LESSON: PEOPLE ARE CATCHIN' ON

Picking up on my theme of the last two postings, I will continue reviewing the lessons I gleaned from the last election. With this posting, I will share my most important lesson. The lesson reflects a topic I have addressed in previous postings: the growing inequality among Americans. This is a fundamentally federalist concern. While the average voter might not be able to verbalize this so articulately – then again, maybe he or she could – there seems to be, and I believe this election demonstrates, a growing awareness that the system is becoming categorically unfair.

I have in the past cited, on various occasions, statistics on the income and wealth distribution in this country. Those numbers reveal a system that is channeling more and more values to fewer and fewer people. A lot of this has been hidden by the promulgation of myths that are aimed to legitimize these distributions. The myths take on two forms. The first is that those who benefit are worthy of those benefits due to the contributions they provide the society. The second is that transfer payments of any kind are “payoffs” to takers in exchange for their votes. The news outlets are reporting that Mitt Romney is explaining his defeat by pointing out that the President “bought” certain constituents' votes by giving them “gifts.” Both of these myths are duplicitous and have the effect of dividing us as citizens.

The first myth is particularly insidious. Don't get me wrong. Those in the upper class are often talented and hard working, but is the top one percent worthy of seventeen percent of the national income (it was eight percent in 1979)?¹ This might be true if this result was the product of fair competition or free markets. I will question this assumption shortly, but before doing so I want to state that even with fair competition or free markets, I contend that increasing inequality just creates and strengthens social forces that are detrimental to all of us. This notion deserves a thought-out explanation, but let me just illustrate this warning by pointing to conditions in nations where high levels of inequality prevail. Just look south of the border to nations that have high degrees of inequality and where drug wars, rampant crime, and kidnappings are as common as the stifling poverty. Gee, is there a connection? But my point here is that the benefits that the rich are enjoying are not the product of free markets; they are more and more the product of “seeking rents.”²

Nobel prize winning economist, Joseph E. Stiglitz, in his latest book, The Price of Inequality,³ explains how the well paid executives of large corporations have used their influence to undermine competition; by doing so, they have, to increasing levels, garnered huge compensations. The overall approach is known as seeking rents. Stiglitz explains the term as a description of business activities that seek compensation higher than would be derived from a truly competitive market. His book outlines a variety of strategies that result in such compensation. Let me give you the most obvious example. By eliminating competition, a corporation can sell its products at higher prices. Most of our major products are in markets that are either out and out monopolies or highly oligarchic (few competitors). And they are able to maintain these conditions through favorable governmental actions. The excuse used is that contracted markets allow for higher economies of scale. This occurs when businesses can produce goods or services at cheaper costs per unit by being able to acquire larger quantities of resources in larger bulk. But this has nothing to do with pricing calculations that businesses would have to make if there were many competitors. Without competition, these corporations are able to charge higher prices than a free market would allow. These prices lead to higher revenues and profits and executive pay.⁴ This is only one way to seek rents. It is a way that demonstrates how the rich are getting over-sized salaries that they do not earn. I will be reviewing in future postings the several ways the rich seek rents and how government either creates these ways or supports them. So please don't give me any self righteous claims of unjustified or unearned “gifts” to groups of voters who don't belong to the one percent.

The second myth is that the gifts are simply catering to the interests of the recipients. If transfer payments, in whatever form they take, were simply that, we should be outraged. But any review of these payments can and is justified for the social benefits they provide. Again, this posting will only address this topic in its most general sense. In its most general terms, we only have to remember a purpose for creating our national government: “to … promote the general Welfare …” . What does the general welfare refer to? It's up to interpretation but would you argue with me if I suggest that it includes a healthy, an educated, a protected, a working/earning population? Do you disagree? Assuming you don't, government benefits or, better stated, investments need to be justified on these grounds. Whether a particular benefit/investment does or doesn't add to the general welfare is subject to debate.

Hence, that's why we have elections. And we just had one. Let's move on and understand that a lesson from this one is that the average American is catching on to the games privilege play.

