America’s move to high inequality is correlated to its retreat from technical innovation.
Joseph E Stiglitz’ essay in the 2012 Oct 26 CampaignStops blog of the New York Times is quite instructive. We outline his thinking, then move onward to probe the link between historic growth in U.S. social inequality growth and funding support for an energy future that has the potential of freeing us from ever-dwindling resources.
Dr. Stiglitz is holder of a Nobel Prize in Economics, former chief economist of the World Bank, Professor at Columbia University, and author of his new book, “The Price of Inequality.” This is an indictment of the forces pushing us into monstrous inequality. For example, even in his Preface he says So much at stake … we are no longer a country of opportunity … our long-vaulted rule of law and system of justice have been compromised, even our sense of national identity may be put into jeopardy. He is on-target — read the book!
He discusses 5 myths that have floated through the presidential campaign. This summary uses direct snippets or paraphrasing from his article.
(1) America is the land of opportunity. Success of young Americans today is more dependent on their parents’ income and influence than in any other advanced country
(2) Trickle-down economics works. The actual situation is that the rich and gotten even richer while the large majority of the country have become less well off.
(3) The rich are “job creators,” so giving them more money leads to more and better jobs. Romney’s own history shows the these people are after the most money by taking a company and restructuring, downsizing, and offshoring it. This is directly in opposition to enhancing the position for the rest of society. Fact: many or most crucial innovations in recent decades have been animated primarily by government-financed research and development.
(4) The cost of reducing inequality is so great that, as much as idealists would like to do so, we would be killing the goose that lays the golden eggs. The actual engine of economic growth is our middle class, not the top 0.5 to 0.01 % of all earners. Inequality has been weakening the middle class.
(5) Markets are self-regulating and efficient, so any governmental interference with markets is a mistake. We are still in the 2008 disaster that disproves this statement. The period between WW-II and 1980 was one of faster, more stable growth than the decades following.
Fig 1 supports Stiglitz points (2) and (5). Point (5) is reinforced by the graph because the period between the war and 1980 was one where the fraction of the total income was essentially constant for each income class, allowing the steady growth that Dr. Stiglitz describes. Fig 1 has been described in many LastTechAge posts, Zero Sum Game is one. Click to see larger image. LastTechAge addressed point (3)’s wonderful Job Creators in our post The Conard Justification.
Fig 2 also illustrates point (3). The background plot is the data of Fig 1. US-supported R&D started its fall about 1983, just after the American income pump started operating.
The foreground graph is the funding amount for U.S. support of fusion energy research, in Millions of Dollars, inflation adjusted to 2012 . Features in the fusion budget curve are discussed in our post Fusion Energy – Kill the beast.
The background shows the operation of an “income pump,” shifting income into the hands of the few very rich households. This has been at the expense of the total earned income share fraction of all those in the lower earnings brackets.
The sudden onset of the effect in 1981 is correlated with the sudden rapid drop in funding for fusion energy research. One does not cause the other, they are both the result of a mature political agenda first implemented in 1981. The agenda is responsible for the erosion of American technical capability over the past 3 decades. Fusion research is just our canary in the mine shaft, useful as sensitive early warning of a poisonous atmosphere.
There are many other societal trends that correlate to Saez-Piketty inequality. The current set of correlations that have been discovered is in the file “Trends correlating with Saez Piketty Inequality.pdf” Click the button [PDF References] under the banner; it is filed under Economy.
Ronald Reagan took office in 1981, an important time point on these graphs. The displayed trendline tries to demonstrate smoothed overall behavior, but the presidential change-over in 1993 is clearly evident as flatting in both curves. In 1994, Clinton lost the control of Congress. Newt Gingrich issued his Contract on America with its renewal of the attack on traditional U.S. equality. The curves of both income fraction and a specific research budget resumed their previous trends with Gingrich’s ascendancy. Recall, though, that Clinton advocated off-shoring nearly everything so that there would be no manual jobs left – all workers in the U.S. would have to have a minimum of a College degree just to get decent work. (He is still proud of this goal.)
The cut in fusion budget has continued to drop and bottomed out at nearly 1/4 its peak support value during the Bush/Cheney years. Over the same time, the top 0.01% of all earners saw their % share of total income jump by a factor of 5× (not shown here, click [Reference pages] > American Income Pump ).
Much of our previously dynamic developments in hard technology (not just fusion research) has been terminated. The right wing noise currently is to end all fusion funds because there have been no fusion power results over the past 3 decades. Remember the canary analogy.
What can we do to keep our competence from being gutted and flenced? This is the second of 3 closely related posts. The other two are
Without action, we lose our energy future
Fusion Energy – Kill The Beast
Update: 2012 Nov 03 Text on Stiglitz’s The Price of Inequality, lost in edit, now replaced
Charles J. Armentrout, Ann Arbor
2012 Nov 01
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