Building a world of
resilient communities.



Economics - Dec 28

Click on the headline (link) for the full text.

Many more articles are available through the Energy Bulletin homepage.

Half of America In Poverty? The Facts Say It's True

Paul Buchheit, Common Dreams
Recent reports suggest that almost 50% of Americans are in poverty or at a "low income" level. The claim is based on a new supplemental measure by the Census Bureau that includes health care, transportation, and other essential living expenses in the poverty calculation.

The concept of "low income" is controversial. It has been defined as earnings between 100 and 199 percent of the poverty level, a claim which, if true, would place every American family making $50,000 or less at a near-poverty level.

... With emotions running high on both sides, we need to take a balanced look at the available data to determine how well the highest-earning family of the poorest 50% -- a family with a $50,000 income -- can survive.

... So total taxes for the poorest 50% are 24 percent of their incomes (3% + 10% + 9% + 2%), as compared to 29 percent for the richest 1% (23% + 5% + 2% - 1%).

Other significant expenses for low-income people, based on the most conservative estimates from the Bureau of Labor Statistics, the Census Bureau, the National Center for Children in Poverty, the Carsey Institute, and the Economic Policy Institute, include food (10%), housing (27%), transportation (6%), health care (5%), child care (8%), and household expenditures (5%). Expenses for insurance and savings and entertainment, although important to most households, are not being included here.

Energy costs hit low-income families especially hard, taking about 20% of their incomes. At the $50,000 income level the burden is closer to 12%, as generally agreed upon by the Bureau of Labor Statistics, the Coalition for Clean Coal Electricity, the Department of Housing and Urban Development, and the American Gas Association.

.. Another fact is that earnings have remained flat for most people while productivity has grown 80% since 1980. If a $50,000 family had received a fair share from their contribution to America's growth, they'd be making $90,000, and they wouldn't need a dime from government.
(27 December 2011)

A Doomsday View of 2012

James Petras website
Introduction: The economic, political and social outlook for 2012 is profoundly negative. The almost universal consensus, even among mainstream orthodox economists is pessimistic regarding the world economy. Though even here their predictions understate the scope and depth of the crises.

There are powerful reasons to believe that beginning in 2012, we are heading toward a steeper decline than what was experienced during the Great Recession of 2008 – 2009. With fewer resources, greater debt and increasing popular resistance to shouldering the burden of saving the capitalist system, the governments cannot bail out the system.

Many of the major institutions and economic relations which were cause and consequence of world and regional capitalist expansion over the past three decades are in the process of disintegration and disarray. The previous economic engines of global expansion, the US and the European Union, have exhausted their potentialities and are in open decline. The new centers of growth, China, India, Brazil, Russia, which for a ‘short decade’ provided a new impetus for world growth have run their course and are de-accelerating rapidly and will continue to do so throughout the new year.

The Collapse of the European Union

Specifically, the crises wracked European Union will break up and the de facto multi-tiered structure will turn into a series of bilateral/multi-lateral trade and investment agreements. Germany,France , the Low and Nordic countries will attempt to weather the downturn. England, namely the City of London, in splendid isolation, will sink into negative growth, its financiers scrambling to find new speculative opportunities among the Gulf petrol-states and other ‘niches’. Eastern and Central Europe, particularly Poland and the Czech Republic, will deepen their ties to Germany but will suffer the consequences of the general decline of world markets. Southern Europe (Greece, Spain, Portugal and Italy) will enter into a deep depression as the massive debt payments fueled by savage assaults on wages and social benefits will severely reduce consumer demand.

Depression level unemployment and under-employment running to one-third of the labor force will detonate year-long social conflicts, intensifying into popular uprisings.

... Europe: Deeper Austerity and Intensified Class Struggle

The austerity programs imposed in Europe, from England to Latvia to southern Europe will really take hold in 2012. Massive public sector firings and reduced private sector salaries and hiring’s will lead to a year of permanent class warfare and regime challenges. The ‘austerity policies’ in the South, will be accompanied by debt defaults which will result in bank failures in France and Germany.. England’s financial ruling class, isolated in Europe but dominant in England, will insist that the Conservatives ‘repress’ labor and popular unrest. A new tough neo-Thatcherite style of autocratic rule will emerge ; the Labor-trade union opposition will issue empty protests and tighten the leash on the rebellious populace. In a word, the regressive socio-economic policies put in place in 2011 set the stage for new police-state regimes and more acute and possibly bloody confrontations with workers and unemployed youth with no future.

