Tuesday, May 8, 2018

TRUMP PULLS OUT OF IRANIAN AGREEMENT ... PROVING, ONCE AND FOR ALL, HE'S AN IDIOT

The former Shah of Iran was brought to power by the U.S. in 1953. The Shah would set back Iranian development by decades, and helped set the table for radical clerics to come to power in the Middle East. 
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History doesn't just repeat itself with Donald Trump. It thunders and echoes with stupidity. By announcing that the United States would withdraw from a 2015 nuclear agreement signed by the United States and Iran - and China, France, Germany, the British and Russia - Donald Trump is continuing a long string of diplomatic and strategic blunders carried out by the United States against Iran that began in 1953.

The clip below provides a concise and accurate overview of U.S.-Iran relations since the Eisenhower administration overthrew the democratically elected Mohammed Mossadegh (1882-1967). The clip also helps put into context how short-sighted and reckless Donald Trump's decision is today.


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In the FYI category, the International Atomic Energy Agency (IAEA) has verified, at least 10 times, that Iran has complied with the Joint Comprehensive Plan of Action (JCPOA). Trump's own State Department, when it was led by Rex Tillerson, also found Iran was holding its end of the nuclear verificattion bargain.

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I've been teaching about U.S.-Iranian relations in my American Foreign Policy and International Relations courses for the past two decades. One of the best books you can get to help understand where American missteps with Iran began includes "All the Shah's Men."


There's more, but I want to make it clear: this is a major blunder on the part of Donald Trump. It goes beyond "bigly." Seriously, it proves once and for all that Donald Trump doesn't know what the hell he's doing and that, quite frankly, he's an idiot.

Sigh ...

- Mark

POLITICAL ECONOMY FINAL / MARCH 2018


It's that time of year again. Final Exams begin next week. Below are links to issues I have discussed on my blog, which also tie directly into my International Political Economy lectures. So, yeah, what's below is a list of ancillary "cliffs" notes for my class. I will post more later this week. Regular readers (and those who have read my book) will understand the broader story. Of course, those who are interested in knowing how our markets actually work can begin by reading the links below.
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Part I
History and Concepts from the First Two Mid-Terms

What makes the magic of the market work? A useful analogy from Disneyland's Aladdin. 

From War to Mercantilism: The historical role the Renaissance, Reformation, and the Enlightenment had in paving the intellectual path for Market Capitalism to arrive.

Waves of Imperialism ... War and Markets: Why Great Wealth is not a product of individual initiative alone. Here we learn about the three waves of imperialism, which were driven by successive but distinct eras of mercantilism after 1648, 1815, and 1919,

The Moral Justification of Capitalism is on the Ropes ... Here's Why. This is a review of the transformation from feudalism and mercantilism towards the modern liberal state.

Waves of Imperialism, II ... It's not free markets ... the state creates the conditions under which wealth is created (with an all too brief discussion-mention of John M. Keynes and Friedrich List).




Rebuilding Afghanistan ... it's Mindless Modernization Theory, again.

A flood of dollars, new competition, and a crumbling economic framework ... yet we do nothing, still (OK, this one is part of the Bretton Woods lecture, and will be part of the next mid-term).

- Mark

Monday, May 7, 2018

SOMETHING'S GETTING DRAINED UNDER TRUMP ... TOO BAD IT'S U.S. PRESTIGE AND INFLUENCE


Courtesy of Foreign Policy ... More proof that the rest of the world doesn't respect Donald Trump, nor fear his blustering threats.
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- Mark

THINGS ARE LOOKING GOOD IN CALIFORNIA



It's official. California just surpassed the United Kingdom, and is now the world's 5th largest economy. Thank you Governor Jerry Brown and our Democratic-led state government.



For a primer on how California, and other Blue States, transfer wealth to the Red State welfare beneficiaries click here. For a quick look at how California has become the engine of growth for the U.S. economy click here, and here.

- Mark

Friday, May 4, 2018

WOW ... EVEN FOX NEWS IS CATCHING ON

Neil Cavuto is in danger of becoming a serious analyst ...


