Friday, June 23, 2017

The Over-Criminalization of American Life

The over-criminalization of America has undermined justice, the rule of law and legal egalitarianism.
While the corporate media devotes itself to sports, entertainment, dining out and the latest political kerfuffle, America has become the Over-Criminalization Capital of the World. The proliferation of laws and administrative regulations, federal, state and local, that carry criminal penalties has swollen into the tens of thousands.
The number of incarcerated Americans exceeds 2.3 million, with the majority being non-violent offenders--often for War on Drugs offenses.
Holly Harris has written an important summary of this profoundly destabilizing trend: The Prisoner Dilemma: Ending America's Incarceration Epidemic (Foreign Affairs, registration required).
The over-criminalization of America is a relatively recent trend. As Harris notes:
It wasn’t always like this. In 1972, for every 100,000 U.S. residents, 161 were incarcerated. By 2015, that rate had more than quadrupled, with nearly 670 out of every 100,000 Americans behind bars.
The over-criminalization of America is rooted in federal laws and regulations, and state and local governments have followed suite. here is Harris's account:
The burgeoning U.S. prison population reflects a federal criminal code that has spiraled out of control. No one—not even the government itself—has ever been able to specify with any certainty the precise number of federal crimes defined by the 54 sections contained in the 27,000 or so pages of the U.S. Code. In the 1980s, lawyers at the Department of Justice attempted to tabulate the figure “for the express purpose of exposing the idiocy” of the criminal code, as one of them later put it. The best they were able to come up with was an educated guess of 3,000 crimes. Today, the conservative Heritage Foundation estimates that federal laws currently enumerate nearly 5,000 crimes, a number that grows every year.
Overcriminalization extends beyond the law books, partly because regulations are often backed by criminal penalties. That is the case for rules that govern matters as trivial as the sale of grated cheese, the precise composition of chicken Kiev dishes, and the washing of cars at the headquarters of the National Institutes of Health. State laws add tens of thousands more such crimes. Taken together, they push the total number of criminally punishable offenses in the United States into the hundreds of thousands. The long arm of the law reaches into nearly every aspect of American life. The legal scholar Harvey Silverglate has concluded that the typical American commits at least three federal felonies a day, simply by going through his or her normal routine.
Federal policies reward states for building prisons and mandating harsher sentences:
...federal incentives for states that safely decrease their prison populations and reconsider ineffective sentencing regimes...would represent a stark reversal of legislation signed into law by President Bill Clinton in 1994, which did just the opposite, offering federal dollars to states that imposed harsher criminal penalties and built more prisons, which contributed to the explosion of incarceration rates during the past two decades.
How did we become a Gulag Nation of tens of thousands of laws and regulations and mandatory harsh sentences for non-violent crimes--a society imprisoned for administrative crimes that aren't even tried in our judiciary system? I would suggest two primary sources:
1. The relentless expansion of central-state power over every aspect of life. As I describe in my book Resistance, Revolution, Liberation: A Model for Positive Change,the state has only one ontological imperative: to expand its power and control.There are no equivalent mechanisms for reducing the legal/regulatory burdens imposed by the state; various reforms aimed at reducing the quantity of laws and regulations have not even made a dent in the over-criminalization of America.
The second dynamic is the political reality that the easiest way for politicos to be seen as "doing something" is to pass more laws and regulations criminalizing an additional aspect of life. The state and its elites justify the state's relentless expansion of power and control by claiming problems can only be solved by centralizing power further and increasing the number and severity of penalties.
Criminalization is the ultimate expansion of the state's monopoly on coercive violence. As the state expands its power to imprison or punish its citizens for an ever-wider range of often petty infractions, increasingly via a bureaucratic administrative process that strips the citizens of due process, another pernicious dynamic emerges: the informal application and enforcement of formal laws and regulations.
In other words, the laws and regulations are enforced at the discretion of the state's officials. This is the systemic source of driving while black: a defective tail-light gets an African-American driver pulled over, while drivers of other ethnic origin get a pass.
This is also the source of America's systemic blind eye on white-collar crimes while the War on Drugs mandates harsh sentences with a cruel vengeance.When there are so many laws  and regulations to choose from, government officials have immense discretion over which laws and regulations to enforce.
Prosecutors seeking to increase their body count will use harsh drug laws to force innocents to accept plea bargains, while federal prosecutors don't even pursue white-collar corporate fraud on a vast scale.
The over-criminalization of America has undermined justice, the rule of law and the bedrock notion that everyone is equal under the law, i.e. legal egalitarianism.
The over-criminalization of America breeds corruption as the wealthy and powerful evade the crushing burden of over-regulation by either buying political favors in our pay-to-play "democracy" (money votes, money wins) or by hiring teams of attorneys, CPAs, etc. to seek loopholes or construct a courtroom defense.
Meanwhile, the peasantry are offered a harsh plea bargain.
The over-criminalization of America is one core reason why the status quo has failed and cannot be reformed. That is the title of one of my short works, Why Our Status Quo Failed and Is Beyond Reform, which explains why the ceaseless expansion of centralized power leads to failure and collapse.


