Sunday, October 26, 2014

CAPITAL IN THE TWENTY-FIRST CENTURY: EXPLAINS INEQUALITY

"Capital in the Twenty-first Century" by Thomas Piketty was in the news enough to get my attention.  It is not the sort of a book to read when you are tired or sipping wine.  It requires alertness to fully appreciate its value.  I was not able to devote my best attention to it, but feel it is truly monumental.  There has been some criticism, but most of it seemed very self serving by those who thought the status quo was very comfortable for them.  As I finished this book I watched "Inequality for All" that had a brief reference to Thomas Piketty and reinforced the material.

One of this book's advantages over other economic classics is that Piketty had access to much more information.  His focus was on inequality.  Piketty was able to detect patterns and of course exceptions that actually illustrate economic forces.  He believes before statistics were kept that capital income (such as land rents and investments) almost always grew faster than national economic growth.  The only exceptions occurred because of major events such as wars, revolutions and Depressions.  At some point inequality will incite rebellion.  Attitudes change, but history is too often forgotten.

He uses many equations that help you understand his argument.  One key one that any reader should understand simply means the rate of return on capital is greater than the rate of national growth.  Very seldom has that rule not been true and by itself helps explain how the rich constantly get richer. at the expense of common workers.

Slavery (i.e. treating some humans as capital) contributed a great deal of wealth to southern plantation owners.  The fact that it was dehumanizing was consciously overlooked.  The role of labour is too often diminished.

Europe before 1914 was more unequal than the United States, but they both reduced inequality as a result of the shocks between 1914-1945 and progressive taxation.  After the World War II equality actually increased, but by 1980 (when Reagan was elected) started to change to a more normal status.

Inheritance is a key factor in concentrating wealth.  Many start as entrepreneurs with smart thinking and hard work, but eventually they or their heirs become rentiers, i.e. using capital to generate the majority of their income.

Some politicians dismiss inequality discussions as just envy.  The people who deserve to enjoy the riches of life got there on merit and those others just weren't smart enough or worked hard enough.  Meritocracy is an ideal, but sadly the reality leaves much to be desired.  Many of us believe that theft, luck, timing all played key roles in many fortunes.  And what merit justifies the next generations living lives of luxury with little contribution to society?  Robert Reich in his film and many columns points out just how rich the rich are, something the masses are unaware of the extent.

One of Piketty's key recommendations is a Global annual progressive tax on capital, to be sure is more an idea.  Most people would not be required  to pay anything and the top rate would be something like 5%.  Requires a lot of global co-operation.  For a few decades nations have been competing to lower their rates and individuals and companies have been taking advantage.

Another contention from the author is that wealthy people should be helping to pay down the deficit by paying more taxes instead of enriching themselves by loaning money in the form of government bonds.




Piketty and Reich are not against capitalism or innovation or entrepreneurship.  We need incentives to encourage innovation, and hard work. Education has traditionally been the key to improving individuals as well as society, yet many rich people resent taxes going to improving schools or want to control what  and how it is taught.  Health care is another area where the rich begrudge the poor getting "free" care.  Much infrastructure seems unnecessary unless profit can be made directly.  Ironically many things that benefit most people also benefit those with more money.

I believe Piketty's work deserves more consideration. Reich makes too much sense for the main stream media.  Their messages are not endorsed by the 1%, but are critical to understand if civilization is to survive.

Thursday, October 23, 2014

MID TERM ELECTIONS ARE IMPORTANT. LET YOUR VOICE BE HEARD

The choice is clear and the stakes are high.  Some powers are intent upon imposing obstacles between some American citizens and the ballot box.  But for some, voting is not worth the effort.  Fear and greed are the two most powerful weapons against rational thinking and that is another obstacle in the way of setting the American government on a better course..

Representing the interests of the 1% you have those who mock scientists, are dead set against health insurance coverage for the masses, .  You can argue that the other side don't do much to help the common man, but you would be overlooking they are handicapped.  It is also true that nobody gets elected without a lot of financial support that in fact ties their hands a bit.  Politics should not be a horse race, but rather a forum of ideas.

Barack Obama has his hands tied by Congress and his own obligations to those who finance him.  What is a voter to do?  Don't trust those who blame him for the problems.  Obama has offered solutions for the benefit of the common man and tried to surround himself with people who can help boost the country, but he is pretty well stymied.  Still the facts support he has done a good job and the attacks on him are mostly unworthy.

Affordable Health Care (socialized medicine if you prefer) has been an idea accepted by most of the developed world who have discovered that it is more cost effective than most of the alternatives.  Obama selected a plan that originally had been developed by Republicans and works within a market system.  It had been tried in Massachusetts with no major problems and many benefits ironically under a Republican governor who again ironically renounced  it while currying favour with Republican power brokers.  Since its partial implementation has proved itself capable of saving money as well as boosting health.  Republicans still rant against it, but their logic should not be accepted.

