Oh! The Stupid Things I Hear! No. 3

Goddammit.

So I’m listening to the Diane Rehm “Friday News Roundup” (the BBC’s Katty Kay filling in for Diane) this morning and the initial topic is the new jobs report, which shows that 80,000 jobs were added last month:  104,000 new private sector jobs, offset by a loss of about 24,000 public sector jobs.

First I hear Ron Elving, senior Washington editor for NPR News, make the incredibly stupid claim “that’s not bad, but it’s not great either.”  No, that’s friggin terrible.  Look . . .  the United States needs to add about 150,000 new jobs every month just to stay even with population growth.  So a jobs report showing that we created about ½ that amount last month means that October was utterly horrible.  Telling the American public that “we added 80,000 jobs” without putting that figure into context is just journalistic malpractice.

But far, far worse was what Elving said next. 

After mentioning that we’ve now had about 32 months in which unemployment has been 9% or higher, Elving explained that part of what we’re looking at is jobs “that aren’t coming back.  And so we’re trying to figure out what jobs are going to replace the ones we’re losing.”  To which Katty Kay replied that we are moving from a manufacturing economy to a high-tech economy – from “brawn to brain” – and then there was a brief discussion between them about the need to retrain and better educate workers.

Let me say it again:  Goddammit!

This has become one of those enduring zombie myths that Americans have been telling ourselves for decades to explain away the growing inequality and the growing misery that most of us have had to suffer. 

Back in 1998’s Primary Colors – the movie based on Joe Klein’s novelization of Bill Clinton’s 1992 presidential campaign – there is a scene in which the Clinton character explains to a group of voters that their jobs are disappearing overseas, but that he will make sure they can get retraining so they can take on the high-tech jobs with which America will soon be filled.

Only a few years later I remember watching a West Wing episode in which President Bartlet enters into a free trade agreement that sells out his union supporters, but explains his decision by promising Josh Lyman that free trade will bring “high-tech” jobs to America and he’ll make sure the union members will be retrained to work those higher paying, better jobs.

Of course, these fictional accounts only reflect what we’ve been hearing from our elected leaders for decades now:  sure, we’re losing manufacturing jobs but – don’t worry – better paying, high-tech employment is coming our way and all you have to do is get an education and you, too, will be able to take advantage of this boom.

But none of that is true.

Paul Krugman has been pointing this out for years.  Way back in 2006, Krugman explained that this conventional wisdom is

a fundamental misreading of what’s happening in American society.  What we’re seeing isn’t the rise of a fairly broad class of knowledge workers.  Instead, we’re seeing the rise of a narrow oligarchy:  income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite.

[The conventional wisdom is] the notion that the winners in our increasingly unequal society are a fairly large group – that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don’t have these skills.

The truth is quite different.  Highly educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains. . . . .

So who are the winners from rising inequality?  It’s not the top 20 percent, or even the top 10 percent.  The big gains have gone to a much smaller, much richer group than that.

Krugman revisited this issue recently, and this time he came armed with two charts based on CBO data. 

The first shows that from 1979 until 2007, the share of GDP captured even by those in the 81^st to 99^th income percentile has remained flat, and that all gain in income share has been captured by the top 1%.

But it is even worse.  Because as the second chart demonstrates, most of the increase in income share enjoyed by the top 1% was actually captured by the top 0.1% - the highest one-tenth of one percent of Americans.

  

And, oh . . . in case anyone hasn’t yet seen this one, here is another chart showing that for everyone below the top 80% . . . income share has actually fallen:

So, the only people who have seen their income share grow over the past 30 years are the people in the top 1% -- and of those few people, only the people in the very tippy-top 0.1% have done extremely well.

The rest of us, apparently, can suck it.

* * *

It simply is not true that America is switching from a manufacturing base to a “high-tech” base.  Instead, what has been happening is a process that Kevin Phillips described in American Theology:  The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century as the “financialization” of the American economy, a process “whereby financial services, broadly construed, take over the dominant economic, cultural, and political role in a national economy.”

Once again, here are statistics

demonstrating how significant a share of the nation’s profit is now derived solely from the financial services industry:

·         By 2000, manufacturing accounted for only 14.5% of the nation’s Gross Domestic Product but the FIRE (finance, insurance and real estate) sector accounted for 20%;

·         By 2004, the financial sector accounted for 25% of America’s total stock-market capitalization, up from 11% in 1990 and from only 6% in 1980;

·         And by 2004, financial firms alone accounted for nearly 40% of all U.S. profits.

In America, it seems, large profits are no longer made by actual economic activity . . . but by transferring credits and debits in new and exciting ways. 

America isn’t going from a manufacturing base to a “high-tech” base, and it isn’t going from a manufacturing base to a “services base.”  It seems increasingly clear that America soon isn’t going to have a “wealth base” at all.

Instead we are rapidly hollowing out our country, until the only thing that remains is a small, small number of people providing bogus “financial services,” sucking down as much profit as possible without producing anything in the way of real wealth.  These people aren’t a base in any sense of the word; instead, they hang over us, threatening to fall and crush the world’s economy unless we keep constantly propping them up.

I don’t know what the solution to this horrible situation is, but surely it would help if the people responsible for reporting on the state of our nation would stop repeating tired bromides and start correctly describing the actual problem that confronts us.