Politics and economic anxiety

2010-10-08

in Economics, Politics

There is a video circulating online – at least until Disney’s lawyers kill it – that combines old footage of Donald Duck in a dire financial situation with current recordings of Glenn Beck. The point being made seems to be that much of the stregth of the Tea Party movement and individuals like Beck derives from the fear that individuals have about their current financial situation, or near financial future.

I am always curious about the readership of this site, partly because being aware of the situations in which participants find themselves could help illustrate why general currents of thought run in the way they do. To that end, I would be curious to get responses to these questions:

  1. Has anybody reading this site suffered a major financial blow, in response to the global economic crisis that has been ongoing since about 2008? Examples would include getting laid off, having your house foreclosed, etc.
  2. Has anybody suffered a more minor financial blow, such as having to cancel a vacation, experiencing a notable drop in the size of your investment portfolio, etc?
  3. Has anybody suffered from a great deal of anxiety about the state of their current or future economic circumstances, to the extent that it has been one of the top things on their mind?

Whether it is reflected in the readership of this site or not, the difference in perspective between those deeply concerned about current economic conditions and those for who they are a somewhat secondary issue could help to explain much of the political confusion in North America. For instance, the frustration of some people who think we are failing to act on critical long-term problems, because of our obsession with short-term economic performance. And, in contrast, those who are frustrated by the ambition of others to press on with major long-term reforms, at a time when they feel immediate relief is the most pressing priority.

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{ 15 comments… read them below or add one }

Tristan October 8, 2010 at 8:11 pm

So, you don’t think the structural forces behind the rise in income inequality is a problem? Why are you creating a false choice between short-term redress, and long term redress of the failure of our economic system to increase real wages as a share of GDP of most workers over the last 40 years?

Even liberal hacks like Robert Schiller think income inequality is becoming a dangerous problem – concentrating on it is not “short term” thinking – it thinking seriously about mitigating the logical results of the last 30 years of neo-liberalization.

“Moreover, the premise is not that inequality is a bad thing that we want to get rid of. The idea is instead that there is a target level of inequality. Some inequality is indeed a good thing, for without it there can be no effective economic incentives to work harder, save, etc. Indeed, if the nature of the economy were to change so as to make incomes too equal, then the inequality insurance would actively reverse that, making the tax system less progressive. Moreover, the effects of inequality indexation are not to move us monotonically towards a more equal world. There is no ideal expressed or implied here that we will one day have perfect income equality.”

“…by guaranteeing that households at all income strata share in the gains from economic growth, the policy may induce the majority of voters in a democracy to endorse policies that cause the economy to grow, but may not necessarily benefit their particular economic class. That is why we call this the rising-tide tax system: inequality indexation guarantees that a rising tide actually will raise all boats, not just the yachts. As a result, it may help build a social consensus in favor of pro-growth economic policies.”

PDF link:
http://www.nber.org/~confer/2006/midmf06/shiller.pdf

Short video of Schiller on inequality: http://www.youtube.com/watch?v=kq0PtOiO1vs

Tristan October 8, 2010 at 8:13 pm

The gist of the video:

“If these trends that we’ve seen for 30 years now in inequality continue for another 30 years, it’s going to create resentment and hostility….we could turn into a country that even the rich would rather not be in. What’s beautiful about America is our sense of cooperation….We don’t want an economic system that has a winner-take-all aspect to it…”

http://www.youtube.com/watch?v=kq0PtOiO1vs

Milan October 9, 2010 at 3:41 pm

It would have been better to just answer the question. Other people are encouraged to do so.

zoom October 10, 2010 at 8:15 am

1. Yes, I got laid off from my job of 18 years in March of 2009. I’ve since discovered I’m not as employable as I thought I was. Not being bilingual is a serious hindrance. I’m still unemployed. My severance package is almost depleted now.

2. There have been accompanying minor financial blows, such as the loss of health benefits at a time when I actually need them.

3. Financial anxiety operates in the background for me, not the foreground. I always land sunny side up, which allows me to believe I’m on the verge of getting a job. (However, many years ago, when I was a single parent on welfare, I sometimes suffered from fairly intense front-burner financial anxiety. So I know how it feels.)

Tristan October 10, 2010 at 12:52 pm

Sometimes it takes a lot of energy to avoid having any analysis.

Tristan October 10, 2010 at 3:41 pm

1. No, I’m lucky to be a student during this period
2. Yes – I’m counting the 3903 strike as an example of financial and social losses – and the economic collapse helped the government take away our right to strike
3. Yes – but I’m more concerned about a Weimar Germany like slow decline into fascism than anything about my personal circumstances.

