Time for ‘Trickle Along’ Economics? Inequality in Motion and the Lewis model of Economic Development [feedly]

Time for 'Trickle Along' Economics? Inequality in Motion and the Lewis model of Economic Development
https://www.globalpolicyjournal.com/blog/25/04/2018/time-trickle-along-economics-inequality-motion-and-lewis-model-economic-development

ESRC GPID Director and Global Policy's Deputy Executive Editor, Andy Sumner, continues the discussion of a model of economic development from the 1950s and shows how it understands inequality in a different way.

Arthur Lewis outlined one of the best-known models of economic development. Although sixty years old in its earliest iteration, the model remains relevant today to developing countries.

The Lewis model provides an ideal type or a heuristic device for thinking about economic development as structural transformation with an emphasis on labour, which is the factor of production abundant in developing countries.

Lewis argued that the driver of economic development – capital accumulation – was a sectoral movement of workers from the 'traditional' or 'subsistence' sector to the 'modern' of capitalist sector. The former, the traditional sector was characterized by Lewis as low productivity, low wage and with widespread disguised unemployment. The latter, the modern or capitalist sector was characterized by higher productivity and higher wages.

Workers move over time from traditional to the modern or capitalist sector and the capture of labour productivity gains  to capitalists as profits are the source of growth via reinvestment. Here's how Lewis put it himself:

The key to the process is the use which is made of the capitalist surplus. In so far as this is reinvested in creating new capital, the capitalist sector expands, taking more people into capitalist employment out of the subsistence sector. The surplus is then larger still, capital formation is still greater, and so the process continues until the surplus labour disappears.

At first glance it might appear Lewis ignored inequality. That is not the case though. Lewis has a specific take on inequality dynamics during the process of economic development.

For starters, Lewis (1954, p. 147) certainly highlighted the visibility of inequality, noting that inequality between,

the few highly westernized, trousered, natives, educated in western universities, speaking western languages, and glorying Beethoven, Mill, Marx, or Einstein, and the great mass of their countrymen who live in quite other worlds.

Lewis also wrote on horizontal inequality in terms of class, gender, and ethnicity.

It was his focus on economic development itself that was first and foremost but within that he had a different take on inequality.

Lewis discussed inequality in several ways during economic development.

First, in terms of the functional distribution of income between capital and labour rather than household or individual inequality as that was central to his model of economic development: A rise in the share of capital drives growth but does not necessarily imply a change in the within-labour share so individual inequality need not necessarily rise. If there were a larger share of profits in national income this would mean more resources for investment.

However, Lewis noted the tendency for individual inequality to increase in the process:

[t]he central fact of economic development is that the distribution of incomes is altered in favour of the saving class . . . All that the workers get out of the expansion is that more of them are employed at a wage above the subsistence earnings.

When the Lewis turning point is reached and surplus labour is exhausted wages would rise and the functional distribution of income would move in favour of labour.

In other works, Lewis presents an explicit framework to consider this relationship between growth and distribution directly, noting as a starting point that,

growth takes place in [modern sectors], surrounded by traditional activities . . . Development must be inegalitarian because it does not start in every part of an economy at the same time. Somebody develops a mine,and employs a thousand people. Or farmers in one province start planting cocoa, which will grow only in 10% of the country. Or the Green Revolution arrives, to benefit those farmers who have plenty of rain or access to irrigation, while offering nothing to the other 50% in drier regions (p. 26).

However, Lewis said public policy should 'discipline' the 'capitalist class' to ensure more equitable development. The role of the state was also important because if inequality were to rise public policy intervention is needed because,

the Gini coefficient may actually show a rise in inequality, since the share of national output accruing to the bottom 50 per cent may fall . . . To tax its developed sectors and subsidise its underdeveloped sectors is one of the most powerful ways that a government can use to ensure the benefits of development . . . The moral for policy makers is of course not to rely on trickle down to benefit the traditional sector, but to attack the problems of that sector directly.

This is the second take on inequality: inequality between and within modern and traditional sectors. Lewis discusses the relationship between economic development and distribution as one based on within and between sector inequality. He argues that the growth of the modern sector has good and bad impacts on the traditional sector:

Notably, the [modern] may enrich the traditional sector by buying commodities and services from it; providing employment to those in the traditional sector; sending remittances; selling goods and services cheaper; and by developing infrastructure, public goods and, through an example of new ideas and institutions, the enclave sector can modernize the traditional sector. Whether development leads to widening inequality depends, he argued on whether the enclave is able to respond to the new economic opportunities (e.g. price changes or the demand for labour). In short, inegalitarian development is not the failure of 'trickle down' vertically from rich to poor but the failure to trickle along or spread horizontally the benefits from enclave to traditional sectors.