Hopefully this lasts.

- Mark

Thursday, May 3, 2018

WHY DON'T THEY "JUST GET IN LINE"? BECAUSE POLITICAL COWARDICE HAS MADE IT IMPOSSIBLE ... SERIOUSLY

With no Republican prepared to embrace an amnesty-like program that Ronald Reagan implemented in the 1980s, immigration in America has become a stalled and divisive topic. Throw in Donald Trump and his race-baiting "birther" campaign, his policies towards Muslims and his rejection of DACA for young immigrants, and it's easy to understand how immigration and race relations in America have become absolutely toxic. 

It all adds up to an environment where immigration policy in America has become a real but unnecessary mess.

Below is an abbreviated overview that, incredibly enough, also provides a very helpful visual that does a good job of explaining why undocumented immigrants from Mexico, and other parts of Latin America, can't actually "get in line" and "do things right." Simply put, years of political brinkmanship and moral cowardice has created a cruel cul-de-sac of rejection for the vast majority of America's undocumented populations.  


- Mark 

Wednesday, May 2, 2018

ALL OF TRUMPS LIES AND INSULTS, TO DATE

Remember when the New York Times used two full pages to list out all of Donald Trump's Twitter insults? And that was just from the 2016 presidential campaign.



Since taking office Donald Trump has lied so much since taking office (466 days) that the Washington Post felt compelled to keep their own scorecard, which yielded this list of more than 3,000 lies.

Then we have the most recent Twitter insults.

The New York Times has expanded their original list, and now have a count of the 459 people, places and things Donald Trump has insulted since entering the White House. You can click here for that list.

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Here's the point. If you're whining about the Trump administration and his propaganda voices having to sit through a few comedic jabs at the White House Correspondents' Dinner you're way off base.

Bigly.

- Mark

OPTIMISM ABOUT KOREA ... IT'S DEJA VU ALL OVER AGAIN


When it comes to understanding events on the Korean peninsula, we need to move past both Donald Trump's blustering and South Korea's president Moon Jae-in's ego-soothing suggestion that Trump deserves a Nobel Prize for his blustering. It's clear that South Korea's president knows what yanks Trump's chain, and he's tugging that line so he can have a freer hand on the peninsula. 

Then we have North Korea pretty much melting down one of its nuclear mountain test sites. As you can imagine China, North Korea's neighbor, is not happy with this development. As North Korea's biggest trade partner, this makes all the difference in the world.


The Chinese have already hit Pyongyang with economic sanctions that have collapsed trade between the two nations. But all of this - Kim Jong Un drama (with a touch of Trump for added effect) and economic sanctions - is par for the course, and really just surface level white noise.

The real reason we shouldn't get worked up about what's happening between North and South Korea is because we've seen this show before. There are many regional currents and counter-currents at work here, which the Korean leaders understand far better than Donald Trump, John Bolton and the American press.


In an article written for Foreign Policy Jeffrey Lewis, director of the East Asia Non Proliferation Program at the Middlebury Institute of International Studies at Monterey, writes a summary of the primary issues, which helps to explain why we shouldn't get so worked up over what's happening between the two Koreas. In fact, Lewis writes that "optimism over Korea" just might "kill us all."

Specifically, Lewis writes that the primary factors driving rapprochement between the two Koreas include:

* WHAT WE DON'T SEE: There are two other nuclear test complexes in different mountains, which Kim Jong Un hasn't said anything about. He's keeping those open, which means closing down the testing at the melted mountain is effectively good optics.
* IT'S DEJA VU ALL OVER: 10 years ago North Korea agreed to dismantle the cooling tower for gas-graphite reactor at Yongbyon,  then connected it to another pump when no one was paying attention (dismantling the tower was always a PR stunt).  
* THE DISARMAMENT TWO-STEP: Kim Jong Un has not actually promised to disarm. What North and South Korea have done is put out a vague promise to work towards a day when nuclear weapons aren't necessary. This requires the U.S. to pull out of South Korea (which China wants), and to promise not to invade North Korea. Instead, Kim Jong Un actually agreed to a series of steps, which he can back away from at any time (and to the extent that Kim Jong Un does disarm, it's because of China, not Trump).
* THE REAL PRIZE: Kim Jong Un is actually working to gain acceptance as a de facto nuclear player, in exchange for agreeing to certain limits and stage moratoriums. 

