How Will Autonomous Cars Change Our Economy?

Self-driving cars are about to become widespread; the advantages these vehicles have over traditional cars are obvious. One question then is how will this automation impact the economy? Mark Slater investigates...

image: pursuitist.com

Mark Slater
AutoMax, North Carolina

Self-driving cars navigating themselves by computer are becoming an actuality in the 21st century. In fact, it is projected that by 2030 over 50% of the cars on the streets will be driverless. It’s time to carefully examine the effects this will have on our economy and to what extent.

Automated vehicles do have some incredible benefits. It is believed that accidents will be reduced by a considerable amount, mostly because it is estimated that 93% of all vehicular accidents are caused by human error. This is probably one of the best features these cars will bring to the table, but since the roads will be safer when you look at it from the perspective of an insurer or injury lawyer you see the loss of revenue as a direct result of these vehicles. Accidents cost the USA US$900 billion every year in repairs and administration costs- which will also be greatly reduced by the advent of autonomous cars. This could have a massive impact on the economy.

Still, car dealership mechanics need not necessarily fret, as even though there will be a reduction in accidents and the repair work mechanics perform there may actually be an increase in their workload due to a higher need for maintenance as a direct result of an increase in daily automotive use from convenience and vehicle sharing. Mechanics would certainly have to become accustomed with the innovative technology and get themselves through the necessary training. If they invest in these skills they could actually see a substantial increase in revenue over the next few decades.

Morgan Stanley believes US governments could lose US$1.3 billion from more esoteric revenue sources such as parking fees. This is mostly because automated cars can be on the road much more. Here is an example: imagine a parent going to work in the morning and directing the car to go back home and take his daughter to university before directing it to come back to pick him up. The vehicle will have much less need for a constant place to park all day.

Similarly, there will be a widespread reduction in the number of parking garages and parking spaces needed, which will allow for more apartment and office space development. Consumers, and not government, will benefit from this more. There is also a projected reduction of vehicle ownership from an average of 2.1 non-automated vehicles per household to 1.2 driverless vehicles per household, and this would reduce government revenue from vehicle registration fees.

Car ownership could even cease to exist by 2030. A Columbia University study suggested Uber would need just 9,000 autonomous vehicles to completely wipe out all taxis in New York City, with consumers only having to wait 36 seconds on average for a ride.

When these vehicles start to show up more, people will naturally be skeptical of how safe they are. This will be the response until these cars start to gain more recognition for safety. When this happens, the travel industry could also be heavily impacted. Why would anyone book a domestic flight or a hotel when they can have their car drive them somewhere overnight while they sleep safely in the vehicle? Why would anyone go through the trouble of reserving a room or even spending any money on a room when their car could drive them the whole way in privacy and luxury? Highway motel operators will take a big hit when these cars become more common.

It is estimated that trucking companies could save up to US $500 billion dollars annually by 2025. This would, however, cause many truck drivers to become unemployed. Indeed, there are many other drivers that will be affected such as taxi drivers, bus drivers, and even shuttle drivers. This level of job loss could put a real strain on the economy through unemployment.

On the other side of things, however, IT workers and analyst will see a positive impact as they will be more important in the age of automation. Disabled people will also benefit from these vehicles as their mobility, freedom, and income are expected to increase.

Despite the shifting tides, driverless cars could add as much as $7 trillion to the global economy. There will be winners and losers as with anything, but these vehicles will make our lives more efficient, safer, and convenient.

Why Donald Trump Is Now The President of the USA

The Donald has done it. 

How did this happen? Why did it happen? These questions are abound across the globe, as people wake up to news that the former reality TV star has now taken his seat as the leader of the world's richest and most powerful nation.

Donald Trump's own appeal is obvious, whether you agree with his views or not. His bigoted, nuance-free and racist views and proposals appealed to the evident mass of Americans who may have until now been hiding their views from an environment deemed too 'politically correct'. From the moment Trump glided down the escalators of his New York tower to announce his candidacy, making ridiculous blanket claims about Mexican immigrants, these people felt empowered. And when Trump pledged to ban Muslims from entering the USA, they felt empowered. Finally, they thought. Someone is putting out what we've been thinking all along into the public sphere.

Donald Trump's rallies held a cult-like buzz that was
unparalleled by Hillary Clinton.

Trump empowered the racists in American communities, something that was clearly visible before the vote, at his infamously raucous campaign rallies.