Again, the role of the state is highlighted by Lewis who posited that distribution in the enclave depends on the pattern of growth and a set of factors, many of which are 'susceptible to public control', notably the distribution of property, economic structure (in terms of firm size and the capital intensity of production and dependence on foreign resources) and the speed of growth which has the potential to alter 'the relative quantities of the factors of production, and the derived demands, and therefore the distribution of income'.

Further, the traditional sector may see income stagnate because the enclave may be predatory (e.g. driving people off their land); products may compete with traditional trades; the wage rate in the enclave may be too high and raise the price of labour above its marginal productivity; because of geographical polarization (the enclave attracts 'best brains' and capital); because population growth accelerates due to improved public health reducing the death rate; and/or excessive migration from the countryside.

What did Lewis conclude?

Lewis argued for a policy of 'trickle along' to address inequality through public policy. He noted that whether the modern sector enriches or not the traditional sector 'probably depends most on whether the government coerces or helps the traditional sector, and on the nature of the enclaves' (meaning the modern sector).

In short, broad-based economic development requires, counter-intuitively, highly activist policy in the traditional sectors – generally, but not always, rural and agricultural policy, and public investments to constrain the divergence between and within the traditional and modern sectors.

 

 

 

Andy Sumner is a Reader in International Development in the Department of International Development, King's College London. He is Director of the ESRC Global Poverty & Inequality Dynamics (GPID) Research Network. 

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An Overview of the 11th Ministerial Conference of the WTO [feedly]

An Overview of the 11th Ministerial Conference of the WTO
http://cepr.net/publications/op-eds-columns/an-overview-of-the-11th-ministerial-conference-of-the-wto

An Overview of the 11th Ministerial Conference of the WTO

Deborah James
ALAI, April 25, 2018

See article on original site

En español

The WTO's eleventh ministerial (MC11), in Buenos Aires in December, represented an historic moment. Major corporations had sought to ensure that the global economy of the future, in which the digital arena will touch every aspect of economic activity, would be locked into a pro-corporate rules regime. But they were dealt a heavy blow when some developing country members successfully resisted new negotiations on "e-commerce." Yet the changes the developing countries demanded, to open up more policy space for development, remain elusive.

Developing countries only agreed to launch new negotiations through the Doha Round (including expanding the scope and coverage of economic sectors under the WTO's liberalization rules) on the basis that it would also address their concerns about how the organization's founding rules constrain policy space for national pro-development strategies. Since developed countries have never agreed to alter harmful WTO rules, the round has been stymied.

New Corporate Tech Offensive

For the last few years, proponents of liberalization have focused on getting new pro-corporate issues on the negotiating agenda. They hoped to use the Buenos Aires ministerial to launch a new round of talks, which would not only permanently displace efforts to change existing rules constraining development, but would lock-in a pro-corporate agenda focused on the future digital economy. They framed the need for this new set of rules around the argument that micro- and small and medium enterprises (MSMEs) and developing countries would be the prime beneficiaries of "e-commerce for development."

E-commerce rules proponents began this push with a US proposal in July 2016. They then ensured that at least one developing country was listed as supporting each developed country proposal that summer and fall, to create a narrative that e-commerce is not a North vs South issue. But there are at least 12 reasons to oppose e-commerce negotiations in the WTO, which have been detailed here, and summarized here.

In short, tech behemoths like Google, Apple, Facebook, Amazon, and Microsoft seek to consolidate their deregulatory agenda globally, to ensure they cannot be held accountable by workers, consumers, communities, or by the governments of the countries where they operate; that they have an adequate supply of flexible labor; that their tax evasion strategies are codified; that they gain unrestricted market access; and so they can control the data ― the world's most valuable resource ― in their respective sectors. Their goal was to have a mandate to launch negotiations on "e-commerce" by the Buenos Aires ministerial, and last spring there was only tepid hope that this goal could be forestalled.

Other very important issues were on the agenda, including efforts to discipline harmful fishing subsidies; unfortunately, some industrial fishing countries were also using the negotiations to attempt to limit developing country competition. There were proposals on investment facilitation, and to limit countries' ability to regulate domestic services in the public interest. Developing countries sought delivery of a previous mandate to make WTO agriculture rules more flexible so they could feed their impoverished populations through public stockholding, and responses to their demands for changes to policies that have harmed their economies over the 23 years of the WTO's existence ("the development mandate").

Civil Society Advocacy

In early 2017, trade experts working through the global network, Our World Is Not for Sale (OWINFS), and new digital rights members started developing and sharing substantive analysis of the potential impacts of the "e-commerce" proposals. These revealed that Big Tech's agenda would further its own power while severely limiting developing countries' ability to harness e-commerce for development. These civil society groups held standing room-only events at the WTO Public Forum and published a variety of important papers and research documents (all available at www.ourworldisnotforsale.net).

