This issue’s title is excerpted from “The River,” a Bruce Springsteen song that in about 200 words captures the reality of America’s economy better than every economics textbook put together. Here’s the full lyric which, interestingly, conveys everything the protagonist needs to know about how the economy works as it relates to him navigating his life -- but reveals absolutely nothing about how and why “the economy” is stacked against him.
“I got a job working construction
For the Johnstown Company
But lately there ain't been much work
On account of the economy”
I love the lyric, the song, the artist, and the album. On the one hand, Bruce is the poster child for conservative economists and politicians – small town, working class (white) boy follows his dreams, starts his own business, hits it rich, creates an economic juggernaut that sustains hundreds of others. Of course, he’s a flaming liberal and, as he is the first to admit, his story is anecdotal, non-replicable, and one in a million. In fact, for every Bruce Springsteen rags-to-riches story in America, there about 30 million rags-to-rags stories – 200 million or so Americans with little to no shot at such a breakthrough, and a rapidly dwindling possibility of any measurable upward mobility at all!
U.S. Upward Mobility Snapshot: “The hope that children will grow up to have higher standards of living than their parents is widespread around the world. In the United States, this concept is considered by many to be a core component of the American Dream—the idea of a “better life for your children” is a major part of what has drawn immigrants to this country for generations.
Recent research, however, shows that in the United States, the rate of upward absolute income mobility—the fraction of children who grow up to earn more than their parents, after adjusting for inflation—declined substantially over the past 50 years. More than 90 percent of U.S. children born in 1940 had higher real incomes at age 30 than their parents did, but only about 50 percent of children born in 1980 can say the same. This raises the question: Was this decline part of a global trend, or is the United States alone in its low rates of upward mobility?
In short, does the American Dream live on, but in other countries?
There are reasons to expect this may be the case. Many features of the U.S. economic system are unusual among high-income countries. Levels of economic inequality—a key driver of declining absolute mobility in the United States—are higher in the United States than in virtually any other country of its income level.
Contrary to the self-conception that the United States is the “land of opportunity,” relative social mobility—the likelihood of a child born to low-income parents climbing to the top of the income distribution as an adult—is low in the United States, compared to many European countries. The United States also has a distinctive welfare state, with less social insurance and lower labor union penetration than most other high-income countries. Instead, the United States relies on consumer credit for many expenses that other countries cover through social insurance programs,” (April 28, 2021, Washington Center for Equitable Growth.
As individuals, we each have very little influence over, or meaningful input into -- the national economy. This is true even for Bruce, who has had a multi-billion-dollar impact on the U.S. economy. His level of economic influence is virtually indistinguishable from the working-class people he writes about so earnestly. Bruce can buy most anything he wants, but unless he develops a sudden desire for power and is willing to pay off politicians to get it, his influence will remain negligible.
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In the U.S. the economy increasingly dominates public discourse, private attention, press reporting, and the cultural zeitgeist. You’d think humanity’s purpose on earth is to contribute to a national and global economy, and that his or her individual societal standing is directly proportional to net worth. When I grew up in the sixties and seventies we didn’t know anybody who “had money,” nor did we care. It was just the commodity you needed a certain amount of to live while you did the stuff that really mattered. Nowadays we lionize assholes such as Elon Musk and Peter Thiel – when I was young we considered such people vulgar and irrelevant, like Thurston Howell III on Gilligan’s Island.
Ever wonder why Americans aren’t happy with the economy even though everyone insists it’s “booming?” What is the economy, anyway? Well, the economy is complex, so it’s easy to confuse the underlying realities that impact the majority of people with what the press politicians and plutocrats measure, focus and report on. We’ll unpack it a bit for you here.
What the thought leaders mean by the economy has been reduced and oversimplified to two primary factors and their measures – Gross Domestic Product (Gross domestic product is a monetary measure of the market value of all the final goods and services produced in a specific time period by a country or countries. GDP is more often used by the government of a single country to measure its economic health, Wiki), and the Stock Market indices. If either has reached a new high, or both are expanding in value, then the economy is said to be “good” – regardless of any and every other possible measure of the economy, much less any measure of societal good or health that is impacted by the state of the economy.
The thing is, national GDP has no effect on citizens whatsoever, and, although 61% own stock, the bottom 51% of Americans own only .6% of the market’s value, while the top 10% own 89%, and the average American only has $40,000 worth of stock, or about one year of retirement income! In a great year in which the stock market increases in value by 20% (the 20-year average is less than half that), the net worth of the average stockholder increases by $8000, or $22 per day on average. This hardly warrants the breathless and incessant coverage – the reality is that the stock market’s health has very limited effect on the lifestyle of the majority of citizens.
