Tag Archives: economics

America’s white millennial problem: Why the next great generation might not be a liberal one

Nearly anytime Democrats lose an election, there is a pervasive narrative that, just around the bend, there will be an “emerging Democratic majority.” Originally projected to occur between 2004 and 2008, it now appears further away than ever after last month’s midterm blowout. Republicans have a stranglehold on the House, where they control their largest number of seats since 1948. That lead will be incredibly tough to chip away at. Democratic chances of regaining the Senate in 2016, once considered a near certainty, are looking iffy. Republicans control 31 governorships, as well as 68 of 98 state legislative chambers. Democrats still have a strong chance of winning the Presidency, but given the importance of the states for shaping income distribution and policy, even that victory will ring hollow.

Yet again, the Democratic Party faces bleak governing prospects in the short term, with only the nebulous promise of a demographic windfall somewhere off in the future — and even that prospect should be little comfort to progressives. While the “millennial” generation has widely been seen as the key to future of Democratic successes, there are reasons to believe that the liberalism of millennials, at least on certain key issues, has been overstated.

Yes, there is a strong case that younger voters on the whole are more liberal. For instance, a study by the Center for American Progress finds that while the mean American’s ideological position is 209 (with 0 being most conservative and 400 being most progressive), those under 29 score 219.7 (Obama voters scored 244).  But while millennials are more socially liberal across the board, there are stark racial divides on economic issues. Younger voters are more likely than older voters to agree with the statement, “Labor unions are necessary to protect the working person” and “the government should be doing more to solve problems.” These questions, however, are rather vague and positively worded. And other data suggest a large gap between white millenials and millenials of color. For instance, young white men supported Romney in the 2012 election.

White millenials are also significantly less supportive of Obama (54 percent) than black millenials (95 percent) and Hispanic millenials (76 percent). The most recent poll of Obama finds that young whites and older whites have virtually identical approval ratings. A recent Pew survey of millennials finds that on economic issues, there are strong gaps between young whites and young non-white millenials (see chart).

On social issues, however, these gaps are virtually non-existent. This suggests that while social liberalism will continue to be a political winner, economic liberalism may be tougher to sell to white millenials. Additionally, while white millenials say they want to live in a racially equitable society, they are no more likely than their parents to support policies to make that society come about. ”At the same time, whites primed with the reality of growing diversity become are less likely to say they support diversity and more likely to support the Republican party.”

Furthermore, even as minorities make up a larger and larger percentage of the electorate, these racial changes will not inevitably benefit Democrats. While Republicans have never won more than 40 percent of the Latino vote  – the claim that Bush won 44 percent in 2004, as widely reported, now appears to have been incorrect — they could do so in the future. Pew data, for example, show that third generation Hispanics are more socially liberal, but more economically conservative than older Hispanics.

Additionally, a recent Gallup poll shows support for Obama among younger Black Americans is modestly lower than support among their older counterparts. This actually hold strue among millenials as a whole; as there appear to be age gaps that would render the Democratic advantage ephemeral. Harvard’s Institute of Politics finds that there is a distinct difference between the way young millenials (18-to-24) and older millenials (25-to-29) view Obama. Meanwhile, a 2012 American University poll finds that college students in swing states supported Obama by 35 points, while high schoolers (13-to-17) in swing states supported Obama over Romney by only 7 points.

Discussing the future always presents challenges, particularly in the realm of politics. However, when we look at the ideologies that shape the parties, we can see a few general trends from these data. First, the economic liberalism of the millenial generation appears to be driven primarily by people of color, rather than by younger, more liberal whites. (On social issues, the generation appears to be more liberal across the board.) Second, while millenials lean Democratic, they are still effectively up for grabs. White millenials, the data show, may become suspicious of further government programs to advance racial equality, and young people of color may be open to a Republican party that eschews virulent racism. Finally, electoral structures combined with the geographic locations of Democratic voters will bias the system toward Republicans for at least another decade, and possibly longer.

It’s difficult to know what parties will do to remain viable in a shifting American political landscape. However, it’s by no means certain that a new “Democratic majority” will be an economically liberal one. It’s plausible that the new Democratic party will embrace an Andrew Cuomo-esque neoliberalism. The Democratic party that appears to be emerging will be friendlier to finance and economically conservative, but also very socially liberal, particularly on gay marriage and women’s rights. The Democratic party will be committed to reducing greenhouse gas emissions but not at a terrible price to businesses. Public goods will be sold off at bargain basement prices and the safety net will be expanded only slowly, if at all. Both parties will pretend that racial grievances are a thing of the past and present a rosy vision of color-blind America. The ideological distance of both parties on foreign policy will remain where it is today: virtually indistinguishable. This is not inevitable, but what we know about millenials, particularly white ones, suggest this is the most plausible scenario. In the battle for the soul of the Democratic party, millenials might not be on Team Elizabeth Warren.

This piece originally appeared on Salon

Russell Brand is wrong: Voting really can change America for the better

Last year, Russell Brand declared in a New Statesman article that he had never voted because he “regard[s] politicians as frauds and liars and the current political system as nothing more than a bureaucratic means for furthering the augmentation and advantages of economic elites.” And Brand, in many ways, is right — just not about voting. A growing body of political science literature actually finds that voting is an incredibly important lever of policy change. To understand why, though, we need to start with the matter of class.

The class bias in voter turnout in America is strong. A recent study estimates that in 2008, voter turnout among the wealthiest 1 percent of the population was an astronomical 99 percent. It’s not surprising that this level of participation doesn’t hold for all tax brackets; yet the chart below still shows a startling trend. There is only a single instance over the past three election cycles of a lower income bracket having higher turnout than a higher bracket.

For a long time, political scientists weren’t worried about turnout disparities. In their seminal 1980 study on the question (using data from 1972), Raymond Wolfinger and Steven Rosenstone argued that, “voters are virtually a carbon copy of the citizen population.” Later, in a 1999 study, Wolfinger and Benjamin Highton find a slightly larger gap between voters and non-voters, but still conclude that “non-voters appear well represented by those who vote.”

