David L. Martin

in praise of science and technology

Archive for the month “April, 2017”

The Source of “Economic Freedom”

The conservative Heritage Foundation, one of the most influential “think tanks” in America, rates countries around the world on “economic freedom.”  It also provides figures on per capita GDP.  If we plot these against one another, we find that a country’s wealth is indeed correlated with the Heritage Foundation’s Economic Freedom Index:

economicfreedomindexversuspercapitagdp

The green and yellow dots are European countries.  The red dot is America.  The question is, what is it exactly about a country’s “economic freedom” that correlates positively with wealth?  Is it lower taxes?  Less regulation?  Freedom of trade?

To calculate the Economic Freedom Index, they look at 4 major categories of “economic freedom” – government size (including the tax burden), regulatory efficiency, open markets (including freedom of trade), and the rule of law.

The thing is, when conservatives pontificate about economic freedom, they invariably emphasize lower taxes, smaller government, and open markets.  The “rule of law”?  You mean – as in the GOVERNMENT?  No way.

So let’s look at different factors, using the Heritage Foundation’s own data, and see what actually produces the nice correlation above.

Let’s start with free trade.  The Heritage Foundation rates each country on free trade.  Do they put up trade barriers or not?  If we plot their free trade index by country against per capita GDP, we get this:

TRADEFREEDOMRATINGVERSUSPERCAPITAGDP

Yep, free trade is positively correlated with a country’s wealth.  The wealthiest countries tend to be those with the most open markets, although there are some poor countries that rate highly.  El Salvador, for example, with a per capita GDP of only $8303 per year, rates almost as highly as America, with a per capita GDP more than 6 times that.  Clearly, free trade alone won’t cut it.

How about the 2 factors most commonly cited by conservatives – low taxes and small government?  Well – here we have a problem.  If we plot the overall tax burden by country versus the per capita GDP, we get this:

OVERALLTAXBURDENVERSUSPERCAPITAGDP

Instead of a negative relationship between taxes and wealth, we see a strong indication of a positive relationship!  Wealthier countries tend to have higher taxes, not lower.  These are the Heritage Foundation’s OWN DATA.  How about the size of government?  More privatization leads to greater wealth, right?  So let’s plot government spending as a percentage of total output versus per capita GDP:

GOVERNMENTSPENDINGVERSUSPERCAPITAGDP

Crap.  Again we get indications of a positive relationship, not the negative one that we should have.  More government spending is supposed to HURT prosperity.  Instead, it seems to generally help.

The Heritage Foundation’s Economic Freedom Index counts higher taxes and bigger government as NEGATIVES.  But these very things, according to their own data, seem to have POSITIVE relationships to wealth.  So what’s left?

What’s left is the rule of law.  Does the government administer laws fairly, for the benefit of everyone?  Is the government transparent in its dealings?  Is the judiciary independent?  Or do government officials use their positions to line their own pockets, and those of their business associates?  If we plot the Heritage Foundation’s government integrity rating by country versus per capita GDP, we get this:

GOVERNMENTINTEGRITYRATINGVERSUSPERCAPITAGDP

This is the clearest correlation of all.  Poor countries tend to have corrupt governments, with officials who line their own pockets and those of their business buddies.  Transparent governments that respect the rule of law are found in wealthy countries.  Not a single country with a government integrity rating below 60 has a per capita GDP of more than $40,000 per year.  Not a single country with an integrity rating above 75 has a per capita GDP of less than $40,000 per year.

Notice that this graph looks a lot like the very first one – except the correlation is even stronger!  In other words, if they wanted to predict prosperity, the Heritage Foundation would do better to drop everything else used to calculate their “economic freedom index,’ and just use government integrity.  Most of their other “freedom” factors – like lower taxes and smaller government – actually have NEGATIVE effects on prosperity.

In fact, we can use a statistical technique called multiple regression to look at 4 factors and how they affect per capita GDP:  government integrity, overall tax burden, government spending (as a percentage of total output), and free trade – all using the Heritage Foundation’s own data.  When we do this, what we find is this:  Once government integrity is factored in, these others are insignificant.  The fact is, they are correlated with each other.  The size of government, for example, is positively correlated with government integrity:

GOVERNMENTSPENDINGVERSUSGOVERNMENTINTEGRITYRATING

In other words, if you consider the positive effect of a government’s integrity on the country’s wealth, you don’t need all of these other factors.  They’re all correlated with the most important factor:  government integrity.  Countries with bigger governments tend to have less corrupt governments.  Since less corruption tends to mean greater wealth, bigger government also tends to mean more wealth.  The same holds true for higher taxes:

OVERALLTAXBURDENVERSUSGOVERNMENTINTEGRITYRATING

Countries with higher taxes tend to have less government corruption – and more wealth.  It isn’t that higher taxes that are producing the wealth directly – it’s what the taxes are paying for.  Bigger, more transparent government with leaders who use their positions for the benefit of everyone, not just their business partners.  Greater fairness leads to a more vibrant middle class, which is the real source of a country’s wealth.

These relationships are why a country like Norway ranks only 25th on their Economic Freedom Index, yet has one of the highest per capita GDP’s in the world at $68,430 per year.  Norway’s government integrity rating is 88.3, one of the highest in the world, considerably higher than America’s 78.1.  To use the Heritage Foundation’s own words, “Well-established anticorruption measures reinforce a cultural emphasis on government integrity.”  Norway has big, transparent government, with universal health care, excellent retirement programs, and strong labor unions.  But conservative ideology insists that their “bloated” government and high taxes must be bad for business.

And here’s the thing.  11 countries are rated higher than America in government integrity by the Heritage Foundation.  9 of them are in Europe.  Since Europe only has 33 countries, this is about a quarter of ALL of the European countries.

Let me say that again.  A QUARTER OF ALL OF THE EUROPEAN COUNTRIES are given a higher government integrity rating than America by the CONSERVATIVE Heritage Foundation.  Here they are:

Denmark – 84.9

Finland – 90.0

Ireland – 78.3

Luxembourg – 78.3

Netherlands – 85.7

Norway – 88.3

Sweden – 87.4

Switzerland – 80.3

United Kingdom – 78.3

4 of these are Scandinavian countries – Denmark, Finland, Norway, and Sweden.  These countries are often condemned by conservatives as “socialist.”  In fact, they have what are called mixed economies – essentially capitalist, but with strong regulatory oversight and many government-provided public goods.  They are also often referred to as social democracies – again, countries that are essentially capitalist, but have strong economic and social interventions to promote social justice.

Such societies now dominate north Europe.  Labor unions are very strong, so strong that in many cases no laws are necessary to achieve economic justice.  In Denmark, Finland, Norway, and Sweden for example (as well as Iceland), there is no official minimum wage.  They don’t need one.  Powerful labor unions keep worker wages high.

These countries are despised by conservatives.  The people of Norway are consistently rated as the happiest people on earth.  But for conservatives, that just won’t cut it.  Having good wages, excellent retirement, plenty of leisure time, universal health care, and being just plain happy – well, that’s awful.  It’s bad for business.  It must be.

My ideology says so.

The Unqualified American Disaster that was Ronald Reagan

Ronald Reagan is often rated as a successful president by historians.  But unlike George Washington and Abraham Lincoln, his performance is also the subject of controversy.  Let me quote the Wikipedia article on Reagan:  “Since Reagan left office in 1989, substantial debate has occurred among scholars, historians, and the general public surrounding his legacy.”  Howard Kurtz, who now hosts Fox’s Media Buzz program, has said that Reagan was “a far more controversial figure in his time than the largely gushing obits on television would suggest.”

In 10 major polls of presidential rankings taken since 1995, George Washington has never been ranked below 4th place.  Abraham Lincoln has never ranked below 3rd place.  And Franklin Roosevelt has never been ranked below 3rd place.  Ronald Reagan, by contrast, has been ranked as high as 6th and as low as 25th, in the bottom half.  (There have only been 45 presidents.)  This reflects the controversial legacy of his presidency.

What is interesting is that HISTORIANS tend to rank Reagan much lower than the general public.  In a C-SPAN poll of 1145 viewers, Reagan was ranked 6th among presidents.  In an ABC News poll of 1012 Americans, Reagan was ranked 4th, and in a Washington College poll of 800 adults in 2005, he was ranked 2nd.  Yet in a Sienna College poll of 238 presidential SCHOLARS in 2010, he was ranked 18th.  In the same poll he was ranked 34th in intelligence and 26th in integrity.  Abraham Lincoln?  3rd overall, 3rd in intelligence, and 1st in integrity.

