Monday, October 16, 2017

The Southern Diaspora and the Southernization of America

The Republican Party has long been associated with fiscal conservatism.  It still is—or at least it was until Trump arrived.  But it was also generally liberal on social issues with its moral core derived from traditional New England Protestantism.  At some point the Party became associated with a particularly radical social conservatism as its center of gravity moved to the states of the South that promoted the values of Evangelical Christianity.  Donald Trump surprised everyone by gaining the Republican nomination for president, and startled everyone by actually winning the election.  Commentators were so busy drawing comparisons with the rise of Adolph Hitler that they forgot to notice that the politician Trump most resembled was the southern segregationist governor, George Wallace, who ran for president in 1964 and 1972 as a Democrat and in 1968 representing the American Independent Party.  Trump did not run as a segregationist, but he gave a wink and a nod to every racist he encountered.  Wikipedia provides these comments on Wallace’s 1968 campaign.

“Wallace ran a campaign supporting law and order and states' rights on racial segregation. This strongly appealed to rural white Southerners and blue-collar union workers in the North. Wallace was leading the three-way race in the Old Confederacy with 45% of the vote in mid-September. Wallace's appeal to blue-collar workers and union members (who usually voted Democratic) hurt Hubert Humphrey in Northern states like Ohio, Illinois, New Jersey, Michigan, and Wisconsin. A mid-September AFL-CIO internal poll showed that one in three union members supported Wallace, and a Chicago Sun-Times poll showed that Wallace had a plurality of 44% of white steelworkers in Chicago.”

“Wallace's foreign policy positions set him apart from the other candidates in the field. If the Vietnam War was not winnable within 90 days of his taking office, Wallace pledged an immediate withdrawal of U.S. troops. . . . Wallace also called foreign-aid money 'poured down a rat hole' and demanded that European and Asian allies pay more for their defense.”

Wallace appealed to the racial and economic fears of the white working class.  The surprising strength of his campaign should have told us that Trump would also be stronger than expected outside of the South.

Historians, social scientists, and political analysts have often been moved to use a phrase similar to the “southernization of America” to describe the process by which the Republican Party was reconfigured to take its current form and the white working class switched from seeking the economic benefits promised by Democrats to pursuing the cultural values promoted by Republicans.  Could it be that southern values propagated out of the South with the huge migrations of southerners that dispersed throughout the rest of the nation during most of the twentieth century?  James N. Gregory is a history professor at the University of Washington who believes that to be the case.  He presents his data and conclusions in The Southern Diaspora: How the Great Migrations of Black and White Southerners Transformed America (2005).

The migration of Blacks from the South to the cities of the North and West has been referred to as “The Great Migration.”  The migration of whites from the South over the same period was much larger, but much less studied.  Gregory provides this summary of what his investigations demonstrated.

“This book is about what may be the most momentous internal population movement of the twentieth century, the relocation of black and white Americans from the farms and towns of the South to the cities and suburbs of the North and West.  In the decades before the South became the Sun Belt, 20 million southerners left the region.  In doing so, they changed America.  They transformed American religion, spreading Baptist and Pentecostal churches and reinvigorating evangelical Protestantism, both black and white versions.  They transformed American popular culture, especially music.  The development of blues, jazz, gospel, R&B, and hillbilly and country music all depended on the southern migrants.  The Southern Diaspora transformed American racial hierarchies, as black migrants in the great cities of the North and West developed institutions and political practices that enabled the modern civil rights movement.  The Southern Diaspora also helped reshape American conservatism, contributing to new forms of white working-class and suburban politics.  Indeed, most of the great political realignments of the second half of the twentieth century had something to do with the population movements out of the South.”

Given the interest in Donald Trump and the Republican voters, the focus here will be on the effects of the southern white migrants.

Discussing internal migrations and the effects they might have becomes complicated because people will leave one location in search of a better life but a significant number will return eventually, sometimes within months, sometimes only decades later.  Data exist providing numbers of southerners who migrated out over some time period, and data exist indicating where those migrants settled over that period.  However the data needs interpretation from other sources in order to determine what effect they might have had on any society in which they embedded themselves.  Economic and social circumstances would also play a role in where people settled.  Blacks were restricted in where they could go and headed for the black enclaves in the big northern and western cities.  Whites could go anywhere other whites lived, but were not equally welcome in all places.  As a result, whites would also tend to concentrate in areas where jobs were available and any cultural peculiarities they might have brought with them were tolerated. 

The migration flow breaks down into two periods.  The first begins at the start of the twentieth century, grows through the war years and diminishes during the Great Depression of the 1930s.  The second and largest migration period was driven by World War II and the postwar boom years.  The out migration of blacks would peak in the 1970s and fall considerably as the century came to an end.  For whites, the peak would come in the 1950s and stay relatively high from then on.

“In the Great Migration era of the early twentieth century, when African Americans moved north for the first time in large numbers and established much-noticed communities in the major cities, less-noticed white southerners actually outnumbered them roughly two to one.  The margins became larger after 1950 and still larger as the century drew to a close.  Over the course of the twentieth century, more than 28 million southerners left their home region—28 percent were African Americans, 68 percent were non-Hispanic whites, and 4 percent southern-born Latinos, Tejanos mostly, who had been joining the flow north and west since World War II.”

Gregory provides a breakdown of where former southerners lived in 1970 by region.  By far, the most densely settled regions are what he refers to as the Pacific (California, Oregon and Washington) and the East North Central (Wisconsin, Michigan, Illinois, Indiana, and Ohio).

“In 1970, 12 percent of California residents were southern born.  This was proportionally similar to Ohio, where 1.4 million southerners of both races lived, and to Indiana, which was home to 617,000.  In Illinois, where former southerners numbered close to a million, and Michigan, where there were more than 800,000, they constitutes 9 percent of the population….Unfortunately, we have no way of counting the children and grandchildren born in these states.  They would certainly at least double the demographic impact.”

 One must remember that statewide numbers can be misleading because conditions encouraged concentration of migrants.  Consider California as an example.  It saw a huge influx of migrants from Oklahoma, Arkansas, and Texas during the depression years.  Many of them settled in the Central Valley where agricultural jobs were available and became a significant fraction of the population.  California is today, politically, two states: the coast and the inland region.  It is perhaps the most liberal state in the union because most of the voters live on the coast where the original settlers had mostly non-southern origins.  The inland parts of the state are highly conservative, differing little today in political views from those now found in Oklahoma, Arkansas, and Texas.

Gregory was quoted as writing that the migrant southerners “helped reshape American conservatism, contributing to new forms of white working-class and suburban politics.”  How does he justify that claim?

One of the southern contributions to political discourse was to make racism and racial violence more politically correct.  Racism already existed outside the South, but it was generally illegal and violence was not condoned.  The southerners brought the attitude that racism was legal and violence against blacks was condoned.  This message was one of encouragement of others to behave as whites did in the south.  Although the southerners were not numerous enough to be major participants in racial incidents, they could be the tinder that lights the flame.  Gregory provides this example.

“Southern whites played a real part in the hate strikes and white-against-black housing riots that occurred in northern and western cities in the 1940s and 1950s.  Sociologist Katherine Archibald worked in a shipyard in Oakland, California, during World War II.  She witnessed neither riots nor major violent clashes, but in her book Wartime Shipyard,  she explored the tense racial dynamics of the yard, where about 20 percent of the workers were African Americans from the western South and another 20 percent were whites from the same region….Okies often took the lead in whites-only conversations about the ‘Negro problem.’  Vicious, uncompromising racism, she pointed out, was widespread, virtually universal among whites of all backgrounds in the shipyard, but the southerners spoke loudly about their hatreds and theories, drawing a sense of authority from their supposed special knowledge about how to handle black people.  Talk of lynching was an Okie contribution to the racist discourse: ‘What you need round here.’ one former southerner counseled, ‘is a good old fashioned lynching.  Back in my home state we string a nigger up or shoot him down, every now and then, and that way we keep the rest of them quiet and respectful’.”

