Introduction:  The Coming of Another WW∞.

How to Create a Negative Feedback Loop

Don’t let anyone tell you that the U.S. is only fighting 2 wars in Afghanistan and Iraq. Indeed, there are “secret” wars being waged as you read this and Obama’s war-front on terrorism is even more expansive than “cowboy” President George Bush’s. We’re fighting in those places but have also attacked people in Somalia, Yemen, and most obviously, Pakistan – and are or have been implied in the so-called “anti-terrorism” efforts in Thailand, Indonesia, and Lebanon to name a few through aid  networks (be they monetary, military, or “technical”).

Within the currently shocked and confused framework of international law, we have neither determined the legalistic status of “terrorists” nor have we developed a coherent standard operating procedure (SOP) for their treatment. I believe that our current paradigm of “anti-terrorism” has created a feedback loop so grand in magnitude as to depose our imperialist history to be come the single largest contributing factor to new radicalization processes. We’re directly responsible for seeding, watering, and fertilizing the next generation of anti-American terrorists – and ironically in the name of anti-terrorism and security. The irony of this is only matched by the irony that lies in the fact that the United States was heavily implied in the creation of both al Qaeda and the Taliban in the first place – providing their upstart funding for the sake of the United States’ “security” in the Cold War era, more specifically, during the Reagan administration who provided Pakistan 10x the foreign aid the Carter administration could intellectually condone.

The meat and potatoes of how to check these value systems whose adherents’ sense of justice is so offended by our actions as to be compelled to suicide terror will be the West’s raison d’être for the foreseeable future. What approach to terrorism most effectively decreases it? What combination of war, international development, homeland security, political reconciliation and concession makes us safest?

This question’s answer will prove to be the holy grail of 2010 foreign policy – and quite possibly – will be equally relevant in 2110.

]]> http://christopherwalker.wordpress.com/2009/08/10/im-no-economist-but/ Mon, 10 Aug 2009 17:27:17 +0000 christopherwalker http://christopherwalker.wordpress.com/2009/08/10/im-no-economist-but/

The NY Times ran an op-ed piece today from a historian/political science (Eric Zencey) entitled “G.D.P. R.I.P.” where he made the argument that gross domestic product as the indicator in widest usage for taking the temperature of the economy is outmoded.

People have been saying this for decades and I’ve been saying it for at least half that time.

A good anecdote he used was that when someone gets into a car accident and repairs their vehicle, GDP goes up (though that person’s personal economy is negatively impacted).

He failed, however, to propose a different instrument with which we could measure a state’s economic developmental efficacy. I have.

The following instrument was brought to my attention in a sociology class (Social Inequality). It’s called a Gini Coefficient or a Gini Index. I’ve plagued every instructor of political economy topics I’ve ever had since I learned about it – and not a single one had ever heard of it before I brought it to their attention. (Kudos to Professor Regina Burres for disseminating this knowledge.)

The Gini Coefficient is a statistical dispersion plot of everyone’s income within an entire state where economic egalitarianism can be given a rankable quantity. Zero represents perfect equality of incomes (everyone in the state has the same) where 1 represents perfect inequality (where one person has all the income while others have none). This “coefficient” is often multiplied by 100 to make more sense.

Sweden, in 2005, had an index of 23 (0.23). Namibia had an index of 70.7 (0.707). Elite Namibians monopolized larger shares of their nation wealth than elite Swedes.

When we couple this measure of inequality with ΔGPD we can figure out the social sectors in which growth (or contraction) is happening. If, for instance, GDP grows and the Gini index shrinks, we know that the poorer sectors are prospering. If, though, GPD shrinks and the Gini index grows, the poor have then suffered the brunt of an economic contraction.

It’s not enough to ask whether growth has occurred in a state’s economy. We have to ask where the growth has occurred.

It ought to join buggy whips and VCRs on the dust-heap of history.

Though it’s not totally useless in the macroeconomic universe, these abstractions mean little in the realms of our daily lives – and to that end, I agree with Dr. Zencey.

Indeed, any economist would have gladly told him, though, that the rampant use of GDP as a measure of well-being, especially in the long-term is not the fault of economics/economists. This was probably more attributable to social scientists.