But it goes deeper than this; statistics show that a significant majority of Trump's voters were either poor, lacked college education, or both. We could write a whole book about why so many Americans are in these demographics- but one of the significant causes is lack of access to higher education. Education that is inaccessible to so many has proven a barrier to informed voting decisions, and has further increased the power of meaningless, simplistic rhetoric ('Make America Great Again') and fanciful promises.

But it wasn't just the racists and bigots who formed Trump's support. So many more people voted for Trump for a simple reason; they are sick of the corporatist Establishment. The political elite that have transgressed the boundaries of right and left wing, supported by and doing the bidding of massive corporations, regardless of the impact on the public. It's the Establishment that were largely responsible for catastrophes- whether it's the Iraq War, or the 2008 Financial Crisis.

And Trump, right from the start, made it clear he was not part of the Establishment. During the GOP Primaries, he stood out for his constant criticisms of his competing Republican candidates as puppets of wealthy donors. His outspoken and unpredictable nature makes him a nightmare for those who would want to try to take control of his policymaking. And after years and years of the status quo in the Oval Office, people wanted something new, something fresh.

On the left, this desire manifested itself in Bernie Sanders taking Clinton right to the wire in the Democratic primary. On the right, it has led to today- Trump going against the initial odds to become President.

But as much as Donald Trump was responsible for standing out in this election as the anti-Establishment candidate, it's the DNC's fault for putting out perhaps the worst response they possibly could to Trump.

Clinton proved a weak Establishment answer to
Donald Trump

In Hillary Clinton, not only do you have someone mired in political and personal controversies, but you have arguably the most pro-Establishment candidate ever. Polished, extremely well prepared and scripted, Clinton may have been impressive in the elections of the 20th century, but for today's context, she is totally inappropriate. Fascinatingly, Clinton has been able to unify the left and the right in distrust and dislike of her- whether for her shady ties to Wall Street, hawkish foreign policy proposals or the email scandal. The latter has been shown to be a false accusation- but it doesn't matter so much when it comes to the vote, as the accusation itself immediately left an impression on a significant numbers of people.

Furthermore, she lacks the 'X-factor' of Donald Trump. She's too scripted, too predictable, too typically 'politician'. As a result, the main appeal of Hillary for many many voters was not because of what she stood for, or what she was, rather what what she wasn't- Donald Trump. And this fact seemed to be one of the things she relied upon for much of her campaign. The whole potential for a first female President was something similar (demonstrated in her motto, "I'm with her").  There was really a lack of any meaningful other definition to her campaign.

And this should have been picked up by the Democratic National Committee, the DNC, 8 years ago, when their supporters declared their desire for someone fresh in Barack Obama. And when Bernie Sanders, a popular candidate who threatened to turn over the Democrat status quo, came around, they did their best to stop him winning, as revealed by WikiLeaks. Even if it meant breaking neutrality rules and pushing forward a candidate who had less chance of winning against Trump nationally, the DNC wanted to protect the status quo. At all costs- even the resignation of their chair.

It is important to remember that it's the DNC who fended off perhaps the most qualified candidate to fight Trump. And this shameful behaviour means the DNC have a massive role to play in what has happened today.

But Hillary Clinton was still was predicted to beat Trump after accepting the Democratic nomination. It should have on paper been an easy victory for someone who could take advantage of a competitor as unstable, politically inexperienced and controversial as Donald Trump. This is a man, remember, who has a public record of treating women as objects on multiple counts, someone who continuously commits the political faux pas of professing how wealthy he is (even more wealthy than he might actually be), and someone who has repeatedly offended individuals, communities, and entire nations throughout this campaign. How can Hillary lose to this person? That's what we all thought.

But it seems Clinton had underestimated Trump- perhaps even relying too much on his self-destruction to hand her the Presidency. Clinton failed to sweep up many of the voters who felt disenfranchised by the Democratic party's rejection of Sanders, as well as many anti-Establishment Republicans for whom Trump proved too extreme. She did nothing to quell trust issues held by so many with her. She picked one of the most uninspiring VPs in Tim Kaine. She failed to win over millennials. These moves reeked of overconfidence, and proved fatal on Clinton's part.

At the end of the day, however, we had all underestimated Trump. And, perhaps, we overestimated the American voting population.

On this sombre day, it's important to reflect and learn from how and why exactly Donald Trump fended off Hillary Clinton. Sure, it'll be 4 years until the decision can be changed- but the work starts now to minimise the damage Trump causes, and make sure he can't do it for long.

Because there could be a silver lining to this cloud. This is a momentous moment that has shaken both major political parties to the core. The Establishment and the moneyed interests in American politics has been troubled by Trump's success. The next decade or so could prove to be decisive in changing the fundamentals of politics in America- perhaps, just perhaps, the real fight for progressivism has just begun.

