Friday, July 27, 2018

2018: Will Voters Continue to Act Against Their Own Economic Interest

Historically when wealth disparities have become too great, the lower classes have risen up and the top tier of the population hoarding most of the wealth has fared badly.  The French Revolution and the Russian Revolution are but two examples of catastrophic consequences for the top classes.  Britain in contrast - and partly as a result of the terror the French example provided - managed to avoid the French example by making changes that improved the lot of the lower classes.  Those lessons seem lost on today's Republican Party which, combined with pro-rich and pro-corporation policies are overseeing the stagnation of wages for the majority as the top 0.01% ranks in increasing wealth.  Bizarrely, many Americans continue to vote Republican and against their own economic interests.  As a column in the New York Times explores, the carrot(s) that induce such short sighted behavior are views on race, religion, abortion, LGBT rights and immigration.   As the 2018 midterm elections near, the question becomes whether such short sighted voting will continue. Here are column excerpts: 

Even as corporate America has unleashed insatiable consumer demand for innovative low-cost goods and technology, it has driven economic trends that continue to increase inequality, stall wage growth and strengthen the power of business. 
Nearly half the country’s voters support a president who embraces upwardly redistributive policies that many of them do not benefit from.
Why? Because on race, religion, abortion, LGBTQ rights and immigration, President Trump — unlike previous Republican presidents — has given his voters exactly what they want.
This is patently true in the case of immigration. As The Washington Post reported in June, “The Trump administration has ramped up arrests of illegal immigrants, slashed refugee programs, criminalized unauthorized border crossings” and secured a ban on travelers from six majority-Muslim nations.
But recent scholarly research shows how the interests of those on top of the economic pyramid are gaining strength.
“Industries are increasingly characterized by a ‘winner take most’ feature where a small number of firms gain a very large share of the market,” David Autor, an economist at M.I.T., and four co-authors, write in “The Fall of the Labor Share and the Rise of Superstar Firms.”
They go on: Markets have changed such that firms with superior quality, lower costs, or greater innovation reap disproportionate rewards relative to prior eras. Since these superstar firms have higher profit levels, they also tend to have a lower share of labor in sales and value-added. As superstar firms gain market share across a wide range of sectors, the aggregate share of labor falls.
According to Autor and his colleagues, the decline in the size of the pie going to labor — known among economists as “labor share” — coincides with the rise of superstar firms and increasingly with the use of outsourcing to “temporary help agencies and independent contractors and freelancers for a wider range of activities previously done in-house, including janitorial work, food services, logistics and clerical work.” . . . Together, these workplace trends account “for a significant portion of the increase in U.S. wage inequality since 1980.”
Policymaking, judicial decisions and structural changes in the economy have functioned in concert to weaken the clout of voters, consumers, workers and minorities — with considerable support and little or no objection from a key part of the electorate.
The Supreme Court has played a well-documented role in this process, especially in decisions on campaign finance and business law that have empowered corporations and the super rich.
“The Court has given the green light to restrictive voter identification laws, without requiring states to prove that such laws prevent any appreciable amount of voter fraud or promote public confidence in the fairness of the electoral process,” Richard Hasen, a law professor at the University of California-Irvine, wrote in an email in response to my inquiry . . . .
The downstream consequences of concentration for employees are substantial, Shambaugh et al write: “Concentration in product markets can be mirrored by its labor market equivalent — monopsony — that exists when employers face limited competition for workers.” Firms dominating concentrated labor markets “face relatively inelastic labor supply” (i.e., job choices are limited) which, in turn, allows employers to “reduce wages without losing all (or even a large fraction) of their workforces.”
Among economists, one of the most discussed developments is the precipitous decline in the percentage of total economic output flowing to labor, . . . . In other words, shareholders and business owners amassed profits amounting to $1.35 trillion or $17,000 per employee as a result of the increase in profit share.
This bleak tale does not end here, as new pieces of evidence accumulate. Dominique Guellec and Caroline Paunov, senior economists at the Organization for Economic Cooperation and Development, argued in a 2017 paper, “Digital Innovation and the Distribution of Income,” that without government intervention, increased inequality is virtually inevitable:
The growing importance of digital innovation — new products and processes based on software code and data — has increased market rents, which benefit disproportionately the top income groups. In line with Schumpeter’s vision, digital innovation gives rise to ‘winner-take-all’ market structures, characterized by higher market power and risk than was the case in the previous economy of tangible products.
Increased profits, in turn, “accrue mainly to investors and top managers and less to the average workers, hence increasing income inequality.”
In the United States, the top 0.01 percent holds 9.9 percent of the nation’s total wealth excluding deposits in tax havens. When wealth in tax havens is included, the share held by the top 0.01 percent rises to 11.2 percent.
While an increase from 9.9 to 11.2 percent amounts to a 1.3 percentage point increase, in real dollars that translates to $1.06 trillion, or roughly $40 million for every adult in the top 0.01 percent.
A continued failure of wages to advance, despite job growth, while corporate profits shoot up to record levels would give Democrats a significant counterargument to legitimate Republican claims of overall economic improvement.
[T]he question for 2018 will be which demographic and generational groups will see their turnout climb or drop the most.
Since 2016, Trump has successfully angered millions of voters, especially women, who have been mobilizing in support of Democratic House and Senate candidacies. Vilified and insulted members of racial and ethnic minorities are seething. At the same time, millions of others — a majority of them men — have been infuriated by economic and cultural developments they feel have devastated neighborhoods, local environments and workplaces so that they can no longer recognize them.
How many Americans will yield to apathy and how many will believe with conviction that each vote matters?

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