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Wednesday, June 21, 2017

Automation's Destruction of Jobs: You Ain't Seen Nothing Yet

Employers have no choice: it's innovate/automate or die.
Automation--networked robotics, software and processes--has already had a major impact on jobs. As this chart from my colleague Gordon T. Long illustrates, the rise of Internet technologies is reflected in the steady, long-term decline of the labor force participation rate-- the percentage of the populace that is actively in the labor market.
The oft-repeated fantasy is that every new wave of technological innovation creates more jobs than it destroys. Not this time: the total number of full-time jobs has stagnated for years, and most of the new jobs that have been created are in low-wage, moderate-skill positions that cannot move the productivity needle much: jobs such as those in the retail and restaurant sectors.
Real wealth isn't created by printing currency or jacking up stock valuations--it's created by increasing productivity. As this chart reveals, productivity has stagnated for years. This is a complex dynamic, but we can surmise that the low-hanging fruit of automation has already been harvested, and the addition of jobs that are inherently limited in the productivity gains that can be achieved are core components in stagnating/declining productivity.
I have often discussed productivity and economist Michael Spence's framework of tradable and non-tradable labor. You want a beer-bottling machine? That's a tradable good; it can be manufactured anywhere in the world. You want a beer at the local tavern? That is non-tradable--it is a service that can only be provided locally.
The problem is non-tradable labor is typically impervious to productivity gains: even the most experienced bartenders can only draw so many beers and mix so many drinks in an hour. A retail salesperson can only help so many customers in an hours, a gardener can only mow so much lawn in an hour, and so on.
As Gordon and I discuss in our new video program, Robotics & Chronic Unemployment, automation is now entering these non-tradable sectors with a vengeance. Sectors dominated by non-tradable labor include taxis, local trucking, long-haul trucking, delivery services, courier services, retail, restaurants, fast food, and so on.
Every one of these sectors is perched on the precipice of dramatic disruption by automation. Self-driving vehicles, drone deliveries, self-serve kiosks, robotic store clerks that have the entire store inventory available to answer customer questions--the list of automation advances in once-safe sectors is almost endless.
The driver is the need for productivity increases. Labor costs keep rising, especially for labor-overhead expenses such as healthcare insurance and pensions. The cost of living keeps rising, pushing wages higher.
If productivity can't be increased, the only alternative is to raise prices. But consumers, even at the high end, are reaching their limits. When meals that cost $20 now cost $30, consumers start opting for cheaper alternatives.
Corporations and small businesses alike can only trim production costs and keep prices fixed for so long before profits vanish.
Enter automation. The new technologies are now giving enterprises the tools to increase productivity in these previously low-productivity non-tradable sectors.
While we can collectively fret over this need to increase productivity and the resulting decline in paid labor, the employers have no choice: it's innovate/automate or die.
Even local, state and federal government agencies and contractors, heretofore impervious to soaring labor and overhead costs, are about to feel the urgent need to automate as a survival technique as budgets turn red in rising deficits and taxpayers revolt against ever-higher taxes.
There are no safe sectors any more because unrestrained cost increases are killing the economy. Healthcare is a runaway train, and all the buffers that enables prices to go to the moon are gone: we can't even afford the limited Medicare we have now, much less Medicare for All.
It's not just low-skill jobs that are being destroyed. Look at the automation of financial services and trading. In the near future, if you want human service, you'll have to pay extra--if it's available at all.
There is a self-reinforcing dynamic to job losses and stagnating wages. As households receive less income, they must tighten their belts, further pressuring government and private enterprise alike to do more with less costly labor.
Given a choice between a lower-cost automated service and a higher-cost human-labor service, the bottom 95% will have to choose the automated service.
If a fast-food meal at a kiosk is $5 and the one served by a human is $6, which will people choose? I have described the difference in my book Get a Job, Build a Real Career and Defy a Bewildering Economy: this setting is low-touch--the human interaction doesn't create much value for the customer, so they aren't willing to pay a premium for it.
the same is true of most non-tradable sectors.
The coming destruction of jobs will be monumental, unstoppable and long-term. Gordon Long and I discuss the effects of robotics and automation on jobs in this 27-minute program:



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Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Monday, June 19, 2017

What Is the Market Telling Us?

