Financial Crisis

Coasts Create Banking Crisis, Flyover Country Pays the Price

Dale Buss — Sun, 02 Apr 2023 20:28:58 -0400

The figurative tremblors of the last few weeks have confirmed why we call ourselves Flyover Country. It’s because the major shapers of the American economy keep — well, flying over us as they shake the financial foundations of the entire nation.

All of the work of endangering the banking system, laying off hundreds of thousands of digital workers, and plunging America closer to economic crisis has occurred among tech titans, money-center-bank whizzes and kowtowing politicians acting on the coasts, or plotting in the skies as they fly over us in their Gulfstreams. They’ve made us dizzy tracking their movements, encircling us as they try to engineer some kind of pullback from the disaster they’ve created.

It's a disaster that we’re already paying for in the heartland in terms of added federal obligations to cover bank deposits, higher taxes that will result, still-rising interest rates that are choking businesses and households, and more sand in the slowing gears of a national and global economy that is, after all, ultimately reliant on what happens in the middle of the United States, in our factories and on our farms and in our research labs.

But there’s a promising inverse to being on the sidelines for the debacle that was birthed on the coasts: As Silicon Valley folds in on itself, the resulting debilitation of the digital-tech empire, along with the crumbling of the epochal fraud known as cryptocurrency, is unleashing more financial and human capital that is now available for the growth of the heartland for the first time.

New Opportunity

What we must do is take advantage of the regional reordering of the U.S. economy that began during the pandemic and has accelerated since then.

Have no doubt that it’s the excesses of coastal financial elites that generated the crisis which has unfolded over the last few weeks. It has forced them to rely on a Biden administration that won’t allow poorly run banks to fail. And, ultimately, the rest of the country is the backstop of the banks’ inexcusable practices.

Silicon Valley Bank was vastly over-reliant on financing tech companies and serving as a primary capital provider to the go-go digital economy, profiting from borrowing short and investing long with a balance sheet that looked more like that of a money-market firm than a bank. The bank purposefully allowed as much as 94% of its deposits to exceed the FDIC limits on account insurance.

Read the rest of this piece at Flyover Coalition.

Dale Buss is founder and executive director of The Flyover Coalition, a not-for-profit organization aimed at helping revitalize and promote the economy, companies and people of the region between the Appalachians and Rockies, the Gulf Coast and the Great Lakes. He is a long-time author, journalist, and magazine and newspaper editor, and contributor to Chief Executive, Forbes, the Wall Street Journal, the New York Times and many other publications. Buss is a Wisconsin native who lives in Michigan and has also lived in Texas, Pennsylvania and Florida.

Photo: courtesy Flyover Coalition.

The Future of Cities: Recalibrating Expectations: Lessons From Youngstown, Ohio

Sherry Linkon and John Russo — Fri, 24 Feb 2023 20:28:58 -0500

In September 1977, the Youngstown Sheet and Tube Company announced the first major shutdown in the American steel industry. It was closing its largest mill, the Campbell Works, displacing over 10,000 workers. Other shutdowns followed, putting another 40,000 people out of work over the next decade.

The Youngstown, Ohio, population had peaked at 170,000 in 1930, but between the shutdowns and 2020, its population fell to just over 60,000 residents. The metropolitan statistical area known locally as the Mahoning Valley also lost about 20 percent of its population between 1980 and 2020.

This book is being published as a series, with permission of the American Enterprise Institute. Each week a new chapter will be published, with links to each chapter.

Click or tap a link below to read or download each chapter. (PDFs open in new tab or window)

Recalibrating Expectations: Lessons from Youngstown, Ohio – Sherry Lee Linkon and John Russo (new this week)

Sherry Lee Linkon is a professor of English and American studies at Georgetown University. Her most recent book, The Half-Life of Deindustrialization: Working-Class Writing About Economic Restructuring (University of Michigan Press, 2018), won the Working-Class Studies Association’s 2019 CLR James Award for the Best Book of 2018. She edits a weekly blog, Working-Class Perspectives, and her commentaries have appeared in the Moyers and Company blog, NewGeography.com, and the American Prospect. Together with John Russo, she codirected the Center for Working-Class Studies at Youngstown State University for 17 years and coedited New Working-Class Studies (Cornell University Press, 2005).

