Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Poverty Page 2 of 3

The Right Thing to Do: Homeless edition

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On March 3, 2015

26 Comments

So, Utah decided to just give the homeless places to live.  The results are what anyone with sense, or who has followed the topic would expect:

Utah’s Housing First program cost between $10,000 and $12,000 per person, about half of the $20,000 it cost to treat and care for homeless people on the street.

Imagine that.

The right thing to do is almost always cheaper and gives better results, at least if the welfare of people is your concern.

If people are poor, give them money.  If people don’t have a house, get them a house.  If people are sick, get them health care.

The fact is, though, that you have to want to do the right thing. People tend to get down on the Church of Latter Day Saints, but for all their issues, I’ve always had a soft spot for them because I’ve heard many stories like this:

The church donated all of this,” Bate says. “Before we opened up, volunteers from the local Mormon ward came over and assembled all the furniture. It was overwhelming. For the first several years we were open, the LDS church made weekly food deliveries—everything from meat to butter and cheese. It wasn’t just dried beans—it was good stuff.” (The Utah Food Bank now makes weekly deliveries.)

I ask him if this is why the programs work so well in Utah—because of church donations.

“If the LDS church was not into it, the money would be missed, for sure,” he says, “but it’s church leadership that’s immensely important. If the word gets out that the church is behind something, it removes a lot of barriers.”…

….

“Why do you think they do it?” I ask(my emphasis)

“Oh,” he says, “I think they believe all that stuff in the New Testament about helping the poor. That’s kind of crazy for a religion, I know, but I think they take it quite seriously.”

A major driver of the social welfare movement in the United States was the social gospel.  The ending of sweatshops, the huge work programs of the 30s, the provision of Medicare and Social Security was driven in large part by Christian crusaders who believed that what they did to the poor, they did to Jesus.

You have to want to do the right thing.

This is just as true when dealing with matters like inequality.  FDR and the politicians of the 50s ran marginal tax rates for high earners at 90% or so because they, and the American people, genuinely believed that no one should have that much money.  They believed that it was earned by the efforts of other people: a rich person is someone who gets rich on other people’s work, with very rare exceptions, and even they get rich because of the society they are in.  (For a complete explanation of that, something most people refuse to understand, read “It’s Not Your Money.”)

Ethics and mores; belief, is why people do things.  It doesn’t exactly come before material circumstances (the two influence each other, with material circumstances, including technology, determining a range of possibilities), but within what is possible, belief in what we should do determines what we actually do.

In the world today we have the resources not just to feed everyone, but to give them a decent life, with education, entertainment, and housing that is warm in the winter and at least not unbearable in the summer.  We can cloth everyone well.  We have had the ability to do this for at least a hundred years or so, in theory, we’ve had it in practice since the recovery from World War II.

To do so, however, we must believe that we should, and we must be willing to act on that belief.  There will be sacrifices (a lot fewer billionaires, a lot less McMansions), but in the end even most of those who complain would be objectively better off, because inequality is robustly associated with worse health and less happiness, even for those who are the richest.  The top .01%, if they were still the top .01% but had far less money and power, would be happier and healthier in such a world.

As such, the battleground of belief; of ideology, is as important as that of technology. It is belief, mediated by power and turned into behaviour, which determines what actually happens in this world.

More on that later.

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The Problem with Basic Income

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On February 27, 2015

39 Comments

Basic income—just giving everyone a certain amount of money, is an idea with a lot to recommend it.  In any society which isn’t willing to just let people suffer or die because they don’t have money, there is a “social welfare net” with a vast bureaucracy.  Why not just give everyone enough money to live on, and wipe out most of that bureaucracy?  If you’re going to give poor people money anyway, it’s more efficient, and vastly less humiliating.

There’s a great deal of controversy around the idea of technological unemployment (economists sneeringly dismiss the idea on aggregate as the “lump of labor” fallacy), but even if you don’t believe in it en-gross, changing technology does cause specific people, often large numbers of them, to lose their jobs, and many of them never work again, or if they do, work at terrible jobs.  A basic income deals with this issue, at least somewhat, and, again, far more efficiently than welfare and unemployment insurance and so on.  And if you believe that there will be widespread technological improvement as AI and robotics improve, this will mitigate against it.

