Americans Have No Idea About the True Wealth Inequality in this Country!

In my Comparative Politics class, we're discussing political economy these days and it's been an eye-opener for most, because what people think of reality, well, it isn't!

First, let's say that the purpose of civil society is to provide benefits to its members. In order for the political system to work for the benefit of the people--the common people, the majority of whom are in the middle class--it is best to pick a regime that has this foundation principle. In modern societies, this is a liberal-social democracy.

Liberal, because it safeguards and promotes individual rights and freedom. Social, because it provides a social safety net--services people need. Democracy, because it allows for popular participation and a government of-by-for the people.

A system needs legitimacy to be stable and for longevity. The modern state--a creation of the 18th-19th centuries--provided benefits but also a new narrative, myths, practices, and activities that turned people into citizens. Citizens who had obligations to the state but also benefits. Notions of patriotism and nationalism were forged out of this new reality. This has helped cohesion, elevated pride in one's country, and motivation.

If the system and the government are to work for the people, then we have to ask what, does this mean?  Well, I'm sure there are many views on this, but let me suggest a few items: happiness (yes, individually defined), good health, leisure, education, long life, less stress, stability, peace, clean environment, decent shelter, affluence, access to opportunity, economic mobility, justice, etc, etc.  This is the mission statement of a modern, advanced country. Obviously, this was not the mission of older systems, like the Old Regime.

In order to achieve the mission statement, societies/governments/rulers engaged in redistribution of resources and wealth.  Usually it was from the bottom up. This was not good unless you were a member of the elite. These members made all sorts of arguments (including might makes right) in favor of keeping their privileges. And, their appetite was insatiable. Louis the 14th needed more gold for his lavish palaces. Our modern super wealthy and their shills, most of the Republicans, have drawn the line that no tax increases, no matter how modest, should be applied to the upper classes.

 When Reality Escapes the American People

The Occupy Wall Street with its signs, "We're the 99%", brought needed attention to the upper 1% of the economic elites. Yet, the real magnitude of the problem is still unknown to the American people. The power of the myth, the cultural and political forces have managed to create a strong illusion. 

This illusion includes a good dose of patriotism and nationalism, but in a perverted way. "We're # one!"  Others are risking life and limb to get here. Look at the great things we've achieved, and still do. The American dream is alive! You can make it, like Bill Gates, Michael Jordan, and so many others. With hard work and a bit of luck anyone (most?) will make it ..big!  

It's hard to argue against the tendency to compare ourselves to societies far worse than ours. Somehow comparisons to other societies that have better outcomes aren't being made. Yes, there are several societies that have a better distribution of the economic pie, where people live longer, are healthier, more educated, have more leisure, live is safer environments, and report greater levels of happiness. Their political economies are, however, adjusted differently than the US.

As I speak with many students, I hear that they expect to be rich someday. Likewise, many ordinary Americans think they'll be rich one day, or at least part of the upper middle class. But, statistically speaking, this won't happen. 

Unfortunately, the reality isn't very rosy. The Economist, the Wall Street Journal--to name a couple pro-capitalist publications--have pointed out that economic mobility in the US has fallen behind western Europe! 

In a democracy where public opinion is important, where decisions are made based on people's perceptions, it matters greatly whether the public really knows the facts. 

For decades, studies have been consistent as to this public perception about economic reality in the US. People are asked what a fair society would be like. Then they're asked what they think the US is like in wealth distribution. Their guess is terrifyingly wrong!

Watch this video and forward it to everyone you know. 

 Wealth Inequality in the US

 

Who could have guessed it, that the top 1% control 40% of the wealth. That the bottom 80% of Americans have only 7% of the wealth, while the other top 19% own 53% of the wealth. Mind bungling.

The President's Cave in & Miscalculations. Is Leading From the Rear Obama's Style?

Update, Aug. 2nd: Jon Stewart: "You're not pinning this turd on us..."
 


The manufactured crisis of the debt ceiling theater is coming to a close, though the damage will last a long time. Even if the US averted default on its obligations, its credibility has taken a hit. Progressives think that Obama was diminished by this process, and his popularity is also decreasing. Even though the majority of Americans like him, and are more in favor of his proposals than those of the GOP, he's considered a weak leader. Remember, the country has shown that it prefers a strong, effective leader even if he's wrong, to a weak leader even if he's right on the issues! 

