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Coronavirus Hits Black & Hispanic Children
By Shlomo Maital
“It is what it is”. That statement by President Trump, about America’s massive death toll from COVID-19, [160,000 persons so far and rising by 1,000 or more a day, every day since April 1] raised the blood pressure of a lot of people. So did his blatantly false statement that children are “totally immune”, modified to “virtually immune”.
But what was truly upsetting was not Trump’s lies, but medical facts, reported in the journal Pediatrics, and described in a CNN report. Black children, Hispanic children, poor children – all suffer far far more from the virus than others. The virus has swept over society like a tsunami, but it has hit hardest the racial and income groups who always get hit hardest by everything. It is unfair, immoral, unacceptable. Black lives matter. Hispanic lives matter. Children’s lives matter. ALL lives matter. And no, it is NOT what it is. What it is, is – White House officials and the President are tested daily, and get the results within hours. For the rest of America – the wait can be many days. The inequality starts right at the very top. So does the moral rot.
Here is a summary of the report in Pediatrics:
* Coronavirus infection rates in the United States are significantly higher among children of minority race and those from lower socioeconomic backgrounds, according to a new study
* The study examined 1,000 child patients tested between March 21 and April 28 in Washington DC. Only 7.3% of White children tested positive for coronavirus, in contrast to 30% of Black children and 46.4% of Hispanic children, the study found.
* Three times as many Black children reported known exposure to the virus as White children, the researchers reported.
* The test site collected basic demographic information for all patients; the research team then used survey data to estimate family income based on home addresses.
Of the 1,000 people tested, 207 were positive for coronavirus. About 9.7% of those in the highest income quartile were infected, while 37.7% in the lowest quartile tested positive, the team found.
* Of the patients tested, about one third were Black and about a quarter were Hispanic. The team found that the inequities existed even after they adjusted for age, sex and median family income.
The data speak for themselves. Blacks, Hispanics, the poor, lower-income groups, all suffer disproportionately. Why? They have to go to jobs with little social distancing, just to survive, and they have far poorer medical care and far less access to quality care.
I hope we will NOT go back to the good old days. They weren’t so good. A great many things need fixing, and the virus has swept away the topsoil and revealed all the rot beneath. Any society that accepts “it is what it is”, among children of color, is unworthy. And its leaders are criminals.
Wealth Inequality: A Bleak Picture
By Shlomo Maital
source: McKinsey Global
Shocking episodes of police violence against African-Americans have again brought the ugly fact of racism in the United States to the fore.
Underlying it, reflecting it, is the equally shocking chronic inequality of median family wealth between white and black. The graph above, from McKinsey, a global consulting company, shows that since 1992, the median white family has wealth from six to ten times greater than the median black family. The graph ends in 2016 – the wealth inequality has doubtless grown under Trump, because of the massive gift of wealth his tax cut gave, to already-wealthy whites.
African-Americans are equally intelligent, equally hard-working (or more so), equally creative. So why can they not accumulate wealth? Is it because they lack opportunities, in schooling, education, employment and political voice? And why are they dying in large numbers, from COVID-19, well beyond their proportion (12-13%) in the population?
The bitter irony between right-wing US cries of Make America Greater (was it ever, since the end of slavery?), and the terrible injustice of inequality, Make America Fairer, is registering, belatedly, on many Americans, as protests continue. Let’s hope enough of them remember this in 140 days exactly, on Tuesday November 3 – the presidential election.
Global Winners & Losers: The “Elephant” Diagram
By Shlomo Maital
Source: World Bank: Christoph Lakner, Branko Milanovic, 2014
The above diagram tells the story. On the “X” axis: the global distribution of income, from the poorest 5% to the richest 5%. On the “Y” axis: the global rate of growth of the income for each of the 20 5% groups. The time period is the two decades, from 1988 through 2008. In these two decades, the Berlin Wall fell, global trade boomed, China grew by double digits, Asia prospered…and then it ended, in 2008, when the ceiling fell, with the global financial crisis.
The diagram has been dubbed the ‘elephant’ diagram, because it does look like an elephant, trunk and all.
