“Aftershock” by Robert B. Reich

Discussion in 'Reviews' started by Mustang, Jun 20, 2012.

  1. Mustang
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    [FONT=&quot]“Aftershock” by Robert B. Reich[/FONT]

    [FONT=&quot]In the very beginning of the book, Reich introduces readers to Marriner Eccles (1890-1977) who was a wealthy self-made banker, businessman, and economist and Roosevelt’s pick to be the Chairman of the Federal Reserve where he served from 1934 to 1948, seeing the country through its deepest depression ever. Despite his vast wealth, Eccles saw the need to increase the earnings of average people in order to fuel economic growth, and he’s credited with guiding the federal government’s economic policies in response to the Great Depression because, prior to Eccles, those policies hadn’t really changed that much since Hoover was in office. Eccles was not a detached academic. He was a very experienced businessman who was ahead of his time in his economic philosophy which he came by through practical experience.[/FONT]

    [FONT=&quot]Reich wrote this book in 2010 during the aftermath of the financial meltdown of 2008. Hence the title. His book is partially a look at what led to the near financial collapse, but more than that, it’s a book that examines many of the similarities of the American economy prior to both the Great Depression of 1929 and what’s now commonly referred to the Great Recession of 2008. More specifically, Reich examines how the national income was distributed prior to both periods of economic upheaval. [/FONT]

    [FONT=&quot]Despite how some people like to minimize the importance of the OWS movement and their collective claim of being members of the 99%, it might interest people to know that the top 1%’s share of the national income reached a zenith of 23.5% in 1928 right before the stock market crash AND in 2007 just before the financial meltdown. On a graph, the years in between 1928 and 2007 are represented by a U with the years 1929-1973 representing a decline in the top 1%’s share of the national income (because relative incomes were rising for everyone else) and the years 1978 onward representing an increase in the percentage of the national income for the top 1%, which resulted in real wages falling for everyone else.[/FONT]

    [FONT=&quot]I’ll oversimplify a little bit here, but Reich’s contention is this: The reason our economy got into trouble is because as average Americans’ real wages were falling over a 30 year period from the late 70’s onward (for a variety of reasons), average Americans were forced to work harder, longer hours and borrow money in order to maintain an overall rising standard of living. And why were real wages falling over this period? It was happening because wages and salaries remained flat despite the fact that productivity rates continued to rise. This was a change from previous periods when wages rose as productivity rates increased. Put another way, average Americans were not sharing in the greater wealth that was being created by these rising productivity rates. Instead, the greater national wealth being created was increasingly flowing to the top instead of being more equally spread out among all Americans which ultimately meant that average Americans were unable to afford the very goods and services they produced which is exactly what had kept our consumer economy humming for decades.[/FONT]

    [FONT=&quot]To make a long story short (actually, the main text of the book is only 146 pp long), Reich states that in order to put things right again in the American economy (which is a consumer driven economy, after all), the trend of the last 30 years must be reversed in order that average Americans again share a greater portion of the national wealth and can then spend that money which will, in turn, fuel job creation and economic growth. Reich has a few ideas about how to attain these goals, but I won’t go into any detail about them because I can understand how some people could view some of the ideas as income redistribution (which, frankly, has been happening in reverse for decades). But that kind of criticism misses the point. If Americans don’t have the disposable income with which to fuel demand and, hence, job creation, then policies like tax cuts for the wealthy is little more than tinkering around the margins in the scheme of trying to fix our ailing economy.[/FONT]

    [FONT=&quot]“Aftershock” is a worthwhile read if for no other reason than to have a better historical understanding of our economy has (and hasn’t) worked over the last 80 years.[/FONT]
     
    Last edited: Jun 20, 2012
  2. CrusaderFrank
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    Reich is wrong in the trillions column. I doubt you'd find a parakeet that would want to crap on the book for fear of the stupid rubbing off.

    Government guided income redistribution has a 100% Guaranteed Fail Rate, even the People Republic of Vietnam has rejected it as a loser theory in favor of Free Markets and they have prospered. If only the American Left were to the right of the Vietnamese Communists

    If only.
     
