The Crisis of Capitalism, Connect the Dots?


The Crisis of Capitalism
The Crisis of Capitalism

The Crisis of Capitalism, Connect the Dots?

Reading the business news and political commentary over time clues you see certain controversies over and over again. In time, you begin to see the relationships between those controversies. Below are listed six links to stories about the economy. They cover different subjects in different ways sometimes in different formats. For instance the lead article on median household income is a statistics based economics analysis, while the second item is a professional discussing what attitude he should take in encouraging his students to pursue higher education. Nevertheless, they all tie together. They tie together evidencing the crisis of capitalism. And by this I mean capitalism as practiced in the United States. Let me explain how. ( The essay will pick up after the six links.)

Middle-Class Death Watch: The Median Household Is Now Poorer Than in 1984

http://www.slate.com/blogs/moneybox/2014/07/31/middle_class_poorer_than_in_1984_housing_wealth_has_crash_debt_has_risen.html

American Dream Fraud: Confession of a Stupid Idealist

http://www.huffingtonpost.com/larry-strauss/college-costs_b_5641798.html

The Frightening Growth of Suburban Slums

http://www.slate.com/blogs/moneybox/2014/08/01/suburban_poverty_it_s_becoming_more_concentrated.html

Is There Any Way That Weak Employment Numbers In Europe Might Bolster Concerns That Most Economists Are Right About Government Stimulus

http://www.cepr.net/index.php/blogs/beat-the-press/is-there-any-way-that-weak-employment-numbers-in-europe-might-bolster-concerns-that-most-economists-are-right-about-government-stimulus

Wall Street Has Raked In Almost A Billion Dollars Helping Companies Move Overseas To Dodge Taxes

http://thinkprogress.org/economy/2014/07/29/3465206/wall-street-inversions-overseas/

Think everything on a dollar menu costs a dollar? Think again.

http://blogs.reuters.com/great-debate/2014/08/01/think-everything-on-a-dollar-menu-costs-a-dollar-think-again/

Median Household Wealth Falls.

The first story is a economic tragedy, an incredible one. The middle class wealth of Americans has fallen below the level of 1984. And it didn’t fall a little bit, it is twenty percent less, one fifth.

Let me put this in perspective for you. The Gross National Product in 1984 was a little more than four trillion dollars. As of 2012, it was sixteen and a half.

That means that this nation increased the amount and value of its good and services roughly by a factor of four and during that time of growth, the middle class actually lost ground. Where did all that money go? And why did the bedrock producers of wealth, the American worker, get less and less of it?

Currently the one percent hold 38% of the nation’s wealth. Their income rose from 1979 to 2007 at a rate of 275%.

Well obviously, it must be that the one percent produce enormous economic gains while what workers produce is worth less and less. Do they really? Between 1979 and 2007, worker productivity in the United States went up 240 percent. American workers more than doubled their productivity and were rewarded by declining income.

So, from the first story we can conclude that the middle class is becoming poorer while the wealthy accumulate more and more wealth.

Is College Worth It?

The second story is by Larry Strauss.  He’s a teacher and he begins the essay talking about his family coming to America in years past believing in the American dream and through hard work and brains made it into the middle class. But now he finds himself in a quandary. Is a college education a road to the middle class for his economically disadvantaged students? It’s hard to encourage a student from that background to take on an incredible amount of student loan debt on a promise of economic advantage when the job market is so hideous and whole idea of economic advancement may be questionable. His students from four or five years back talk abut owing massive student loans while being lucky if they can find any job at all. Some have moved back in with their parents.

He is confronting with courage and commitment a new conundrum of our age. While college becomes more and more expensive while becoming more and more a corporate form based on profit and dubious numbers, the promise of upward mobility may be overblown if not a mirage. It is entirely possible that large groups of Americans will in the future be permanently consigned to the class they were born in.

Poverty in Suburbia

A new phenomenon, the urban slum, is appearing all over America. First reported during the dot.com burst, by about the year 2000, there were significant numbers. But now their population outnumbers those in the inner city slums. Poverty has moved from the underclass to the middle class.

