Wednesday, February 5, 2014

The Confidence of Ordinary People

I've found coherence amongst the following three quotes:

But authority cannot be humbled unless ordinary people, however much they have been rejected by the educational system, have the confidence to assert themselves against the mighty. If they think themselves inferior, if they think they deserve on merit to have less worldly goods and less worldly power than a select minority, they can be damaged in their own self-esteem, and generally demoralized.

 - Michael Young, The Rise of the Meritocracy, cited by Diane Ravitch here.

As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

- Nelson D. Schwartz, New York Times, "The Middle Class is Steadily Eroding.  Just Ask the Business World"

The function of education, therefore, is to teach one to think intensively and to think critically. But education which stops with efficiency may prove the greatest menace to society. The most dangerous criminal may be the man gifted with reason, but with no morals.

- Martin Luther King, Jr., "The Purpose of Education", 1947 (He was 18 years old)

A lot of our discussions on public affairs have to do with a "building crisis".  If it was clear and present, it would be an emergency.  If it was not a crisis, it would not be worth addressing.  Yet, as we've seen with market bubbles, man-made disasters, and the execution of geo-political threats, dangers that are not yet "felt" by the American public are dangers nonetheless.

Here's an interesting graph:
In approximately 1972, Productivity uncoupled itself from Real Median Family Income.  Said otherwise, on a per capita level, we are producing more marketable "stuff", but paid less for doing so.

Conveniently enough, you'll see that "Real Median Family Income" line maps well with the 65% mark on this graph:

And I'll be durned if the Top 1%, while more volatile, is doing a better job of keeping up with productivity.  I'm not an economist, but I think this is a fairly simple visualization of the prioritization of capital over labor in our tax code and public policy.  If your income is derived from capital, as opposed to salary or hourly wages, you are likely going to amass wealth at a greater rate than those who don't.

But here's the kicker, almost half of all Americans do not participate in the stock market or have appreciable capital investments:
This is not as simple as looking at tax rates, although the following chart should be required viewing before any future discussions of "tax and spend" government:
Click image to expand

Rather, political inequality is forcing the wealth gap to expand.  Our government is less democratic.  Education, criminal justice, environmental protections, transportation, energy - you name it - public policy has been compromised, commonly shrouded in terms like "freedom", but more often than not in contravention of public sentiment.

Remember when the middle class was not just a pedantic turn of phrase, but actual a focus of public policy?  Can you point to the entirety of policy initiatives implemented over the last ten years and tell me that the middle class is still a priority?  If the middle class is eroding, and discount stores are being replaced with high end luxury boutiques, why is it alarmist to suggest the same thing may happen to our government?

This post would be a lot easier if I could end it with a policy prescription.  I can't.  I think the minimum wage is a start, but it is an ugly, blunt, sledgehammer of a tool that really doesn't get us far enough.  I also don't think we get anywhere by bringing our top-earners "down".  The key to this is an escalator paired with a release on some of the burdens placed on our lower classes.  The potential of a system in equilibrium (between productivity and income) is there.  We had it.  The question is how it was lost.

That's all for today.  Have a great Wednesday doing what you love!  Be careful on the roads - it is as bad as it looks.