John Russo is a visiting researcher at Georgetown University’s Kalmano-vitz Initiative for Labor and the Working Poor. Previously, he was a pro-fessor of management and coordinator of the labor studies program in the Williamson College of Business Administration at Youngstown State University. Russo has written widely on labor and social issues and is rec-ognized as a national expert on labor unions, work, and working-class pol-itics. His work has appeared in NewGeography.com, the American Prospect, Fortune, Social Policy, and other publications, and he is the managing editor of Working-Class Perspectives.

Read the Series:

Introduction: Welcome to the Urban Future – Joel Kotkin

I. The Big Picture for Global Geography

American Aspiration is Metropolitan – Ryan Streeter

The Urban Future: The Great Dispersion – Wendell Cox

The Future of the Big American City is Not Bright – Samuel J. Abrams

II. The Variety of Urban Experiences

The Future of Chinese Cities – Li Sun

Africa's Urban Future – Hügo Krüger and Bheki Mahlobo

The Fall of the Jewish Gangster

Joel Kotkin — Thu, 23 Feb 2023 20:28:58 -0500

Antisemitism has always partly been driven by envy; Jews attract a unique resentment for their disproportionate intellectual achievements in literature, science, education and, particularly, finance. At the same time, however, this success can be inverted. Historian Fred Siegel calls this “the flip side of cleverness”, a tendency among some to apply their minds to illegal activities.

In the first decades of the last century, Arnold Rothstein, described by one social historian as “the JP Morgan of the underworld”, is widely regarded as the founder of American organised crime. Later Bernard Madoff, Sam Bankman-Fried as well as the odious Jeffrey Epstein and Harvey Weinstein have carried on this grim tradition, albeit with usually less lethal means.

Today, America’s most prominent malefactors are more those of privilege than products of mean streets. Their evolution is epitomised by Bankman-Fried, a graduate of MIT, who was described by the Jerusalem Post as the product of “an upper-middle class family of Jewish academics”, raised in a $4 million home near Stanford amid the elite culture of Silicon Valley. Like many would-be tech moguls, Bankman-Fried revelled in his “outsider” image — as demonstrated by his pervasively sloppy dress code — but he was also an insider whose large contributions to the Democrats won him access to White House officials even as FTX was collapsing around him.

The complex nature of Jewish economic life was shaped by history. With their homeland destroyed by the Romans in AD70, Jews, already scattered throughout the Mediterranean world, were forced to employ their smarts and connections to survive. Once Christianity became the state religion, Jews faced greater restrictions, eventually barring them from most economic activities and service in the government or army. They were, notes historian Yuri Slezkine, “a cohesive tribe of professional strangers”, as opposed to most peasants, who were not literate, knew little about how the cash economy worked and often lived their entire lives within a relatively small perimeter. With the rise of capitalism, however, these habits born of exclusion turned out to be advantageous, as originally observed by both a sympathetic Max Weber and more hostile Werner Sombart. Jews may not have been the originators of capitalism, but as the Jewish historian Ellis Rivkin has argued, they were “best positioned to benefit”.

It also helped that Jews were literate, sometimes in more than one language, with contacts and family dispersed across numerous geographies. Before the Holocaust, Jews made up the vast majority of Eastern Europe’s factory owners, bankers, lawyers and physicians. By the 1880s, Jews accounted for a bare 4% of the population of the Austrian Empire, but comprised 40% of Vienna’s gymnasium students, a pattern seen throughout Eastern Europe. They also dominated the professions and the stock exchanges. A handful rose to prominence as global banking families, most obviously the Rothschilds, who played a preeminent role in the rise of the modern European and then North American economies.

Yet such success led some to suggest Jews were by nature manipulative and dishonest, a view common among European Christians for most of the last two millennia. Two dominant archetypes emerged in terms of Jewish image — one elevated, the other despised. “From Moses the lawgiver to Madoff the shyster”, writes University of Michigan historian Jeffrey Veidlinger. “Jews have figured prominently in European myth for some 2,000 years.” They were seen either as unmatched moral exemplars or “feared and despised as imagined worshippers of the Anti-Christ, political conspirators, financial manipulators, child murderers, and threats to racial purity”.