If the news that urban poverty had increased dramatically wasn’t bad enough, that it is in the suburbs is a human tragedy in itself. An inner city can get services to people easily by comparison with an urban environment. In an inner city, you can walk from one place to another, public transportation is common and facilities such as soup kitchens, government offices, etc., can be centralized for greatest access. The urban landscape was designed around the automobile. Housing developments were laid out between broad sweeping roads with access to home with lots of parking and big garages.

Poor people have trouble keeping cars and if they have a car, the cost of maintenance, insurance and fuel will often make it unusable. So, the urban often go without food and government services. And the scattered community and its implied culture of success makes the support of neighbors and even friends difficult. It’s hard to maintain self-respect in a culture which even in the darkest of economic times blames unemployment and poverty on defects of character.

The Intellectual Poverty of the Ruling Class

The response of the government in the United States and Europe to the greatest economic calamity since the Great Depression was austerity. This was an odd response. The great body of economic thought in both the United States and Europe was that in a time of economic calamity the government should step in and stimulate economic activity while alleviating the suffering of the people. This was ignored. A handful of economic studies and a privileged band of economists gave credence to the idea that austerity promoted growth. It was a bizarre theory now and after its continued disastrous failings, even more bizarre now.

Look at the problem from the perspective of the people. The collapse was caused by a relatively small group of banks on Wall Street. Once this catastrophe happened, millions of people lost their jobs and the businesses that served those people perished as well. They suffered while having no responsibility for what happened, and when it might be expected that the government well aware and having aided and abetted the actions of these investment bankers would take some pity on their plight, they were thrust from the concerns of the government, abandoned to the invisible hand of the market which was intent on preserving and maintaining their suffering. Many unemployed people felt that it was strange that the banks did not suffer while they were considered to have failed in a fundamental way, that if only they were more ambitious, more careful and displayed more grit, they could lift themselves out of the economic crisis, and thus shift from “takers to makers.”

In the United States, the cash strapped local and state governments cuts services, while the President created a stimulus package half the size of what was necessary. After that the President began making cuts joined by Congress. Nevertheless, the United States has done better than the European Union which intent on punishing the “unworthy” imposed draconian cuts on its weaker members, many of which have suffered terrible economic losses. Meanwhile, the so extravagantly promised wonder growth from austerity has failed to materialize.

Why did a doctrine contrary to basic economic theory gain such traction? It was convenient. In the United States, the “very serious people” as well as the economic elites had wanted to cut benefits such as social security for many years. They wanted to impose discipline on the people. Newspapers, in particular the Washington Post and to a lesser extent the New York Times provided (and still do) a constant diet of horror stories about deficits and the costs of benefits. For elites, disaster, catastrophe, human suffering, even calamities caused by or enabled by their actions are opportunities to enact their agendas. And they saw the economic disaster as an opportunity. So, on fragile but well publicized evidence, they proceeded to impose austerity. Their actions produced human suffering on a vast scale while crippling the recovery.

Facts, evidence and expertise are not important in Washington. When facts and evidence prove inconvenient, they are ruthlessly attacked. The attacks often verge on the hysterical.

The ruling classes in the United States place little importance on objective evidence and reasoning when creating public policy. Their disregard has produced great human suffering and bodes ill for the continued existence of the middle class.

The Wages of Sin are almost a Billion Dollars

The next story concerns the movement of American companies’ headquarters overseas to avoid taxes. It’s called inversion. A large American company purchases a small foreign company and then takes on their tax identity and from then it does the same things it did before just without paying taxes in America.

Here we have corporations, created in the United States, its employees trained in American institutions, its rights protected by the laws of the United States, moving to  foreign country not actually but symbolically – just enough to avoid taxes. Millions of Americans have suffered and died for this nation. Millions more have paid taxes to support the legal and physical structures (like roads and schools) that made these corporations possible. Their profits are often subsidized by government contracts and by a myriad of laws that support established businesses.

And yet they abandon any responsibility to the United States, to simple morality and the demands of patriotism.

This is a tragedy, perhaps in a real way, the first direct evidence of nation in the throes of self destruction. But the greater tragedy right now, is that no one is going to do anything about this. There has been a bill submitted to Congress to end the practice but it is dead on arrival in the House of Representatives. No one is going to do anything about this, the people who are evading these taxes are more important than the interests of the American people.