The Sienna College poll has been taken 4 times since 1990.  It has never ranked Reagan above 16th.  It has never ranked Franklin Roosevelt BELOW 5th, or Abraham Lincoln below 3rd.  Why is Reagan ranked so highly by the general public, but middle of the road by presidential scholars?  I submit that it is because the media has constructed a narrative about Reagan for those who only concern themselves with superficials, while historians by definition have dug deeper.

The media narrative is this:  The economy was in the doldrums in the late 1970’s.  Unemployment was out of control.  Government spending was out of control.  High taxes were killing economic growth.  The Soviet military was far superior to America’s.  Reagan turned the country around.  He brought an economic boom and put people back to work.  He slashed government spending.  And he saved the military from being decimated.  He won the Cold War.

Well, let’s start with unemployment.  Here are the unemployment rates in America over the course of the 20th century:

unemploymentratehistorical

As you can see, there were a lot of ups and downs after 1950.  Unemployment did jump up in 1975.  Jimmy Carter took office in January of 1977.  For 4 years, the unemployment rate dropped.  Then Reagan took over in 1981.  That year, the unemployment rate jumped to a higher level than it had been since the 1940’s.  But by 1984 it was dropping again.  The last year of Reagan’s presidency, 1990, it was at 5.5%, about the same as it was the year before he took office (5.7%).  The average unemployment rate in the Carter years?  6.5%.  The average unemployment rate in the Reagan years?  7.5%.  So much for “putting people back to work.”

How about economic growth?  Surely he worked wonders there.  Okay, let’s look at the per capita GDP growth rate over the second half of the 20th century:

gdpgrowthhistorical

As you can see, there’s a lot of year-to-year fluctuation.  During the 4 Carter years, the growth rate averages out to 3.23%.  And during the 8 Reagan years?  3.61%.  A little better, but hardly a boom.  The 8 Clinton years were considerably better – 3.81%.  But I don’t hear people talking about how Clinton “turned the country around.”

How about government spending?  And the federal deficit?  Well, some people seem to have amnesia about that.  Certainly Reagan cut a lot of federal programs.  But overall, federal spending increased dramatically under Reagan:

federalspendingversusrevenuehistorical

This was overwhelmingly due to his dramatic increase in military spending:

militaryspendinghistorical

As a result, the federal deficit exploded during the Reagan years:

federaldeficithistorical

During the Clinton years, federal spending dropped dramatically, due largely to cuts in the military.  By the late Clinton years there was actually a budget surplus.  So much for the myth that Reagan cut government spending.

One thing is true about Reagan and the economy.  The rate of inflation dropped sharply, under Reagan, from double-digit values in the late 1970’s, to less than 6%.  But this had nothing to do with tax cuts, government spending, or economic growth.  It was a simple consequence of monetary policy.  In the years prior to 1981, the money supply was allowed to grow.  As it did, interest rates generally rose.  In 1965, the Federal Reserve interest rate was less than 4%.  By the late 1970’s it had climbed to 15% and was rising rapidly:

federalfundsratehistorical

This caused the inflation rate to also increase dramatically.  That’s not rocket science.  Inflation occurs when the money supply exceeds production.  By the late 1970’s, inflation was following the same pattern as the Federal Reserve interest rate, shooting up into double digits:

inflationratehistorical

So Reagan did something very simple and effective.  He restricted the money supply.  Interest rates dropped sharply.  Inflation dropped sharply.  That’s all.

If it’s so simple and effective, why didn’t presidents do it before?  Because when the economy was doing well, presidents didn’t worry too much about inflation.  Inflation had been increasing all through the boom years of the 1960’s.  It didn’t affect economic growth.  Economic growth in the 1960’s makes the Reagan years look like a recession.  Reagan deserves credit for reducing inflation.  But he didn’t do it by cutting taxes or reducing spending.  He simply restricted the money supply.

Well, what about the military?  Isn’t it true that the Soviet Union was outspending America before Reagan?  Yep.  There was a period in the 1970’s when the Soviets did outspend America militarily:

defensespendinghistorical
But this overlooks something very critical.  America was not alone in countering any Soviet threat.  In fact, concern about the Soviet threat was much more focused on Europe than the United States.  America is part of NATO.  The relevant question is, was the Soviet Union outspending NATO before Reagan?  The answer is no:

defensespendingnatohistorical

Reagan instituted a Cold War military build-up when NATO was already outspending the Soviets.  In virtually every way, NATO had superiority.  The Soviets were rapidly building up their nuclear arsenal, as you can see here:

nuclearwarheadshistorical

But the actual number of nuclear warheads is quite irrelevant to security.  More warheads just make the rubble bounce some more, and as you can see, Reagan didn’t add more warheads.

What about one of the most popular statements concerning Reagan – that he won the Cold War?  He supposedly outspent the Soviets, leading to the collapse of their economy and the collapse of the Soviet Union.  This is perhaps the most pernicious and most ridiculous of the claims about Reagan.  The Soviet economy did not collapse.  The end of the Cold War was overwhelmingly the result of the policies of Mikhail Gorbachev.

When Gorbachev became General Secretary in 1985, the Soviet economy was stagnating.  He instituted economic reforms.  He increased privatization and encouraged foreign investment.  He directed resources away from the military into productive industries.  These reform efforts did not lead to an economic boom in the Soviet Union.  But neither did they lead to economic collapse.  And the point is, it was Gorbachev who instituted these reforms on his own initiative, not because of anything Reagan did.

The clearest evidence that Reagan had nothing to do with Gorbachev’s policies is the fact that he rejected an offer from Gorbachev in 1986 to reduce medium-range nuclear missiles.  Nuclear weapons represent a small fraction of the military budget.  Gorbachev wasn’t trying to reduce them for his economy’s sake.  He was the first Soviet leader to understand that reducing fear in your adversary ENHANCES your security.  But Reagan dragged his feet.  Gorbachev was doing everything American conservatives wanted to see – moving away from a centralized economy, moving away from militarization, increasing personal and press freedoms – yet Reagan did nothing to encourage these things.  Gorbachev wanted to eliminate nuclear weapons altogether.  It was not to be.

The Soviet economy never collapsed.  The Soviet Union did, as Gorbachev’s refusal to support dictators with Soviet military power led to unhindered revolutions within the Soviet Union.  He also allowed the reunification of Germany.  The Berlin wall came down.  The Soviet Union collapsed.  Russia did not.

Ironically, the economic reforms instituted by Gorbachev did not revive the Russian economy.  It was Vladimir Putin who stabilized and revived the Russian economy, and therein lies the greatest irony.  Putin has also degraded Gorbachev’s democratic reforms and moved back toward militarization.  The notion that Reagan collapsed the Russian economy by forcing Russia to overspend militarily is backwards.  Russia has done better economically under Putin than it did in the 1990’s.

Meanwhile, the nuclear threat is just as real as it was 30 years ago.  Recently, The Bulletin of the Atomic Scientists moved its doomsday clock to 2.5 minutes before midnight, the closest it has been since 1953.  The Cold War may be over, but the threat is still with us.  Gorbachev wanted to eliminate nuclear weapons.  Reagan dropped that ball.

These are the basic policy disasters that Reagan dealt the country.  They are part of a larger problem – the problem of modern conservative dogma, which has been relentlessly promoted by well-funded, well-organized political machines for 40 years.  For much of the 20th century, America thrived under Roosevelt’s New Deal.  Labor unions were strong, at least in the industrialized North.  Taxes on the wealthy were used to invest in infrastructure and education.  At the same time, there was an optimism about the future.  Technology was unquestionably improving people’s lives.  There was a feeling that science and technology were replacing superstition and prejudice.  The “space age” forced many people out of parochial ways of thinking.  Idealism was strong.

But high-profile assassinations, followed by Watergate, led to a wave of cynicism in the 1970’s.  Along came Reagan.  On the economic side, he virtually destroyed the power of organized labor and slashed taxes on the wealthy.  This has given us the income inequality, decaying infrastructure, and struggling education system we have today.  The middle class is increasingly squeezed.  While wealthy European countries enjoy the benefits of strong labor unions, universal health care, and large numbers of workers in the public sector, America has moved toward ever-increasing privatization and the starvation of government at every level.  Even prisons are now privatized, something that would have been unthinkable a century ago.