Why is the encouragement of racism of significance in the history of American conservatism?  Because every Republican president from Nixon to Trump has sent the message that racists are welcome in the Republican Party, the conservative party.  This embrace of racism led southern Democrats to turn into southern Republicans and helped working and middle class whites outside the South decide to vote the same way, although there would be more than racism involved.  Under Trump, the Republican Party is best described as a white nationalist party.

Gregory provides several examples where the migrant southerners did more than just talk.  The resurgence of the Ku Klux Klan in the 1920s was driven mostly by southern activism.  The participants were majority non-southerners, but southerners led the way.

“Estimates of the numbers who joined [the Klan]….range well above 2 million, with two-thirds of the membership outside the South.  Huge Klan organizations were built in Indiana, Ohio, Pennsylvania, Illinois and Michigan.  The West also responded to the Invisible Empire.  Oregon elected a Klansman governor in 1922, as did Colorado in 1924, and there were pockets of Klan strength in California and Washington.”

A Texas native, D.C. Stephenson was perhaps the most politically successful of the Klansmen.

“….Indiana alone counted 300,000 Klansmen….the 1924 election season witnessed Stephenson’s greatest triumph: first a Klan takeover of the Republican Party, then of the Indiana statehouse.  Until he was brought down by a 1925 rape and suicide scandal, Stephenson was the most visible and probably the most powerful Klansman in the country.”

A similar dynamic occurred when George Wallace brought his campaign to the North in the 1960s.  He received considerable support from southern migrants, but probably more importantly, their support provided the cover for others who might have hesitated to vote for such a controversial and unlikely figure.  By the time Wallace arrived on the national scene a number of other developments had occurred. The civil rights movement and subsequent legislation had further aroused racial issues.  School desegregation would be a long and nasty process—unpopular in both the North and South.  The war in Vietnam would grow to monstrous proportions, dividing the nation as to how to define patriotism.  The cultural upheavals of the 1960s had offended the traditionally minded and prompted religious groups to become more politically active.

Wallace brought more to the table than just racism.  Like Trump he appeared to be the answer to a number of the concerns of the white lower and middle classes.

“His promises crossed the boundaries conventional in northern politics.  He sounded like a Republican on welfare, race, and taxes, a Democrat on social security and union rights, and a southerner on the centrality of God-fearing religion.”

Much of the cultural division that emerged during the 1960s was driven by southern music.  Traditional southern music formed the basis for both an industry of folk music and one of country music.  The two would take opposite sides on virtually all issues.

The South also spawned liberals who would take their music north and create an industry that would side with liberals on issues related to race and unionization, and promote anti-war stances during the 1960s.  Woody Guthrie was born in Oklahoma and gained notoriety in California.  He would be the prototype.  The traditional southern melodies would be used to create protest songs that were used as a resource in the labor and civil rights movements, and ultimately in the antiwar movement.

Country music took a different path.  It had been increasing in popularity outside the South for some time, acquiring a country-western flavor when cowboy themes were added.  However, the arrival of rock and roll music in the 1950s produced an existential crisis.  To continue to grow, country had to redefine itself.  It had to shed the hillbilly and cowboy imagery and find an audience on which to focus.  If the youth wanted rock and roll and exciting experimentation, country would go for an older audience and emphasize traditional values.

“The racial markings remained very apparent as Nashville positioned itself against the racially integrated imagery and personnel of rock and roll and as George Wallace and other segregationist politicians claimed country music for the backlash cause.”

Country music also positioned itself as the “working man’s” music.  The songs were often about humble people working dangerous jobs, while suffering broken romances with unfaithful women, and the disdain of the elites.  This approach was broadly popular across different regions and the various ethnicities.  It had found a definite demographic niche.

“Listener surveys revealed that country music appealed largely to whites in middle-age range, twenty-five to forty-nine, with few younger listeners.  And the audience was largely blue-collar families—especially the skilled and semi-skilled sectors—with mid-range incomes and modest educations.  In the North, former southerners accounted for a vigorous portion of this market, thus approximating the start-up role they played in the Wallace crusades.  But the product had spread far beyond that base.  Country music had also become popular in ethnic neighborhoods, showing up in all sorts of blue-collar taverns….”

With the coming of the Vietnam War and the associated controversies, country music put itself firmly on the side of the war and the soldiers who had to fight it—a strategy that would again be popular with its audience.  It would represent patriotism and traditionalism.  Would this be enough to help determine the course of working class conservatism?  Gregory provides this comment.

“These are songs some critics will say, and who knows what they meant to audiences?  But they were not just songs.  Country music of this era was surrounded by political commentary.  DJs, artists, journalists, and music-buying publics recognized that music was a prime battleground for the epic conflicts of the Vietnam era.  Politicians did as well.  Many of the medium’s biggest stars signed up to help Wallace in 1968, performing with the governor as he crisscrossed the country.  Nashville’s ‘Music Row was practically a battlefield command post for George Wallace,’ observed journalist Paul Hemphill, who found also a few Nixon supporters but nary a star who publicly supported Hubert Humphrey.”

“In the years that followed, Republicans moved to take over that command post.  Repeatedly (and awkwardly) declaring his fondness for country music, President Nixon courted musicians and Nashville executives, knowing that these entertainers would help secure the new voting blocs that the Republicans counted on, working-class whites in the South and working-class whites outside the south.”

Southern whites would provide yet another factor that would drive working-class and middle-class whites in a more conservative direction: the rise of religious political activism.  The religion exported to the North and West was of a very traditional Bible-driven form.  It was tolerant of racism, but intolerant when it came to Catholics, Communists, homosexuals, and feminists.  It did not become aggressively political until the Roe v. Wade decision in 1973.  On the issue of abortion, the southern churches and Catholicism finally found common ground.

“Fear of Catholics had been part of what had last driven evangelicals into the political arena in the 1920s, when their voices and votes had aided the causes of prohibition, anti-immigration, and the Ku Klux Klan.”

“With the reawakening of politicized Christian conservatism, Republicans grafted moral traditionalism onto the patriotic and racial traditionalism that had been helping them win elections.  Opposition to feminism, gay rights, sex education in the schools, and especially abortion offered a new way to appeal to blue-collar and lower-middle-class whites who not long before had been consistent Democrats.”

The politicization of Christian traditionalists provided the Republicans with another opportunity to gain votes among the white working and middle classes by promising to discriminate against and restrict the civil rights of an expanded list of people.  The party once known for fiscal responsibility and civil liberties had now formed a covenant with these white voters that allowed blacks, Hispanics, immigrants of all kinds, homosexuals, and women to be considered as less than full citizens of the United States. 

Such an approach to politics would inevitably lead to someone like Donald Trump.

And that is how we arrived at where we are today.

The interested reader might find the following articles informative:

Sunday, October 8, 2017

Capitalism Ends with an Overdose of Itself

What we now call economics was once referred to as political economy.  This latter term recognized the fact that the activities we associate with economics today should be considered
in the context of the overall performance of society.  It was assumed that healthy economies, in terms of production and trade, should be coupled with cultural, legal, and national constraints to produce a healthy society.  Political economy then becomes a domain consisting of social scientists as well as those devoted to studying the flow of money and product.  Over time, the discipline of economics has grown apart from this coupling with sociology.  In fact, the neoliberal uprising in the latter half of the twentieth century has resulted in the near elimination of social issues except to the extent that they support neoliberal capitalistic models.

Wolfgang Streeck seems a throwback to an earlier time in that his primary background is in sociology, and he views economic antics in the context of their interaction with society in general.  This perspective produces a rather jaundiced view of the path down which neoliberal capitalism is taking us.  His views are summarized in a collection of essays in his book How Will Capitalism End?: Essays on a Failing System

Streeck is the director of the Max Planck Institute for Social Research in Cologne and Professor of Sociology at the University of Cologne.  He is an Honorary Fellow of the Society for the Advancement of Socio-Economics and a member of the Berlin Brandenburg Academy of Sciences as well as the Academia Europaea.  Although Europe is his home base, his view is relevant to all.  His reference to capitalism as a failing system refers to all advanced Western economies.  The United States, as the biggest and most powerful economy, is also the baddest of the bad actors.

