Today's Buggy Topic
Yesterday, August 24, 2008 --- at his impressive data-driven web-site --- Mark Perry, a libertarian economist at the University of Michigan, set out a series of charts that compared the inequality in medal-winning by countries with the distribution of income in the US. The two were fairly highly correlated in the percentages . . . the top Olympic-winning countries (as a percentage of all countries participating --- at the 5%. 10%, and 25% of the total) matching more or less with the top of income-earners in the US (as a percentage of all earners as the same levels). Click here for the Perry charts and comments, along with prof bug's two lengthy replies.
A Buggy Starting Point: Some Problems with the Perry Viewpoint
There are, of course, some problems with the Prof Perry's comparative analysis, illuminating as it turns out to be.
* For one thing, economies in the advanced industrial and post-industrial world have different degrees of inequality, with the English-speaking ones generally experiencing the most, and the Japan, small Scandinavian, German, Dutch, Belgian, and German-speaking countries the least. There are, of course, trade-offs here. There always are in economic, social,and political life . . . maybe, come to that, life in general. In this case, the trade-off has been slower economic growth over the last 20-25 years --- at any rate as a general thing. Still, some of these more egalitarian countries --- the small ones anyway --- have managed to reform their business sectors, reduce or alter their unemployment benefits, and increase their growth rates of GDP and productivity in the last four years or so.
* For another thing, the comparison Perry uses between Olympic-winning countries and American income-earners by percentage levels --- illuminating and provocative as they are --- misses a major difference: there are only three medals to be won in any Olympic contest, whereas the actual distribution of income across 150 million working Americans is a continuum running from the minimum wage (plus earned income-tax credits) annually to what Warren Buffett and Bill Gates and other multi-billionaires earn at the top. What follows?" The US economy performed admirably in the growth rates of GDP and productivity in the 25 years after WWII --- or for that matter between 1870 and 1914 despite the disruptive shift in those days from an agricultural to an industrial-financial economy --- and average real wages continued to rise in both periods at a fairly fast clip. Yet, since 1975, though the US economy has undergone another dislocating upheaval in its economic structures --- a radical shift from an industrial-urban society to a nimble, post-industrial knowledge-based economy highly suburbanized and globalized, with revolutionary new technologies the major driving force of this radical transformation --- low-skilled labor in the US has seen its wages fall about 15% since 1979, and average male wages have stagnated . . . a growth of 2.0% in the same period. And these wages are adjusted for inflation.
The Political Fall-out Consequences
These are what prof bug, a political scientist with a Ph.D. in economics as well, are mainly concerned with.
These fall-out spillovers from the stagnation in real wages, together with the growing insecurities in average households about health care costs, about energy and food prices --- roughly a quarter of average budgets --- and about jobs, have fed a new populist reaction in American life . . . a recurring culturo-political surge that has marked US history in three or four earlier waves, starting with the Jeffersonian-like protests among poor farmers in the 1790s (the whiskey rebellion) and during era of the Jackson presidency in 1828. As with later agrarian and eventually industrial populist protest movements, poor farmers rallied to reformers who appealed to their sense of being "cheated" and "manipulated" --- the two common populist slogans that echo off and on in American life --- by the dominant economic and political elites.
Jackson, above all, used his presidency to fight what he regarded as the dominant manipulating elites of the day.
In an up-to-date article in US News and World Report, Jackson's first administration (1829-1833) summarizes his struggles this way, likening them to what is happening in US politics today, especially in the Obama coalition of Democrats:
"From the start of his administration, Jackson fought what he considered a profligate and selfish American aristocracy and worked on behalf of western farmers and eastern laborers. He tried to weed out corruption and incompetence from the civil service. He dismissed many government workers and installed loyalists. A backer said Jackson found "nothing wrong in the rule that to the victors belong the spoils of the enemy." He vetoed the recharter of the Bank of the United States, saying it would have made "the rich richer and the potent more powerful." His extensive use of the veto, in fact, set the precedent of making the chief executive central to the legislative process. Until that time, presidents generally exercised their veto power only when a bill seemed unconstitutional. Jackson broadened the criteria for veto to include bills he disagreed with. Most Americans liked what they saw."
Back to Prof Bug and Prof Perry's Comparisons
The parallels between these and later populist upsurges in American life --- especially in the late 19th century and down to 1914, when agrarian unrest was fed by the radical restructuring of the US economy from an agricultural small-town economy to a giant urbanized industrial and financial economy; and later in the 1930s efforts by the CIO labor union to organize industrial workers --- and what is going on in the appeals of Obama and Hillary Clinton to large numbers of Americans, not just Democrats, are set out and analyzed by prof bug in response to Mark Perry's stimulating comparisons between Olympic metal winners and the winners of the American competitive economy.