Category Archives: Commentary

Structure and Superstructure

By James Kwak

Noah Smith begins his latest Bloomberg column this way:

Stanford historian Ian Morris is fond of saying that “each age gets the thought it needs.” According to this maxim, ideas like the Enlightenment, communism or even Christianity are a product of the economic and political circumstances of their times.

This is something I’ve long believed, dating back before my days as a graduate student in intellectual history. It’s also pure Marx. In the “Contribution to the Critique of Political Economy,” the great bearded one wrote:

With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. In considering such transformations a distinction should always be made between the material transformation of the economic conditions of production . . . and the legal, political, religious, aesthetic or philosophic—in short, ideological forms in which men become conscious of this conflict and fight it out.

When I was a junior in college, I underlined that passage in my bright red copy of The Marx-Engels Reader. (As I’ve often said, Harvard social studies majors will probably be the last people on the planet still reading Marx.)

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Economic Anxiety and the Limits of Data Journalism

By James Kwak

[Updated: see bottom of post.]

There is an ongoing battle among the liberal intelligentsia over “economic anxiety.” The basic question is whether economic factors—loss of manufacturing jobs, decline in living standards, increase in insecurity—are a valid explanation for the rise of Trump. To simplify, one side claims that economic anxiety is one reason, along with racism (and sexism, and anti-Semitism, and …), for Trump’s popularity; the other side claims that the economic argument is wrong, and the Trump phenomenon is all about racism (and sexism, and anti-Semitism, and …).

This debate has reached its cultural apogee with the genre of the economic anxiety tweet, which features a racist, sexist, anti-Semitic, or otherwise reprehensible Trump supporter, accompanied by a sarcastic comment about the supporter’s “economic anxiety.” Here are some recent examples (screenshots because WordPress doesn’t seem to display the second-level embedded tweet properly):

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Why this particular debate has become so bitter has been lost to history. Probably the economic anxiety deniers think that explaining Trump in (partially) economic terms amounts to excusing or ignoring racism, while the economic anxiety believers think that the racism-only story ignores the erosion of the middle class over the past thirty years. This is why—since we’re all well-meaning liberals here—when not confined to 140 characters, the deniers take pains to say that we should help poor people, while the believers take equal pains to say that racism is bad.

The people thinking of the clever economic anxiety tweets are just doing it to annoy the other side; they know that one anecdote, or several dozen, doesn’t prove anything. But periodically there are attempts to disprove the economic anxiety hypothesis—with data! Dylan Matthews of Vox is the latest to take up the challenge, with a long, heavily documented, and very heated argument that the Trump phenomenon is about race, not economics. But it fails, for a simple reason: You just can’t prove what he wants to prove with the data we’ve got.

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The Absolutely Best Debate

By James Kwak

Judging from my Twitter feed, there is one thing that we all agree on after the first two debates (including Kaine-Pence): the moderators are useless. They ask dumb questions, they don’t ask important questions, they can’t get the candidates to answer the questions anyway, they don’t call out the candidates when they lie (OK, this mainly applies to one of the candidates), etc.

So … let’s get rid of the moderators!

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Is Inequality Rising or Falling?

By James Kwak

Last week, Council of Economic Advisers chair Jason Furman took to the Washington Post to announce that President Obama has “narrowed the inequality gap.” Furman’s argument, bolstered by charts and data from a recent CEA report, has won over some of the more perceptive commentators on the Internet, including Derek Thompson, who concludes that Obama “did more to combat [income inequality] than any president in at least 50 years.” In 538, the headline on Ben Casselman’s summary reads, “The Income Gap Began to Narrow Under Obama.”

But is it true?

I already wrote about the key misdirection in Furman’s argument: his measures of reduced inequality compare the current world not against the world of eight years ago, but against a parallel universe in which, essentially, the policies of George W. Bush remained in place. (This is not something either Thompson or Casselman fell for; they both realized what Furman was actually arguing.) Today I want to address the larger question of whether inequality is actually getting worse or better.

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This Chart Does Not Say What You Think It Says

By James Kwak

[Note: Usually I post things here first, then on Medium. This time I did the opposite.]

Jason Furman, chair of the Council of Economic Advisers, is in a celebratory mood:

Looking at that chart, and at Furman’s triumphant tweet, you would think inequality had declined during the Obama administration.

Not so fast.

The first thing to understand is what that chart actually says. It does not say that the top 0.1 percent’s share of national income has gone down by almost one percentage point (rightmost column) since Barack Obama took office, nor does it say that the bottom 20 percent’s income share has gone up by more than half a percentage point (leftmost column).

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Wells Fargo and the Cult of the Customer

By James Kwak

“An unwavering focus on the customer.” Those words grace the cover of Wells Fargo’s 2014 annual report:

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The 2015 annual report features this:

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One can only wonder what the bank’s public relations whizzes will think of for the 2016 version.

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Yay! We’re Almost as Rich as We Were in 1998!

By James Kwak

There’s been a fair amount of triumphalism about the Census Bureau’s recent report on income and poverty, which showed a 5.2% increase in median real household income from 2014 to 2015. For example:

Congratulations!

But, and I don’t think Jason Furman would disagree, this is not particularly strong evidence that everything is rosy, or that “America is already great,” as some would have it. As many people have pointed out, median household income in 2015 was only back to its 1998 level. Actually, when you take into account a methodological change in 2013, it’s still 5% below its 1999 peak.

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