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Don't hate the playa, hate the game...
In case you’ve been wondering about your paycheque lately, no, it isn’t your imagination.

According to the latest data from the St. Louis Fed., two important (and related) trends are continuing to set records. As a percentage of the total economy (GDP), corporate profits just hit an all-time high while wages, again, sunk to new lows.

These two facts paint a very different picture of our “struggling economy” than we are usually shown. Some people, obviously, are doing pretty well right now, despite the ongoing effects of the worst economic collapse since the Great Depression. Now, just as in the 30s, those who’ve managed to stay rich are doing pretty well for themselves. With competitors failing and plenty of bailouts, many actually gained from the market meltdown. The rest of us, obviously, haven’t fared so well.

Recessions, like most calamities, tend to be felt most at the bottom of social hierarchies, among those who are already most vulnerable. Poor, racialized communities will be hit harder than wealthier white ones, and in those communities, women, children and the elderly will likely suffer the most. Those who are “higher ups” can easily pass on costs to those “below” them, while the opposite rarely has a chance to happen. The same happens in times of war, natural disasters and “prosperity” – that’s the nature of life in a ranked society.

What the growing distance between profits and wages tells us, much like other rapidly growing forms of inequality over the last 40 years, is that wealth is a poor measure of general “prosperity”. Contrary to the myths of “trickle-down economics”, the rich can get much richer without any direct benefit to those around them. Decades of policies which attempted to fix the economy by stimulating businesses only widened the gap between them and everybody else. The role of “Reaganomics”, in the end, was more rhetorical than anything else, drawing attention away from the obvious source of these corporations’ new wealth.

This statistic in particular is important because of the terms it uses: wages vs. profits. While discussion of the “1%” focus on individuals, it tends to draw attention away from the systems which allow one percent of the population to amass so much wealth. While CEO bonuses are indeed outrageous, they’re still only a very tiny fraction of the money involved. Much larger sums are spent on the corporation itself – on bureaucracy, advertising, marketing, financing and investment. The cost of such bureaucracy has exploded in the past few decades, also afflicting the public and non-profit sectors. Often the corporations themselves are owned by large groups of shareholders who, in turn, own many others, so it makes little sense to look at any CEO or corporation in isolation. Capital, in general, is the issue here. It can just as easily move between investors as it can between companies or nations, but as a share of the total economy it’s been growing both in size and influence, to the point where many find it indistinguishable from the economy itself.

Ignoring the distinction between capital and the rest of the economy was the mistake that allowed nearly all mainstream economists and business writers to miss the obvious signs of an impending economic collapse in the last decade. Because they measured success in stock prices, everything seemed to be booming. In reality, as investment revenues grew wildly out of proportion with the rest of society, they inflated prices for any and every investment, creating a massive bubble which couldn’t help but burst. All the major solutions (bailouts, austerity, tax cuts etc) have followed the same logic – giving trillions to banks and large corporations and inflicting harsh cuts on everybody else.

Pumping more of what little money we have available to us into investment capital will not revive our economy – at best it will put off the inevitable. Bailouts, tax cuts, “quantitative easing” and other forms of stimulus and subsidy all have their costs, which of course fall on the rest of us. These infusions of money can drive up speculation for a while, but if the underlying economy is losing funding, that will catch up with markets soon enough. In the long run, these kinds of imbalances are never sustainable.

This growing inequality isn’t just a nasty-side effect of the problems we’re facing, it is the issue. These catastrophic “bubbles” wouldn’t have been possible had investors not had enough cash on hand to drive markets all over the planet into delirium. People would not have needed sub-prime mortgages if they hadn’t been excluded from normal housing markets (by income, race and geography) and of course, we wouldn’t have trouble spending money or making loan payments if we could earn a decent wage. Capitalism, by definition, is rule of the economy by investors – a form of control ultimately based on inequality and disparity. Poverty and recession aren’t the result of mistakes or failures – they’re the product of this system functioning exactly the way it’s supposed to. Until we acknowledge that, we’ll continue to be mystified by this process and the results, but once we do, it all starts to make a frightening sort of sense.

This year America’s collective gas bill is on track to hit half a trillion dollars. With that comes not only colossal public expenses, but crippling blows to individual finance. Some Americans are reportedly paying up to 50% of their income on their cars between insurance, repairs, fuel and other expenses. Those with the largest burden, of course, are often the poorest. A new website and project from the New America Institute is hoping to bring attention to the high cost of car ownership. The Energy Trap features personal video testimonials from all over the US talking about the time and money being devoted to people’s commutes.

