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Rich America versus Poor America: stats about the wealth gap

Occupy's "99%" and "1%" slogans made America's widening wealth gap into part of the common discourse. But (as this video demonstrated) it's still hard to wrap your head around how widespread poverty is in America, and how much richer America's rich have become. This listicle, 21 Hard To Believe Facts About 'Wealthy America' And 'Poor America' delivering a series of ringing slaps to make the reality sink in:

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Man in a "drunken blackout" bought 69 percent of the global market in oil futures

2009: "Between the hours of 1:22 a.m. and 3:41 a.m., [Steve Perkins] gradually bought 69 percent of the global market [7 million barrels of crude oil], while driving prices up from $71.40 to $73.05, by bidding higher each time. At 6:30 a.m., presumably sobering up and realizing what he’d done, he sent a message to his managing director claiming an unwell relative meant he would not be able to make it into work." 'Drunken' Broker Sent Oil to 8-Month High in 2009 Mark

Chinese corruption and looting on a vast scale: industry, government, and military

Here's a well-cited and pretty scary article describing the vast scale of corruption at the highest levels in China, and the extent to which "the success of 300m Chinese who live in western level prosperity depends on the continued exploitation and good nature of one billion people who live on an average of $5000 per annum." The author, Steve Keen (Professor of Economics & Finance at the University of Western Sydney) ranges widely over Chinese industry, government, and the military.

Zoomlion has an interesting business model, it is similar in many of ways to Caterpillar, except whereas Caterpillar report falling sales, Zoomlion reports astounding sales growth with a fivefold increase in revenue since 2007. Zoomlion customers sometimes buy ten concrete mixers when they planned to initially by one or two. They have a perverse incentive to buy more than they need because these concrete trucks are purchased via finance packages supplied by Zoomlion.

Then the machines can be garaged and used as collateral to borrow further funds from other lenders. Zoomlion continues to grow while cement sales have plunged. In May, cement output increased 4.3 per cent YoY, down from 19.2 per cent recorded last year. Zoomlion’s new debt of $22.5B buys roughly 900,000 trucks which could produce enough concrete (at six loads a day) to build over thirty Great Pyramids of Giza a day .

Every sector is infected with these kinds of perverse business practices, steel traders used loans meant for steel projects to speculate in property and stocks , it has been common (apparently) for steel traders to secure loans to buy steel then use this same steel as collateral to borrow funds to invest in property development and the stock market. In many ways this is the steel version of the Zoomlion model. A fundamental foundation of any lending market is the ability of the lender to ensure title and guarantee ownership of collateral...

...The current political leadership of China represents the greatest looting of a country by the political class ever seen in history. In the Hurun Report released in March 2012—the richest 70 members of the government have a net worth of $89.8 billion, an average of over $1B each. This compares to $7.5 billion for the 660 for the US government, an average of $11M each. China’s Billionaire People’s Congress Makes Capitol Hill Look Like Paupers. In a country so indoctrinated in the works of Marx, it seems only a matter of time before the current Chinese proletariat, suffering under extreme wealth distribution, will rise up. One only has to look at the geographic distribution of wealth to see where the problems might begin.

Furthermore, this does not take into account the wealth held by the families of these politicians. Nor is this corruption limited to politicians. The military, according to John Garnaut’s report, has become one of the most corrupt state enterprises of all. China’s wealth distribution is becoming completely one sided The success of 300m Chinese who live in western level prosperity depends on the continued exploitation and good nature of one billion people who live on an average of $5000 per annum. This week Chinese military leaders have been ordered to report assets under the following CCP directive – The General Political Department, Discipline Inspection Commission: Leaders Must Report Income, Real Estate Holdings and Investments. This is likely to be met with extraordinary resistance. This could result in a standoff between the CCP and the PLA , where both bodies equally riddled with corruption struggle for the upper hand. The great

The Looting of China by the Kleptokapitalist Bourgeoisie Roaders (via Naked Capitalism)

Aaron Swartz reviews Twilight of the Elites, an indictment of meritocracy

On Crooked Timber, Aaron Swartz reviews Twilight of the Elites, Chris Hayes's indictment of "meritocratic" society. I recently blogged an excerpt from Twilight, published in The Nation -- I was really impressed by it. Swartz's review has cemented that view.

Hayes pins the blame on an unlikely suspect: meritocracy. We thought we would just simply pick out the best and raise them to the top, but once they got there they inevitably used their privilege to entrench themselves and their kids (inequality is, Hayes says, “autocatalytic”). Opening up the elite to more efficient competition didn’t make things more fair, it just legitimated a more intense scramble. The result was an arms race among the elite, pushing all of them to embrace the most unscrupulous forms of cheating and fraud to secure their coveted positions. As competition takes over at the high end, personal worth resolves into exchange value, and the elite power accumulated in one sector can be traded for elite power in another: a regulator can become a bank VP, a modern TV host can use their stardom to become a bestselling author (try to imagine Edward R. Murrow using the nightly news to flog his books the way Bill O’Reilly does). This creates a unitary elite, detached from the bulk of society, yet at the same time even more insecure. You can never reach the pinnacle of the elite in this new world; even if you have the most successful TV show, are you also making blockbuster movies? bestselling books? winning Nobel Prizes? When your peers are the elite at large, you can never clearly best them.

The result is that our elites are trapped in a bubble, where the usual pointers toward accuracy (unanimity, proximity, good faith) only lead them astray. And their distance from the way the rest of the country really lives makes it impossible for them to do their jobs justly—they just don’t get the necessary feedback. The only cure is to reduce economic inequality, a view that has surprisingly support among the population (clear majorities want to close the deficit by raising taxes on the rich, which is more than can be said for any other plan). And while Hayes is not a fan of heightening the contradictions, it is possible that the next crisis will bring with it the opportunity to win this change.

This is just a skeletal summary—the book itself is filled with luscious texture to demonstrate each point and more in-depth discussion of the mechanics of each mechanism (I would call it Elster meets Gladwell if I thought that would be taken as praise). So buy the book already. Now, as I said, I think Hayes is broadly correct in his analysis. And I think his proposed solution is spot on as well—when we were fellows together at the Harvard Center for Ethics, I think we annoyed everyone else with our repeated insistence that reducing economic inequality was somehow always the appropriate solution to each of the many social ills the group identified.

Interestingly, the term "meritocracy" was originally coined as a pejorative, and it originates with Michael Young, who also founded the Open University.

Guest Review by Aaron Swartz: Chris Hayes’ The Twilight of The Elites (via 3 Quarks Daily)