Some extremely skilled delegates, particularly from South Africa and Uganda, intervened strategically in negotiations throughout the year. African Group resistance accelerated as questions emerged about how pro-development the "e-commerce" proposals really were.

Just prior to the ministerial, e-commerce proponents scaled back their ambitions due to resistance from the African bloc and some Asian and Latin American members. They then proposed talks on more seemingly technical issues, such as those regarding e-payments, e-signatures, and spam. It seemed that perhaps a full new mandate on negotiations would not be agreed, but that at least something ― such as "upgrading" committee-based discussions to a more institutional structure ― could be achieved.

The efforts of civil society, despite obstacles to their participation, contributed to blocking these endeavors. (See box).

Civil society mobilized

Just days before the ministerial, dozens of members of OWINFS and other civil society organizations (CSOs), received notice that the Argentine government had rescinded their accreditation ― already confirmed by the WTO. The international press extensively covered this outrageously repressive move, and OWINFS demanded that all CSOs be allowed to participate, or that the WTO postpone the meeting until an amenable host could be found. Host country governments of some CSOs intervened with the Argentine government, and about half the banned representatives were finally allowed to participate.

During the ministerial, OWINFS members monitored the negotiations day by day and held twice-daily strategy meetings to share breaking news and create strategies to influence the outcome. We held daily mobilizations in the conference center, bringing our message to the delegates, and conducted extensive media outreach and livestreamed our events. We reacted to breaking developments with lightning speed; when an attempt was made to gain support for a liberalization agenda by promoting "gender and trade," we conducted overnight analysis of the true impacts of the proposals, gained the support of hundreds of feminist groups, and warned delegates not to use "gender" as a Trojan horse for neoliberal policies. We constantly advocated for our positions with delegates in Buenos Aires, while our members at home talked to their capital-based decision-makers.

 

Evaluation of the Results of the Ministerial

The result was a near-miracle: the efforts of Google, Apple, Facebook, and Amazon were ultimately unsuccessful against the resistance from most developing countries. WTO members only affirmed existing mandates; there was no new mandate, not even to upgrade the status of discussions. Big business was left empty-handed. At the same time, a positive agenda for change has yet to be agreed.

Less than half of WTO members supported a "Joint Statement on Electronic Commerce" the final day. They plan to hold "exploratory work towards future WTO negotiations," even though there is no mandate from the ministerial conference to take e-commerce further than the "discussions" currently authorized. This represents a repeat of tactics used in the proposed Trade in Services Agreement (TiSA). A self-selected group of countries took it upon themselves to rewrite the WTO's trade in services rules in ways that intrude deeply on nations' right to regulate, and that exclude any development dimension. TiSA had no WTO mandate and was in theory was conducted outside of it, but the secretariat was complicit by facilitating its meetings. The same must not happen with e-commerce.

A majority of countries agreed that their sovereign rights to regulate services in the public interest should not be further limited by the WTO; an attempt by neoliberal proponents to get agreement on new "domestic regulation" disciplines failed. Likewise, most WTO members realize that new negotiations on investment facilitation are unwarranted and decided against a new mandate on this.

Other issues like MSMEs and "gender and trade" emerged as Trojan horses to sneak in "new issues" and proponents will likely continue these stealth tactics in the future.

At the same time, OWINFS delegates were deeply disappointed that WTO members again missed a crucial opportunity to address fundamental problems in the global trading system. Despite a mandate to find a permanent solution for public stockholding in agriculture, members failed to remove WTO constraints on countries' ability to feed their hungry populations and improve farmers' livelihoods; on a workable Special Safeguard Mechanism (which would allow countries experiencing import surges to protect domestic farmers); and on disciplining subsidies that distort trade and damage farmers' livelihoods around the world. Likewise, they made no progress on the key issue of WTO constraints to development, having completely ignored the G90 development proposals.

Fortunately, given that there was no ministerial declaration, previous affirmations of the development agenda still stand. It is unfortunate that members were not able to agree to discipline fish subsidies, but given that some members opposed preserving development policy space in fisheries, it is better that members continue consultations in Geneva on this issue.

As the US attempted to bully its way into shaping an outcome in its corporate tech interests, the EU's failure to play a constructive role at the ministerial was disappointing, and many right-wing Latin American and Asian countries also went along with the corporate agenda. The African Group, India, the ALBA group of Latin American countries, and others promoting an approach to multilateral trade policy that fosters, rather than constrains, development prospects saved the day.