This high cost is starting to take its toll (often literally). The Globe and Mail recently ran an interesting article about “Peak Cars” (RTH link), which notes that rates of driving have already been falling for some time, especially among young people. Because of the high cost of insurance, generally low incomes and already high debt burdens, it just doesn’t make sense for many young people to drive. For most younger men I know especially, it’s pretty much an either-or choice of having your own car or appartment, and I must admit that I would have trouble owning a half-decent car for less than I pay in rent. Putting this in visual and financial terms, Streamline Refinance released this ‘infographic‘ about how much commuting costs in terms of housing or how much it effectively lowers your wages. They claim a thirty mile commute is the long-term equivalent of just under half a million extra to spend on a home (after mortgage voodoo is worked out), or nearly a million if both couples drive it.

Cars provide a perfect example of how costs in our society get hidden by distribution. Governments certainly spend a lot on roads, highways and parking lots, – more than any other form of transport, and most other programs – but that doesn’t buy any vehicles. On top of the horrendous cost of roads (often tens of millions per kilometre for urban highways), there’s also the price of the cars themselves as well as their fuel and parking spaces. These costs are borne by the public, so they don’t show up on government balance sheets except as tax revenues. Instead they’re paid directly by us, or hidden in the prices of everything we buy (“free parking” at malls, trucking costs etc). Despite this illusion, the price of cars is still a very real public cost – simply paid for directly by us and not by the state.

There are, of course, a great many public costs associated with cars. Virtually every part of the industry receives massive public subsidies (oil, manufacturing, roads etc). This includes policing, the incredible increase in regulations needed for traffic management, and the criminalization of many otherwise-harmless activities like “jaywalking”. It includes health care costs related to accidents, inactivity and air pollution, as well as the incalculable price of human suffering for those affected. And then there’s the environment costs – mining, quarrying, oil extraction, roads, parking, smog, sprawl, climate change – any of these, alone, generate billions in “externalized” costs for the environment and society. Oh, and then there’s oil wars…

What this demonstrates is that demanding “jobs” or “growth” as a cure-all to economic issues can in fact lead us into traps that really aren’t economic or efficient at all. Automobile manufacturing is pretty much the primary industry in Ontario, linked by some to one out of four jobs. Taken uncritically, that’s a massive boon to our economy. But is it? We need to be wary of “progress” measured only in hours worked or money spent – neither relates directly to our welfare or quality of life. Health, safety, air quality – these things do. The more intently our economy focuses on the abstractions it creates, the more it loses focus on measuring or accounting for real world value, and the more detached and alienated it becomes.

With the decline in first-world manufacturing, most people (especially in Hamilton) are no stranger to the idea of work becoming more irrelevant and pointless. If you have any doubt that a person can be employed full-time for purposes which create next to no real-world value, I’d suggest a short stint at one of our many call centres. Complex and expensive machines like cars provide an attractive remedy to that, since they’re one of the few things we still make. Unfortunately, making pointless machines is no more useful than making pointless phone calls. Time spent building cars and roads is time which by definition isn’t spent on housing, food or medicine (all are in fact more expensive as a result). Decades of development make it fairly clear that providing a posh fleet of luxury vehicles for the wealthy doesn’t equate to feeding the hungry or housing the homeless. The last decade has shown pretty clearly what happens to the world’s poor when we try using part of our food supply (corn) to supplement our fuel supply.

It’s time to focus on our needs, and not ill-defined amorphous ways of getting them like “jobs” or “economic growth”. If we need to get from one side of town to another, there are ways of achieving that which don’t involve over a hundred horses’ power per person. There are bikes, trains, feet and buses. There are better ways to efficiently use those cars (ride and car shares), and there are far more efficient ways to build and arrange cities so a half-hour car ride isn’t necessary to reach school, work or amenities. If we need homes, let’s devote our funds and efforts toward building the best and most efficient homes possible rather than convoluted methods of financing them. If we need food, let’s grow it. If we need clothes, medicine or tools, let’s make them. Doing these tasks is “work” too, often far more rewarding than most jobs you could name (which is why so many people do them when not paid for it). If the jobs we’re working and institutions we’re relying aren’t meeting our needs, why continue to meet their demands for cash and labour?

With the growing shortages of just about any resource one can name, the environmental struggles of the past century are about to become a lot more “real”. With declining economic prospects and growing energy costs, “green living” is going to go from being a middle-class lifestyle fad into a basic demand of millions of poor people, even more than today. This is a necessary transformation if the environmental movement is to grow and evolve. Rather than asking ourselves what we can do to shame and cajole motoring suburbanites into changing their “evil” ways (cars, meat, McDonalds, Wal-Mart etc), it’s time to ask ourselves how we can help the growing chunk of society who can no longer afford to be a part of this industrial, petrochemical society. How do we help people live through the winter when natural gas and fuel oil are no longer available (Canada has already seen a fuel oil shortage, and our gas reserves are plummeting)? How do we help people get to work, school or grocery stores when they have to sell their car? If environmentalism wants to become a truly popular movement, these are the kind of questions we needs to ask. Most people don’t benefit from pollution and environmental devastation any more than we do from sky high bank and corporate profits. It’s time to stop pretending “the environment” is a separate issue from the political and economic woes faced by average people – all economic issues are ecological, and vice versa. Once we all recognize this, we may finally be able to do something about it.