James Petras is a Bartle Professor (Emeritus) of Sociology at Binghamton University, New York. He is the author of more than 62 books published in 29 languages, and over 600 articles in professional journals, including the American Sociological Review, British Journal of Sociology, Social Research, and Journal of Peasant Studies. He has published over 2000 articles in nonprofessional journals such as the New York Times, the Guardian, the Nation, Christian Science Monitor, Foreign Policy, New Left Review, Partisan Review, TempsModerne, Le Monde Diplomatique, and his commentary is widely carried on the internet. ...
(24 December 2011)

Financial apocalypse 2012

CNN Money
The Mayan calendar says the world is supposed to end next December. But plenty of things could help wreck the global economy before then. Here's six of them.

1) Collapse of the Euro zone ...
2) Geopolitical oil price spike
As we've seen over the last few years, oil prices can spike for seemingly any reason at any time.

Of particular concern in 2012 is a situation involving Iran. The country, the world's third-largest oil exporter, could see its crude shipments squeezed by deepening sanctions imposed by Europe and the United States.

If the country's 2.2 million barrels day of crude are shut off completely Merrill Lynch predicts a $40 rise in oil prices.

A more frightening scenario is this: Israel bombs Iran's nuclear facilities and Iran responds by rocketing oil tankers passing through the Strait of Hormuz. It wouldn't be the first time. Iran hit this ship in 1987 in an attempt to cut off Iraq's oil exports when those two countries were at war.

That, said Merrill, "could result in a much faster oil price escalation."

3) Pop of the China housing bubble ,,,
4) U.S. banks fail en masse ...
5) Government derails the recovery ...
6) Natural disaster strikes ...
"Climate change is becoming about as subtle as a kick to the shins," said Aaron Huertas, a spokesman for the Union of Concerned Scientists.

While $12 billion would hardly derail the economy of Maine, let alone the United States, it's worth noting that each year the world emits record amounts of greenhouse gases, and it's doing very little to reverse the trend. How long before another major city ends up under water?

"As far as climate stuff goes," said Huertas, "we're heading in the wrong direction."
(December 2011)
Suggested by Erik Curran of Transition Voice.

The Book of Jobs

Joseph E. Stiglitz, Vanity Fair
Forget monetary policy. Re-examining the cause of the Great Depression—the revolution in agriculture that threw millions out of work—the author argues that the U.S. is now facing and must manage a similar shift in the “real” economy, from industry to service, or risk a tragic replay of 80 years ago.
... The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to “where it was” does nothing to address the underlying problems.

The trauma we’re experiencing right now resembles the trauma we experienced 80 years ago, during the Great Depression, and it has been brought on by an analogous set of circumstances. Then, as now, we faced a breakdown of the banking system. But then, as now, the breakdown of the banking system was in part a consequence of deeper problems. Even if we correctly respond to the trauma—the failures of the financial sector—it will take a decade or more to achieve full recovery. Under the best of conditions, we will endure a Long Slump. If we respond incorrectly, as we have been, the Long Slump will last even longer, and the parallel with the Depression will take on a tragic new dimension.

... At the beginning of the Depression, more than a fifth of all Americans worked on farms. Between 1929 and 1932, these people saw their incomes cut by somewhere between one-third and two-thirds, compounding problems that farmers had faced for years. Agriculture had been a victim of its own success. In 1900, it took a large portion of the U.S. population to produce enough food for the country as a whole. Then came a revolution in agriculture that would gain pace throughout the century—better seeds, better fertilizer, better farming practices, along with widespread mechanization. Today, 2 percent of Americans produce more food than we can consume.

What this transition meant, however, is that jobs and livelihoods on the farm were being destroyed. Because of accelerating productivity, output was increasing faster than demand, and prices fell sharply. It was this, more than anything else, that led to rapidly declining incomes.

... Given the magnitude of the decline in farm income, it’s no wonder that the New Deal itself could not bring the country out of crisis. The programs were too small, and many were soon abandoned. By 1937, F.D.R., giving way to the deficit hawks, had cut back on stimulus efforts—a disastrous error. Meanwhile, hard-pressed states and localities were being forced to let employees go, just as they are now. The banking crisis undoubtedly compounded all these problems, and extended and deepened the downturn. But any analysis of financial disruption has to begin with what started off the chain reaction.