In reality, like any ethnic group under assault, some felt compelled to break the law. As early as the 10th and 11th centuries, Jewish leaders worked to fight criminals in their communities, most urgently when the scams inspired antisemitism from outside. But Jews also sometimes were persuaded to protect those who ran afoul of secular governments, in part due to the clear antisemitic bias of such regimes. Jews arriving in America or Britain, argued historian Irving Howe, entered a new environment that was more free but they still carried attitudes from their past. “The Torah tells us to do business honestly and follow the rules of the country,” notes Rabbi David Eliezrie, a prominent Chabad author and intellectual. “But we all too often lived in countries where the rules were impossible to follow.”

Not surprisingly, Jewish community leaders have tended to downplay the criminal element of their tribe. It’s understandable that they prefer to focus instead on Jews’ extraordinary portion of Nobel Prizes (accounting for well over 20% of all winners between 1901 and 2022 while comprising just 0.2% of global population) than engage in discussions about gangsters and schemers. The Holocaust has also tended to dominate community consciousness, given the impact on many of our families. But focusing on Jews largely as martyrs and moral exemplars constitutes, as the author Dara Horn notes, a preference, if you will, for dead Jews — as long as they provide “a service to mankind” — over living ones. Martyrdom and intellectual achievement have been elevated as the centrepieces of Jewish identity, says Steven Windmueller, a professor emeritus at the Hebrew Union College-Jewish Institute of Religion in Los Angeles, but “there’s an embarrassment about economic success”.

Read the rest of this piece at UnHerd.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo: Bybit via Flickr under CC 2.0 License.

CSY Repost – What Happened to Addressing Inequality?

Pete Saunders — Tue, 13 Dec 2022 20:28:58 -0500

My father, a retired AME Church pastor, on occasion would start a sermon with a story about a pastor preaching a particularly fantastic sermon. The pastor was heaped with praise by his congregants after service. The following Sunday he preached the exact same sermon, to the puzzlement of the church members. The Sunday after that he did the same thing, and church deacons decided to talk to the pastor after service. “Pastor,” they said, “today makes three consecutive Sundays you’ve preached the exact same sermon. How long do you intend to keep doing this?” The pastor replied, “I’ll move on when the church members start living the lessons of the message.”

I’m about to apply the same approach to American metro inequality discourse.

It wasn’t that long ago – 2008, with the election of President Barack Obama – that the issue of economic inequality in America was thought to have been overcome. The nation had elected its first Black president and it was viewed as evidence that perhaps our nation was ready to enter a “post-racial” era. It was a demonstration of our commitment to the ideal that “all (wo)men are created equal.”

But that didn’t last long.

The fallout from the financial crisis and Great Recession over the ensuing years revealed the unequal nature of economic recovery. Gaps widened between the nation’s haves and have-nots: knowledge economy coastal cities versus the rural hinterlands; sunny locations promoting affordability and lifestyle versus gritty manufacturing-based cities. And it wasn’t only inter-regional inequality that was exposed. Intra-regional inequality, or the way we view differences in the quality of life of people within the same region, became more apparent. It refreshed concerns about who was thriving in the new American economy, and who wasn’t. The resentment among white working-class voters that pushed Donald Trump into the White House in 2016 added another layer to inequality discourse.

More recently, concerns of inequality hit another fervent peak in 2020, when the tragic deaths of George Floyd, Ahmad Arbery and Breonna Taylor were protested by people worldwide. Inequality discourse probably reached a peak in the summer of 2020. Since then it’s faded considerably as the nation turned its attention to other important matters like surviving the Covid pandemic, the January 6 insurrection, mass shooting tragedies, the war in Ukraine, the reversal of Roe v. Wade, obscenely high gas prices and existential threats to our system of government.

Racial, economic and social inequality, particularly in our nation’s cities, hasn’t disappeared. At a minimum inequality levels remain the same, and perhaps widened. If anything, our nation has become much better at identifying inequalities and their impact on American society, but no better at all at resolving it.

The Covid pandemic was a case study in how America identifies inequality yet failed to address it. Early in the pandemic we recognized that people of color were hospitalized and dying from Covid at substantially higher rates than whites, even when controlled for economic factors. We knew that the divide between the professional class that had the ability to weather the pandemic working from home, and the service class that was urged to work in direct contact with the public to keep the economy moving, was largely a divide between whites and people of color.

