On a New Form of Indentured Servitude

This is one of Al Clayton's powerful photographs in the 1969 book Still Hungry in America, which chronicled poverty and hunger in the American South.

There’s so much going on in the USA that warrants attention these days that it’s hard to know where to start.  But, since I’m an economist I’m going to start here.

“There are families not eating at the end of the month,” said Stephen Quinn, executive vice president and chief marketing officer at Wal-Mart Stores, and “literally lining up at midnight” at Wal-Mart stores waiting to buy food when paychecks or government checks land in their accounts.

Among the steps Wal-Mart is taking to address the changes in shopping habits, Mr. Quinn listed an overhaul of the retailer’s private-label brand, Great Value, which is promoted in commercials describing how families can fix dinners with Great Value products “for less than $2 a serving.”

The really sad thing about this blurb is that I got it from the Media & Advertising section of the NY Times. It did not come from the op-ed page, it did not come from the business section nor the politics section.  It’s there because Walmart is having to work on its product mix to reflect hunger in those families living below the poverty living in one of the richest countries in the world –The United States–and I am deeply ashamed as a citizen of that country to read this anywhere STILL after all these years.

There’s been an academic discussion about the disconnect between what some of our nation’s statistics tell us is going on and the reality on the ground.  There was a conference this weekend to talk about re-working the way the nation calculates its GDP.  This is extremely important.  Because of globalization, we are most likely over stating our performance in way that is throwing off our policy targets.  We are losing per capita income from the lowest to middle quintiles and we are hemorrhaging well-paying jobs for our most vulnerable citizens.  They are not able to get enough to live on and they are not wealthy enough to buy health care insurance or to pay premium taxes to feed an already over-bloated, costly, and inefficient industry.

A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

The most interesting thing about this is that the argument is that our workers supposedly have become increasingly more productive over the last decade or so. What we might be measuring are impacts from trade instead.  This goes a long way in explaining why the returns on labor (MRP or marginal revenue product) and the returns on capital are becoming so disparate.

The statistical distortions can be significant. At worst, the gross domestic product would have risen at only a 3.3 percent annual rate in the third quarter instead of the 3.5 percent actually reported, according to some experts at the conference. The same gap applies to productivity. And the spread is growing as imports do.

That may help to explain why the recovery from the 2001 recession was a jobless one for many months and why the recovery from this recession is likely to generate few jobs for many months.

In addition, more detailed import data would help to explain wage inequality, by linking some low wages more accurately to particular industries exposed to import competition.

On another front, many argue that labor productivity is rising faster than the pay of workers who made the greater productivity possible. That argument would be watered down if more accurate data showed that productivity had been overstated.

Just as more and more working class families fall into the cracks, we also have the latest sham of health care where families now struggling to make ends meet with face a tax if they don’t buy health insurance from overpriced insurance industry plans.  Let me point you back to a piece in Politico for this beauty.

Page 29, sentence one of the bill introduced by Senate Finance Committee Chairman Max Baucus (D-Mont) says: “The consequence for not maintaining insurance would be an excise tax.”

And the rest of the bill is clear that the Finance Committee does, in fact, consider it a tax: “The excise tax would be assessed through the tax code and applied as an additional amount of Federal tax owed.”

The bill requires every American, with few exceptions, to carry health insurance. To enforce this individual mandate, the Senate Finance Committee created the excise tax as a penalty for people who don’t have insurance – and it can run as much as $3,800 a year per family.

The House bill also refers to the penalties for not carrying insurance as a tax. It calls for a “tax on individuals without acceptable health care coverage” and amends the tax code to implement it.

I have to ask what it is wrong with this country?  It seems to pushing its poor to the brink of destruction during a time of when its also funding (through direct funds and also extremely low interest rates) arbitrage profits for the already rich at places like Goldman Sachs.   We might as well just call them all Princes and call ourselves the new corporate serfs because we’re going to be paying for our indentured status for some time under what’s going on right now. We’re tithing for the benefit of huge financial institutions be they investment bankers, insurance, or mortgage brokers.   They’ve become the residents of the neoGothic cathedrals of the 21st century dark ages of America.  We’re back to ‘Still Hungry in America’ and this is ever so wrong.

Oh, meanwhile, via CNN breaking news:

The Dow hits 10,170 in intraday trading, its highest level in more than a year.

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