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Socially Useless

In the light (or all-devouring darkness) of the financial crisis, the following advertisement seems most condign:

Via John Médaille.

Comments (83)

Love it! The drink as well as the commercial.

Kamilla

There are always some groups whom it's acceptable to stereotype and demonize.

I think the old banker's reaction to the bankers' treatment would capture my own response. (I would think, "seriously?? You can't think of anything good that bankers do?!")

Try having a country entirely without them. Go ahead. Have fun. (I just reposted a humorous comment poking fun at _Atlas Shrugged_ at my Facebook account, and I agree with the comment [the import of which was that it's a pretty darned pretentious novel with a lot of nonsense in it} but I must say, some things bring out all my remaining sympathies for that point of view. Serve some people right if all the bankers in the world would go on an Atlas-style "strike.")

Hyperbole, people.

There are always some groups whom it's acceptable to stereotype and demonize.

Of course, and I came to political maturity listening to conservatives demonizing many of them - working class folks desirous of better wages and more secure conditions of contract, for example. But let some of that bile be vented upon the Lord's Anointed, and suddenly it's not so funny, or conducive to chin-stroking affirmations of the awfulness of some class of persons.

Try having a country entirely without them.

I'd like to try having a country without so many financial engineers developing oh-so-clever ways of moving rents around, folks whom Lord Turner rightly deemed socially useless parasites. In fact, we have had a country without them, in the past, and it worked out just fine. I wish we could return to that country.

Oh, and the libertarian fantasy of an Atlas-style General Strike of the oligarchy has to be the most puerile and ressentiment-laden nonsense ever to be put to paper. Poor dears, living in luxury unfathomable by the overwhelming majority of all human beings who have ever lived, so oppressed by an increase of a few points in the marginal rate of taxation! Quelle horreur! They'll take their toys and go home!

Love the bankers. They're as good a lot as any other on this planet.

I'm hoping for a bloggers' strike.

They're as good a lot as any other on this planet.

My point almost exactly! They're just as corrupt/corruptible as any other segment of the economic population, though they probably have more opportunities to perpetrate frauds, and frauds of great magnitude, than virtually any other group. Only pols can vie with them for that dishonour.

When told that society wouldn't be as well off without giving bankers millions of dollars, Maureen Dowd quipped, "Let's test that theory." With wealth inequality approaching Mexico, I ain't losing sleep worrying about how the men making millions annually are going to get by.

Their is nothing wrong with banking per se, its just that most of them don't acknowledge Christ as King and do not follow Catholic social teaching as outlined by Leo XIII in Reverum Novarum - if it wern't for the fact that the co-operatives in the UK are into the 'trendy' environmental, you're a bad person if you don't recycle crap I'd bank with them, at least the greedy ones don't make recycling your excrement a prerequisite for banking with them.

In fact, we have had a country without them, in the past, and it worked out just fine.

When exactly was this mythical time? Without financial engineers such as Robert Morris, Alexander Hamilton, John Nixon, etc. it's questionable whether the U.S. would be an independent nation.

Right, Max. Bankers are just as good as bloggers.

Maximos writes:

"I came to political maturity listening to conservatives demonizing...working class folks desirous of better wages and more secure conditions of contract..."

Well, my goodness, Jeff - I guess you used to hang with a pretty ugly crowd.

Perhaps you could provide some actual cites of what you're talking about, just to help me out, here.

I mean, maybe there's some slick corporate ad or other to be seen on YouTube that portrays "working class folks desirous of better wages and more secure conditions of contract" as "socially useless."

Or maybe there's not.

Steve,
You must be joking. As if there aren't entire think tanks and lobbying groups devoted to unconditionally opposing labor unions and undermining worker protection laws. Or does that not count as "desiring better wages and more secure conditions of contract"?

I'll show Wall Street bankers more respect when they stop giving themselves obscene bonuses that have risen exponentially over the years, largely based upon market bubbles they helped create.

When exactly was this mythical time?

Oh, do keep up, please. I'm referring to the physics-envy financial engineering that began in the 1970s, the sort of thing that Paul has been banging on about for some time, and quite rightly.

Right, Max. Bankers are just as good as bloggers.

Whatever, Mike.

Perhaps you could provide some actual cites of what you're talking about, just to help me out, here.

What Step2 said.

"I ain't losing sleep worrying about how the men making millions annually are going to get by."

Well you should be! What's good for the rich is ipso facto good for the rest of us, don't ya know. There's a darn good reason why the CEO of the Fortune 500 company I work for makes 300x the annual pay of the company's average hourly worker.....isn't there?

What's good for the rich is ipso facto good for the rest of us, don't ya know. There's a darn good reason why the CEO of the Fortune 500 company I work for makes 300x the annual pay of the company's average hourly worker.....isn't there?
No and no.

I couldn't tell if you were being facetious or not.

There are plenty of examples in history of men making ungodly amounts of money benefiting society. There are also plenty of examples of men making ungodly amounts of money while make their countrymen's lots worse.

Badger, I was being facetious. My point is simple: does anyone really need $15 million a year? Sure, some rich folks do a lot of good with their money, but there is a reason that Christ said that it's difficult for the rich to enter the Kingdom.

I suspect that American CEOs' outrageous salaries has something to do with their relatively (compared to western Europe and southeast Asia) greater susceptibility to litigation. I doubt very much that that is the whole story, however--there's probably also an American cult of the CEO that doesn't exist to the same extent in western Europe and southeast Asia, as well as different relationships between CEOs and shareholders.