Celebrities Won't "Save The Day"

Donald Trump is threatening in the polls and the liberal elite has dangerously fumbled in their latest heavy-handed ploy to take him on writes James Dancey.

I was perusing through the YouTube trending bar a couple days ago and I saw this ‘Save the Day’ video, a campaign by celebrities telling you not just to vote, but to not vote for Trump. It was 3 minutes of sincere personages looking you in the eye and appealing to your sense of moral righteousness. Sounds perfectly fine right? Wrong.

You see Trump runs a narrative that we’ve seen before, that it’s the big liberal elite and media moguls ganging up against him, and it’s one that has been bought before. Trump himself is not far from the aristocracy, although he won’t release his tax returns he likes to flaunt himself as a self-proclaimed multimillionaire, his father was a property magnate and once upon a time he received a small loan of a million dollars; hardly a working class hero.

Yet he has grappled the popularity of the people he has been so distant from in the earlier years of his life, why? It’s a combination, there’s the obvious brutally honest (and regularly offensive) demeanour he has which attracts the masses who are fed up of being condescended by men and women in suits and ties, however, he is regularly propelled by the media’s coverage (despite nearly all being negative) helps feed his narrative that he is the underdog (despite by no means being that).

So now we have celebrities, doing what celebrities do best, being in front of the camera, and telling you not to vote for Trump, because he’s a misogynist, a racist and an all round disgusting human being. That’s all correct, and they’re all right, but it’s not going to stop people from voting him. A slew of celebrity endorsements, from David Beckham to Steven Hawking didn’t stop people voting leave in the EU referendum. Why?

Celebrities are becoming less idolised in modern society as more and more people view them as glorified civilians, which in many ways is what they are. An actor isn’t really qualified to give you political advice, although most politicians aren’t qualified to give you political advice either, but no-one listens to politicians, so what are the chances they’re going to listen to celebrities?  

Every time the media report on one of Donald Trump’s awful slurs or supposed ‘mishaps’ (which are so common nowadays they can hardly be considered that) they’re just giving him more airtime and attention. I understand it’s hard to find good news about Hillary Clinton, who spends half her time being comatose and the other half being jeered over her emails, but finding ‘bad news’ about Donald Trump is just supporting his beliefs that the media is after him, and despite all the reports being completely true, he is a terrible human being, people have already made up their mind on him.

This new Save the Day campaign is not going to change anyone’s mind about Donald Trump, it’s more likely to change people’s opinion on the celebrities themselves, why? I don’t know, but Donald Trump’s supporters are fiercely loyal to him and that’s not going to change anytime soon, if you really want to sway the undecided voters you should give people reasons to vote for Hillary, not to vote against Trump, because people aren’t going to buy that.

The juvenile jest that Mark Ruffalo will do a nude scene at the end of this film just nails how confused this political advertisement is. The self-conscious near parody tone is meant to add a humorous edge to the video but ends up outlining exactly what is wrong with these campaigns, the ‘We’re famous so you should vote the way that I’m voting’ gimmick that people have heard enough of, it has reached saturation point and there’s more chance that this contrived, calculated political move will backfire rather than succeed.

Hillary’s downfall will be the fact that she does terribly in the swing states; Sanders would’ve destroyed Trump with the impartial voter, but now the Democrats have shot themselves in the feet; they are calling on a liberal elite that the electorate is about to rebel against. People want to hear about policies that are going to enhance their lives, not about why Donald Trump is a bad person. Donald Trump has stolen so much of the media attention and coverage that few have ever commanded that he may just win the Presidential race; well it will be less his win, more the democrats’ loss.

Save the Day will fail, it may even have a negative impact, you’re not going to convince anyone about Donald Trump, people have seen and heard enough of him to have an opinion, favourable or unfavourable. You have to convince people why Hillary is better, not why Donald is worse, it’s the exact same technique tried by the remain campaign in the EU referendum (and failed), same technique tried by Owen Smith against Jeremy Corbyn in the Labour Leadership race (and failed), do the elite not know anything else other than attack with no defence? Or are there actually no reasons to vote Hillary? Or as she’s better known in the media: Not Trump. Both are reasonable theories. How I yearn for Bernie Sanders.

Unless Hillary changes her campaign focus, she will fail, and that has worrying implications for the whole of the progressive world. 

The US Gun Dilemma

America have a serious dilemma on their hands, that no-one feels prepared to confront, says guest writer James Dancey.






It doesn’t take an idiot to realise that lack of gun regulations in the USA causes more shootings than in nearly every other country in the world.