Streeck sees capitalism as a highly unstable construct that is incapable of self-regulation and must be continually forced to remodel itself as society and stakeholders, such as its needed workers, constrain its behaviors.

“Capitalism has always been an improbable social formation, full of conflicts and contradictions, therefore permanently unstable and in flux, and highly conditional on historically contingent and precarious supportive as well as constraining events and institutions.”

“In fact, the history of modern capitalism can be written as a succession of crises that capitalism survived only at the price of deep transformations of its economic and social institutions, saving it from bankruptcy in unforeseeable and unintended ways.”

Early capitalism savaged itself and society with wild periods of boom and bust as it was unable to live with unmanaged competition.  It moved on to forming monopolies to control competitors and stabilize (maximize) profits.  Society had to move in and apply constraints.  It struggled for decades with labor movements which eventually forced it to change its mode of operation and cede more of its autonomy to social forces.  In the early twentieth century it was essentially ruled by government decree as it was used to support two world wars.  In the period between the wars, capitalism failed to lead to stable societies in many countries and succumbed to either fascism or communism.  After the second war capitalism had generally been left in a highly-controlled mode by governments following Keynesian economic principles.

“Out of this grew the democratic welfare-state capitalism of the three post-war decades, with hindsight the only period in which economic growth and social and political stability, achieved through democracy, coexisted under capitalism, at least in the OECD world where capitalism came to be awarded the epithet, ‘advanced’.”

From about 1970 on, this equilibrium would dissipate under a surge in neoliberal thinking and the combined effects of a series of economic and social crises.  Streeck highlights three economic crises that followed this transition point.

“To be precise, three crises followed one another: the global inflation of the 1970s, the explosion of public debt in the 1980s, and rapidly rising private indebtedness in the subsequent decade, resulting in the collapse of financial markets in 2008….This sequence was by and large the same for all major capitalist countries, whose economies have never been in equilibrium since the end of post-war growth at the end of the 1960s.”

During this post-war period the acceptance of neoliberal principles produced profound changes in capitalist societies.

“While in the 1970s governments still had a choice, within limits, between inflation and public debt to bridge the gap between the combined distributional claims of capital and labour and what was available for distribution, at the end of inflation at the beginning of the 1980s the ‘tax state’ of modern capitalism began to change into a ‘debt state.’  In this it was helped by the growth of a dynamic, increasingly global financial industry headquartered in the rapidly de-industrializing hegemonic country of global capitalism, the United States.”

The financial burden of debt would cause yet another transition to what Streeck refers to as the “consolidation state.”  If the level of debt was deemed to be insupportable, then the only way to keep indebtedness in check was to scale back government expenditures.  This trend was encouraged by the neoliberal crowd who believed that a strong market economy and a strong society were one and the same.  However, by diminishing the capabilities of government and virtually eliminating any possibility of collective action on the part of wage earners, capitalism weakened the sources of power that had kept it from running off the rails in earlier times.

“The advance of neoliberalism coincided with steadily declining electoral turnout in all countries, short-lived exceptions notwithstanding.  The shrinking of the electorate was, moreover, highly asymmetrical: those that dropped out of electoral politics came overwhelmingly from the lower end of the income scale—ironically where the need for egalitarian democracy is greatest.  Party membership declined as well, in some countries dramatically; party systems fragmented; and voting became volatile and often erratic….Also declining is trade-union membership—a trend reflected in an almost complete disappearance of strikes, which like elections have long served as a recognized channel of democratic participation.”

In addition, the continued accumulation of wealth in the hands of a very few that is an intrinsic property of market capitalism has supported a herd of oligarchs who use their money to influence political policies, and they use their philanthropy to recast society in a form with which they are more comfortable.  Streeck quotes a conclusion reached by Jeffrey Winters in Oligarchy and Democracy.  Winters constructed a Material Power Index to assess the degree of influence which the very wealthy possessed in comparison to the bottom 90% of the population. Winters produced an interesting comparison.  If one takes the wealth provided power of the top 100 households and compares that to that of the bottom 90% (excluding home equity) the ratio is 108,765 to 1. 

“….this corresponds roughly to the difference in material power between a senator and a slave at the height of the Roman Empire.”

Is capitalism really heading toward some ultimate crisis that will finally break its hold on society, or are we just moving towards another transition point?  Streeck points out three trends that have been running in concert over several decades that suggest the problems with capitalism are long term and intrinsic.  He focuses on lower growth, increasing inequality, and ever larger levels of both public and private debt.  These are long-term global trends.  The three feed off each other.  For example, low growth justifies wage stagnation, but wage stagnation and the inability to accommodate more debt limit aggregate demand, leading to continuing low growth.

“….low growth contributes to inequality by intensifying distributional conflict; inequality dampens growth by restricting effective demand; high levels of existing debt clog credit markets and raise the prospect of financial crises; an overgrown financial sector both results from and adds to economic inequality etc., etc.  Already the last growth cycle before 2008 was more imagined than real, and post-2008 recovery remains anaemic at best, also because Keynesian stimulus, monetary or fiscal, fails to work in the face of unprecedented amounts of accumulated debt.”

Extreme inequality and low demand, which seem to be coupled, leads the wealthy to seek essentially nonproductive ways to increase their wealth.  This is likely a source of the extreme risk taking that has permeated financial markets.  Wealth, with nowhere productive to go, bids up asset prices and leads to bubbles and crashes.

There is certainly danger in the power of oligarchs to influence society and government policy, but Streeck points out an additional aspect of extreme inequality: the tendency of the very wealthy to view themselves as above or at least separate from society.  In fact, a new term has been conjured up to describe such a situation: plutonomy.  We have this definition from Wikipedia.

“Plutonomy is a term that Citigroup analysts have used for economies ‘where economic growth is powered by and largely consumed by the wealthy few’.”

A society in which a few extremely wealthy people continue to make money while everyone else treads water and watches cannot go on forever.

Capitalism has also created problems for itself by moving market solutions into areas that should, and ultimately, must be controlled by society.  Following Karl Polanyi, Streeck mentions the three “fictitious commodities” of “labour, land (or nature) and money.”

“A fictitious commodity is defined as a resource to which the laws of supply and demand apply only partially and awkwardly, if at all; it can therefore only be treated as a commodity in a carefully circumscribed, regulated way, since complete commodification will destroy it or make it unuseable….Unless held back by constraining institutions, market expansion is thus at permanent risk of undermining itself, and with it the viability of the capitalist economic and social system.”

Advanced nations are all struggling to deal with capitalism’s commodification in these areas as they increasingly impinge on and alter the nature and stability of societies.  As low growth persists in the economies, ever more complex and risky methods of gaining profits are being pursued.

“….we may note that it was an excessive commodification of money that brought down the global economy in 2008: the transformation of a limitless supply of cheap credit into ever more sophisticated financial ‘products’ gave rise to a real-estate bubble of a size unimaginable at the time.  As of the 1980s, deregulation of U.S. financial markets had abolished the restrictions on the private production and marketization of money devised after the Great Depression.  ‘Financialization,’ as the process came to be known, seemed the last remaining way to restore growth and profitability to the economy of the overextended hegemon of global capitalism.”
Streeck list a number of predictions on how capitalism might ultimately fail and require a reimagining of how societies must work in the future.  The two most compelling thoughts involve inevitable crises involving land (nature) and labor.  In the former case, global warming has the potential to impose catastrophic changes on climate and the environments in which nations must exist.  This will require advanced planning and resource allocation on a broad scale.  Will states weakened by generations of neoliberal market-driven propaganda have the strength to counter the profit-driven oligarchs and their legions of lobbyists?  Can profit-driven capitalists be expected to come to their own rescue? 

