtually non-existent. Even with Obama’s reforms, the state does not provide healthcare or insurance to most people. Outside wealthy communities, state schools often fail to deliver a real education. In such circumstances, is it any wonder ordinary citizens want their taxes cut? That at least is change they can believe in.

Matthew Yglesias questions whether there is still much anti-tax fervor left.  But whatever the current polling numbers are, both Ehrenreich and Robin show how the weakness of our social welfare state is self-reinforcing.  Ehrenreich also shows how social silences about poverty are imposed, down the very youngest children:

At school, [Kristen's] seven-year-old’s class was asked to write out what wish they would present to a genie, should a genie appear. Brianna’s wish was for her mother to find a job because there was nothing to eat in the house, an aspiration that her teacher deemed too disturbing to be posted on the wall with the other children’s requests.

That teacher’s reticence is re-enacted daily on a happy talk MSM that leaves it to the World Socialist Web Site to report on the US’s soaring child poverty rate. If the middle class is invisible to them, how can they glimpse those barely keeping their heads above water?

2) Martha McCluskey, From the Welfare State to the Militarized Market: Losing Choices, Controlling Losers: McCluskey is one of the ClassCrits organizers, and her book chapter puts Ehrenreich’s observations in a broader historical perspective:

The triumph of market freedom has been accompanied by increasing authoritarian government control in many spheres. . . . [For example, in the] welfare reform policies of the 1990s . . . restrictions on poor mothers were rationalized as expanding their “freedom of choice” by making their power to bargain for better choices appear pathological. . . . [F]ree market rhetoric identifies welfare state protections with market losers who threaten others gains, so that security seems to come from controlling rather than supporting those who are most insecure.

As with the market fundamentalism in Lochner v. New York, constrained choices can be reconstructed as free choices by masking the role of law in coercing and penalizing many peoples’ choices in the interests of privileging some interests. The ideology of market freedom contains a contradiction: if freedom comes from maximizing unconstrained self-interested gain in a harsh world of zero-sum competition, then maximizing one’s freedom can mean imposing the most constraint on others. Market winners will not be those who best make the tough choices necessary to maximize resources within given constraints, but those who create better choices for themselves by mobilizing government power to constrain others. This strategy permeates foreign policy that links military and corporate power to control global competition, and it shapes domestic policies controlling struggling workers and racialized groups through mass incarceration and the criminalization of immigration.

McCluskey’s deconstruction of free market rhetoric reminded me of the paradoxes explored in a recent article titled Monopoly and Competition in 21st Century Capitalism.   The authors note that, today, “most of the examples of competition and competitive strategy that dominate economic news are in fact rivalrous struggles between quasi-monopolies (or oligopolies) for greater monopoly power.”  The authors back their ideas with empirical data about the degree of concentration in many US industries.  More importantly (given the endless contestability of such data), they give a fascinating account of competition as an essentially contested concept in the history of political economy.

3) Glenn Greenwald on the surveillance state: Greenwald believes that a sprawling surveillance apparatus is becoming increasingly focused on political “radicalism,” rather than the terror threats that were its founding rationale.  This is a real problem, made all the more menacing by economic instability.  The state could address it by embracing the bold experimentalism of the New Deal. That nurturing and supportive role is being increasingly eclipsed by a domestic state remade in the image of its foreign roles.  Alfred W. McCoy has argued that “the crusade for democracy abroad . . . has proven remarkably effective in building a technological template that could be just a few tweaks away from creating a domestic surveillance state—-with omnipresent cameras, deep data-mining . . . biometric identification, and drone aircraft patrolling ‘the homeland.”  The “Secure Communities” program may be validating McCoy’s (and Greenwald’s) fears.

I think all of this work is an important “reality check” as we consider the patterns of privilege and burden created by the modern economy.  Don Peck recently observed the self-serving two-step that many at the top have used to justify their accelerating affluence:

As America’s winners have been separated more starkly from its losers, the idea of compensating the latter out of the pockets of the former has met stiff resistance: that would run afoul of another economic theory, dulling the winners’ incentives and squashing their entrepreneurial spirit; some, we are reminded, might even leave the country. And so, in a neat and perhaps unconscious two-step, many elites have pushed policies that benefit them, by touting theoretical gains to society—then ruled out measures that would distribute those gains widely.