Read the rest of this piece at Corner Side Yard Blog

Pete Saunders is a writer and researcher whose work focuses on urbanism and public policy. Pete has been the editor/publisher of the Corner Side Yard, an urbanist blog, since 2012. Pete is also an urban affairs contributor to Forbes Magazine's online platform. Pete's writings have been published widely in traditional and internet media outlets, including the feature article in the December 2018 issue of Planning Magazine. Pete has more than twenty years' experience in planning, economic development, and community development, with stops in the public, private and non-profit sectors. He lives in Chicago.

Photo source: quillette.com

What Really Divides America

Joel Kotkin — Mon, 03 Oct 2022 20:28:58 -0400

Reading the mainstream media, one would be forgiven for believing that the upcoming midterms are part of a Manichaean struggle for the soul of democracy, pitting righteous progressives against the authoritarian “ultra-MAGA” hordes. The truth is nothing of the sort. Even today, the vast majority of Americans are moderate and pragmatic, with fewer than 20% combined for those identifying as either “very conservative” or “very liberal”. The apocalyptic ideological struggle envisioned by the country’s elites has little to do with how most Americans actually live and think. For most people, it is not ideology but the powerful forces of class, race, and geography that determine their political allegiances — and how they will vote come November.

Of course, it is the business of both party elites — and their media allies — to make the country seem more divided than it is. To avoid talking about the lousy economy, Democrats have sought to make the election about abortion and the alleged “threat to democracy” posed by “extremist” Republicans. But recent polls suggest that voters are still more concerned with economic issues than abortion. The warnings about extremism, meanwhile, are tough to take seriously, given that Democrats spent some $53 million to boost far-Right candidates in Republican primaries.

Republicans are contributing to the problem in their own way, too. Rather than offering any substantive governing vision of their own, they assume that voters will be repelled by unpopular progressive policies such as defunding the police, encouraging nearly unlimited illegal immigration, and promoting sexual and gender “fluidity” to schoolchildren. They ignore, of course, the fact that their own embrace of fundamentalist morality on abortion is also widely rejected by the populace. And even Right-leaning voters may doubt the sanity of some of the GOP’s eccentric candidates this November.

In short, both major parties stoke polarisation, the primary beneficiaries of which are those parties’ own political machines. But most Americans broadly want the same things: safety, economic security, a post-pandemic return to normalcy, and an end to dependence on China. Their divisions are based not so much on ideology but on the real circumstances of their everyday life.

The most critical, yet least appreciated, of these circumstances is class. America has long been celebrated as the “land of opportunity”, yet for working and middle-class people in particular, opportunity is increasingly to come by. With inflation elevated and a recession seemingly on the horizon, pocketbook issues are likely to become even more important in the coming months. According to a NBC News poll, for instance, nearly two-thirds of Americans say their pay check is falling behind the cost of living, and the Republicans hold a 19-point advantage over the Democrats on the economy.

A downturn could also benefit the Left eventually. As the American Prospect points out, proletarianised members of the middle class are increasingly shopping at the dollar stores that formerly served working and welfare populations. Labour, a critical component of the Democratic coalition, could be on the verge of a generational surge, with unionisation spreading to fast food retailers, Amazon warehouses, and Starbucks.

To take advantage of a resurgent labour movement, however, Democrats will have to move away from what Democratic strategist James Carville scathingly calls “faculty lounge politics”: namely, their obsession with gender, race, and especially climate. For instance, by demanding “net zero” emissions on a tight deadline, without developing the natural gas and nuclear production needed to meet the country’s energy needs, progressives run the risk of inadvertently undermining the American economy. Ill-advised green policies will be particularly devastating for the once heavily Democratic workers involved in material production sectors like energy, agriculture, manufacturing, warehousing, and logistics.

To win in the coming election and beyond, Democrats need to focus instead on basic economic concerns such as higher wages, affordable housing, and improved education. They also need to address the roughly half of all small businesses reporting that inflation could force them into bankruptcy. Some progressives believe that climate change will doom the Republicans, but this is wishful thinking. According to Gallup, barely 3% of voters name environmental issues as their top concern.

Read the rest of this piece at UnHerd.

Photo: Ted Eytan via Flickr under CC 4.0 License.

Can Space Save Earth?