What is the story it tells? The poorest 5% were left out – their incomes did not grow at all. The ‘middle class’ in the poorer countries, mainly China, enjoyed strong growth. The ‘middle class’ in the wealthy countries were hard hit — the 80th percentile did not grow at all, in income. And the top 5%? Their income soared.
Now — looking at elections in the UK, in the US, and elsewhere — I think you could have made strong predictions just based on the ‘elephant’. A large underclass, in the left-out economy. A large middle-class hard hit and struggling. A wealthy elite, able to buy political influence. The rising economic power of China.
Britain’s Labor Party leader Corbyn was crushed, because he lost touch with his voters. There is a real and present danger that the Democrats in the US may do the same – though I understand, they are studying the UK election closely.
The two groups of big-time losers, in the elephant diagram, will stay home or vote against you, if you ignore what matters to them and if you ignore policies that they believe will help them. It happened before – it could happen again.*
* “Lakner & Milanovic: “democracy is correlated with a large and vibrant middle class, its continued hollowing-out in the rich world would, combined with growth of incomes at the top, imply a movement away from democracy and towards forms of plutocracy. Could then the developing countries, with their rising middle classes, become more democratic and the US, with its shrinking middle class, less?”
The Great Money Mystery—Solved!
By Shlomo Maital
There is a major economic mystery in Israel, US and the West.
Governments are running big budget deficits, printing mountains of money, and yet – there is still virtually no inflation, while the inequality of wealth and income has grown alarmingly.
Why? And — should we worry?
I spoke with my friend Arie Ruttenberg about this. Ruttenberg built Kesher Barel into Israel’s largest advertising agency, sold it to the global McCann-Erickson, founded Club 50 and sold it to Migdal, and wrote a book about creativity with me [Cracking the Creativity Code, 2014]. He has expanded his assets through clever, at times contrarian, investments. Here is his ‘take’ on this mystery. It takes him 1,267 words to explain – double the length of my usual blog. I hope your investment of time is worth it. I’m pretty sure it is.
“In the old economy, the money that reached the marketplace was spread among everyone. When they used the money to buy goods, prices rose and this led to inflation. In the new economy, the money reaches only a few of the very rich, who mainly buy stocks, bonds and real estate. These are not included in standard measures of inflation, therefore it seems like there is no inflation.”
“Lately, Donald Trump, US President, has boasted about his ability to flood the system with limitless amounts of money and without causing inflation. Really? How can this be understood? There have been a few explanations of this phenomenon, that on the face of it contradict the Keynesian economic model: Huge budget deficits, together with an expansionary monetary policy and zero interest rates, and all this with full employment…and no inflation. A true economic miracle, that invites other politicians, including some among the Democrats, to offer the nation a Paradise on Earth, of unlimited prosperity through printing money. How did this happen? Is this really sustainable? Or, is it an illusion, with inflation hidden and disguised as something else? And is there a ticking time bomb, very very quiet, a social ‘bomb’ that will result in a deafening explosion soon?”
“A common explanation for this phenomenon is linked to globalization and technology. The argument is that we are at the dawn of a new macro-economic age, based on enormous global productive capacity and perfect competition through digital trade accessible for all. This explanation is only very partial, because it fails to explain why huge amounts of printed money enter the market and ‘evaporate’ without causing any increases in prices.”
“My argument is that the budget deficits and the monetary expansion indeed have had an enormous impact, but in contrast with the past, they have not caused significant inflation in consumption goods, but instead have mainly brought a rise in the price of equities, bonds and commercial real estate, which in turn increase economic and social inequality.
“John Maynard Keynes’ model assumes a uniform economy in which all consumers have similar preferences and compete for the same goods and services, available in limited quantities in the consumer goods markets. In this case, any additional money in the hands of consumers competes for the given amount of goods and so necessarily causes a rise in prices.