Its homicide rate sits at over double that of other similar first world countries including Canada, Australia and the UK. 60% of those homicides are firearm contributed, no example of ridiculously easy access to firearms could be more emphasised than the recent disgraceful  homophobic terror attack on the Pulse Bar in Orlando, Florida.

Allow me to present to you a gentleman, this gentleman is Omar Mateen. He has been investigated twice for terror related incidents, he was reported to have been in a violent and abusive relationship with his ex-wife, he had to quit his job as a security guard due to aggressive tendencies, was kicked out of the police force and was also a steroid abuser. Would you give this man a gun? Of course the clear answer is no. So why was he, of all people allowed to purchase such dangerous and clearly fatal weapons?

Gun ownership in the USA (wonderslist.com)

Well because it’s land of the free, where any maniac is ‘free’ to buy a gun, and ‘free’ to commit mass homicide. Donald Trump was quick to point out that he was ‘right’ about Islamic terrorism. Now, I’m not doubting that extremism is a threat in people’s every day lives. But Mateen, was born in the US, no amount of Trump’s imposed immigration control could’ve stopped him. The only way you could’ve stopped him from committing such an atrocity is to prevent him from having access to the artillery in the first place.

Trump frequently references the second amendment on gun control, it’s strange how people are always so keen to defend an outdated piece of literature when it’s convenient for them. The idea of amendments is that they are not set in stone. A good example is the 21^st Amendment that wiped the 18^th Amendment off the books.

But of course, Congress are not interested in that, American gun retailers bring far too much money into the US Economy. In fact whenever a mass shooting occurs gun sales skyrocket which is fantastic for those businesses and their shareholders who benefit off the fear that the public hold, a fear that the next terror attack could occur in their downtown coffee shop or their children’s school. A fear that is completely justified as they are well aware these demented individuals can also get their hands on the very same weapons.

Let me say that there are no reasonable arguments for maintaining the status quo as this situation is the perfect example of what is bound to happen on an increasingly regular basis as tensions in the US rise, public paranoia and an AR-15 is not a good combination. 

Many people argue that the only option is to introduce new, harsh laws for gun control. Now I’m obviously for these suggestions, however, this does actually present a new problem. How do the Government take all these weapons that they would outlaw off the public who own them? How much domestic instability will it cause?  Surely the most delusional individuals who feel possessive over these weapons would be the most dangerous, and in return would the general public feel prepared to give up these weapons if they feel their way of life would be threatened if they did by these psychopaths.

Unlike other countries like Canada, the UK and Australia the US is absolutely huge and having it being run from such a centralised position makes it so hard to control weapons.  I fear that a harsh, immediate, reactionary law could actually cause more damage than prevent it. As proven with the futile Iraq, Libya and Syria situation we must never put the motion into emotion.

In my opinion the only way to bring about change is to ease it in gently, if you present an idea too rigidly you can often face backlash. There is still a large amount of the US population who have to be convinced that gun control is the right option despite all these horrifying shootings.

Slowly introduce laws that sanction those who are on the more unstable side of society such as criminals and just let it slowly branch across. I believe we’d see the results and people would begin to buy into the idea that actually gun control would be good. However, when people have been living with the status quo for centuries it can be hard to challenge it. But with all that said, if there’s one thing we should believe in, it is change.

Failures of The American Education System - The American Inequality Series #5

In this final instalment of the American Inequality Series, we analyse how responsible the USA's education system is for the nation's growing economic inequality.

The quality and level of education is seen worldwide to be a strong determinant of an individual's future socioeconomic status. 

fig.1

Take a look at this graphic (fig.1) from the US Bureau of Labour- a clear positive correlation exists between level of education and earnings, and a clear negative with the level of education and unemployment rate. 

According to the Institute of Education Studies, the median earnings for young adults with a bachelor’s degree was $46,900- the equivalent for high school dropouts was less than half, at $22,900. It’s been getting worse for high schoolers: those who have only graduated from high school have seen their real incomes decline by over a quarter in the last 25 years.

So a correlation can be observed, but is there a causality between the two? The general consensus among academic seems to answer yes- in a well-known study by David Card, of UC Berkeley confirms the causality, concluding that “individual returns to education are declining with the level of education”. Education was proven to be a major factor in unemployment during the recent recession- nearly 4 out of 5 jobs lost during the economic crash belonged to workers with a high school diploma or less. Furthermore, 63% of US jobs now require a postsecondary degree- up from 28% in the 1970s. So education, now more than ever, seems to provide a safety net from both unemployment and low earnings.

