Monthly Archives: July 2015

Rethinking the Inevitability Thesis about Tiananmen Square .

A recent study shows that social mobility was never has high in the U.S. as perceived, but, on the other hand, mobility has not declined in most states, contrary to common belief. Instead, declining mobility is concentrated among a cluster of states in the U.S. South. This sort of empirical analysis is crucial to sorting out the realities of social and economic inequality in America and devising effective responses.

For example, one thing the study highlights is that low-income children raised in stable, two-parent households have a better chance of upward social mobility. Marriage rates are low among low-income black households; i.e., many single moms. Some people use such data to condemn young black males as poor fathers. Other data, however, show that a big reason black males are not present is that our radicalized system of mass incarceration ensnares a high percentage of young black males, locking them up for long periods in prison, stunting their educational opportunities, limiting their employment prospects after prison and rendering them unable to sustain stable long-term family commitments. As Michelle Alexander demonstrates, this is not because black males are more likely to commit crimes than their white counterparts at similar socio-economic levels, but because of the discriminatory ways in which drug laws (and sentencing) are used to target minority youth. Ditch the drug war and reform the criminal justice system, and one would see major changes (for the better) in rates of marriage and family stability. Leading to greater social mobility, etc. etc. Finally, politicians are waking up to the need for reforms to the criminal justice system, including sentencing (here, here, here).

When a big country like Germany deliberately pursues economic policies that discourage domestic consumption and raise savings (which fuel investment in export industries), the result is a large trade surplus. This surplus is NECESSARILY matched by deficits on the part of its’ smaller trading partners, like Greece. Those deficits must be financed, which requires that the deficit countries – again, like Greece – borrow money from those – like Germany – who are running surpluses. Were Greece to have its’ own currency, then that currency would devalue, thus discouraging imports and promoting exports. While not a painless solution, this course would over time correct Greece’s trade deficits and allow it to begin paying back its’ creditors. But since Greece is part of the Eurozone, this is not a possibility. If Germany were to change its’ policies to encourage consumption (including imports) and discourage excessive saving, then this would also allow deficit countries – like Greece – to run trade surpluses that could be used to pay back past debts. Instead, Germany is demanding that Greece adopt harsh austerity policies that will dramatically reduce Greek consumption and restore Greek “competitiveness” via reduced wages. But for Greece to do so without major debt forgiveness and while Germany continues its’ own policies that gave rise to large trade surpluses in the first place is entirely unreasonable and unlikely to solve the problem. Greece is not without blame in the current crisis, but Germany is equally culpable, if not more so. Whenever imbalances in trade produce unsustainable debts, adjustments must be made on the part of both creditor and debtor countries.

This reality is recognized in a recent IMF analysis, which acknowledges that Greece cannot hope to pay back its’ debts even were it to accept every feature of the deal on offer from the EU. The rigid positions taken by Germany and the EU are not based upon sound economic analysis, but are instead all about preferred political outcomes: Merkel and company want to push the left from power in Greece and ensure that big governments and big banks call the shots in Europe rather than elected representatives of the people. The EU’s democratic deficit has never loomed larger than it does today.