Joel Kotkin and Marshall Toplansky — Tue, 06 Sep 2022 20:28:58 -0400

The world economy is in the doldrums, pessimism is rife around the world, and most young people, according to one survey, believe climate change means the end of human life on Earth.

Yet a better future beckons, if we can only begin to look outside ourselves, and even beyond our planet. It is in space that we may find solutions to some of our most pressing problems, including a workable energy strategy and access to the precious minerals needed to sustain our prosperity.

Space has always held a special place in our collective imagination. Missions to Mars, the mining of asteroids and the development of space-based human societies have been the subject of TV shows and movies for decades, all speaking to the notion of a human “manifest destiny” that will transcend the inertia of our Earth-bound society.

Despite a decades-long torpor at NASA, the space industry is making a major comeback. The U.S. Bureau of Economic Analysis has just announced that it is formally tracking the industry’s growth, which it estimates contributes approximately $200 billion annually to the U.S. economy and already employs 354,000 people. The global space economy could reach $1 trillion by 2040, according to new research from Morgan Stanley.

This rapid growth reflects not so much the desire to “boldly go where no one has gone before” but — as in the westward expansion across America of the 19^th century — our hunger for riches, precious metals and minerals. It has less to do with exploratory zeal and more with maintaining and feeding our terrestrial habitat.

In this quest, government is still a large part of the effort — with serious players including nations as diverse as China, Russia, India, Japan and Israel. NASA, for its part, has spent five years building the Artemis moon exploration program.

But increasingly, today’s return to space is being driven by private sector innovation and for-profit companies, which made 2021 the best year for space growth in decades.

The dominant players now are firms like SpaceX, Relativity, Virgin Galactic, Blue Origin and Long Beach-based Rocket Lab, which has recently announced a new mission to explore the gases of Venus. A recent report from the not-for-profit Space Foundation noted that about 90% of the more than 1,000 spacecraft launched this year have been backed by commercial firms — most notably the hundreds of Starlink internet satellites launched by Elon Musk’s SpaceX. The pace of new launches is now the greatest since the late 1960s during the U.S.-Soviet “race to the moon.”

SpaceX dominates today, accounting for upwards of 60% of all new commercial rocket launches. The company has achieved major technological breakthroughs in recent years, dramatically lowering the cost of spaceflight. Sending people or cargo into space, measured per kilogram, is 85 times cheaper today than when the space shuttle first launched in 1981.

SpaceX is preparing to establish a permanent presence on the moon and launch a crewed mission to Mars, but other players are also driving change. NASA, for instance, is planning new unmanned deep-space exploration. Japan has already started small-scale efforts to test the feasibility of retrieving metals from asteroids, the first attempt to shift mining away from our fragile planet to the vast and, as far as we know, empty areas in space.

These activities are already helping Earth in profound ways. Perhaps the most evident benefit has come in the form of satellite communications. SpaceX, through its Starlink constellation of satellites, beams broadband service to customers around the globe.

The efforts of space companies to provide orbital communications networks have, among other things, begun to bring cyberspace to the developing world. Aerospace engineer and consultant Rand Simberg says the Starlink system is why “Ukraine has maintained the internet through the war.” Sadly, the U.S. government recently rejected a Starlink project to serve rural America.

Read the rest of this piece at Los Angeles Times.

Marshall Toplansky is a widely published and award-winning marketing professional and successful entrepreneur. He co-founded KPMG's data & analytics center of excellence and now teaches and consults corporations on their analytics strategies.

Photo: SpaceX via Flickr under under CC 2.0 License.

Class is Back

Joel Kotkin — Thu, 23 Jun 2022 20:28:58 -0400

The growing likelihood of recession, at best sharply lower growth and maybe 1970s-style stagflation, seems likely to further accentuate the class and political divisions already rubbed raw by the pandemic and a global supply crisis. A majority of Americans feel we may be headed for a depression, while Britain is already experiencing negative growth.

Some, particularly on the American right, believe high prices and a sinking stock market should all but assure a GOP landslide in the Midterms later this year. Inflation and the slowdown have already helped Canada’s conservatives increase their majority last month in Ontario, the country’s dominant province, largely by winning over working-class voters.