In a demand based society; a consumer society, where the economy is based on large numbers of people buying things, a basic income makes sense.  People with no (or too little) money, don’t spend it (obviously) and that’s bad for the economy.  Every dollar you give a poor person gets spent; it immediately goes to someone else, and that means that even those who are well off have reason to be for a basic income: most of it is going to wind up in their hands, and if it doesn’t (because you have a basic income which goes to everyone, not just those below a certain income), well, they still get theirs.

One might point out that we’re moving away from a demand based society, however, at least in the West. More than all the productivity gains of the last business cycle in the US, for example, have gone to the top 10% (really the top 3%).  Consumer inflation is flat, and in many countries verging on deflation, while the goods that the rich buy (investment art, Manhattan and London real-estate) are booming.  Moving away from a broad-based demand society, such as we had in the post-war liberal era was mainly done because it benefited the rich, but it also solved another problem—increased demand fed into oil and other commodity prices, and as the 70s  and early 80s showed, that lead to huge inflation and economic dislocation.

So basic income, at any level that would be equivalent to a living wage (aka. letting people live a decent life, not just barely scrape by), can be expected to spike inflation in various commodities, including oil.  This is a problem, but it’s not a huge problem, because we finally have the technology which allows us to move off oil (not completely, but enough to mitigate the effect of demand increases), and because, hey, we’re flirting with deflation anyway.

The real problem with basic income has to do with who controls our economy—with the fact that we are sold what we need, by and large, by oligopolies.  A few large companies control most industries, and effectively price set.  (Broadband profits in the US are almost 100% a year.)

This is known as pricing power. When someone needs what you sell more than you need to sell it to them; when they have little choice but to pay what you ask, you can demand a premium.  If something is scarce, either naturally or artificially, those who control it get more of the share of national income than otherwise.  In a society whose economy is not controlled by oligopolies this is usually a good thing—prices go up, more people enter the industry, prices drop.  That’s the what the economics textbooks tell you happens.  But it doesn’t happen in an oligopolistic economy where the oligopolists control government and where barriers to entry are very high.

So those who are in an oligopolistic situation, whether telecom companies, health insurers, pharmaceutical companies or landlords, are generally able to set prices: you must have medicine, you must have shelter, and in a modern economy, try and get by without a phone and internet.

What this means is that increases in income, especially at the lower end, tend to be simply taken away by those who have what you must have.  Everyone will know what the basic income is, and they will know who is surviving on just that, or just that plus a low-wage job.  And they will raise prices so that money goes to them.

Basic income which does include either oligopoly busting or regulation (or having the government, oh, just provide broadband and/or housing itself) will help many people, to be sure.  But in a not very long time, most of the gains will be eaten by those who have pricing power.

This, by the way, is far from a “socialist” theory. This comes out of bog-standard neo-classical economics.  Non-competitive markets tend towards concentration of wealth, and those who have pricing power use it (they act in their own self-interest, precisely as economics says they will.)  Markets are wonderful things. They are extremely efficient at allocating money.  And they will do exactly what they are set up to do.  In an oligopoly situation, with capture of government, they will allocate that money very quickly to the oligopolists.

So if you want basic income to work, you must also make capitalism work. You must create actual competitive markets, you must-trust bust, you must regulate and you must move, as government, to ensure that the important things people will spend that basic income on are not scarce—either naturally or artificially.

This extends far beyond basic income.  A market economy; a capitalist economy, works to the benefit of the majority only when it is competitive and when scarcities are actively managed, ideally to remove them, and when they can’t be removed, to ensure that those who provide scare necessities, do not reap outsize profits which allow them to buy up the rest of the system, including government and civic society.

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I’ve never understood why people care what the CBO says

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On February 19, 2014

6 Comments

On raising the minimum wage:

President Obama’s plan to raise the minimum wage to $10.10 per hour would wipe out about 500,000 jobs by late 2016, according to the nonpartisan Congressional Budget Office…

…The CBO cautioned that its estimates of job losses were subject to wide fluctuation and could come in lower than 500,000 and as high as 1 million.

“In CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of one million workers,” it said in a report Tuesday.

