Saturday, May 2, 2015

Wall Street Bonuses Are Twice the Total Earned by Minimum Wage Workers

According to the Bureau of Labor Statistics, about 1.1 million US workers were paid just the federal minimum wage in 2013. The average Wall Street bonus paid at the end of 2013 was about $164,000 with all the bonuses adding up to about $26.7 billion. That $26.7 billion is twice the combined earnings of the 1.1 million people making minimum wage. 

It's important to remember that, once we the taxpayers bailed out Wall Street in 2008, one of the first things the big banks did was pay bonuses. That was a transfer -- redistribution -- from the average American to the wealthiest. Suggest redistribution of wealth from the 1% (or 0.1%) to the average, and Republicans and Democrats go into hysterics. (Pres. Obama has called for equality of opportunity, but not for more just outcomes or redistribution.) 

For 35 years, both parties have repeatedly endorsed policies that have taken from the little held by the average and poorer and redistributed it upward. This is the point made by Joseph Stiglitz, Anthony Atkinson, Thomas Piketty, and many other progressive economists. And it is a point willfully ignored or dismissed by conservative economists who still dominate economic thinking in the US. The economist John Roemer has made the point that so great an indifference to fact by so large a percentage of economists counts heavily against economics being a science.

Roemer has a nice survey essay: The Ideological and Political Roots of American Inequality

Property Rights in the New Glorious Not-Quite-Revolution

My guess is that many glitterati economists and political scientists at places like Stanford and Harvard are couching the TPP in terms of "property protections" (among which intellectual property is currently the most popular). By the same token that the "Glorious Revolution" supposedly marked a milestone in protecting property from the interference of a national leviathan (making possible the English revolutions in finance and industry), now restrictions on international leviathans (or national ones with international influence) will -- if you drink Obama's Kool-Aid -- promote revolutions in international commerce. With the TPP, international players will have further incentives to innovate and trade because they will be more confident of retaining the gains from their effort.... Or something like that. 

John Roemer wrote a nice survey essay in 2011: "The Ideological and Political Roots of American Inequality". He suggests that micro-economic theory has turned from focusing on the coordinating functions of markets to focusing on markets as devices for harnessing incentives (modeled in the theoretical tool of this time -- game theory). So politicians and executives who want to further line their own pockets now have a theoretical justification for opposing policies that might be deemed to interfere with the incentives of market rewards (especially any redistributive policy).

This serves a convenient dual purpose. First, since the middle class and poor are "takers, not makers," the effect on incentives for them is irrelevant, neatly excluded from the 'scientific' program. Second, redistribution effected by markets is okay (it's 'natural'), but redistribution effected by the leviathan is distortionary and depresses incentives. Regulations, environmental protections, loosening intellectual property protections, and so on, all involve government action that will weaken owners' property claims and effectively redistribute down the economic ladder. This also explains why we are seeing an explosion in conservatives and corporations appealing to rights.