“I propose that we think about consumers, in terms of two groups: a) owners of capital and b) those who earn a living by their labor. Owners of capital earn far more than they need for their subsistence, and they save the difference, mostly by investing in equities, bonds and commercial real estate. These investments continue to expand their incomes, from year to year, but the added income does not necessarily increase their consumption, which is already very high. The second group, wage-earners or free-lancers who make a living from their wages, spend nearly all their income on their subsistence, and their savings are mostly targeted toward their pensions – that is, future consumption. Ultimately those savings will be almost completely eroded in value.
The gap between the two groups continues to grow over time, and continually increases the degree of inequality between them.
“What happens to the economy when the government vastly expands the amount of money? Or when the Central Bank creates huge amounts of credit at zero interest rates?
“The answer is: Most of the money and credit flows into the hands of the owners of capital, who grow wealthier as their assets expand, and as they continue to grow their wealth and create more jobs for wage-owners, until the economy reaches full employment. The wealthy grow even wealthier and those who live on their wages earn only enough to barely survive. In this way, the economy reaches full employment, but income and wealth inequality grow.”
“If the demand for workers grows, why don’t wages rise? Because of the two new phenomena I mentioned, globalization and technology. Through those two forces, we have turned the majority of workers into commodities – that is, into a basic good that has cheap plentiful substitutes. These two forces create a situation in which the supply of labor becomes almost infinite — in economists’ jargon, perfectly elastic. Therefore, when the owners of capital expand their businesses and assets, they do so almost without raising wages at all. When there is full employment, you can always hire cheap foreign workers.
“And why doesn’t the fall in unemployment bring a major increase in the demand for consumer goods and hence, a rise in their prices?
“Because of the same two reasons — globalization and technology. Workers can today buy cheaper goods anywhere on earth, via the Internet, and the supply of such goods is becoming nearly infinite. In this way, inflationary pressure in the goods market is prevented.
“Why doesn’t the rapid growth in incomes of the owners of capital cause inflation, when they spend that income?
“There are two reasons. First, because wealthy capitalists cannot eat two steaks for breakfast; and second, because it does cause inflation, but it is not called inflation, it is called “a rise in the stock market” and “a rise in the price of commercial real estate”. Yes, the excess demand caused by the budget deficit and cheap credit creates strong inflation in the main “goods” that the wealthy consume, but because these rises in equity prices and real estate prices are not included in the consumer price index, it is regarded as part of economic prosperity, and not as inflation.”
“Why do the wealthy people continue to buy stocks, bonds and real estate after they have become so costly?
“Because the rate of interest is zero, and because there are no other investment opportunities. Thus, the wheel continues to turn, over and over, never stopping, when: a) the wealthy grow more and more wealthy, pocket trillions of dollars of wealth, and feel super-rich; and b) the wage-earners enjoy full employment, stretch their income to last the full month, and are content. This can be described as the “happiness of the poor”; c) the politicians waste money endlessly and are pleased with themselves; d) the governments expand the debt they owe and nobody cares; e) the central banks expand their balance sheets, and again, nobody cares. Hallelujah! The messiah has come!
“Can this go on forever? There is no reason why not, on condition that: a) a few madmen do not arise and start to complain about the social inequality that is becoming unbearable; b) a ‘crazy’ US Central Banker does not appear who starts to raise interest rates, and thus puncture the stock markets, bond markets and real estate prices; c) a stupid American President does not appear who crushes globalization, imports of cheap goods and imports of cheap foreign labor, through trade wars.
“Then, what happens to the global economy? It becomes an economy of rich feudal lords, and contented vassals who earn exactly as much as they need to go to bed with a full stomach, get up the next morning and to serve their lords. Is this what Paradise looks like? No, this is what the economics of wealth inequality looks like.
“At the end of the 1970’s, Israel had a cabinet minister who used the phrase “blessed inflation”, to describe the impact of influence on accelerating economic activity – until, that is, the inflation destroyed the Israeli economy. When the US President brags about flooding the American economy with money in order to create growth, he is boasting in fact about “increasing blessed inequality”.
“How long will this last? Heaven knows”.
What We Don’t Know…Is Hurting Us!