First of all, so that we’re all on the same page, read this. Henry Blodget, CEO of Business Insider, published these charts, which give a very clear picture of why people are so angry about the economy. To summarize: corporate profits are at an all-time high, while wages (adjusted for inflation) are still lower than the early 1970s. In fact, the percentage of the GDP spent on wages is at an all-time low after decades of declines. Employment still hasn’t recovered since the crash of 2008, the number of people giving up on job searches is growing, as is the average length of unemployment. By standard measures of inequality, America scores lower than China and India. All of these figures have been common enough, but it’s really nice to see them all in one place. It’s also a lot better than what Blodget first had to say about the protesters.

I chose this link among the millions talking about these protests because it gives us glimpse inside the machine. We all know about the symptoms of the problem – poverty, unemployment, etc – but that offers no prescriptions. The dire plight of those in poverty has been used to justify every economic policy from Reaganomics to Leninism. We don’t just need to talk about how bad it is – we need to ask ourselves what’s happening that’s driving all of these numbers with such consistency. There’s lots of villains here – “corporate greed”, banks, the Federal Reserve, the government etc. Easy as those answers might be – they do very little to actually explain what the problem is.

So what is?

Our entire economic system. Call it capitalism if you like, or corporatism if that suits you better. Some like “neo-liberalism”. Plutocracy also works, and the term technocracy is becoming more applicable by the day. Whichever name you use, it’s clear that beyond the divisions in individual fortunes, competing corporations or even nation-states, lies a system which is far too consistent and inter-related to be a coincidence. Globalization has brought together all the worlds major powers for the purpose of un-ending profit, and despite all the petty feuds, it still manages to function like one massive machine.

Looking at the issue this way is important. It explains our colossal power structures without conspiracy theories about secret cabals of bankers ruling the world for centuries. What makes control by a secret society of bankers really all that much different from ordinary, run-of-the mill capitalism? Looking for someone to blame will only find us the most local and recent examples – it doesn’t really matter who’s in these positions of power. If they want to keep their job, they have to play along – that’s the genius of this system. It isn’t a question of “who”, it’s a question of “what”.

This system is not static. It has been growing and evolving for at least two centuries. The simple growth in scale and scope is clear enough – 3% yearly growth means doubling in size every 24 years – and very clearly matches what we’ve seen over those years. Equally important, though, is the growth in complexity. The explosive growth of bureaucracy in both the public and private spheres now demands an enormous flow of cash, resources and capital to support, leaving little for wages or production itself.

Why does bureaucracy grow in this way? Because powerful groups and institutions are always competing for dominance. Growth is a survival strategy, to avoid being taken over or pushed aside. Over time, a few do become dominant and grow much larger than the rest. As they grow, they must become more complex to maintain and reproduce central control over a wider area and population. That complexity takes the form of rigid and bureaucratic institutions designed to supervise us and act as intermediaries between ourselves and the system (in ways which, of course, suit the system).

More power, wealth and prestige clearly benefit the people in charge of these institutions, as well as the institutions themselves, but the benefits to us are dubious at best. Having larger and more distant institutions ruling us certainly doesn’t grant us any greater representation. It also isn’t any cheaper, at least for clients, as the efficiencies they create (like buying in bulk) are all too often spent on themselves.

While advertising, management and banking cost money and create jobs, they don’t actually add value to products. A carrot is still a carrot, regardless of how many billboards advertise it or how many managers watched it grow. The carrot in question will surely be expensive and may even be profitable, but it’s no use to starving millions. Many of our largest corporations no longer even manufacture their own goods – choosing to focus entirely on investments and “brand image”. This growing overhead cost puts pressure on all other prices associated with production – there’s less money to spend on wages or raw materials, and a strong drive to raise prices. From appliances to homes, we’ve witnessed some pretty impressive raises in prices over the last few decades, though clearly not in the costs of production.

At first, the growing distance between wages and prices seemed to be a boon. It boosted profit margins and forced families to work more to get by. Eventually it began forcing individuals and even nations deeply into debt, which made even more money since they could lend their profits back to us, at interest to buy more goods. Sooner or later, though, these debts catch up with us and we hit a wall as there’s just no more blood to squeeze from the stone and people can no longer afford to buy or borrow. This kind of rampant, disproportional and parasitic growth is never really sustainable, as any tumour can tell you.