Let me summarize: we think it will cost jobs, but we have no idea how many.

The fact is that empirical studies on raising the minimum wage have found no consistent pattern of job losses.  Sometimes you even get job gains. This is pure economic modeling: “well, if prices increase, buying must decrease, and labor is a market”.  That’s economic theory in a nutshell, the problem is it doesn’t work that way in the real world all the time.

In real terms, the minimum wage was much higher 40 years ago.  Did they have worse employment, or better employment than us?

Raising the minimum wage means that a lot of people have more money to spend, and spend it they do, because people earning that little spend every cent they have.  So it increases demand. It decreases borrowing from payday loan places, which charge usurious interest, and that also increases spending, because payday loans very quickly cripple the buying power of those who take them.

Economic modeling is, well, hard, and it’s not a science, because economics is not a science.  When the CBO says there’s a two-thirds chance a # is between negligible and a million people, they might as well be confessing to this.

Go ahead and raise the minimum wage.  It might increase employment, it might decrease employment, but it will help most minimum wage workers.  And because there are so many other things going on in the economy, any post-facto study on the affect will also be questionable.

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On Bangladesh’s Textile Disasters

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On May 12, 2013

24 Comments

My father worked in Bangladesh for 8 years in the 80s, and in East Pakistan (what Bangladesh was called pre-independence) in the 50s.  I have relatives who live in India, and I spent my summers and many Christmas vacations in Bangladesh.  My mother spoke fluent Hindi (though that isn’t the language spoken in Bangladesh) as she grew up in Darjeeling and Calcutta.

Let’s run through the points.

The first is the simplest: I find it interesting that there is so much textile manufacture in Bangladesh. There was none to speak of in the 80s.  Let me put it crudely, Bangladesh is way down the chain, there are very few poorer, more corrupt countries in the world outside of Africa.  The textile industry is running out of cheap places to make clothes if they’re in Bangladesh.

The second is this: Bangladesh’s government will never enforce safety regulations in the textile industry. It is impossible, it will not happen.  Nothing happens, nothing gets done in Bangladesh without baksheesh—bribes.  Bribes are the actual salary of government employees, they are not paid enough to live decently on without them.  Textile factories will be throwing off so much money, in Bangladeshi terms, that virtually anyone can be bought, and with so much money at stake, anyone who can’t be bought will be otherwise dealt with.

Which means that if textile manufacturing jobs are to made safer it must be done by the companies buying the textiles, like Joe Fresh.  Only they can do it, because they control the money spigot. If unsafe work circumstances will cost the people running the factories money, they will fix it, assuming that the audits are thorough and rigorous, by incorruptible people.  Those people will have to be outsiders (outsiders aren’t necessarily incorruptible, but locals can be gotten to too easily) though they will need local fixers on staff.

My prediction is that some nominal steps will be taken, but only nominal ones. You don’t do textile manufacture in a country like Bangladesh because you want safe, you do it because you want cheap.  Really, really cheap.  Bet on the big headline disasters being only the tip of the iceberg, with routine maimings and horrible work conditions being part of the daily life of the workers.

All that said, if you live in Bangladesh, odds are you have no options.  These jobs may be horrible but they are jobs, and pay better than most of your other options.  That’s why the textile companies are there, no one who has other options would work in their hellhole sweatshops.

Ultimately that comes back to us and our corporate leaders.  We want cheap clothes, they want outsize profits (they don’t pass most of the “cost savings” on.)  If you aren’t dirt poor yourself, I suggest you look at the label, and if it’s made in a third world country (including China), don’t buy it.  It’s not much, but it’s about as much as you can do.  And, generally speaking the quality of clothes will be better.

If you really want to do something about this, tie work safety to allowing clothes made in such countries to be imported to developed nations, and have the inspectors be government employees of the country where the clothes will be exported.  That goes against everything our current government and corporate leaders are willing to do, however, and also offends the sensibilities of many on the left  so just get used to the fact that a lot of blood stains your clothes, just like lots of blood is mixed in to your oil and is used to fertilize your food.

Some basics on the economy

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On September 3, 2012

64 Comments

1) the majority of new jobs are bad.