And before the whole thing segues into "whether CEOs make too much" (however much that would be), please recall that the thesis on the table here is that bankers--and now, presumably, CEOs as well--are "socially useless." Methinks a rather stronger statement than that they "should make less."

~~~please recall that the thesis on the table here is that bankers--and now, presumably, CEOs as well--are "socially useless." Methinks a rather stronger statement than that they "should make less."~~~

The two are not unrelated: the question could be rephrased as "are they as 'socially useful' as their salaries would seem to indicate they are?"

Step2, Maximos:

I am not familiar with any "think tanks" or "lobbying groups devoted to ***unconditionally*** opposing labor unions and undermining worker protection laws" - let alone *demonizing* them in the way that bankers are demonized in that ad.

Nor, I think, are either of you.

I think the bankers have earned some fun at their expense.

It is often reasonable to distinguish between a real creative mind building and earning and improving and earning and working hard and earning, etc., a real private enterpriser, of honor and dignity but blessed with abundant skills of leadership and foresight and perseverance, which enables him to die a very rich man; between this and a financial engineer. There is free enterprise and then there is finance capitalism, in other words. In the joke the banker fills in for the latter.

Of course no one but the sheerest fool imagines a free society without bankers of any kind. Of course the functions of capital and credit inter-mediation are necessities in an economy. But we get out of wack when we start to suppose that these auxiliary facets of free enterprise are the thing itself. You can have all the banking you want; if you have no enterprise and wealth-formation, you'll have little prosperity.

I am not familiar with any "think tanks" or "lobbying groups devoted to ***unconditionally*** opposing labor unions and undermining worker protection laws"

It seems to me that the adverb "unconditionally" is performing the bulk of the labour in this objection, and if anyone really doubts the claim of dogmatic conservative opposition to the labour movement, what remains of it, then he is invited to conduct a term search for "unions" at the website of, say, the Heritage Foundation - the results are pretty well uniformly negative, and if that does not suggest unconditional opposition, then nothing does.

As regards the demonization, that is more a matter of talk radio and popular conservative discourse, the translation of those tired Heritage talking points into a rhetorically primitive discourse of othering. Would an audio file of some co-workers suffice, or do I have to catch an actual conservative pundit opining that unions are exploitative, criminal conspiracies to enrich shiftless layabouts?

Paul: "the bankers" have earned this? *Tout court*? All bankers, as such?

This is demagogy at its worst and stupidest.

There is free enterprise and then there is finance capitalism, in other words. In the joke the banker fills in for the latter.

No, the bankers fill in for, say, the "geniuses" who brought you the CDS.

I think that this is no time for people who like bankers to go all politically correct all of a sudden. I think its silly when Arabs protest the contents of a Disney song. I think its equally silly when bankers do it. Insensitivity training ought to be an industry.

Besides, its just a funny ad. We all know that without bankers, these people will have nobody to fondle their money for them. :)

Maximos: it might be interesting to discuss the merits of this or that particular dispute between Big Labor, on the one hand, and, say, the Heritage Foundation on the other.

But one really does tire, at a certain point, of all the broad-brush, specifics-free vituperation.

Maximos, it was legitimate to ask when the mythical "pre-banking" era was, since (in contrast to Paul, who has been consistently the claim that the damaging financial engineering started quite recently, within the last 40 years), you have rather strenuously suggested that grave financial depredations existed back in the 1800's also.

As far as the unions, it is possible to agree with the achievements that unions garnered over the first 50 years of operations, and then to feel that for the last 50 years they have consistently pushed too far - sometimes precisely at the expense of the little guy. For example, my brother, working for an airline, watched as the union leadership BOTH mis-represented the needs of the hourly wage workers, AND lined their own pockets.

Paul, I am fine with fun at bankers' expense even while I fully intend to continue to use their services. Just as I feel free to make jokes about accountants and actuaries, even though that pokes fun toward me as well: there is always a thread of truth in a stereotype, or the characterization would never be accepted. And there is always a limit to how far to push the stereotype: since it is a generalization, some members of the group will meet the characterization more than others, and some not at all.

The bankers who pushed the limits of reasonable risk-taking, and (even more) figured out the optimum means of disguising what they were doing, have given the whole group a bad image. Just as loud-mouth basketball players give that whole group a bad name. If good bankers (and yes, there remain some) cannot police their wayward confreres, then they can at least submit to some fun being poked at them in good grace.

But there is a line between poking fun at a group based on a common but not universal characteristic, and claiming a basis for actually punishing a whole class based on that characteristic. The latter is prejudice, and is no more appropriate when used on rich people than on poor, or black, or whatever.

Fondling money!? Are you mad? It's the filthiest stuff on Earth. If you doubt me, toss a penny in a peatri dish. I worked for a couple of years as a bank teller, and believe me, I would always wash my hands BEFORE going to the bathroom, the stuff is that dirty.

Do bank executives (I mean that, most people in banking are low-pay peons.) deserve their outlandish pay scales? Do CEOs? Of course not, but it is done as there is no alternative in the current labor ecology. If you want to see them make less, increase the supply of capable CEOs in relation to the demand. Of course, that would require the destruction of more than a few of the dogmas of Left Liberalism.

As for unions, they could be a force for good. Unfortunately, they are more often "exploitative, criminal conspiracies to enrich shiftless layabouts" than not in America. Many unions could be rehabilitated, but it would require the division of public and private unions, along with a few other measures to keep them out of the Commie Kool-aid.

After all, do you think you can cast out the demon of Greed with Envy?

I'm referring to the physics-envy financial engineering that began in the 1970s, the sort of thing that Paul has been banging on about for some time, and quite rightly.

In other words, a variant of the Hyman Minsky hypothesis.

Do bank executives (I mean that, most people in banking are low-pay peons.) deserve their outlandish pay scales? Do CEOs? Of course not, but it is done as there is no alternative in the current labor ecology.

Patrick, although I understand your point, do you mean to say that there is no way to get a moral CEO in charge of a company? (As I have said in the past-) Wouldn't a good board of directors be ready to say something like this: "We are willing to pay a half million for a good CEO, maybe with a potential bonus of another 100 or 200 K for great results, but above that, any CEO who wants a share of the profits "he creates" to the tune of a 15 million bonus is no CEO that _we_ want, because he thereby proves himself morally unqualified for the position."

Great comment, Patrick.

Steve, I can't see any reason why bankers should be immune from ridicule. Most beer commercials ridicule young decadent men. Some ridicule fathers, husbands, or good friends. A few celebrate these latter things. Also, the one older banker gives as good as he gets, which is to me the funniest part of the commercial (do they let that kind of stuff air on regular TV over there?)

Also, any investigation into the personalities of the men who run, and have run, our great houses of finance, will demonstrate conclusively that these are not, by and large, men unacquainted with ridicule and rough humor.

Outside of beer commercials, my writings on this subject of finance have gone to great lengths to make careful distinctions.

Tony, one of my favorite movie comedies makes fun of my profession. I hear what you're saying.

But one really does tire, at a certain point, of all the broad-brush, specifics-free vituperation.

Indeed, which is why I referenced the mindless vituperation showered upon organized labour by the popular right; for while unions have sometimes proven corrupt, or counterproductive, they have also sometimes proven immensely utile, as in the three decads or so following WWII; financial engineering, by contrast, has proven itself capable of one thing, and one thing only: augmenting the rents collected by - surprise! - financial engineers and other rentiers, while obliterating an entire decade's worth of growth (or creating an entire decade's worth of utterly illusory growth, take your pick).

In other words, there is no point in having a discussion about the relative merits and demerits of unions and financial engineering until and unless this asymmetry is admitted. For reasons of the emotive commitments of popular conservatism, along with the normative commitments implicated in the discussion - too numerous to list, but certainly indicated by my numerous more detailed posts on political economy, and in the generally negative reactions to them - I don't see much of a reason to believe such a discussion possible. When I can garner a response better than, "he proposes to steal our freedoms", "he denies the benefits of trade", " he ignores the problem of unintended consequences" (as though only my positions, or positions like mine, have unintended, and negative, consequences - please), and "Maximos' policy proposals lead logically and inexorably to totalitarianism", perhaps such a discussion will be possible. Oh, yes, I've neglected to mention the accusation that, as an opponent of industrial agriculture, I must want billions of people to die, from which it follows that I must embrace population control, or even genocide.

From my perspective, and based upon my own experience in blogging, I have no reason whatsoever to expect calm, rational discussion of controverted issues in political economy; until I can muster up some hope of the same, I'll continue to mock the incoherence and hypocrisy of a popular conservatism that vituperates volubly over anything likely to benefit labour, but moves heaven and earth to deny that private-sector financial engineering had a giant had in the Great Recession.

Doubtless, even this, or especially this comment will be greeted with some snark. That's part of the problem.

Oh, no, Maximos, I'm still saving up the snark generated by your earlier comment about "taking their marbles and going home." Here it is:

Ah, you mean that these are the sort of "socially useless" people whom you ardently reserve the right to milk to keep society going the way you want it to go, heaping scorn on them the while. _That_ kind of "socially useless." I get it now.

See, Paul, speaking for myself, a TV commercial is a TV commercial. This particular one, I think it's pretty silly, but I might shrug it off merely qua commercial. I have no problem with making fun of professions in a light-hearted, in-passing way. It only rouses me to join Steve in talking about "mindless vituperation" when a commercial like this is put up as, "Hey, you know, that makes a lot of sense" by making it the content of a blog post headed by the title, "Socially Useless." That's not just mild humor anymore.

Ah, you mean that these are the sort of "socially useless" people whom you ardently reserve the right to milk to keep society going the way you want it to go, heaping scorn on them the while.