Right now, a compliant press is busy churning out pro-tax evasion articles. Because no matter what a business does in the United States, it has stalwart defenders in the press if only in the business press.

A Dollar Menu, it depends how you count.

Many workers in the United States make little money. A full time worker on minimum wage gets 290 dollars a week. The United States has the highest proportion of low paid workers in the developed world. Seventy-three percent of those on food stamps are working Americans. And of these working Americans a good number work in fast food. Since their salary is insufficient to support a family they have to resort to state and federal aid. This is in a real way a subsidy paid by the taxpayer to companies paying the minimum wage. If the workers had little chance of meeting basic human needs while working at one of these places, they are hardly likely to stay. Fast food businesses as well as big box retailers are able to maintain their work force through federal and state benefits for the poor and their children.

So, what does a dollar hamburger cost? And what would it cost if the worker were paid enough and given enough hours to not need benefits to have a decent life?

Summing Up

Those are the stories I found in one day on the web

Here are the factors we seen in the stories:

1. The middle class has been denied a share of the growth in production and profits from 1984 to the present time.

2. The traditional route of social and economic advancement, education, is losing its capacity to generate social mobility, and the crushing burden of student loans calls into question, whether or not higher education is worth pursuing.

3. The traditional middle class environment, the suburbs, once a symbol of economic success, are now suffering the same blight as the inner city.

4. The governing elites no longer concern themselves with issues related to the population at large but focus their concern on the “wealth producers.” And in that pursuit, facts and ideas that contradict their goals are simply ignored.

5. The corporate movement to avoid taxes is organized, profitable and continuing.

6. Many corporations are paying such low wages that government benefits are necessary to provide basic necessities to their workers, and that this constitutes a massive de facto transfer of money from the government to these corporations.

This adds up to a bleak picture of the future. We have a middle class declining in numbers and wealth while the means of upward mobility increase in expense while becoming less useful. The leadership we have is unconcerned with these problems and in fact, these kinds of issues are peripheral to their interests. Corporations are no longer content with their privileges and power but have abdicated all responsibility for participation in an organized society. These organizations now live by the philosophy, “It’s just business.” And that justifies any crime and any breach of duty with the nation that sired you.

In conclusion I believe that the crisis of capitalism is upon us. I believe that capitalism as practiced in the United States is concentrating wealth and income among a very small group of people while diminishing wages and opportunities gradually diminish the middle class resulting in a huge permanent underclass locked into permanent income insecurity.

Oh, BTW, Crushing Student Debt is a Huge Drag on the Economy


021!!@@#dddddd444I would suggest that it is unethical to burden students with the costs of their education. Education is a society wide benefit, and we should all share the burden.

Page Seven

The Long Road to Solvency The Long Road to Solvency

The outstanding debt held in student loans, estimated at over one trillion dollars, is now the second largest class of debt held by consumers — second only to home mortgages. The dangers posed by this debt may not be as great as the mortgage debt and its role in the ensuing financial system crash of 2008. But it is consequential for the economy, not to mention it’s devastating personal effects.  You can read about the dimensions and find the relevant data here.

While this news isn’t “buried,” in the sense I’ve been using the term here in Page Seven, it does not receive the attention it deserves by economists or business writers as a major factor in the sluggish recovery, or in the prospects for long term growth. Nor is it prominent in the scripts and talking points of the two major ideological…

View original post 602 more words

Student Loan Debt – A Crushing Burden


Student loans are how most American students finance their education. They seldom have any other choice. This article I am quoting comes from Edufactory. It is interesting web site. It looks at the world from the vantage point of a college student, more European than American. But I like to hear what Europeans have to say about U.S. issues. I find the common thought pattern of the “beltway boys” or the “very serious people”  to be irritating. This is a very large article. This is the opening paragraphs.

Debt has had a crushing impact on the lives of those who must take student loans to finance their university education in the US. For tuition fees that have been so notoriously high in private universities now are rising in public universities so quickly they are far out-pacing inflation. Student loan debt in the US has been much higher than in Europe (with the exception of Sweden), though recent developments there would indicate that this gap may soon no longer exist (Usher).