Sometimes even a bachelor’s degree is not enough: according to Elena Bajic, CEO of online executive job recruitment site IvyExec, “when an employment recruiter looks at an Ivy League degree, they will look at it more carefully”.

Nevertheless, clearly advanced education of some level plays a role in one’s future economic prosperity. The ‘American Dream’ dictates a desire for opportunity for all to become prosperous- so if education is a key (though not the only) to the door from poverty into prosperity, do all Americans have this opportunity?

fig.2

The greatest barrier for many Americans to college education (in particular elite the Ivy League elite) is financial. The Higher Education Research Institute at UCLA observed choices made by students with regards to college- in particular those who had been offered a place at their first choice. HERI noted that only 56.9% of students enrolled in their first choice college in 2013- and compiled the most significant factors for why so many students didn’t enrol in their first choice, even if they got an offer. Fig.2 shows the 4 most notable reasons- all of them centering around college fees highlights how much finances matter to students wishing to go to college.

Public colleges hold relatively little clout over the education ‘market’ of the USA. Only 5 of the top 20 universities in America are public (state-funded)- a damning statistic, though it must be considered that there are almost three times as many private 4 year institutions as there are public equivalents.

But there is still an increasing pressure among the young people of America to go to top universities- and the majority of these are private colleges, whose national average total fees (for a typical four year study) in 2013-14 were $40,917, $9,000 more than the public equivalents. 

Two conclusions can be drawn from this data:

1) The poorest of society are struggling to afford a college education, and therefore are more rarely enrolling. 

2) Those who are only able to afford a public college education remain at a disadvantage when it comes to post-graduate employment.

fig.3

Colleges have attempted to lower economic barriers of entry via financial aid; for example, 70% of students at Harvard University receive such aid from the college. 

However, the effect of this has been minimised by rapidly rising college tuition fees- fig.3 shows how in the past decade, fees have inflated at a rate disproportionate to most other goods and services- and at a strongly contrasting level to real household income, which has in fact fallen in previous years (fig.4). 

fig.4

This has led to a widening gap between education opportunities for the poor and wealthy. The wealthy are mostly in the best position to provide their children with good quality education, which in turn benefits their future income, so they can educate their children well, and so on.

Socio-economic mobility is not dead- successful ‘rags to riches’ stories are not unheard of- however for many lower class people the environment and opportunity is not present to help them succeed academically- and the state of the US jobs market means they often remain poor for their whole life as a result.

Debt And Social Welfare Failures Are Fuelling Wealth Inequality In America: The American Inequality Series #2

The phenomenon of easy access to credit and the debt has been a key factor in the stability of the USA’s modern economy. Borrowing plays a huge role- consider the housing market, whose dependence on the lending industry has drastically increased in the past 50 years; between 1949 and the turn of the millennium, the mortgage debt to household income ratio rose from just 20% to 73%. 

There are many reasons for this phenomenon of ‘credit addiction’- the principle of these being increasingly easy access to credit, changing consumer decisions and the squeezing of incomes. Let’s analyse these and see which contributes most, if at all, to American wealth inequality.

Credit addiction has without doubt been encouraged by the financial sector in America. The subprime market’s recent catastrophic explosion exemplified how open credit has become in the US. The subprime market emerged from a restricted financial industry- previously, banks had to take great care in selecting who they could lend to, to minimise the likelihood of future unpaid debts. This process was rigorous- any previously outstanding debts, or missed payments would almost rule you out of contention for a mortgage.

The subprime market sought to open a whole new world of profitability- opening the door to credit to these individuals who were previously deemed unsuitable to receive a mortgage. The industry boomed- at its peak in 2005 the subprime industry had granted $625bn of loans, contributing to over a trillion dollars in loans made by subprime lenders between 1994 and 2007.

Their open availability made subprime mortgages incredibly attractive- a complex arrangement between financial institution and bond traders meant banks were in little danger if mortgages were to go unpaid. They could benefit from cheap loans, avoiding the traditional risks associated with defaulting customers.

Unsurprisingly, the result was devastating- the recent subprime crisis had severe implications on homelessness for example. According to the National Coalition for the Homelessness (NCH), there were 342,038 foreclosures of US properties in April 2009 alone- a third higher than the already high foreclosure figure of April 2008.

The authorities have also played a role in this disaster- attempting to kickstart the economy following the dot-com crash of 2000, the Federal Reserve cut long term interest rates from 6.5% to just 1%- former Chairman of the Fed Alan Greenspan admitted that this move “fundamentally engendered” the development of the doomed housing bubble whose explosion caused this economic trouble.

