Wednesday, October 12, 2011

Something Is Broken

Listen! The wages of the laborers who mowed your fields, which you kept back by fraud, cry out, and the cries of the harvesters have reached the ears of the Lord of hosts. You have lived on the earth in luxury and in pleasure; you have fattened your hearts in a day of slaughter. You have condemned and murdered the righteous one, who does not resist you.
James 5:4-6

All demonstrations share one constant. There are always crazy people.


So it’s not surprising that the Wall Street protests have attracted their share of strange folks.

Another constant in demonstrations is that they tell us something is broken. We may not agree with the cause or causes advocated by the demonstrators. And we may not agree with their definition of the problem or their proposed solution, but their very presence tells us that something is wrong. Not unlike the biblical prophets.

The Wall Street Protestors lack a coherent message, but they are generally upset about the economy. They claim to represent the 99% of Americans who (they claim) were left behind in the economic gains of recent decades, and have suffered most since the collapse of 2008.

We can argue about the details, but the basic picture is depressing. Poverty is increasing. Middle class wages have been stagnant for decades. Long term unemployment raises the specter of creating a permanent underclass of jobless people. The unemployment rate for college graduates under age 25 is 9.6%, and for young high school graduates, the average is 21.6%.

The numbers are appalling. And that doesn’t count the young people who have gone back to school in the hope that one more degree will help them get a job. Or those who have taken minimal jobs just to survive. As the New York Times observed in an editorial, “Such poor prospects in the early years of a career portend a lifetime of diminished prospects and lower earnings — the very definition of downward mobility.”

The problem is not that rich people are getting richer. The problem is that poor people are getting poorer. And the middle class is barely hanging on. Over the past decades we have been redistributing income from the bottom to the top at an alarming rate.

W. Edwards Deming, the late great guru of business systems theory, whose analysis was a major factor in developing the Japanese auto industry, famously observed that “Every system is perfectly designed to get the results it gets.” If our economic system is increasing economic inequality, it’s because it is designed to increase economic inequality. If it is increasing unemployment, then it is designed to increase unemployment.

This does not mean that business leaders and politicians intentionally conspired to favor the rich at the expense of the poor. But if that’s what the system has produced in recent decades, then that’s what the system is designed to produce. If we want different results, we will have to make changes in the system.

This is not impossible. This is not the first time that our nation has confronted great disparities of wealth and poverty. In the past, we have made corrections and moved on. We did this without confiscating wealth or nationalizing industries. We used sensible regulation and oversight to channel our creative and entrepreneurial genius. Our greatest economic gains were made during a time of shared prosperity and relative economic equality in the decades after World War II. In those years we all grew together. There is no reason to believe we cannot do that again.

In the meantime, New York City has already spent $1.9 million on security costs related to the demonstrations.

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