Peck is mostly comfortable with the idea that those at the top are a legitimate meritocracy, though he does note that “some of the policies that have most benefited the rich have little to do with greater competition or economic efficiency.”  John Kay of the Financial Times ups the ante, suggesting that we must always be careful to assess whether fortunes spring from productivity (a sign of a well-ordered society) or brute power (an indicator of injustice):

Two broad economic theories describe the allocation of income and wealth. The power theory states, broadly, that people get what they grab: from the forest, the markets, or the shop window. The distribution of income reflects the distribution of power. . . .The alternative theory is that what people earn reflects their marginal productivity – how much they personally add to the value of goods and services. The marginal productivity theory has many attractions, especially to those who are well paid: if what they receive is a product of their own efforts, their rewards are surely well deserved.

Kay worries that, among elites, the “ethic of just reward through effort gave way to the culture of present entitlement from possession.”  If, as McCluskey, Ehrenreich, and Greenwald all suggest, today’s low wage labor force is being pressed toward privation by the state’s “guard labor,” then the edifice of industry built on a cheap workforce owes as much to state discipline as it does to managerial genius.

When the dragnet replaces the safety net, workers have fewer options and are more desperate for any position they can get.  Instead of developing better technology, methods, and innovations, business leaders can count on profits from squeezing workers.  Prosperity based on that kind of sweating can’t last forever, as dollar stores are now learning.  But when CEOs’ average pay is $9.8 million per year, they need only keep the game going a few years to earn the fortune of a lifetime.

Image Credit: Flawka.

To recap, my post argued the following points:

1) Some people are doing extremely well in today’s economy, a large number are worried or struggling, and a growing class is experiencing desperate privation. This situation demands some legitimating explanation. 2) It is hard to demonstrate factually that the top 0.1%, which has seen a near 400% increase in its income since 1980, has become four times more valuable to the economy since 1980. 3) So defenders of this vast inequality argue that those in the middle and lower classes deserve to work harder and to make do with less.

Let’s take criticism of each step of the argument [...]]]> There were a number of interesting comments on my last post. I want to address some of the critical ones.

To recap, my post argued the following points:

1) Some people are doing extremely well in today’s economy, a large number are worried or struggling, and a growing class is experiencing desperate privation. This situation demands some legitimating explanation.
2) It is hard to demonstrate factually that the top 0.1%, which has seen a near 400% increase in its income since 1980, has become four times more valuable to the economy since 1980.
3) So defenders of this vast inequality argue that those in the middle and lower classes deserve to work harder and to make do with less.

Let’s take criticism of each step of the argument in turn.

1) Legitimation: Some want to stop the conversation at point 1, arguing that there is no need to legitimate inequality, and no way to fairly or efficiently remedy it. For example, some libertarians a) believe that there is no level of inequality that demands legitimation.  I have also heard objections to redistribution based on the idea that b) any governmental effort to redistribute income is doomed to be counterproductive, due to the incompetence or venality of legislators and bureaucrats.  Let me take each point in turn.

a) Inequality as a non-problem: Let me again try to divide this into two responses, based on the level of inequality we are facing:

i) Global Inequality: For some commenters, even the extremes of global inequality are not a problem that merits coordinated governmental attention. Commenter Promethefeu insisted that, in general, the extraordinary wealth of the richest both results from and reinforces a global economic order that is gradually improving the lives of everyone. This simultaneously descriptive and normative claim also fits comfortably with Promethefeu’s view that the resources of the planet are either literally or constructively inexhaustible.

I do not agree with these claims. In several posts in our Law & Inequality category, I have described the work of Thomas Pogge, who has argued that trade rules set up by the governments of wealthy countries and elites in many poor countries (with rich natural resources) have contributed mightily to the crushing poverty of the world’s most vulnerable billions. (I’ve also linked to the book Thomas Pogge and His Critics, which features some critiques of Pogge that I ultimately find unconvincing.)

To what degree is economic life zero-sum?  The more I read about natural resources, the more I’m convinced that we may have already hit peak oil, and that other energy options will not be able to perform the functions it has played in our economy with the same degree of cheapness and safety.  (Kunstler’s book “The Long Emergency” has a good chapter on this; Bill McKibben, Tim Jackson, and Paul Gilding also offer evidence.)  Limits of the earth’s carrying capacity are also a staple of conservative Malthusians.  I don’t share their policy prescriptions; I just bring their analysis up to make it clear that there is not a simple left/right divide on the issue.  Extreme inequality lets those at the top feed their cars by starving the poor.  Less dramatically: driving safety also gets distributed based on purchasing power (and if you don’t believe me, check out Debra Satz’s new book).