GDP is measure of short-run output and nothing more. In this sense, it never died as an index of well-being because it never really was. Insofar as it is useless for this purpose is more a testament to the stupidity of the people misusing it. GPD remains an important index for macroeconomic study.

To that end, Zencey’s analysis should join the “dust heap” because only people of his sort have lent GDP credence outside its intended realm of relevance.

DAMN: I love demolishing people’s (bad) work.

]]> http://riverdaughter.wordpress.com/2009/04/20/and-the-rich-just-keep-getting-richer/ Mon, 20 Apr 2009 17:30:03 +0000 dakinikat http://riverdaughter.wordpress.com/2009/04/20/and-the-rich-just-keep-getting-richer/

This graph from the Congressional Budget Center for Budget and Policy Priorities shows the most recent date on U.S. Income Inequality. This includes new data from 2006. This is pretty astounding. It shows just exactly how much of the country’s income has gone to the richest and poorest Americans and of course the middle classes.

Let’s assume that all U.S. incomes had all increased at the same rate as the lowest quintile.

lowest fifth: $1,639
second fifth: $3,000 to $33,000
middle fifth: $5,000 to $48,000
fourth fifth : $6,000 to $62,000
fifth fifth: $11,000 to $110,000
top fifth: $37,000 to $374,000

Now let’s see what it would look like if we’d all experienced the same increase as the top 1%.

lowest fifth: $38,000 increase to $53,000
2nd fifth: $77,000 increase to $107,156
3rd fifth: $110,000 increase to $152,000
4th fifth: $144,000 increase to $200,00
5th fifth: $253,000 increase to $352,000
Top fifth: $862,000 increase to 1.2m total

This basically makes the income inequality in this country the widest on record. The Center’s release also included this:

Taken together with prior research, the new data suggest greater income concentration at the top than at any time since 1929

If you want to check out how our US income inequality compares to the rest of the world, check out the GINI Index here in the CIA World Fact Book. The GINI index is a measure of income/wealth distribution. The lower the coefficient, the more equal the wealth distribution. So zero would mean perfect equality where everyone has the exact same income. One means there is perfect inequality or one person has all the income and the rest of the folks have none.

In 2007, the US had a GINI coefficient of 45. Denmark had a 24 in 2005. UK had 34 in 2005. Needless to say, we are up there with most of the world’s tin pot dictatorships on income equality. Uganda and Venezuela have ratings similar to ours.

In view of these numbers, I would say the populist rage overtaking the country isn’t about taxes.  It may not even be about government spending.  It is probably about the fact that most Americans are losing ground.  This in itself wouldn’t be a problem, but not only are the majority of us losing ground, we a select few that are gaining hugely.  It is also undeniable that this gain has come the political class who becomes wealthy themselves enabling policy that widens the inequality gap.

The Gini index is one of the most common measurements of income inequality. It measures income inequality on a scale of 0 (everyone has the exact same amount of money) to 1 (one person has all of the nation’s wealth) using the Lorenz curve. There is an interesting trend that has been shown for decades in the Gini index. Industrialized nations (France: .327, Denmark: .247, United Kingdom: .36) have low values while non-Industrialized states (Bolivia: .601, Mexico: .461, Turkey: .436) have very high amounts of inequality. The theory being that with increases in GDP, the wealth makes its way around to the general population.

This seems fairly consistent across every nation with one, obvious exception. The United States (.408) is comparable to China (.469) in income inequality.

Some of the difference is in income tax levels. However, much of the difference is accounted for by two factors. First, many European countries tax capital gains at the same rate as normal income. The United States does not. The US tax rate for regular income (in the top bracket) is 35% while capital gains are taxed at only 15%. The wealthiest 1% make large portions of their income in stock options and other investments taxed under the considerably lower rate. 

Second, other countries have a much higher rates of unionization than the United States. For example, in 1960, when the US had much lower income inequality, 30% of American workers were union members compared with 32% of Canadians. Today, American union membership is down to 13% while Canada’s has remained constant. 

One of the chief debates in economic circles is whether or not the standard of living for the average American has increased at all. The value of the output of the average American worker (in 2006) has been estimated to be 150% of the average output in 1973. Median income (adjusted for inflation) has modestly increased. The number between 1973 and 2005 is estimated to be a 16% increase. While this seems significant, the average American is working two jobs often with less benefits to make that increase possible. Thus, the standard of living for the average American family may or may not have increased over the previous three decades.