Yes, because obviously the "suffering" of a plutocrat whose taxes rise from a marginal rate of 35% to a marginal rate of 39% and change exceeds by several orders of magnitude the suffering of a man struggling to feed a family of four (or more) on wages made stagnant, or declining, by contemporary American political economy. Why, does the latter man not know, as Henry Ward Beecher, that great nineteenth-century pastor to the plutocracy, once declaimed in reference to protesting railroad labourers, that bread is cheap and water is free, so that a family can have good bread and water for breakfast, bread and water for lunch, and good water and bread for dinner? Why, the unutterable effrontery of those who plead difficulty in procuring adequate combinations of shelter, heat, food, and health care, by comparison to the torments of those who must now surrender 40 cents, instead of 35, of every marginal dollar! The poor are always the real whiners, and the whiners are always poor!

I'm prepared to say that much of what high finance does is, indeed, socially useless. Sorting out which parts are actually necessary is difficult enough; discerning legislative or regulatory reforms to address those that are of dubious utility is a harder problem still.

For instance, there is no question in my mind that the basic work of investment banking -- credit intermediation in the form of security issuance -- is a necessity. If Maximos is proposing the jettisoning of this industry tout court, he's lost his marbles.

But that is only, as it were, the beginnings of the conversation we need to have. Is our economy really all the better off with the dominance of Wall Street? In 1998 Goldman Sachs held $250 billion in assets; today that number is over $1 trillion. Arguably it was already too big to fail at one-fourth its current size.

According to David Smick, writing in Commentary (not exactly a bastion of socialists and populists), "Before the outbreak of the financial crisis, the U.S. financial-services industry represented an incredible 40 percent of corporate profits and 30 percent of the stock market’s value." Since the bailouts, "we have a dollar-based global financial system dominated by roughly 25 government-subsidized international megabanks, with some of the biggest owned by China. These giant financial institutions control roughly $50 trillion in bank assets. That’s 60 percent of the world’s total bank assets."

This is not healthy. It is an eminently conservative project to check the growth of this gargantuan plutocracy. And yes, ridicule is a legitimate tool in that.

Maximos,

I thought the commercial was cute -- we all need to be able to laugh sometimes at those we admire. Of course, I would have loved the commercial if the hero called out "bureaucrats" even more, since I work as a bureaucrat and think self-deprecating humor is good for the soul:

http://nlt.ashbrook.org/2010/01/another-new-even-more-surprising-critic-of-government-employee-unions-and-the-pensions-theyve-secure.php

Singer: even better, how about TSA bureaucrats?

Yes, because obviously

Right, see, so they're _not_ socially useless, because you (in your hypothetical role as government agent-of-change) _need_ the money from the tax hike to help out the poor, struggling family. If you need to get that extra money, skimming it off their profits, then they're not socially useless. This should be obvious. You need those nasty, rich whiners to work hard enough to make that nasty "extra" money so you can take it back from them to fund the programs you think justice requires.

Jeff, it was nice to read Yglesias making that argument against California's bloated public pension system. I would offer one caution, however, and that is that one should not wish for the evisceration of the public sector in California, for the dirty little secret is that there are swathes of the state in which the middle class depends upon public sector employment. Eliminate too much of that, and you have a Latin-American style stratified society. California's problems are far more profound than a bloated clutch of public-sector unions.

Oh, God, yes, let's mock TSA bureaucrats. And let's mock the intelligence bureaucrats who couldn't, or didn't, connect all of the dots on the Christmas Crotchbomber, even when they already had all of the dots sitting in front of them. On account of that failure, we will now be subjected to even more inanities from the TSA.

For the record, Paul, I don't propose to abolish investment banking; what I'd propose is the proscription of most derivatives, and most debt-securitization instruments not linked to any underlying investment in production and innovation. Let Government Sachs help some corporation issue bonds, raising capital for new investment in making useful stuff, but let's not have any more of this MBS nonsense. If you fail, and it costs the people trillions, don't try again.

Right, see, so they're _not_ socially useless

Of course, I never said that rich people qua rich people were socially useless. If you want to frame the discussion so simplistically, then, yes, the wealthier segments of the population are immensely useful, because they often run enterprises which employ many Americans, and afford us goods and services conducive to commodious - if not always ethical - living; then, their tax monies support useful public services.

What I've said is that financial engineers are socially useless, inasmuch as the benefits accruing to society from their tax contributions are outweighed, by several orders of magnitude, by the costs to society of the externalities of their practices. Again, Lord Turner was correct: this sort of thing is social parasitism.

"I am not familiar with any "think tanks" or "lobbying groups devoted to ***unconditionally*** opposing labor unions and undermining worker protection laws""

Adams, Nash, Haskell & Sheridan

Permanent Solutions Labor Consultants, Inc.

Labor Relations Institute, Inc

Jackson Lewis

AFI International

CUE

Burson-Marsteller

Heritage

United states chamber of Commerce

The Republican Party

Employment Politics Institute Foundation

Center for Consumer Freedom

Center for Union Facts

Marcus Foundation

Walton Family Foundation

National Right to Work Committee

National Right to Work Legal Defense Foundation

The clip was ok as far as it went but why did the productive workers suffer the bankers to live?

And again i will point out that a significant share of top executive compensation is the result of rent seeking and could be easily corrected with a 90% top marginal rate.

Wait a minute. Wasn't Al lecturing us just this week about overheated rhetoric with faintly violent implications?

Thanks for the list Al.

I don't really want to kill the bankers, occasional references to guillotines in private conversation aside. That's just venting. I just want them reduced in power and wealth, as they've reduced ours.

What I've said is that financial engineers are socially useless, inasmuch as the benefits accruing to society from their tax contributions are outweighed, by several orders of magnitude, by the costs to society of the externalities of their practices.

Well, in that case, you should have no objection if that particular group were capable (which in practice they aren't) of "taking their marbles and going home." You should offer them a cushy one-way trip to The Valley and see them off joyfully at the airport.

Indeed, which is why I referenced the mindless vituperation showered upon organized labour by the popular right; for while unions have sometimes proven corrupt, or counterproductive, they have also sometimes proven immensely utile, as in the three decads or so following WWII; financial engineering, by contrast, has proven itself capable of one thing, and one thing only: augmenting the rents collected by - surprise! - financial engineers and other rentiers, while obliterating an entire decade's worth of growth (or creating an entire decade's worth of utterly illusory growth, take your pick).

The UAW workers who expect to work for 30 years and be supported for another 30 years for doing a job that can be done for $10-$20/hour depending on the region of North America are also rent seekers. Don't lose sight of the fact that the unions are so widely despised on the right precisely because of the fact that they have such an incredibly entitled attitude.

The financial engineers' great trick was convincing the public that they are entrepreneurs, not gamblers and rent-seekers. Of course, for a long time, a lot of middle class families actually benefited from the higher values of their investments that these fraudsters helped create. The same cannot be said of the higher product prices that were a result of union rent-seeking (is it any wonder why lower priced Japanese cars made in right-to-work states are also higher quality).

Find the one that doesn't fit:

I just collected the garbage for my city. I saved thousands of people from rat-borne disease. I made 35, 000 this year. I'm a garbage collector and proud of it.

I just discovered a cure for cancer. I will save millions of people from a horrible death. I made 1.7 million dollars this year (the price of a Nobel Prize in Medicine to a single individual). I'm a medical researcher and proud of it.

I just discovered how to eke out another .02 cents on the stocks for my company. I will save millions of people from having to eat waffles. I made 10.9 million dollars this year. I'm a CEO of a Fortune 500 company and proud of it.

The Chicken

Disclaimer: Not all garbage men are reputable; not all medical researchers are reputable; not all CEO's are disreputable; probably not all garbage men can spell rat-borne; probably not all medical researchers can spell Nobel; probably not all CEOs of a Fortune 500 company can spell .02. This test is solely for entertainment purposes.

Maybe I'm crazy here, but if financial engineers really are speculators, and don't help to move money around to their highest and best use (as I suspect they do, at least much of the time), then surely they don't deserve their very high salaries and are socially useless in the sense that they don't generate wealth, aren't they?

Maybe you'll take the Hayekian stance that a person deserves whatever the market determines his value to be, but there are a couple of problems with that. First, I think it's wrong--I think it's quite possible for us to come up with more objective valuations of what a person's work brings to society and then ask ourselves whether society's priorities, in giving them the salaries they receive, are screwed up. (E.g., when people condemn baseball players' salaries, perhaps what they should be understood to be doing is bemoaning the fact that so many people find baseball so interesting that they're willing to pay $33 million a year to see Alex Rodriguez play.)

Second, Hayek's position could be right only if there aren't large market distortions. But if Paul Cella is right that financial engineers couldn't have reached the position they have without government subsidies--i.e., market distortions--then they aren't being paid what they deserve.

In any case, the truly important thing is to respond to Lydia's comment: "Well, in that case, you should have no objection if that particular group were capable (which in practice they aren't) of 'taking their marbles and going home.' You should offer them a cushy one-way trip to The Valley and see them off joyfully at the airport." Surely, they can pay for their own one-way trip?

That's fine. Let 'em pay. I was just being exuberant in my reference to offering them a cushy one-way trip, as a way of countering Maximos's _moral outrage_ at the idea of people who object to being milked and dream (however pointlessly) about "striking." My point is that you can't have it both ways: You can't say that so-and-so is socially useless while at the same time being angry at his even fantasizing about taking his ostensibly "useless" talents and employing them somewhere else. If he's really socially useless, you should be happy to see him go, not angry about it.