A potential paradigm shift toward embracing "plurilateral" agreements emerged from MC11. While the current proliferation of bilateral and mega-regional agreements was going to continue irrespective of the ministerial's outcome, attempts to gain agreement among "like-minded" countries on e-commerce and other issues within the WTO is a new challenge. This must be carefully watched, as there will be efforts to set a standard among the most neoliberal countries and then to import this into the WTO as a new multilateral obligation. OWINFS members continue to support changes to rules that harm farmers and constrain development in the WTO, and also oppose the expansion of liberalizing trade rules ― be they in bilaterals, plurilaterals, or multilaterally in the WTO.

Next Steps: Where to Go from Here

Another key issue for the WTO this year will be US attacks on the dispute settlement mechanism (DSM). The Trump administration opposes any circumscription of US sovereignty, and has sought to interfere in dispute settlement proceedings by blocking confirmation of new members of the appellate body panel, on the basis that it has ruled against the United States in some key cases when the US was violating WTO rules, and is thus biased. Yet the DSM continues to enforce asymmetrical rules against developing countries and public interest regulations, and its effectiveness depends on the complainant country's ability to retaliate, making it useful for powerful countries but less so for developing ones. The US is not unfairly targeted by the appellate body as Trump alleges; rather, the WTO consistently rules in favor of increased market access (on the side of the complainant) and against national interest regulations (on the side of the defendant). The Trump administration has not put forward critiques of the DSM with any proposed solutions, and it remains unclear where this issue will go, except that it will certainly "spill over" into negotiations occurring simultaneously.

At the same time, Trump's recent invoking of tariffs on steel and aluminum, and on US$60 billion of imports from China, may increase the US desire for a functioning dispute settlement system, as countries often resort to safeguard measures or cases at the WTO when negotiations have failed to resolve differences proactively.

Civil society must massively accelerate its work to challenge and beat back the corporate "e-commerce" agenda, especially as we will face greater opposition, even from within civil society itself. Google and other tech companies provide significant funding to CSOs working on digital rights, campaigning on net neutrality and other issues. Now that they have faced a setback at the WTO, they will channel more funds to CSOs to campaign for "trade agreements to achieve digital rights," including provisions like "access to the Internet." This will create a situation in which advocates may think they're working against censorship in Russia by putting that in a trade agreement, while remaining unaware that the structure of the agreement is organized around consolidating rights for corporations while limiting their responsibilities to the communities and countries where they operate.

Civil society, including trade unions, should expand work to create greater global awareness of the implications of proposed "e-commerce" rules in the WTO, particularly by noting that it would affect a multitude of issues ― such as industrial policy, jobs, workers' rights, development, financial regulation, tax justice, and others ― rather than viewing it solely through the lens of trade or the WTO.

It will also be essential to safeguard development in fisheries while limiting harmful fisheries subsidies, as this will again be a key issue. Likewise, CSOs must remain on guard for any other expansion of the WTO, such as rules limiting domestic regulation and promoting investment facilitation. And it is essential that CSOs expand work on agriculture and development, such as highlighting how existing WTO rules constrain developing countries' ability to achieve the SDGs, and demanding changes to allow more flexibility from harmful rules.

---

Deborah James is the Director of International Programs at the Center for Economic and Policy Research (www.cepr.net) and coordinates the global Our World Is Not for Sale (OWINFS) network.

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Trump’s Expected “Rescissions” Would Cut Funds That Agencies Still Need [feedly]

Trump's Expected "Rescissions" Would Cut Funds That Agencies Still Need
https://www.cbpp.org/blog/trumps-expected-rescissions-would-cut-funds-that-agencies-still-need

Lawmakers of both parties have criticized the Administration's announcement that President Trump will soon ask Congress to cut (or "rescind") funding that policymakers have previously enacted for appropriated programs, arguing that would undermine the recent bipartisan deal to fund the government for 2018 and 2019. The President reportedly won't propose to cut funding provided in the 2018 Omnibus Appropriations Act but only funds that policymakers provided in prior fiscal years that haven't yet been obligated (i.e., legally committed, as by signing a contract). But the implication that these "carryover balances" are unneeded is simply wrong.

In many programs, an agency must obligate all the funding it receives by the September 30 end of the federal fiscal year; any unobligated funding disappears. But for many other programs, Congress gives the agency multiple years to obligate the funding because its projects or activities are long term in nature and the agency can more carefully manage the funds by obligating them over time, as they are needed. That's the case with long-term construction projects and research and development programs. Congress also allows an agency to obligate the funds over the course of more than one year when the programs in question operate on a different cycle than the federal fiscal year (such as a school year).

In any given year, an agency funds these kinds of programs through appropriations that the President and Congress provided in the current year and prior years. So taking a dollar from prior-year funding would force the agency to reduce its intended activities for the year just as much as taking a dollar from current-year funding would.

Where carryover funding truly is unneeded, Congress can rescind these funds and then use the savings to cover unmet funding needs elsewhere. That's what lawmakers did in the 2018 omnibus act, which rescinded some carryover balances in more than 50 budget accounts by more than $2 billion and shifted those dollars to other programs while remaining within the overall, agreed-upon caps on defense and non-defense discretionary funding.