By Shlomo Maital
“What you don’t know can’t hurt you!” I wonder if anyone ever said anything dumber. What you don’t know will hurt you and always does. And what is worse, what you don’t know that you don’t know, THAT will do you in for sure.
I am an economist. We pretend that we understand how the world’s economy works. Do we really? Didn’t the 2008 global crisis, and aftermath, prove anything? That we did not know enough to predict it, and worse, did not know enough to know how to dig the world out of the mess it was in (the ‘austerity’ camp fought the ‘spend/spend’ camp, confusing the world totally).
So the first step in dealing with this problem, is to try to KNOW and define what we don’t know. Here is a partial list:
* Globalization: Globalization is the process in which nations of the world together moved toward freer movement of goods and services, people, information, technology and capital across borders. It has generated unprecedented wealth for those individuals, businesses and nations clever enough to become globally competitive and join the globalized ecosystem — $150 trillion worth, according to McKinsey Global Institute. This is mainly true of Asia, including China but not solely. It also left left out individuals, businesses and nations not able or willing to become part of the global system. Some have thrived in the globalized world; many have suffered. Economists say opaquely, it’s “Pareto-optimal” (winners can compensate losers, with lots left over). I say, economic borders are being restored because those losers are finally revolting, after being ignored and neglected.
In the era of Trump and his Wall and anti-globalization backlash: How can the benefits of globalization be distributed more fairly and how can the inevitable losers to globalization be compensated, without ruining the energy and freedom that drive globalization and without seriously disrupting its benefits?
* Global aging: Large parts of the world are aging demographically. Yet the issue of how to set aside adequate resources for the retired and elderly has barely begun to be addressed. How can we ensure that the retired and the elderly live in dignity without imposing an unfair or unbearable economic burden on working people and the young, and prevent a war between the generations?
* Global Capitalism: History shows that socialism, based on state ownership of key assets, has failed. But it also shows that capitalism, the system of free open markets, has not fully succeeded and continues to endanger our fragile global ecosystem. The fundamental causes of the 2008 financial crisis and ensuing recession have not been remedied. What new, basic economic architecture can create a system that is good at both generating new wealth and ensuring its distribution is fair and equitable, within a system that is not prone to repeated, frequent collapse?
* Global Social capital: Social capital is the summed present value of the bonds of love and friendship among family, friends, neighbors and communities, that generate mutual support and security. Financial capital is tracked to the last dollar; social capital is hugely important, gigantic in size, yet is not measured, tracked or fostered. Growing urbanization has begun to diminish social capital and hamper its formation. How can we reverse the decline of social capital, measure it and expand it, in a world where urbanization and the anonymity it creates are destroying the crucial social bonds that once enhanced lives everywhere?
* Global Search for Meaning: How can better-off individuals, businesses and nations the world over find new meaning and purpose in life, other than acquiring more and more goods and services — proven to be ultimately disappointing, unable to bring true happiness? How can we rebalance present-future choice and make the future what it once was, without crashing the borrow-and-spend system?
Economists and politicians lack viable answers. They’re hopeless. Can social entrepreneurs can come up with some initial answers and find ways to try them out? At the least, we will know what we don’t know, before it kills us. Let entrepreneurs everywhere work on these global life-or-death dilemmas, rather than invent another app that will show how far we’ve jogged.
Piketty: The #1 Amazon Bestseller Nobody Really Reads
By Shlomo Maital
Can you believe a 696-page boring economics book, Capital in the 21st C., is the #1 Amazon best-seller, and one of Harvard University Press’s (Belknap) all-time best-sellers? And can you also believe very few people have actually ploughed through this tome? And that people constantly mispronounce the author’s name: He is French, and his name is toh-MA pi-ke-TTY, rhymes with bring me TEA!
Bloomberg Business Week has devoted an entire issue to Piketty, his arguments and his criticics, including Chris Giles (Financial Times) and two respected macro-economists, Per Krusell and Tony Smith. (See: http://www.businessweek.com/articles/2014-05-29/pikettys-capital-economists-inequality-ideas-are-all-the-rage ).
As a service to my readers, and to prevent a widespread narcolepsy epidemic (the malady that causes people to fall asleep in daytime), here is a very short summary of the ongoing debate.
