Insta-Millard: In the new Gilded Age, the rich do not share the wealth

May 6, 2014

Have the GOP and the Über-wealthy set up the whole world for another Great Depression?  Should we expect a World War to follow?

Or, do we have time to make our societies more egalitarian, and more anti-poverty, and more stable?  Graphic from BusinessWeek:

Super wealthy have concentrated the wealth of the world in their personal control. Capitalism run riot? Graphic from BusinessWeek

Super wealthy have concentrated the wealth of the world in their personal control. Capitalism run riot? Graphic from BusinessWeek

Opportunity to move up, economically, is stifled when so much wealth blocks access to the top economic rungs.

These figures come out of a clever analysis by economists Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics, who is a visiting professor at Berkeley. The Internal Revenue Service asks about income, not wealth, which is the market value of real estate, stocks, bonds, and other assets. Saez and Zucman were able to deduce wealth by exploiting IRS data going back to when the federal income tax was instituted in 1913. They figured out how much property different strata of society owned by looking at the income that was generated by that property, such as dividends and capital gains. To simplify, if a family reported $1 million in rental income one year and the market rate of return on rental properties was 10 percent, then Saez and Zucman concluded that the family must have owned property worth $10 million.

The message for strivers is that if you want to be very, very rich, start out very rich. The threshold for being in the top 0.1 percent of tax filers in 2012 was wealth of about $20 million. To be in the top 0.01 percent—that’s the 1 Percent club’s 1 Percent club—required net worth of $100 million. Of course, even $100 million is a pittance to Bill Gates, whose net worth, according to the Bloomberg Billionaires Index, is nearly 800 times that.

It will require great creativity to work our way out of this maldistribution without some sort of catastrophe.

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2 Comments | Economics, Gilded Age, Great Depression, History, Income Distribution, Opportunity | Tagged: , , , , , | Permalink
Posted by Ed Darrell

May 6, 1882: Race and immigration policy collide

May 6, 2014

Today is the anniversary* of our nation’s first** law generally governing immigration.

It’s a history we should work to change, to put behind us, to move away from.

Congress passed the Chinese Exclusion Act, which barred Chinese immigrants from the United States for 10 years.

1882 Chinese Exclusion Act, page 1 - National Archives

1882 Chinese Exclusion Act, page 1 – National Archives

1882 Chinese Exclusion Act, page 2 - National Archives

1882 Chinese Exclusion Act, page 2 – National Archives

We cannot paint over this part of history.  The Chinese Exclusion Act was racist in intent, and racist in content.

What should we learn from it?  Among justifications for the law were claims that immigrants from China were taking jobs from citizens, especially in California.  Chinese workers imported to build the Transcontinental Railroads sought new employment once the routes were built.

Reality probably differed a lot.  Chinese entrepreneurs, with money they had earned working on the railroads, established news businesses.  Yes, a lot of Chinese were getting jobs.  They were mostly new jobs, in new businesses, boosting the economy and creating more jobs.  That came to an almost-screeching halt.

Did America learn?  This law was renewed, then made permanent — not really fixed until World War II, when China was an ally in the War in the Pacific, against Japan.  Even then, it wasn’t a good fix.

The law was repealed by the Magnuson Act in 1943 during World War II, when China was an ally in the war against imperial Japan. Nevertheless, the 1943 act still allowed only 105 Chinese immigrants per year, reflecting persisting prejudice against the Chinese in American immigration policy. It was not until the Immigration Act of 1965, which eliminated previous national-origins policy, that large-scale Chinese immigration to the United States was allowed to begin again after a hiatus of over 80 years.

Can we learn from this history, for immigration reform now? Santayana’s Ghost wonders.

How much is resistance to immigration reform based on racism, the sort of racism that kills the U.S. economy?

The Chinese Exclusion Act proved to be an embarrassment for Uncle Sam: “A Skeleton in His Closet,” by L.M. Glackens, published in Puck magazine on Jan. 3, 1912. Uncle Sam holding paper “Protest against Russian exclusion of Jewish Americans” and looking in shock at Chinese skeleton labeled “American exclusion of Chinese” in closet. Image from NorthwestAsianWeekly.com

The Chinese Exclusion Act proved to be an embarrassment for Uncle Sam: “A Skeleton in His Closet,” by L.M. Glackens, published in Puck magazine on Jan. 3, 1912. Uncle Sam holding paper “Protest against Russian exclusion of Jewish Americans” and looking in shock at Chinese skeleton labeled “American exclusion of Chinese” in closet. Image from NorthwestAsianWeekly.com

____________

*    I note the image says it was approved by President Chester Alan Arthur (who had succeeded to office after President James Garfield was assassinated a year earlier).  The New York Times calls May 6 the anniversary of Congress’s passing the law; if Arthur signed in on May 6, it was probably passed a few days earlier.  May 6 would be the anniversary of its signing into law.

**  The Chinese Exclusion Act was preceded by the Page Act of 1875, which prohibited immigration of “undesirable” people.  Who was undesirable?  “The law classified as undesirable any individual from China who was coming to America to be a contract laborer, any Asian woman who would engage in prostitution, and all people considered to be convicts in their own country.”  It was not applicable to many immigrants.  The Page Act was named after its sponsor, Rep. Horace F. Page of California.

This is based on, and borrows from, an earlier post at MFB.

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1 Comment | Economics, History, Immigration, Legislation, Racism, U.S. House of Representatives | Tagged: , , , , , , , , , | Permalink
Posted by Ed Darrell

Birth of hydrogen phobia: May 6, 1937, the Hindenberg crash

May 6, 2014

May 6, 2014, is the 77th anniversary of the Hindenberg tragedy. Docking at its station in New Jersey, after crossing the Atlantic, a spark ignited the aluminum-based paint on the airship, and the entire craft exploded into flame.

35 people died on the airship, and one on the ground — did you know a few survived? The Associated Press interviewed a man who was 8-years old that day, and a passenger on the airship.

Werner Doehner, an 8-year-old passenger aboard the Hindenburg, saw chairs fall across the dining room door his father had walked through moments before the disaster. He would never see his father alive again.

“Just instantly, the whole place was on fire,” said Doehner, of Parachute, Colo., who is the last surviving passenger. “My mother threw me out the window. She threw my brother out. Then she threw me, but I hit something and bounced back. She caught me and threw me the second time out. My sister was just too heavy for her. My mother jumped out and fractured her pelvis. Regardless of that, she managed to walk.”

Hindenberg on fire

Hindenberg on fire, May 6, 1937.

The disaster erroneously condemned hydrogen in the public’s mind. Despite widespread use of hydrogen gas for cooking and some transportation during World War II (including in the U.S.), use of hydrogen as a fuel beyond that has always faced the hurdle of the “Hindenberg Syndrome,” the fear that the gas would explode.

Is the fear justified?  Fact is that gasoline is much more volatile, more explosive, and generally more dangerous, than hydrogen.  We move, and use, millions of gallons of gasoline in the U.S. every day, worldwide very hour, bound by laws enforcing strict liability, in relative safety.  Most people don’t think about the explosive power of the few gallons of gasoline stored under the rear seat of their car, where the children ride.

What other technologies do we fear irrationally?  What technologies do we irrationally fail to fear so much as we should?

This is mostly an encore post.

2 Comments | Disasters, History, Safety, Technology, Transportation, World War II | Tagged: , , , , | Permalink
Posted by Ed Darrell