Thursday, December 31, 2015

Rising Tide

We've been waiting for the rising tide that lifts all boats.  That was the way our economy worked when I was in Economics 101, but things have changed. Curious why it doesn't trickle down?
  • In the 80's, big business abandoned the multifaceted concerns of community and common good for just the bottom line.  Profitability and competition by acquisition are the rule now.
  • Regulatory reform - relaxation of constraints on risk in the finance marketplace gave us the Great Recession along with today's continuous flow of wealth into the finance industry.
  • Income - wages have been flat for the bottom 80% since the 70's.  At the top, extraordinary increase.  Wages affect profits, so common practice is to pay the least possible for needed skills.  Employees are a managed cost of production.
  • Limited hours - as corporations grow in size, a variety of mechanisms have emerged for keeping benefits low for employees, the most common of which is artificially reduced hours.   Employees need only be treated well enough to avoid costly problems.
Not that WalMart is the only predator in the marketplace, but the WalMart heirs have more wealth among them than the economically lower third of Americans combined.  There are several million extraordinarily wealthy folks in the U.S., but only a few who have earned it.  Most have inherited it or gained it through the efforts of others.  

U.S. tax regulations allow a number of escape paths for the very wealthy.  Channeling income through Bermuda, for example, costs millions but avoids hundreds of millions in taxes for the exceptionally wealthy.  

Forecast:  This is neither an equitable economy nor culture.  It has morphed in the last half-century into a rather predatory capitalism.  The GAP between the privileged few and everyone else continues to widen at an accelerating pace.  

Income inequality is not uniform among the states.  After tax income inequality in 2009 was greatest in Texas and lowest in Maine.[a]
Scholars and others differ as to the causes, solutions, and the significance of the trend,[1][2] which in 2011 helped ignite the“Occupy” protest movement.  Education and increased demand for skilled labor are often cited as causes,[3] some have emphasized the importance of public policy; others believe the causes of inequality’s rise are not well understood.[4]  Inequality has been described both as irrelevant in the face of economic and social mobility in America[5], and as a cause for the significant decline of that same mobility.[6]

Happy New Year.