We should also take into account the fraudulent way in which the loans have been administered by the banks and the vindictiveness with which those who have been unable to pay back have been pursued by collection agents. The most frustrating aspect of student loan debt being the legally toothless position the debtor is in, because government policy has relentlessly vested all the bargaining power in the hands of the creditors.

Student loans are a strange philosophical creature here at the beginning of the 21st century. Daily, the newspapers and television are filled with talk about the need for highly educated workers. States with low ratios of college graduates to the general population are considered poor sites for new factories and development. A nation’s competitiveness, perhaps in the long term, its very existence, may depend on the level of education of its population.

So, how does discouraging people from going to college make sense? Isn’t that a form of slow societal suicide?

And what is the effect on those who bear that debt for decades? It’s pretty obvious it forces students away from any job that isn’t well paid. That debt makes sure that the debtor works all the time, year after year. It never stops. There is no opportunity to write that novel, travel or simply live a life free from constant financial pressure.

Why do we finance education this way?  The philosophy of secure investment and low interest rates, a product of the Chicago School of Economics, epitomized by the policies of the International Monetary Fund are the root cause. To make investments maximally secure, government spending must be minimized and wage pressure limited. Spending must be limited because taxation, any taxation, for any purpose is inimical to maximum profit. Wage pressure produces inflation which reduces the value of debt. If debt decreases in value, once again, investment security is threatened. Therefore expenditures on education must be carefully limited.

Of course, from a banking stand point, subjecting millions of Americans to continuous debt during the entire course of their lives with the full support of the federal and state government to collect the money might seem advantageous.

Many of you have already realized the problem with this. In the long term, investments in a nation with a gradually decreasing educational level endangers investment. That is easily explained. You are only damaged by a poor long term investment, if once you have maximized profit you can’t move your investment elsewhere. When the United States becomes unprofitable, the money will simply move. By then the process can go on in, perhaps, Russia or some country in Western Europe.

Americans to preserve their country’s international standing, future prosperity and in the long term the existence of the nation might want to consider how to maximize the graduation rate as well as prioritizing the fields where we want graduates. Training tens of thousands of students each year in broadcast journalism when there are only a few openings does no one any good except those holding the educational loans.

Let’s read a bit more from the article –

As typical of  “invisible” movements, statistics fail us in drawing its proportions. We have no estimate, for instance, of how many have been driven to suicide or how many have been forced to go into exile due to their student debts. Nor do we have a measure of the social impact of the growing de-legitimation of the student debt machine. We can only speculate about the consequences of disclosures concerning the collusion between the university administrations (especially in the case of “for profit” institutions) and the banks, now commonly acknowledged in the media as well as in congressional investigations. For sure, blogs and web-groups are forming to share experiences and voice anger about student loan companies like the biggest one, the Student Loan Marketing Association (nicknamed “Sallie Mae”). On Google alone, there are about 9,000 entries under the rubric “Sallie Mae Sucks,” and another 9,000 under “Fuck Sallie Mae.”  Browsing through the chat rooms, with their harrowing stories of wrecked lives and mounting frustration against the operations of Sallie Mae, makes it clear that the potential for a debt abolition movement is high. So far, however, most attempts that have been made to give an organizational form to this anger have largely demanded the application of consumer protection norms to the management of the debt.

Student loans may well be justified as part of the mix that pays for education. But it should be determined at what level it deters significant numbers from college. It should be determined when it goes to institutions primarily set up to collect that money with little benefit from the education paid for. The proportion of the educational expense paid for these loans increases year by year. Is that healthy for the educational system in the long term or for the citizens in this country?

It takes intelligence to make good decisions about what we as a nation need from education. It takes intelligence to measure the effects of this debt on the society as a whole. It takes intelligence to challenge the strange doctrines of the Chicago School and its many adherents.

I don’t see our leadership rising to the challenge.

James Pilant

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What on earth is S365? (via (B)LogtheLeg)


The debt ceiling agreement clobbers grad students. It makes it harder to get loans for those working toward advanced degrees. We in this country need to encourage education not just at the bachelor level but at all levels. We don’t just live to make money but to extend our civilization. It’s important to continue this process.

Let’s cut grad students a break and maintain their ability to stay in school.