Meanwhile, Reagan eroded the wall of separation between church and state that had been a cornerstone of American democracy from the beginning.  Shocking almost everyone by praying at the Republican convention, he welcomed not just religion, but religious fundamentalism into the public space.  Ideas that had been discredited for decades by mainline Christianity, such as young-earth creationism, began to gain popularity.  To this day religious fundamentalists wage war against science and history in classrooms, and Reaganites do their best to see that public dollars are funneled to religious schools so that the next generation can be indoctrinated into religious fundamentalism and the worship of the almighty free market.

bachelorsdegreeshistorical

But perhaps the most damaging thing Reagan did, at a time when the country had slipped into cynicism, was to reinforce that cynicism – to tell large numbers of young people that the best thing they could do for their country was to pursue their individual selfish interests.  Countless young Americans, especially young males, decided not to pursue careers in fields like science and engineering, in favor of those in business and law.  And as financial aid for college dried up, many young men didn’t bother to go at all.  From 1962 to 1975, the percentage of young American men receiving Bachelor’s degrees surged from 16% to more than 27%.  But during the Reagan years it actually dropped to a low of 23%.  Only recently has it begun to climb again, but American men still lag behind women in educational attainment.

incomebypercentilehistorical

Meanwhile, enormous numbers of good-paying jobs, particularly those that do not require college, were being lost to automation.  Good-paying manufacturing jobs were replaced by poorly-paying service jobs.  This combined with Reagan’s trickle-down economics began to divert more wealth away from working people to wealthy owners.  It was the beginning of a trend that has continued to this day, thanks to the gutting of labor unions and a highly regressive tax system.  In America today, the top 1% of income earners pay an average of 5.4% of their income as tax.  By contrast, the middle 20% pay 9.4%, and the poorest 20% pay 10.9%.

taxburdenbypercentile

Trickle-down economics was discredited long ago, yet continues to dominate our economic policy because of “Reagan worship.”  The typical worker at a McDonald’s in Demark makes the equivalent of $20 per hour, gets 5 weeks paid vacation, maternity or paternity leave, and overtime pay for working on Sundays.  And Denmark, like other Scandinavian countries, provides its people with universal health care and excellent retirement benefits.

Meanwhile, in America, more than 150 BILLION DOLLARS of taxpayer money goes to provide public assistance to WORKING PEOPLE, because they do not make enough to live on.  More than HALF of all fast food workers are on public assistance.  48% of home health care workers are on public assistance.  46% of child care workers.  Nearly THREE QUARTERS of all of the people in America who benefit from public assistance are in families with a WORKING BREADWINNER.  This is Reagan’s legacy – the legacy of trickle-down economics, still being vigorously promoted by his worshippers at every level of government.

I have lived most of my life, the last 37 years, in the shadow of Reaganism.  It appears likely that widespread Reagan worship is now coming to an end.  The Republican party is now 90% white, and year by year has lost membership, to the point that now only 23% of the American electorate is Republican.  Young Americans simply aren’t voting Republican any more.  In the presidential election of 1984, a whopping 60% of voters under the age of 30 voted Republican.  2016, only 37% of these voters voted Republican, compared to 55% who voted Democratic.  Much of this pattern is related to ethnicity – 75 PERCENT of non-whites under the age of 25 voted Democratic in the 2016 election.

America is becoming increasingly non-white.  Today, in 2017, the majority of American children under the age of 5 are non-white.  By 2020, less than 3 years from now, a majority of Americans under the age of 18 will be non-white.  This means that by 2030 (probably sooner), a majority of Americans under the age of 28 will be non-white.  All of these people will have been born in the 21st century, at least 20 years after Reagan was president.  Reaganomics persists in the halls of power because of the tremendous electoral advantage of rural America, along with creative gerrymandering by state legislatures.  But its days are numbered.

Trickle-down Ideology and Economic Reality

Once again we are being treated to promises of strong economic growth, thanks to – you guessed it – tax reduction.  Trickle-down is alive and well in the halls of Washington.  There’s just one little problem.  It has never worked.

The conservative Heritage Foundation compiles economic data on countries around the world, in order to calculate an Economic Freedom Index for each country.  Taxes?  You bet they look at taxes.  Income tax for example.  Now, conservative economic dogma tells us that tax reduction leads to prosperity.  So let’s start with something simple – the maximum individual income tax.  Their data, not mine.  And let’s look at THEIR measure of prosperity:  per capita GDP.  Here goes:

MAXINCOMETAXRATEVERSUSPERCAPITGDP

Whoops!  There’s supposed to be a negative relationship here.  Lower income taxes are supposed to produce more prosperity.  In fact, some countries with very high maximum tax rates are among the most prosperous.  What’s going on here?

Well, first of all, income tax is only one tax.  There are sales taxes, property taxes, and so on.  In fact, if we look at maximum income tax rates by country versus their overall tax burdens, there’s little or no relationship:

MAXINCOMETAXRATEVERSUSOVERALLTAXBURDEN

In other words, if a country doesn’t tax your income directly, it tends to find some other way to tax you.  This is a very common governmental “tax scam.”  “We have low income taxes! Isn’t that great?”  But they just end up collecting the money some other way – sales taxes, property taxes, and so on.

Okay, so let’s look at the overall tax burden by country.  Again, these are the Heritage Foundation’s figures, not mine.  Now, for sure, there MUST be a negative relationship between the tax burden and economic prosperity.  Right?

OVERALLTAXBURDENVERSUSPERCAPITAGDP

Well, crap.  We still don’t get a negative relationship.  In fact, there is a strong suggestion of a POSITIVE relationship.  Countries with higher overall tax burdens tend to be the wealthiest!  Again, these data are from the CONSERVATIVE Heritage Foundation.  In fact, they rank countries on tax rates, overall tax burden, and the percentage of output that goes into government spending.  All of these are counted as negatives by them – factors which, as they increase, supposedly make a country “less free,” and less prosperous.

Conservative dogma tells us that overbloated government is an impediment to prosperity.  So let’s look at their figures on government spending as a percentage of output:

GOVERNMENTSPENDINGVERSUSPERCAPITAGDP

Although there are a few outliers, the overall relationship here is even stronger – more prosperous countries tend to have MORE government spending, not less.  Not a single country in which government spending is less than 30% of output has a per capita GDP of more than $25,000 per year.  By contrast, Norway, in which government spending is about 45% of output, has a per capita GDP of about $68,000 per year.  Luxembourg, in which government spending is about 42% of output, has a per capita GDP of about $99,000!

Of course, per capita GDP is only one measure of prosperity.  But I use it because it is a popular measure among CONSERVATIVES – the production per person.  A better gauge of well-being is the Human Development Index.  It takes into account not only income levels, but education and life expectancy as well.  Better still is the Inequality-adjusted Human Development Index.  A few people who are doing very well can pull the per capita GDP figure way up.  But the IHDI is a much better gauge of how a typical person in the country is doing.

So let’s look at maximum income tax rates versus the IHDI by country:

MAXINCOMETAXRATEVERSUSIHDI

The green and yellow dots are European countries.  The red dot is America. Overall, there’s not much of a relationship.  But notice something curious.  As maximum income tax rates increase, the countries split.  Among countries with a rate of 40% or more, some rank very highly on the IHDI.  Virtually all of these are European countries.  Other countries rank very poorly.

Remember what I said before about income tax rates versus OVERALL taxation?  High income taxes do not necessarily mean high taxes overall.  So let’s look at the overall tax burden by country in relation to the IHDI:

OVERALLTAXBURDENVERSUSIHDI

Now the split we saw before has largely disappeared.  Instead we see a clear positive relationship between the overall tax burden by country and the IHDI.  Higher taxes do not translate into lower individual well-being.  Just the opposite tends to be true.  And “bloated” government?

GOVERNMENTSPENDINGVERSUSIHDI

Again, there is a clear positive relationship between government spending and the well-being of a typical person.  The differences between countries are striking.  In Austria, government spending is a whopping 52% of output.  Austria’s rating on the IHDI?  0.816.  In Bangladesh, government spending is only 14% of output.  Bangladesh has a rating of only 0.403.

Notice that there are a few outliers.  High government spending is no guarantee of prosperity.  In the little East African country of Lesotho, government spending is 60% of output.  Nevertheless the country remains poor, government corruption is rampant, and much of the population lacks access to banking services.  Even worse is the little island nation of Kiribati.  A whopping 95% of output consists of government spending.  Again, government corruption is rampant and most people do not even have access to banks.  The country is poor and will remain poor until the rule of law is instituted.