Add to this the fact that China's role in the Korean peninsula will be maintained, regardless of what Donald Trump thinks, and you have a situation where Trump's visit to North Korea is more window dressing and PR fodder for the western press (and Trump's base). Keep in mind that China has repeatedly demanded that North Korea suspend its nuclear and missile tests in the past in exchange for the U.S., Japan, and South Korea halting regional military drills. So Trump's demands on this issue won't be nothing new.

In sum, Donald Trump might think that he's setting the table on the Korean peninsula but, in reality, we've seen this show before. Perhaps more importantly, China's the real player behind the scenes.


For a complete review of Lewis' piece, click here. I've posted a little more than half of the article below (copyright issues, you know).
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Last week’s inter-Korean summit, and North Korean leader Kim Jong Un’s declaration that he would “close” his nuclear test site by May, were greeted widely with celebration. But contrary to the hoopla, we have now arrived at an especially dangerous moment in Washington’s relationship with Pyongyang. We are on the verge of letting our hopes get in the way of our survival.

Consider the now widespread view that North Korea’s test site is unusable or that the mountain that contains it has collapsed. This was always garbage reporting. You can download the two academic papers that are said to have originally made these claims — they say nothing of the kind. What the papers do is prove that, after North Korea’s big nuclear test in September 2017, the cavity created by the explosion collapsed in on itself. We already knew that probably happened (although it is cool to see it demonstrated through seismology).

But the collapsing of the cavity and shrinking of the mountain do not mean the tunnels leading to it collapsed, let alone that the mountain itself had done so. And, of course, there are two other nuclear test complexes underneath entirely different mountains at the site

Kim was quoted as making this point himself: “Some said we will dismantle unusable facilities, but there are two more larger tunnels [in addition to] the original one and these are very in good condition as you will get to know that when coming and seeing them.” But commentators in the West, hoping for a diplomatic breakthrough (whether for political or more idealistic reasons), still heard what they wanted to hear about the condition of North Korea’s program.

The whole episode reminds me of something that happened a decade ago — when North Korea agreed to demolish the cooling tower at its Yongbyon gas-graphite reactor. The demolition of the cooling tower, accomplished with great fanfare, was not, in fact, a part of the original agreement that the Bush administration had reached with North Korea. But the Bush administration went back and asked North Korea to do it because it wanted “a striking visual, broadcast around the globe, that would offer tangible evidence that North Korea was retreating from its nuclear ambitions.” In other words, it was a PR stunt — and people fell for it.

There was just one problem. Although North Korea never rebuilt the cooling tower, that didn’t stop it from it secretly restarting Yongbyon — it simply connected the reactor to a nondescript and very boring pump house it had constructed under everyone’s noses. (This was the same sort of pump house, incidentally, that North Korea helped Syria build at its secret nuclear reactor near Al Kibar.) But without the visual of Yongbyon’s cooling tower, almost no one noticed what North Korea was doing with the reactor.

Kim’s promise to close the nuclear test site doesn’t really mean much in practice, certainly not much more than the demolition of the cooling tower. The site is a few support buildings surrounded by mountains with massive tunnel complexes dug horizontally into them. 

Simply closing the site wouldn’t be anything like the disabling of South Africa’s nuclear test site, whose vertical shafts were filled with debris. Instead, it would be more like the closure of Degelen Mountain at the Semipalatinsk test site in Kazakhstan, which the United States helped seal after the Soviets had abandoned it. Scavengers eventually just popped open the seals, forcing the United States to reseal them and then add surveillance measures. 