What does Piketty claim? Simply – that “Beta” (the ratio of capital to income, for nations) initially fell, but in recent decades has risen. This is because the fraction of income saved (which is what leads to capital accumulation) exceeds the rate of growth of income or GDP.
So what? People who own capital can earn high return on their wealth, averaging 8 %; this doubles their wealth every 9 years. People who spend their income (most of us working people) fall into debt and fail to accumulate wealth.
So what? People with great wealth gain control of the democratic system, to perpetuate their wealth through tax breaks.
The growing concentration of wealth in fewer and fewer hands cannot be corrected by the democratic system (the vast majority, who have no wealth), because the super-rich use their wealth to manipulate the democratic system.
That last paragaph is NOT in Piketty. It comes from an article by John Cassidy, “Is America an Oligarchy?”, The New Yorker, April 18. He quotes two political scientists, Gilens and Page, who claim that: “Our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts”:
Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise. But …in the United States, our findings indicate, the majority does not rule—at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover … even when fairly large majorities of Americans favor policy change, they generally do not get it.
On many issues, say the authors, the rich exercise an effective veto. If they are against something, it is unlikely to happen.
So here is where things stand. Wealth grows faster than income. Wealth concentrates in fewer and fewer hands. Wealth corrupts democracy.
Marx predicted that the concentration of wealth would grow so intolerable, that the proletariat would revolt.
If the democratic system cannot repair itself – what other solution is there?
All That’s Wrong With Democracy:
Roger Cohen Gets It Right!
By Shlomo Maital
Roger Cohen, the New York Times columnist, is a fierce critic of my country Israel – sometimes deservedly, sometimes excessively. But lately he’s been a fierce critic of U.S. President Obama, and this time, it’s richly deserved. In today’s New York Times, he tears a strip off Obama for his weak wishy-washy speech in Europe on how to stand up to Russia. The problem is, Cohen says, that Western democracies are “failing to deliver”, while despots like Putin actually have been performing rather well.
The proof? Soaring unemployment in Europe (3 m. unemployed in France, for instance), rising fascist right-wing parties (Marine LePen and the Front Nationale did well in France’s municipal elections last Sunday), European integration is stalled and Europe is internally divided and at odds, the EU is overly bureaucratic and undemocratic; income disparities in Europe and the U.S. are huge and growing; there is “spreading middle-class dystopia”; money has skewed fairness on both sides of the Atlantic, corrupting democracy. Scorched earth Republicans devote their politics to obstruction. “A CEO can earn $80 m. for a few weeks of work while incomes for most Americans are stagnant.” Many young people have lost the sense of possibility and hope.
Concludes Cohen: “Unless Western societies find a way to shake their moroseness, level the playing field and rediscover [equality], they are going to have a hard time winning the contest of ideas (against the despots)”.
“Now is not a time for bluster,” intoned Obama. And that is precisely what he provided in his speech – empty words. Saudi Arabia has given up on the U.S. Israel may soon have to do the same. And Vladimir Putin is laughing up his sleeve.
A full century ago, Louis Brandeis, U.S. Supreme Court Justice, said that you can’t have both democracy and great concentrated wealth. Israel just passed a law to try to mitigate that concentration. Before the U.S. and Europe can confront Russia, they need to look in the mirror and confront their own problems.
Why Money Should Be Like Manure – But It Isn’t!
By Shlomo Maital
Money, it is said, is like manure. To do any good, it has to be spread around widely.
But in today’s screwed-up post-global-crisis world, it isn’t. Money is increasingly concentrated in a very few hands. And as a result it just sits there. This is the nub of the problem.
Consider these two pieces of data.
* A new study by Oxfam, the British philanthropic NGO, claims that 85 super-super-rich individuals in the world hold wealth worth $1.65 trillion! This amount of wealth, held by fewer than 100 individuals, is equal to the value of all the wealth held by the poorest half of the whole world – 3.5 billion people. The average wealth of the super-super-rich 85 is $19 b. per person.