However, in a more recent review of the data, Jan Leighley and Jonathan Nagler find “enduring and increasing” differences between voters and non-voters on issues relating to class-based issues.  They find that non-voters are far more likely to support union organizing, a job guarantee and universal health insurance.

Why the differences in the studies? It turns out, the reason is historical. Difference between voters and non-voters with regards to the size of government and redistributionweren’t as strong in the 1970s and 1980s, when the earlier studies were conducted; since then, according to Larry Bartels, the U.S. has become a world leader in class conflict over government spending. These biases began accelerating at the end of the 1980s.

Since then, the Leighley and Nagler thesis has enjoyed increasing support. A 2012 Pewsurvey revealed similar differences, with non-voters far more supportive of government intervention in the economy and far more supportive of the Affordable Care Act. A Public Policy Institute of California (PPIC) study of Californians from 2006 finds that non-voters are also more likely to support higher taxes and more services. They were more likely to oppose Proposition 13 — a constitutional amendment that limits property taxes — and to support affordable housing.

Given all of this, it’s unsurprising that the current Republican electoral strategy is based around disenfranchisement through means like voter ID laws. Consider a Pew poll taken from before the 2012 election: Among “likely voters,” Obama and Romney were split, with 47 percent of voters each. Among non-voters, however, Obama had 59 percent support, compared with Romney’s 24 percent support.

 

One problem with this is that turnout inequality affects both parties — pulling the Democrats and Republicans to the right. The corollary is that voter suppression efforts pursued by Republican partisans also affect the behavior of Democrats. And there is strong evidence that voter suppression efforts increase turnout inequality.

For instance, one study finds that “state voter registration laws pose a substantial barrier” to the mobilization of low-income voters.  While 63.2 percent of citizens in the lowest income bracket (less than $10,000) are registered, a full 87.1 percent of those in the top bracket ($150,000 or more) are. Research shows that same-day registration decreases the class bias of the electorate, so rollbacks of same day registration will also harm low-income voters.

It’s important to note that the gap between registration and turnout is higher for low-income citizens. A bit more than 16 percent of registered low-income citizens don’t vote, while only 6.9 percent of registered citizens in the top income bracket don’t vote. (See chart) Much of the problem, then, is getting low-income voters  – who are hampered by voter ID laws and reduction in early voting — the the ballot box. It’s unsurprising that an investigation of Republican voter suppression efforts finds that “larger increases in class-biased turnout, indicating higher turnout among lower income voters relative to wealthy voters, is significantly associated with a larger volume of proposed legislative changes.” This finding was confirmed by a study of Indiana’s voting law by Matt A. Barreto, Stephen A. Nuño and Gabriel R. Sanchez.

Where class bias is lower, the poor benefit. Christopher Witko, Nathan Kelly and William Franko studied 30 years of data on turnout inequality and find, “where the poor exercise their voice more in the voting booth relative to higher income groups, inequality is lower.” Their results show that lower turnout inequality leads to significantly more leftist governments and significantly more liberal economic policies. In currently unpublished research, James Avery studied the period between 1980 and 2010 and finds  “unambiguous” evidence that increased turnout bias leads to “greater income inequality several years later.”

This means that the impact of voting goes beyond simply elections.

In the wake of the 1965 Voting Rights Act, long-term Democratic incumbents shifted their voting behavior to respond to the newly mobilized Southern black electorate.Thomas Hansford and Brad Gomez studied more than 50 years of data and find that the “effect of variation in turnout on electoral outcomes appears quite meaningful.” One recent studyfinds that where there is less class bias in turnout, party policy platforms are more favorable to the poor. James Avery and Mark Peffley find that states with low-income voters turned out to vote, politicians were less inclined to pass restrictive eligibility rules for welfare.  Political scientists Kim Hill and Jan Leighley find in two studies that states with a more pronounced class bias, social welfare spending is lower. David Broockman and Christopher Skovron find that legislators tend to overstate the conservative attitudes of their constituents. This could be because their constituents tend to be wealthier. One study of wealthy citizens finds that, “on economic issues wealthy Democratic respondents tended to be more conservative than Democrats in the general population.”

Voting should only be the beginning of political change; it should not be the end. It is, however, necessary. In their study, Hill and Leighley find, “it is the underrepresentation of the poor, rather than the overrepresentation of the wealthy” that explains why states with high turnout inequality have low social welfare spending. The fight to reduce the influence of the wealthy will be a long one, but it begins at the ballot box.

So don’t listen to Russell Brand. Vote.

This article originally appeared on Salon

Black people, white government

In the wake of the unrest in Ferguson, Missouri, after the Aug. 9 shooting of black teenager Michael Brown by white police officer Darren Wilson, there has been a focus on racial disparities in representation. A recent study found that while people of color make up 37.2 percent of the U.S. population, they account for only 10 percent of elected officials at the federal, state and county levels. By contrast, white men, who make up 31 percent of the population, account for 65 percent of representatives.

With midterm elections coming up, registration and turnout are increasingly important matters, particularly in cities such as Ferguson that are majority black but are controlled by a majority white political class. The political science literature allows us to discern why some councils in black cities are overwhelmingly white — and why this is a problem.

Proportional representation?

To find out which cities aren’t represented proportionally, Demos, the think tank where I work as a research assistant, turned to the International City/County Management Association (ICMA) census, which has demographic data on more than 2,600 cities. To measure descriptive representation, Demos examined councils where the share of the African-American population was large enough that a representative council would have at least one black councilmember. Of those 438 councils, 175 underrepresent their African-American population by at least one councilmember. Of the 95 cities that were half African-American, 42 of them were underrepresented by at least one councilmember. Within this group, 14 cities stood out as being particularly unrepresentative, with only one or no African-Americans on their councils. One such city, with a population that is 63 percent black but a council with only one black member, is Ferguson.