North Korea can seal up the tunnels, but it could always unseal them later. And we should keep an eye out for the proverbial pump house. After all, it’s not like North Korea is short on mountains or labor to dig new tunnels.


ABOUT THE AUTHOR
Jeffrey Lewis is director of the East Asia Nonproliferation Program for the James Martin Center for Nonproliferation Studies at the Middlebury Institute of International Studies at Monterey.

This is not to say that I am not delighted that North Korea has announced an end to nuclear explosive testing and the closure of its test site. This is a very good thing. But we must be clear about what’s happening and what it means. 

North Korea isn’t giving up a test site because it collapsed. North Korea agreed to stop testing because Kim is getting what he wants. 

The third inter-Korean summit was not premised on Kim Jong Un offering to disarm. He has never, ever made a concrete promise to abandon his nuclear weapons program. If you read the joint statement closely, what South and North Korea have done is to take disarmament off the table as a concrete outcome and substitute a vague aspiration that at some point nuclear weapons will no longer be necessary.

Until that time, Kim is willing to agree to a much more modest series of steps — a moratorium on launches of intermediate- and intercontinental-range ballistic missiles, as well as an end to nuclear testing. Those are good things. We should appreciate them as genuine improvements to U.S. security, not something to tide the United States over until North Korea turns over missiles and nuclear warheads.

Kim is working toward winning a de facto recognition of North Korea as a nuclear power in exchange for his agreement to respect certain limits — an end to certain missile tests and nuclear explosions, an agreement not to export nuclear technology to other states, and perhaps a pledge by North Korea not to use nuclear weapons. To accept this would represent a complete and total retreat from decades of U.S. policy — a retreat that I believe is overdue and the inevitable consequence of North Korea’s development of ICBMs and thermonuclear weapons. 

We have to learn to accept North Korea as it is. And what North Korea is, is nuclear-armed ...

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- Mark

Tuesday, May 1, 2018

MAY DAY, OR INTERNATIONAL WORKERS' DAY ... SO WHAT'S HAPPENED TO LABOR IN AMERICA? (and, NO, Trump's not going to fix this)

(This post was originally posted over three years ago. It helps explain what's happened to labor in America, and around the world).
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... Because smart machines appear to both facilitate and terminate the functions of ordinary workers, the wage gains made by labor in the first two industrial revolutions are slowly being degraded and lost.

Specifically, ordinary workers are watching as the financial gains they help generate today are gobbled up by those who either develop our new technologies, or who control and financially underwrite the larger economy. This reality helps explain why we are now living in an era where we can have a strong economy, a record setting stock market, record wealth creation, and growing GDP, but very few financial gains for ordinary workers who help increase our nations productivity.

This hasn't always been the case. There was a time when the compensation of ordinary workers kept pace with increased productivity.


So, what's happening?

In a few words, the rules of the economic game have been changed. But technology is only partially responsible for the weakened position of labor and stagnating wages we have seen over the past 40 years. The other part is political, and can be tied directly to state-led policies that have stripped labor of its bargaining power, and is now marginalizing its place in society. As I pointed out over a year ago, the case of Detroit goes far to help us see how this happened.

We'll get to the Detroit example after we discuss why Nouriel Roubini's "rise of the machines" apocalyptic prediction for ordinary workers is already in the works.

ECONOMIC FALLOUT FROM THE THIRD INDUSTRIAL REVOLUTION
At the outset we need to acknowledge that current trends make it clear that future advances in technology will continue to primarily benefit those with money and high skill sets. What this says about the prospects of ordinary laborers, and the middle class, is not good.

Why keep the house cleaner around so long when the iRobot Roomba 880 can vacuum your floors for free? To be sure, there will always be service oriented work, but the number of laborers needed to complete a job will decline as machines do more of our menial work.


In fact, the amount of things we now do for ourselves - called "prosuming" - is considered so normal that we don't even think about how we have adapted to technology. We now pump our own gas. We do much of our banking at the ATM or on-line. We purchase products on the internet. We order uber drivers from our phones. We do so many tasks that once required considerable assistance from a middleman or service professionals that we're eliminating the need for low- and middle-skilled workers.