If there were evidence that the extraordinary accumulation of capital in the top 1 to 10% were leading to much more research on how to solve the energy, food, and health dilemmas created by a coming age of scarcity, I’d have to reconsider my position.  One question for those who disagree with me: is there any evidence that would lead you to reconsider your position?

ii) US inequality: This is a tougher case for me to make than the global case, because income is much more compressed in the US than it is globally. It is probably better to be among the poorest 10% of Americans than it is to be living at the median wage in a desperately poor country.  Nevertheless, there is a lot of evidence that high inequality in a developed country hurts everyone in that country–not just those at the bottom.  So even if redistribution is not Pareto-optimal at the very moment it occurs, it eventually improves the welfare of all, on average.

Again, values can trump these facts: someone who only wants to think about “process,” and not the pattern of distribution it generates, won’t be upset by global extremes, much less US levels of inequality.  But I don’t think it’s possible to be a purely process-oriented economic thinker, especially if you view economic transactions as legitimately “market-oriented” to the extent they are distant from the state. Give me a sector where someone has achieved great or near-great wealth, and I can easily point to several instances where that person, his company, or his industry has vastly benefited from state intervention.  (The work of David Cay Johnston, James K. Galbraith, and Alperovitz & Daly is only the tip of an iceberg of evidence supporting this point.)

Even as pure a libertarian thinker as the early Robert Nozick insisted on justice in rectification in addition to justice in transfers and acquisition.  Moreover, it is inconsistent for a libertarian thinker to argue simultaneously a) that the state has engaged in a monstrous series of favors to various groups and b) we must suddenly end state intervention in toto, thus allowing those with ill-gotten gains to consolidate and press their advantage in the new order.  There has to be a period of rectification, and for me, much of that rectification will focus on inequality that was generated by the endless series of state-corporate mutual favors that produced a goodly number of our richest, from the robber barons to the current Forbes 400.  Laissez-faire “shock treatment” is good for creating Russian-style oligarchies, but has never achieved the type of pure and free market that its supporters tout.

b) Government is the problem, not the solution:  This last point leads to what I think is a much stronger critique of my position on inequality: that government is too captured to address the problem meaningfully.  Extrapolating from Arthur Okun’s “leaky bucket” theory of redistribution, a critic of redistribution might predict that a Medicare program is always going to be aimed more at enriching doctors and hospitals than helping patients.  Loopholes fecundate in the tax code.  Defense spending succors one boondoggle after another.

However, those who push that position are also consistently enabling the “wrecking crew” that makes government so dysfunctional. Medicare Part D could be much less costly if private insurers were less involved and government made full use of its bargaining power.  In the debt ceiling fight, it was the anti-revenue absolutists who fought to maintain loopholes on things like corporate jets and carried interest.  Anyone who proposes large cuts in defense spending will face a Dolchstoss strategy from the opposition.

2) Has the Top Tenth of One Percent Become Four Times More Productive?: We can see from this chart that, if we exclude the outliers in the top 0.01% (who earn an average of $27 million annually), households in the top tenth of one percent earn, on average, about $3.2 million annually.  Adjusted for inflation, this is a nearly 400% increase in income since 1980, an era when median wages stagnated.  Most of the revenue proposals now on the table would increase the top tenth of one percent’s payments of taxes by 1 to 10 percent. So let’s assume the hardest case for me: a 10% federal tax raise, or about $320,000 for the median taxpayer in this group, to help pay for the mix of programs presently funded by the US government. Is that fair?

Again, it all depends on the context.  Sure, there are some brilliant managers, inventors, and professionals who deserve every cent of their millions.  But there are also a lot of people I think we’d all acknowledge are merely lucky, passive rentiers, expert exploiters of contacts and connections, and blatant copiers of value-draining business strategies (like pollution, tax arbitrage, evasion of labor and health standards, etc.).  I cannot tell you how many examples like this I come across as I teach cases in various IP and health law topics, or research deregulation. For just two examples, consider the interactions of private equity barons and nursing homes, or the software patent arms race.