Deceptively, many politicians push the idea that the standard of living of normal Americans has vastly increased over the previous three decades. They do this by using the average American salary which is strongly effected by abnormally high incomes. The relatively small number of Americans with extraordinarily high incomes thus push up the average income making it appear that average Americans are better off. The GNP has increased, but that increase has not been widely shared.

Ultimately, this is NOT a political point. It is a statement of fact: America is more unequal than any other industrialized nation. Do with that information what you will.

All statistics are from the CIA or US Census Bureau.

The Gini index is one of the most common measurements of income inequality. It measures income inequality on a scale of 0 (everyone has the exact same amount of money) to 1 (one person has all of the nation’s wealth) using the Lorenz curve. There is an interesting trend that has been shown for decades in the Gini index. Industrialized nations (France: .327, Denmark: .247, United Kingdom: .36) have low values while non-Industrialized states (Bolivia: .601, Mexico: .461, Turkey: .436) have very high amounts of inequality. The theory being that with increases in GDP, the wealth makes its way around to the general population.

This seems fairly consistent across every nation with one, obvious exception. The United States (.408) is comparable to China (.469) in income inequality.

Some of the difference is in income tax levels. However, much of the difference is accounted for by two factors. First, many European countries tax capital gains at the same rate as normal income. The United States does not. The US tax rate for regular income (in the top bracket) is 35% while capital gains are taxed at only 15%. The wealthiest 1% make large portions of their income in stock options and other investments taxed under the considerably lower rate. 

Second, other countries have a much higher rates of unionization than the United States. For example, in 1960, when the US had much lower income inequality, 30% of American workers were union members compared with 32% of Canadians. Today, American union membership is down to 13% while Canada’s has remained constant. 

All statistics are from the CIA or US Census Bureau.

A large and prosperous middle class has long been a hallmark of America. Not for us the split between royalty and peasants.

Well, those days are gone.

In 1980, corporate CEO pay was 40 times that of the average worker in America. Now it is about 400 times as much, and about 800 times as much as a minimum wage earner. “In other words, the average CEO earns more before lunch on the very first day of work than the minimum wage employee earns all year.”

While the majority of us have been steadily loosing ground in the economy, the super-rich have been taking giant bites. Since the 1970’s, almost all of our economic “growth” has been growth for the wealthy, and shrinkage for the rest of us.

“Them that’s got shall get.
Them that’s not shall lose.
So the Bible says,
And it still is news.”

God Bless the Child.    Billie Holliday

Corporate CEOs with their astounding salaries, bonuses, perks and so on are really only the underbelly of the rich though. The top twenty private equity and hedge fund managers “pocketed an average income [in 2006] of $657.5 million or 22,255 times the pay of the average worker.” (Bail out, anyone?)

In 2006 — the last year for which we have figures — in the United States the top 1% of the population owned more than 1/3 of the wealth of the entire country, and the top 5% owned almost 60% — and growing. That left the remaining 95 percent of us to somehow split up the remaining 40% of the wealth. This is the greatest inequity in the U.S.A. since before World War II — think Robber Barons and the Great Depression. Perhaps, as a society we didn’t really learn our economic lesson from those times.

In 2007 our U.S.A. GINI Index score was 45. The GINI Index — a measure of income equity — scores from 1 (best) to 100 (worst). Our near neighbors on the Index (from 44.5 to 46) were the Phillipines, Kenya, Cote d’Ivoire, Camaroon, [USA] Uruguay, Jamaica, Uganda, and Equador.

Welcome to the “Third World”, folks.

It is facts like this that caused Warren Buffet (that radical populist) to say in a New York Times interview, “There is class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

And it’s not just about money. It’s about quality of life, access to education, even about staying alive. In 1980, the richest Americans had a life expectancy 2.8 years longer than the poorest. By 2000, that gap was 4.5 years.

Wake up, folks. It’s not really about abortion rights or gay marriage, or anything like that — those are simply the tired old ‘divide and conquor’ issues we have been fed. It’s about establishing a good quality of life for people — for all people — not just the wealthy few.