Put more simply, ordinary workers are being displaced by machines, which is pitting more and more workers against one another for fewer and fewer low- and middle-skill jobs. As wages stagnate and decline (and they have) middle-class Americans have had to cope with more work, while accumulating more debt.

While more debt is good for those in the financial sector in the short-term, it's not so good for society over the long-term.

The on-going displacement of workers by technology explains why economist Nouriel Roubini suggested that our modern economy is built on a "rather shaky foundation." Roubini's concern - as Franklin D. Roosevelt and the intellectual godfather of capitalism, Adam Smith, understood - is that if workers can't earn a strong income America will be left with an economy where only distressed consumers, debtors, and the wealthy can buy the products produced.


Suggesting that the U.S. will become dependent on distressed consumers, prosuming debtors, and a small group of extremely wealthy consumers to keep the economy going isn't some wild prediction on Roubini's part. It's already happened. People have been working and racking up debt in America because of stagnating and declining wages for some time now.

Think about the following for a moment.

LOST WAGES, DEBTOR NATION
According to data from the St. Louis branch of the Federal Reserve, because wages have stagnated or declined in America over the past 40 years, America's middle class lost about $1.215 trillion in wages during this time. Put another way, if wage gains from 1970 through 2010 had maintained the same pace that it did immediately after World War II through 1970 Americans would have had an additional $1.215 trillion in their pockets.

To make up for these lost wages, and to help make ends meet, American households became two-income families, saw breadwinners working two or more jobs, or began tapping into (or gave up on) savings. Worse, credit card use shadowed all of these developments.

This helps to explain why American households racked up almost $1 trillion in credit card debt right before the market collapsed in 2008.


Taking on almost $1 trillion in credit card debt came close to matching the $1.215 trillion in lost wages that Americans lost over the past 40 years. But it has turned America into a nation of debtors, while transferring trillions to the wealthiest Americans.

The economic fallout from the Third Industrial Revolution is clear: Productivity and wealth may be increasing but ordinary workers aren't seeing the same share of the wage gains that they saw in the immediate post-war era. The amount of debt and individual bankruptcy cases in America is just one of several examples of the economic fallout.

All of this is important to economist Nouriel Roubini because it confirms that technological leaps aren't necessarily making workers or nation-states better off in the long-term. But Roubini's analysis is incomplete. Technology is only one part of a larger problem. A very deliberate set of government policies in the United States have advanced a national race to bottom, which is also working against the interests of labor.

As I pointed out over a year ago, what's happening in Detroit helps explain why the rise of the machines is not the only challenge laborers face in America.

WHAT'S WRONG WITH DETROIT ... AND AMERICA
Contrary to what you've heard, the fiscal problems of Detroit, and the challenges that confront America, are not so simple, or the result of labor unions. The 79,500 Michigan jobs/workers that were displaced or shipped to China between 2001 and 2007 didn't happen because of mysterious "magic of the market" forces. Nor did Detroit's tax base suddenly disappear because of incompetent political leadership (though the incompetence didn't help).

Michigan's jobs and manufacturing picture worsened - as did the nation's - because of policies taken by the federal government over the past 30 years. These policies rewarded companies for shifting manufacturing jobs around the world.

When jobs leave so does the tax base. Pretty simple.

Now, someone reading this might be screaming at their screen right now that unions priced the American worker out of the global labor pool by demanding too much. Think again.

Germany produces twice as many cars as the United States. Their unionized auto industry pays workers significantly more than what the U.S. auto industry pays. Indeed, when you take out what it costs for health care (Germany has universal health care) we find that German auto workers make about two times what their U.S. counterparts earn, while benefits for German workers are substantially more rewarding (8 weeks paid vacation, free day care, etc.).



So, the big question is if German auto workers make far more than their U.S. counterparts, why is it that Germany hasn't experienced collapsing industrial cities like Detroit? Why is it that Germany - with its higher salaried auto workers - is seen as the key to Europe's economic stability, while the U.S. is still languishing in a 2008-induced market zombie walk?