The rule of law.  This is in fact one of the most important factors that goes into the Heritage Foundation’s Economic Freedom Index.  The rule of law, not low taxes or limited government, is what predicts a country’s prosperity.  They rate every country on “government integrity.”  Are government institutions strong, or is there widespread corruption?  Are laws applied consistently and fairly, or does the government play favorites?

Government integrity correlates HIGHLY with per capita GDP:

GOVERNMENTINTEGRITYRATINGVERSUSPERCAPITAGDP

It correlates even more highly with the IHDI:

GOVERNMENTINTEGRITYRATINGVERSUSIHDI

Countries with strong, transparent governments, governments that administer the laws fairly, without favoritism, tend to be prosperous.  Countries with corrupt governments, with officials that use their positions to help themselves and their business associates, tend to be poor.  The country with the Heritage Foundation’s highest government integrity rating (90) is Finland.  In Finland, government spending is a whopping 58% of output.  The government is strong and highly transparent.  America gets a government integrity rating of only 78.1, below 10 other countries and below 4 of the 5 Scandinavian countries.

The other conservative nonsense?  High taxes, “bloated government”?  It’s just that – nonsense.  Countries with higher overall taxes tend to be MORE prosperous.  Countries with “bloated” government tend to be MORE prosperous, not less.  Countries with strong governments that are relatively free of corruption tend to be more prosperous.  The Scandinavian countries, with their mixed economies of capitalism with a heavy dose of socialism, are consistently rated highly, and BY THEIR OWN MEASURE OF PROSPERITY, they are considered prosperous by the conservative Heritage Foundation.

The Origins of the American Middle Class

Not too many generations ago, most Americans were poor.  Most rural Americans lived on farms and had to constantly struggle to survive.  It was little better for working people in cities, many of whom were children.  They worked long hours, often under unhealthy or dangerous conditions, for slave wages.  There was no such thing as “retirement” for most people.  Many children died before reaching the age of 5.

I am not referring to pre-industrial America, in which many people were indeed poor and lived on farms (and millions were literally slaves).  I’m referring to what Mark Twain called “the Gilded Age” of the late 19th century, a time when the industrial revolution arrived with a vengeance in America.  Railroads blanketed the landscape.  Industrialists like Andrew Carnegie and John Rockefeller virtually had a free hand to build their fortunes.  Business monopolies were everywhere.  Child labor was widespread.  Many states did not have compulsory education.

Mark Twain called it “the Gilded Age,” in reference to the fact that its fabulous wealth and shining cities were like a superficial layer of gold, laid over a mountain of human misery.  Many industrial workers were recent immigrants, who were not only taken advantage of by their employers, but subjected to discrimination and racial hatred by many of their fellow workers.  American industry had the highest accident rate in the world – in 1889 alone, 20,000 American railroad workers were injured, and 1,972 killed on the job.

companytown

Many American workers lived in company towns, whole communities monopolized by single companies.  The land, the houses, the stores – everything – was owned by the company, the only employer by definition.  You paid rent to and bought supplies from the very company you worked for.  Many companies didn’t even bother to pay their employees real money, but merely a company script that could only be used at their stores.  It was common for workers to be in debt, permanently, to their employers.  Such as system is called debt bondage.  In essence, it is no different than slavery – instead of simply paying its slaves nothing and providing them with housing and food, the company does not provide housing and food but pays the workers just enough to keep them in permanent debt.

It wasn’t long before all of this unbridled exploitation and misery led to a political movement to do something about it.  The Progressive Era was born.  Progressive activists, by and large, were not opposed to industrialization.  They embraced modernism, including science and technology.  But they were determined to deal with the waste, corruption, and exploitation that had come about in the Gilded Age.  The energy behind the Progressive Era came from a coalition of academics, ministers, journalists, labor activists, and lots of ordinary folks.  There was tremendous energy behind the idea of progress – a belief in science, technology, and social progress.

One of the often-forgotten elements of this was the so-called “country life movement,” which sought to improve the lives of rural people specifically.  This movement particularly targeted the South and the Appalachia, where many rural people were living in what today we would call third world conditions.  No electricity, no indoor plumbing, no running water, no clean drinking water period.  Roads in rural areas were little more than cattle trails, impassable in all but the best weather.  Up to this point, road construction was largely up to private landowners.  Progressives demanded and got government action.  The modern road system began to spring to life.

Rural schools in the late 19th century were often one-room buildings, and many children didn’t go to school.  In most cases teachers were not even professional educators and were not certified.  The revamping of education in the Progressive Era was without a doubt one of the most sweeping and significant forces responsible for the blossoming of the American middle class.  In  1880, only 16 states had compulsory education laws.  By 1910, all but 7 states (all of them in the South) had them.

It was also at this time that modern scientific methods were introduced in agriculture, dramatically increasing farm production and efficiency.  Extension services sprung into being.  The destructive and unsustainable logging of forests gave way to modern forestry.  Similarly, unsustainable hunting and fishing was replaced with bag and catch limits.  The conservation movement replaced uncontrolled resource degradation with the sustainable harvest and maintenance of renewable resources.

Perhaps most significant of all was the rise of the labor movement.  This rise was accompanied by fierce resistance from industry.  There were many violent episodes, often involving strike-breaking police.  Yet the labor movement moved forward, year by year, decade by decade.  By the mid 20th century it was a powerful force in American politics.  By 1945, 1 out of every 4 American workers was a member of a union.  Unions eliminated child labor, created the 40-hour work week, and greatly reduced the dangers faced by working people.  It hardly needs to be said that they instituted decent wages and benefits.

1920 is often used as the cutoff point for the Progressive Era.  There was a tremendous backlash in the 1920’s against organized labor, which was seen by white racists as an alliance of Jews and American blacks.  After dropping steadily, income inequality suddenly spiked in the 1920’s, reaching its peak in 1928.

Then came the Great Depression, and in 1932, Franklin Roosevelt became president.  Roosevelt’s New Deal took progressivism to a new level.  For the first time, bank deposits were insured by the federal government.  For the first time, the federal government provided for people’s retirement.  For the first time, Wall Street was extensively regulated by the federal government.

incomeinequality

Roosevelt put the country back to work, not in the private sector, but in public projects.  Much of America’s road and bridge system was built during this time.  Parks, schools, hospitals, dams were built.  But more than that, the New Deal Coalition, as it was called, dominated American politics from 1932 to 1980.  It included intellectuals, farmers, labor unions, minorities, and even southern whites (who by historical accident were overwhelmingly Democratic).  It gave tremendous power to organized labor and provided educational opportunities for millions.  The result was a thriving middle class.  Income inequality plummeted.  In 1928, the top 1% of income earners took in 20% of all the country’s income.  Within only 20 years that figure was down to 11%, and by 1978 it was down to 8%.

There was one other thing Roosevelt did that was very important.  Historically, federal taxes on the wealthy had been almost inconsequential.  In the late 1920’s, the HIGHEST federal income tax rate was only 23%.  In 1932, Roosevelt increased it to 63%!  By 1944, it had gone up to 94%, and stayed above 90% until the early 1960’s.  Instead of putting the tax burden on working Americans, he put it squarely on the wealthy.

suburbia

The result was a huge surge in consumer expenditures by the now-energized middle class.  Millions of Americans could now afford cars, washing machines, refrigerators, and televisions.  For the first time, large numbers of people took to the road and actually got a look at their own sprawling country.  Our whole notion of middle class life comes out of this period – the suburban family, living in a HOUSE, not a shack or a trailer, enjoying modern appliances and annual vacations, epitomized in such television shows as Leave It to Beaver and Father Knows Best.

Economists even have a term for this period of low inequality and a strong middle class – the Great Compression.  The thing is, the Great Compression occurred not just in America, but pretty much throughout the first world.  Countries like France and the United Kingdom showed plummeting inequality from the 1920’s to the 1970’s, just like America.

The difference is that most of Europe never embraced trickle-down economics.  Thanks to Reagan, the highest federal income tax rate in America is now only 40%.  In France it is 45%.  In Denmark?  56%.  In Denmark, rated as one of the most worker-friendly countries on earth, income inequality has barely budged in 40 years, while in America it has skyrocketed.

When a country has a vibrant middle class, its economy is strong.  In a previous post, I discussed the fact that poor countries tend to have high income inequality, the opposite of what trickle-down economics would predict.  The American middle class was created by progressives who demanded, and got, better education, better pay, better benefits, and better conditions for working people.  Some writers have called the last 40 years of trickle-down economics in America the new Gilded Age, a time when a few people have become incredibly wealthy at the expense of many.  How much longer will it last?  Not much I suspect.