Try this imaginary exercise. Suppose, tomorrow, these 85 super-super-rich followed Warren Buffett and Bill Gates and gave away their wealth (gradually selling assets, in order not to depress the prices of stocks, bonds and real estate) and handed the proceeds to the world’s 3.5 billion poor people. Each poor person would get $471. This is a paltry sum. But it would change the lives of the poor. They could start businesses, buy small pieces of land, buy a home. And this spending would generate income for other poor people, who in turn would spend it…and end the global economic stagnation.
Imagine, as John Lennon says.. Imagine. But it’s just a pipe-dream. The wealth of the super-super-rich is the opposite of manure. It sits in their safes and living rooms, instead of spreading around the world.
* According to the Financial Times, Jan. 22, “the pile of unspent corporate cash that has built up since the start of the financial crisis is being held by an increasingly concentrated pool of companies that will be crucial to hopes of a pick-up in business investment to stimulate the world economy.” A study by the consulting firm Deloitte shows that globally, “about a third of the world’s biggest non-financial companies are sitting on most of a $2.8tn gross cash pile of unspent corporate cash (retained earnings) ! And of that sum, fully 5 per cent is accounted for by Apple alone, with $150 b. in unspent cash! ” “Looking ahead, the wave of cash [spending] that many are expecting will depend on the decisions of a few, rather than the many,” a Deloitte expert said.
Why aren’t corporations spreading around their cash, like manure? In a risk-averse world, with sluggish economies, there is no need to invest in more productive capacity. Better to hold on to the money and play with it than invest it in real industry, in real job-creation, in real innovation. This is what the handful of rich corporations believes.
Why not impose a tax on unspent retained earnings, to create an incentive to invest it? Why reward Apple for holding its cash abroad, instead of investing it in America?
So there you have it. Billionaires and rich corporations. Both sit on huge piles of money. And the money just sits there. Until it starts to move, we won’t see true global economic recovery or more new jobs for those who really need them.
Is America Truly a Land of Opportunity?
By Shlomo Maital
Horatio Alger, Jr. was a 19th-century American author who wrote many juvenile novels about boys who rose from poverty and humble backgrounds to middle-class security and comfort through hard work, determination, courage, and honesty. He helped create the mythology of America as a land of unlimited rags-to-riches opportunity for everyone – a myth that was once partly true, but no longer is. Today, Horatio Alger is science fiction. How do I know?
As witness for the prosecution, I call on President Obama. He claims he will make upward mobility, and lower inequality, “the defining challenge of our time”, as his main goal for the remainder of his presidency. Here are some facts he cited, in an important speech:
* An American child born into the lowest 20 per cent income level has less than a 1-in-20 chance of making it to the top – while a child born into the top 20 per cent has a 2-in-3 chance of staying there. So much for Horatio Alger.
* The top 10 per cent of income earners gets half of all national income, up from only a third in 1979, and matching the inequality in Jamaica and Argentina.
Obama’s speech even won praise from New York Times columnist Paul Krugman, who loved Obama’s statement that fiscal deficits are a lesser threat compared with a “relentlessly growing deficit of opportunity”.
Nice speech, Obama. But once again, you spin words without deeds. Because you forgot to mention the one thing that could truly revive the middle class – in-sourcing, bringing home all the well-paying middle-class manufacturing jobs that America blithely sent abroad in outsourcing. Only 9 per cent of America’s workforce is employed in manufacturing. Less than 12 per cent of GDP originates in manufacturing. Not that long ago, it was fully 21 per cent (in 1980). The U.S. share of world manufacturing production has declined from 31 percent in 1980 to 24 percent in 2008.
By outsourcing manufacturing jobs, America has given up two pillars of the middle class — $20/hr. wages (more than double what Wal-Mart pays), and the productivity gains that accompany manufacturing technology, now being reaped mainly by China. No country can truly prosper unless it makes things.
A few key changes in America’s tax laws could be a good start. But forget that – Republicans will never support anything that damages the privileges of the wealthy. What is hard to understand is why so many of the lowest 20% of the income distribution vote for them.
TIMnovate 