But in the longer run, the real winners may still be on the left. Last time the economy was weakened like this – the 1930s – US progressives took the helm for almost a quarter of a century and Clement Attlee’s Labour Party took power in Britain in 1945, after serving loyally in Churchill’s wartime coalition. Once again, today’s shaky economy undermines the already weakened neoliberal order. A strong majority of people in 28 countries around the world, according to a recent Edelman survey, believe capitalism does more harm than good. Wages are stagnant, even in long-booming East Asia.

Jean-Luc Mélenchon’s left-wing alliance’s stunning surge last week in the French legislative elections affirms the progressives’ improved prospects. Along with a resurgent right-wing National Rally, Mélenchon’s gains destroyed President Macron’s chance to govern with a legislative majority. Leftists have had a field day in Latin America, too, with recent election victories in Columbia, Chile, Honduras and Mexico. Meanwhile, Russia, Central Asia, Turkey, much of Africa, China, the Philippines and Myanmar are all ruled by would-be autocrats, not always strictly leftist, but generally hostile to the neoliberal economic order.

The accelerating shift away from neoliberalism stems from the already expansive class divides that widened further during the pandemic, with CEOs earning ever more than their employees. Flawed policies, including the maintenance of ultra-low interest rates for too long and unnecessarily huge stimulus packages, have created a huge inflation crisis that the Biden administration initially dismissed as ‘a high-class problem’ that would be temporary. In truth, inflation has hit hardest those who are most exposed to higher food, fuel and housing prices – the middle and working classes – and seems likely to stay with us for a while.

James Madison rightly assumed that ‘the most common and durable source of factions’ grows from ‘unequal distribution of property’. Today, the looming recession seems likely to widen conflicts between the technocratic oligarchy, the middle class and the low-wage precariat. Members of the technocracy, epitomised by Silicon Valley, elite bureaucrats and ‘Jupiterian’ politicians like Macron, all gained power and wealth during the pandemic. To be sure, recession means less luxuriant balance sheets – the 50 richest people in the world have lost an astounding $563 billion this year – but this poses no real threat to their economic preeminence and growing political power. After all, outside of China, there’s no one left to challenge them.

In contrast, the middle and precariat classes – the latter made up of part-time ‘gig’ workers with little job security or benefits – are being pummeled by the soaring cost of rent, energy and food. Ideally, these two classes would combine to curb oligarchic power, but all too often they have distinctly different worldviews. Small-business owners and rural voters – the base of the right in Europe and North America – tend to suffer the effects of inflation, but generally blame government regulation for their problems. In contrast, the precariat seeks a programme of subsidies, rent control and expanded pensions to expel the spectre of poverty.

Read the rest of this piece at Spiked.

Marshall Toplansky is a Clinical Assistant Professor of Management Science at the Argyros School of Business and Economics at Chapman University.

Photo: Old York Guy, via Wikimedia under CC 3.0 License.

The Kids Are Not Alright and the Center is No Longer Holding

Joel Kotkin — Sun, 24 Apr 2022 20:28:38 -0400

Across the West, the young are losing faith in the future.

The recent French election provides a case study. In the first round vote, voters narrowly favored President Emmanuel Macron, the epitome of “enlightened” elite rule, over Marine Le Pen, the doyenne of French fascism. While those two are now facing off, it was Jean-Luc Mélenchon, a grizzled former Trotskyite with a far-left agenda, who finished first among voters under 35, followed by Le Pen, while Macron was far back in the pack as the established parties of the left, center and right all collapsed.

Students at the Sorbonne, many of whom backed Mélenchon, are taking to the streets to protest the choice between far-right Le Pen and the elite technocrat Macron, who now seeks to win them over by declaring a net-zero emissions agenda, based in large part on nuclear power.

Much the same youthful alienation is evident here. Ahead of a likely rematch between what would be a 81-year-old Joe Biden and a 77-year-old Donald Trump, American politics seem geriatric and sclerotic. And the pandemic has only made things worse. Young workers were particularly vulnerable to job loss, as they were overrepresented in high-risk service sector industries, notes Pew. And now they are in the crosshairs of inflation, most notably for rents that are up 17 percent in major cities already this year.

Despite notions that younger voters would remain reliable Democrats,, Biden has already lost his majority among the young, the same troubled generation that helped elect him. Biden has seen his approval number among the twenty-something members of Generation Z plummet from 60 percent to 39 percent, notes Gallup. Among Millennials—those born between 1981 and 1996—he’s plunged from 60 percent to 41 percent. Other polls, including a new one from Quinnipiac, show the same dynamic.