The world must also deal with an ever increasing population with ever increasing demands on the earth’s resources.  As more nations increase in wealth and demand the right to have a lifestyle similar to that in the advanced countries, the impact on resources will worsen.  Again, will profit-driven capitalists contribute to wise discourse on allocation of critical resources, or will they counter any attempt to limit their profits?

The excessive commodification of labor may force society to rise up and demand a new societal approach before climate change becomes critical.  Capitalism has brought increased wealth to nations, but its decision to not share that wealth has led not to increased prosperity and improved lives for the majority, but rather the opposite.

“Deregulation of labour markets under international competition has undone whatever prospects there might once have been for a general limitation of working hours.  It has also made unemployment more precarious for a growing share of the population.  With the rising labour-market participation of women, due in part to the disappearance of the ‘family wage,’ hours per month sold by families to employers have increased while wages have lagged behind productivity, most dramatically in the capitalist heartland, the U.S.  At the same time, deregulation and the destruction of trade unions notwithstanding, labour markets typically fail to clear, and residual unemployment on the order of 7 to 8 percent has become the new normal, even in a country like Sweden.”

The combined impact of automation and artificial intelligence has yet to be fully felt.  There will be very few jobs for which human interaction is absolutely required.  It is the duty of a market-driven capitalist to replace all humans with more reliable and cheaper options whenever possible.  Some sort of intervention in the system will be required by society through its agent, the government.  Will profit-driven capitalists be willing to address the problem by limiting their freedom of operation or by limiting their profits?  Or will they fight against any such resolution?  Who will win the day?

Streeck believes capitalism as we know it must eventually disappear, but he does not profess to know exactly how or when it will happen.  And he does not expect the transition to a new economic model to be quick or easy.  Part of the problem will arise because there has been, up to this point, no serious and credible proposal for how to replace our current form of capitalism.

“Not just capital and its running dogs, but also their various oppositions lack a capacity to act collectively.  Just as capitalism’s movers and shakers do not know how to protect their society from decay, and in any case would lack the means to do so, their enemies, when it comes to the crunch, have to admit that they have no idea of how to replace neoliberal capitalism with something else….”

“Before capitalism will go to hell, then, it will for the foreseeable future hang in limbo, dead or about to die from an overdose of itself but still very much around, as nobody will have the power to move its decaying body out of the way.”

Interested readers might find the following articles informative:

Friday, September 22, 2017

The Wars on Public Education and Teacher Unions

Back in 1983 the economy was not particularly healthy, and countries such as Japan and Germany seemed to have passed us by economically.  Someone had to be at fault.  A group was convened during Reagan’s administration to determine how our education system could be the problem.  This group issued a document titled A Nation at Risk.  One of the conclusions of the report was that average SAT (Scholastic Aptitude Test—used for college admission) scores had been falling for a considerable period; therefore our schools are failing us and putting our national security at risk.  This is just what Republican politicians wanted to hear.  They wanted to be able to blame liberals for all the nation’s troubles and they wanted to divert the massive education funding devoted to public schools in a more conservative direction.

Since this report was issued the propaganda machines of political parties and varied moneyed interests have propagated the notion that public schools are heading steadily downhill and taking our students with them.  The problem with this story is that the conclusion of the report was false.  Whether from malice or stupidity, the authors performed a statistical analysis that would have received an F grade in any of the public schools they had criticized.  It is well-known that SAT scores correlate closely with parental income.  Once college attendance was a benefit reserved mainly for the financially well-off.  As time went on college attendance became available to many more people of lower financial status.  As a consequence, the average SAT score began to drop.  But did this mean that the schools were falling in performance?

It is possible for average scores to drop for a given population while scores for all subgroups within the population are rising provided the population of the subgroups is changing.  For some reason, a group of scientists in the Department of Energy (DOE) was asked to reevaluate the data considered in the A Nation at Risk report.  When the students were broken into groups by income level, the scientists showed that all income groups were actually improving in performance over time—exactly the result a healthy school system should be providing.  However, the DOE study did not provide the desired answer and the report was buried, only to appear in an obscure publication years later.  More on this topic can be found here and here.  

The net result has been decades of sniping at traditional public schools and the teachers who work in them.  One of the latest to bemoan this situation is Erika Christakis in an article for The Atlantic.  The piece was titled The War on Public Schools in the paper edition and changed to Americans Have Given Up on Public Schools. That’s a Mistake for the online version.

Christakis describes the low esteem granted to our public schools and then provides some needed perspective.

“….contempt for our public schools is commonplace. Americans, and especially Republicans, report that they have lost faith in the system, but notably, nearly three-quarters of parents rate their own child’s school highly; it’s other people’s schools they worry about.”

“….Americans tend to exaggerate our system’s former glory. Even in the 1960s, when international science and math tests were first administered, the U.S. was never at the top of the rankings and was often near the bottom.”

“Since the early 1970s, when the Department of Education began collecting long-term data, average reading and math scores for 9- and 13-year-olds have risen significantly.”

“These gains have come even as the student body of American public schools has expanded to include students with ever greater challenges. For the first time in recent memory, a majority of U.S. public-school students come from low-income households. The student body includes a larger proportion than ever of students who are still learning to speak English. And it includes many students with disabilities who would have been shut out of public school before passage of the 1975 law now known as the Individuals With Disabilities Education Act, which guaranteed all children a ‘free appropriate public education’.”

Perhaps the worst of the anti-public-education invective is directed at teachers’ unions.

“In 2004, Rod Paige, then George W. Bush’s secretary of education, called the country’s leading teachers union a ‘terrorist organization’.”

“Our secretary of education, Betsy DeVos, has repeatedly signaled her support for school choice and privatization, as well as her scorn for public schools, describing them as a ‘dead end’ and claiming that unionized teachers ‘care more about a system, one that was created in the 1800s, than they care about individual students’.”

Teachers and their unions are an easy target for assigning blame.

“Our lost faith in public education has led us to other false conclusions, including the conviction that teachers unions protect “bad apples.” Thanks to articles and documentaries such as Waiting for ‘Superman,’ most of us have an image seared into our brain of a slew of know-nothing teachers, removed from the classroom after years of sleeping through class, sitting in state-funded ‘rubber rooms’ while continuing to draw hefty salaries. If it weren’t for those damned unions, or so the logic goes, we could drain the dregs and hire real teachers.”

Christakis exults in referencing a study that actually demonstrates that school systems with strong unions do a better job of maintaining teacher quality than weak or nonunionized systems. They do this by campaigning for higher wages that attract better teachers.  The higher wages make the tolerance of poor teachers more expensive, thus encouraging them to eliminate subpar performers before they gain tenure.  Besides encouraging the dismissal of the weaker teachers, the higher wages encourage the good performers to stay on the job. These results are derived from the work of Eunice S. Han: The Myth of Unions' Overprotection of Bad Teachers: Evidence from the District-Teacher Matched Panel Data on Teacher Turnover.

Han provided a long and detailed study..  A succinct summary is more easily accessible in an interview of Han that was reproduced in a Washington Post piece by Valerie Strauss: Think teachers can’t be fired because of unions? Surprising results from new study

When asked to describe her results, Han provided these comments.

“By demanding higher salaries for teachers, unions give school districts a strong incentive to dismiss ineffective teachers before they get tenure. Highly unionized districts dismiss more bad teachers because it costs more to keep them. Using three different kinds of survey data from the National Center for Education Statistics, I confirmed that unionized districts dismiss more low-quality teachers than those with weak unions or no unions. Unionized districts also retain more high-quality teachers relative to district with weak unionism. No matter how and when I measured unionism I found that unions lowered teacher attrition. This is important because many studies have found that higher-quality teachers have a greater chance of leaving the profession. Since unionized districts dismiss more bad teachers while keeping more good teachers, we should expect to observe higher teacher quality in highly unionized districts than less-unionized districts — and this is exactly what I found. Highly unionized districts have more qualified teachers compared to districts with weak unionism.”