The (Fallen) Prophet of “What Everybody Knows”

As the television “news” world bids goodbye to Bill O’Reilly, it is worth noting something very O’Reilly-ish and very Fox News-ish.  Many people have forgotten that Bill O’Reilly and Fox News have been bosom buddies from the beginning.  Although the Fox NETWORK came into existence in 1985, the Fox News Channel did not exist until 1996.  That same year, Bill O’Reilly was hired by Roger Ailes to host The O’Reilly Factor.

From the beginning, the Fox News Channel tried to portray itself as unbiased.  “We report, you decide” was their motto.  They were “fair and balanced.”  It would seem that no one was buying it then, and never would.  In 2009, Pew conducted a survey of Americans, asking them their opinions about various news outlets.  47% reported that Fox News was “mostly conservative,” compared to only 38% who said that it was “mostly liberal” or “neither mostly liberal nor mostly conservative.”  Even 48% of Fox viewers reported that the network was “mostly conservative.”

And Bill O’Reilly?  For years, he referred to his show as the “no spin zone.”  Justin Peters recently authored an article on Slate, a kind of O’Reilly Factor eulogy, in which he rightly pointed out that a show like The O’Reilly Factor “is constructed by producers who choose the guests and the topics; by writers who polish the monologues; by technical directors who control the camera angles and shot selection; by a host who knows how to maintain a huge audience by flattering their resentments and beliefs.”  It is virtually the definition of spin, promoted as unbiased “common sense.”

And this is a common pattern among conservatives – to promote ideology as if it’s a kind of default position, the only position that reasonable people could possibly agree to.  For decades, long before the Fox News Channel came into being, conservatives complained about “liberal bias” in the media.  Much of this consisted of attacks on the media’s tendency to consider different points of view, rather than simply reporting what “everyone knows.”  Bill O’Reilly was the foremost promoter of what “everyone knows.”  What does everyone know?  Everyone knows “common sense.”

It is “common sense” that America is a Christian nation.  Unless, of course, you happen to be Jewish, Muslim, Hindu, Buddhist, or any number of others.  It is “common sense” that tax reduction leads to greater economic growth.  Unless, of course, you actually know something about history.  It is “common sense” that abstinence-only education leads to lower pregnancy rates.  Unless, of course, you look at actual statistics on the subject.

Our current president is the logical outcome of this kind of thinking.  We don’t need facts and figures.  We don’t need to understand nuances and complexities.  We just need “common sense.”  We just need a “plain talker” who will tell us “the truth” – the truth being what we already know, our “common sense.”  This was Bill O’Reilly in a nutshell.  And it is our current president in a nutshell.

For the last 25 years, crime rates have been declining in America.  They are now about half of what they were in the early 1990’s.  Yet year after year, a majority of Americans have reported that crime rates are INCREASING.  Along comes a president who says, “Crime rates are higher today than they have been in 47 years.”  Crime rates are not a matter of opinion.  This statement is utterly and completely false.  But when a majority of Americans THINK crime is increasing, and their president tells them it is very high, that is interpreted as “honesty.”  “Everyone knows” that crime has been increasing.  It’s “common sense.”  A president who affirms this is “honest.”

Like so much “common sense” throughout history, this is nothing more than ideology.  For most of American history, it was “common sense” that men were smarter than women.  That whites were superior to blacks, Asians, and…well, basically everyone else.  That people would never choose to have fewer children.

Years ago, a documentary called The Thin Blue Line was produced, about the case of a man who was convicted of killing a police officer.  The producer, Errol Morris, was criticized for presenting a case in favor of the convicted man, because this was “his” truth – that there was no actual truth, only the accused man’s truth versus the prosecutor’s truth.  Morris responded that THERE IS A FACT OF THE MATTER.  The police officer WAS KILLED.  SOMEBODY killed him.  Who was it?

Our media has suffered a great deal from post-modernism, the belief that there is no absolute truth – that everything is just someone’s opinion or perception.  Those who espouse such a view should spend some time with children dying of cholera, or carrying 60-pound packs of roofing up a ladder in 100-degree heat.  Life is full of inescapable facts, truths that do not care about your ideology or your philosophy.  It’s all too easy to call something true if you want very much to believe it.  To accept something that you very much want to reject – something that defies your brand of “common sense” – well, that’s a much better candidate for THE truth.

Population Growth and Prosperity, Revisited

In a previous post, I discussed the curious preoccupation some conservatives have with population growth as an indicator of economic prosperity.  I examined both population growth and immigration rates by state, and showed that there is no relationship to median household income or the American Human Development Index.

But in fact, if we look at things country by country, we find that population growth is NEGATIVELY correlated with economic prosperity.  Here are population growth rates by country over the last 15 years or so, plotted against per capita GDP:

popgrowthversuspercapitagdpbycountry

Although there’s a lot of variation, and some outliers, the basic relationship is clear.  Prosperity is NEGATIVELY correlated with population growth.  This relationship becomes even clearer if we plot population growth against the Inequality-adjusted Human Development Index, which measures the economic well-being of a typical resident in each country:

popgrowthversusihdibycountry

The green and yellow dots are European countries, the yellow being the 5 Scandinavian countries.  The orange dot is America.  Notice that these countries tend to have low population growth.  Toward the lower right are many African and Muslim-dominated countries.  Burundi, for example, has one of the highest population growth rates in the world – 3.34.  Its rating on the IHDI is only 0.269, and the per capita GDP is only $800 per year.educationpays

At first glance it might seem strange that population growth would be negatively correlated with economic prosperity.  Naively, we might think that people would have more children in an area with more wealth, and that they would migrate to such areas.  They do, but there is another factor which more than counteracts this trend – education.

The more educated people are, and in particular, the more educated women are, the fewer children they tend to have.  This is true within the U.S., and it is true across the globe.  Better-educated people tend to be wealthier and have fewer children.  The average American with a Bachelor’s degree makes 65% more than the average person with only a high school diploma, and the average American with a Master’s degree makes about twice as much.  Education levels are in fact one of the factors that go into the calculation of the IHDI.  When women are educated, they either delay having children, or have none at all.  Either way, family size tends to be smaller.

The negative relationship between education and family size is the reason a state like Connecticut, where 36% of the population has a Bachelor’s degree, has a much lower population growth rate (0.07) than a state like Louisiana, where only 21% of the population has a Bachelor’s degree (population growth rate 3.27).  A whopping 62% of American mothers who have high school or less have their first child before the age of 25.  But for American mothers with Bachelor’s degrees, this figure is only 26%.  55% of American mothers aged 40-44 who lack a high school diploma have 3 or more children.  By contrast, only 32% of mothers with a Bachelor’s degree have 3 or more.  And about a QUARTER of American women with Bachelor’s degrees, aged 40-44, have NO children at all.

It’s true that people tend to migrate to areas where jobs are available.  In America, many rural areas are losing population, while cities are growing.  But many of these jobs are not good-paying jobs, and again, when people are better educated, they tend to have fewer children.  This powerful effect means that using population growth, or immigration rate, as a measure of economic prosperity is worthless.  But that doesn’t stop many conservatives and conservative “think tanks” from doing so.

The Tyranny of Low Expectations

One of the most persistent debates in the academic world is the nature/nurture debate.  How much of who were are and what we can do is shaped by our genes versus our environment?  Academia has gone through a number of phases, leaning in one direction or the other, but the issue today is as controversial as ever.

In a way, the question itself betrays an ignorance of how our bodies and minds are shaped.  When we say that a trait is highly heritable, we mean IN A SPECIFIC ENVIRONMENT.  If you change the environment, you may change the heritability.  This should be obvious when it comes to something like hemophilia.  It’s a “genetic” disease.  But it’s cured by giving the person regular injections of clotting factors.  In this environment, the trait cannot express itself.  That’s what heritability is – how consistently a trait appears from generation to generation.

naturenurture

But the real meat of the nature/nurture debate is not about physical traits.  It’s about the mind.  What mental abilities are heritable, and to what degree?  This is not a small matter.  After all, our form of government depends on an educated, informed electorate.  What if most people aren’t capable of being educated or informed?