Across the country, 1.2 million African-Americans are underrepresented by their city councils. By contrast, about 500,000 whites live in such communities. One in six African-Americans lacks proportionate council representation. For whites, 1 in 66 do. Approximately 77,000 African-Americans live in communities where they make up more than half the population but hold only one or even no seats on the local council. Since the ICMA is only a sample of cities, there are likely millions more African-Americans across the country who are not represented by their city councils.

Diverse constituencies

In political science, descriptive representation refers to legislators’ having things in common with the groups they represent. It has been linked to confidence in governmentpositive legislative outcomes and engagement with the political process. Political scientist Christian Grose found that black legislators lead to more congressional attention and money for black constituents.

Benefits such as these could have stopped the crisis in Ferguson. A black city council may have raised the alarm about police treatment in a city where blacks make up 93 percent of arrests, 91 percent of searches and 86 percent of stops by the Ferguson police.

Researcher David Canon suggests that descriptive representation can be especially useful in areas with racial tension, where politicians must balance the needs of a diverse constituency. By contrast, policymakers in Ferguson were sharply criticized for their handling of the crisis and the poor performance of the police chief they appointed. As one protester told the council, “You’ve lost your authority to govern this community.” Another noted, “Mike Brown had to die for our voices to be heard.”

Most blacks, in Ferguson and beyond, do not enjoy descriptive representation, because of the municipal electoral process, in which the game is rigged against candidates of color.

Political power

Low turnout in council elections is a key factor in reducing descriptive representation. Municipal elections have far lower voter turnout than national elections. But it’s unlikely that demographic factors are the culprit. Instead, the most likely explanation is that politically motivated parties have kept some elections off cycle to bolster their political power.

“Even if we control for a host of other factors associated with turnout, holding an on-cycle election still increases the turnout of registered voters by an average of 26 to 36 percent above turnout for off-cycle elections,” write political scientists Zoltan Hajnal, Paul G. Lewis and Hugh Louch. Similarly, political scientists Christopher Berry and Jacob Gersen found that when school board elections are timed to state and national elections, voter turnout is about 150 percent higher. Political scientists Thomas Holbrook and Aaron C. Weinshenk focus on campaigns andfound that “the effect of the total amount of campaign spending on turnout is notable.” This is worrying because an overwhelmingly rich and white donor base makes fundraising difficult for candidates of color.

In addition to these demand-side factors, researchers are examining supply-side factors. After all, people can’t vote for candidates of color unless there are people of color on the ballot. Paru Shah of the University of Wisconsin has been doing pioneering research on the subject. She has found when people of color run, they win about half the time. She told me that “compared to their population size, there are fewer minority candidates running” and explained that an important question is whether a candidate of color has won an election among a group voters before, since “once a candidate of color has run and won, there was a tipping point.”

There are also important effects on turnout. Amir Fairdosi and Jon Rogowksi found that a black Democratic candidate on the ballot in a midterm boosts black turnout. (There is not an equivalent boost for a black Republican.) Lawrence Bobo and Franklin Gilliam found that in areas with high levels of black political empowerment, such as having a black mayor, black political participation is higher.

This conclusion has support from other studies, and the political effects of greater minority participation are substantial: A large body of research shows that a shift in the electorate turning out to vote will shift politicians’ voting preferences. When people of color become more involved in the political process, it creates a positive cycle that can bring about beneficial policies.

‘Old boys’ club’

When citizens lack descriptive representation, as most blacks do, they do not trust their representatives. Some 44 percent of Americans surveyed said that “an old boys’ club” is the best description of our representatives, with only 7 percent saying they are “the best and brightest.” That means the next Ferguson is just around the corner: When a crisis happens, unrepresentative local governments will struggle to retain legitimacy. Even without crisis, vital needs of the community will remain unaddressed by a government that seems unresponsive and aloof.

However, the Ferguson protests also showed the power of descriptive representation. Witness the dramatic change of mood when Missouri Highway Patrol Capt. Ron Johnson, an African-American, was placed in charge of security in Ferguson. Business Insider reported, “In a tactical U-turn, Johnson, and a handful of black officers without body armor, walked among thousands of protesters.”

The first major step toward better representation is tying municipal elections to presidential or midterm elections, like those coming in November. This will ensure that media coverage and major candidates will bring more voters to the polls.

This article originally appeared on Al Jazeera

The 1% are more likely to vote than the poor or the middle class, and it matters — a lot

Does it matter that the wealthy turnout to vote at a rate of almost 99% while those making below $10,000 vote at a rate of 49%? It sure seems like it would, but for a long time many political scientists and journalists believed it didn’t. In their seminal 1980 study on the question (using data from 1972) Raymond Wolfinger and Steven Rosenstone argued that, “voters are virtually a carbon copy of the citizen population.” In a 1999 study, Wolfinger and Benjamin  Highton find a slightly larger gap between voters and nonvoters, but stillconclude, “non-voters appear well represented by those who vote.”

This argument has been largely assimilated by pundits and also non-voters, 59% of whom believe “nothing ever gets done,” and 41% of whom say “my vote doesn’t make a difference anyway.”

But more recent research suggests that the logic of wealth voters is sound — and that if the poor and middle class turned out at a higher rate, policy would shift leftward on economic policy. The most importantstudy on the question is by Jan Leighley and Jonathan Nagler. They revisit the Wolfinger/Rosenstone thesis and find that, in fact, non-voters are not, “a carbon copy” of the voting electorate as previously assumed. They find that, “notable demographic, economic, and political changes that have occurred in the U.S. since Wolfinger and Rosenstone’s classic statement [their 1980 book, “Who Votes”].” The most important difference that Leighley and Nagler find is that:

After 1972, voters and non-voters differ significantly on most issues relating to the role of government in redistributive policies. In addition to these differences being evident in nearly every election since 1972, we also note that the nature of the electoral bias is clear as well: voters are substantially more conservative than non-voters on class-based issues.