When asked about the four states that had restricted or eliminated collective bargaining for teachers in 2011 and whether that offered data to support her results, Han had this reply.

“Indiana, Idaho, Tennessee and Wisconsin all changed their laws in 2010-2011, dramatically restricting the collective bargaining power of public-school teachers. After that, I was able to compare what happened in states where teachers’ bargaining rights were limited to states where there was no change. If you believe the argument that teachers unions protect bad teachers, we should have seen teacher quality rise in those states after the laws changed. Instead I found that the opposite happened. The new laws restricting bargaining rights in those four states reduced teacher salaries by about 9 percent. That’s a huge number. A 9 percent drop in teachers’ salaries is unheard of. Lower salaries mean that districts have less incentive to sort out better teachers, lowering the dismissal rate of underperforming teachers, which is what you saw happen in the those four states. Lower salaries also encouraged high-quality teachers to leave the teaching sector, which contributed to a decrease of teacher quality.”

If highly unionized systems produce better teachers, then there should be evidence in student performance.  When asked about this Han had this reply.

“Since there’s currently no data on student performance by school district levels with nationally representative samples, I use high-school dropout rates as a measure of student achievement. My study found that unions reduce the dropout rates of districts. This is where my study differs from some earlier ones that found that unionism either had no impact or had a negative effect on the dropout rate. I define unionism more broadly than those earlier studies. It’s not just collective bargaining that matters; it’s the union density of teachers in a district that’s important. Union density measures the strength of the union, because even when teachers can’t engage in collective bargaining they can use their collective “voice” to influence the educational system. What I found was that union density significantly decreased the high-school dropout rate, even in districts without collective bargaining agreements.”

Let us return to the notion that there is a war being waged against public education.  Christakis pleads with us to not allow that war to be lost.  The real issue is not the performance of individual students but the performance of the nation as a whole.

“My point here is not to debate the effect of school choice on individual outcomes: The evidence is mixed, and subject to cherry-picking on all sides. I am more concerned with how the current discussion has ignored public schools’ victories, while also detracting from their civic role. Our public-education system is about much more than personal achievement; it is about preparing people to work together to advance not just themselves but society. Unfortunately, the current debate’s focus on individual rights and choices has distracted many politicians and policy makers from a key stakeholder: our nation as a whole. As a result, a cynicism has taken root that suggests there is no hope for public education. This is demonstrably false. It’s also dangerous.”

Christakis ends her piece by referring to a comment from Benjamin Barber issued in 2004.

“America as a commercial society of individual consumers may survive the destruction of public schooling.  America as a democratic republic cannot,”

The interested reader might find the following articles informative:

Thursday, September 14, 2017

The New Road to Serfdom

In the traditional liberal, free-market school of economics, few hold a loftier position than Friedrich A. Hayek.  In the 1930s and early 1940s he wrote and published one of the best known books on economics and society.  He chose to call it The Road to Serfdom.  His thoughts were controversial at the time.  He was writing when the dominant themes of the day were driven by the rise of totalitarian regimes in Russia, Germany and Italy.  The three nations did not follow identical paths with Germany and Italy were grouped together as fascist states, and the most common opinion viewed fascism as a case where capitalism had gone wrong.  Hayek disagreed and concluded that totalitarianism in all three cases was a result of a move away from liberal, market-driven economic regimes to a more socialist approach.  In his view, socialism always leads to totalitarianism and will leave populations in a state of servility—or to use his word, serfdom.

“For at least twenty-five years before the specter of totalitarianism became a real threat, we had progressively been moving away from the basic ideas on which Western civilization has been built.  That this movement on which we have entered with such high hopes and ambitions should have brought us face to face with the totalitarian horror has come as a profound shock to this generation, which still refuses to connect the two facts.  Yet this development merely confirms the warnings of the fathers of the liberal philosophy which we still profess.  We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.  Although we had been warned by some of the greatest political thinkers of the nineteenth century, by Tocqueville and Lord Acton, that socialism means slavery, we have steadily moved in the direction of socialism.  And now that we have seen a new form of slavery arise before our eyes, we have so completely forgotten the warning that it scarcely occurs to us that the two things may be connected.”

Hayek was born in Vienna but spent most of his professional life in England and the United States.  He apparently was a wise man who deserved the Nobel Prize he ultimately received for his body of economic work.  However, his claims about socialism and serfdom missed the mark.  An inevitable conclusion, based on the above quote from his book, was that England was inexorably developing into a fascist state.  That nation has performed in a peculiar fashion at times over the years but no one has ever concluded it was a fascist state.

Hayek used the word slavery twice in the above quote, yet he chose the term serfdom for use in his title.  That is a curious choice.  Consider a dictionary definition of the term serfdom’

“A person in a condition of servitude, required to render services to a lord, commonly attached to the lord's land and transferred with it from one owner to another.”

The term serfdom is most often used in the context of feudalism, an economic system in which landowners agreed to allow serfs (peasants) to work that land.  There was an agreement in place that the landowner (lord) would receive a share of the earnings from the land and that each participant in the system had additional responsibilities concerning the functioning of the lord’s domain.  The terms of that agreement could vary widely.  In some instances a serf’s fate could be little different than slavery, but the serf had entered into a contract with a private entity more akin to a modern company than to a public entity such as a nation.  Words such as “servility” and “slavery” might have been more consistent with the point Hayek wished to make.

This splitting of hairs on terminology arose because Samuel Freeman produced an interesting document titled Illiberal Libertarians: Why Libertarianism Is Not a Liberal View.  Freeman believes that libertarian philosophies, which are often associated with economic liberalism, are actually illiberal and have as their goals ends that are inconsistent with the thinking of classical liberals such as Hayek.  In fact, current libertarian thinking, according to Freeman, is leading us back to a form of feudalism.  If that is the case, the serfs of the future will arise from a perversion of capitalism not that of socialism—just the opposite of what Hayek had predicted.

One must be careful to not confuse liberal social and political views with liberal economic beliefs.  In economics, the term liberal refers to belief in laissez-faire, market-driven economic systems.

Freeman tells us that classical liberals believed in market-driven economies, but they also recognized that markets could lead to unstable social conditions due to very uneven accumulation of wealth.  Consequently, some mechanism for social maintenance and redistribution of wealth must be available.  The government has a role to play.

“Major proponents of classical liberalism include David Hume, Adam Smith and the classical economists (most of whom were utilitarians), and contemporary theorists such as David Gauthier, James Buchanan, and Friedrich Hayek. I use the term 'classical liberalism' in the Continental sense to refer to a liberalism that endorses the doctrine of laissez-faire and accepts the justice of (efficient) market distributions, but that allows for redistribution to preserve the institutions of market society.”

“Liberalism evolved in great part by rejecting the idea of privately exercised political power, whether it stemmed from a network of private contracts under feudalism or whether it was conceived as owned and exercised by divine right under royal absolutism. Libertarianism resembles feudalism in that it establishes political power in a web of bilateral individual contracts. Consequently, it has no conception of legitimate public political authority nor any place for political society….”

Libertarianism has become an entirely different beast.

“By 'libertarianism' I primarily mean the doctrine argued for by Robert Nozick, and also in differing accounts by Jan Narveson, Ayn Rand, Murray Rothbard, John Hospers, Eric Mack, and others.”

“It is commonly held that libertarianism is a liberal view. Also, many who affirm classical liberalism call themselves libertarians and vice versa. I argue that libertarianism's resemblance to liberalism is superficial; in the end, libertarians reject essential liberal institutions. Correctly understood, libertarianism resembles a view that liberalism historically defined itself against, the doctrine of private political power that underlies feudalism. Like feudalism, libertarianism conceives of justified political power as based in a network of private contracts. It rejects the idea, essential to liberalism, that political power is a public power, to be impartially exercised for the common good.”