SO, WHAT HAPPENED TO DETROIT?
While we could discuss how favorable legislation helped facilitate the financialization of America's economy (discussed in my next post on this topic) for now we'll concentrate on three other developments that help us understand what happened to Detroit, and America's manufacturing base.

The first development is pretty simple. For the longest time no one wanted to buy U.S. automobiles. Beginning in the early 1970s America's auto makers began producing crap. Remember the Gremlin? The Corvair? The Pinto? The Chrysler Imperial LeBaron Two Door? The AMC Pacer? The Chevy Chevette? This wasn't the workers fault. This one is on management. When auto manufacturers in America were forced to shut their doors jobs disappeared too.



The second answer is a bit more complex, but still relatively simple too.

Germany's constitution and social culture embrace unions, worker councils, and the right to strike. This helps shape Germany's union-management relations so that they are collaborative, as opposed to being adversarial (the case in the United States). It's the primary reason that Germany didn't experience wholesale layoffs in the auto industry after the 2008 market collapse (offering "extended vacations" instead). Unions and management worked together to keep people employed.



Finally, apart from producing crummy automobiles and going after unions, the United States has gone out of its way to encourage its auto industry and manufacturing base to leave, while doing little to protect American workers. Think about the following.

As I noted above, between 2001 and 2007 Michigan lost 79,500 auto jobs to China. This happened because of specific government policies, both here and in China.
1. Free Trade Agreements: The U.S. has entered into numerous trade agreements that facilitate moving manufacturing jobs overseas, especially to low paying regions of the world.
2. Currency Manipulation: China has been allowed to manipulate its currency, which enables it sell more goods in the United States.
3. Labor Rights Abused: China regularly suppressed labor rights, which lowers manufacturing wages by as much as 47% to 86%, and attracts manufacturers from the U.S. 
Throw in generous U.S. tax credits for business expenses - which include credits for shipping jobs overseas - and it's easy to understand why almost 3 million jobs in the United States were outsourced or were displaced by government policies between 2001 and 2007 (the German government, on the other hand, appears to have had a role in saving VW from a hostile takeover in 2008 by orchestrating the largest hedge fund loss in history).

By sending taxpayer funded trade representatives to negotiate trade deals, while ignoring currency and labor abuses, the U.S. government has effectively told Detroit and America's industrial base - and the middle class - we don't care about you. The end result is that millions of American jobs have been sent to countries all over the world.



Overseas profits and executive pay in the United States has climbed, but workers and America's middle class are left scrambling for what's left.

WHAT WORKERS ARE COMPETING WITH ... IT'S NOT JUST MACHINES
The interesting thing about these developments is that while negotiating trade agreements the private sector has been adamant about protecting proprietary rights and corporate patents. Forcing governments around the world to go after street vendors and protect intellectual property rights is part of our larger free trade negotiating position. Worker rights, however, are an entirely different matter.

Forced or slave labor? No problem, send the products here. 

Child labor? No problem, send the products here. 

Unsafe working conditions? No problem, send the products here. 


All of this has made it easier to go after labor in the United States.


To be sure, there's no doubt that German auto makers have shifted production over seas and now produce cars in China. But they don't do so as part of a larger policy goal to drive down wages in Germany. The idea that we're all in this together is rooted in Germany's historic approach to economics, and is not simply a shop floor poster in Germany.



Forcing the American worker to compete with laborers who have few protections and can't defend themselves in a global undermines the moral justification of capitalism - the idea that if you work hard you can get ahead. It also defeats the spirit of market economies that we fought two wars in the 20th century to promote.

At the end of the day, as I wrote almost two years ago, if we wanted to protect and demand global labor rights we could. But we don't. Instead we encourage firms in the United States to go abroad and then dismiss the needs of labor, which helps explain what happened to Detroit and what's happening in America.

Racking up almost $1 trillion in credit card debt becomes much easier to understand once we see the bigger picture.