I won’t wade too much into the vast literature on this subject.  I will simply point out a few things that should be pretty uncontroversial.  Some abilities clearly run within families.  Musical ability for example.  There have been a number of studies of identical twins, which show that people who share the same genetic code tend to have similar personality traits and a number of mental abilities, even if they are raised in very different households.

magnus

It should also be apparent that some people are vastly superior to others when it comes to particular mental abilities.  The current world champion chess player, Magnus Carlsen, became a grandmaster at the age of 13.  It is doubtful that I would ever become a grandmaster, no matter how long and hard I trained.  But when it comes to a general, overall measure of intelligence – well, that’s a very tricky proposition.  Some people are very good at memorization.  Others have excellent spatial abilities.  Still others are highly adept at verbal interaction.  Some people have tremendous analytical abilities.  And some people have remarkable social skills.

When it comes to intelligence, things that seem obvious often turn out to be wrong.  Take brain size for example.  In the 19th century, it was widely believed that cranial capacity is a good predictor of intelligence.  But a moment’s consideration reveals how flawed this is.  If it were true, then big people, with big heads, would routinely occupy the positions we associate with high intelligence – high-powered science, engineering, medicine, law, and so on.  This has never been the case.  Also, since men’s brains are, on average, much larger than women’s, men as a group should be consistently more intelligent than women.  Even using IQ, a highly debated measure of intelligence, this is not the case.

brainshumanelephant

This seems all the more remarkable when we consider that a larger brain does not have larger brain cells – it has more brain cells.  Men on average have 13% more neurons than women.  Naively, then, we might think that this must translate into greater mental ability.  But brains, and minds, are far more complicated than that.  Elephants have much larger brains than people – that does not make them smarter.

There is also the fact that what we think of as “intelligence” often turns out to be a lot less impressive when we look deeper.  Take arithmetic for example.  Most of us will take a while to multiply 2 10-digit numbers.  A few people can do this very quickly.  Since most of us can’t, that seems impressive.  But in the 1970’s, pocket calculators became widely available.  Such a device can do this task in a fraction of a second, and it does this with no more circuitry than you would find in a grasshopper.  A personal computer can do countless calculations every minute, and it does, just to display a video or browse the web.  It can do a complex statistical analyses in seconds, tasks that would take an army of human beings weeks to complete.  That does not make it smart.

The real question is how much of our mental ability – to memorize, to comprehend, to analyze, and so on – is a product of expectations.  The human brain has not changed physically for thousands of years.  Presumably, most of human history, and prehistory, contains unrealized Einsteins, Lincolns, and Shakespeares.  Clearly, the environment can have a big effect.

militaryexercises

One of the things that surprises many people who join the military is the realization that they can actually accomplish much more than they thought they could, when they are pushed.  They discover that many of the limits on their own abilities, even physical abilities, are psychological.  Once these psychological barriers are overcome, the results can be dramatic.  In the Marine Corps, the saying “improvise, adapt, and overcome” has become an unofficial motto in many units.  The human will is a powerful instrument.  The determination to succeed should not be underestimated.

Albert Einstein famously said, “Education is not the learning of facts, but the training of the mind to think.”  Any good educator can tell you that half the battle in education is creating the proper mindset.  If a student is discouraged or apathetic it doesn’t much matter what their “inherent” abilities are.  Without motivation from the student, the best efforts of the teacher will fail.  What is really striking is how dramatic the result can be when psychological barriers are removed.

Which gets us back to the question of what really constitutes mental skill.  A pocket calculator can multiply big numbers.  A personal computer can do complex statistical analyses.  A search engine can retrieve a mountain of information about a word or phrase in seconds.  So what is mental skill?  Although this is of course a complex question, I would argue that a lot of it boils down to the ability to keep things separate in your mind, and to correctly discern their relationships to each other.

jeopardywatson

This can be illustrated by looking at 2 different computer programs – Komodo and Watson.  Komodo is a chess-playing program.  It’s very good at the game, much better than any human.  But it doesn’t know about anything other than chess.  Its “mental world” consists of the fine details of chess – the pieces, the rules, the tactics, and so on – but the rest of the universe might as well be all one category:  “extraneous stuff.”  By contrast, Watson knows a lot about a lot of things.  I very much doubt it could beat Komodo at chess, but it’s very good at the game Jeopardy!, which requires extensive, broad knowledge, an understanding of natural language, and the ability to relate many things to many other things.

Almost intuitively, we can see that Watson is smarter than Komodo, for kind of the same reason that a person is smarter than a personal computer.  It is the ability to categorize an enormous amount of stuff, and understand the relationships amongst all of that stuff.  That is, after all, what language is – categories and relationships.  It is also what mathematics is, and since every field must be understood with either language or math (or both), we realize that the ability to analyze, interpret, and understand the world must rely on categories and the relationships between them.  It is UNDERSTANDING that we recognize as an indicator of intelligence.  Komodo’s understanding is quite limited – to chess.  Watson’s is much broader.

goodsynonyms

Think of how much human understanding is built on distinctions in language.  Take the word “good” for example.  Looking at a thesaurus we can find more than 50 synonyms.  Favorable, positive, satisfying, valuable, nice, superior, worthy, agreeable, honorable, neat – these are just a few.  The reason we have all of these synonyms, and more, is that they all express different things.  That’s the point.  Without all of these distinctions, we can’t properly conceptualize the world.  If we just used the same word, “good,” for all of these things, we would be very limited.  All these distinctions, and the relationships between them – well, that’s what we call understanding.

My point is that we really evaluate smartness as the ability to UNDERSTAND, and we evaluate understanding in terms of how broad it is, not how deep it is in one specific area.  The ability to memorize a bunch of facts and figures is inconsequential compared to a basic understanding of logic.  Smartness is about the ability to grasp “big picture” issues, which makes a person (or a program) highly adaptable to almost any given situation.

The fact is, smartness is really about overall PATTERNS of thinking, not so much how many fine details you can manage.  Take this sequence for example:

All fish live in the sea.

All sharks live in the sea.

Therefore, all sharks are fish.

Is the logic of this sequence valid?  The answer is no.  But many people would say yes.  Why?  Because they have never been educated in the basics of logic and critical thinking.  They aren’t used to the HABIT of thinking critically.  In this particular case, it’s a matter of clearly distinguishing whether a statement happens to be true from whether the LOGIC by which you arrive at the statement is valid.  If we change the sequence a bit, the flaw becomes obvious:

All fish live in the sea.

All jellyfish live in the sea.

Therefore, all jellyfish are fish.

Understanding why the logic of these sequences is wrong doesn’t require tremendous amounts of memorization.  It’s simply a question of developing habits of thought, much like doing basic addition or multiplication.  It’s about achieving CLARITY on the basics of logic and analysis – the separation of one concept from another, and the ability to grasp the relationships between them.  If everything kind of mushes together in your head, you don’t have understanding.  It’s much like the difference between a bunch of paint colors that are thrown on a canvas and mixed together versus DaVinci’s Mona Lisa.  Or someone pounding on a bunch of piano keys all at once versus a Bach symphony.  Once the basics are nailed, they can be applied to any number of specific situations.

Now the question is, are most people actually incapable of understanding the big picture – history, science, literature, art, politics? Are they actually incapable of mastering basic reasoning, of understanding logical fallacies?  If so, our system of government is doomed to failure.  But I think the answer is a resounding no.

In grade school, students are generally asked to memorize and regurgitate.  It really isn’t until college that we must learn to examine ideas critically, to question, to analyze.  If we look at educational attainment in the U.S. in relation to religious affiliation, we find some rather striking patterns:

educationbyreligion2

Unitarians have the highest rate of college graduation among any major religious group in America – a whopping 72%.  Hindus aren’t far behind, at 67%.  Jews are also high, at 59%.  Some mainline Christian denominations, such as Presbyterians and Episcopalians, are also above 50%.  By contrast, only 22% of Baptists graduate from college, and only 16% of Pentecostals.

Are Jews and Hindus that much smarter, inherently, than Baptists and Pentecostals?  Or could it be something much more obvious and straightforward?  American Jews and Hindus tend to put a strong emphasis on education.  They tend to encourage their children to go to college.  Baptists and Pentecostals, on the other than, de-emphasize education, particularly college.  They often see college as a threat to traditional values.