Is Freeman correct in claiming that dominant libertarian philosophies are generating an economy that begins to resemble feudalism?  Jonathan Taplin certainly believes so.  He invoked Freemen’s association with feudalism in describing the effect technology platforms are having in changing the relationship between employers and workers.  Taplin’s views are presented in his book Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy.

Taplin’s title is derived from a quote attributed to Mark Zuckerburg:

“Move fast and break things.  Unless you are breaking stuff, you aren’t moving fast enough.”

Some might read that statement and be impressed by the speed with which the tech empires, such as Facebook, Google and Amazon, have created dramatic changes in society.  In Taplin’s view, Zuckerburg was issuing the advice that to succeed in the tech world you had to move fast enough that you could break laws and trash ethical norms before anyone could catch you.  Once you established yourself no one would be able to stop you from doing whatever it is you wanted to do.  It is this elitist view that those who are the drivers of technology should be able to do whatever technology allows them to do that aligns the tech titans with the Koch brothers philosophically.

“….the Kochs are important because they financed the rise of the libertarian political framework that Peter Thiel, Larry Page, Jeff Bezos, and Mark Zuckerburg used to get rich.  Without the political protection of the Koch network, none of the Internet empires would exist at its current scale.”

“By 2013 both Google and Facebook followed Koch Industries and joined the American Legislative Exchange Council (ALEC)….ALEC states that its current goal is to further ‘the fundamental principles of limited government, free markets, and federalism’.”

Google and Facebook had, in effect, announced that they believed in the same economic policies as the Koch brothers.  Blowback from the more socially liberal community in which the companies were embedded eventually forced them to withdraw from the ALEC cabal, but the point had been made.

Taplin’s association of tech libertarians with the path to feudalism is best represented by what he refers to as the “Uber-izing of human labor.”  By insisting that its workers are independent contractors rather than employees, Uber plans on eliminating any government interference in the interactions with its workers.  There is only the collection of bilateral agreements between Uber and each of its workers who only have the rights Uber chooses to allow.  The drivers are now the serfs, the Uber managers are the Lords, and the computer platform Uber provides is the equivalent of the land the serfs were allowed to cultivate.  The insidious cleverness of Uber-izing is that labor is broken down into microtasks with accompanying micropayments.  No money is wasted on benefits and the rate of rent collected from the sea of workers can be changed arbitrarily.

The method of treating labor as microtasks to be farmed out, hopefully to the lowest bidder, has obvious advantages to employers and is growing in importance.  It is referred to as “crowdwork.” One only needs the appropriate tech platforms to connect with laborers.  As experience has demonstrated, a successful platform will generate network effects that make it difficult to mount competition.  And the profit to be made can be so substantial that any competitors that might appear are easily bought out.

Workers once spent a century struggling for the right to come together and demand to be paid living wages.  Progress has taken us to a point where individuals now collude in a system that encourages workers to be the lowest cost bidder for microtasks with micropayments.

Yes, we are now—finally—on the road to serfdom.

Thursday, September 7, 2017

Manufacturing Returns to the US, but Beware, the Robots are Coming

Mass producing clothing has traditionally required a little skill and a lot of labor.  Apparel manufacturers have responded to that fact by moving their production to countries where cheap labor was readily available.  That tactic has provided needed income to poor nations and provided inexpensive clothing to the rest of the world.  This process has been going on for decades.  Consequently, it was interesting to note that one of China’s largest apparel producers was actually investing in a plant to produce clothing in Arkansas for sale in the US market.  It was not attracted by cheap labor in Arkansas; rather, it was coming for the opportunity to eliminate labor.  Kevin Hamlin provides background on this activity in an article in Bloomberg Businessweek.  The article was titled The 33ȼ T-Shirt in the magazine version.  Online it became China Snaps Up America’s Cheap Robot Labor.

Automation can easily reproduce complex precision acts once performed by humans.  They have a more difficult time with simpler tasks requiring a lot of hand manipulation.  The human hand is a wondrous device and some of its actions, such as the sewing and stitching of clothing have resisted robotic duplication.  That apparently is changing.  An American outfit called Softwear Automation is producing “sewbots.”

“It took seven years for Softwear Automation, founded in 2007 by a group of engineers from Georgia Tech, to introduce its first sewbot, which is capable of making bathmats and towels. A $1.8 million grant from the Pentagon’s Defense Advanced Research Projects Agency funded the work.”

The sewbots are not yet capable of producing all types of clothing, but their developers believe it will just be a matter of time until they are.

“Stitching a dress shirt with a breast pocket requires about 78 separate steps. Tricky, but such a bot is coming, says the chief executive officer of Softwear Automation, Palaniswamy Rajan: ‘We will roll that out within the next five years’.”

Once you can go beyond the complexity of towels and bathmats, the next step up in difficulty is t-shirts.  That is what has attracted the Chinese.

“By early 2018, Tianyuan Garments Co., based in the Suzhou Industrial Park in eastern China, will unveil a $20 million factory staffed by about 330 robots from Atlanta-based Softwear Automation Inc. The botmaker and garment company estimate the factory will stitch about 23 million T-shirts a year. The cost per shirt, according to Pete Santora, Softwear’s chief commercial officer: 33¢.”

This plant is expected to produce about 400 jobs in Arkansas.  It should provide even lower cost t-shirts and keep more of our consumer dollars circulating within the US than if the goods had been manufactured elsewhere.  It becomes relatively easy to move manufacture to the markets where the product will be sold.  Those are good things.  However, this development also generates some concerns for the future.

Human labor cannot compete with that cost for producing t-shirts.  Soon other tasks will be automated and gradually one of the most prominent paths for poor countries to improve their economies will disappear.  Poor countries must be able to sell something in order to acquire funds needed to purchase the components required to develop a modern society.  If all a nation has to sell is cheap labor, time is rapidly running out for it.

We in the US should also be concerned by this development. Automation has led to the elimination of moderately-skilled jobs in manufacturing and other occupations.  Those who have found work after losing those jobs have generally ended up in lower-skilled occupations.  As robotics becomes more competitive an option for those positions, where might one go next?

If nearly all work can be replicated by a machine, then we face enormous economic changes that will require a complete rethinking of our social contract.  Clearly, someone has to make the robots—at least until the robots decide to make themselves—so at least some work will persist, but it is time to begin taking note of where technology is taking us.

Alec Ross produced an interesting look at what the growth industries of the future might be in his book The Industries of the Future.  Robotics is, of course, one of his targeted areas.

“A few countries have already established themselves as leading robot societies.  About 70 percent of total robot sales take place in Japan, China, the United States, South Korea, and Germany—known as the ‘big five’ in robotics.  Japan, the United States, and Germany dominate the landscape in high-value industrial and medical robots, and South Korea and China are major producers of less expensive consumer-oriented robots.  While Japan records the highest number of robot sales, China represents the most rapidly growing market, with sales increasing by 25 percent every year since 2005.”

Japan attracts considerable interest because it faces a future in which it will have fewer people than jobs, thus making advances in robotics a necessity.  Much development is aimed at providing the low-skilled labor necessary to care for their aging population.  While its population is aging, its population is also declining.  There will simply not be enough workers to care for the elderly using traditional methods.

Ross lists some of the directions development is taking in eliminating the need for low-skilled human labor.

“Panasonic created a 24-fingered hairwashing robot that has been tested in Japanese salons.  The robot will likely be installed in hospitals and homes as well.  It measures the shape and size of the customer’s head and then rinses, shampoos, conditions, and dries the customer’s hair using its self-advertized ‘advanced scalp care’ abilities.”

“Right now at the Manchester Airport in England, robot janitors use laser scanners and ultrasonic detectors to navigate while cleaning floors.  If the robot encounters a human obstacle, it says in a proper English accent, ‘Excuse me, I am cleaning,’ and then navigates around the person.”

Restaurant jobs, ever a refuge for the marginally employed, are also at risk.