Maybe Obama is gambling on the possibility the Republicans will nominate someone worse to run against him next year. The economy won't be much better before the next election, because this president failed to take action and the GOP has done everything it could to damage it.


Read Paul Krugman's "The President Surrenders" editorial.

Here's something to remember: One of the biggest differences between progressives and the American conservatives is that progressives want an active government to mitigate social darwinism the Republicans are in favor of. 

Every time there's a failure of government, the conservatives win points! They seem to be winning the narrative on this one too. They come into government with an intent of making the government worse! They create deficits, slush social services, and remove consumer protections. They love gridlock, because this increases the public's cynicism of their government!  Sadly, the person with the bigger, loudest megaphone is not disputing this narrative!


I'm with Senator Bernie Sanders on the need to issue a serious primary challenge to Obama. Not the Nader type, or a foolish preacher, or some leftist fringe, but a good, sensible progressive like Feingold. I'm sure Obama will prevail but he will have to understand that there's an activist base out there and elections (especially close one) depend on getting the base excited and to the polls. Besides, we have to publicly discuss a few important issues and highlight the importance of good government, for the benefit of the people.

I argue that the narrative is extremely important in shaping our political discourse. Most Americans support progressive positions but it's the conservative narrative that often prevails. The more we spend time discussing the ridiculous [or, the artificial crisis of the debt ceiling] the more time, energy, and money we're wasting, instead of tackling serious problems.


There are going to be lots of polls following this manufactured crisis. As of now, the public blames the GOP more, but Obama's ratings are looking more and more Bush-like.

Here's a snapshot:
Q: If negotiations between President Obama and Congressional Republicans on the federal debt ceiling fail, and it leads to an economic crisis, would you place more blame on the President or on Congressional Republicans, or would you blame both equally?  
President Obama: 35
Congressional Republicans: 46
Both equally: 18
Not sure: 1


Here's a slew of numbers from DK/SEIU weekly poll.

This president hasn't learned yet that he can't trust this Republican party. When asked back in December--when he caved in regarding the Bush tax breaks to the super rich--why he didn't make the looming debt ceiling part of the deal, he said the Republicans would do the responsible thing when needed. Great call...t. Probably he forgot how the GOP negotiated on health care reform.... 

Islamic Banks: Have They Eliminated Interest, or Just Changed its Name?

"Those who charge usury are in the same position as those controlled by the devil's influence. This is because they claim that usury is the same as commerce. However, GOD permits commerce, and prohibits usury. Thus, whoever heeds this commandment from his Lord, and refrains from usury, he may keep his past earnings, and his judgment rests with GOD. As for those who persist in usury, they incur Hell, wherein they abide forever" [The Koran]

The rise of Islamic Banking over the past 40 years into an institutional financial structure spread over the globe has been a phenomenon that has attracted lots of interest. As is often the case whenever a new idea arises it s rise is associated with many falsehoods, half truths and unfulfilled promises. The whole concept of Islamic Banking rests on 4 Qoranic verses that speak against Ribaa (2275-81; 3:130-2; 4:161 and 30:39). Although the Arabic word Ribaa does not mean interest rate yet the four schools of Islamic jurisprudence have interpreted Ribaa to imply interest rates. In the opinions of many that interpretation could easily have been usury. In that case the idea of “Islamic Banking” would no longer appear to be inviolable.

The Islamic Development Bank, the largest Islamic Bank, is a breath of fresh air in the stultified field of economic development. How appropriate it is to give interest free loans to the developing nations instead of burdening them with huge debt service and strict conditionalities a la World Bank and the IMF. But this idea of interest free banking which rests strongly on the two sources of (1) Ijma, Consensus, and (2) Qiyas, analogy, becomes more problematic in other areas.

It should be clear from the above that the basis on which interest free banking rests does not sanctify the idea but in fact is an attempt to replace the interest rate income with a substitute that achieves the same objective as the banished instrument. This is nothing short of a process that seeks conformity with the letter of the prohibition against Ribaa but not its spirit. Since income that flows from trade and risk sharing is considered to be Hallal, lawful, Islamic Banks have adopted Profit Loss Sharing (PLS) as a replacement for the Lender-Borrower Haram, forbidden, relationship.

The Mudarabah and Musharakah, the most popular methods to avoid interest rate income are structured so as to yield the same income that traditional interest rates would have produced in traditional banks. Such a cumbersome structure makes Islamic Banks less competitive than traditional ones. It might be instructive in this regard to recall the words of the Islamic Pakistani economist Ahmad: “”No single Moslem country is running its financial institutions without resorting to interest… no one knows how to do it…they resort to some kind of subterfuge..change the name of interest and you have abolished interest”.