2) the economy has still not recovered all lost jobs, either in absolute or as a percentage of the population

3) so there are fewer jobs, and what new jobs have been created are worse. They pay worse.

4) The upper middle class job market has recovered, which is why those folks are no longer panicking and are telling you that the economy isn’t so bad as all that.

5) the failure to force the rich to take their losses and to break up the banks means that the same people who caused the 2007/8 financial crisis still control the economy and the government.

6) failure to restructure the economy to get off oil and over to an electrical economy means that the US (and the world) are caught in the oil price dilemna: any real recovery increases oil price and will be derailed by those high oil prices.

7) Europe, ex. Germany, is in recession.

8 ) the developed world is in depression, it never left depression.  During depressions there are recoveries (such as they are) and recessions, but the overall economy is in depression.

9) China’s economy is slowing down.  Since China is the main engine of the world economy, followed by the US, this is really bad.  If it goes into an actual recession, bend over and kiss your butt goodbye.

10) Austerity is a means by which the rich can buy up assets which are not normally on the market for cheap.

11) the wealth of the rich and major corporations has recovered and in many countries exceeded its prior highs.  They are doing fine. Austerity is not hurting them. They control your politicians.  The depression will not end until it is in their interest for it to do so, or their wealth and power is broken.

12) The US play is as follows: frack. Frack some more.  Frack even more.  They are trying the Reagan play, temporize while new supplies of hydrocarbons come on line.  Their bet is that they’ll get another boom out of that.  If they’re right, it’ll be a lousy boom.  If they’re wrong (and the Saudis think they are, and the Saudis have been eating their lunch since 2001) then you won’t even get that.  Either way, though, they’ll devastate the environment, by which I mean the water you drink and grow crops with.

13) For people earning less than about 80K, the economy never really recovered.

14) If you’re out of work more than 2 months your odds of getting another job drop through the floor.  If you do get one, odds are it will pay much less than your previous job.

15) Canada is undergoing austerity madness at all levels of government, and the corporations, with historically low tax rates, are not going to spend either. With Chinese demand for commodities dropping, expect a nasty recession.

16) Australia, having tied itself completely to China is about to reap the downside of that decision.

17) Wages are being systematically broken in the developed world.  The rich do not believe they need you, except as wage-slave labor.  You will all be company store slaves, paying rental streams to everyone to be allowed to continued to eke out a miserable existence.

18) Since the US sells protected works (so called “intellectual property”) you will continue to see a massive attempt to break anyone who doesn’t pay IP rent to the US.  Some countries (Sweden, Germany, among others) are going along.  But there are signs of rebellion.  Apple may have won against Samsung in their ridiculous attempt to enforce patents on obvious solutions, but both Japanese and Korean courts threw the cases out.  Paying rent to America, the hegemon, when the world system is working is one thing, paying rent when the world isn’t working is another.

19) Stirling Newberry says, and I agree, that none of this is stable, but it will last as long as the majority of the baby boom, the silents and a good chunk of the Xers still think they can hang on to their little piece of the pie, and screw everyone else.  It will most likely break down in 2020/24, which is when the demographics turn.  Young people today are completely screwed, they have astronomical student loans, no or shitty jobs, can’t afford a house and can’t afford to start a family.  Note that the places where revolutions, peaceful or otherwise, are happening, are places where the majority of the population is young.  Latin America, the Middle East.

Addendum

20) The economic numbers you hear don’t mean squat. Headline inflation does not matter, ask yourself instead “what are my fixed expenses?”  Start with food.  Jobless claims cannot be compared to prior numbers because less people have the sorts of jobs that let you make those claims.  For the to make sense you’d have to adjust them for the reduced # of jobs which allow claims.  The unemployment rate has dropped even though there are, in absolute terms, less jobs, because people have given up looking.

21) The money the Fed floods into the financial markets (quantitative easing, among others) is mostly NOT getting to ordinary people, and whatever Bernanke and his apologists say, it was never intended to.  It is intended to prop up financial actors, and keep the rich richer.  It has done what it is supposed to do.

The Musical Chairs Economy

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On February 19, 2012

31 Comments

Ok, for some time, folks have been after me for a formal economics post.  What’s going to happen in the future in the US?