Here, as in France, it turns out that young voters are not the sure thing many progressives had hoped. Pollster Sam Abrams has found that a small majority of students reject both political parties; only 18 percent think the Democrats are moving in the right direction which looks good only in comparison with the 10 percent who think that Republicans are doing so. Most young voters, according to the Pew Research Center, are neither liberal, outside of cultural issues, nor conservative. A strong majority think the country is headed in the wrong direction.

Why so alienated? Start with economics. In the United States, the odds of a middle-class earner moving up to the top rungs of the earnings ladder has dropped by approximately 20 percent since the early 1980s, meaning the young face diminished prospects. A Deloitte study projects that Millennials in the United States will hold barely 16 percent of the nation’s wealth in 2030, when they will be by far the largest adult generation. Gen Xers, the preceding generation, will hold 31 percent, while Boomers, entering their eighties and nineties, will control 45 percent of the nation’s wealth.

Read the rest of this piece at Daily Beast.

Photo: mSeattle via Flickr, CC 2.0 License

The Working Classes Are a Volcano Waiting to Erupt

Joel Kotkin — Wed, 20 Apr 2022 20:28:38 -0400

Whatever the final outcome, the recent French elections have already revealed the comparative irrelevance of many elite concerns, from gender fluidity and racial injustice to the ever-present ‘climate catastrophe’. Instead, most voters in France and elsewhere are more concerned about soaring energy, food and housing costs. Many suspect that the cognitive elites, epitomised by President Emmanuel Macron, lack even the ambition to improve their living conditions.

The French elections reflect the essential political conflict of our time. On one side, there is a powerful alliance between the corporate oligarchy and the regulatory clerisy. On the other, there are two beleaguered and angry classes – the small-business owners and artisans, and the vast, largely unorganised service class. The small-business class generally tends to favour the populist right, whether in America, Australia or Europe. These people want the government out of their business and to be left alone. Meanwhile, workers tend towards the populist left, which promises to relieve their economic pain.

The common feature is the politics of anger and resentment. In the first round of the French elections, a majority voted either for Marine Le Pen and other rightist candidates, or for the old Trotskyist warhorse Jean-Luc Mélenchon and other candidates of the hard left. The establishment parties, like the centre-left Parti Socialiste and the Gaullist Républicains, were left way behind. The ultra-green Parti Socialiste mayor of Paris, Anne Hidalgo, won less than two per cent – a pathetic performance from the onetime ruling party. Intriguingly, voters under 35 went first for Mélenchon and then Le Pen, leaving the technocrat Macron in dismal third place among the young. Macron only won decisively among voters over 60.

We may, as de Tocqueville put it during the early stages of the Industrial Revolution, be ‘sleeping on a volcano’. A still inchoate rebellion from below against the concentration of wealth and power above seems to be gathering momentum. Across the 36 wealthier countries of the Organisation for Economic Cooperation and Development (OECD), the richest citizens have taken an ever-greater share of national GDP in recent years as the middle class has become smaller. Heavily in debt, mainly because of high housing costs, the middle class ‘looks increasingly like a boat in rocky waters’, suggests the OECD.

One key indicator of the declining middle class is rates of home ownership, which are stagnant or plummeting, particularly among the young, in the United States, the United Kingdom and Australia. In the United States, the chance of middle-class earners moving up to the top rungs of the earnings ladder has dropped by approximately 20 per cent since the early 1980s. Life expectancy in the US has dropped to the lowest levels in a quarter of a century.

This growing class division is a global phenomenon. In 1974, the proportion of global corporate income that went to labour was about 64 per cent. It dropped to 59 per cent by 2012. This pattern has applied not only to wealthy markets in the West, but also to labour-rich markets like China, India and Mexico. In 2017, the Pew Research Center found that poll respondents in France, Britain, Spain, Italy and Germany are even more pessimistic about the next generation than those in the United States. Such sentiments are shared in countries like Japan and India, where many new college graduates fail to find decent employment. Well over two thirds of Mumbai youths are pessimistic about their prospects.