 

That is, after the New Deal consensus eroded, policy views became more polarized along class lines and the class-skewed nature of the electorate began to matter considerably. Non-voters skew left on a variety of issues:

A Public Policy Institute of California (PPIC) study of Californians from 2006 finds that non-voters are more likely to support higher taxes and more services. They are also more likely to oppose Proposition 13 (a constitutional amendment which limits property taxes) and to support affordable housing (a more recent study finds similarly). More recently, a 2012 Pew study that examined likely voters and non-voters finds a strong partisan difference. While likely voters in the 2012 presidential election split 47% in favor of Obama and 47% in favor of Romney, 59% of non-voters supported Obama and only 24% supported Romney. The study also found divergence on other key policy issues, including healthcare, progressive taxation and the role of government in society.

The ideological turnout gap seems strongly related to the economic divide in voting behavior. A recent study by William Franko, Christopher Witko and Nathan Kelly examined 30 years of data for all 50 states. They find no instances in which low-income voter turnout was higher than high-income voter turnout. Across midterm and presidential elections, Census data show strong gaps between turnout rates between those earning above $150k and those earning less than $10k (a 32.6 point gap in 2008, a 34.9 point gap in 2010).

There is evidence that this affects the political system. Consider a recent study by David Broockman and Christopher Skovron finds that politicians believe that their constituencies are significantly more conservative than they are. Such a bias should be impossible to sustain – politicians have strong electoral incentives to gauge their constitutents’ views correctly. Once we understand that voters are more conservative than non-voters, the puzzle disappears. Politicians’s real constituents are the people who vote — a disproportionately affluent and conservative slice of the population.

Conversely, where the electorate is less skewed policy outcomes shift left. In a recent study William Franko, Nathan J. Kelly and Christopher Witko find that “where the poor exercise their voice more in the voting booth relative to higher income groups, inequality is lower.” In another study, Franko examined voting gaps and policy outcomes in three areas–minimum wages, anti-predatory lending laws and SCHIP (State Children’s Health Insurance Program). He finds that states with smaller voting gaps across incomes had policies more favorable to the poor. States with low turnout inequality have a higher minimum wage, stricter lending laws and more generous health benefits than those with high turnout inequality.

The design and benefit levels of  many social safety net programs such as Temporary Assistance for Needy Families (TANF), are decided at the state level, which provides a natural experiment to test how turnout inequality  affects policy. James Avery and Mark Peffley find that, in states with higher rates of low-income voting, politicians were less inclined to pass restrictive eligibility rules for social benefits. Political scientists Kim Hill and Jan Leighley find in two studies that states with a more pronounced turnout bias, social welfare spending is lower. Thus, the evidence confirms what theory would predict: closing low-income voting gaps is consequential for public policy, in favor of lower-income households.

This piece originally appeared on Vox.

What if economic growth is no longer possible in the 21st century?

Co-Written with Lew Daly.

For decades, rapid economic growth has been the norm for developed countries. An educated workforce, a large population boom, major technological advances, and abundant fossil fuels were the key components of growth, generating substantial and broadly distributed increases in standards of living in many countries. We have grown so used to such growth that we inevitably view it as a panacea for a host of economic ills, whether it’s a deep recession or income inequality.

We now understand, however, that the postwar growth paradigm is not environmentally sustainable. We also know that the shared prosperity it once delivered is itself unraveling. With these combined trends, something has to give in order to maintain living standards.

One possible scenario, with surprisingly good news for average Americans, is that constraints on growth will force political leaders to accept redistribution as a policy tool. Indeed, if we cannot grow our way to broadly shared prosperity again, redistribution is the only way to save the middle class.

Many economists have warned that the old model is dying out. In a much-cited paper, Robert Gordon argues that the rapid growth we take for granted is not only historically anomalous but likely to slow significantly in the 21st century, pointing in particular to diminishing returns from technology as one major drag. Developed countries have already picked the “low-hanging fruit” of technological advance (in Tyler Cowen’s phrase), and future innovations will produce far less growth, he argues.

Steven King, chief economist at HSBC, similarly argues, “The underlying reason for the stagnation is that a half-century of remarkable one-off developments in the industrialized world will not be repeated.” Gordon also points to rising inequality, which has led to stagnating middle-class wages, as a drag on future growth. As a result of these trends and others, average annual growth will fall below 1 percent in the 21st century, he predicts.

Then there is the impact on the global economy that will result from combating global warming. Working from a conservative carbon budget of 450 parts per million (PPM), Humberto Llavador, John Roemer, and Joaquim Silvestre predict that achieving this target will require a substantial slowing of growth, mainly borne by the United States and China. The U.S. and China must keep growth within the threshold of 1 percent and 2.8 percent of GDP per year, respectively, for the next 75 years, they say.

In an interview, Roemer tells us that these results are optimistic; after all, some economists have argued that growth may not occur at all. In the paper, the three argue that “there is no politically feasible solution to the climate change problem unless” both the U.S. and China “honestly recognize the connection between restricting emissions and curbing growth.” In contrast, the Congressional Budget Office’s long-range analyses use a growth projection of 2.2 percent on average over the next 75 years.

Other economists have come to similar conclusions about the connections between growth and sustainability. Early in 2012, Kenneth Rogoff argued that maximizing growth must be weighed against the negative possibilities of growth, like global warming. Indeed as James Gustave Spethnotes, environmental impacts are the most significant challenges to growth: “Economic activity and its growth are the principal drivers of massive environmental decline.”

Growth constraints will push the issue of distribution to the forefront of political discussions. In his forthcoming book Capital, Thomas Piketty predicts that growth will slow to between 1 and 2 percent — 19th-century levels — by the end of the 21st century. This trend, he further argues, will be accompanied by higher returns to capital and lower returns to labor, thereby exacerbating inequality.

The conclusions that flow from these observations are stark. The old economic paradigm relied on unsustainable growth, so we must change the paradigm. For decades, our rising standard of living came at a deep cost to our environment and our children’s future. There is simply not enough planetary bio-capacity to grow our way out of the messy moral discussions of distribution. The idea that inequality is merely an inefficiency to be corrected with a technocratic fix or perpetual growth is no longer tenable.