Get a look at how the British see us at   http://www.independent.co.uk/news/world/americas/american-inequality-highlighted-by-30year-gap-in-life-expectancy-869736.html

This post originally appeared on another blog server on 12.10.07

Income Inequality

Let’s spend a moment looking at income inequality and the idea of retirement. This, whether you are aware of it or not, works against the notion of how you view some of the social programs you may have been counting on in your retirement years.

One of the most popular measures of this was developed by almost a century ago. The Gini index was developed by the Italian statistician Corrado Gini and published in his 1912 paper “Variabilità e mutabilità” (“Variability and Mutability).

There are several ways to express the degree of income inequality in a society. The simplest way is to arrange whatever units you choose persons, families, or households in rank order, from poorest to richest; divide the hierarchy into fifths (quintiles) or tenths (deciles); and compute either the average income by decile or quintile or the share that each grouping has of the society’s total income. Then, the shares or averages of rich and poor can be compared.

The chart above puts the poorest person at zero and the richest at one. The curved line represents all of those who fall in-between those two points

A low Gini index suggests that there is a great deal of income equality while a high number would show a society that has great disparity in income distribution. This is expressed as a number from zero to one.

But like all attempts to measure the economy and the persons who live in it, the Gini index has both its pluses and minuses. Let’s first consider why it works.

The Gini index does not consider the “who earns what” in its calculations nor does it take into consideration the size of the economy. The population of an entire country being measured is not accounted for in the index. The transfer of wealth, as would happen from the rich to the poor is measured in the changes of inequality over a period of time.

But the Gini index is a general measure that does not hold up well when the attempt to drill these numbers down to regional observations. This would force the index to compensate for purchasing power, which might be better for some in areas of the country that were more developed as opposed to other regions where the ability to spend wealth may be hampered.

Gini- Generally speaking

Efficiency is also a consideration. Generally speaking, wealthier households use money better than those who must make living standard decisions about each dollar available to spend. In other words, one household could own half of all the available wealth and the country might have the same index reading as one where distributions were divided equally – one household with no income compared to one household with.

How does this measurement, which often does not take into consideration how much social assistance a household might receive, affect retirement planning.

Consider a study made by Harvard and Berkeley, done separately but with the same attempted goals. Absolute standard of living, a measure of how well you do as it corresponds with death rates found that income distribution did have an effect on not only how well you live, but how long and what social services you might need as a result of your shorter life span and the causes.

At the heart of what many of us expect, is the presence of some social support. Janet Yellen, president and chief executive officer of the Twelfth District Federal Reserve Bank, at San Francisco believes that support comes with a paradox. You can have generous social insurance programs and employment protections, much as they do in Europe, but are they efficient or equitable? In order for these types of programs to be equitable, they would need to be good for everyone. Efficiency suggests programs that take the nation as a whole into consideration.

The Importance to Your Retirement Plan

Why is this important to retirement planning? Two reasons come to mind. First, the US is seen as highly productive, social mobile, and economically innovative. On the flip side of that coin is Europe. Because of its guarantees to its workers, many companies have stagnated creating higher-than-necessary unemployment. This restricts growth.

The second reason we should all consider is referred to as the American Business Model, which does not treat companies as living entities but as tradable and expendable. In some ways, the employee can get caught up in this kind of thinking making retirement planning more of a personal endeavor rather than a state sponsored or even company sponsored reward for long years of toil.

While Europe may be criticized by America business and folks like Ms. Yellen for what it does for its workers, there has to be a happy medium that allows for both equity and efficiency. Unfortunately, that is not likely to happen.

To see how the Europe (currently) supports its citizenry through its social programs, here is a list:

Country Summaries

Albania | Andorra | Austria | | Belgium | Bulgaria | Croatia | Cyprus | Czech Republic | Denmark | Estonia | Finland | France | Germany | Greece | Hungary | Iceland | Ireland | Italy | Liechtenstein | Lithuania | Luxembourg | Monaco | Netherlands | Norway | Poland | Portugal | Russia | Serbia | Slovak Republic | Slovenia | Spain | Sweden | Switzerland | Ukraine | United Kingdom

The problem with calculating a nation’s well-being via per-capita GDP:

…you and your friend are the only people sitting at a bar. Then Bill Gates walks in, and your friend states (correctly) that “The average person in this bar is a billionaire!”