One could argue Western society has developed a culture of debt-accumulation. Availability of finance on any consumer product, from a blender to a Mercedes, has encouraged people to be less financially responsible. You no longer need to take a single heavy hit on your bank account to purchase a car- finance allows the (greater) cost to be spread over a few years. As a result, prices in the short term are lower and thus customers are more likely to be seduced to purchase a car that is beyond their financial boundaries.

Additional interest payments make the situation worse- Jeremy Vohwinkle of GenerationX Finance describes new car purchasing as borrowing money at a high rate of interest to invest it in a stock guaranteed to lose value rapidly. Yet March 2014 saw the average amount borrowed by American car buyers surpass $27,000 for the first time ever. 

The wealthy are not so reliant on financing- cash purchases ultimately cost less and often cars do not represent a significant enough hit on a millionaire’s finances that he has to take a loan for it. 

America’s total consumer debt lies at almost $3.2tn- over $10k per man, woman and child- 67% of this debt being as a result of loans, and 72.5% belonging to the bottom 90% of Americans. This is despite almost half of post-recession consumer spending coming from the wealthiest Americans. 

The ever-present temptation of taking loans, trading short term gain for a greater long term loss, to cover purchases such as cars and more significantly homes, has driven down the economic prosperity of much of the poor and middle class.

Debt has also been piled on by the US’ social welfare system (or lack of one). Take the medical system- a NerdWallet survey found that Healthcare bills were the primary cause of personal bankruptcy. Healthcare is special in this regard because unlike a house or a car, we usually have no choice as to whether we need it or not. After a car accident, one cannot choose not to go to hospital- they are taken by emergency services, and often they wake up to the bill- which they must pay, as they’ve already been treated.

This unlucky 20 year old got charged $55k for an appendectomy.
Even after insurance contributions, he had $11k left to pay.

One could argue that health insurance solves this problem- but even ignoring its ever-rising price (family health insurance topped $16k for the first time ever last year) over 10 million fully insured Americans aged 19-64 are expected to face bills they will be unable to pay in the near future. Plus, as the picture on the right shows, even health insurance can leave a substantial bill for the individual to pay. This idea of healthcare being financially unattainable is something that, while far from being exclusive to the USA, is pretty much unheard of in similarly developed countries like the UK and much of Europe.

These problems are mostly faced by the poorer of society. Like an overly expensive house or car, it adds to personal debt. However, usually being an involuntary expenditure, it can be even more damaging.

How Corporations Are Contributing To Wealth Inequality In The USA : American Inequality Series #1

The power of the Corporate Lobby, according to George Monbiot, is a ‘Great Unmentionable’- rarely discussed in the media or among politicians, it has maintained a firm grip on every level of American policymaking. Not only has it subverted the very system of representative democracy that the West prides itself upon, but it has potentially created conditions conducive to a strong socio-economic imbalance in the States.

Corporate lobbyists have one primary goal- to represent their employers in the political arena, not by competing directly within it but by gaining favour with those already within. 

Outgoing Congressional Speaker John Boehner was seen
handing out cheques on the House floor seeking votes
against the cutting of tobacco subsidies.

Of course, this cannot be done by a friendship alone- since 1998 the nation’s largest lobby, the US Chamber of Commerce, has spent over $1.1bn on lobbying activities. The massive payments involved reflect lobbying’s effectiveness; PepsiCo spent $10m in 2009 lobbying to (successfully) prevent 24 states attempting to pass a soda tax. Even more spectacularly, current House of Representatives Speaker John Boehner was caught handing out cheques to fellow politicians written by a lobbying tobacco company- on the very house floor a debate on cutting tobacco subsidies was to be discussed. The tobacco company saw these payments as an investment to prevent their own subsidies being cut- and, unsurprisingly, the House voted against cutting them. 

But a more appropriate action of the lobby to the topic of economic inequality is the influence of corporations over minimum wage legislation. A minimum wage naturally affects businesses, leading them to either spend more or reduce staffing. However, in a period of constantly inflating costs of living, arguments are being made that minimum wages set by every state are all insufficient to maintain a decent standard of living. Governments around the world have sought to address this issue- the British government, for example, recently implemented a 'living wage' designed to provide enough for workers to maintain a decent standard of living.

Housing is a key indicator of living standards- yet in Florida, the minimum wage ($7.93) is less than half of what is needed to rent a two-bedroom home at official ‘Fair Market Rent’ calculations. Similar results arise in every state- the National Low Income Housing Coalition calculates that it would take two minimum wages to afford a Fair Market Rent nationwide, even with many one-bedroom properties.