If an agency now discovers some additional carryover balances that it doesn't need, the President and Congress can always rescind them and use the funds to cover ongoing needs that the 2018 omnibus act couldn't fully address. Even with the funding increase for non-defense discretionary programs in the omnibus act, such funding remains 5.4 percent below its 2010 level as adjusted for inflation. One example of where funding falls short of need is job training, which members of both parties have highlighted as a priority; core job training grants to states have shrunk by 18 percent since 2010, after adjusting for inflation.

Shifting funds that are unexpectedly unneeded to places where they are needed would have no impact on overall funding and, thus, would keep faith with the new funding caps to which policymakers agreed in the budget deal. But simply rescinding the funding — whether it was provided in the 2018 omnibus act or in some prior year — would reduce funding below the agreed-upon caps and break faith with that agreement.

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Regulatory failure [feedly]

Regulatory failure
http://understandingsociety.blogspot.com/2018/04/regulatory-failure.html

When we think of the issues of health and safety that exist in a modern complex economy, it is impossible to imagine that these social goods will be produced in sufficient quantity and quality by market forces alone. Safety and health hazards are typically regarded as "externalities" by private companies -- if they can be "dumped" on the public without cost, this is good for the profitability of the company. And state regulation is the appropriate remedy for this tendency of a market-based economy to chronically produce hazards and harms, whether in the form of environmental pollution, unsafe foods and drugs, or unsafe industrial processes. David Moss and John Cisternino's New Perspectives on Regulationprovides some genuinely important perspectives on the role and effectiveness of government regulation in an epoch which has been shaped by virulent efforts to reduce or eliminate regulations on private activity. This volume is a report from the Tobin Project.

It is poignant to read the optimism that the editors and contributors have -- in 2009 -- about the resurgence of support for government regulation. The financial crisis of 2008 had stimulated a vigorous round of regulation of financial institutions, and most of the contributors took this as a harbinger of a fresh public support for regulation more generally. Of course events have shown this confidence to be sadly mistaken; the dismantling of Federal regulatory regimes by the Trump administration threatens to take the country back to the period described by Upton Sinclair in the early part of the prior century. But what this demonstrates is the great importance of the Tobin Project. We need to build a public understanding and consensus around the unavoidable necessity of effective and pervasive regulatory regimes in environment, health, product safety, and industrial safety.

Here is how Mitchell Weiss, Executive Director of the Tobin Project, describes the project culminating in this volume:

To this end, in the fall of 2008 the Tobin Project approached leading scholars in the social sciences with an unusual request: we asked them to think about the topic of economic regulation and share key insights from their fields in a manner that would be accessible to both policymakers and the public. Because we were concerned that a conventional literature survey might obscure as much as it revealed, we asked instead that the writers provide a broad sketch of the most promising research in their fields pertaining to regulation; that they identify guiding principles for policymakers wherever possible; that they animate these principles with concrete policy proposals; and, in general, that they keep academic language and footnotes to a minimum. (5)

The lead essay is provided by Joseph Stiglitz, who looks more closely than previous decades of economists had done at the real consequences of market failure. Stiglitz puts the point about market failure very crisply:

Only under certain ideal circumstances may individuals, acting on their own, obtain "pareto efficient" outcomes, that is, situations in which no one can be made better off without making another worse off. These individuals involved must be rational and well informed, and must operate in competitive market- places that encompass a full range of insurance and credit markets. In the absence of these ideal circumstances, there exist government interventions that can potentially increase societal efficiency and/or equity. (11)

And regulation is unpopular -- with the businesses, landowners, and other powerful agents whose actions are constrained.

By its nature, a regulation restricts an individual or rm from doing what it otherwise would have done. Those whose behavior is so restricted may complain about, say, their loss of profits and potential adverse effects on innovation. But the purpose of government intervention is to address potential consequences that go beyond the parties directly involved, in situations in which private profit is not a good measure of social impact. Appropriate regulation may even advance welfare-enhancing innovations. (13)

Stiglitz pays attention to the pervasive problem of "regulatory capture":

The current system has made regulatory capture too easy. The voices of those who have benefited from lax regulation are strong; the perspectives of the investment community have been well represented. Among those whose perspectives need to be better represented are the laborers whose jobs would be lost by macro-mismanagement, and the pension holders whose pension funds would be eviscerated by excessive risk taking.