... it was not until government spending soared in preparation for global war that America started to emerge from the Depression. It is important to grasp this simple truth: it was government spending—a Keynesian stimulus, not any correction of monetary policy or any revival of the banking system—that brought about recovery. The long-run prospects for the economy would, of course, have been even better if more of the money had been spent on investments in education, technology, and infrastructure rather than munitions, but even so, the strong public spending more than offset the weaknesses in private spending.

Government spending unintentionally solved the economy’s underlying problem: it completed a necessary structural transformation, moving America, and especially the South, decisively from agriculture to manufacturing. Americans tend to be allergic to terms like “industrial policy,” but that’s what war spending was—a policy that permanently changed the nature of the economy. Massive job creation in the urban sector—in manufacturing—succeeded in moving people out of farming.

... The parallels between the story of the origin of the Great Depression and that of our Long Slump are strong. Back then we were moving from agriculture to manufacturing. Today we are moving from manufacturing to a service economy. The decline in manufacturing jobs has been dramatic—from about a third of the workforce 60 years ago to less than a tenth of it today.

... Of four major service sectors—finance, real estate, health, and education—the first two were bloated before the current crisis set in. The other two, health and education, have traditionally received heavy government support. But government austerity at every level—that is, the slashing of budgets in the face of recession—has hit education especially hard, just as it has decimated the government sector as a whole. Nearly 700,000 state- and local-government jobs have disappeared during the past four years, mirroring what happened in the Depression. As in 1937, deficit hawks today call for balanced budgets and more and more cutbacks. Instead of pushing forward a structural transition that is inevitable—instead of investing in the right kinds of human capital, technology, and infrastructure, which will eventually pull us where we need to be—the government is holding back. Current strategies can have only one outcome: they will ensure that the Long Slump will be longer and deeper than it ever needed to be.

... What we need to do instead is embark on a massive investment program—as we did, virtually by accident, 80 years ago—that will increase our productivity for years to come, and will also increase employment now. This public investment, and the resultant restoration in G.D.P., increases the returns to private investment. Public investments could be directed at improving the quality of life and real productivity—unlike the private-sector investments in financial innovations, which turned out to be more akin to financial weapons of mass destruction.

... The good news (in a sense) is that the United States has under-invested in infrastructure, technology, and education for decades, so the return on additional investment is high, while the cost of capital is at an unprecedented low. If we borrow today to finance high-return investments, our debt-to-G.D.P. ratio—the usual measure of debt sustainability—will be markedly improved. If we simultaneously increased taxes—for instance, on the top 1 percent of all households, measured by income—our debt sustainability would be improved even more.

The private sector by itself won’t, and can’t, undertake structural transformation of the magnitude needed—even if the Fed were to keep interest rates at zero for years to come. The only way it will happen is through a government stimulus designed not to preserve the old economy but to focus instead on creating a new one. We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality. To that end, there are many high-return investments we can make. Education is a crucial one—a highly educated population is a fundamental driver of economic growth. Support is needed for basic research
(January 2012 issue)
If one takes seriously the problems of peak oil and climate change, there are many opportunities for productive investment. -BA

What do you think? Leave a comment below.

Sign up for regular Resilience bulletins direct to your email.

Take action!  

Find out more about Community Resilience. See our COMMUNITIES page
Start your own projects. See our RESOURCES page.
Help build resilience. DONATE NOW.


This is a community site and the discussion is moderated. The rules in brief: no personal abuse and no climate denial. Complete Guidelines.


No Mere Resolution: The Vermont Legislature and the Steady State Economy

In Vermont, a famously beautiful and progressive land that has also offered …

Regional Cities and the Curse of "Glocality"

One of the essential themes in my continuing study of and reflection upon …

Emmanuel and Elizabeth at Pocheco: "Let's change everything"

When you ring Pocheco, a company that makes 2 billion envelopes a year in …

Beyond Crisis

Community currencies created by groups in Spain in response to the economic …

Is Sustainability only for the Privileged?

Those proposing just sustainability argue that if sustainability only …

"The Divide" Shows Inequality on the Big Screen

Inequality represents simultaneously a cornerstone and a weak link in …

Planting Justice Creates Access to Living-wage Careers and Affordable Food

With the help of Slow Money Northern California, Planting Justice has …