Opinion

The Great Debate

from Lawrence Summers:

On inequality

Inequality has emerged as a major economic issue in the United States and beyond.

Sharp increases in the share of income going to the top 1 percent of earners, a rising share of income going to profits, stagnant real wages, and a rising gap between productivity growth and growth in median family income are all valid causes for concern. A generation ago, it could have been plausibly asserted that the economy’s overall growth rate was the dominant determinant of growth in middle-class incomes and progress in reducing poverty. This is no longer plausible. The United States may well be on the way to becoming a Downton Abbey economy.

So concern about inequality and its concomitants is warranted. Issues associated with an increasingly unequal distribution of economic rewards will likely be with us long after the cyclical conditions have normalized and budget deficits finally addressed.

Those who condemn President Barack Obama’s concern about inequality as “tearing down the wealthy” and un-American populism have, to put it politely, limited historical perspective. Consider a sampling of past presidential rhetoric.

President Franklin D. Roosevelt, talking about the financial industry in his first Inaugural Address in 1933, said “Practices of the unscrupulous money changers stand indicted in the court of public opinion …. They know only the rules of a generation of self-seekers. They have no vision and when there is no vision the people perish.”

Despite stimulus, middle class still struggles

Five years ago Monday, President Barack Obama signed the signature economic proposal of his presidency, saying that the passage of the $787 billion economic stimulus package heralded the “the beginning of the end” of the Great Recession.

The president told a Denver audience that he was “keeping the American Dream alive in our time.” But for millions of Americans, he made things worse.

It is now clear that bold White House predictions about stimulus jobs “saved and created” were just a prelude to later pledges about keeping your doctors and falling premiums.

Why Michael Sam’s future may be tougher than we think

University of Missouri defensive end Michael Sam stands to make history as the first openly gay athlete in the National Football League. The league, sports media, and armchair commentators are now scrambling to predict how the All American’s disclosure of his sexual orientation may affect his future team members.

Though the public response to Sam’s announcement has been overwhelmingly positive, social psychology and organizational behavior research suggest he may have a struggle ahead. His success or failure in the NFL will largely depend on the leadership of his prospective team.

Sam’s Mizzou family supported him as an openly gay player, and he had an odds-defying season. But he began his career with the Tigers as a closeted gay man. That distinction is key. Anti-gay attitudes decrease when individuals have close gay friends, University of California, Davis psychologist Gregory Herek has found. Compared to other stigmatized groups, gay men and women have the advantage of concealing their stigmatized identity in new relationships — coming out once they’ve established trust. Because Sam’s sexual orientation will be known before he ever signs to a team, this opportunity to “win hearts, then change minds” may be lost.

The deadly consequences of ‘Stand Your Ground’ laws

The trial of Michael Dunn in Florida has again raised questions about Florida’s “Stand Your Ground” law. Dunn, 47, is charged with fatally shooting Jordan Davis, an unarmed 17-year-old, in the parking lot of a Jacksonville convenience store, over loud music. Many questions swirl around whether Dunn was legally justified under current Florida law, as he insists he was, to fire into the car where Davis sat listening to music. As the jury deliberates, there will be many more discussions about how factors like race and the jury’s interpretation of Stand Your Ground determine the verdict.

This misses the bigger question, however, which is whether this lethal confrontation would have happened without the law. If Florida had not passed its law so that a person has no “duty to retreat” before using lethal force, how would Dunn have responded? Would he still have gotten his gun from his car and fired repeatedly into Davis’s vehicle? Would he have even had a gun with him?

These same questions can be asked of the other cases that have received so much media attention. Would George Zimmerman have followed Trayvon Martin, with a gun, and confronted the teenager if Florida law had not offered him these additional self-defense protections? Would Raul Rodriguez, convicted of murder and sentenced to 40 years for the murder of his Houston neighbor, have confronted his neighbor over loud music and killed him, if not for Texas’s similar law?

Servicing the underbanked

A new report from the United States Postal Service inspector general proposes that the agency offer non-bank financial services, including payday loans. Opinion pieces and blog posts praised this idea as a way for the post office to solve its fiscal woes while reaching a portion of Americans outside the traditional banking system. A Reuters “Great Debate” piece, “Transforming Post Offices into banks”), called the proposal a “win-win.”

These pieces overlook some practical problems, however, and leave numerous questions unanswered about implementation. While government and charitable-sponsored financial services should play a role in consumer lending, they cannot replace market-based solutions.

Notably, the USPS proposal underestimates the challenge of offering consumer financial services in an increasingly competitive marketplace regulated by complex federal and state laws. Without a sizable government subsidy, the report’s suggested interest rate for small-dollar loans would not even cover basic operating expenses.

from Jack Shafer:

The new Medicis funding journalism

 

Neil Barsky, a former Wall Street money manager, became the latest Medici of journalism this week when he hired Bill Keller, former executive editor of the New York Times, to head his new non-profit journalism enterprise, the Marshall Project.