This erosion of opportunity sets the stage for a potential combustion of class anger, particularly as the pandemic and now Russia’s invasion threaten to make things worse. The unemployment rate reached 32.5 per cent in South Africa during the pandemic years, with almost two thirds of young people with no job in sight. The story is unfortunately similar elsewhere in Africa, with regional powers such as Kenya and Senegal reporting over 40 per cent unemployment. This is a recipe for chaos. Several Latin American, African and Middle Eastern countries have also defaulted on long-term loans and more may follow.

Even China seems poised for an outbreak of class warfare. Since 1978, China’s Gini coefficient, a key measurement of income inequality, has tripled. China has gone from being highly egalitarian to becoming more stratified than Mexico, Brazil or Kenya, as well as the United States and virtually all of Europe. China, notes one observer, is now developing ‘something resembling a permanent caste system’.

Read the rest of this piece at Spiked.

Photo: Olivier Ortelpa via Flickr under CC 2.0 License.

California's Vanished Dreams, By the Numbers

Joel Kotkin — Fri, 15 Apr 2022 20:28:38 -0400

Even today amid a mounting exodus among those who can afford it, and with its appeal diminished to businesses and newcomers, California, legendary state of American dreams, continues to inspire optimism among progressive boosters.

Laura Tyson, the longtime Democratic economist now at the University of California at Berkeley, praises the state for creating “the way forward” to a more enlightened “market capitalism.” Like-minded analysts tout Silicon Valley’s massive wealth generation as evidence of progressivism’s promise. The Los Angeles Times suggested approvingly that the Biden administration’s goal is to “make America California again.” And, despite dark prospects in November’s midterm elections, the President and his party still seem intent on proving it.

But most Californians, according to recent surveys, see things differently. They point to rising poverty and inequality, believe the state is in recession and that it is headed in the wrong direction. Parting with the state’s cheerleaders, the New York Times’ Ezra Klein, a reliable progressive and native Californian, says the Golden State’s failures are “making liberals squirm.”

Reality may well be worse than even Klein admits. In a new report for Chapman University, my colleagues and I find California in a state of existential crisis, losing both its middle-aged and middle class, while its poor population faces dimming prospects. Despite the state’s myriad advantages, research shows it plagued by economic immobility and inequality, crushing housing and energy costs, and a failing education system. Worse than just a case of progressive policies creating regressive outcomes, it appears California is descending into something resembling modern-day feudalism, with the poor and weak trapped by policies subsidized by taxes paid by the rich and powerful.

California may conjure images of Rodeo Drive and Malibu mansions in the public imagination, but today the state suffers the highest cost-adjusted poverty rate in the U.S. The poor and near-poor constitute over one third – well over 10 million – of the state’s residents according to the Public Policy Institute of California. Los Angeles, by far the state’s largest metropolitan area, and once a magnet for middle class aspirations, has one of the highest poverty rates among major U.S. cities. A United Way of California analysis shows that over 30 percent of residents lack sufficient income to cover basic living costs even after accounting for public-assistance programs; this includes half of Latino and 40 percent of black residents. Some two-thirds of noncitizen Latinos live at or below the poverty line.

“In California, there is this idea of ‘Oh, we care about the poor,’ but on this metric, we are literally the worst,” Stanford’s University’s Mark Duggan, principal author of an economic comparison of California with Texas, told the San Francisco Chronicle.

The state’s poverty and associated dysfunction are on full display in leading cities like Los Angeles and San Francisco, where a large underclass now inhabits the streets – the once-iconic locales having become poster children for urban dysfunction. Beyond massive homeless camps, crime has become so bad that the LAPD has warned tourists it can no longer protect them. San Francisco, meanwhile, suffers the highest property crime rate in the country. Businesses like Walgreens have shut down numerous Bay Area locations due to “rampant burglaries.” Homelessness and crime increasingly dominate the state’s political discourse, particularly in these two deep blue bastions.

California also faces growing inequality. By the Gini index, a measure of the distribution of income across a population, California has the third-highest inequality behind New York and Louisiana, and has experienced the fifth largest expansion of inequality since 2010, according to American Community Survey data. California also suffers the widest gap between middle- and upper-middle-income earners of any state.

Read the rest of this piece at Real Clear Investigations.

Photo: NeoBatfreak Wikimedia under CC 4.0 License.