What really matters – and is almost never discussed – is the wage rate, or earned income. Here’s why the elite doesn’t want to talk about it: “In the three decades following World War II, hourly compensation of the vast majority of workers rose 91 percent, roughly in line with productivity growth of 97 percent. But for most of the past generation (except for a brief period in the late 1990s), pay for the vast majority lagged further and further behind overall productivity. From 1973 to 2013, hourly compensation of a typical (production/nonsupervisory) worker rose just 9 percent while productivity increased 74 percent,” Economic Policy Institute, January 6, 2015.
Occasionally the mainstream press will address unemployment – which is generally considered to be “good” if it is coming down from higher levels and being reduced towards its theoretical optimal limit. But economists consider it a massive problem when it approaches this limit and, according to the right, causes wages to rise, which is for some reason considered “bad.” Thought leaders and the press consider an unemployment rate that gets close to the point where the neediest people benefit directly from its further reduction “unhealthy.” In this case the Fed and other mechanisms go into overtime to cool the “overheating” economy just when it’s about to actually do exactly what Springsteen’s working-class hero needs it to do – provide him with a job!
Also, when unemployment gets too low from the elite’s perspective, suddenly they start worrying about inflation. Not real inflation mind you, just the theoretical possibility that the reduction of unemployment past some mythical threshold -- known only to a handful of economists -- will “trigger” inflation, thus making the lower class much worse off than if they didn’t have a job.
First, it never happens in this manner – inflation is triggered systemically by several mutually-reinforcing factors having very little to do with wage rate and employment levels. For instance, the recent run of inflation supposedly triggered by Covid and worker shortages has been proven to have been caused primarily by corporate profit taking: “Corporate profits drove 53% of inflation during the second and third quarters of 2023 and more than one-third since the start of the pandemic, the report found, analyzing Commerce Department data,” Fortune, January 20, 2024.
Second, employment is better from every measure than idleness, unemployment compensation is anemic and stigmatizing, and working people hold communities together much better than do cohorts of jobless citizens.
At any rate, this mistaken theory of super high employment equals inflation which is bad ensures that at least 4% of Americans are always idle. This is on top of the estimate of at least that many people who have stopped looking for work, and thus don’t show up in the unemployment numbers. Not to mention that consistent majority of job-holding Americans who either dislike or outright hate their jobs, whom we might best term the “reluctantly employed.” Bottom line, unemployment is not accurately understood, it’s used as an economic tool to prophylactically suppress wages, and it’s deliberately mis-measured for purposes of myth, national pride, and propaganda.
Related, Job Creation is only occasionally covered in the news. When it is, if the President is a Democrat, Republicans will make two conflicting claims at the same time: 1. Job creation is the result of previous and ongoing Republican efforts to safeguard capitalism from the Communists; 2. Job Creation is going to lead to inflation “this time” because the Democrats don’t know how to run an economy. One can understand MAGA embracing such a “heads I win, tails you lose” logic, but the economic reporters at the New York Times should know better.
Conversely, immigration is quite often in the news. The right uses the issue as an economic cudgel, although occasionally as with Trump it’s also deployed as a tool of hate, violence, and control. Regardless, immigration’s key statistics, such as the number of undocumented immigrants entering the country each year, are politically-, not fact-based.
I worked for Customs and Border Protection and DHS for 11 years and we had no definitive numbers on either border crossers or undocumented immigrants. We used whatever official-sounding estimates we could find that most fit the narrative we wanted to speak to each year, which my office determined statistically to be inaccurate by at least 100% using simple modeling techniques. The inside-the-Beltway game is to use your numbers to justify Agency budget growth, not to seek accuracy.
Ominously, the biggest indicator of societal health and individual well-being – the relative level and trends in inequality – is never addressed by American economic thought leaders. Economists, politicians, and plutocrats know full well that inequality exists and is problematic for the majority, but since they benefit directly from growing inequality (for a while and up to a point) they go to great lengths to disguise the inequality and to downplay it – some going so far as to justify it as indicative of a dynamic economy! “Greed is good,” “a rising tide lifts all boats,” trickle-down economics, we’ve got any number of ways to spin that lie. But the bottom line is that the U.S. has become the most unequal developed nation, and inequality is tearing us apart, although the conflict manifests and is characterized as “political discord” as opposed to economic or class warfare.
The bottom line on economic measures is that the economy is a complex adaptive system that is continuously interacting with human societies and the environment, themselves complex adaptive systems. There are simply too many variables and dynamics to usefully reduce economic reality to two or three measures or be characterized by one of two words – “good” or “bad.” And, if we were going to highlight just two numbers, the most important and relevant to the majority would be wealth and income inequality and unemployment.