Foreign policy is always a delicate affair.  At one time a super power could impose its views on any dissenters.  Armament manufacturers do provide jobs and wealth and have pressured government leaders to use weapons to protect their interests.  The world is a complicated place with countless points of view and somehow we need to learn how to get along to solve global problems that can do us all in.  The Republicans took advantage of 9/11 to invade a country not connected to the event.  They thought they could force foreigners to their will, but found taking sides and deceiving people is not a good plan.  It is far better to take the time to understand the situation than to jump in.  Obama has been more cautious and long term in his thinking.

Immigration is another dicey problem.  Many businesses and individuals see it has a chance to get cheap labour.  Others feel their jobs threatened.    Still others distrust strangers with different cultural values.  The Republican rhetoric concentrates on sealing the border.  Their tough stance indicates that they think they can use this as a wedge issue where prejudice and fear make people irrational.  At the same time businesses like to have cheap labor and see immigrants as another way to minimize worker choice.  America has been made great by immigration and there is every reason to think they will actually benefit from future immigration.  There will have to be tough decisions, but they should not be based on prejudice and exploitation.  Obama seems to be more understanding.

Climate change is laughed at by Republicans who claim it has not been proved.  There has been an overwhelming conclusion by the global scientific community that this is the major problem in the world.  (I would just add aggravated by overpopulation).  Republicans have fossil fuel money and religious conservatives demanding the rejection of any plan to deal with the future disaster.  This alone is grounds for voting for an alternative to the Republicans

Inequality concerns are brushed off as envy.  Most Americans are unaware of just how much the 1% controls in their country.  Republicans claim the wealthy are job creators, but that overlooks outsourcing, union bashing and other practices.  The true job creators are consumers, but the bulk of Americans have less money and job security than in the past.

The Republicans are obstructionists.  What does that mean?  Instead of compromising and working together they vote against Democratic proposals on principle.  There may well be legitimate principles, but if they really want to serve their constituents they should be working to create laws that work.  There is a lot of money that could help fix the deficit and get Americans working, but the Republicans are far more interested in protecting their rich supporters.

The Presidential election stirs a lot of attention, however too many voters underestimate the importance of mid term elections.  The President certainly has a lot of power, but cannot accomplish what he promised without Congress.  At the moment the American Congress is very obstructive and ignoring the common man in favour of their rich donators.

Campaign financing has come to distort the discussion platform and if anything most Republicans would tilt it even further.  Corporations are not people, but are allowed to influence the outcome. At bottom campaign finance laws should be altered to limit the influence of money.

It is true that a lot is stacked against a single voter.  Those who have the most to gain by a Democratic victory seem to have the most hoops to jump through.  Those who are wishy washy will be bombarded with a lot of distortions.  Gerrymandering means single votes might have very little impact.  Even though the rules allow a party to dominate with fewer total votes the party with most votes does gain some moral leverage. Single votes do add up so make sure your vote is part of the equation.  You can be sure many others with different priorities will make it to the voting booth.

Thursday, October 9, 2014

The Rural Urban Divide: Do you lock your doors?

The Royal Winter Fair in Toronto used to boast that this is when and where the city meets the country.  It is a good thing such opportunities still exist as many city dwellers have lost their connections to the land where most of our ancestors spent most of their time.  There is a feeling of superiority that each faction has towards the other, but too often misunderstanding hurts both.

Michael Ignatieff pointed out in a previous blog that he ultimately identified the rural urban divide as one of the most critical in Canada.  You can look at both Canada and the United States (really most other countries) and see similar patterns.  With increasing urbanization are we losing anything?
Read about Michael's view and more references to Haliburton:  http://www.johnfdavidson.com/2014/04/fire-and-ashes-by-michael-ignatieff.html

Most of my life has been lived in cities, mostly mid-sized, but my last two years of high school were spent in Haliburton, Ontario a touristy rural area.   I resented my parents for dragging me away from city life.  My city friends would sometimes complain about boredom, but they didn't realize the options they had that I didn't.  I went to the University of Guelph, primarily because I liked their semester system, but as it also included a major agricultural college I met a lot of "country hicks," only I learned they weren't "hicks."  Finally I got a city job and eventually ended up as a traveling salesman where I enjoyed working in small towns and rural areas. 

Paragraph added Apr 26/16: Some of the differences were one movie theatre with movies that had been shown in bigger cities several years before; a Junior D hockey team that became a Saturday nite habit,  a library that could easily fit inside a mid sized trailer; everybody seemed to know about everybody:

As a bit of a punk when living in Haliburton my brother Marshall and I used to watch the cottagers driving back home and thinking how ignorant they were.  To some degree this juvenile attitude was picked up from our peers.  We didn't appreciate that the cottagers did get a lot of enjoyment from the country and they did contribute significantly to our welfare. We knew we were different and of course there had to be some superiority that came with it.  Perhaps we were defensive.

What are city kids unaware of?  Food originally is not packaged.  Concrete and asphalt don't cover everything.   Of course today more and more kids rural and urban spend their time indoors, though I suspect rural kids still spend a little more outdoors.

