The numbers that define 2014

By Marc Jampole

Numbers define the last day of the year for me. As the owner of a small business, I typically spend December 31 creating detailed balance sheets and sorting corporate income and expenses into various categories—kind of a dry run for doing our corporate taxes next month. I also start to organize the financial information we send our clients at the end of every month. Personal finances also get attention because I take a look at how all my family’s investments performed in 2014 and compare where we stand now to how much we had a year ago. Thank goodness, we’re without debt, so I don’t have to add up the money owed or the interest paid.

These numbers have usually put a smile on my face for about 30 years now. I have a good business and a nice portfolio of investments.

But every year when I turn to the numbers that define where we stand as a society, my facial expression immediately turns dour. Number of soldiers and innocents dead in wars. Number of victims of gun violence. Number of people in the United States and worldwide starving or experiencing food insecurity. Number of people locked in prisons for victimless crimes. Number of children and women who are victims of sexual and domestic violence. Number of people dead from epidemics and violent weather.

Even when these numbers go down, they still dismay.

Then there are the numbers that suggest our decline as a society. Rate of inflation in the cost of a college education. Estimated number of people denied the right to vote because of recent state voting laws. Amount that average temperatures for the year exceeded historical averages. Decline in the upward mobility of those in the lowest 80% of the population. Loss of buying power of the minimum wage. Decline in union membership.

The big numbers news for 2014 came in April and November. In April, Belknap Press released Arthur Goldhammer’s English translation of Thomas Piketty’s Capital in the 21st Century, which detailed the steady increase in the share of the wealth and income pies in industrialized nations going to the top 1% and the top .1% of the population. Piketty proved what most people have experienced: the net transfer of wealth and income from the bottom 99% of the population to the top 1% over the past 35 years. While the numbers were depressing, progressives could at least take solace in realizing that Piketty had turned the world’s gaze to the problem of growing financial inequality and redefined the premises of public discourse on the economy for years to come.

No such consolation can we find in the outcome of the mid-term elections, which saw Republicans win the U.S. Senate and tighten their hold on the U.S. House of Representatives and state legislatures.

A confluence of many forces caused this crushing defeat for those who want to see a more equitable distribution of wealth, higher taxes on the wealthy, more investment in infrastructure and basic research, more government support of public education, gay marriage, greater women’s reproductive rights, more restrictive gun control laws and the shrinking of our military and military budget:

• Continued fallout from the Democrats’ decision essentially to sit out the 2010 election, thereby insuring that Republicans could gerrymander Congressional seats after the 2010 census.
• The mainstream news media’s insistence on providing more coverage to Republican candidates, strategy and disputes, and on defining all issues from the point of view of right-looking moderate Republicans.
• Obama’s decision to wait until after the 2014 election to begin taking stands on immigration, climate change and normalization of relations with Cuba instead of doing so in the heat of campaign when it could have energized traditional Democratic voters who felt there was no reason to come to the polls.
• The impact of the slew of laws passed over the past four years that make it harder to register to vote and to vote.
• The truly obscene amount of money spent by corporate interests to support both parties, mostly the Republicans.
• An insidious form of racism—the racism that makes people apply higher standards when judging the performance of African-Americans in public, business, civic, social service or government roles. I’m convinced that Americans were more disappointed in President Obama’s performance than they would have been if a white president had done the same things and gotten the same results. Right-wingers and the news media fueled this disappointment in Obama’s performance by the manufacturing of a series of phony crises that somehow demonstrated administration incompetence or duplicity. These crises turned out to be mostly overblown. Nothing that the Obama Administration did related to Benghazi, the Ebola crisis or ISIS compares to how the Bush II Administration botched response to Hurricane Katrina or its incompetent prosecution of the war on terror. Well, there was the healthcare website in late 2013….

These explanations don’t still the gut-wrenching anxiety that comes from knowing that under Republican control of the legislative branch of the federal government, the sequester is likely to remain or be replaced by a miserly budget that continues to cut funds for infrastructure, global warming, social net programs and public education; that there likely will be no raise in the federal minimum wage; and that there will be lots of votes attempting to turn back the clock on Obama’s legislation and executive actions.

And the explanations don’t assuage the dismay in knowing that as long as the Republicans control Congress and most state governments, we will likely make no progress in creating a more equitable society and economy.

Foreign Affairs latest pub to glorify entrepreneurs, pretend befuddlement that entrepreneurism hasn’t led to greater wealth equality

By Marc Jampole

Once again, Foreign Affairs is pretending to cover an issue extensively while presenting opinions running the gamut from y to z. I write “y to z” because the original expression is “running the gamut from a to z.” When you write or print out the alphabet, “a” is on the left and ”z” on the right. Thus when creating a play on words to describe the narrow and conservative range of points of view Foreign Affairs typically considers, the most accurate formulation is that it runs the gamut from “y to z.”

The selection of experts all saying the same thing is one of the more pernicious rhetorical devices by which propagandists try to pull the wool over the eyes of the public. The publication suggests that the narrow range of opinions it is presenting covers all possibilities, when in fact those giving the opinions generally agree on everything except a few details.