Fortunately, we have plenty of GDP that could help the middle class, with approximately $200,000 a year potentially available for each family of four. Given that the median family of four only gets about $67,000 a year at this point, it should be clear that it is possible to grow and strengthen our middle class, significantly, while adjusting to the lower GDP growth we are likely to experience in the future.

The question is, will political leaders accept the need for distributional remedies, or will they continue to side with the wealthy against the struggling middle class?

Originally published on The Week.

Natural Gas Will Not Save the U.S. Economy

Co-Written with Lew Daly

Economist Kenneth Boulding famously said, “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” But it’s not just economists who believe that anymore. Such ideas are still widely accepted by thought leaders, journalists, and politicians who, together, form a strong consensus that the U.S. recovery should be bolstered by natural gas exploration and production. The McKinsey Global Institute claims in a recent report that a natural gas boom is one of the most important “game changer” ideas for U.S. economic growth, while The Economist writes, “Become a champion of a global fracking revolution, Mr. Obama, and the world could look on America very differently.” And in his recent State of the Union address, President Barack Obama said “I’ll cut red tape” for factories that use natural gas, and that “Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas.”

But the belief that natural gas can be a “bridge fuel,” allowing us to grow rapidly in the age of global warming, is fit for a madman.

The current consensus is that if global temperatures rise more than 2 degrees Celsius above preindustrial levels, the consequences would be catastrophic (the Arctic melt would raise sea levels by tens of meters). So scientists have proposed a “carbon budget”: the total amount of carbon dioxide that can be released into the atmosphere without raising temperatures by 2 degrees. Using a conservative carbon budget of 450 parts per million—which has been endorsed by the International Energy Agency and Britain’s Stern Review—economists Humberto Llavador, John Roemer, and Joaquim Silvestre have thrown cold water on the idea that natural gas is our nation’s economic savior. In a forthcoming paper, they argue that given that budget, the world’s two largest CO2 emitters, the U.S. and China, must keep GDP growth within the threshold of 1 percent and 2.8 percent of GDP per year, respectively, for the next 75 years.

These results may sound surprising, but they are in line with a growing body of research on stranded carbon assets, which are assets such as fossil fuels (oil, coal and natural gas) that will lose their value well before they’re expected to. This can happen as a result of, say, market disruption (rapid advances in green technology like wind and solar polar or divestment) or government regulation (a carbon tax or stricter fuel economy standards). That latter is more likely because, even now, we have found way more fossil fuels than we could possibly burn without inviting long-term environmental disaster.

The Intergovernmental Panel on Climate Change’s carbon-budget model, widely considered the most reliable, puts the budget for 2012-2100 at between 886 and 1119 gigatons of CO2. Total known fossil fuel reserves in the world, if burned, would add 2860 gigatons of CO2 to the atmosphere. Thus, simple math indicates that almost two-thirds of all known fossil fuel reserves must remain unburned if global temperatures are to remain habitable. And these are optimistic estimates. James Hansen of the Columbia Earth Institute and other leading scientists and economists argue that all extraction of coal and other unconventional fossil fuels, like the Canadian Tar Sands, must cease immediately and the extraction of conventional fossil fuels, like oil and natural gas, must be significantly pared down.

Projects like the Keystone XL pipeline and other attempts to revive the U.S. economy based on fossil-fuel extraction are the equivalent of running up billions in debt and then running off to borrow more. The international community is already blowing through its carbon budget; the IPCC predicts that given “business as usual,” we’ll burn 1,000 gigatons of CO2 between 2012 and 2033, depleting the more conservative budget entirely and nearing the upper bound. We’ve already seen the consequences of temperatures growing by less than one degree Celsius, yet we’re on track to see themrise by more than six degrees by 2100. Our current trajectory tempts ecological and economic collapse, and yet, many are arguing that we accelerate the process.

Part of the problem is that our measure of growth, GDP, does not take into account the costs or sustainability of growth. One billion dollars of growth in the production of solar energy is not the same as $1 billion produced by coal in terms of ecological harm and sustainability, but GDP counts them equally. Instead we should measure progress using more extensive metrics like the Genuine Progress Indicator, which factors the impact of greenhouse gas emissions into its calculations. Further, we should institute a carbon tax, preferably an international one. Some companies currently price carbon internally—meaning that they put a price on the carbon produced by their projects, and subtract that from any expected returns—but do so at widely varying rates. A Carbon Disclosure Project study finds that nine of the largest energy companies in the United States internally price carbon dioxide emissions, at a cost ranging from $15 per ton (Devon) to $60 per ton (ExxonMobil). Governments should consider the social and environmental cost of carbon dioxide when they are making infrastructure and research investments, regulating extractive industries like fracking and offering tax incentives. Against the EPA’s recommendation, the State Department decided not to consider the social cost of carbon in its analysis of the Keystone pipeline.

The State Department also didn’t consider the very likely possibility that the pipeline will become a stranded asset. We can only hope it will—because that would mean we’ve finally learned that if we don’t live within our carbon budget, the long-term ecological and economic harm caused by our relentless extraction and burning of fossil fuels will obviate any short-term benefits to the economy. If we build our recovery on natural resources that need to remain underground to keep global temperatures stable, then we’ll be like the foolish builder in the Gospel of Matthew “who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.”

Originally published on The New Republic.

Philanthropy! What is it good for? Almost absolutely nothing

Think of the planet’s best human being. Who are you thinking of? Pope Francis? Your parents? Justin Bieber? According to Business Insider, it’s Mark Zuckerberg. Why? Because he’s planning to donate $1 billion (less than 5 percent of his massive fortune) to charity. While it’s certainly welcome, philanthropy is far more insidious than it appears at first sight. It tends to lead to fawning press coverage, but little in the way of good reform. Worse, it perpetuates the myth that society’s problems can be solved by the rich and powerful.