The Marshall Project, which will scrutinize the criminal justice system, joins a busy flotilla of non-profit journalism organizations already patrolling the news beat. Everywhere you look, a rich patron has founded, funded or seeded a substantial non-profit journalism outfit in the last half-decade: Herbert Sandler and ProPublica, John Thornton and the Texas Tribune, Pete Peterson and Fiscal Times, the Koch brothers and the Franklin Center, John Arnold and WNET, scores of other local and regional operations funded by minor Medicis, and well-established enterprises, such as the Center for Investigative Reporting and the Center for Public Integrity.

If you expand the definition of non-profit journalism to include for-profit outlets that aren't making any but depend on a reservoir of money earned elsewhere to keep them afloat, you'd factor in Jeff Bezos and his Washington Post, John Henry and his Boston Globe, the Scott Trust and the Guardian, Pierre Omidyar and the $50 million he has pledged to First Look, and Hamad bin Khalifa Al Thani and Al-Jazeera. Widening the definition to include state-sponsored or licensed outlets such as the BBC and NPR, both of which walk the investigative beat, and the pool of cash grows larger still.

The middle class’s missing $1.6 trillion

The United States was the world’s first middle-class nation, which was a big factor in its rapid growth.  Mid-19th-century British travelers marveled at American workers’ “ductility of mind and the readiness…for a new thing” and admired how hard and willingly they labored. Abraham Lincoln attributed it the knowledge that “humblest man [had] an equal chance to get rich with everyone else.”

Most Americans still think of themselves as middle class.  But the marketing experts at the big consumer goods companies are giving their bosses the unsentimental advice that the middle class is an endangered species. Restaurants, appliance makers, grocery chains, hotels are learning that they either have to go completely up-scale, or focus on bargains for the struggling and budget-conscious.

Current income surveys, for statistical reasons, usually segment families by broad categories, which obscure the recent radical shift of income to a thin stratum of the super-rich. Well-to-do people may buy $100 coffee pots, but the lion’s share of the income growth has been going to folks with five houses and staff to make the coffee.

In the Netherlands, bankers turn to God — by law

 

Lloyd Blankfein, the chief executive officer of Goldman Sachs, once famously said he believed banks were doing “God’s work.” Now, the Netherlands is going one step further: starting later this year, all 90,000 Dutch bankers will have to swear an oath that they’ll do their “utmost to maintain and promote confidence in the financial-services industry. So help me God.”

It’s part of a major attempt by regulators and banks to clean up after the financial crash of 2008, and put behind them scandals that continue to blacken the financial service industry’s reputation. Just last October, the big Dutch cooperative bank Rabobank paid a $1 billion fine to settle charges in the Libor rate-fixing scandal.

Board members of the banks have already been required to swear the oath since last year, but now it’s being expanded to cover everyone who works in the sector. It consists of eight statements, including promises not to abuse knowledge and “to know my responsibility towards society.” There’s also a new banking code, a special declaration of moral and ethical conduct that all board members are required to sign, a “treat your customer fairly” initiative, and a “suitability” test for executive and non-executive directors of supervisory boards.

America’s long search for Mr. Right

What’s wrong with central casting? It’s a virtual truism: The United States always seems to pick the wrong guy to star as George Washington in some faraway civil war. We sell him weapons for self-defense against his despicable foes — and then, sometimes before the end of the first battle, we find we are committed to a bad actor who bears an uncanny resemblance to Genghis Khan.

President Barack Obama just approved the sale of 24 Apache helicopters to the Iraqi government of Prime Minister Nouri al-Maliki — despite well-founded concerns that Maliki may use them against people we do like as well as those we don’t.

Helicopters aren’t the only munitions on Maliki’s shopping list. Washington has negotiated the sale of 480 Hellfire air-to-ground missiles, along with reconnaissance drones and F-16 fighter jets.

Why the far-right fears change in Chattanooga

On Wednesday through Friday, 1500 autoworkers at Volkswagen’s plant in Chattanooga, Tennessee will vote on whether to join the United Auto Workers union in a landmark National Labor Relations Board election. Like other U.S. outposts of foreign auto companies, the facility, which opened in 2011, has never had a union.

A vote for unionization at Volkswagen would be a historic victory — not only for the UAW, but for the entire labor movement. It would provide unions with a key victory in the South, even in the face of a lavishly-funded external anti-union campaign, and may lead to transformative changes in labor-management relations, especially among European-owned firms.

If the Chattanooga workers vote to unionize, they will provide another example that when companies remain neutral in union elections, employees usually choose unions. Instead of pressuring the employees to vote against the UAW, Volkswagen management has let workers make the choice on their own. This is exactly what should happen in union elections, but rarely does. Volkswagen would probably have recognized the union on the basis of documented interest among workers, but Republican politicians and anti-union groups such as the National Right to Work Committee (NRTWC) demanded that the company hold an NLRB election. Ironically, the NRTWC has insisted that Volkswagen provide employees who oppose the UAW with an opportunity to make their case to the workforce, something that pro-union workers never enjoy during standard U.S. anti-union campaigns.

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