One of the arguments for a financial products safety commission, which would assess the efficacy and risks of new products and ascertain appropriate usage, is that it would have a clear mandate, and be staffed by people whose only concern would be protecting the safety and efficacy of the products being sold. It would be focused on the interests of the ordinary consumer and investors, not the interests of the financial institutions selling the products. (18)

It is very interesting to read Stiglitz's essay with attention to the economic focus he offers. His examples all come from the financial industry -- the risk at hand in 2008-2009. But the arguments apply equally profoundly to manufacturing, the pharmaceutical and food industries, energy industries, farming and ranching, and the for-profit education sector. At the same time the institutional details are different, and an essay on this subject with a focus on nuclear or chemical plants would probably identify a different set of institutional barriers to effective regulation.

Also particularly interesting is the contribution by Michael Barr, Eldar Shafir, and Sendhil Mullainathan on how behavioral perspectives on "rational action" can lead to more effective regulatory regimes. This essay pays close attention to the findings of experimental economics and behavioral economics, and the deviations from "pure economic rationality" that are pervasive in ordinary economic decision making. These features of decision-making are likely to be relevant to the effectiveness of a regulatory regime as well. Further, it suggests important areas of consumer behavior that are particularly subject to exploitative practices by financial companies -- creating a new need for regulation of these kinds of practices. Here is how they summarize their approach:

We propose a different approach to regulation. Whereas the classical perspective assumes that people generally know what is important and knowable, plan with insight and patience, and carry out their plans with wisdom and self-control, the central gist of the behavioral perspective is that people often fail to know and understand things that matter; that they misperceive, misallocate, and fail to carry out their intended plans; and that the context in which people function has great impact on their behavior, and, consequently, merits careful attention and constructive work. In our framework, successful regulation requires integrating this richer view of human behavior with our understanding of markets. Firms will operate on the contour de ned by this psychology and will respond strategically to regulations. As we describe above, because firms have a great deal of latitude in issue framing, product design, and so on, they have the capacity to a affect behavior and circumvent or pervert regulatory constraints. Ironically, firms' capacity to do so is enhanced by their interaction with "behavioral" consumers (as opposed to the hypothetically rational actors of neoclassical economic theory), since so many of the things a regulator would find very hard to control (for example, frames, design, complexity, etc.) can greatly influence consumers' behavior. e challenge of behaviorally informed regulation, therefore, is to be well designed and insightful both about human behavior and about the behaviors that firms are likely to exhibit in response to both consumer behavior and regulation. (55)

The contributions to this volume are very suggestive with regard to the issues of product safety, manufacturing safety, food and drug safety, and the like which constitute the larger core of the need for regulatory regimes. And the challenges faced in the areas of financial regulation discussed here are likely to be found to be illuminating in other sectors as well.

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Becky and the Grind [feedly]

Becky and the Grind
https://workingclassstudies.wordpress.com/2018/04/23/becky-and-the-grind/

Becky and the Grind

Becky's aunt had given her $300 to catch up on her electric bill so the power would not be turned off in her apartment.  But when Aunt Millie checked with the electric company, the outstanding bills had not been paid.  Becky had spent the $300 on something else, maybe something more important than electric power, but probably not.  Regardless, Becky had lied to Aunt Millie and, thus, had crossed a moral Rubicon that raised doubts about whether her extended family would provide any future financial assistance, which she often needed.  Worse, it was a huge lapse in her usually fierce self-respect and familial reliability.   As aunts and uncles talked it over, they debated "cutting her off" vs. "how to get her turned around."

Now in her late thirties, Becky had grown up poor and had struggled since she got pregnant in high school, but for most of her life she had been exemplary in turning her lemons into lemonade.   In better times and in a better place, her exertions and street-wise savvy would have been enough to get her a better life.  She had finished high school while raising her daughter and working a variety of low-wage jobs, some requiring a 90-minute commute on a string of buses.  Her daughter, now in college on a scholarship and loans, had been the center of her life, and she had been a mother we all admired for her grit and determination – her gutsy interventions in schools and the various bullshit jobs she endured.  Her latest job, however, had been as an off-the-books home care worker for an elderly man to whom she got very attached; when he died recently, she had to do her grieving while being unemployed and ineligible for unemployment compensation.  Worse, she had injured her shoulder lifting the old man from bed to chairs and back again, and now she needed an operation that Medicaid would pay for, but she wouldn't be able to work for months while she recovered.

Becky's own mother and father, now separated, were both too poor to be much help financially, though they tried to help out in various ways when they could.  Collectively the extended family had the means to help Becky fill some of the gaps for a while, but they might not do that if they couldn't count on her to keep her word and do what she had promised.  The aunts and uncles had seen others of Becky's generation fall under the weight of the daily grind of working dead-end jobs that didn't pay enough to reliably put food on the table and a roof over their heads.  One wrong move and you could fall into a downward spiral of cascading personal and financial problems.  Just the threat of living on that edge was stressful enough to drive many into alcohol and drugs for temporary relief – which, of course, always made things worse, making multiple wrong moves more likely, if not inevitable.   Becky's brother, for example, had pretty much succumbed to the grind a few years after high school, and how he gets by now nobody wants to know.