"Well, in that case, you should have no objection if that particular group were capable (which in practice they aren't) of "taking their marbles and going home."

They can't because they have no marbles of their own. Things like 30 - 1 leverage, proprietary trading schemes, and no-equity bailouts allow all sorts of wonderful things to happen to a few, while generating nothing for the nation as a whole.

"Do Innovations Do Much Good?

MR. VOLCKER: A few years ago I happened to be at a conference of business people, not financial people, and I was making a presentation. The conference was being addressed by a very vigorous young investment banker from London who was explaining to all these older executives how their companies would be dust if they did not realize the joys of financial innovation and financial engineering, and that they had better get with it.

I was listening to this, and I found myself sitting next to one of the inventors of financial engineering. I didn't know him, but I knew who he was and that he had won a Nobel Prize, and I nudged him and asked what all the financial engineering does for the economy and what it does for productivity.

Much to my surprise, he leaned over and whispered in my ear that it does nothing—and this was from a leader in the world of financial engineering. I asked him what it did do, and he said that it moves around the rents in the financial system—and besides, it's a lot of intellectual fun.
Now, I have no doubts that it moves around the rents in the financial system, but not only this, as it seems to have vastly increased them."

Ponder this; for two or three decades a whole lot of really serious brain power has been engaged in essentially unproductive activities that turned out to be very harmful.

Paul, the difference between gallows humor and incitement revolves around the potential for implementation (cough, Tiller, cough). Also, for the sake of brevity, I left some assumptions unstated. The men in the assembly seem sober and responsible; I assumed a sort of people's trial where the bankers could have stated their cases. You know, explain how sure they almost crashed the world's economy but look how they have suffered - I mean only a seven figure bonus.

"Ponder this; for two or three decades a whole lot of really serious brain power has been engaged in essentially unproductive activities that turned out to be very harmful."

Not being polemical here, but this is a really sweeping statement, so how do you know this? Besides credit default swaps, what other financial instruments are you familiar with? Personally, I don't know of any--it's beyond my pay grade. That said, I naively think of financial instruments in general as just different ways of bundling risk. In other words, they allow us to make some investments that would otherwise be significantly riskier without the instrument. Am I being overly naive here, or what?

Well, in that case, you should have no objection if that particular group were capable (which in practice they aren't) of "taking their marbles and going home." You should offer them a cushy one-way trip to The Valley and see them off joyfully at the airport.

They can pay their own way, and in fact should probably pay ten times the going rate. Moreover, my mockery of the Randian fantasy was not directed at the financial engineers specifically, but at upper-class whining generally, as that seemed to be the context of the earlier part of the thread.

The UAW workers who expect to work for 30 years and be supported for another 30 years for doing a job that can be done for $10-$20/hour depending on the region of North America are also rent seekers.

From the perspective of the mainstream right, on which it is generally believed that wages should correspond as closely as possible to marginal productivity - though there really is no obvious means of calculating this, there being a technical economics literature on the subject (in practice, this means that wages should be whatever the "market", based upon fluctuating conditions and actually-existing power-relations, determine) - yes, unions are rent-seeking operations. From a broader politico-economic perspective - and laying aside the question-begging assumptions that wages should be set in this manner, and this manner alone, and that a negotiation between an individual worker and a vastly more powerful fictitious person, known as a corporation, is free in any meaningful sense of the term - it is not self-evident that a process integral to the creation of the American middle class, and the wider politico-economic benefits that made possible, was an instance of rent-seeking. Perhaps in certain instances, which is to say, circumstantially, but not intrinsically, and not tout court. The creation of the middle class was a classic instance of non-zero-sum economic thinking in the United States.

Financial engineering, on the other hand, has proven itself to be zero-sum, and ignominiously so. Moreover, as James Kwak demonstrates, bankers tend to be overpaid relative to their individual contributions, much as are athletes, except that, unlike athletes - who at least entertain us - and the middle class that arose on the basis of unionism, overpaid bankers, traders, and hedge-funders offer little or no - often negative - follow-on benefits.

Al, thanks once again for posting that brilliant passage on Volcker and the financial engineer.

Conservatives would do well to recognize that, while they are bound to be defenders of a diversity of forms of inequality, natural and social, there is no imperative to defend this particular form of inequality. It often seems as though vulgar conservatism latches onto just any old form of inequality, if it is the sort the arouses the ire of leftists or distributists, and clasps that inequality to its breast, resolving to defend it as though it were the embodiment of Christlike purity itself. And particular form of inequality should at once express foundational social and ethical norms, and afford generalized benefits to society. Financial engineering fails on the latter account, and if it is regarded as expressive of essential values - by conservatives, no less - then those conservatives must learn afresh how to shudder.

In other words, they allow us to make some investments that would otherwise be significantly riskier without the instrument.

They permit one clever person to make an investment with less risk than some other, less clever, or irrationally-willing-to-gamble person, who effectively assumes the risk; that is, they shuffle risk off to dark closets, from which it emerges at random intervals to terrify us all. Risk is, just as death is inescapable. The delusion of financial engineering is that it can be eliminated.

"They permit one clever person to make an investment with less risk than some other, less clever, or irrationally-willing-to-gamble person, who effectively assumes the risk; that is, they shuffle risk off to dark closets, from which it emerges at random intervals to terrify us all. Risk is, just as death is inescapable. The delusion of financial engineering is that it can be eliminated."

Who is this other person in the above quote? Do you mean one of the persons whose money is being bundled into the financial instrument? Or do you mean one of the other financial engineers who isn't using the instrument? Or some third kind of person?

Any or all of them, depending upon circumstances. Plus, the rest of us, when the bubble burst and the bailouts happened.

Yes, Bobcat, you are being very naive. Your assumption would be correct if the financial system was regulated as to things like assessing risk, preventing institutions from becoming over leveraged, and having the primary purpose of facilitating useful production as opposed to skimming and churning money in a closed loop. Oh, and did I mention leverage?

For the 1.0 version of this you might start with "Liar's Poker." Add tons of steroids for our present experience.

I'm trying to figure out how the "ridicule" of this ad--which hardly deserves the description because of its almost total absence of wit--serves the supposedly helpful function of making Paul's highly qualified and hedged-about point, about the social utility of some small sector of the banking industry. The bottom line is that the ad does not even attempt to make Paul's point, which is that there are certain sectors of the banking industry that trade in things that don't really exist.

My brother is an investment banker, it so happens, and provides retirement services. He helps people to invest in their own retirements, their children's future, and so forth. He also profits handsomely from the enterprise, and I have never for a moment thought that he was overpaid given the massive value of the expertise he provides. Nor have I ever for a moment thought that he was a literally "useless" human being. Nor that the existence of some think tank with a generally anti-union policy bent justified treating him as a complete social outcast.

And since the vast, overwhelming majority of bankers, and the vast, overwhelming majority of baking services, have just as much social utility as my brother, Paul's suggestion that this is really some kind of high-minded satire making an extremely useful point about the securitization of derivatives--or at least, that it is so when put into his hands and posted in this particular forum--strikes me as obvious nonsense. All this talk of whether there are rightists making similar noises about socially useless groups is just a self-justifying distraction. Two wrongs, and their relation to a right, seems to have been covered in kindergarten, unless I misremember.

To sum up: the ad says that bankers, as a group, provide nothing of any value and ought to be shunned utterly (it also suggests that they are crude, mean-spirited old bastards to boot). You will have an extremely difficult time convincing me that the ad produces in the typical viewer--or was intended to produce in the viewer--anything remotely resembling Paul's heavily-qualified point about the utility of certain practices within certain sectors of the baking industry.

The best that can be said of the beer commercial is that it is a momentarily amusing one. Did I say this -- that "[the beer commercial] is really some kind of high-minded satire making an extremely useful point about the securitization of derivatives"? Huh?

I'm sure we all know investors or bankers or investment bankers, Sage. Just like we all know fine and decent lawyers but still laugh at lawyer jokes.

You didn't like this joke. Fair enough.

"The best that can be said of the beer commercial is that it is a momentarily amusing one."

Ok, I would have settled for tar and feathers.

You can't say that so-and-so is socially useless while at the same time being angry at his even fantasizing about taking his ostensibly "useless" talents and employing them somewhere else. If he's really socially useless, you should be happy to see him go, not angry about it.

Except when those persons deserve that anger.
http://obsidianwings.blogs.com/obsidian_wings/2009/03/bonuses-at-aig.html

Maximos,
You might enjoy reading this transcript of an award winning public radio show about the global credit crisis. It doesn't absolve the bankers of anything, but it shows how they were caught up in what they phrased as "data over common sense".
http://www.thislife.org/extras/radio/355_transcript.pdf

al at 11:31 a.m.:

Ah, a list.

No quotations, no argument. Just a list.

You write: "The clip was ok as far as it went but why did the productive workers suffer the bankers to live?"

Well, yeah, that's kinda the way that Stalin felt about the Kulaks.

Hilarious.

You stink of totalitarian hatred.

In other words, they allow us to make some investments that would otherwise be significantly riskier without the instrument.

They permit one clever person to make an investment with less risk than some other, less clever, or irrationally-willing-to-gamble person, who effectively assumes the risk; that is, they shuffle risk off to dark closets, from which it emerges at random intervals to terrify us all. Risk is, just as death is inescapable. The delusion of financial engineering is that it can be eliminated.