Two-thirds of American Hindus are college graduates.  It suggests that, at the very least, a large proportion of Americans are capable of graduating from college.  The fact that only about 1 in 3 do cannot be attributed to inherent ability.  It is easily attributed to low expectations – a culture that values “hard work,” but only as long as it’s physical work and not mental work.

norway

In Norway, the vast majority of people go to school until the age of 19, and many until the age of 24.  Many of these go on to college, which is provided tuition-free.  Norway has the highest rate of college completion in the world, 35%.  About a third of the entire workforce is employed in the public sector (compared to about 15% in America).  And by the way, it also has one of the highest per capita GDP’s in the world, as well as universal health care and excellent retirement systems.

Working people in Norway, as in many other European countries, have long since organized to check the power of business.  Checking the power of business, like checking the power of tyrants, requires educated, informed citizens.  And this in turn requires high expectations.  Low expectations generate uneducated, uninformed people who are easy marks for hucksters and charlatans, whether they be snake oil salesmen, religious leaders, or politicians.  The tyranny of low expectations yields a population of sheep who are easy prey for the wolves.

In 1922, journalist Walter Lippman published Public Opinion, a book that should be required reading in grade school.  He created the phrase “manufacture of consent” to describe the way elite propagandists manipulate public opinion when the mass of the public is incapable of understanding public affairs on a broad scale.  Low expectations do not just come about by accident.  They are carefully and shrewdly nurtured by powerful people who benefit from the manufacture of consent.

The fact is, critical thinking should be taught at every grade level, just as arithmetic and mathematics are, starting with very basic things and progressing to the finer details.  Any high school graduate should be a master at recognizing hucksterism and propaganda masquerading as objective journalism.  It really isn’t rocket science.

Manufacturing Fetishism

If you asked the average American what percentage of the American workforce is employed in manufacturing and resource extraction, what number would you likely get?  30%?  50%?  I would be amazed if the average was less than 20%.  The national focus on things like coal mining and auto building suggests that Americans believe that huge chunks of the workforce are engaged in these activities.

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Economists actually have a term for preoccupation with manufacturing – “manufacturing fetishism.”  Here are a few facts.  Manufacturing jobs in America – and these are ALL manufacturing jobs, everything from shoes to concrete – number about 15 million, about 10% of American jobs.  And resource extraction?  Less than 1 million jobs.  Let’s be generous and add agriculture and logging to this.  That’s another 2.5 million jobs.  So all together – manufacturing and resource extraction – amount to about 17.5 million jobs.  About 12% of the workforce.

Of course, manufacturing and resource extraction tend to be focused in certain geographic areas.  40% of the country’s coal production, for example, comes from one state:  Wyoming.  This makes particular communities vulnerable to job loss in these sectors.  But then, many small towns have only a few big employers.  Such vulnerability is not restricted to manufacturing and resource extraction.

nurse

The other 88% of the workforce consists of service jobs.  Health care alone accounts for more than 20 million jobs, far more than manufacturing.  Retail trade accounts for more than 16 million.  Education about 14 million.  The list goes on and on.  But for some reason, we don’t hear concerns about grocery stocker or cashier jobs disappearing.  Why?

A number of reasons have been given, but as with many issues, I think this one comes down to something very simple.  Last year, economist John Kay wrote an article in which he pointed out that many people do not consider jobs like teacher, nurse, and secretary to be “real jobs.”  A “real job” is a job like welder, coal miner, or auto mechanic.  Why?  Because historically, welders, coal miners, and auto mechanics have been overwhelmingly male.  Strikingly, the one manufacturing sector that has been historically female-dominated – textiles – is seldom valued by manufacturing fetishists.  Today there are about 640,000 Americans employed in textile manufacturing – more than 10 TIMES the number of coal miners.  But most of them are women.

coalminers

To this day, manufacturing workers, overall, are about 70% male.  Coal miners are 96% male.  Steel workers?  83% male.  Car manufacturing?  72% male.  On the other hand, textile manufacturing is only 46% male.  Cut and sew apparel manufacturing has an even lower percentage – only 35% male.

As Kay points out, manufacturing fetishism has no economic basis, but considerable social and political significance.  Manufacturing was once the principal source of low-skilled male employment.  As Kay says, “It would be an absurd response to look back longingly on pictures of men with bare torsos covered in sweat working in the light and heat of rivers of molten iron, or heaving coal as they spent half their day working underground; these may have been real jobs, but they were awful jobs, and our society is better off for no longer needing them.”  But when large numbers of people cling to a macho caricature of masculinity, and politicians cater to that caricature, the question is not whether our society is better off.  It’s easy to get people to vote against their own interests, when you appeal to their prejudices and fears.

whiteworker

In previous posts (here, here, and here), I discussed the meaning of “hard work” in America – the way it is typically associated with physical and not mental work, and particularly with white male physical work.  When liberals criticize white rural Americans as being racist, misogynistic, and ignorant, conservatives often respond that they are hard-working.  It is quite apparent that they do not mean MENTAL work.  The lionization of the white Protestant American male as the virtuous hard worker in the face of lazy savages, parasites, and egg heads is nothing new.  It has long served the interests of business owners, who laugh all the way to the bank at the manipulability of the “hard-working,” macho, poorly-educated, white American male, who will let you exploit him and thank you for it.

It is no coincidence that our new president, Mr. GTP, espouses all of this – an obsession with manufacturing and resource extraction, an intolerance and insensitivity to immigrants and brown people in general, a de-valuing of education, intellectual preparation, and analysis, and a profound disrespect of women in every aspect of his life.  Nor is it a coincidence that many of his biggest boosters are those who complain about the “feminization” of our society.  Manufacturing fetishism is all about the macho caricature of masculinity.  Sexism has revealed itself to be an enormous driver of our politics, perhaps even stronger than racism.  Those who wish to move forward on these issues are finding enormous resistance from a large segment of the population.  I have no doubt about which side will triumph, but it’s gonna be a hell of a battle in the meantime.

https://www.johnkay.com/2016/08/29/the-economics-and-politics-of-manufacturing-fetishism/

Economic Theory and Economic Reality

There is a remarkable heads-in-the-sand attitude toward automation among many economists.  They point to historical examples of automation that have actually produced new, better paying jobs, arguing that the current wave of automation will be no different.  What I find so remarkable about this is that we have already had half a century of job loss from automation to inform us.  How long does it have to go on before we conclude that things are different this time?

assemblyline

In the mid 20th century, 35% of the America work force was employed in manufacturing.  Many of these jobs paid well.  But it’s important to remember that there were far fewer people in America at that time.  In 1950 the total population of the U.S. was only about 150 million, and only about 60 million were employed.  That means only about 21 million Americans were employed in manufacturing.

Today the country’s population is 320 million, and 150 million are employed.  So even if the same NUMBER of Americans were employed in manufacturing today as in 1950, they would only represent 15% of the workforce.  In point of fact, 10% of American jobs today are in manufacturing.  Manufacturing jobs have shrunk, but they have particularly shrunk as a percentage of all jobs.  America does not have a manufacturing economy, it hasn’t had one for decades.  It has a service/information economy.

The vast majority of that job loss is due to automation.  Now supposedly, automation should replace lost jobs with better-paying jobs.  And of course it has.  Jobs like computer programmer and web designer didn’t exist 60 years ago.  But these are a TINY FRACTION of the jobs available.

cashier

About 20 million Americans are employed in wholesale and retail trade – grocery stockers, cashiers, warehouse workers, and so on.  Another 14 million work in the hospitality and food service sector – hotel maids, waiters, burger flippers, and so on.  Together these total 34 million people, about a quarter of the workforce.  These are the kinds of jobs that have, by and large, replaced manufacturing jobs.  It didn’t happen overnight.  It has been going on for 60 years.

Economists who argue that automation must always lead to better-paying jobs have not been paying attention.  Where are all of these good-paying jobs that automation is supposed to create?  Amazingly, some economists argue that there has been no negative effect from automation!  Their argument goes like this.  If automation is replacing human workers, there should be huge gains in productivity, because productivity measures output per human worker (or human hours worked).  But in fact, productivity has not grown substantially – American GDP growth has been poor for decades, compared to the mid 20th century.

This remarkable myopia conveniently ignores the fact that much, if not most of the American economy consists of selling things to HUMAN BEINGS, not machines.  Your assembly line robot doesn’t buy the car it’s helping to build.  So who are you going to sell your cars to?  If someone loses their good-paying manufacturing job and acquires a poorly-paying service job, they don’t have as much disposable income to buy stuff.  Naturally the economy will suffer as a result.

It’s a vicious cycle.  Owners bring in automation to replace human workers, which reduces their costs and increases their profits.  But now workers must find poorly-paying jobs, which limit their ability to buy goods and services.  Lower demand means lower production.  Productivity declines.  Profits decline, putting more pressure on owners to cut costs still further, causing them to reach for automation to replace more human workers.

