Apr 10 2008
Oil Prices and Income Disparity
There’s a superb article in BusinessWeek that anyone even superficially interested in the current economic situation in the United States ought to read. The author discusses the disparity between the likely cause of current high oil prices (speculation) and what the government’s economists like to claim is the cause (supply shortages). The author’s point is this: Either those claiming supply shortages are terribly deluded or they are intentionally lying to us.
Considering the government’s willingness to personally bail out the very wealthy investment bankers behind the Bear Sterns debacle, and their current and historical attitude toward oil investors, it’s certainly starting to look like the latter. I don’t know if the people responsible are aware of it, but what they’re doing with all of this is putting another nail in the coffin of the American middle class.
Rising oil prices hurt the middle class disproportionately — the very poor cannot afford to drive anyway, and the very rich are practically unaffected. The secondary effects of rising oil prices also disproportionately affect the non-rich, by passing high diesel prices into the cost of food and the other necessities of life. In March, the Washington Post attempted to compute the “real” rate of inflation by only looking at products and services that are basically non-optional for the average family (food, transportation, etc.). They concluded that prices of essential goods and services had risen 9.2% since 2006. This, while workers’ wages are rising at half that rate and the government is loudly proclaiming that inflation is well under control.
We can talk about the elimination of the middle class stalling national progress, but the bigger problem with the secondary effects of oil price jumps is that they hurt the poor as well as the middle class. Even tertiary effects — increases in the price of corn due to ethanol production, for example — are hurting the poor here and worldwide. What scares me is that this creates prime conditions for class warfare here at home. Screwing with oil prices is serious stuff in a huge country with lousy infrastructure.
We’ve been priming the pump for this sort of thing for a long time. Take a look at the Gini Index for the USA, a value which represents the unevenness of income distribution in a country:
We’ve been on a long upswing since the 1980s and we’ve now nearly reached parity with China. The only major countries with a wider gulf between the rich and the poor are Mexico and Brazil.
I look forward to the end of conservative economic policy in this country — hopefully before the riots start.
“I look forward to the end of conservative economic policy in this country”…
Loaded question - where do you place the starting point of conservative economic policy in the U.S.?
1776?
If you define a conservative economic/social policy as one that generally encourages the free and unrestrained exercise of capitalism, then America has a long history of such policy. I’m not saying it’s a bad thing, but it doesn’t work forever if you don’t keep tabs on it.
All societies have to be mean to the rich at some point to keep from imploding, as long as wealth equals power equals more wealth. It took unpalatable amounts of socialism to get the USA out of the 1930s and I think it probably will to get us out of the current situation. In both cases, checks weren’t applied to capitalism when they needed to be, when they could have been less intrusive.
I think I’m expected to point a finger at Reagan here, and I will say that his tax reforms didn’t help the income disparity in this country, as is obvious from the Gini graph. Neither did Bush’s. Income disparity isn’t the whole story, especially when you’re a rich country, but there’s no reason we should be like Brazil.
I look forward to the (temporary) end of conservative economic policy because some degree of socialism is the only thing that will get us out of the mess we have created. Of course, I’m also frightened at the prospect of the current American Democratic Party being the ones at the reins.
Regarding my reference to post-Depression America:
OK, there was also a small global confict in there somewhere. Tiny thing, anyone could have missed it.
Just wanted to make sure you didn’t forget FDR, Truman, JFK, LBJ, Carter and Clinton, although frankly I think Clinton was a little right of Nixon. I don’t think it’s a conservative thing, I think it’s a policy failure thing. Johnson’s Great Society built on FDR’s legacy and probably could have worked. But it didn’t and led us right to where we are now - in the middle of social problems that will require some sort of radical change in the way we operate as a society. Nixon and Ford messed with the free market with price controls - the socialists! I narced out Frank’s Five and Dime for raising the prices on Hot Wheels cars and got a “WIN” button and nice letter from the Hitler Youth or some similar organization. Carter, well those silly Iranians just scared him right under the desk.
We just continue to fail to execute. I think we’ve got a competency problem, not a policy problem. And it’s not going to be the current crop of Joker #1,2 or 3 that gets us to the future. We do need a good dose of real conservatism; don’t use so much crap, take care of yourself and your family, walk lightly on the planet, be cheap and use what you’ve saved to spread a little compassion.
Cathartic - thank you.
Well, I can’t really disagree with you.
I used some terminology pretty badly — rather than “conservative”, referring to the policies preferred by the current batch of “conservative” politicians, I should have said “laissez-faire liberal” which is really more accurate and encompasses most of the people you named (FDR only at the beginning, though).
The world needs periodic review of the policies in use, and I’m just saying that we could stand to move back in the direction of Keynesian economics for a bit. The very sound conservativism that you advocate is dependent on somehow stripping the average American of his sense of God-given entitlement, and possibly injecting a few IQ points. I don’t see it happening in the short term. But you’re right in saying that until someone capable of actually leading is in power, none of this is really relevant.
And the “conservatives” currently in power are an embarrassment to conservativism.
“And the “conservatives” currently in power are an embarrassment to conservativism.”
Amen! I also totally agree with you on the benefit of a healthy dose of JMK. We could learn a little from a few European democracies - the case study’s already being run. Gee and the list is about the same as the list of European countries who don’t want to play in our “coalition”
..just re-read this whole thread. I need a healthy dose of anti-cliche drugs. Sheesh, I’m so embarrassed.