Friday, June 20, 2014

The Lottery, American Style

When we had satellite television, I found myself watching Extreme Makeover, Home Edition, with my wife. The plot? A poor family living in the country had been nearly bankrupted by medical bills. They were lucky enough to find a bone marrow donor for the mother who had Leukemia, now in remission. But they were stuck in a house that they couldn't live in after a fire. The happy ending? They get a new house, a new barn and a new car. Can you see the product placements everywhere?

But that isn't the most interesting part of the show to me. What interests me is the eye-watering scale of the rewards in this show and other reality shows and game shows. When the game show, Deal or No Deal started, they were offering a million and sometimes more for people to guess which suitcase had a million bucks in it. American Idol, America's Got Talent, Who Wants To Be A Millionaire, and even Are You Smarter Than A Fifth Grader were all offering a million or more as the grand prize.  Even the Publisher's Clearinghouse Sweepstakes has offered $1 million a year for life.  $1 million is equivalent to at least 20 years of income for most people, many of which can only dream about just accumulating that kind of money in their job, profession or trade.

In previous articles I've noted how the extreme concentration of wealth in this country has really gotten out of hand. Proof can be had by just searching for "banana republic" in your search engine of choice.  Even Alan Greenspan, Ayn Rand's biggest fan, has expressed concerns about this. These giant prizes are to me, evidence that the upper class knows that everyone else is getting restless and shafted. They may not be concerned with another Bastille Day, but they seem rather concerned that Americans are getting burned out and bankrupted at the same time. Hence, the bread and circuses.

During the last decade, I saw a huge increase in the production of reality shows and game shows that somehow return the riches to a few chosen people. It seems like the upper class is throwing crumbs or a few pieces of bread to the little people as they watch the circus, while the accretion of wealth at the top accelerates, with little notice.

Could the source of these gigantic prizes be a guilty conscience or are they intended as a distraction? I don't know. Maybe it's both.

Now there is nothing wrong with a little generosity. But there does appear to be a confluence of events. On the one hand, we have suffered a tremendous economic collapse now known as the Great Recession. On the other we are witness to gigantic transfers of wealth in this generation from the lower classes to the upper class. This is what happens when wages stagnate for 30 years while executive pay rises by more than 270%.

Anyone who is still working now amid 6.8% and greater unemployment will realize a subtle increase in buying power. That buying power is magnified and concentrated among the people at the top 1%. The top 1% had and still have the power for years to organize these game and reality shows as well as the "generosity" in the prizes. It's a perfect distraction for the rest of us to watch while wealth and power continue to concentrate among the top 1%.

Such displays of ostentation in mass media are also the carrot on the stick. They are intended to inform us that wealth is something we could have if we could only win the lottery. This notion seems particularly relevant with the rise a few years ago of Ted Williams, the Golden Voice. During his rise, I've seen him pop up in the news and as a guest on Late Night with Jimmy Fallon. There is no doubt he has a great voice.  But just how did he get there?

He was a homeless man for years and one day, he was panhandling at a freeway off-ramp when fate took a turn.  A man who worked for a television production company gave him some money while exchanging some words. The man in the car noticed Ted's voice and returned, offering more money for an opportunity to make a video and put it up on YouTube. The clip went "viral" and soon, he was receiving offers from major networks. He is said to have remarked that, "I feel like Susan Boyle."  He seems to have won a lottery, eh? Now his voice introduces Ryan Seacrest on American Idol.

Hard work and dedication to one's chosen profession or trade, combined with a complete education don't really matter any more because the game is stacked against the middle class. If we're focused on a lottery rather than our own abilities, then we're distracted. That's perfect because the upper class does not like competition. You might recall this quote from one of the world's richest men of the 20th Century, John D. Rockefeller. He said, "Competition is a sin."

I was surprised to find some confirmation of this trend in an article on the Huffington Post by none other than Arianna Huffington. "Shorting the Middle Class" is a short financial history of the last 30 years illustrating the relationship between key events and trends during that period. What does it mean to short a security? It means to bet that the value of the security will be less in the future than it is now. That is a bet on failure.

Arianna's article demonstrates how elite investors have been shorting the middle class in mortgage investments and insurance scams. First, millions of people who want to own a home are offered mortgages that are impossible to keep with variable rate mortgages and then these securities are packaged and sold to one or more groups of investors. They are impossible to keep because these investors are aware of the trends with wages, knowing that wages will either stagnate or fall. Another group of investors buys securities or insurance that pays off when those same homeowners default on their mortgages.

While the mechanics of what happened are interesting history, Arianna makes two very interesting points. In 30 years, the salaries of top executives of the Standard & Poor 500 have gone from 30 times what their workers make to more than 300 times. Of course, for a few years after the credit crunch of 2008, executive pay faltered because the stockholders are seeing the lack of performance and voting with their shares.  There are some who are actually starting to talk about ways to improve corporate governance, but given current realities in Congress, improvement is not likely.

Another point that Arianna makes is that a new social and financial class has emerged. The "formerly middle class". These are people who had a job, a house and two cars. They were making good money until the Great Recession. These same people are finding it very difficult to return to their previous status. And at the moment, their numbers are swelling quite quickly with no end in sight.

Executive compensation seemed to have peaked in 2008, but shortly after that, executive compensation continued to rise. A recession is the point at which employers refuse to pay for labor or labor refuses to work for what they've been paid. We reached that point. The collapse of the housing bubble reflects what employers are refusing to pay for labor.  Some might say that the Iron Law of Wages is at work.  The Iron Law of Wages says that wages will always tend towards subsistence for labor.

You may have noticed that they've been trying to find ways to cheer up the working class. Tax credits for first time home buyers, earned income credits, Make America Work credits, rebates and other incentives come from the government, but this is no replacement for a standard of living. Healthcare reform was stymied by an intransigent conservative wing proffering an "every man for himself" motto.

Consider what we've been told for the last 80 years or so. Go to college, get a job, buy everything on time and make payments. It's OK to be in debt. The first form I can recall learning to fill out in High School was a credit card application. How is filling out a credit card application a life skill? I can also remember that in my home economics class, there was little emphasis on saving.  Based on that experience, I would say that Rob Kiyosaki, author of Rich Dad, Poor Dad was right. The educational emphasis, at least when I was going to school, was to get people into jobs. The upper classes are more concerned with teaching entrepreneurial skills than how to get a job.

Most Americans, having found a job, find it hard to move from one job to another. The lack of savings makes it hard for an employee to exercise economic mobility. Imagine what our country would be like if we all had a year of expenses saved up. Knowing we have a choice to move or not to move reduces the chances for resentments, corruption, and the temptation to commit a crime against an employer. When  employees are paid enough, they begin to stop thinking about the money and spend more time thinking about the work.

So on the one hand, employers would probably prefer to have a captured audience working for them. On the other hand, if employees had real freedom to choose their jobs due to a large savings account, then only employees who really wanted to work in a job would be on the job. More to the point, many more millions of people would be doing what they want to do rather than what they have to do just to pay the bills.

I don't know what the answer is, but continuing the conservative economic policies that started with the Reagan Revolution is not an answer. It is the direction opposite of where we should be heading. The Reagan Revolution as envisioned by the Tea Party is bringing about the mindset of the Hunger Games rather than the peaceful coexistence we all want. Their vision seems to be very few winners and lots of losers. In that vision, the country loses.

Wealth doesn't exist in a vacuum. It arises as a result of cooperation from others. So when the wealthy begin to believe that they don't need the rest of us, it's time to remind them that money isn't speech. Here and here.
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