An even more scathing criticism is delivered by Dr Hasanuz Zaman who writes:
".. many techniques that the interest-free banks are practicing are not either in full conformity with the spirit of Shari’ah or practicable in the case of large banks or the entire banking system. Moreover, they have failed to do away with undesirable aspects of interest. Thus, they have retained what an Islamic bank should eliminate. "

The current Sharia prohibition on Ribaa renders consumption loans very difficult to structure and as a result the practice of financing trips and personal purchases under Islamic Banking rules becomes harder to structure and implement. Furthermore, a real challenge of Islamic Banking is the ability to develop effective tools that Central Banks can employ in transacting their monetary policies.

Equity and justice, the hallmarks of an Islamic society, do not have to be incompatible with a banking system that charges interest rates. All what is needed to make traditional banking acceptable to the Moslem believer is an act of Ijma, consensus, by Islamic fiqh whereby a distinction is made between usury and a regular interest rate. Once the Islamic Ulamah agree to equate Ribaa with usury then the often cited reason for the prohibition of Ribaa in the first place, ruinous borrowing and the need for Adl, justice, in protecting the weak and the poor would have been met.

Moslem societies do not have to invent financial instruments to perform the function of what is already being done but albeit under a different name. Islam can enrich us all by emphasizing the importance of ethics in the economic sphere but it does not need to reinvent the wheel in order to accomplish that.

Global Capital and Delocalization

“Ideological celebration of so-called globalization is in reality the swan song of our historical system.”

Immanuel Wallerstein

In Epilogue II of War and Peace, which often goes unread, Tolstoy berates modern Historians who “ought to be studying not the manifestations of power but the causes which create power” if they are to provide a “description of the flux of humanity and of peoples”. Alas they act “like a deaf man answering questions no one has put to him.” This serious methodological defect highlighted by Tolstoy over a hundred and fifty years ago is still often committed not only by historians but by many of their colleagues in the social sciences. The results of such flawed cognitive processes dominate the field of Economic Development, Environmental Studies and what passes for analysis in the ubiquitous phenomenon of Globalization to name just three areas.

One illustration of the shortcomings of such models can be seen clearly in the efforts of The Group of Industrialized Countries, G 8, to deal with the ever spiraling level of poverty and deprivation on the African continent. The G 8 decided in 2005 to stem this downward cycle by lending its strong approval to the UK’s “Commission for Africa” plan spearheaded by the then Chancellor of the Exchequer Gordon Brown and the support of the PM Tony Blair in addition to the rather lukewarm support of the US administration. Fundamentally, the plan was based around the idea that a write off of the debt of the countries in question is the prescription for leading these countries out of poverty and dependency. Unfortunately, this scheme of increased money grants has been tried before with dire results.

The level of sincerity of the G8 nations is not questioned; their ability to differentiate between “manifestations” and “causes” is. There is no doubt that if an individual/country/institution has a lighter burden of financial liabilities, then they would be better of temporarily. But if the initial conditions that resulted in the debt in the first place have not been removed, then do we have any right to expect a different outcome the next time around? Of course not. Since it is safe to assume that neither countries nor individuals within countries will freely choose to live under inhumane conditions of deprivation, misery and squalor, then such outcomes are imposed on the unlucky recipients by a set of rules that demand such outcomes. Outcomes do not just happen; they are dictated by the prevailing social, economic and political structure; by the mode of production. Outcomes change only if we make changes to the world system.

Environmental studies is another field that is replete with policy suggestions that commit the fallacy that Tolstoy warned against. Despite the clear conclusions of large scale scientific studies that global ecological resources are under severe stress the global community and the United Nations proceed to work on peripheral issues . We have chosen to address symptoms instead of causes when we know that any meaningful relief demands a fundamental change in the conduct of economic, social and political affairs. Anything short of a radical change in the architecture of the world system is a palliative measure that would be doomed to fail and to only aggravate the problem that it was intended to resolve.

Whether it is global warming, the ever shrinking rain forest, desertification, endangered ocean fisheries, urbanization , water scarcity, pollution or declining biodiversity, just to name a few of the major environmental issues, it is clear that all of these problems are generated as a result of the global community’s unrestrained obsession with material accumulation. Again the solution is clear and obvious but the global community chooses to concentrate on “manifestations” instead of the real “cause”, economic growth. But to renounce growth and advocate redistribution is an unrealistic expectation from within the confines of the current paradigm that is constructed on the unrealistic assumptions of infinite growth and an economy that is not subject to any form of ecological constraints.