Maximos, excellent point. Just what I wanted to say, too. There is a big difference between selling a share of stock in GE, and selling a so-called "share" of the action in a roll of the dice done by re-packaging the roll of dice as if it was stock. The bundling of the risk did not alter the riskiness, nor did it make the risk more bearable by smoothing it out among those who could bear it thus smoothed out: what the bundling did was allow people to pretend there was no risk, to sell (and buy) the bundle as if the risk were not there.

What I do not accept is that the bundling somehow caused people who had no business taking on an ARM mortgage to think, as if rationally and clearly and with forethought: "I can afford this mortgage." What these people did instead was to think: "where before I knew I could not pay the 30-year mortgage payments at 6%, now I know I can make the initial payments at 2%, and I can just pretend about the future when the increases kick in - after all, so many other people are jumping off the bridge." So along with the predatory financial re-arranging, there was also the darwinian "I'll put blinders on my own eyes so I can't see the predators."

and the middle class that arose on the basis of unionism,

Well, no, not so excellent a point, sorry. The middle class existed back in the 1700's, and was well on its way toward stronger growth before the unions were even dreamed of, and long before the unions had any appreciable effect. What the unions did for the first time was to give the blue-collar, muscle-worker an expectation of being a member of the middle class. It has never been established whether such a vision was realistic, or was a chimera or pipe-dream based on a mixture of greed, envy, and over-optimism (or over-trust in those "selling" such optimism).

It has never been established whether the notion of a single wage-earner dad-with-family doing 8 hours of factory-floor work a day being thereby able to have a two-car single-family home, a travel vacation each year, and send his several kids to college, is sustainable and rational as an economic model. It would be nice if EVERY hard working individual could afford that. But until the advent of mass-production and large-scale corporate enterprise, nobody thought college education was within the reach of most, and nobody ever imagined that muscle-workers were to be considered middle class . No, before that, "middle class" was ALWAYS reserved for the shop keepers, businessmen, entrepreneurs who risked their own capital. In part because muscle labor alone without risk never managed to achieve a high enough return to fit the bill.

Now, it does not bother me a bit that labor unions helped get many blue collar workers a much better living. I never benefited from that myself (directly, that is), but given the horrible working conditions before the unions came along, I am happy the unions helped put an end to that kind of slavery. What bothers me is the _assumption_ that a basic laborer's work-value must, automatically, put him in the middle class range. Hullo - isn't this a sort of fairly obvious grade inflation? Maybe in some places, times, and industries it could, and maybe in other circumstances it just doesn't.


Tony, either a significant percentage of muscle-labourers will be elevated into the middle classes, by means of various political and economic expedients, or representative government in these United States will be increasingly circumscribed (I exclude as unrealistic the possibility, discussed in at least one recent book, that declining middle class fortunes will incline the electorate to revolutionary ferment of some sort, because the elites will circumscribe representative government de facto, or even de jure, well before that becomes a realistic prospect. In the words of a disreputable Polish death metal band, "slaves shall ****** serve" - and this is the credo of all elites, sometimes expressed more genially as, "people must know their places."). Some conservatives occasionally wax rhapsodic, or nostalgic, or merely utopian, about a social order in which the franchise was tied to the ownership of property, forgetting the rather different historical circumstances - not to mention the primitive accumulation that these arrangements facilitated, but lay that to the side - in which such arrangements prevailed; the advent of mass society as a general phenomenon put paid to such relics of agrarian capitalist society, and they shall not return, save as tragedy, likely on the model of the Pink Police State - but I dare say that there is nothing laudable, from a conservative perspective, in the postmodern version of bread and circuses.

In part because muscle labor alone without risk never managed to achieve a high enough return to fit the bill.

As I've said previously, I fail to see why marginal productivity should be the sole, or principal, determinant of material prospects, not least because this is to presuppose the primacy of quantitative economics over culture, where it is a set of ethical norms, instantiated in culture, that preclude consigning vast swathes of the population to undignified subsistence.

In fairness, Paul, no, you did not literally say that.

I would only add to the discussion that there is a very obvious difference between unions and the banking industry. Namely, that unions do not produce anything in and of themselves, and it is perfectly possible to imagine, say, a non-unionized auto industry. It's a lot harder to imagine a banking industry with no bankers in it.

If Heritage (or whoever) has produced articles damning the auto industry as such, describing auto workers as useless parasites, rather than indicting the perverse effects of unionization on that industry, I'd like to see some citations. Otherwise, it's not a 1-to-1 comparison.

The usual mindless crap.
Max, what shield of impervious armor do you clothe the government in that it always escapes mention?
How do government agencies intrude to the tune if trillions, debase an entire process of credit allocation, and disappear from the sights of your eagle eye?

Bankers, what good are they? Well for better or worse we will be spending the next few years finding out as Mother Government, with the soft touch of a Sasquatch, trods ever ambitiously on what once was a country that clung to the remnants of a minimal freedom.

Not that many will mind. It's just a shame that others will be dragged down to the level of those who lust for subordination and humiliation.

On the happy side, Barney Frank is contemplating expanding the role of certain agencies to include lending and underwriting for co-ops and condos,on the assumption one must presume that you can't have too much of a good thing.
Also, that lessons are made to be forgotten, minefields designed for walking, citizens meant to be robbed, and as always, someone else to shoulder all the blame.

It's a great racket, puts what is left of the mafia to shame.

I must, must clarify one thing. It isn't a beer commercial. It's hard cider. Apples =/= grain.

As for middle class, they were not all shopkeepers. Many were also _skilled_ labor. This goes back before the 1700's, to the guilds. Now, the guild system has only some similarities with unions, in which unions are grossly lacking. As it is, they were meant to be negotiators for the workers, now they are just as bad to the workers as the management.

Patrick, one of the things I am ignorant of (among a great many, to be sure) is the extent to which, in the old guilds, the skilled laborer worked on something that was his own risked capital. I believe that it was more than an insignificant amount. Didn't joiners buy the wood and then work it? Didn't the boatmaker buy wood and work it? Didn't a smith buy pig iron and work it into equipment and tools? And didn't each of these suffer greatly if he was lazy, worked unskillfully, or charged enough that competition undercut him?

Tony, either a significant percentage of muscle-labourers will be elevated into the middle classes, by means of various political and economic expedients, or representative government in these United States will be increasingly circumscribed. (I exclude as unrealistic the possibility, discussed in at least one recent book, that declining middle class fortunes will incline the electorate to revolutionary ferment of some sort, because the elites will circumscribe representative government de facto, or even de jure, well before that becomes a realistic prospect.

Maximos, that is an odd thing to say on several counts. (1) Would it not be true that "elevating" (your word choice, not mine) a muscle worker into the middle class on solely political expedience mean, as an automatic by-product, that such laborer's own work does not of itself return sufficient wealth to make him a part of the middle class? And if so, then what you seem to be suggesting is that political expedience may run contrary to economic reality, and there is nothing to complain about in this.

(2) If laborers are thus moved into the middle class specifically by reason of political expedience, then ipso facto "representative government in these United States will be increasingly circumscribed". I take that as proof positive that doing it simply by reason of political expedience is degenerative in itself. If political expedience AND wholesome morality (which cannot operate in blindness to economic reality) work hand in hand to do it, then (at least in theory) we can have an expansion of freedoms that we have already lost to some extent. But I do not find that it is the liberals who are trying to explain economic reality so that elevating laborers into the middle class is obviously the natural and morally right result - they are rather hell-bent on obfuscating economics to get that. As, witness, the Clinton administration mandating giving risky mortgages on financially unsound bases.

(3) Using the word "elite" in this context is more than a little bit problematic. It can have more than one meaning, and one meaning is in reference to those in the forefront of forming opinions or ideas among the masses. This is, without doubt, found more fully in the mainstream media and in academia, which are almost wholly in the hands of liberals. Are you suggesting that liberals are saying (behind their backs) that people need to be kept in their places, even while telling the masses to their faces "you deserve a middle class life-style" regardless of economic reality? This would indeed be consistent with certain aspects of the heart and soul of the liberal establishment (at least that element of the liberal establishment which holds the actual reins of power, in their clear understanding that they will never keep the reins of power if they cease to have a lower class to which they can preach the mantra of promote

a respect for true freedom.

Some conservatives occasionally wax rhapsodic, or nostalgic, or merely utopian, about a social order in which the franchise was tied to the ownership of property,

Yes, I have seen that too. It is somewhat ill-placed, isn't it? What those conservatives should instead wax rhapsodic about, rather, is a condition in which the franchise is limited to those who can demonstrate both an understanding of reality (beyond their own noses) and a love for the common good. Unfortunately, since the liberal education establishment has unfortunately managed to train the vast multitude to think of themselves as "educated" when they have finished high-school (including those high-school drop-ups who graduate simply because the system won't allow failure to anyone who doesn't defy the system enough to drop out) there is no prospect of ever changing the current condition of universal franchise.

that declining middle class fortunes will incline the electorate to revolutionary ferment of some sort

Oh, that's rich. Really, really rich. Let's take that phrase "declining middle class fortunes" and look at it. We all know that the middle class has been shrinking - media has been shrieking about it for decades. In 2003, the Washington Post put it on the front page after some 1990s statistics came out: "Middle Class Shrinking" they said in the headlines. When you looked at the actual numbers, though, what it turns out to be was that BOTH the lower and middle classes shrunk, and the upper class experienced great increase.

