Inequality for All

Heard Robert Reich on NPR this morning promoting the documentary "Inequality for All". I hope to go see it soon, but wanted to put down a few thoughts on the interview before I forgot them.

The CEO making $10M-$30M per year saying he doesn't know where all his money goes, and the poor would be better off with it because they spend - highly anecdotal, but I should watch to see what the full story is. However, that does raise a good point: when economists and politicians are considering particular policies, is there a metric for how much of the money will enter the market, and how much will be absorbed? Dollars spent, in either production or consumption, per dollar of stimulus? I know traditionally production is preferred, but since we are such a consumer market, is consumption close to as good? In a recession, is consumption required to entice greater production? I really need to brush up on these basics.

Reich supports increasing the minimum wage as a way to combat technology and globalization. Going back to my last post, that is just a band-aid!

The call-ins were obtusely simple, like, "tax the capitalists who are profiting from all the machines that are replacing workers." ...and who do you suppose made those machines? The reason they say technology "displaces" jobs rather than "destroys" is because the job the machine does is replaced by jobs to make, sell, and repair that machine.

Also, should read Tip and the Gipper, and find some other first hand accounts of political history, not just the historical outcomes.

Income Inequality - Globalization and Technology

I heard excerpts from Obama's interview with NPR this morning, and I think the most interesting question was what he thought about the way the divide between rich and poor has increased over the course of his presidency. Obama cited globalization and technology as forces that pushed middle class jobs overseas or replaced them with machines. These are prevalent trends and the Obama administration is doing what they can to combat them. He said he did not believe these factors made the divide inevitable, but what he cited as steps he's taken to mitigate them were nothing more than band-aids: raising the minimum wage, closing tax loop holes, making the income tax more progressive, etc. If you are benefiting from a raise in the minimum wage or an increase in food stamps, then you are not, and will not be, part of the middle class. Disposable income is the key to a middle class existence, be it for a more comfortable lifestyle or for being able to save for retirement. No disposable income = no middle class. One thing that I hope he mentioned was how many fewer people would be falling out of the middle class on account of medical expenses, thanks to Obamacare. He has taken steps to stop the number one cause of bankruptcy, and should receive tremendous credit for that if successful. But the downside of globalization and technology are combated through education, and it looks like that's going to be somebody else's claim to fame.

Sure, taxes could be more progressive, and certain banking practices could be made illegal, but it comes down to what jobs Americans are getting. To improve the jobs Americans are getting, technology needs to become an ally. Technology can be a driving force behind jobs directly or indirectly, as a means to an end or as the end itself. We don't view things like planes, trains, or automobiles as technology, but they were at one time, and they created tremendous business. They ultimately became so ubiquitous that they're just a part of ordinary life, and our normal economy now. I'm sure fleets of stage coach drivers and mountain guides were replaced by a small team of train engineers, but was that a weight on the economy? No! When did our view of technology become so backwards? Oh yea, when we stopped educating our students to be able to change with the times.

Nobody would say that public education was better back when steel was being invented than it is now. What can be argued however is that there wasn't such a void between where education ended and where utilization of modern technology began. For example, anyone could pick up a steel shovel or walk into a steel building with no prior knowledge, and be able to benefit from the technology; that may not be the case for today's computer driven economy. As steel structures became ever more complicated, greater education was needed to meet the challenge, same is true of today's tech. The big difference lies in the fact that from the beginning of the 20th century to around the 70's, our education system was adequate in closing the gap between the state of technology and how much learning was required to profit from it. In other countries, that's still true, but we have fallen behind. The gap between where our schools leave us and where the state of technology is today has widened.

I think some notes on the Khan Academy would be an appropriate followup to this post, then probably a post on business practices, which I think is really where the divide comes from (ie: technology and globalization are already allies, and have already made America wealthy, but that wealth does not spread).