But I admit that it’s probably very difficult to conceive of an empirical project where we could reliably code the various top 0.1% incomes as “valuable/deserved and productive” vs. “mere copying or an exercise of power.”  So let’s again take the toughest case for me: imagine the 10% tax were only imposed on the best of the top 0.1%.  Let’s say they took home (and I’ll be very rough here) about $1.75 million as opposed to $2.1 million.*  Is that really so troubling, compared with, say, the extreme discomfort of the neglected quadriplegics, poor children suffering dental pain, or abandoned elderly left to fend for themselves in the wake of an austerity budget?  Even if we assume that only 20% of the taxed income filters through to worthwhile social ends, even if the bucket of redistribution is that leaky, I’d still endorse it.

Note: I am not taking the easy road of dismissing the marginal spending of our top 0.1% as wasteful.  As much as I like Umair Haque’s blogging, I don’t think that this is necessarily a representative picture of the spending habits of the very rich, or a merited response to the group as a whole:

[A] playhouse for the super-rich . . . can easily cost more than the average income of the people formerly known as “the middle class.” [It is] described in an eyebrow-raising New York Times piece[:] “[at the home of] an oil company executive, and his wife, Kristi, a Playboy model turned blogger, is the $50,000 playhouse the couple had custom-built two years ago for their daughter[.]“

If $50,000 seems a bit off for that kind of purchase, don’t worry — other playhouses in the piece went for as much as a cool $250k.  [This item] is a peculiarly apt metaphor for what’s gone wrong with the economy today: the super-rich, whose gains reflect little social value creation, have gotten richer — and are hyperconsuming the stuff of idle, yawning luxury with an appetite that makes Caligula look like a blushing bride.

I am not penning a jeremiad about wasteful spending; I’ll leave that to Robert Frank.  Rather, I am combining concern about relative and absolute poverty.  High levels of inequality may be all right if those at the bottom have some guaranteed minimum of shelter, health care, food, education, and chances to prove themselves capable of joining those at the top.  But that does not describe the US, and I have a sense that in an age of scarcity it may be hard for any country to sustain very high levels of inequality and reliably prevent privation for those at the bottom.

3) Justifying Immense Gains at the Top by Stigmatizing the Economy’s Losers: I don’t think there were many comments on this point, but I think it is critical to the post.  What I find most disturbing about the current inequality debate is the growing momentum behind the idea that the poor simply don’t deserve much action on their behalf. (Or, in more detached terms, that any effort to raise their estate must be part of a centuries-long world-historical process that we need be in no hurry to rush.)  I think there is a growing pressure to reduce the cognitive dissonance of a world increasingly divided into ever-richer rentiers and the hopelessly disenfranchised.  We need to be very careful about buying into any narrative that would label certain people as “producing nothing,” or “unemployable because currently unemployed.”  But as long as there are massive gains at the top and stagnation or decline for middle and lower class Americans, those will be very tempting ways of explaining/justifying our economy.

A concluding thought:   When I began this response, I was hoping to neatly separate out the differences about values that we may have, and the types of factual disputes that are more amenable to conclusive settlement.  But as I write it, I more deeply appreciate truth’s debt to values.  How we explain inequality will have a lot to do with how much we value the work of the wealthiest (and the relief of the suffering of the poorest), and those valuations will in turn inevitably inform the explanations of inequality we propose.  I believe that, in fact, the very wealthy owe a great deal of their net worth to the government that all of us (and our forebears) support (and built), and that as a matter of value we should care more about an inclusive and resilient future than immediate discretionary consumption in the present.

I think those facts and values add up to a more progressive tax system and more dedication of government funding to infrastructure, conservation, and improvements in health and education.  The very wealthy have benefited disproportionately from past investments.  In an era of historically low tax rates for the wealthy, and looming austerity and infrastructural decline, they need to invest in a common future.  I am afraid that those who fail to demand this reflect Adam Smith’s diagnosis of a “disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition.” I hope that public debate on redistribution can proceed on the basis of more fair-minded dispositions.  There are heroes and geniuses, looters and loafers, in all social classes.

*Based on William Domhoff’s figures, I’m conservatively assuming the effective tax rate on the top 0.1% is about 35% (that is, that the marginal rate dominates, that state taxes and deductions cancel out, and that dodges like the carried interest rate are relatively rare). As Domhoff notes, that’s not a safe assumption for the very top: “the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era, so the top 400 had a tax rate of 20% or less in 2007, far lower than the marginal tax rate of 35% that the highest income earners (over $372,650) supposedly pay.”