OK, now look behind the statistics: during the same period, we experienced an influx of (depending on guesstimates) between 6 million and 10 million illegal aliens. It is obviously true that however much better an illegal alien finds life here than they did at home, it is almost impossible for them to move out of the ranks of the lower class within a mere 5 or 6 years at the lowest-paid jobs that are the only ones open to them. What the statistics say NOT ONE WORD about is, of those in the lower class during the 80s, how many of _those_ remained in the lower class in the 90s, but we can surmise that with an additional (at least) 6 million new lower class members, and still the overall percentage of the lower class dropped significantly, what happened during the period was a remarkable movement of a huge swath of the American lower class into the middle class, and a still more remarkable movement of people from the middle class into the upper class. And did the article mention any of this? No, of course not: it protested that the middle class was shrinking.

Maximos, that is an odd thing to say on several counts.

No, my statement does not imply, nor was intended to imply, that in the absence of any socio-political structuring of the economic system, that the labourer's productivity would be insufficient to elevate him into the ranks of the middle class - though, on the presupposition of a largely, or purely, market-based determination of wages (with the discreet silence on the power-relations that such systems instantiate), that is true enough - nor, what is less, that any such structuring of the market would run counter to economic reality. Much as the natural law underdetermines the specificity of a nation's political structures and economy, so also do 'economic laws' underdetermine that specific articulation. Political economy, particularly once a culture has risen above the most primitive levels of barter, is artifactual, a cultural and more or less reasoned response to circumstances - including material facts - that may be governed in accordance with a diversity of normative and practical objects. Illustratively, in Gilded Age America, with her high tariffs and largely captive internal markets, there was no necessity compelling the issuance of such meager wages to labour; as demonstrated by numerous other forms of political economy, inclusive of more than a few industrialized nations in the present, a nation with a system of tariffs, or border-adjusted value-added taxes, and a substantial domestic market and/or substantial export markets, can easily shift the distributions towards labour, precisely in order to sustain a broad middle class and a consumer base for that productivity. That this was not done so in Gilded Age America, and increasingly is not done in contemporary America, is a function of numerous contingent factors, cultural, historical, ideological, and pertaining to existing power-relations, and not of any necessity. Moreover, the Scandinavian social democracies demonstrate the possibility of combining a more progressive distribution of the social product with high productivity - that is to say, high growth on GDP per capita. Some social democracies even retain labour-market flexibility, and free-trade policies comparable to those in the Anglo-American economies, while simultaneously providing transition services for dislocated workers - essentially embodying the judgment that the externalities of free trade should not be borne exclusively by the individual. That these systems of political economy function as they do suffices to indicate that there is no operational impediment to them over and above that which confronts any system of political economy; that such systems may not transfer to the American context is a function of contingencies of American history, character, and culture.

If laborers are thus moved into the middle class specifically by reason of political expedience, then ipso facto "representative government in these United States will be increasingly circumscribed".

It was the circumscription of representative governance that made possible the political economy of the gilded age, and, to a degree, has made possible the political economy of our own, late, Great Barbecue. Have the Wall-Street centric policies of recent governments been democratically popular? I think not.

But I do not find that it is the liberals who are trying to explain economic reality so that elevating laborers into the middle class is obviously the natural and morally right result - they are rather hell-bent on obfuscating economics to get that. As, witness, the Clinton administration mandating giving risky mortgages on financially unsound bases.

This was an instance of certain aspects of an articulated political economy failing to cohere, either logically or operationally, with other aspects of an articulated political economy. If the multifarious facets of a nation's political economy do not generate adequate returns to labour, then there is no amount of financial hocus-pocus that will enable labour to, say, afford escalating burdens of debt, whether mortgage or consumer-credit related. When a nation's political economy is manifestly incoherent in this manner, one should inquire as to whom is thus benefited

Using the word "elite" in this context is more than a little bit problematic. It can have more than one meaning, and one meaning is in reference to those in the forefront of forming opinions or ideas among the masses.

Economic elites, and the courtiers they purchase from among the conservative think-tank universe, also have vested interests in keeping people in their places, as the grand politico-economic bargain of recent decades has mandated the combination of low interest rates - obviously to lower the cost of capital for Wall Street speculation - low rates of "wage inflation", and an expansion of debt as a structural compensation for the low rates of wage growth.

Oh, that's rich. Really, really rich.

I'm not inclined to credit any statistical analysis dating from the early years of the Noughties, inasmuch as the data set will likely reflect both a)the recent idiocy of the technology bubble, and b)the nascent speculative bubble in real estate, construction, and related modes of speculation. In reality, the Noughties were a decade void of income gains, and most increases in household income may be attributed to increased labour force participation, ie., an increase in the percentage of households with two or more income-earners, or income-earners working more than one job.

Max. I love it,"the courtiers they purchase from among the conservative think tank universe".
So Max, did you hear about Jonathan Gruber, MIT economist selling Obamacare while under contract to the Administration? For a modest $297,000, that's a lot of consulting, not that Gruber ever mentioned it.
Of course that's only one person, and of course it's also representative of our current "Stimulus Plan". Part of the larger and current picture you might say.

Would it be too much to ask for a dollop of honesty and integrity Max? A tad of balance?
Don't try to answer, you can't.

If only Maximos had gotten into his time machine and traveled about 10 hours into the future, he would have had a chance to see the first story on Jonathan Gruber. Then he could have displayed his integrity and balance, much like johnt has.
http://voices.washingtonpost.com/ezra-klein/2010/01/jon_gruber.html

Step2, gifted as you are you might have noticed my reference."it's also representative" etc. Brilliant as you are you might have allowed for Max to read of it and respond. Perceptive as you are you would have known that this post of Max's is both typical and in it's direction and purpose, repetitive. My response therefore being predicated on said weary theme.
Shallow as you are, you did none of these things, dishonest as you are you ignored the obvious, petty as you are you resorted to the childish sarcasm that is your trademark.

So the call for balance is lost on you.
That's the last sentence in case you missed it, missing things being your forte.

You're a child Step2, don't bother me.
So how is you boy Obama doing?

Maximos, I too worry about statistics from the "Noughties" as you call it. That's one reason I mentioned statistics from the Nineties instead.

Much as the natural law underdetermines the specificity of a nation's political structures and economy, so also do 'economic laws' underdetermine that specific articulation. Political economy, particularly once a culture has risen above the most primitive levels of barter, is artifactual, a cultural and more or less reasoned response to circumstances - including material facts - that may be governed in accordance with a diversity of normative and practical objects.

Maximos, I disagree with how you construe the issue, but let's take your point at face value and cut to the chase, point blank and head on: Take any decade in the 1900's before 1960. Take the total amount of wealth created in the country under the hands of unskilled labor, average it out and share it equally between ALL of that unskilled labor ALONE, and don't share out one single red cent to any investor at all. Is it statistically verifiable that this amount of wealth would be enough to give each labor wage-earner's family - man, wife, and 3 or 4 children - a middle class life-style? I am not aware that this can be substantiated. Now, throw in the minimal requirement that the investors who supply the capital on which the laborer labors a very, very modest 3% return (in real terms, that is to say over inflation). Is it STILL verifiable that the total wealth left can support every laborer's family. I haven't crunched the numbers, so I don't know. Unless you have crunched the numbers then you don't know either. But if you don't know, then it remains possible that the economic REALITY, separate from any cultural constraint that is supposed, simply does not admit of a reasonable promise to unskilled labor that they attain a middle class life style.

Now, let's take another tack: "middle class" life style is, itself, a moving target, largely defined by the median or average of the many levels of life style. ALmost by definition, then, unskilled labor could not naturally and commonly be expected to produce the amount of wealth (not income - I am not talking about what he is paid, I am talking about the amount of new wealth his labor generates) that the common man considers average. And yet, the liberal mainstream makes its bread and butter off of a constant projected vision that EVERY person should have the equality of wealth that is common in the middle class. Isn't that basically impossible?

That's one reason I mentioned statistics from the Nineties instead.

Statistics from the nineties are also troublesome, as I meant to indicate by referencing the increasing rate of labour force participation, as well as the succession of bubbles that have constituted the American economy for two decades. To say that such-and-such an economic process has elevated many formerly middle-class families into the upper class - by which I assume is meant the upper-middle - under the former conditions is merely to state that much of this progress owes to the combination of multi-income families and investment returns on - this is the nineties we're talking about, right? - the technology craze. Some of those returns owed to actual increases in productivity; most were speculative and illusory, as disclosed by the bust of the early Noughties. In any event, saying that many middle-class families have ascended to the upper class is not quite the same as saying that they have ascended to the upper class because both spouses work, or work multiple jobs, or got lucky speculating and have some investment income. To say the latter is to say that they're prosperous by doing with two income earners what was once done with one, and that they got a little lucky in the Wall Street casino.