Becky's generation had grown up in a deindustrializing place where, with very minor ebbs and flows, things got worse each decade of their lives.  The jobs kept leaving, as did the people, those who could.  Most of the bad jobs got worse, and what new jobs there were at the Dollar stores were oppressively monitored to prevent employee theft – "worse than being in jail," said one of the nephews who knows whereof he speaks.  If they were the cardboard rational economic actors of Economics 101, Becky's generation should all leave town to find better jobs in more auspicious economic climates.  But where exactly would that be for people without college degrees?  And even if having a socially rich network of families and friends were as unimportant as Economics 101 suggests, would a rational actor actually benefit economically by moving away? Is there a study that shows that, or is it just the rational-man logic that works out nicely in mathematical formulas?

The aunts and uncles, now mostly retired on modest pensions and Social Security, came up in better times when steady work in factories, offices, and stores was not so rare, but they too have lived with some grind.  They know how the grind works on you over time, grinding you down inside as well as out.  Through bitter experience, they also know that sometimes helping out those in danger of giving up actually assists them in giving in to their cascading spiral of defeat.

Might Becky have used that $300 to make a wild bet on the lottery or to buy drugs to sell or use?  Or might she have used it to help out her boyfriend's children? She spends more and more time at his place, and maybe she is half-consciously abandoning her apartment one bill at a time and preparing to move in with him?  Like many single mothers with daughters, she and her daughter Dory were as close as twin sisters, at least when Becky didn't have to be the stern parent.  Now that Dory is gone and hopefully headed for a better place, has Becky begun to lose her way, abandoned and confused?  Or is she once more working with new lemons to see if lemonade can be made of them?

The aunts and uncles need to know.  For every one of Becky's generation who has been beaten down by the relentless grinding of the grind, two or three are persisting against the odds, constantly uprooted by lost jobs, pay cuts, sadistic supervisors, and just plain hard work on weakening bodies.  Becky has been one of these.  To give up on her now would be a defeat for the family and its own tenuous morale.  But if she has already given up on herself, it would be worse than a waste of scarce resources to help her out again – it would dishonor and insult those who are still, against the odds, pulling their own weight, or at least trying to.

Aunt Millie, the family welfare manager, will eventually find out where that $300 went.  She thinks Becky may be capable of a boldface lie, as Becky has always been able to present a bold face to bad circumstances.  The aunts and uncles trust that Millie will be able to tell, but who knows for sure (in the short term).  Millie herself seems to be growing weary of managing small amounts of money as her siblings bicker about who does or does not have the moral rectitude to deserve their help.  Nobody doubts that Becky is responsible for her own life, regardless of the circumstances she has had to face, nor that they are responsible to help her if they can.

As a peripheral observer of this extended family dilemma, I marvel at the practical moral complexity of the family conversation and can't help comparing it to the superficiality of educated middle-class pundits' palaver about low-information voters and the white working class.  Or, worse, the simplistic judgments about moral and cultural rot of the conservative authors of Coming Apart: The State of White America: 1960-2010 and Hillbilly Elegy.  Why is it so difficult for people with college educations (especially elite ones) to see how fucking heroic Becky has been for 37 years and how it may now all be for naught if the grind turns out to be stronger than she is?  Why is it so hard to see that if we want to reduce opioid addiction, suicides, and other moral failures, we need to reduce the grind – with dramatically steadier jobs and higher wages?  $300, for Christ's sake!  There are lobbyists in Washington, D.C., tonight spending that to buy politicians a bottle of wine for dinner.

Jack Metzgar

 -- via my feedly newsfeed

Bernie Sanders to announce plan to guarantee every American a job [feedly]

Bernie Sanders to announce plan to guarantee every American a job
https://www.washingtonpost.com/news/wonk/wp/2018/04/23/bernie-sanders-to-unveil-plan-to-guarantee-every-american-a-job/

Sen. Bernie Sanders (I-Vt.) will propose a jobs guarantee program for every American worker "who wants or needs one." (Alex Wong/Getty Images)

Sen. Bernie Sanders (I-Vt.) will announce a plan for the federal government to guarantee a job paying $15 an hour and health-care benefits to every American worker "who wants or needs one," embracing the kind of large-scale government works project that Democrats have shied away from in recent decades.

Sanders's jobs guarantee would fund hundreds of projects throughout the United States aimed at addressing priorities such as infrastructure, care giving, the environment, education and other goals. Under the job guarantee, every American would be entitled to a job under one of these projects or receive job training to be able to do so, according to an early draft of the proposal.