The way we capture and characterize the economy is not just inaccurate, it is infantile, counterproductive, and a driving or contributing cause of much of what is wrong with the world, from inequality to climate change, to injustice, to war and other forms of violence, to structural racism and misogyny. It is beneath a supposedly great country to mislead in this manner.
Economic statistics and modeling indicate that full employment is possible and its potential impacts on inflation controllable. Second, the less inequality in a society, the healthier and happier its citizens, and the more stable its society. Importantly, statistics prove that reducing inequality increases health and happiness, and that government policy can reduce inequality without generating negative second and third order effects.
Why is economics so central yet so poorly understood? Purposeful and exploitable knowledge asymmetry! Knowledge asymmetry is thus not a market failure or externality as most economists aver – it is a purpose-built feature of our economic system! In fact, Knowledge asymmetry is an unacknowledged form of rent (rent: “money earned that exceeds that which is economically or socially necessary,” Investopedia). Rent is an upward extraction of wealth from people who can’t afford to pay it to people who don’t need it. Checking account overdraft fees are a simple example.
As bad as extraction and rent are, there is worse coming. The neoliberal elite thinks that digitalization and financialization will replace the previous need to extract resources and labor from the economy. In fact, it has already accepted the implications of -- and is preparing rapidly for -- a post-labor world. Marx worried that the people, commodified as “labor,” would continue to be exploited by capitalists until such time that capitalism essentially destroyed itself, at which point the people would replace capitalism with a more humanistic economic system. Even he could not contemplate the monstrous possibility that a rationalized form of capitalism such as neoliberalism would come along and remove “the people” from the system entirely!
It’s not that capitalism and markets are inherently evil, or inevitably lead to inequality. They have their place and, in a well-regulated political economy controlled by the people – give us our best shot at relieving chronic problems such as poverty, poor health, pollution, and human-driven climate change. But we don’t have a well-regulated political economy, we don’t have control by the people, and “the people” don’t have a sufficient understanding of the economy to steer it correctly. In that scenario, wicked and ignorant people make our systems problems worse by the day – the first actively, the second passively, in a race to the bottom we call a vicious cycle.
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Where are we then? Discussions of labor, alternative economics, and “the people’s needs” have all but disappeared from common discourse in the U.S. and UK since the 60s and 80s, respectively. Thus, most living citizens know no other path even exists except some vague misunderstanding of communism and socialism.
It’s clear that American plutocrats understand that lower wages for the masses results in less wealth available to extract from them. But most of them are so hateful, power hungry, and selfish that they’d rather remain clearly on top while extracting less, than extracting considerably more from a less stratified society. This appears irrational to us, but then, the rich are different, and we must forthrightly deal with that reality rather than continue to be amused by it.
The Way Forward? Participative Democracy, education, and regulation is the three-pronged lever that can reverse the vicious cycle. It’s a three-generation effort to get there – fighting the bad guys the whole way. But there is no way out but through, and our models indicate the problem will continue to worsen left unaddressed – vicious systems cycles don’t “self-reverse.” You working like mad to climb the ladder doesn’t fix the problem for anyone else even if you are successful – and the odds of that grow slimmer by the day because of trends and business models that constrain and exploit you – (conspicuous consumption, wage stagnation, technology, surveillance capitalism, self-regulating markets, growing corruption, etc.). Regular readers, we know we sing this same “way forward” song in most every newsletter; we’re trying to create an earworm and generate some momentum so bear with us!
While I love “The River,” it is with reservations. It is dripping with resignation, and an uncritical acceptance of its lyrics keeps us in the “one down” situation we find ourselves in relative to the elite. But expressing these feelings is how Bruce overcomes his depression and connects with other people.
Springsteen is strong enough to face reality head on and keep fighting, God bless him for succeeding and giving us hope and inspiration. So, let’s not give in to the temptation to wallow in pity but instead follow his lead – each in our own way as individuals, but also collectedly seeking joy and transcendence like we do at his concerts.
Revelatur is a fact-based reporting entity. But there’s still room for the personal in our work as well. And for me, I remember when I got my work permit at 14 and realized I was going to have to work the rest of my life just to survive, because my parents were in debt and inheritance was out of the question. I knew by then that the government wasn’t going to lay down a pathway for me either.
What I remember so vividly was the sinking feeling of there being no way out for someone like me. And we hypothesize that this feeling impacts everyone not born wealthy – likely women and people of color even more so – and results directly in the anomie, ill health, reduced life expectancy, and rage many Americans feel and increasingly exhibit. It’s the feeling that you’re alone in a highly competitive society instead of on a team working together. And that feeling leads to vulnerability, which is easily exploited by people like Trump. It’s no wonder really that there’s MAGA, the real wonder is why it didn’t happen earlier.