The entire global economy now depends on this stripped-of-information "market" for its stability.
Ho-hum, another day, another record high in the S&P 500 (SPX). What is this market telling us? If you're long, the market is screaming "you're a genius!":
But other than that, what else is the market telling us? Is it telling us anything about the real-world economy and the open market for equities based in that real-world economy?
Before we can answer "what is the market telling us?" we must first ask, "what can the market tell us?" That is, what is the current market capable of communicating?
This is the key question, for as we all know central banks have intervened in the market in an unprecedented fashion for over eight years. Central banks have transformed stock markets into signaling devices that are intended to boost the perception of increasing wealth, whether earnings and productivity are actually increasing or not.
The idea is to generate a "wealth effect" that encourages people to borrow and spend more as they feel their wealth is increasing. This "wealth effect" borrowing and spending will (so goes the assumption) overcome the stagnation of wages and spending, and spark a gloriously self-reinforcing consumer credit-spending binge.
This is considerably different from an open market of decentralized buyers and sellers, which reflects statistical data and sentiment regarding the real-world economy of sales, profits and productivity.
Traditionally speaking, the stock market is a discounting mechanism, that is, the market absorbs data about the present and projects that into the future. If growth appears to be slowing, the market discounts future earnings and stock valuations decline accordingly.
If growth appears to be picking up, the market increases its expectations of earnings and valuations expand accordingly.
But even though global growth is visibly slowing, stock markets keep going up.
What gives?
There are several dynamics in play. One is that human players now account for no more than about 10% of market activity; the rest is robots and ETF (exchange traded funds) buying and selling.
Another is that central banks have been major buyers of ETFs and stocks, and this is unprecedented. The Swiss Central Bank is now a major shareholder of Apple and Amazon, and the Bank of Japan owns a significant chunk of Japanese ETFs.
Central banks once bought assets such as bonds and futures as a temporary plunge protection team tactic to stop a downturn from accelerating into a rout or crash. Now they are buying trillions of dollars in bonds and stocks during so-called "good times" to keep the market lofting higher even as growth slows.
This permanent intervention via buying stocks has distorted what the market can tell us. Rather than communicate a sense of how the real economy is doing, the market now reflects the will of central banks to keep the market lofting ever higher on the back of central bank purchases and liquidity.
This has created a disconnect between the market and the real economy, a gulf that widens daily. Can it continue? Yes, as long as central banks keep buying stocks and increasing liquidity.
But there is a cost to this manipulation: there is little information left in the market other than the enthusiasm of central banks to push valuations higher and suppress volatility.
This lack of reality-based information and the homogenizing of sentiment leaves traders and owners alike with a false sense of confidence, and sets up a Titanic Mindset: hey, we can maintain full speed through this dangerous ice field in a flat-calm sea because this ship is unsinkable: the "experts" told me so. What can a crummy little iceberg do to an unsinkable ship other than inconvenience the passengers? That's a risk we'll take.
The entire global economy now depends on this stripped-of-information "market" for its stability. It's difficult to see this as healthy or sustainable.


