Jeremy Grantham: ‘Twas Capitalism That Killed Capitalism
Via Macrobusiness:
From the always essential Jeremy Grantham’s latest note:
An extraordinary, large exit poll run by Reuters/Ipsos in
which 45,000 people participated took place in the early evening on
election day in the US. To say this was a detailed poll is an
understatement. The spreadsheet for each question in small print runs
the length of a generous dining room table, 11 feet! It will tell you
how the American Hindu sample of 172 voted. The poll’s early results of
9,0002 inputs also revealed on the night before the election, when the
bookies’ odds 3 against Trump were 5 to 1, that the odds were wrong. The
critical statement polled, in my opinion, was this: “America needs a
strong leader to take the country back from the rich and powerful.”
From my perspective, the pushback against the rich and powerful for
several decades has been very unexpectedly wimpy. “Occupy Wall Street”
aside, the average voter had sat still for a series of major tax cuts
for the higher tax brackets and on capital – capital gains and
dividends. The lowerincome workers had paid the cost of outsourcing and
labor-saving technology but had received no material help, while
corporations and corporate officers and owners were the beneficiaries.
In fact, money spent on worker training and education declined relative
to foreign competitors. This shows up clearly in declining educational
standards where today the US global rank is, to be friendly, mediocre.
Most scarily in this regard, the average Chinese 20-year-old now ranks 2
full years ahead of his American counterpart in math proficiency! So,
all in all, we can say that global forces pushed wages down and politics
pushed them deliberately lower. The combined result is shown in Exhibit
1: The share of GDP going to labor hit historical lows as recently as
2014 and the share going to corporate profits hit a simultaneous high.
Similarly, Exhibit 2 shows that the share of all income going to the top
0.1% rose well beyond any previous record and approached 100% of all
the recovery in total income since the lows of 2009!
The “rich and powerful” not only increased their share of income and
capital at an unprecedented rate in recent decades, but they also
increased their grip on politics through a rising tide of political
spending, including lobbying and the new Super PACs, courtesy of the
Supreme Court’s ruling in Citizens United. Even before this ruling,
Princeton University Professors Gilens and Page had reported4 on the
complete lack of influence that voter opinion had on the probabilities
of any bill passing through Congress. If favored by the public the
average 31% chance of passing rose to a dizzying 32%. If not favored, it
fell to 30%, justifying the nickname given to the influence of the
average citizen: “Gilens’ Flatline.” When favored by the richest 10%,
bills passed at a 65% rate – there is inertia after all. But when
opposed by the wealthier and supported by inertia, the passing rate was
essentially nil. Those hoping that there is any life at all left in
representative democracy have to hope that some critics of this work are
right when they claim that the data is complicated to sort out and the
conclusions may be overstated. Anecdotal evidence on such issues as the
minimum wage and gun laws, though, suggests that majority opinion is,
shall we say, easily offset. Scarily, Gilens’ work does not include the
post Citizens United data on political spending that is shown in Exhibit
3. I could not resist throwing in political contributions from unions,
which are often cited by right-wingers as somehow balancing the books.
And once upon a time they did. But, as unions have been severely
weakened by the same combination of global forces and politics
previously described, political contributions from unions have become a
rounding error, offsettable by a mere handful or less of billionaires....
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MUCH MORE