In the gospels, there is a story of Christ watching as the wealthy deposit large amounts of their money into the church coffers. Then a poor widow gives two mites, an incredibly modest sum. Jesus turns to his disciples and says, “Verily I say unto you, That this poor widow hath cast more in, than all they which have cast into the treasury. For all they did cast in of their abundance; but she of her want did cast in all that she had, even all her living.” The story is intuitive, because we reward people for their effort; to whom much is given, much is expected.

There’s a very real sense in which it would be hard for Zuckerberg to have done less for the poor. After all, he and his rich Silicon Valley friends regularly use their wealth to lobby for policies that would make them even richer — even if in the guise of social responsibility.

As Chris Rock notes, “behind every great fortune, there is a great crime,” and behind Zuckerberg’s wealth is the relentless monetization of privacy (or, more accurately, the lack thereof). A cynic would be forgiven for wondering if his acts of charity are actually a strategy to placate critics. But, according to Business Insider’s Nicholas Carlson, these recent acts of charity should completely silence the critics.

But Carlson’s obsequious flattery is nothing like the unctuous adoration festooned by Matthew Bishop and Michael Green in their book,”Philanthrocapitalism” — which bears the Orwellian sub-header, “How the Rich Can Save the World.” The authors write approvingly that, “Today’s Philanthrocapitalists see a world full of big problems that they, and perhaps only they, can and must put right.” Maybe, but there could also be a more insidious motive.


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As H.L. Mencken writes, “The urge to save humanity is almost always a false front for the urge to rule. Power is what all messiahs really seek: not the chance to serve.” While some philanthropists support good causes (like Bloomberg’s fight against Big Tobacco), other pet causes are not so humanitarian. While we may applaud the work of Bill Gates, many philanthrocapitalists, like the Adelsons and the Kochs, have decided that their philanthropic venture will be empowering the Ted Cruzes of the world to wreak havoc. Wealth is power, and concentrated wealth is concentrated power. The most benevolent inventions are also the cruelest.

Even when philanthropy is benign, it is inefficient. In every other developed nation (and the U.S. until recently), everyone, including the rich, pays lots of money in taxes and that funds education, healthcare and daycare. In the U.S., the rich pay significantly less, and charities must beg them for money in order to treat the poor. Hospitals and homeless shelters must dedicate time and energy to wooing billionaires for a pittance.

In his book “The Brothers Karamazov,“ Fyodor Dostoyevsky notes this paradox about liberalism, “The more I love humanity in general the less I love man in particular. In my dreams, I often make plans for the service of humanity, and perhaps I might actually face crucifixion if it were suddenly necessary. Yet I am incapable of living in the same room with anyone for two days together.” Social democracy, like that practiced by other developed nations, is the solution to the Dostoyevsky problem. Social democracy allows us to love humanity with our taxes and then work on loving each individual person throughout our lives.

Although many on the right (and the sycophantic center) long for the good old days of charity, such dreams are exactly that — profoundly unrealistic. Conservatives, who distrust human nature so profoundly most of the time, place far too much weight on human benevolence when it comes to charity. There simply is no way to ease poverty with charity. For one, charitable contributions in 2011 were only about $300 billion, far below the $707 billion that the government spends on income security and healthcare for the poor. Given the relative weakness of the U.S. safety net already, one funded entirely on charity would be abysmal. And $300 billion is all charitable donations; many donations aren’t aimed at helping the poor, but instead religious or cultural endeavors. One study finds that of the $250 billion given to charity in 2005, only about 30 percent went to aid the poor. Often, “charity” is simply a means to evade taxes. The Walton family, for instance, uses complex “charitable” trusts that end up sending more money tax-free to their heirs than charitable causes.

While government programs like food stamps face strict and rigorous oversight from both the government (GAO) and media (Fox News), private charities face little scrutiny. Government welfare programs are, contrary to popular belief, incredibly successful at reliving poverty and have incredibly low rates of fraud. And these programs must represent the will of the people, rather than a small elite. Social democracy is a huge project, and requires large portions of GDP. (U.S. government revenues as a percentage of GDP is 10 percent lower than the OECD average.) Churches, foundations and other private organizations are simply too decentralized and inefficient to ever provide that level of aid.

Philanthropy has moral problems too. It assumes that those who earn money have the right to keep it, and do with it as they please. We may like it if Bill Gates gives away a few billion, but are we not also forced to accept that he would be equally right to not give away his wealth? The philanthrocapitalist ethos assumes that since markets are good, Gates could only have made the money justly. Wealth is equated with virtue.

At my old school, a business professor used to challenge her students by asking, “Who did more good, Bill Gates or Mother Theresa?” We may be inclined to say Gates, but as Slajov Zizek writes, “The catch is that before you can give all this away you have to take it.” He notes correctly that, “According to [philanthrocapitalist] ethics, the ruthless pursuit of profit is counteracted by charity: charity is part of the game, a humanitarian mask hiding the underlying economic exploitation. Developed countries are constantly ‘helping’ undeveloped ones (with aid, credits etc), and so avoiding the key issue: their complicity in and responsibility for the miserable situation of the Third World.” Philanthocapitalism assumes the justice of a market distribution and thereby further legitimates the system.

Philanthropy is also profoundly undemocratic. Social programs based in democratic principles work by creating a sense of shared concern for the poor and middle class. We’re all in this together. Like the early church, social democracy is premised on the idea “from each according to their abilities, to each according to their needs.” Philanthropy assumes a far different relationship between the rich and poor.

Oscar Wilde writes, “Charity [the poor] feel to be a ridiculously inadequate mode of partial restitution, or a sentimental dole, usually accompanied by some impertinent attempt on the part of the sentimentalist to tyrannise over their private lives.” In charity, the rich approach the poor not as equal citizens but rather benefactor and serf. It perpetuates a class society, where the poor and middle class are dependent on the wealthy.