Our economy has literally exploded since the 1970s, but since about that time, the amount given to wages froze, and even began to decline. The global economy opened up, we had a few digital revolutions, and stock market growth which blew away everything which came before it. This enormous influx of profits was spent finding ways to grow even larger fortunes, generally at the expense of workers and customers. The idea that wealth can grow without “trickling down” isn’t an anti-establishment fantasy – it’s been the dominant trend in nearly all economic data in many of our lifetimes.

Many people would suggest more government regulation to solve this problem. Given the sorry state of the European and Chinese economies at the moment, it seems fairly obvious that no form of state-based socialism – democratic or autocratic – is faring any better. The endless, ideologically driven debates about public versus private spending have sheltered the obvious answer – that these kinds of bureaucracies are just as ineffective, inefficient and petty whether they’re owned by billionaires or run by the government. The endless battle between the two has taken a horrendous toll on the rest of us, as each new set of regulations spawned whole new bureaucracies on each side, all eventually paid for by us.

This system needs to be looked at as a whole. Trying to isolate different sectors will only get us caught up in its circular and self-serving logic. Villainizing the bankers valorizes the government, and vice versa. Either approach takes half of the status quo for granted. Taking a more distant view, things come much more clearly into focus: the state and capitalists are intimately related, one issue Karl Marx and Adam Smith could totally agree on. The government exists to enforce property relations for private businesses, who exist to create enough commerce to fund the state. To both groups, the rest of us exist largely as a resource to be exploited, and a populace to be ruled.

Gathering in the streets and occupying parks isn’t a solution to this problem, but it’s a crucial step. It isn’t the signs we carry that are important, the statements we make to the press or the “demands” everyone’s so concerned about that matter – it’s the directly democratic process by which it’s all organized. That crucial aspect of these protests has been largely ignored, but is by far the most important. The ability of people who’ve never met before to assemble and self-organize into networks of occupations and protests spanning the globe is the true revolution here, and these encampments are only the first step.

Another world is undeniably possible. But before we can go about building it, we need to avoid that first crucial mistake of the current order. We can’t assume that any one person, group or platform is worth more than the input of the people involved. I’m not the 99% and neither are you – we all are. If we’re going to claim to speak on behalf of just about everybody, then we better make damned sure we’re actually offering them a chance at the mic, and not just grandstanding. A directly democratic world cannot be imposed by despots.

What might a directly democratic society and economy look like? Neighbourhood assemblies and their committees could take over many of the duties of local governments. Business and production could be run along co-operative and federated lines, for which there’s already many models, ranging from very small to very large businesses. The ghastly and grossly inefficient retail empires could fairly easily be replaced by consumer federations, collectively organizing bulk purchases directly from suppliers. These are a few vague options, but one aspect unites them. Their self-organizing nature eliminates the need for costly administrations and bureaucracies, and with them these motivations for exploitation and endless growth. While shouldering the burden of organization and capital on ourselves won’t be easy, especially at first, it isn’t as if we aren’t already paying for them with our working lives.

In my constant search for good, graphic representations of the state of the world, I stumbled across a couple of economics blogs which go into amazing detail.

Modeled Behavior, an economics blog, has a beautiful set of graphs which detail the rise in incomes of the top 1% over the last 40 years, compared with the stagnation of the bottom 80%. There are a lot of different ways to look at this data, and it’s important to see it in many forms. However you look at it, the data is clear: a virtually flat set of lines for most of us and a wildly climbing curve for the top 1%, rising and falling with the “economy”.

Since 1970 we’ve had computers become commonplace in homes, governments and businesses. We’ve had a second gender enter the workforce en masse. We’ve had “Globalization” connect markets all over the world to allow us westerners access to dirt-cheap foreign labour and resources. And yet none of this seems to have had any real positive effect on four fifths of the population. In fact, since 1976, 58% of income growth went to the top one percent of income earners, and almost all of the rest went to others in the top 20% (mostly those near the top of it).

This isn’t about the guy on your block with a nice car, or even those dudes uptown with the mansion. This is about the very small number of people, a few percent at most – who own things like CFL teams for fun. The super-small number of people at the top who own more than everyone else put together.

A rising tide is not lifting any other boats. And trashing the planet isn’t making most of us any richer.

I’ve seen lots of charts like these before, and they’ve all been getting a lot worse since I started looking at them in the late 1990s. What I didn’t expect is for the business press to start getting worried about it.

Business Insider – 15 Mind-Blowing Facts About Wealth And Inequality In America

Oh, and the picture in Canada isn’t any better. Statscan.

This is scary for two reasons. First, it means far less money for most of the population – particularly the parts who tend to spend it, rather than hoard or invest it. Giving money to people who live paycheque-to-paycheque means it gets re-spent immediately. And making them poorer only drives everyone they spend money with into ruin as well. but the scarier reason is that the more money hoarded by a tiny elite who loans it back to the rest of us, the worse this will get.

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