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Sunday, June 18, 2017

We're in a Boiling-Point Crisis of Exploitive Elites

The "fixes" to the stagnation of postwar Capitalism in the 1970s were financialization, globalism, and the sustained expansion of debt--all have run out of steam.
Many of us have written about cycles in the past decade: Kondratieff economic cycles, business/credit cycles, the Strauss–Howe generational theory (an existential national crisis arises every four generations, as described in their book The Fourth Turning), and long-wave cycles of growth and decline, as described in seminal books such as The Great Wave: Price Revolutions and the Rhythm of History and War and Peace and War: The Rise and Fall of Empires.
There is another Rhythm of American History that few recognize: the economic, social and political crises sparked by exploitive Elites. There are two dynamics that drive these crises:
1. The exploitation of commoners by financial/political Elites reaches extremes that create systemic instability as commoners no longer have the means to improve their conditions.
2. The economic mode of production that generated Elite wealth no longer functions, but the Elites cling to the failing system and enforce it with increasingly violent suppression of dissent.
Here are the previous Crises of Exploitive Elites:
1. Slavery, 1850 to 1865. Though the toxins generated by slavery are still with us, the existential political, social and economic crisis arose in the years between 1850 and the end of the Civil War in 1865.
In broad brush, the rise of the American West triggered a political crisis in the U.S. as the southern states realized the non-slave West's rising political power would doom the fragile balance between the non-slave Northern industrial-economy states and the cotton/agricultural slave-economy South.
It was a trend the South couldn't possibly win, but the South's exploitive Elites refused to concede any of their power--and that refusal to adapt tp changing conditions guaranteed the Civil War.
The first Industrial Revolution radically transformed the source of wealth creation. The plantation agrarian mode of production of the South was eclipsed by the vast wealth-generating might of the rapidly industrializing North.
The Southern political and economic Elites could not win economically or politically, so they attempted a military solution--a war they might have won had it not been for the Westerners Lincoln, Grant and Sherman. (Lincoln was born and raised in the frontiers of Kentucky, Indiana and Illinois; both Grant and Sherman were born in Ohio and served in Army postings along the West Coast.)
The moral tide was rising against slavery. The Christian world had long been divided on the issue of slavery, but the tide turned against slavery in the early-to-mid-1800s, both in Great Britain an the U.S. Moral turnings are powerful instigators of political crises, and once again the Southern Elites attempted to stem this tide with military force.
2. The Crisis of Gilded-Age Exploitation, 1892 to 1914. The dates of this crisis are inexact and open to interpretation, but in broad brush, the Second Industrial Revolution (mass production, integrated industrial corporations, the rising dominance of Finance and Industrial Capital, emergence of monopolies and cartels, etc.) forced millions of commoners into the penury of wage-labor while concentrating the gains of capital and speculation into the hands of the few.
Adjusted for inflation, the wealth of the financier-industrialists in this era exceeds the wealth of today's billionaires, and is on par with the extremes of wealth concentration that characterize the last stages of the Roman Empire.
Commoners attempting to unionize were brutally suppressed by hired private enforcers and the police/military forces of the American government. Radical unions such as the I.W.W. (Industrial Workers of the World, a.k.a. Wobblies) were destroyed by coordinated, concerted government suppression, much of it by means that are visibly illegal by today's standards.
The conflict between exploited industrial labor and politically dominant Capital was eventually resolved by progressive anti-trust laws (aided by President Theodore Roosevelt) and the beginnings of social rights and welfare programs--universal education, limits on hours worked per week, etc.
3. The Great Depression and the Failure of Debt-Based Capitalism, 1929 to 1941. Capital was increasingly concentrated in the hands of the Elites in the Roaring 20s, but the commoners had new access to the financial magic of credit: banks sprouted by the thousands, anxious to loan money to fund the purchase of more farmland, new autos, and all the other output of a consumerist economy.
But alas, credit is not collateral, nor is it wealth. When the debt bubble burst, so did the stock market, which was based on highly leveraged margin debt.
The Elite financiers resisted writing down the debt that had made them so rich, and as a result the Depression dragged on, immiserating millions who then turned to fascism or radical socialism as the political fixes to the systemic exploitation and dominance of Elites.
4. Civil Rights and Global Empire, 1954 to 1973. The legacy of slavery's oppression had lingered on for almost 100 years, and the rising prosperity of the 1950s and 60s generated a social, moral, political and economic movement to throw off the most oppressive aspects of an exploitive social/political order.
At the same time, the costs of maintaining a Global Empire were raised to a boiling point by the war in Vietnam, which destabilized the moral, political, social and economic orders.
In response the Elites instigated waves of violent, suppressive state tactics designed to disrupt and destroy the organized dissent of social movements. These tactics included the FBI's COINTELPRO programs as well as other blatantly illegal, heavy-handed government enforcement of the dominance of exploitive Elites.
I've written extensively about state over-reach and illegal suppression of dissent: remember, the state exists to enforce the dominance of Elites: everything else is propaganda, misdirection and obfuscation.
Simply put: when lies no longer work, the government devotes its resources not to eliminating wars of choice, cronyism and corruption but to suppressing dissent and resistance to those extractive, exploitive policies.
Which brings us to the present-day Crisis of Exploitive Elites. The "fixes" to the stagnation of postwar Elite/state-dominated Capitalism in the 1970s were financialization, globalism, and the sustained expansion of debt in all sectors--state, corporate and household.
Now all three engines of "growth" have run out of steam. All three greatly exacerbated wealth and income inequality, as these two charts reveal:
Once again, the political and economic Elites are resisting the tides that are undermining their Empires of Debt and Exploitation. The Elite-controlled Corporate Media has been ordered to War Status, an DefCon-5 emergency requiring an endless spew of all-out propaganda designed to distract, disrupt and destroy organized dissent and any resistance to the dominance of Exploitive political and financial Elites.
The Exploitive Elites cannot turn back the clock, so they cling to their failed "fixes" and demand our compliance.
The Exploitive Elites cannot turn back the tides of history, but they can immiserate millions. That seems to be "solution" enough for them, but you cannot destroy rising moral revulsion to soaring inequality and the abject failure of debt-based global capitalism with mere media propaganda.
Of related interest:
The Pin To Pop This Mother Of All Bubbles?


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