A representative from Sanders's office said they had not yet done a cost estimate for the plan or decided how it would be funded, saying they were still crafting the proposal.

Sanders joins two other rumored 2020 Democratic presidential contenders who have expressed support for the idea of a jobs guarantee. The push reflects a leftward move in the party's economic policy, away from President Barack Obama's use of public-private partnerships or government incentives to reshape private markets and toward an unambiguous embrace of direct government intervention.

Job guarantee advocates say their plan would drive up wages by significantly increasing competition for workers, ensuring that corporations have to offer more generous salaries and benefits if they want to keep their employees from working for the government. Supporters say it also would reduce racial inequality, because black workers face unemployment at about twice the rates of white workers, as well as gender inequality, because many iterations of the plan call for the expansion of federal child-care work.

"The goal is to eliminate working poverty and involuntary unemployment altogether," said Darrick Hamilton, an economist at the New School who has advocated for a jobs guarantee program along with Stony Brook University's Stephanie Kelton and a group of left-leaning economists at the Levy Economics Institute at Bard College. "This is an opportunity for something transformative, beyond the tinkering we've been doing for the last 40 years, where all the productivity gains have gone to the elite of society."

Others, including some Democrats, are not convinced. The idea is also dead on arrival with Republicans in control of Congress, and conservatives have trashed the idea of a jobs guarantee as impractical, impossibly expensive and dangerous to the private sector.

"It completely undercuts a lot of industries and companies," said Brian Riedl, of the conservative-leaning Manhattan Institute, a think tank. "There will be pressure to introduce a higher wage or certain benefits that the private sector doesn't offer."

Ernie Tedeschi, an economist who served in Obama's Treasury Department, said there would be large logistical and practical challenges in ensuring millions of new federal jobs serve productive ends.

"It would be extremely expensive, and I wonder if this is the best, most targeted use of the amount of money it would cost," he said.

Critics point to potential unintended consequences in the plan. Although it would probably boost wages for workers, those higher wages could bump up costs for private businesses, leading some to hire fewer workers or take other steps — such as reducing benefits or looking to replace workers with machines.

These effects would be more pronounced if the plan were to pull away workers who hold private-sector jobs, rather than pulling in workers without jobs who wanted them. The unemployment rate currently sits at 4.1 percent, a historically low figure. But that figure does not include people who've given up looking for work, and the labor force participation rate — a broader measure of those not working — suggests there may be people not counted among the unemployed who would join the labor force.

The new government spending could also lead to inflation, decreasing the real value of workers' wages.

Obama's economic initiatives, generally, focused on using the government to influence private markets and industries in pursuit of policy goals. His economic stimulus plan — in which he and Democrats tried to pull the United States out of a deep recession — channeled money through private enterprises to boost hiring and investment, and offered tax cuts and rebates in the hope of getting people to spend more.

But in a new political climate, ideas such as a jobs guarantee plan is gaining traction among prominent Democrats. Sen. Kirsten Gillibrand (N.Y.) backed the idea on Twitter earlier this month. As first reported by Vox, Sen. Cory Booker (N.J.) last week also announced his intention to introduce a separate bill that would create a pilot program for a job guarantee in 15 rural and urban areas.

Under the early draft of Sanders's job guarantee, local, state and American Indian tribe governments in every section of the country would send proposals for public works projects for their areas to 12 regional offices that encompass the country. These 12 regional offices would act as a clearinghouse for these projects, tasked with sending recommended projects to a new national office within the Labor Department office for final approval.

Once approved, the projects would hire workers at a minimum salary of $15 an hour with paid family and medical leave, and offer the same retirement, health, and sick and annual leave benefits as other federal employees.

About 2,500 job training center and employment offices already exist around the country, and the plan imagines tasking them with connecting workers to these local projects. When the programs are up and running, anyone can wander into a job center and — at least, in theory — find either job training or a job on one of these projects.

The plan's authors envision millions of Americans being hired under the proposal, with the number going up during economic recessions in the private sector and down during economic booms. They also say it would significantly increase the government's involvement in the American economy to a level not seen since World War II, if ever in the country's history.

Beyond how to pay for the plan, many other aspects of the jobs guarantee have not been specified.

It's not clear what would happen to a worker who violated the terms of employment. The plan suggests creating a Division of Progress Investigation to "take disciplinary action if needed," leaving authority to the head of the Labor Department. Aides to Sanders stress that the policy details remain in their initial stages.

Proponents trace the idea to the New Deal era, when President Franklin D. Roosevelt pitched a "Second Bill of Rights" to Congress in 1944. First on the list: the "right to a useful and remunerative job."

"This is not a radical idea," Hamilton said. "It was well-couched in the Democratic platform that existed during its heyday. I'm glad Democrats are trending back to their roots."

 -- via my feedly newsfeed