“There is potential for robots to replace many of those waitstaff jobs over time.  It’s already happening in trial forms in many restaurants around the world.  In Asia, many countries are starting to experiment with adopting robots in their restaurants.  The Hajime restaurant in Bangkok solely uses robot waiters to take orders, serve customers, and bus tables.  Similar restaurants are cropping up in Japan, South Korea, and China.  These robots, designed by the Japanese company Motoman, are programmed to recognize an empty plate and can even express emotion and dance to entertain customers.  It’s unclear exactly how you tip for good service.”

It is well known that pets are popular with and beneficial to the elderly whose infirmities restrict their mobility.  Wouldn’t it be nice to have a pet that couldn’t wreck a carpet?

“….a Japanese industrial automation company AIST has created PARO, a robot baby harp seal covered in soft white fur.  PARO exhibits many of the same behaviors as a real pet.  Designed for those who are too frail to care for a living animal or who live in environments that don’t allow pets, such as nursing homes, it enjoys being held, gets angry when hit, and likes to nap.  When President Barak Obama met PARO a few years ago on a tour of Japanese robotics innovations, he instinctually reached out and rubbed its head and back.  It looks like a cute stuffed animal, but costs $6,000 and is classified by the US government as a class 2 medical device.”

Not many of the jobs of today may be available in the near future.  This could be an opportunity to “live the good life” with abundant leisure to use profitably.  If this is our future, then we will have to be educated and learn how to use leisure in a way that brings satisfaction.  We cannot all be educated to be robot builders.  On the other hand, if we proceed without planning for the future we could end up with chaos and strife that are beyond belief.

The interested reader might find the following article informative:

Sunday, September 3, 2017

The United States, Families, and the Happiness Penalty

The United States is awash with politicians who promote “family values” as a fundamental requirement for a healthy nation.  They are usually referring to a nuclear family with a few children and two straight parents.  If that is the ideal, one would think that said politicians would do more to make it easier to raise a family.  It is not uncommon to encounter headlines such as People Without Kids Are Way Happier Than Parents in the U.S.  The consensus seems to agree with the accuracy of that statement.  What is it about the US that renders parents unhappy?  Is the US unique in this respect?  Is there a pain associated with modern parenthood that explains the lower fertility observed in the wealthier nations that often leads to declining populations?

There is an organization called the Council on Contemporary Families (CCF) that set out to answer those questions.  Their findings are summarized in CCF BRIEF: Parenting and Happiness in 22 Countries.  They refer to the degree to which parents are less happy than nonparents as the “happiness penalty.” 

“Many people now know that parents in the United States report being less happy than nonparents, but there is considerable disagreement about why parents pay a “happiness penalty,” along with conflicting reports about whether this is true in most contemporary cultures. To explore these questions, our team, with support from the National Science Foundation, examined comparative data from 22 European and English-speaking countries.”

The CCF concludes that this happiness penalty is not inevitable and that there are countries in which parenthood actually leads to greater happiness.

“The good news is that parents are not doomed to be unhappier than nonparents. Our results indicate that the parental ‘happiness penalty’ varies substantially from country to country, and is not an inevitable accompaniment of contemporary family life. In fact, in some countries, such as Norway and Hungary, parents are actually happier than nonparents!”

However, the US was notably deficient in parental happiness compared to other countries, a curious situation for a supposedly family-values nation.

“The bad news is that of the 22 countries we studied, the U.S. has the largest happiness shortfall among parents compared to nonparents, significantly larger than the gap found in Great Britain and Australia.”

Why should that be?  The CCF has a very simple and obvious explanation.  Parental happiness increases when governments provide services that make life easier for parents to earn a living and raise children.  The US is the worst performer because it has the most family-unfriendly policies of any of the other countries studied.

“What we found was astonishing. The negative effects of parenthood on happiness were entirely explained by the presence or absence of social policies allowing parents to better combine paid work with family obligations. And this was true for both mothers and fathers. Countries with better family policy “packages” had no happiness gap between parents and non-parents.”

Services like low-cost childcare, healthcare, education, and generous family leave policies that provide flexibility in dealing with the contingencies associated with raising children can be provided through general taxation more efficiently by governments than by parents who must seek them on the open market.  Not surprisingly, these are the same policies that lead to greater happiness for a population as a whole.

“Furthermore, the positive effects of good family support policies for parents were not achieved at the expense of non-parents, as some commentators have claimed might be the case. The policies that helped parents the most were policies that also improved the happiness of everyone in that country, whether they had children or not. Policies such as guaranteed minimum paid sick and vacation days make everyone happier, but they had an extra happiness bonus for parents of minor children.”

The US has been experienced a growing population in recent years that is due mainly to immigration.  Non-immigrant citizens seem to have a fertility level that is right around the value necessary to maintain a constant population.  Are their long-term ramifications for the nation from continuing the US policy of making it extremely difficult and expensive to raise children?  An article in The Economist provided some relevant information that addresses that issue.

The subject for The Economist was the tendency of women to refrain from having children.  The article concluded that the trend to have children later in life condensed the period in which women could have children.  That shortened period could be eliminated entirely for some who undergo economic shocks and decide to delay having children.  Consider the following data.

Plotted for the United States are the percentages of women who are childless at a given age as related to their year of birth.  The trend to give birth later in life is apparent, but generally women eventually had children at a more or less constant rate—at least until the housing bubble and the Great Recession that followed.  In the boom years just after the turn of this century women were more likely to have children.  That trend ended and turned around during the Great Recession.  The trend is most noticeable for the 30-year-olds.  But note that the recession has come and gone and the 30-year-olds continue to put off childbirth at an increasing rate.  The curve for women at age 35 begins to show the same trend. 

It is too early to assume that these curves can be extrapolated and that deciding to not have children might become ever more common.  But one would think that politicians who believe so fervently in the wisdom of markets would realize that making parenthood expensive and difficult might cause people to forego that burden.

The interested reader might find the following articles informative:

Thursday, August 24, 2017

Medicine: Philanthropy for Profit?

Elisabeth Rosenthal has produced an eye-opening polemic: An American Sickness: How Healthcare Became Big Business and How You Can Take It Back.  No matter how corrupt and dysfunctional you might believe the medical industry to be, she provides you with enough examples of unrestricted greed to convince you that things are even worse than you thought.  Doctors, hospitals, insurers, device makers, pharmaceutical companies, even charities—none are spared.  In her view, medicine has become a type of protection racket, a form of “medical extortion”—“pays us what we want or you will be harmed.”

“Faced with disease, we are all potential victims of medical extortion.  The alarming statistics are incontrovertible and well known: the United States spends nearly one-fifth of its gross domestic product on healthcare, more than $3 trillion per year, about equivalent to the entire economy of France.  For that, the U.S. health system generally delivers worse health outcomes than any other developed country, all of which spend on average about half what we do per person.”

Faced with disease, we encounter a system that makes no sense; one the providers of the medical services scarcely understand themselves.

“Imagine if you paid for an airplane ticket and then got separate and inscrutable bills from the airline, the pilot, the co-pilot, and the flight attendants.  That’s how the healthcare market works.  In no other industry do prices for a product vary by a factor of ten depending on where it is purchased.”

Our system seems to consist of a number of actors, all of which are trying to work the system in such a way as to maximize their profit and increase the cost to the patient and to the nation as a whole.  Rosenthal provides numerous examples of outrageous charges that are created in the relentless pursuit of ever-greater revenue.  Many are expected.  Financial chicanery on the part of hospitals, drug companies, and device manufacturers has received some notoriety from press coverage in the past.  More distressing are the cases of individual doctors who cleverly pursued options that allowed them to extract enormous sums from the system while contributing very little.  Perhaps most distressing was Rosenthal’s claim that even well-known charitable organizations have fallen victim to this quest for ever-greater revenues.

“No one player created the mess that is the $3 trillion American medical system in 2017.  People in every sector of medicine are feeding at the trough: insurers, hospitals, doctors, manufacturers, politicians, regulators, charities, and more.  People in sectors that have nothing to do with health—banking, real estate and tech—have also somehow found a way to extort cash from the patients.”