Corporate taxes have sunk in recent decades as profits
have boomed.

Corporations have repeatedly successfully lobbied for tax cuts- a significant reason why corporate taxes have sunk in recent decades while profits have boomed (see graph). For example, Whirlpool Corporation spent just under $2m in the year 2011-13 in lobby fees chasing the renewal of lucrative tax credits (equivalent to tax breaks) for creating environmentally friendly appliances. The passing of this motion, thanks to the lobbying, was worth an estimated $120m in 2012-13- a healthy return on the initial investment, and government revenue lost. 

Both movements of corporate lobbies to maintain low minimum wages (such as the success of the National Restaurant Association over employees in 2014) and win tax breaks, subsidies and such from the government have drastically exacerbated the issue of wealth inequality- they have made it easier for those higher up in business to profit more, often at the cost of employees lower down.

The American Inequality Series: An Introduction

“The richest country, is not that which has the most capitalists, monopolists, immense grabbings, vast fortunes, with its sad soil of extreme, degrading, damning poverty, but the land… where wealth does not show such contrasts high and low, where all men have enough- a modest living…”

The famous words of 19th-century American poet Walt Whitman ring true perhaps more than ever in the United States of today. The previous few decades have seen economic inequality in the USA escalating with little end in sight- and recent economic crashes have not exactly helped the situation either. 

Economic inequality has been a theme reoccurring throughout the world, throughout history- from the time of Ancient Greece, where Plato described any city to be split into “the city of the poor, the other of the rich… at war with each other.”, to today where inequality is often a side effect of economic development (India, China are notable contemporary examples). 

But the USA has experienced a more unorthodox growth in inequality. Like China and India, in recent decades the US economy has been growing- yet an almost unique mixture of politics and economic culture has made the USA, according to the Credit Suisse Global Wealth Databook, the most unequal of the top 20 developed global economies, scoring a GINI coefficient of 85.1% (the higher the coefficient, the more the inequality). In comparison, the UK scored a relatively modest 67.7%, the aforementioned India 81.1% and China 69.5%. 

The GINI coefficient is the most common mathematical measure of wealth inequality, measuring income distribution. Considering a score of 0% means perfect equality (everyone has the same income) and 100% means total inequality (one person holds all income, everyone else has nothing), 85.1% shows how far the USA’s inequality has grown.

The last time the USA saw inequality at the levels of today was in the years leading to the Great Depression- so what is it that is driving today’s inequality? 

Over the next few weeks at poponomics we'll be discussing all things America, from the idea of the 1%, to education, to politics, to the very nature of capitalism itself, as we closely analyse this massively important question.

Stay tuned- the American Inequality series starts on Wednesday, as we turn our attention to the impact Corporations have had on American society.

Supply Side 'Trickle-down' economics- does it work?

Supply-side (or 'trickle down') economics has for the past few decades been one of the discreet tenets of Western economy. It's the belief that giving financial benefits to the wealthiest of society (in the way of tax cuts/breaks, regulatory advantages given to big businesses) will inevitably benefit society as a whole, as the wealth will 'trickle down' the economic ladder in the form of employment, pay rises or whatever else of the extra wealth the richest will generously share with the rest of the population.

It's been a policy the conservatives of America has held ever so close to their hearts, and one that has faced much opposition by the lower and middle classes of America.

So how did trickle-down begin?

A turning point was certainly in the 1980s, during the divisive periods when Ronald Reagan and Margaret Thatcher were in power in the USA and UK respectively.
Perhaps never have two leaders either side of the Atlantic been so harmonious- Reagan curiously dubbed Thatcher "the most important man in England", and Thatcher once described Reagan as "the second most important man in my life".
The harmony of the two certainly extended to economic policy; both leaders were strongly influenced by the Chicagoan and Austrian schools of economics, the proponents of which included notable anti-regulation, free-marketers Milton Friedman and Friedrich Hayek.

Trickle-down was one of their most prominent legacies. Thatcher and Reagan carried out drastic economic changes that were designed towards 'supply-side economics' (another name for trickle-down). The most important relevant policy change was that of tax rate changes.
In the USA, the Tax Reform of 1986 saw the top tax rate for individuals drop from 50% to 28%, partly compensated for by an increase of the bottom rate of tax from 11% to 15%. This was the very first time in the history of the USA that the top rate of tax fell at the same time as the bottom rate rising.
In the UK, Thatcher followed suit by dropping the top rate of tax from 80% to 63%, meanwhile almost doubling VAT (Value-added tax) and the amount everyone had to pay to fund the National Health Service. However, she did indeed drop the common tax rate from 33% to 30%.