The way out of this of course is to understand that you must have large numbers of human beings, with disposable income, to buy goods and services and have a vigorous economy.  This simple truth has eluded the American business community.  If everyone is cutting costs by paying fewer and fewer people less and less, who is available to buy your product or service?

leisure

Interestingly, some economists point to Nobel laureate Herbert Simon as a guide on this issue.  In 1960, Simon argued that there would continue to be work for human beings in the face of automation.  Yet Simon himself wrote, “.…full employment does not necessarily mean a forty-hour week, for the allocation of productive capacity between additional goods and services and additional leisure may continue to change as it has in the past. Full employment means that the opportunity to work will be available to virtually all adults in the society….”  In other words, Simon is saying that a “job” might only mean that you “work” one hour a week, and have the rest of the time for leisure.  BUT THAT’S THE WHOLE POINT.  How are you supposed to afford leisure time if you are only paid a crappy wage for the time you’re actually working?

Like so many arguments, it seems to boil down to nothing more than semantics.  Futurists like Martin Ford argue that basic income is the natural solution for the inevitable job loss from automation.  Everyone gets a basic annual income, regardless of what they do or don’t do.  So if everyone spends an hour a week “working,” and still collects a healthy annual income, do we have “full employment”?  Simon, and his promoters, would apparently say yes.  But such a society is no different than what Ford is advocating.  He just calls it “jobless.”  One person’s “jobless society” is another person’s “full employment.”

workforcebysector

Of course, that’s not what we have.  We have production increasingly diverted away from working people, to owners.  We have good-paying jobs being replaced by poorly-paying ones.  Whatever THEORIES economists have about how automation is supposed to work, it hasn’t happened.  Auto workers and coal miners haven’t been replaced by software engineers and management consultants.  They’ve been replaced by grocery stockers and shoe salesmen.

cellphone2

Our economy today is often called an information economy.  We have computers, wireless networks, GPS receivers, and more.  With all of this technology, know how many Americans are employed in “information”?  Less than 3 million.  To this we can add about 2 million in computer manufacturing, and another 3 million in computer design.  This totals about 8 million – about 5 PERCENT of the workforce.  All of this wonderful technology simply doesn’t require lots of human beings to create and sustain.  Jobs in the information economy do tend to pay well.  But there just aren’t that many of them.

In the coming years, automation will almost certainly accelerate, as computer/robot sophistication grows by leaps and bounds.  When automation starts to make huge inroads into the massive service sector, where will those people go?  When the grocery stockers, hotel maids, and burger flippers find themselves without work, then what?  They’re gonna be hired as electrical engineers – or economists?  I don’t think so.

Republicans are only 23% of the electorate. So why are they so prevalent in public office?

The percentage of American voters who identify as Republican has steadily shrunk for the last decade.  In 2004, it was at 34%.  Now it is down to 23%.  Yet we have a Republican President and a Republican-controlled Congress.  68% of governorships are held by Republicans.  64% of state legislatures are controlled by Republicans.  Why?

A big part of the answer lies in understanding the tremendous advantage rural America has over urban America in electoral politics.  The electoral college is the most prominent example of this, but it is really only the tip of the iceberg.  In 2016, Hillary Clinton received about 2.8 million more votes than Donald Trump.  But many of her votes came from highly populated states like California and New York.  In California, for example, she beat Trump by about 4.3 million votes.  But her 55 electoral votes from California were countered by 64 electoral votes from 4 much smaller states:  Wisconsin, Michigan, Ohio, and Pennsylvania.  Taking those 4 states together, Trump beat Clinton by only about half a million votes.  In other words, for every 5 people who voted for Clinton in California, it took only 1 Trump voter in one of those other 4 states to negate their votes.

This illustrates how the electoral college discriminates against populous states, but there are plenty of other examples.  Take the U.S. Senate, for example.  Every single state gets 2 senators, no more, no less.  The state of Wyoming, with only 582,000 people, gets 2 senators.  The state of California, with 38 million people, gets 2 senators.  At present, 52 of the 100 U.S. senators are Republicans.  They are overwhelmingly concentrated in the less populous states.

How about the U.S. House of Representatives?  Currently, 237 of its 435 members are Republicans.  Of the 435 congressional districts, the vast majority are rural.  Rural America is overwhelmingly white.  Only 22% of the rural population is non-white, compared to 35% of the urban population.  Only 8% of the rural population is African-American.

Rural America is increasingly voting Republican.  This map shows the shift in voting from the presidential election of 2012 to that of 2016:

voteshift2012to2016

The blue areas, by and large, are big cities.  Urban America is voting increasingly Democratic.  But rural America is voting increasingly Republican.  And the vast majority of congressional districts are rural.  This partly explains why the House of Representatives is dominated by Republicans.

But there is another issue that is important.  In the election of 2012, voters cast 1.2 million more votes for House Democrats than Republicans.  Yet the House remained firmly Republican.  The reason is that in 2010, the Republican party targeted legislative races in key states.  State legislatures control House districting.  Republican legislatures created districts favorable to Republicans.  That’s called gerrymandering.

Gerrymandering gives the Republican party a tremendous advantage.  Careful gerrymandering can negate millions of Democratic votes, and it does.  Take Texas for example.  Here is a map of the current House districts in Texas:

texasdistricts

Notice the small blue areas (not the big swath of blue in South Texas)?  Those are big cities – Houston, Dallas, Fort Worth, Austin, San Antonio, and El Paso.  These 6 cities have a combined population of about 7.2 million.  The total population of Texas is about 27 million.  So these 6 cities comprise more than a quarter of the entire state’s population.  But notice how the huge red districts tend to tap into these urban areas, diluting their voters with large swaths of rural voters.  This is the San Antonio area for example.  Notice how the city is invaded by huge districts from the surrounding countryside:

sanantoniodistricts

District 23, for example, stretches clear across West Texas, almost to El Paso.  Yet it crowds into San Antonio, diluting its Democratic-leaning population with thousands of square miles of rural Republican voters.

texasdistrict23

26% of the population of this district is rural.  That may not seem like a large percentage – but rural voters in most parts of Texas are overwhelmingly Republican.  Here are the results of the 2016 presidential election by Texas county, shaded according to the vote margin for the winner:

texasdistrictsvote

If the urban vote is 60% for a Democrat, while the rural vote is 90% for a Republican, the Republican will win with 53%.  The current U.S. Representative from the 23rd district is Will Hurd, a Republican.

In Texas, 29% of voters are Republican.  31% are Democrat.  Yet Texas has had a Republican governor for the last 22 years.  The state Senate is 65% Republican and the Texas House is 63% Republican.  Yet large cities in Texas are dominated by Democrats.  Of the 6 largest cities in Texas (listed above), 5 have Democratic mayors.

This kind of situation, with urban areas controlled by Democrats, while state government is controlled by Republicans, is becoming increasingly common.  Of the 50 largest cities in America, only 13 have Republican mayors.  Yet 31 of the 50 states have Republican governors.  The nature of the system, which inherently favors rural areas in state elections, combined with aggressive gerrymandering by Republican-controlled legislatures, has given the Republican party a great deal of control at the state and national level, despite the actual vote counts favoring Democrats.

Many rural parts of the country are actually losing population.  America is becoming increasingly urbanized.  Young voters, especially urban voters, tend to lean Democratic.  But because rural voters now have influence well beyond their numbers, Republicans have succeeded in dominating state governments and the U.S. Congress.  Republicans continue to try to minimize the effect of Democratic-leaning voters, by limiting immigration, legal or not, and making it more difficult to vote.

Assuming these trends continue, the state and federal government will at some point become dominated by Democrats, as well as large city governments.  But this may take a while, depending on how successful Republicans are at suppressing Democratic-leaning voters.  By 2040, which is only 23 years away, most of the southwestern states will be majority non-white.  By 2060, much of the country will be majority non-white.

demographicfuture

Long before then, the vast majority of voters under the age of 50 will be non-white.  Unless current trends change drastically, these people will be voting Democratic.  Already, today, young voters are leaning strongly Democratic.  Among voters under the age of 30, Hillary Clinton beat Donald Trump by a 15-point margin.  Among non-white voters of this age, she beat him by about a 50 POINT MARGIN.

Of course Clinton did beat Trump by 2.8 million votes.  I wonder how many more defeats by Republicans will be translated into “victories.”

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