James Pilant

Based on the timing on this post, I think you can infer it's the debt ceiling bill that passed the House earlier. But let's go a bit in depth, and discuss something which I don't believe was discussed on the Floor of the House. I'm not going to delve into the numbers of the debt ceiling, for you all can read that on whichever source you choose. What many of your outside sources will not tell you is the name of the bill itself. It is entitled, "To … Read More

via (B)LogtheLeg

The only debt I can care about these days is my own (via MichaelEdwardKelly.com)


This is a personal view of our current debt limit crisis. I liked his take on the situation and call your attention to it.

James Pilant

It's been a while since I've delved too deeply into a political discussion here, and that's been a conscious decision. I've really found myself thinking less and less about national issues as time has gone on, and I think this is a direct result of me thinking more and more about my own personal issues. So when it comes to this whole "problem" of the debt ceiling debate, I have little to offer. It's not that I haven't been watching the news, or r … Read More

via MichaelEdwardKelly.com

Student Loan Debt – A Crushing Burden


Student loans are how most American students finance their education. They seldom have any other choice. This article I am quoting comes from Edufactory. It is interesting web site. It looks at the world from the vantage point of a college student, more European than American. But I like to hear what Europeans have to say about U.S. issues. I find the common thought pattern of the “beltway boys” to be irritating. This is a very large article. This is the opening.

Debt has had a crushing impact on the lives of those who must take student loans to finance their university education in the US. For tuition fees that have been so notoriously high in private universities now are rising in public universities so quickly they are far out-pacing inflation. Student loan debt in the US has been much higher than in Europe (with the exception of Sweden), though recent developments there would indicate that this gap may soon no longer exist (Usher).

We should also take into account the fraudulent way in which the loans have been administered by the banks and the vindictiveness with which those who have been unable to pay back have been pursued by collection agents. The most frustrating aspect of student loan debt being the legally toothless position the debtor is in, because government policy has relentlessly vested all the bargaining power in the hands of the creditors.

Student loans are a strange philosophical creature here at the beginning of the 21st century. Daily, the newspapers and television are filled with talk about the need for highly educated workers. States with low ratios of college graduates to the general population are considered poor sites for new factories and development. A nation’s competitiveness, perhaps in the long term, its very existence, may depend on the level of education of its population.

So, how does discouraging people from going to college make sense? Isn’t that a form of slow societal suicide?

And what is the effect on those who bear that debt for decades? It’s pretty obvious it forces students away from any job that isn’t well paid. That debt makes sure that the debtor works all the time, year after year. It never stops. There is no opportunity to write that novel, travel or simply live a life free from constant financial pressure.

Why do we finance education this way?  The philosophy of secure investment and low interest rates, a product of the Chicago School of Economics, epitomized by the policies of the International Monetary Fund are the root cause. To make investments maximally secure, government spending must be minimized and wage pressure limited. Spending must be limited because taxation, any taxation, for any purpose is inimical to maximum profit. Wage pressure produces inflation which reduces the value of debt. If debt decreases in value, once again, investment security is threatened. Therefore expenditures on education must be carefully limited.

Of course, from a banking stand point, subjecting millions of Americans to continuous debt during the entire course of their lives with the full support of the federal and state government to collect the money might seem advantageous.

Many of you have already realized the problem with this. In the long term, investments in a nation with a gradually decreasing educational level endangers investment. That is easily explained. You are only damaged by a poor long term investment, if once you have maximized profit you can’t move your investment elsewhere. When the United States becomes unprofitable, the money will simply move. By then the process can go on in, perhaps, Russia or some country in Western Europe.

Americans to preserve their country’s international standing, future prosperity and in the long term the existence of the nation might want to consider how to maximize the graduation rate as well as prioritizing the fields where we want graduates. Training tens of thousands of students each year in broadcast journalism when there are only a few openings does no one any good except those holding the educational loans.