Take the total amount of wealth created in the country under the hands of unskilled labor, average it out and share it equally between ALL of that unskilled labor ALONE....

I'm not certain that this is an appropriate intellectual exercise, inasmuch as the logic of an industrial political economy - which is what we're talking about if we're discussing the first three-quarters of the twentieth century - is increased productivity via the application of various machine technologies, which, by their nature, increase the returns on any given unit of labour. If we hypothesize that the returns to labour were kept at the level of basic social reproduction, ie, subsistence, this would mean a)that all of the returns from increased productivity went to capital, and b)that in a short period of time, those returns would collapse for want of a mass market for that productivity. Increasing returns to labour were necessary to sustain the industrial production regime itself, hence the structural importance of unionism and other twentieth-century bulwarks of the middle class. And, in fact, the "Fordist" political economy did deliver increasing prosperity to unskilled and low-skilled labour, at least in sectors utilizing productivity-multiplying machines and techniques.

"middle class" life style is, itself, a moving target, largely defined by the median or average of the many levels of life style.

The very structural logic of industrialism, under the conditions I've stipulated, will generate enough wealth to elevate workers in affected industries to the middle class - often the lower-middle class - lifestyle appropriate to that stage of industrial development.

So the call for balance is lost on you.

In five years of reading your bitter comments you've never before shown the slightest interest in balance. Why the sudden change?

You're a child Step2, don't bother me.

I'm sorry if your constant indigestion is getting the better of you, johnt. Try being correct more often and I'll bother you less.

So how is you boy Obama doing?
So that is your idea of substantive adult discourse? Ridiculous as usual.

To say the latter is to say that they're prosperous by doing with two income earners what was once done with one,

Unfortunately, you are using a moving yardstick to do the measuring when you say that. Listen, I agree with you on the damage that moving from a single-income family into a 2-income family standard has done to our society. That's one of the first things my wife and I agreed on: she would stay home with the kids, I would put the food on the table.

But along side the change to a 2-income family, we have ALSO seen: average single-family house size run from around 1100 square feet (that's the size of my parents house when they bought it in suburbia in 1953) to around 2000 sq. ft, while the family size shrank to half, so you have an effective 4-fold increase. One radio and no TV, through 3 radios, a so-called "hi-fi" stereo, and a B&W TV, to no (dedicated) radios any more, 2 or 3 Ipods, several TVs, and a number of computers/gaming units in the house. One car to at least 2. Maybe one kid going to college if he had great grades, to any kid going to college who either got at least C's and wants to, or any kid who got B's (or better) and can't decide what else to do for another 4 years. 3 stations on TV, to hundreds on TV, and virtually unlimited on internet. One library within walking or biking distance, to most of the world's printed output on your desk.

Many of these changes don't really increase the satisfaction we have in life, but they do constitute some component parts of how we need to measure standard of living. The fact that even poor families can easily, without trying hard, have a colored TV in the house, whereas when I was growing up only the wealthier 4 or 5 families on the block had them, should at least signify how much the yardstick has moved.

which is what we're talking about if we're discussing the first three-quarters of the twentieth century - is increased productivity via the application of various machine technologies...were kept at the level...of the returns from increased productivity...

In my thought experiment, I was NOT, most explicitly and definitively NOT asking about how to measure the added value of an added worker's labor to a given economic engine. I.E. marginal value, increases in productivity, or any other standard fare for the arguments about who ought to get more of the profits.

No, I was providing a method for getting around all of that stuff, and looking directly and forcefully at the sheer concrete amount of wealth as such. If you divide up all the wealth produced under unskilled labor, and give it to those laborers, will that amount of wealth give them a middle-class life-style. You DON'T have to discuss change in productivity to answer that question.

I don't know that anyone has definitively settled that question by a valid application of mathematical formulae and sound statistical data, so I posited a theoretical answer: it is impossible that such labor provide a middle life-style, because what we understand by "middle" is in comparison, and included in the comparison is the universe of labor with skilled labor, and also with mental work of engineers, academics, judges, etc.

Unfortunately, you are using a moving yardstick to do the measuring when you say that.

Which is precisely what you are doing when you shift the discussion to a series of non-income, consumption-related improvements in lifestyle and quality of life. When we are discussing class mobility, we are talking about a phenomenon of income, above all else, and in that case, the increase of two-earner (or more) families is pertinent. Those other phenomena are relevant primarily - as in the tired discourse of Will Wilkinson - if one wishes to argue that, while inequality is increasing, it is of small or no consequence because of improvements in consumer goods, lifestyle, and so forth.

No, I was providing a method for getting around all of that stuff...

It is artificial and - to the extent that anyone engaging in the exercise is endeavouring to establish a partisan political point, to legitimate some contingent feature of political economy - perverse to argue that the share of the social product accruing to one segment of the workforce can be isolated from the economic, social, and political contexts integral to the actual labour performed by that segment of the workforce.

I don't know that anyone has definitively settled that question by a valid application of mathematical formulae and sound statistical data

I'm dubious that it can be settled by such means, as this is essentially a matter of contingent, artifactual political economy.

because what we understand by "middle" is in comparison

This sounds a bit too much like a stipulative argument for my tastes, to be honest. If we assume that "middle-class" is defined by certain professional occupations, and analogous forms of white-collar work, then no, various unskilled and low-skilled manual-labour employments will not afford a "middle-class" lifestyle. However, what Americans typically have in mind when they consider such a lifestyle are various concrete attainments, and not generally those that arise in discussions - as above - concerning improvements in consumption; relative comparisons become important, for example, during bubble phases, with a "keeping up with the Joneses" effect (my neighbour just bought a giant gas-guzzling SUV as a sign he's doing well, and, as a member of the same social class, I should do the same), or a ratchet effect (If the rich now drive the 7 Series BMW, where they previously drove the 3 or 5 Series, many in the middle classes think that it's now middle-class to get the 3.), or in times of economic distress (when declining fortunes in the real economy prompt its denizens to cast their eyes toward Richistan, where various plutocrats continue to consume in lavish style, untouched by the general privation). The former two phenomena are pathological, though not solely at the level of individual consciousness and psychology; the latter, when it becomes a perduring feature of a society's political economy, portends instability and upheaval: thwarted expectations and kindled resentments are volatile.

Step2, you not being able to show me just where I am incorrect in this thread is as I expected from you.
Gruber is an example, it really matters not if Max, who BTW, is obviously fixated, has heard of him or not. In any case, and for the second time, I went on to another and larger example. Therefore your initial response to me was, yes, stupid. I would rather be suffering from indigestion myself, an affliction disposed of through the delights of modern plumbing, of which you are probably unaware.

As for balance, much could be said but all would be lost on you. So in the interest of simplicity may I point out that it is both especially strange & dishonest to go on as Max has considering who is in the WH & who controls both Houses of Congress. Max refuses to acknowledge this and offers his Humpty-Dumpty views of the world instead, a problem he shares with you I gather.

In this both you and he emulate what I have the right to conclude is your hero, B. Hussien Obama, who has spent a full year hiding behind one George Bush. The method of evasion and avoidance of responsibility seems to run through and permeate the three of you, perhaps you all could meet for lunch and compare notes.
Sorry if I lowered the discourse by mentioning The One's name, some things are sacred after all.

Now I have wasted my time by twice responding, I can't forgive myself. But I'll try.

The former two phenomena are pathological, though not solely at the level of individual consciousness and psychology

I can agree with that: there is both plenty of (personal) envy and greed involved in those, along with a cultural twisting due to social pressures.

Nevertheless, Maximos, you and I seem to be talking almost directly at cross purposes here.

When we are discussing class mobility, we are talking about a phenomenon of income, above all else, and in that case, the increase of two-earner (or more) families is pertinent.

But my point was not centrally _about_ class mobility, it was other. So, using something other than _income_ was not a false step. My primary, central point was to pick apart an assumption, thereby getting at something about unions. The unions have declared as widely as they can, and convinced a great many people, including all of the unskilled and minimally skilled laborers they can get their hands on, that if the wealth they work so hard at creating was rightly distributed, they could live a middle-class life-style. This point is NOT an issue about class mobility, except secondarily. It could be viewed in terms of those workers moving _up_ the scale gradually into the middle class of incomes, but that is remote to the question, because the question can be investigated without changes in social structure, because it can also be looked at in stasis.

My concern is to point out that the claim could be simply, flatly, definitively wrong as a matter of pure mathematics without looking at developments in income and class. Take a snapshot right now. These workers have a _current_ wealth output from their work (I am NOT talking about their wages, I am talking about the wealth that exists when their labor is complete). And right now, in that snapshot, a person considered at an average middle class lifestyle has X amount of wealth as illustrated by his house, cars, vacations, education, etc. Give the best possible distribution of the wealth generated under the hands of labor, by distributing ALL of the wealth produced at the hands of the laborers TO THE LABORERS, and see if that amount of wealth provides the AMOUNT of wealth that is needed for a middle class life-style. I will admit that this requires a measure of where the "middle class" is at the moment you take the snapshot. But it SIDESTEPS any of the admitted pathological stuff you pointed out that come from alterations in in social environment.

My point about the changes in houses, cars, etc was not about changes in class stratus at all, but about changes in wealth itself. But that point was not my central concern.