BuddyRich October 11, 2010 at 9:04 am

1. No

2. No

3. Some anxiety due to our particular circumstances. Both my wife and I work in IT in the public service, however, she wants to leave the PS to pursue another career (actually to become an entrepreneur in a completely unrelated field, visual arts). Add that we are also contemplating having a child and with the added financial obligations they bring, money, or more importantly job security is always at the forefront. And while the PS is a safe job for now, I can see a 90’s style reduction in the near future (though attrition could perhaps lesson the blow).

That was a great video BTW. I can see both points of view. Debt is an ugly trap to get into, and it is a trap. When it comes down to it, living paycheque to paycheque (if you have one) is one thing, but when you do so while also increasing your debt level at the same time (as an increasing number seem to be doing) you can start to feel entrapped and have less concern for 10-20 years from now and more concern for your immediate well-being.

Tristan October 11, 2010 at 1:18 pm

“when you do so while also increasing your debt level at the same time (as an increasing number seem to be doing) you can start to feel entrapped and have less concern for 10-20 years from now and more concern for your immediate well-being.”

Look at the relation between increasing consumption, increasing availability of credit, and not increasing real wages as share of GDP since 1980, and you can see why increasing debt levels are not merely the product of “bad planning” by individuals, but purposeful choices by groups in power, mostly financiers.

BuddyRich October 11, 2010 at 9:15 pm

I don’t necessarily think there is a coordinated Illuminati-like conspiracy going on, just individual avarice by people with more control over the system than the average Joe gaming it for their own profit. However, motive is a hard thing to judge, it wouldn’t surprise me if I was wrong on this.

I do absolutely agree that our current economic policies are helping to increase rather than decrease the income gap and this has dire consequences. It brings to mind a piece in the Globe and Mail I read this weekend:

http://www.theglobeandmail.com/news/national/a-radical-pessimists-guide-to-the-next-10-years/article1750609/page1/

Still, while that income gap is narrowing nationally, if we look at other countries (China, Brazil, India) the number of people that have been lifted out of absolute levels of poverty on aggregate is still quite astonishing. No idea if the income gap itself is increasing in those countries as well (it may well have) but the income floor itself has been raised and standards of living are no longer those of the 3rd world for many in those countries.

BuddyRich October 11, 2010 at 9:17 pm

errr… make that “income gap growing nationally”…

Tristan October 12, 2010 at 1:06 am

Are you actually equivocating between the statement that financiers have a disproportionate amount of control over monetary and fiscal policy, and an illuminaty conspiracy theory?

????

BuddyRich October 12, 2010 at 7:01 am

No. Quite the opposite… I was just refuting your assertion that:

“…increasing debt levels are not merely the product of “bad planning” by individuals, but purposeful choices by groups in power, mostly financiers.”

To me, that statement sounded like an attempt to pin it on some big conspiracy. That financiers (and other people) are working in concert with one another for some unknown (and nefarious) reason. I should not have mentioned the Illuminati and introduced that hyperbole if it was not your intention.

In a certain sense financiers are working against each other, but by doing so are collectively participating and perpetuating the system. I could get behind that statement, but I don’t think there is a nefarious greater purpose to it, other than individual selfishness. One financier would just as likely wipe another out if it benefited him/her.

Anon October 12, 2010 at 9:12 am

“The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”

-Anatole France

Tristan October 13, 2010 at 4:47 pm

“To me, that statement sounded like an attempt to pin it on some big conspiracy. That financiers (and other people) are working in concert with one another for some unknown (and nefarious) reason.”

The history of neo-liberalism is well studied, and the shared interests of the world’s rich are not at all hidden. And their motives are not universally nefarious either – George Soros gives back with one hand as he steals with another.

Little about the conspiring of financial capital and state leaders is “secret” – it is plain and its results obvious in government policies.

David Harvey’s book, “A Brief History fo Neoliberalism” is a good introduction, and can be found online as an ebook. Or, there is Chomsky’s famous speech “Free Market Fantasies” that is transcribed here: http://www.chomsky.info/talks/19960413.htm.

The rise of neoliberalism is a reality, and you have to explain it somehow. If you want to explain it in terms of what the populous demanded, you could try to do that. Maybe consumers demanded empty choice between products and desired nothing more than the breaking of unions and the disastrous implementation of monetarist economic policies. The alternative explanation – that governments fell to elite pressure, largely to the pressure of finance capital – seems a much more likely story.

Tristan October 13, 2010 at 4:49 pm

“In a certain sense financiers are working against each other, but by doing so are collectively participating and perpetuating the system. I could get behind that statement, but I don’t think there is a nefarious greater purpose to it, other than individual selfishness. One financier would just as likely wipe another out if it benefited him/her.”

So you don’t think financiers fought for liberalization of credit card regulations, or the opening up of markets to foreign direct investment, in concert with each other? Of course they did. Financiers do what they must to maintain rates of capital accumulation.

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