That’s from The G-Spot, where Blogger Kathy G. (didn’t Dylan write a song by that name? and if not, why not?) has some fine riffs on inequality.

Measured by per-capita GDP, as I’ve noted, Israel is in superb economic shape. In reality, the Republic of Tel Aviv flourishes, while the rest of Israel languishes.

Kathy G. proposes several alternatives to GDP as a measure of economic health. All are more abstract, which makes them harder to understand. The Gini index, which directly measures inequality, has another problem – less is better. A score of zero would indicate complete equality. The bar where Bill Gates is drinking would be close to 100.

Here are two thoughts on how to make the measures more understood:

1. Use the Contra-Gini index instead. Subtract Gini from 100. In the 1980s, Israel had a Contra-Gini score of 68 or 69. We’ve sunk to 62. Not as bad as the U.S. at 55, but not healthy. Sweden is up at 77. Wouldn’t it be great to compete with Sweden?

2) Use the third decile. In each country, use income to divide the population into ten slices. Then take the per-capita GDP of the third slice from the bottom. I’m suggesting the third decile intuitively. These aren’t the poorest. They are likely to be the folks working but struggling to get by. If the third-decile stagnates or sinks, the country is in bad health. If they are doing better from year to year, the land is a happier place to be. On the other hand, if the very rich go from flying first-class to flying private jets, it means very little about general welfare.

GINI index is a measure of income inequality in a society. A society that scores 0.0 on the Gini scale has perfect equality in income distribution. Higher the number over zero means higher inequality. The Gini coefficient was developed by an Italian statistician Corrado Gini and published in his 1912 paper “Variabilità e mutabilità” (“Variability and Mutability”).

Gini index in most developed European nations is between 24% and 36%, the United States Gini index is above 40%, indicating that the US has greater inequality in income distribution. By looking at the map prepared by Prof. Russ Lopez in 1999, you can see the differences between Gini index in different metropolitans in the US.

Now look at the Gini world map, as you can see most of developing countries have large gini scale indicating not only the nation face poverty, but also the wealth is distributed unequally.

For more info you can visit:

Human Development Report

Wikipedia

Gini index

So, Huckabee has surprised the media and the political establishment by winning the caucus in Iowa. And why are they surprised? Because someone who is so unprofessional and who has virtually no money for his campaign can somehow attract voters.

But since being professional means saying nothing in fear of repelling voters, is it really such a big surprise that someone who speaks his mind gains momentum? I for one would rather vote for someone who actually wants do make a difference than someone who has perfect hair.

And as a lefty it seems to me that Huckabees Fair Tax would do more for the poor than any democratic candidate will. Remember that the GINI index meassuring inequality rose under Bill Clinton. I suspect that Hillary and Obama are the same kind of pseudo-leftists.

The only problem with Huckabee is that he is a religious fanatic. A pretty big problem one might say. Still, hopefully his success will inspire other “amateurs” or  as I prefer to call them, real politicians, to step forward.

See p60-191.pdf for a report including graph that income inequality has gone up since 1968. It is going up for reasons “still not entirely understood.”

“Although the Census Bureau has been measuring incomes for a half-century and a a large number of factors have been identified as contributing to changes in inequality, the root causes are still not entirely understood.”

The root cause is the 1965 Immigration Act, i.e. legal immigration is the root cause of the income inequality the census measures. The graph shows inequality went down during the period before the 1965 Immigration Act, the immigration restriction period. Inequality bottomed out around 1965 to 1968 and then went back up.

No immigration the graphs shows inequality going down, after legal immigration, income inequality goes up on the graph. The graph shows that just around 1965 and for a couple years, income inequality bottomed out. This is despite the passage in 1964 of the Civil Rights Act.
See Census gov p60-229.pdf page 14 of pdf for graph of men’s median wages which are lower than in 1973. After 1973, men’s wages flatlined. This supports identifying the 1965 Immigration Act and legal immigration as the cause.

Senators who voted for S. 2611, amnesty and the path to more income inequality.

Human Development Reports: “position 35 Poland gini index of 31.6 “

Human Development Report 2007/2008 – Country Fact Sheets – Poland: “The HDI for Poland is 0.870, which gives the country a rank of 37th out of 177 countries with data (Table 1)”