In its last issue, Foreign Affairs presented the opinions of about a half dozen experts on what the United States can learn from the experience of fighting the Iraqi and Afghanistan wars. These so-called experts focused exclusively on how we can fight wars better and spent no time discussing how we can better evaluate if a war is worth fighting.

In the current issue, called “Here Comes the Disrupters,” Foreign Affairs turns to a discussion of entrepreneurship, which loosely means the craft and science of starting businesses. The publication concerns itself primarily with entrepreneurs whose business ventures disrupt an industry, usually through technology. In the mythology of capitalism, entrepreneurs are heroic disrupters who through their vision, talent and perseverance overcome the great odds facing anyone who starts a business (except those who start with a lot of money and connections, which seems to apply to Jeff Bezos, Michael Dell, Meg Whitman, Bill Gates and most of the other entrepreneurs lauded by the mass media).

The introduction by editor Gideon Rose sets the stage for the one-note pony show in the magazine by praising Joseph Schumpeter, a mid-20th century Austrian free-market apologist who postulated that innovation was crucial to economic growth and that entrepreneurs were solely responsible for all innovation. Rose, like most right-wingers, praises the “perennial gale of creative destruction” (a translation into English of Schumpeter’s words) that roils the lives of individuals but benefits the overall economy and therefore helps all individuals raise their standard of living.

Yet Rose expresses befuddlement at how to share the fruits of entrepreneurship with the rest of the humanity: “Everybody wants more growth, more dynamism, and more broadly distributed benefits, but nobody seems to know how to get there.”

But we do know how to get there. We tax the entrepreneurs for their excess profit and use that money to provide a range of benefits and incentives to others, such as a decent minimum wage, high wages for all; job creation programs, low-cost college education, social nets for the poor and active public investment in infrastructure and research and development. That’s what the industrialized nations did roughly between 1935-1975.

Fostering entrepreneurial creative destruction was and remains a major rationale for virtually every aspect of the Reagan revolution, including lowering taxes on the wealthy, passing regulations making it harder for unions to organize, letting the buying power of the minimum wage deteriorate, scrimping on societal investments and retreating from our commitment to free public education and low-cost universities. The result—a steady decline in new start-up companies (that is, companies less than a year old) since 1978 from more than 14% of all U.S. firms to around 8%.

In other words, by writing that nobody seems to know how to broadly distribute benefits in society, Rose has either not read even the basics of 20th century history or is consciously lying. I’ll leave my readers to decide which one.

One reason that entrepreneurship has slowed down may be that our society has become less equitable since the late 1970s. To start a business requires resources that the entrepreneur must either have or borrow—but most start-up business people must pledge their house and other assets as collateral to borrow money from banks. Even venture capitalists want the entrepreneur to have some “skin in the game.” But fewer people have the “skin” to get into the game, as technology automates ever more middle class jobs, wages have stagnated for essentially 35 years and the cost to gain the education needed to be an effective technology entrepreneur becomes ever more expensive. The basic dynamics of capitalism have always depended on the accumulation and investment of capital. No wonder entrepreneurship is declining—fewer people can muster the capital needed to compete.

Rose follows his wave-the-free-market-flag encomium to entrepreneurship with interviews with six of the world’s leading technology capitalists whose companies significantly changed the dynamics of their respective industries, people like Amazon’s Jeff Bezos and Skype co-founder Niklas Zennstrom. The publication creates an artificial diversity by featuring an American man and woman, plus males from South America, Africa and Scandinavia and a Jew from Wales. But the diversity is only ostensible, as all come from either upper middle class or wealthy backgrounds and all attended elite educational institutions or exclusive colleges.

The six entrepreneurs seem to agree on most things. Yes, entrepreneurs help the entirety of society and not just themselves. Yes, competition, free markets with government investment in pure research, little regulation and open immigration are the ways to foster entrepreneurial activity. Yes, it’s too bad that creative destruction causes people to lose jobs, but what can we do about the vast wealth and income inequalities that have formed in virtually all countries of the world? All agree that “creative destruction” is a good thing.

Interestingly enough, the chiming of this chorus of “disrupters” rings most harmonious when discussing the single most important factor in their success. All blame their success on the luck of being at the right place at the right time with the right product or concept, the right contacts and a goodly amount of financial backing. Yet none seem to understand the major implication of relying on luck, which is that these captains of technology don’t deserve all the accolades and rewards they get. To rely on luck really means one is relying on society, since society creates most of the conditions which shaped the successes these people have had. If you don’t believe, consider the bad luck of living in a society with no roads or telephones.

Without knowing it, these entrepreneurs build the best case possible for high rates of taxation on the incremental income of the wealthy. Taxes quantify the value of luck to the entrepreneur. The more one makes, the luckier one has been, the less one has had to do with one’s success and the greater share should be returned to society to pay it forward for the next generation of the lucky few and the just-muddling-through rest of us.

Funny thing, though, none of these entrepreneurs want to complete the thought process. They prefer instead to speculate on what society can do to make it easier for entrepreneurs to succeed, as if that were the end goal of society.