Let’s read a bit more from the article –

As typical of  “invisible” movements, statistics fail us in drawing its proportions. We have no estimate, for instance, of how many have been driven to suicide or how many have been forced to go into exile due to their student debts. Nor do we have a measure of the social impact of the growing de-legitimation of the student debt machine. We can only speculate about the consequences of disclosures concerning the collusion between the university administrations (especially in the case of “for profit” institutions) and the banks, now commonly acknowledged in the media as well as in congressional investigations. For sure, blogs and web-groups are forming to share experiences and voice anger about student loan companies like the biggest one, the Student Loan Marketing Association (nicknamed “Sallie Mae”). On Google alone, there are about 9,000 entries under the rubric “Sallie Mae Sucks,” and another 9,000 under “Fuck Sallie Mae.”  Browsing through the chat rooms, with their harrowing stories of wrecked lives and mounting frustration against the operations of Sallie Mae, makes it clear that the potential for a debt abolition movement is high. So far, however, most attempts that have been made to give an organizational form to this anger have largely demanded the application of consumer protection norms to the management of the debt.

Student loans may well be justified as part of the mix that pays for education. But it should be determined at what level it deters significant numbers from college. It should be determined when it goes to institutions primarily set up to collect that money with little benefit from the education paid for. The proportion of the educational expense paid for these loans increases year by year. Is that healthy for the educational system in the long term or for the citizens in this country?

It takes intelligence to make good decisions about what we as a nation need from education. It takes intelligence to measure the effects of this debt on the society as a whole. It takes intelligence to challenge the strange doctrines of the Chicago School and its many adherents.

I don’t see our leadership rising to the challenge.

James Pilant

Opinion: The Looming Student Loan Crisis (via AOL News)


For many student loans are a continuing crisis in their lives. Is this kind of debt for millions of Americans sustainable? What are the social effects?

Does the student loan burden keep students away from running for public office, pursuing jobs valuable to society like police, fire and military?

Is this the way, we as a nation should finance our children’s education when that education is so critical to national success and competition?

Read this article and see what you think.

James Pilant

Like home ownership, a college degree used to be perceived as one of the keys to success. Unfortunately, these days it’s starting to look like a gateway to financial ruin.

The Federal Reserve has confirmed that as of June 2010, consumers now owe more on their student loans than on their credit cards.

A separate report reveals that one in five people can’t make their monthly payments.

As a result, Sallie Mae and Citibank have become the arch nemesis of millions, and the country as a whole faces what some warn is America’s next “mortgage meltdown.”

..Read More

Student Borrowing Increases Dramatically


Here are the key findings from the Pew Research Center Analysis.

* One-quarter (24%) of 2008 bachelor’s degree graduates at for-profit schools borrowed more than $40,000, compared with 5% of graduates at public institutions and 14% at not-for-profit schools.
* Roughly one-in-four recipients of an associate’s degree or certificate borrowed more than $20,000 at both private for-profit and private not-for-profit schools, compared with 5% of graduates of public schools.
* Graduates of private for-profit schools are demographically different from graduates in other sectors. Generally, private for-profit school graduates have lower incomes, and are older, more likely to be from minority groups, more likely to be female, more likely to be independent of their parents and more likely to have their own dependents.
* Although private for-profit schools specialize in different fields of study than do public and private not-for-profit schools, the differences in borrowing patterns persist within fields of study. For almost every field of study at every level, students at private for-profit schools are more likely to borrow and tend to borrow larger amounts than students at public and private not-for-profit schools.

Here’s some more from the report –

Undergraduate college student borrowing has risen dramatically in recent years. Graduates who received a bachelor’s degree in 2008 borrowed 50% more (in inflation-adjusted dollars) than their counterparts who graduated in 1996, while graduates who earned an associate’s degree or undergraduate certificate in 2008 borrowed more than twice what their counterparts in 1996 had borrowed, according to a new analysis of National Center for Education Statistics data by the Pew Research Center’s Social & Demographic Trends project.

I’m sure there are people who look at this and say these young people are borrowing too much money and that may often be true. But if you follow the costs of going to college, tuition, books, etc., you come to a different conclusion. Since students can borrow money to a guarenteed level, tuition and fees will rise toward that level each year. When the level is raised, the college and university costs start their inexorable increase to get all the loan money possible. When the top borrowing amount no longer works for a number of institutions, the borrowing cap is raised and it starts all over again.

Tuition costs have increased at twice the level of medical costs increases over the last decade. That’s right. Even the insurance companies couldn’t keep up with the colleges and universities of the United States.

James Pilant