This is the most insidious part of the Davostype conferences (where the rich are surprised to discover inequality exists) and the slavish way Business Insider/Forbes/Fortune treat Gates and Buffet. It is the belief, the disgusting and entirely ill-founded belief, that rich people matter. That we need them. It is they who need us. The rich actually give far less of their already outsize income to charity than the middle class. This shouldn’t surprise us; as G.K. Chesterton noted, “You will hear everlastingly, in all discussions about newspapers, companies, aristocracies, or party politics, this argument that the rich man cannot be bribed. The fact is, of course, that the rich man is bribed; he has been bribed already. That is why he is a rich man … a man who is dependent upon the luxuries of this life is a corrupt man, spiritually corrupt, politically corrupt, financially corrupt.”

Paul Piff confirmed this with research showing that wealth is corrupting, that the rich are more unethical than the poor (in his words, they are “assholes”). It’s no wonder Paul warned that, “the love of money is the root of all evil.” Lenin illustrated the concept with a Bible verse from Thessalonians, “For even when we were with you, this we commanded you, that if any would not work, neither should he eat.” Republicans use the verse to chastise welfare cheats, but it’s worth remembering that the rich exist as parasites in our society, extracting far more for themselves than they could ever put in. It is their silly ideas and pet interests that are preventing true reform, their greed poisoning the atmosphere and their love of finance that caused the financial crisis. Philanthropy is predicated on the idea that we need them. Like an emotionally abusive and rapacious lover, they want us to love them because we are dependent on them. Nothing could be further from the truth.

Originally published on Salon.

Five suprising things Marx got right

There’s a lot of talk of Karl Marx in the air these days – from Rush Limbaugh accusing Pope Francis of promoting “pure Marxism” to a Washington Times writer claiming that New York City Mayor Bill de Blasio is an “unrepentant Marxist.” But few people actually understand Marx’s trenchant critique of capitalism. Most people are vaguely aware of the radical economist’s prediction that capitalism would inevitably be replaced by communism, but they often misunderstand why he believed this to be true. And while Marx was wrong about some things, his writings (many of which pre-date the American Civil War) accurately predicted several aspects of contemporary capitalism, from the Great Recession to the iPhone 5S in your pocket.

Here are five facts of life in 2014 that Marx’s analysis of capitalism correctly predicted more than a century ago:

1. The Great Recession (Capitalism’s Chaotic Nature)

The inherently chaotic, crisis-prone nature of capitalism was a key part of Marx’s writings. He argued that the relentless drive for profits would lead companies to mechanize their workplaces, producing more and more goods while squeezing workers’ wages until they could no longer purchase the products they created. Sure enough, modern historical events from the Great Depression to the dot-com bubble can be traced back to what Marx termed “fictitious capital” – financial instruments like stocks and credit-default swaps. We produce and produce until there is simply no one left to purchase our goods, no new markets, no new debts. The cycle is still playing out before our eyes: Broadly speaking, it’s what made the housing market crash in 2008. Decades of deepening inequality reduced incomes, which led more and more Americans to take on debt. When there were no subprime borrows left to scheme, the whole façade fell apart, just as Marx knew it would.

2. The iPhone 5S (Imaginary Appetites)

Marx warned that capitalism’s tendency to concentrate high value on essentially arbitrary products would, over time, lead to what he called “a contriving and ever-calculating subservience to inhuman, sophisticated, unnatural and imaginary appetites.” It’s a harsh but accurate way of describing contemporary America, where we enjoy incredible luxury and yet are driven by a constant need for more and more stuff to buy. Consider the iPhone 5S you may own. Is it really that much better than the iPhone 5 you had last year, or the iPhone 4S a year before that? Is it a real need, or an invented one? While Chinese families fall sick with cancer from our e-waste, megacorporations are creating entire advertising campaigns around the idea that we should destroy perfectly good products for no reason. If Marx could see this kind of thing, he’d nod in recognition.

3. The IMF (The Globalization of Capitalism)

Marx’s ideas about overproduction led him to predict what is now called globalization – the spread of capitalism across the planet in search of new markets. “The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe,” he wrote. “It must nestle everywhere, settle everywhere, establish connections everywhere.” While this may seem like an obvious point now, Marx wrote those words in 1848, when globalization was over a century away. And he wasn’t just right about what ended up happening in the late 20th century – he was right about why it happened: The relentless search for new markets and cheap labor, as well as the incessant demand for more natural resources, are beasts that demand constant feeding.

4. Walmart (Monopoly)

The classical theory of economics assumed that competition was natural and therefore self-sustaining. Marx, however, argued that market power would actually be centralized in large monopoly firms as businesses increasingly preyed upon each other. This might have struck his 19th-century readers as odd: As Richard Hofstadter writes, “Americans came to take it for granted that property would be widely diffused, that economic and political power would decentralized.” It was only later, in the 20th century, that the trend Marx foresaw began to accelerate. Today, mom-and-pop shops have been replaced by monolithic big-box stores like Walmart, small community banks have been replaced by global banks like J.P. Morgan Chase and small famers have been replaced by the likes of Archer Daniels Midland. The tech world, too, is already becoming centralized, with big corporations sucking up start-ups as fast as they can. Politicians give lip service to what minimal small-business lobby remains and prosecute the most violent of antitrust abuses – but for the most part, we know big business is here to stay.

5. Low Wages, Big Profits (The Reserve Army of Industrial Labor)

Marx believed that wages would be held down by a “reserve army of labor,” which he explained simply using classical economic techniques: Capitalists wish to pay as little as possible for labor, and this is easiest to do when there are too many workers floating around. Thus, after a recession, using a Marxist analysis, we would predict that high unemployment would keep wages stagnant as profits soared, because workers are too scared of unemployment to quit their terrible, exploitative jobs. And what do you know? No less an authority than the Wall Street Journal warns, “Lately, the U.S. recovery has been displaying some Marxian traits. Corporate profits are on a tear, and rising productivity has allowed companies to grow without doing much to reduce the vast ranks of the unemployed.” That’s because workers are terrified to leave their jobs and therefore lack bargaining power. It’s no surprise that the best time for equitable growth is during times of “full employment,” when unemployment is low and workers can threaten to take another job.