Globalization is yet another area whose analysis lacks distinction between symptom and cause. Recommendations and policy suggestions emphasize the superficial aspects of the phenomenon in question, proceed to describe in great detail its outer appearances, then conclude that globalization’s demands must always be accommodated since the process of globalization is inevitable and even irreversible. No attempt is made to explain the cause of globalization, its ultimate goal or whether that end is worthwhile. Globalization, to this group, is the order of the day, it can never do any harm and it must be unquestionably accommodated. A slight variation of the above admits to the possibility of generating unpleasant outcomes from the globalization process but believes that the structure is amenable to adjustment. It believes that reform could produce globalization with a human face thus creating a win-win solution for all stakeholders. This level of analysis is equally unsatisfactory since it does not delve into a meaningful analysis of the reason globalization arose, what is its reason d’être and whether it is amenable to reform.

Conclusion

Globalization in its entire facets, political, social, cultural and economic, is ultimately the result of a unique project due to the nature of capital accumulation on a world scale and the need for capital to dominate and homogenize. As production and consumption become alienated from their local surroundings, then this pursuit of global commodification will result in delocalization, desocialization and deterritorialization. Globalization results in less diversity, less control and a loss of identity. None of these unhealthy effects of globalization can be eliminated if globalization is maintained.

Change, if it is to come, will only occur when the victims decide to take action in order to vanquish the world system that has produced an environmentally unhealthy ecosystem and a humanly unjust society.

Energy Consumption Story Told with Balloons

Editor's note: this post was provided by Ghassan Karam. Click on the picture to open it into a larger window and see the bigger picture...

The Politics of Tax & Spend and the Role of Government. Pay Your Taxes But Ask for Accountability too!

Ah, the tax-filing deadline is fast approaching. Have you done your taxes? You should file if you want to receive a "rebate" from our government, because this money (that we don't have but will borrow at great expense) will stimulate the slumping economy--or, that's the idea during this election year! Sure, why not. Our government wastes so much money anyway, what's a few hundred more billions of dollars? What most people don't get is that our political system is responsive to those who get access to it--the multitude who decide to organize and participate or those who buy influence through lobbying and personal connections.

As humans see the benefit of organizing themselves into a civil society--hopefully with a good social contract--the question arises of what the role of the government should be. I think it should be to protect and empower the commonwealth, that is, for the benefit of the greatest number of people possible. Yes, of course, I recognize the principle of protecting the minorities, however small they are, so you can not exploit the few for the benefit of the many either. This philosophical (and I maintain, practical) approach to the role of government is one of the important differences between the progressives and the conservatives today. But, in order for our government to do all the good things for us, it needs money, hence the ..dreadful taxes.

Have you noticed who has the strongest voice against taxes? Those who are better off. They usually get their way of tax breaks and lower taxation as a percentage and ability to pay. This week, NOW produced an excellent piece on the tax policies many states have embraced--policies that place most of the tax burden on those who can least afford it! See, for example, what NOW discovered in Alabama [click on the link to watch the NOW video] one of the most regressive states in the US, where a family of four with as low income as $12,600 has to pay taxes.

The connection to poverty & hunger is crystal clear. Next Friday, the farm bill expires and Congress is working on a new one. In light of our huge budget deficit, this farm bill is "the most lavish subsidies in American history" the Wall Street Journal has decried! The Senate Majority Leader Reid (D-NV) has acknowledged that the insurance companies and the commodities industry are the two most powerful groups that carry great influence with both parties in Congress. Most of the farm subsidies go to rich farmers, big corporations-- a practice which is both wasteful and unethical. This is one of the many cases where we have to stop and think, and ultimately call it as it is.

The smaller government advocated by conservatives means a big enough government to maintain a trough that feeds the few, but small enough that cannot regulate, inspect, and ensure a more fair distribution of the public wealth! This is the bottom line. Oh, OK, there's an exception regarding the size of the government: those conservatives that want the government to be strong enough to shove down our throats a particular religious morality they advocate.Why is there so much hunger in the US today? Why do we increase the farm subsidies to the rich farmers [there's a fight to limit payments to farmers making up to a $1 mil. instead of the present $2.5 ceiling] but we don't increase food stamps to poor Americans? Most rural poor that get food stamps have little food after the 3rd week of the month. We're talking about working people here, who simply do not make enough to feed their families.

