Saturday, April 22, 2006

Tipping Point??

Every rubber band can withstand only so much force before it breaks. What about the social fabric of a society? Does the principle apply or do we have the right to assume that no force can ever break the tevlar like strength of social cohesion?

Let us take a look at the facts and nothing but the facts, and then you decide. Income distribution in the US has continued, over the past quarter of a century, to reward the few at the expense of the many. The chasm that separates the top quintile (20%) of US households from their counterparts at the bottom of the distribution has become a gulf that does not bode well for the future of the class relations. The top 20% of households has increased to an astounding 52.2% of income. This simply means that the top 20% make more than the other 80% of the population put together.

To make things worse, the distribution of income within that top 20% is also very uneven. Actually the figures for 2003 show that the top 1 % of income earners account for over 14% of income. The top 10% account for 37.2% of income. Yet inspite of all this inequality the US government does not see it fit to issue or publicize the Gini coefficient (an accepted measure of inequitable income distribution that could be generated at the push of a button. But then why inform the masses about their standing when you can make the TV rounds and proclaim, as Secretary Snow has just finished explaining last week. He said that we should be proud of the way that our system works because it distributes the spoils according to an “aspirational” compensation system set by the market. Thank you Secretary Snow for explaining to us so cogently why is it that so many Americans choose to live in fear of how to pay for an unforeseen illness, who is to fund their pensions, how to finance their children’s’ schooling and put food on the table.

According to a recent study by the Institute for Policy Studies the average compensation of a CEO was 42 times that of an average worker during 1980. That gap has risen to a multiple of 431 in 2003 which translates to $11.8 million compensation for the CEO versus the $27460.00 for the worker. How much more can the social fabric withstand?

Tuesday, April 04, 2006

Vive La Difference !!!

Is there really anyone who believes that there is no major difference between the United States and France? Just in case that rare specie exists a recent survey done among the French should dispel that illusion. The survey in question found out that three quarters of the young French (yes, three out of four!!!!) would like to become civil service employees. Is this the kind of ambition and creativity that built Silicon Valley or even such prosperous enterprises as Starbucks, Dell Computers and the iPod juggernaut? I am afraid not, the ambition of these young Frenchmen and Frenchwomen is what is needed to create a stagnant economy hampered by bureaucracy and stifled by innovation. And don’t let anyone tell you that statistics show that the French are more productive than the American workers on a per hour basis. The figures are accurate but only because so few of the French people are working!!!

Monday, April 03, 2006

Immigration: Full Amnesty is the Right Way.

The House and the Senate, not for the first time, are working on legislation reform bills that are in sharp disagreement with each other. The House has already passed legislation that would make it a felony to be in the US without proper immigration papers while the Senate is preparing legislation that would offer the estimated 12 million undocumented workers the chance to obtain citizenship. If there ever was an issue that has valid points on both sides of the divide then this is it.

Economists have often admonished us that” there ain’t no such thing as a free lunch; TANSTAAFL. According to this principle no matter which side you take there is a price to pay. So what would the rational economist (Is there any other kind? :-)) do in such a situation? Naturally homoeconomicus will favour the less costly side.

Although there are valid points on both sides of the divide it can be argued very clearly that the concerns of the House side: the right to control borders, downward pressure on the minimum wage in addition to increasing official unemployment rates among teens and low skilled workers are easily trumped by the moral concerns that are guiding the debate in the Senate.

Why am I obligated to help? To me the answer is simple and straight forward. The rights of the poor, the oppressed and the underprivileged rest on two fundamental principles.
(1) The utilitarian idea that if I am in a position to lessen pain, in any form, then I should.
(2) The chasm that separates the poor from the rich has expanded at an alarming rate over the past half a century. Since this increased inequality is the direct outcome of a “world system” and since we are not ready to jettison this unjust system then it must be the moral obligation of those that have profited the most to help those that are most in need.

In the final analysis integrating the 12 million undocumented workers in the US is the right policy but must not be viewed as anything more than a stop gap measure until the next wave of immigrants storm through the borders. That can only be stopped by treating the underlying problem at its roots. Eliminate poverty, improve standards of living and support social justice through fair trade and targeted economic aid.

Sunday, April 02, 2006

Decline in Unionization: Who Is Responsible?

A pivotal institution in the economic, social and political life of the United States is in real danger of extinction. Preventing organized labour from going the way of the do-do bird will not be an easy matter especially when the efforts to weaken labour unions by management and international economic relations are aided by the misguided policies of the labour unions themselves to deliver the proverbial one two punch.

The United States has never welcomed labour unions with open arms. At the height of unionization only 37% of the private sector work force was unionized; but that has dropped to an abysmal 8% of the private sector work force during 2004. Compare that to the current rates of 95% in Sweden , 60 % in Norway and 40% in Germany.

What is even more alarming is that the labour union disappearing act goes on. General Motors has announced the planned layoff of another 30,000 hourly workers in addition to the 20,000 planned layoff by Ford Motor and the potential total shut down of Delphi, the auto parts manufacturer.

It is common to explain the labour woes by references to Ronald Reagan who fired all PATCO employees and sent a strong message to take strong stands against demands by labour unions as it is also customary to blame globalization and the “race to the bottom” that it has engendered. But are the Labour Unions themselves to be viewed as victims and held blameless?

Whose idea was it to raise the effective cost of a typical UAW employee to $74 per hour? Was it company management that suggested setting up job banks in order to pay employees for not working? Who was it that insisted on total implementation of rigid work rules that in effect decreased competitiveness? The sad fact of the matter is that labour has played an active role in its own demise.