In Conclusion:

Marx was wrong about many things. Most of his writing focuses on a critique of capitalism rather than a proposal of what to replace it with – which left it open to misinterpretation by madmen like Stalin in the 20th century. But his work still shapes our world in a positive way as well. When he argued for a progressive income tax in the Communist Manifesto, no country had one. Now, there is scarcely a country without a progressive income tax, and it’s one small way that the U.S. tries to fight income inequality. Marx’s moral critique of capitalism and his keen insights into its inner workings and historical context are still worth paying attention to. As Robert L. Heilbroner writes, “We turn to Marx, therefore, not because he is infallible, but because he is inescapable.” Today, in a world of both unheard-of wealth and abject poverty, where the richest 85 people have more wealth than the poorest 3 billion, the famous cry, “Workers of the world uniteyou have nothing to lose but your chains,” has yet to lose its potency.

 

This piece first appeared on The Rolling Stone.

The robots aren’t the problem, politicians are

A spectre haunts us, the spectre of robots. The Economist writes, “it seems likely that this wave of technological disruption to the job market has only just started. From driverless cars to clever household gadgets, innovations that already exist could destroy swathes of jobs that have hitherto been untouched.”

recent study from the University of Oxford finds that 47% of U.S. jobs could be replaced by computerization (see chart). The study includes a handy table at the bottom where you can see the probability of your job being computerized (most likely to be affected: telemarketing, least likely: recreational therapy). As Tyler Cowen writes in Average is Over, “as intelligent-analysis machines become more powerful and more commonplace, the most obvious and direct beneficiaries will be the humans who are adept at working with computers and with related devices for communications and information processing.” This, he argues will drive inequality.

It’s certainly true that innovation has driven inequality, but it is more complicated than Cowen makes it out to be. Technology has always been disruptive, but how the gains are distributed is the real issue. Oscar Wilde wrote in 1891,

Up to the present, man has been, to a certain extent, the slave of machinery, and there is something tragic in the fact that as soon as man had invented a machine to do his work he began to starve. This, however, is, of course, the result of our property system and our system of competition. One man owns a machine which does the work of five hundred men. Five hundred men are, in consequence, thrown out of employment, and, having no work to do, become hungry and take to thieving. The one man secures the produce of the machine and keeps it, and has five hundred times as much as he should have, and probably, which is of much more importance, a great deal more than he really wants.

His analysis is surprisingly relevant today. The benefits of technology and globalization have been distributed differently in different societies. In countries with strong bonds of social democracy, the benefits have been more widely distributed through a government transfer system.

The conventional wisdom is that skill-biased technological change is driving inequality. The premise is that technological developments have favored college-educated workers over unskilled labor, thereby increasing inequality. Since it was formulated, SBTC has drawn criticism. A 2002 paper by David Card first drew attention to potential holes in the explanation: a short period of stabilization in wage inequality in the 1990s during a technological boom and the failure to explain wage gaps between men and women as well as blacks and whites. A 2012 paper by Daron Acemoglu and David Autor noted other failures in the theory, namely that it could not explain the divergence in incomes that had occurred among skilled workers and why the real median wages could decline during a period of increasing productivity.

New research Larry Mishel, Heidi Shierholz and John Schmitt further vitiates the thesis. Mishel et al. argue that “job polarization,” the premise that more jobs have been created in low-wage sectors and high-wage sectors, thus driving wage inequality, doesn’t actually explain the problem. On the one hand, high-wage occupations have not significantly expanded their share of the workforce since 2000. On the other, low-wage jobs have not increased as a total share of employment since 1979.

They find that changes in the occupation structure do not affect the wage structure, so if technology causes a shift from manufacturing to retail, this doesn’t necessarily entail a shift in the wage structure. They find that inequality is increasing within occupations, not between occupations as the SBTC narrative would predict. The SBTC narrative relies on the idea of an “education premium,” i.e., people with higher education reap the benefits of technological progress. But Mishel et al. find that wage inequality has grown strongly since the mid-1990s while the education wage premium grew little. Wages for college graduates have flattened over the last 10 years, even among science, technology, engineering and mathematics (STEM) and business occupations. He and his colleagues point instead to political choices, not economic inevitability.

In the show Always Sunny In Philadelphia, Charlie Kelly is one of the owners of a bar, but has lost a large portion of his share through Esau-esque trades. Because he no longer owns as much of the bar, he is forced to do the bad jobs around the bar, which become known as “Charlie work.” Charlie is subject to bouts of unemployment and degrading labor. He is trapped in a Catch-22; he would happily give up “Charlie work” in favor of machines, but because he lacks a stake in the bar, it would only leave him unemployed. This is the plight of many Americans, because America has not developed social democracy. John Schmitt of the Center for Economic and Policy Research told me that countries with strong social safety nets view globalization more positively than countries without. That’s because the gains from trade are distributed more equally, so everyone benefits. In America, since the 1970s, these gains have accrued more and more to the richest Americans, while hourly compensation for non-supervisory workers has remains stagnant (see chart).

Oscar Wilde proposes to eliminate “Charlie work” through machines:

And as I have mentioned the word labour, I cannot help saying that a great deal of nonsense is being written and talked nowadays about the dignity of manual labour. There is nothing necessarily dignified about manual labour at all, and most of it is absolutely degrading. It is mentally and morally injurious to man to do anything in which he does not find pleasure, and many forms of labour are quite pleasureless activities, and should be regarded as such. To sweep a slushy crossing for eight hours, on a day when the east wind is blowing is a disgusting occupation. To sweep it with mental, moral, or physical dignity seems to me to be impossible. To sweep it with joy would be appalling. Man is made for something better than disturbing dirt. All work of that kind should be done by a machine.

In the near future, such work will be done by robots, a welcome development. The question is how we distribute these gains. Since the 1970s, we’ve allowed most of them to accrue to the top 1%. That is not practical, nor was it inevitable. We need the productivity growth that comes from machines to be distributed equitably, so that everyone benefits.