The answer, for around the next 5 to 6 years, maybe longer, is the musical chairs economy.  Let’s lay out the basics.

What has happened is that the general circle of prosperity has been reduced.  Less people now live in the “good” US economy.  When they drop out of that economy they also use a lot less oil and gas, and even electricity.

Since the US can no longer sell nearly as much paper in exchange for real resources and goods, the US now has to sell something the rest of the world wants.  One part of that is intellectual property, which is why you will continue to see stricter and stricter IP laws.  The other part of that is hydrocarbons.  The world is still hungry for oil.  And if Americans use less of it, and if the US moves massively to fracking of unconventional oil (which it is) then the US can, again, become an oil exporter.  (Remember, for much of the 20th century the US exported oil.)

This plan includes impoverishing large numbers of Americans, since the reduction in oil use is not primarily being produced by providing the same services with less energy, but that is not an issue to those who run America’s industry or politics, since they do not, despite rhetoric, care about the welfare of ordinary Americans.

This game, in a lesser form, has been going on for a long time.  In the older version, going on since at least 1980 or so) production was offshored or outsourced, workers laid off and they never found good jobs again.  Industries of the past were offshored, but industries of the future were mostly not created (the internet boom being the last large-scale industry creation episode).  When they were created, they “went to scale” in other countries–once how to produce was understood, the production was done overseas, where it was cheaper, not just in wages but in terms of regulations (for example, batteries are made in China by hand.  Batteries, of course, are mostly acid containers.)

The game has now moved into a more virulent stage.  During the 2000’s various economists and financial gurus used to laugh that the fools overseas were giving America real goods and resources in exchange for worthless paper.  They thought they had found a free lunch, and many of them were right, form themselves, individually (who cares about fellow Americans?  If they can’t make too bad for them.)

So what happens now is a recovery of sorts.  Life is not so bad for the upper middle class and the upper class (I don’t include the oligarchs in the upper class, they are the ruling class, the upper class are the lawyers, doctors, judges, county pols, mid-level real-estate developers and so on.)  Since the majority of the population who wants a job can find one, who cares if millions of Americans are unemployed?  They are not economically functional in this economy, it is better for them to just go away, so that oil can be sold overseas.

Bear in mind that the short history of American economics in the post-war period can be summed up as “suburbanization.”  Wave after wave of developments, and the money which were made from them.  Suburbanization, by its very nature, requires gasoline, because it requires cars.  Suburbs do not, and probably cannot, have rapid transit.  They are also not economically self-sufficient, generally deliberately (the horror of some one working from home causes vapors amongst developers and suburban homeowners, it seems.)

Peak oil may or may not be here, but it’s pretty clear that peak cheap-oil has passed.  The American lifestyle of the 20th century, which has not been fundamentally changed by the internet and assorted telecom gadgets, is oil based.

So, there will be recessions and non-recessions (amidst what is an ongoing long Depression).  And in each recession those who fail to grab a chair will be cast out into the dispossessed.  Those who keep their chairs will be allowed to keep some facsimile of the “American lifestyle”.

The people who run the American economy and political system will continue along these lines so long as it continues to bring them money or power.  As noted, they do not have fellow feeling for other Americans, they believe they earned everything they have, and that if someone else isn’t prosperous, it’s because they didn’t earn it.  Such useless eaters are a drag on society.

I emphasize the thought process, which some will find polemical, because it is at the heart of the problem.  It is the most important part of the post.  There are other options, from the managed decline favored by environmental purists through to various types of smart growth.  They are not being pursued and will not be pursued because they are more work with less certainty of who will reap the profits and power than simply managing the current decline, and culling the herd from time to time, as necessary.

“The powerful do as they will, the weak suffer what they must.”

As long as you, the people, believe you are weak, you will suffer what you must.

The monopoly of violence and simple solutions to supposedly insoluble problems

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On August 11, 2011

50 Comments

One of the interesting things happening in Britain is the formation of ad-hoc groups for neighbourhood defense.  People have noticed that the police can’t defend them, and have decided to defend themselves.