THE REAL REASON WHY RICH ARE GETTING RICHER

The economic fallout from the Third Industrial Revolution is real. People are losing jobs, while low- and middle-skilled workers are encountering more competition for the work that they do. Technology is pushing this along by creating magnificent labor saving devices. Still, as we saw above, technology alone is not the only culprit for falling wages and job instability.

The experience of Detroit (and Germany) makes it clear that the U.S. government has embraced a series of domestic and foreign policies over the years that have undermined labor's bargaining position, and America's broader wage picture. The ability to send American jobs overseas so easily today is not simply a function of mysterious market forces led by technological advancements. An aggressive post-war trade policy, built around the American-led Bretton Woods institutions, is what made globalization possible. 

For those who study international relations or American foreign policy - and to be blunt about it - what we've experienced is Pax Americana empire building, with a mercantilist twist. There are no "free markets" here.
The wealth that has been created as a result of these dynamics - increased productivity, labor displacement, and aggressive trade policies - has been phenomenal. Just over the past 10 years global GDP has gone from $43 trillion to $77.6 trillion. The distribution, or the trickling down, of this wealth around the world and in America has not comported with the promise of free market enthusiasts. 

What's worse are some of the claims that are made to explain why "the makers" of wealth are far more deserving than "the takers" who push for higher wages. Among their arguments, as I noted in an earlier post on inequality, is that the top 1 percent of wage earners (and their congressional sychophants) believe their income gains are "earned" because - if we are to believe their argument - they are smarter, harder working, and more deserving, among others. End of story.

Conversely, if your income and financial situation have stagnated or worsened - as is the case with America's middle class - it's because you are not smart enough, hard working enough, and less deserving. At the same time, many are viewed as whiners and moochers.


Both assumptions are simply not true.

Let's make this real simple. The rich aren't getting richer simply because of productivity gains made possible by technology. The rich are getting richer because of state sponsored globalization (Bretton Woods/Treaties), state supported outsourcing (tax inducements), a string of market bailouts, artificially cheap money, legislative favors that include tax gifts, deregulation, and many other state-led developments that have nothing to do with being harder working or smarter than middle-class Americans.

Put another way, as I point out in my book, the state creates the conditions under which wealth is created. The fact that it's not trickling down to ordinary workers is also on the state.

CONCLUDING THOUGHTS
As I pointed out in "The Rise of the Machines (Part I) ..." the technological ecosystem created in California didn't happen simply because entrepreneurs and capital magically merged together. The state created the conditions for a unique set of developments to find critical mass in the Silicon Valley. Just as we couldn't marvel over the gifts of athletes until we had organized sports and built stadiums, we couldn't have benefited from the gifts of Robert Noyce and Steven Jobs if the state had not created the conditions for market entrepreneurs to prosper. 

Unfortunately, over the past 40 years the United States has moved in an ideological direction that no longer recognizes the mutually beneficial relationship between states and markets. We have chosen, instead, to focus on the market myth of the frontier rugged individualist.

This ideological shift has created a safe environment for favorable legislation and political gifts to play big hand in determining how much of market profits trickle down to the workforce. Wealth creation and wealth accumulation at the levels we see today are not simply a result of technology driven increases in productivity, as economists like Nouriel Roubini suggest. 



In fact, making technology the primary culprit in putting people out of work, or pushing wages down, is too facile. Worse, it provides "market cover" - and a convenient excuse - for larger politically motivated commercial and trade policies that have done so much damage to the prospects of ordinary workers, and the middle class, over the past 40 years. 

We need a new cooperative agreement between the state, workers, and industry - coupled with a new social structure of innovation that helped build the Silicon Valley - that reflects how markets really work. Without it, the wealth gaps and stagnating wages we see today will continue apace.

The Third Technological Revolution will not bring promised benefits, as promised by Ronald Reagan and other "supply-siders" over 30 years ago, as long as the productivity and new wealth associated with the rise of the machines doesn't "trickle down" to the middle class. 

- Mark