So what were effects of these trickle-down policies?
Let's remember, the motivation supposedly behind trickle-down economics was that the population as a whole would benefit from the wealthy being wealthier. The idea is that as the national wealth pie grows as a result of the richer getting richer, everyone else's pie would simultaneously grow as a result.
So has it worked?
Well, a certainly interesting effect is encapsulated well in the following graphic:

Comparison of wages of the top 1%, overall wages and productivity.
(Mother Jones) 

Note the real separation point on the graph, where the average income of the top 1% really lifts off- it's after the turn of the decade, through the 1980s- conveniently the decade of Reagan's presidency.

Note not just how the income of the top 1% rises incredibly, that as productivity increases the average overall wages of the population lags behind, barely increasing in relation to the other two factors in the chart.
The meaning of this is pretty unpleasant- the 'pie of wealth' may have increased, but this chart suggests that more prominent has been a relocation of sorts of national wealth.
The wages of the overall population has suffered since the 1980s when it is considered that productivity has boosted- the overall population have not benefited in terms of wages from this increase. Instead the wages of the wealthiest have been boosted far more than before the 80s.
CEOs in 1965 made 24 times more than the average production worker- in 2009, this figure was 185.

It seems clear that wages of the middle and lower classes, contrary to the motives of supply-side economics, have suffered as a result of the policy- meanwhile clearly the wealthiest have benefited HUGELY.

So why haven't most of the population benefited- a key belief of the theory is that it's better for everyone if the wealthy are wealthier, right?

Buffett has been a prominent opponent
of trickle-down economics.

Here there is a great fault in the trickle-down ideology- reduction in the taxes enforced upon the wealth is itself no guarantee of further reinvestment into the economy.
This is because the benefits are being given to people who are not in need of it. Little is in the way of CEOs creating new jobs to further production- most already have the capital available to invest where they see fit.
Warren Buffett (pictured right), one of the wealthiest men in the world, and perhaps the most prolific investor claimed "People invest to make money, and potential taxes have never scared them off". Taxes are rarely a stumbling block for the wealthiest, who are willing to take risks to invest (most entrepreneurs are where they are now as a result of their calculated risks).
Therefore tax cuts to the wealthy rarely open the doors to new investments. Instead it leads to simply a further amassing of wealth by the wealthy. By no means will the wealthy invest everything they benefit from tax cuts, to the gain of the middle and lower classes as the theory suggests. A staggering example of this is how currently the top 1% of wealthiest people in the world control 39% of the world's wealth. This is a clear sign of a broken global system, a large part of which is thanks to trickle-down.

Trickle-down, supply-side, Reaganomics, whatever name it is called, is a lie.

The solution lies not in blessing the wealthy with benefits and hoping that it will filter down to the rest of society, but the solution lies in the middle class. We need to make the middle the centre of our economic system, and see middle-out growth that will benefit everyone (yes, including the wealthy).

Middle-out. That is the solution we need.

Sources for this article can be found linked within.

What Happened To Freddos Being 10p? Deflation; Part Two

So, in the previous article we looked through the negative effects of inflation- how it can spiral, leave people impoverished, and so on- and we also looked at a positive if you like borrowing.
However, let's talk deflation- the reduction of general prices in the economy.

What causes deflation? It's exactly the opposite of inflation. Inflation is caused by an oversupply of money in the economy- deflation is caused by an undersupply of money. Whereas inflation decreases the value of money, deflation increases it, causing things to become cheaper. Sounds good, right?

There are many consequences of deflation however that can be damaging- profit loss for businesses being the root of the major ones. Dropping prices to an extent are beneficial- it can grant more people access to essentials such as heating, which, as discussed in the previous article, can save lives.

However if deflation gets out of control, falling prices will mean profits of businesses will fall- and thus most businesses will cut down on costs, leading to people being made redundant, factories and offices shutting down, work being outsourced, and so on.
Unemployment would increase, and even those fortunate enough to keep their jobs would see their pay decrease.
Unemployment can be devastating- it would lead many to default on any loans or mortgages taken out, it can cause people to lose their homes (though this is more likely in the USA than the UK).

You may be thinking, why have we heard so much more about inflation in the news than deflation? Well deflation can often be more easily controlled by governing authorities. In the USA, the Fed (the central bank) prevents deflation by flooding the market with money, thus increasing prices. The UK follows a similar protocol- we mentioned previously the idea of Quantitative Easing.

So should we be happy that the price of a Freddo has increased over the past two decades? Not really- but perhaps the fact that it didn't drastically fall in price is something we should also be well aware of.