Tuesday, May 21, 2013

Welcome To ‘The Trickle-Up Economy’

Economic Matters

Youth Unemployment: Almost 300 million youth worldwide are without jobs. The Economist writes about the long-term effects on starting off their careers without gaining a first job early on after completing their education: “A clutch of academic papers, based mainly on American statistics, shows that people who begin their careers without work are likely to have lower wages and greater odds of future joblessness than those who don’t. A wage penalty of up to 20%, lasting for around 20 years, is common. The scarring seems to worsen fast with the length of joblessness and is handed down to the next generation, too.”
Source: The Economist

The American president Ronald Reagan got it wrong when he talked about the trickle-down economy in the 1980s, a period of great change that witnessed the tearing up of the social contract and the increase of division and economic inequalities. 

Under Reagan’s watch, the American economy was transformed into a trickle-up economy, aided in large part by Wall Street financial schemes and the introduction of useless financial instruments (i,e., hedge funds, derivatives, swaps) to not only confuse people unfamiliar with financial speculation (re: gambling), but ensure that the desired goal was achieved—to wit, money ought to flow upward to the wealthy, who would become the super wealthy and super super wealthy. The U.S. Congress, with a few exceptions, filled with fearful men and women, became blind to it, fearful of losing financial support for their re-election campaigns

Coupled with two unproven economic theories—balanced budgets and austerity measures—and you have the makings of a society where we witness 1% having undue influence on not only the American economy, but the world's economy. Proof: witness the effects on the world economy of the 2008 Wall Street meltdown; its effects are still being felt and will be for a long time.

In a recent article (“Generation Jobless”) in The Economist, almost 300 million young people are unemployed worldwide:
Official figures assembled by the International Labour Organisation say that 75m young people are unemployed, or 6% of all 15- to 24-year-olds. But going by youth inactivity, which includes all those who are neither in work nor education, things look even worse. The OECD, an intergovernmental think-tank, counts 26m young people in the rich world as “NEETS”: not in employment, education or training. A World Bank database compiled from households shows more than 260m young people in developing economies are similarly “inactive”. The Economist calculates that, all told, almost 290m are neither working nor studying: almost a quarter of the planet’s youth (see chart one).
Do the power brokers on Wall Street show any guilt for their actions, their miscalculations at the world’s largest gambling pit? No, they are without remorse, and in fact see it their duty to accumulate wealth. Why should they pay more taxes? they whine with a collective voice. And now the financial barons of Wall Street, a small minority group with loads of power and influence, want to ensure it remains this way. If they had a motto, it would likely be “More for me, and nothing for you.” It’s the rationalization, justification and institutionalization of inequality. More of the same.

Everyone should view economist Jeffrey Sach’s commentary in the Huffington Post on the pathological behaviour of Wall Street players, calling them a bunch of  “crooks, ” an true appraisal of the gamblers who view themselves as honest agents. Nothing could be further from the truth.

So, what is the U.S. Justice department doing about the fraudsters? Well, nothing; it has decided, instead, to go after the journalists who report bad news, a foolish and anti-constitutional strategy that is bound to fail. An article, by Richard Eskow, in The Huffington Post, says the follwing:
Every law enforcement agency needs to worry about keeping its citizens safe. But "too big to jail" leaves the administration with a black mark in that category, too. Our nation's bankers “put Americans at risk” before 2008 and continue to do so every day. Their misdeeds have deprived Americans of wealth, health, and even their lives. (The suicide rate has risen four times faster since the recession began.)
But bank crime doesn't seem to appear on the Obama Administration's radar, and it doesn't seem to interest the Holder Justice Department. That means local law enforcement spends a lot more time evicting homeowners—including the victims of illegal foreclosure—than it does arresting lawbreaking bankers. They're wiretapping reporters and jailing leakers, while letting executive-suite criminals go free.
Apparently leaks which keep the public informed require "very aggressive action" -- but crimes which shatter the economy, leaving millions without homes and millions more without jobs aren't worth lifting a finger to investigate.
In an op-ed piece (“The Chutzpah Caucus”) in The New York Times, Paul Krugman writes about the irrational thinking of hard-line conservatives:
The funny thing is that right now these same hard-line conservatives declare that we must not run deficits in times of economic crisis. Why? Because, they say, politicians won’t do the right thing and pay down the debt in good times. And who are these irresponsible politicians they’re talking about? Why, themselves.
To me, it sounds like a fiscal version of the classic definition of chutzpah — namely, killing your parents, then demanding sympathy because you’re an orphan. Here we have conservatives telling us that we must tighten our belts despite mass unemployment, because otherwise future conservatives will keep running deficits once times improve.
Put this way, of course, it sounds silly. But it isn’t; it’s tragic. The disastrous turn toward austerity has destroyed millions of jobs and ruined many lives. And it’s time for a U-turn.
Welcome to the Trickle-Up Economy; well it’s more like a strong cash current flowing to the top. Nice. You get the picture. If I didn’t know any better, I would have thought I was living in feudalistic age. But that couldn’t be true, could it?


Here are some excellent articles on Trickle-Up Economics; it’s rarely discussed today:

1. America's Trickle “Up” Economy and the Rationalization of Inequality (Huffington Post; December 2012)

2. Canada Discovers Trickle Up Economics (Toronto Star; Dec. 2010)

3. Tricke-Up Economics (Washington Post; Sept 2006)