Do charities really deserve to be included among that list of transgressors?

Rosenthal claims that a decision by the Cystic Fibrosis Foundation (CFF) to fund a small pharmaceutical company on a high-risk, high-payoff drug development has caused many charities to rethink their spending plans.  The CFF investment turned out to be wildly successful for both cystic fibrosis sufferers and the CFF itself.

“The mindset and mission of many disease foundations underwent a sea change in 2014, when the Cystic Fibrosis Foundation (CFF) received a $3.3 billion windfall as the result of its decision to invest over the years in a small Massachusetts biotech firm.  A total of $150 million invested in Vertex Pharmaceuticals ultimately helped produce Kalydeco, the first blockbuster drug against cystic fibrosis (CF), which was approved by the FDA in 2012.  Two years later, the foundation sold its rights to drug royalties to a venture capital firm and received over $3 billion in an instant, about 30 times the amount the foundation had typically raised in a year.”

“Suddenly foundations had an enticing new business model: ‘venture philanthropy’; that is, investing money in drug, device, and biotech companies with the expectation of financial return.”

Such a model worked well for those suffering from cystic fibrosis, why would it not work well in other instances?  Rosenthal points out that, in general, drug and device makers are high-revenue outfits that will always welcome investments, but will not alter their basic objective, which is to make as much money as possible from their products.  Charitable foundations are supposed to be representing the interests of disease sufferers, a task that includes protecting them from financial harm.  How can a foundation possibly promote the need for lower costs for patients when they are pursuing a financial strategy that demands that new products be priced as high as possible?

To illustrate this conflict of interest, Rosenthal discusses the history of diabetes research and treatment.

“After Frederick Banting and his colleagues discovered and isolated insulin in the early 1920s, they licensed the patent for only a dollar as a ‘gift to humanity.’  Type 1 diabetes, which previously killed children only months after onset, was suddenly transformed into a chronic disease.  To this day insulin is the alpha and omega of type 1 diabetes treatment.”

The initial goal of charitable foundations formed early in the twentieth century was the support of basic research into cures.

“The March of Dimes, focused on polio, raised money from hundreds of thousands of donors who paid much of the cost of developing both the Salk and Sabbin vaccines.  The foundation never sought to make money from either inoculation.  After World War II the Cystic Fibrosis Foundation (established in 1955) supported the scientists who identified the defective gene for that disorder.  The National Multiple Sclerosis Society (founded in 1946) funded the Columbia University scientist who discovered the abnormal spinal fluid proteins associated with the disease.  The Juvenile Diabetes Research Foundation (JDRF) was founded in 1970 by the patients of diabetic children to promote research into a cure….”

Note the intended focus for JDRF on a cure for type 1 diabetes.  For-profit corporations wish to treat everything and cure nothing.  There is no money to be made in curing things.  That is what universities and government agencies do.  Yet JDRF has made a conscious decision to begin switching its focus from working with academics to working with corporations. 

“In late 2013 JDRF announced that it was ‘going the equity route,’ joining with PureTech Ventures, a for-profit venture capital firm, to create a fund to fuel new diabetes start-ups.”

The logic JDRF uses to justify that change is that the increased revenue from funding advances in diabetes treatments will allow it to fund even more advances in treatments.  That might fly if advances in treatments were still contributing to improved lives for the patients.  Carolyn Y. Johnson discusses the impact of commercial development on diabetes sufferers in a Washington Post article: Why treating diabetes keeps getting more expensive

The intent of the discoverers of insulin to make it a “gift to humanity” has not worked out so well.  Pharmaceutical companies have managed to come up with new versions of the drug which allow them to gain new patents and continue to increase the cost. 

The original source of insulin was extraction from animals, a relatively expensive and inefficient process that occasionally was accompanied by side effects.  Yet the cost to diabetics was minimal.

“Irl Hirsch remembers when insulin cost 75 cents a vial. The 58-year-old doctor has used insulin for more than half a century and knows firsthand that pricing and access weren’t an issue for much of that time.”

“Drugstore ads from the 1960s published in The Washington Post advertised insulin for as little as 84 cents a vial — less than a bottle of Breck shampoo, three bags of Halloween candy bars or a can of Suave hair spray. The most expensive version listed in the ad was less than $2 a vial.”

Drug companies eventually produced microbes that could reproduce exactly the insulin produced by humans, a much more efficient process that held the promise of unlimited supply and ever cheaper costs.

“The modern age of insulin innovation kicked off with Eli Lilly’s introduction of Humulin, in 1982. Using genetic engineering, biologists figured out a way to modify bacteria into tiny, specialized factories that could create insulin that matches the kind the human body produces. Allergic reactions became rare as more people used the newer version.”

“Humulin could be created in vats instead of harvested from cows or pigs, and it relieved doctors’ worries that the looming diabetes epidemic would cause a shortage.”

But lowering costs is not a viable business model in our medical system. Rather, it makes more sense to continually tweak the product being sold in order to maintain patent protection and to justify continuous price increases.

“A version of insulin that carried a list price of $17 a vial in 1997 is priced at $138 today. Another that launched two decades ago with a sticker price of $21 a vial has been increased to $255.”

Developments have made life for those with diabetes simpler and more comfortable, but definitely not cheaper.  Many patients are shielded from this price rise by insurance plans.  Costs rise and show up in premium increases but direct payment is relatively stable.  It is those who are not insured, or those who are on Medicare, that notice the enormous growth in list prices.

The critical question is: “Are the new developments worth the cost to patients?”  Unless one works in the pharmaceutical industry, the answer seems to be no.

“’I don’t think it takes a cynic such as myself to see most of these drugs are being developed to preserve patent protection,’ said David Nathan, a Harvard Medical School professor. ‘The truth is they are marginally different, and the clinical benefits of them over the older drugs have been zero’.”

In Rosenthal’s view, JDRF has bought into a scheme whereby ever more advances will add to cost but will only marginally improve the lives of those it was created to protect.  And furthermore, it is putting those it represents at increased financial risk, clearly not what its founders had in mind.

Rosenthal compares JDRF’s excitement about new and more expensive products with its lack of interest in potential cures.  Dr. Denise Faustman, a professor at Harvard Medical School, has been searching for a cure for type 1 diabetes for years.  She discovered a possible pathway that makes use of BCG, a long-used and thus generic vaccine against tuberculosis.

“Dr. Faustman discovered that BCG was powerful enough to reverse type 1 diabetes in genetically predisposed mice.  More exciting still, she found that mice with diabetes of long duration would start producing insulin once again after treatment with BCG.  The results were heralded as thrilling and widely circulated when published in 2001, but further testing was obviously needed with human trials.”

But who would fund clinical testing of a potential diabetes cure?  The pharmaceutical industry had no interest because there was no way to make a profit.  Surprisingly, and disturbingly to Rosenthal, the JDRF has shown no interest in supporting Faustman’s work.  Could it be that big-time medical philanthropies have business plans and organizations that need to be protected from cures as well?

Faustman has been able to push along her work with the help of donations, mainly from the Iacocca Foundation, and has managed to conclude a phase 1 study on the use of BCG that was approved by the FDA.  She is currently trying to gather about $25 million needed to move to a phase 2 clinical study.  That amount of money is nothing within the vast consumption in the medical industry.

Rosenthal was moved to install this “economic rule” in second place on her list “Economic Rules of the Dysfunctional Medical Market.”

“A lifetime of treatment is preferable to a cure.”

She also included this quote by a JDRF critic.

“’If the March of Dimes was operating according to today’s foundation models, we’d have iron lungs in five different colors controlled by iPhone apps, but we wouldn’t have a cheap polio vaccine,’ said Dr. Michael Brownlee, the Anita and Jack Salz Chair in Diabetes Research Emeritus at the Albert Einstein College of Medicine…”

The interested reader might find the following articles informative:

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