  3. Mustang
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    If Robert Stack wasn't dead, I would call him up and ask him to do an episode of "Unsolved Mysteries" where he could explore the reasons why middle class conservatives' seem to have so much hostility toward the OWS movement when conservatives themselves are members of the very middle class which is getting increasingly squeezed out of its fair and equitable share of the national wealth which it just so happens that they're helping to create through their hard work.

    After all, it is indeed a mystery.
     
  4. CrusaderFrank
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    CrusaderFrank Diamond Member

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    It's your fucking genius government that is crowding out the Middle Class with more and more regulations and sucking up 10% of the GDP with new borrowing every year
     
  5. Mustang
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    Your ideology is blinding you to historical trends. Your lack of understanding of economics isn't helping either.

    Here's are some facts: As more and more of the national income is concentrated in the hands of an ever smaller percentage of the population, the general population can't afford consumer goods (other than possibly the barest of necessities), and the economic engine stalls. Tax cuts won't spur growth if it continues to go to the very people who are already reaping the benefits of an increasing share of the national wealth and lower marginal tax rates.

    Keep in mind that conservatives don't get some sort special exemption from the trend of the last few decades where more of the national income is increasingly flowing to the top at the expense of everyone else. This issue isn't about liberal versus conservative. This is about economics and power, and what the powerful can buy within the political process. The fact that powerful people with political influence due to their deep pockets can get people like you to sign on to their agenda simply amazes me. And the fact that middle class conservatives keep lining up to blame liberals for all problems is more amazing still.

    Put simply, you champion the agendas of people who have no concern for the economic welfare of your group (the middle class), and then you blame liberals who are fighting for the middle class when things don't improve for your group.
     
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  6. Truthmatters
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    Pareto efficiency - Wikipedia, the free encyclopedia


    It is commonly accepted that outcomes that are not Pareto efficient are to be avoided, and therefore Pareto efficiency is an important criterion for evaluating economic systems and public policies. If economic allocation in any system is not Pareto efficient, there is potential for a Pareto improvement—an increase in Pareto efficiency: through reallocation, improvements can be made to at least one participant's well-being without reducing any other participant's well-being.

    It is important to note, however, that a change from an inefficient allocation to an efficient one is not necessarily a Pareto improvement. Thus, in practice, ensuring that nobody is disadvantaged by a change aimed at achieving Pareto efficiency may require compensation of one or more parties. For instance, if a change in economic policy eliminates a monopoly and that market subsequently becomes competitive and more efficient, the monopolist will be made worse off. However, the loss to the monopolist will be more than offset by the gain in efficiency. This means the monopolist can be compensated for its loss while still leaving a net gain for others in the economy, a Pareto improvement. In real-world practice, such compensations have unintended consequences. They can lead to incentive distortions over time as agents anticipate such compensations and change their actions accordingly.

    Under certain idealized conditions, it can be shown that a system of free markets will lead to a Pareto efficient outcome. This is called the first welfare theorem. It was first demonstrated mathematically by economists Kenneth Arrow and Gérard Debreu. However, the result only holds under the restrictive assumptions necessary for the proof (markets exist for all possible goods so there are no externalities, all markets are in full equilibrium, markets are perfectly competitive, transaction costs are negligible, and market participants have perfect information). Moreover, in the absence of perfect information or complete markets, outcomes will generically be Pareto inefficient (the Greenwald–Stiglitz theorem
     
    Last edited: Jun 21, 2012
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    Gini coefficient - Wikipedia, the free encyclopedia


    The Gini coefficient (also known as the Gini index or Gini ratio) is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" (Italian: Variabilità e mutabilità).[1][2]

    The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini coefficient of zero expresses perfect equality where all values are the same (for example, where everyone has an exactly equal income). A Gini coefficient of one (100 on the percentile scale) expresses maximal inequality among values (for example where only one person has all the income).[3]
     
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  10. CrusaderFrank
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    Did you sell your OWS tent?

    The economy isn't a closed system zero sum game. Eating the rich won't help.

    I started by saying that the Communist Peoples Republic of Vietnam tried it your way and they failed miserably. They had no rich people and they had to import rice to keep their citizens from starving to death. They dropped your system as a failure, embrace free markets, free enterprise and capitalism and now are growing, prosperous and are the second largest exporter of rice on the planet.

    Same people, same country, they dropped your failed ideas for mine and are doing great
     

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