1See New York Times website: http://www.nytimes.com/2011/10/26/us/politics/top-earners-doubled-share-of-nations-income-cbo-says.html . The 17 % of national income statistic refers to the top 1 %'s share in 2007.

2For an interesting description of how this term evolved, see Stiglitz's book cited in the next note.

3Stiglitz, J. E. (2012). The price of inequality: How today's divided society endangers our future. New York, NY: W. W. Norton and Company.

4I have only given the most sketchiest of explanation of this type of rent seeking. I will in the future attempt to review this strategy more completely.

LESSON: MAKE NICE TO MINORITIES

With the last posting, I began a series of postings dedicated to lessons I derived from the results of the recent election. I believe these lessons are, one, encouraged by viewing the election from the perspective of federation theory and, two, useful to being addressed in civics classrooms. The last shared lesson was the realization that mid-term elections are a different political event than are presidential elections. A short version of this lesson is that the difference between them reflects the fact that mid-term elections over-represent voters who are either dissatisfied with conditions as they are or voters who are more emotionally invested in the fortunes of their favored political party. The result is that one is on very thin ice when one generalizes from the outcomes of mid-term elections or arrogantly states that those elections substantiate what the American electorate wants.

With this posting, I want to echo a lesson that the media has been emphasizing; that is, the Republicans have to begin to cater to or do a better job of alluring non-white voters – the minorities. Here, of course, I am referring to mostly African-American and Latino/a voters. The most cited stat is that Republicans were able to garner only 23 % of the Hispanic vote last Tuesday. African-American numbers are probably of less interest given that those voters have fallen traditionally, at least since the 1960s, heavily in the Democratic column. But when one analyzes the two populations, the Hispanic and African-American, we have, especially on social issues, fairly conservative folks. And yet the conservative national party is getting its clock cleaned by these sectors of the electorate.

Here is the problem: too many Republicans view these groups as “takers” not “makers.” They have boxed themselves into language, reflecting beliefs that no conditions in life exist in which a person should depend on governmental assistance. They are also taken with the idea that illegal aligns – or undocumented immigrants, depending on how you view these souls – are somehow taking advantage of our laws regarding immigration. The assumption is that the laws are reasonable and breaking them has no legitimate standing. Whether this is true or not is the subject for another posting. But in terms of the concern here, the language these beliefs have generated has made, or at least encouraged, Republican leaders to cater to the more bigoted elements in their ranks. So, the consensus I have been hearing is that they are scrambling to find new strategies that will be more conducive to these voters. Perhaps nominating more Latins and blacks will fix their problem. My take is that unless they view these voters as partners in our union, they will not find the way to their hearts. And if Republicans want a long term condition that can depend on more Hispanic and even African-American votes, that's where they need to be. Stan Greenberg, the highly regarded pollster, stated that the change in demographics this election exposed has generated a change in the mindset among the nation's voters.¹ Exemplifying this point, Mitt Romney didn't even win the Cuban-American vote in Miami-Dade, Florida – a traditionally Republican stronghold.

The challenge posed by the African-American population, though, is more daunting. Here we have too much history. After all, it was the Democratic Party that sacrificed its reliable voting base in the South to commit to the Civil Rights legislation of the 1960s and all the governmental policy that has been implemented since that has protected and advanced the interests of these voters. And instead of seeing the self- inflicted damage Republicans are doing, they are supporting such efforts as overturning in the Supreme Court the Civil Rights voting law of 1965. They undermine public education with their calls for vouchers and charter schools. They jump at any opportunity to cut back on economic programs that provide low income assistance.

My lesson from this election is that the Republicans are a far cry from finding the messages and images needed to present the minority populations with an agenda of proposed policies that are believable and attractive to these minorities. Hence, at least in presidential elections, Republicans are in bad shape and, of yet, don't seem to know how to improve on their prospects. 

 

1Mr. Greenberg's conclusion was stated on a C-Span broadcast which aired on November 7, 2012.