There's a great hunger in rural America, 35 million of out citizens, but this is not even an issue discussed in the current presidential race! Bill Moyers has another excellent piece on the farm bill this week. Cash Cows and Cowboy Starter Kits from EXPOSÉ illustrates, some of the subsidies in the current iteration of the bill don't go to the stereotypical small American farmer — or even to farmers at all. See how the farm bill gives billions to people who don't farm, or "drought aid" to people who didn't suffer any drought conditions! Or, how people got money from the space shuttle explosion over Texas for a bogus "livestock compensation"!!!

Poverty exists in the US and it's bigger than we want to admit or pay attention to.There's another class, the missing class, of the near-poor. Katherine S. Newman has a great book on this subject. This video explains more about those Americans who are also forgotten, who live on the margins of the mainstream economy, and on the edge of economic disaster. We can cut hunger in the US by half in one year by eliminating the waste in just one area: farm subsidies. But, we need leadership and political commitment. Oh, yes, we also need a politically educated public, and that Americans start behaving as they are in the economic scale not as they'd like to be or "see" themselves in the undetermined future.

We should have a serious discussion on the role of the government and to dispel some misconceptions about the infallibility of capitalism. The free marketplace is a great but imperfect mechanism and like a good car needs to maintained and occasionally steered in the right direction. We have to examine ways make it work for the commonwealth and not to privatize the profit while we socialize the risk. There is no rational or moral argument to continue doing what we've been doing on many levels of public policy. We should start with our intense focus on being very militaristic and the costs associated with such a strategy, and move on to allocation of resources and benefits in our commonwealth.

Bears, Bulls, and other Animals in our Forest

It's Spring break, but I'm already planning my next week's classes! See what some free time does to me... (looking for trouble). It's fun, coming up with stories and exam questions..

Class exam: Analyze the concept: socializing the risk and privatizing the profit. Include examples. You should also reference the ideological framework as to the role of the state (gov) in a modern capitalist system. Does the marketplace need the government to operate, or does the latter function as an impediment to the former?

Now, the following is a story I just made up but will use in class to ease the students back into rigorous learning, and, of course, to ..indoctrinate them.

Once upon a time, there was a small club of friends who dined and played (golf, bridge, etc) together no matter what happened in the world. They were considered wise men by their peers, and had advised other people to be aggressive in their investments--normally with other people's money!

They all made millions in salaries & bonuses, because they deserved it--and because a small group of their peers agreed that those who move lots of money around have lots of stress. Money always shows how much a person is appreciated was the dictum.

There are certain story tellers who convinced the majority of the village people that welfare--often called, the social safety net--for the working & indigent classes is a very bad thing. They also said that the government is a necessary evil and that, for our sake, it should be so small as to be drowned in a bathtub... Private companies, usually after huge over runs of the original estimate, would provide the bathtub and the taxpayers would gladly buy it.

On the other hand, assisting the hard-working and money-making businesses (ie, corporate welfare) was is a good thing they told us. The preferred to be mum, retreating in the quiet of the backrooms as they made their deals. After all, who needs all those statistics, numbers (oh, the horrors of ..math), and the legaleze--all very boring. Who could argue against this: American companies are patriotic and would never deliver inferior products, waste taxpayers money, put any American in danger, and charge us higher prices through no-bid contracts. The free market would never allow that, would it?

Those who have more money, wealth and power got even more money & legal benefits since apparently they deserve it. They owed their success to their own efforts alone, something like pulling their own bootstraps. Of course, they needed bigger tax breaks too! They had more expenses you know!... End of this little story.

So to better understand all this, I brushed up on Adam Smith recently. I had to discuss his ideas in class too--Moral Sentiment, and Wealth of Nations. I understand that profit is the engine of capitalism. Smith said something about competition and how it's good for the marketplace, but measures had to be taken to prevent predatory markets and companies. Ah, well. I'm sure the modern capitalists and those in power know that.

I also read, Free Lunch by David Cay Johnston, and watched him on Bill Moyers Journal. [here's a clip on YouTube]. I suggest you check those short videos. Very informative. Anyway, I'm wondering why those who demonize the (our) governmnet often turn to it for help & salvation when they screw up?

Do you have an answer?