perverse to argue that the share of the social product accruing to one segment of the workforce can be isolated from the economic, social, and political contexts integral to the actual labour performed by that segment of the workforce.

Fortunately, that's not what I was doing, because I am not talking about sharing the social product between segments. I am well aware of your concern for the social and political contexts which drive the manner in which we decide to distribute the wealth. I was making a point that SIDESTEPS that issue, because I assume that any or every possible argument about how much of the wealth produced by the factory ought to go to the managers, the engineers, and the investors (and how much to labor) is of necessity tinged with self-interest. So I don't provide room for any of that argument, I take that argument off the table: assume that it ALL goes to labor. Total, one hundred percent. So there is no reason to bother worrying that labor's share is colored by the social or political context.

If you want to try to tell me that the total amount of wealth that is the output under the hands of unskilled labor cannot be isolated from the political context, then I would say I don't think you are listening loud enough. Their work results in an output, physical results, a concrete amount of produced goods. Whatever that is, it IS THAT amount regardless of whatever politics and social distribution schemes currently provide for sharing and dividing it up. Since I am not looking at the division of the output between segments, that issue says nothing to my point.

If we assume that "middle-class" is defined by certain professional occupations, and analogous forms of white-collar work, then no, various unskilled and low-skilled manual-labour employments will not afford a "middle-class" lifestyle. However, what Americans typically have in mind when they consider such a lifestyle are various concrete attainments

And that's just what I mean as well. I don't mean in comparison to white collar, or certain occupations, or social stratus. I mean concrete amounts of wealth.

For example, in 1960, both lower class wage earners, and middle class skilled workers, and middle class white collar workers, and upper class snobs, all thought that you couldn't be middle-class if you didn't own at least one car and maybe a second (unless you were wealthy enough to pay for cabs everywhere and not notice the cost). And except for those living in the heart of the 4 largest cities, middle class pretty much was not considered middle class if living in a rented apartment. So, if the entire wealth generated under the hands of unskilled labor in 1960 were completely given over to those workers, would that amount of wealth enable all of those people to buy a house and own a car and a half, in 1960, along with the other accoutrements of the that commonly perceived idea of middle class wealth?

My point about the middle being in comparison is not, as you seem to assume, that I want to define my way into "showing" that labor cannot be middle class. I was making a different point: if our PERCEPTION of what it means in terms of wealth (not social status or caste) to be middle class (see above for concrete example, which mentions nothing about social environment) is a widely held perception, what it amounts to more than anything else is a generally consistent averaging of the life-styles of many different types, some clearly poor, some barely poor, some clearly rich, some nearly rich, and many sort of in between. [Unlike former times in Europe, Americans find it very easy to ignore a theoretical caste based on either antecedent family status, or typical caste common to your occupation, and allow a person's actual wealth in hand to define his status in terms of "middle class" or elsewhere.] If the many possible ranges of income that go into the social perception of where middle wealth is, then automatically that average consists of factoring in the wealth enjoyed by those in skilled labor, and those in academia, and engineers, doctors, lawyers, advertisers, and con-men as well.

This means that there are lots and lots of people that have skilled labor and other sorts of work that is not muscle labor (like writers) that are part of the average. If the amount of wealth enjoyed in the hands all of these are component parts going into how we perceive the "average" life-style, then either (A) the amount of wealth produced by unskilled labor is very similar to the amount of wealth ENJOYED those in the average (not received in income by - I am not mixing apples and oranges), or (B) there is no mathematical possibility that the total output of unskilled labor is going to enable all those laborers to equal in wealth the _perceived_ average of all who make up the average.

Again, this is based on a snapshot at any one time, and has absolutely nothing to do with changes in perceptions or changes in society over time, nor shared income between segments of the workforce responsible for a given product.

Tony, I understand perfectly well what you intend to establish by means of your exercise. My objection to it is twofold: first, it is trivially true that the amount of tangible wealth generated by unskilled and low-skilled labour will be insufficient to afford such labourers a middle-class lifestyle (assuming that we're not talking about minimally-skilled labour employed bolting some parts of automobiles together, where his productivity is enhanced by machinery and his compensation - possibly - by collective bargaining); second, it is nonsensical, as a matter of political theory, and, at a certain level of analysis, even as a matter of economics (depending upon other socio-economic conditions) to imagine that any political imperative is established by this procedure, for any imperative thus imagined would essentially reduce to a mandate to minimize the solidaristic elements of the social contract. Even setting aside the normative questions, this is not even pragmatically possible in advanced industrial and post-industrial democracies; there is no conceivable way of establishing, as a socio-political norm, the notion that each segment of society should enjoy that wealth, and only that wealth, that results from its work (though some early political economic literature can be read as suggesting precisely this). Even libertarians such as Charles Murray have discussed what is effectively a guaranteed annual minimum income - though it is not, of course, called that - as a replacement for the welfare state apparatus, the point being - whatever the merits, or lack thereof, of Murray's proposal - that there is such a thing as society, and, this notbeing 1832, there is no necessity of there existing subsistence deprivation in our society.

If the amount of wealth enjoyed in the hands all of these are component parts...

Again, this strikes me a trivially true. Of course unskilled labourers will not equal in wealth the perceived middle class averages. However, the middle class, being an exceedingly broad spectrum, a series of family resemblances, and not a simple matter of averaging, can encompass a substantial percentage of the labouring classes. At this point, I'm sensing a conflation of unskilled labour and unionized factory labour; there being a vast difference between a group of unionized janitors and people operating industrial machinery of some sort, I'm not certain that your point is as strong as you assume it to be. Do you mean to tell me that, had the entire product of General Motors in 1959 gone to assembly-line and other labourers, that those labourers would not have been middle-class?

But my point was not centrally _about_ class mobility, it was other. So, using something other than _income_ was not a false step. My primary, central point was to pick apart an assumption, thereby getting at something about unions.

Now, that's just a conflation of two somewhat distinct threads of conversation. My original statement regarding the declining fortunes of the middle class had nothing to do with unionism per se, but with the phenomenon of treading water via increased labour-force participation. It was no controversion of this argument to note the profusion of improvements in consumer goods, when the central middle-class goods of a house, health care, and so forth, seem to recede ever-further up the income scale. If, on the other hand, you wish to argue for the impossibility of the unionist aspirations, the historical and contemporary evidences are far from uniformly negative.

Tony, I understand perfectly well what you intend to establish by means of your exercise. My objection to it is twofold: first, it is trivially true that the amount of tangible wealth generated by unskilled and low-skilled labour will be insufficient to afford such labourers a middle-class lifestyle (assuming that we're not talking about minimally-skilled labour employed bolting some parts of automobiles together, where his productivity is enhanced by machinery and his compensation - possibly - by collective bargaining);

emphasis added for sake of clarity:

Then you totally, 100 percent misunderstood my point. You don't get the meaning behind my phrase "generated under the hands of" unskilled labor. I mentioned factories specifically to INCLUDE such enhanced labor. I specifically DON'T CARE how much compensation is "arranged" either with or without bargaining, in whatever system or non-system, because I ignore compensation altogether.

But enough: I explained the point 3 times, and it went totally, absolutely past you 3 times. It is obvious that you aren't going to get it, so there is no use my doing it a 4th.

No, Tony, it did not go past me. Let me be blunt: during the height of unionism in the United States, when tariff and trade policies, and political support for unionization, and numerous other policies besides, undergirded the economy, many unionized auto workers, and steel workers, especially those with experience and seniority, earned incomes comparable to, and sometimes in excess of, incomes earned by professionals in the middle class. They did so because, in the context of the economy of the time, they actually produced more wealth than many accountants. Period. So no, it is not categorically true, as the issuance of a formalistic analysis of what it is to be middle class, that unskilled/industrial labour does not, and cannot, generate sufficient wealth to qualify as middle class. Moreover, the perception of middle-class-ness is not solely, or even primarily a matter of averaging, as though Americans as a people engage in an implicit and intuitive quantitative and qualitative averaging out of everyone from the working poor to the local plutocrats, locate the center, and declare that the middle class. Such an averaging does occur, and it is useful as a means of locating the core of the middle class; but middle-class-ness is not a matter of being at that center, or close to it, but of a series of family resemblances oriented around any such average. In the mindset of most Americans, a family who own a decent double-wide, have reasonably stable employment, and access to some accoutrements of the "good life" - or at least some facsimiles thereof - qualify as middle class. A family who rent an apartment in an city, or an older suburb, will likely qualify, depending upon any number of factors, despite the fact that they may not conform to the average, in which prosperous accountants and auto mechanics are tossed together. In fact, I know such families.

But if you're going to argue that blue collar labour qua blue collar labour does not generate middle-class levels of wealth, and so cannot be middle class, and insult me for failing to see your argument precisely as you see it, then I will not only remind you of the historical evidence - which does not conform any strong version of your argument - and object to the perception/averaging heuristic - since middle-class-ness is a series of family resemblances across a broad spectrum, replete with many lacunae and anomalies - but suggest that I don't take kindly to personal barbs, in any context.

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