This it is not a good thing for the State, which is why the police are strongly against it.  This is potentially the beginning of the breakdown of the monopoly of state violence, and the beginning of the creation of militias.  Normally, of course, I’d be aghast at the creation of militias.  They lead to nasty sectarian strife, etc… and if they take off, that’s exactly what will happen.

But what they also are is a crack in the social contract between state and citizens, an acknowledgement that the State can’t defend its own ordinary people.  And as you walk down this path, citizens start questioning their support for the State, period — whether in taxes, or in obedience to the State’s law.

Normally, again, this is a bad thing.  Heck it’s a bad thing here, but just as with the riots it is a natural reaction to the current situation.  When the State doesn’t do its job properly, whether that’s running the economy for everyone’s benefit, not just a few; or whether that’s maintaining the basic monopoly of violence (which includes basic social welfare so that the designated losers of the system don’t resort to uncontrollable violence), people start opting out.

States which don’t perform their basic functions become failed states.  There are a lot of ways to get there, but one of them is to allow the highest inequality in the developed world to exist in your capital (sound familiar?).  Those people lash out, you can’t repress them effectively anymore, others step up to do what should be your job.

Those who say there is no solution are, as usual, full of it.  There is a solution, and it is obvious.  Britain had plenty of money for the Iraq War, had and has plenty of money for Banker salaries and a housing bubble.  A chunk of that money could have easily made sure this didn’t happen, but the choice was made to have rich bankers and bomb Muslims: those were Britain’s priorities.

But if you wanted to fix it, first you clamp down hard (you now have no choice, because you didn’t care about these people), then you offer them a future.  You basically give everyone who wants a job, a job, put ex (or current) sergeants and corporals in charge, move any non-married men and women out of the city, and put them to work fixing and building things. There are always roads and buildings to be repaired, ditches to be dug, farmers who need help and so on.   You hire out of work tradesmen, and they teach them skills.  You pay them decently, you feed them, you house them, you give them skills.  After 4 or 5 years, you start putting them back into the private work force, and you subsidize their first job.

This isn’t rocket science, it is dead obvious.  Yes, it is expensive, but it is less expensive than the Iraq War or bankers bonuses.  And it is a hundred times more humane, and will prevent further occurrences while improving race relations, your economy, your tax base and you workforce.

When people say there are no simple solutions they are, in the current context, almost always full of shit.  What they mean is that there are no simple solutions which are socially acceptable either to the governing class or to society as a whole.

Innocents were already being hurt in Britain

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On August 10, 2011

49 Comments

So a guy gets hurt in the riots.  He lives in the most unequal city in the developed world. He is a part of the society which condemned these people to hopeless lives, to the point where they rioted, after 333 of them died in police custody over 13 years with not one cop being convicted of anything.  They rioted after a black man was shot and the police lied about it.  They rioted when there is one job for ever 58 applicants where they live, where right out of high school most of them will never hold a job.

Riots aren’t pretty, if you don’t want them to happen, make sure your society doesn’t abandon a racial minority to squalor and hopelessness.

You should all know better. Yes, it’d be nice if they were more targeted against the people who have fucked them the most, but y’know, that’s the way riots go. Hell, even clearly political riots like the Greek ones started out with the rioters fucking up their own neighbourhoods.

This is why you don’t let things get to the point where people riot, don’t let their lives be completely intolerable. As Stirling noted, even soulless technocrats from the liberal era understood that.

I have sympathy for the victims, but so what? I have more sympathy for the 333 people who died in police custody. They lost a lot more. And it may not be that shopkeeper’s fault, but that’s how these things go. When you treat people like sub-humans, they eventually show you what that means.

I am not going to play the gutless liberal game of condemning people who have been treated like animals for lashing out in pain. Is Britain a democracy, or not? If it is, then everyone is complicit, if it isn’t then a revolution is needed and anyone who isn’t working towards one is complicit. And in the meantime, a lot of innocents are going to get hurt, that’s what happens in unjust societies.

If people won’t help those in pain, then those in pain will share the pain. That’s what happens, especially when you’re talking young men who never had a chance, who were born with no future, and society just doesn’t care.

British bankers were making millions, billions, and British government couldn’t find enough money to help these people? To give them jobs?

And British society tolerated those priorities?

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