A really peculiar phenomenon was friendships.  In the city I mostly had friends my own age and interests.  In Haliburton it was often the case that those my own age with reasonably similar interests might live a long way away.  I had never had to go on a school bus  (except school trips) and fortunately lived just one mile away from high school and walked it.  Most of my classmates came from different directions much further away and our friendships were mostly at school.  I found myself friends with those along my walk to school of different ages and interests as well as a few that walked from the opposite direction.  In cities it seems you can be choosier about who you hang out with, but maybe you don't appreciate that others are actually human too.

Coming from a city it was natural to lock our house and car doors, but learned our new neighbors didn't feel the need.  After awhile it seemed natural to forget about locking.  At the local high school dances you could find young couples "making out" not necessarily in their own cars.  As there are not as many street lights you get used to being outdoors in the dark.  This became unconscious for me, but was brought home by my city bred girl friend, now my wife who was alarmed when I casually walked outdoors at night.

Guns, at least in the country are normal for hunting. Most of my fellow students came from families where hunting was a very big deal.  Lots of businesses would shut down during hunting season.  You could feel excitement.  I was too far citified to understand, but couldn't miss observing (and keeping my mouth shut about it).

My brother Marshall and I noticed a preference for country music which at first struck us as being in a backward foreign country.  After awhile you gradually notice a few country songs that sound ok and then perhaps a few that hit home.  These days country music has infiltrated city areas and vice versa.,

I got my driver's licence at age 18 in Haliburton where the high school provided driver education.  I got used to driving the curvy hilly roads, but dreaded driving on four lane highways and city streets.  I did get used to city driving and learned that many city drivers were very nervous about driving on rural roads.  Many years later I found myself driving on similar roads that I used to enjoy in Haliburton, but this time in rural Nova Scotia near Windsor,  the home of Thomas Haliburton whose name was borrowed for the Ontario county and town I learned to drive in.

Many parents, likely my own, thought that moving to the country would avoid many of the problems associated with the city.  Drugs perhaps the biggest concern.  I avoided them in the city and was able to avoid them in the country.  Alcohol was very normal in both.  There were fights, but not common.

Today we live in a wired world and no one is far from the advantages offered by cities.  On the teaching staff at the Haliburton Highlands Secondary School were staff that some probably couldn't get a job in a city, but others who were very happy to live in the country.  I didn't quite make the cut for the Oshawa high school basketball team, but was surprised to see the coach switch to one of my Haliburton rivals.

My youngest sister, Jennifer was the only one born in Haliburton and her birth was one of the few times I visited the local hospital.  It filled its basic function, but was not much like what I had visited in Oshawa and more recently in bigger cities.  My father probably died unnecessarily because he wasn't diagnosed quickly enough in a small town hospital (not Haliburton).  Eventually he was taken to Kingston where university affiliated doctors figured out his problem, but too late.   This has squelched a former romantic notion of retiring to the country, but not the idea of it being a great place to breathe and enjoy life.  I am aware that modern technology is closing the gap between large cities and smaller centres where some serious surgical operations have been performed remotely.

The Canadian middle class dream of owning a home has driven many people to buy property miles from their job and commuting.  This often means living in a small town or even rural property.  For some this is an adjustment and many come to appreciate the benefits of living where you are more likely to know your neighbors and get some relief from city pollution.  As urbanization increases  and the population grows, commutes are getting longer in time even more than distance. It is easy to foresee that in the future only the well off or those that can eke out a living nearby will spend much time in the country.  Others of us are becoming conscious of our short term greed hurting the environment.  In the future I see more  people will be living in high rises and taking public transportation to work.

City life suits me.  I am able to walk downtown, to the library, to a very pleasant lakefront park and have many entertainment choices.  Within a short drive I have many shopping options.  I still miss the country.  I am no longer able to justify making sales calls in the country, though I do talk to lots of country dwellers on the phone and I will be at the Royal again this year to soak in some of the country atmosphere.

In one of my high school classes a teacher asked us how many expected to live in Haliburton after graduation.  Only two held up their hands and both had fathers who owned local businesses.  My father did own a trucking business, but I wanted nothing to do with it.  For most of us the jobs are in the cities and so are a lot of other attractions.

Politically rural areas tend to be more conservative than cities and the deciding issues could be different.  Each group feels their priorities prove their superiority.  It would be helpful if they understood one another better.

There still is a big difference between country and city living, but each have their advantages.  As time goes by the two nations are merging and both becoming more diversified.  I would close by saying we are losing something as we seem to be losing a little more of the country each day. 

An earlier blog in a strange way illuminates some crucial differences between urban and rural thinking when it comes to animals.  Rural people have a closer connection to animals that produce food and are used for work.  City people tend to get more attached to their pets.  I learned about this when selling tooth brushes for dogs.  The blog post has deeper implications for the rural urban divide.  Read more here:  http://www.johnfdavidson.com/2011/06/rural-and-urban-contrasts-towards-pets.html