US regressing into a developing nation for most people, MIT professor warns

As Trump declares war on America's workers...

 

Russia Today/Moscow: Growing income inequality is turning the US into a dual economy, with one economy for the rich and another for the poor, according to an MIT professor, who warns that the middle class is vanishing.

In his new book, “The Vanishing Middle Class,” Peter Temin, professor emeritus of economics at Massachusetts Institute of Technology, warns that the US is moving backward and becoming more like a developing nation, as the “the vanishing middle class has left behind a dual economy.

We are still one country, but the stretch of incomes is fraying the unity of the nation,” Temin wrote in the introduction of his book, according to a copy obtained by Barnard College.

The economist describes a dual economy, where the gap between the rich and the poor has grown wider.

Temin points to a study from the Pew Research Center, which, he said, “shows that the income share lost by the middle class has gone to people earning more than double the median income.

In short, the rich got richer. The poor did not disappear, and the middle class shrank sharply,” Temin wrote. “We are on our way to become a nation of the rich and the poor with only a few people in the middle.

 

Temin argues that American history and politics had a lot to do with the increasing wealth inequality.

Over a period of 40 years, from World War II to the 1970s, Temin said that wages grew with the rest of the economy. Then, starting in the 1970s, national production continued to grow, but wages did not.

The middle class’s share of total income fell 30 percent in 44 years,” Temin wrote.

The wealthiest 20 percent of the population had access to education, good jobs and social networks, while the other 80 percent was increasingly burdened with debts, low-wage jobs, and health problems. Now, Temin said the conditions where many poorer Americans live in resemble developing countries, with dilapidated housing, crumbling public transportation, and roads and neglected social structures.

Temin splits the economy into the “FTE sector” (finance, technology, and electronics) and low-skill work. The economic gap between rich and poor began with the war on drugs, he said.

The low-wage sector—like the FTE sector—was born in 1971 as President [Richard] Nixon replaced [President Lyndon B.] Johnson’s War on Poverty with a new War on Drugs and appointed Lewis Powell to the Supreme Court,” Temin wrote. “As the War on Drugs expanded in subsequent decades, it was enforced far more strongly for African Americans than for whites, becoming… the ‘New Jim Crow,’ revamping and renewing the racist intent of the repressive old anti-black Jim Crow laws that followed Reconstruction in the South.

After that, Temin said, the FTE sector became driven by money and free-market individualism. They began to ignore the needs of the low-wage sector, turned away from public-spirited universalism to free-market individualism and even began to work against the low-wage sector.

The FTE sector was able to stay in power, Temin said, because of Investment Theory of Politics, which he describes as “the connection between the income distribution in the United States and political decisions.

Investment Theory of Politics was developed by political scientist Thomas Ferguson, director of research at the Institute for New Economic Thinking (INET), who said that there is a direct correlation between the money major political parties spend and the votes they win.

The evidence can be seen in a simple graph from a study conducted by the Roosevelt Institute on the influence money had on the 2012 presidential election.

Temin used a model created by Nobel Prize winner Arthur Lewis, which was designed to describe how far inequalities have progressed in developing nations. When Temin used the applied the model to the US, he said: “The Lewis Model actually works.

We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people,” Temin wrote, according to the Independent.

To break the cycle, Temin provides some recommendations, including reducing mass imprisonment, which costs around $1 trillion a year, or 6 percent of the total US gross domestic product, according to a 2016 study from Washington University in St. Louis, Missouri.

He recommends using the money to increasing funds for public education, so families can escape the low-skill trap and integrate into the broader economy.

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Posted by on April 22, 2017, With 1680 Reads Filed under Government & Politics. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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2 Responses to "US regressing into a developing nation for most people, MIT professor warns"

  1. Khalid Talaat  April 22, 2017 at 9:30 am

    I was once standing in a resident visa processing line of a developing country . As a group of Americans shuttled from our sponsor’s office, we waited in line with skilled and unskilled workers from different countries for the official start of business. On time, an official set up another table to form a new line and put up a sign that read VIP ONLY. Another official came along the line looking at our designations and repeating in different languages, engineers, doctors and IT personnel please move to the VIP line. Two Americans behind me indicated that one was a lawyer and the other an accountant and should they move to the VIP line. Here is the dialogue as I remember it.
    The official: No.
    Lawyer: why not?
    Official: you don’t make money.
    Lawyer: What do you mean? of course I make money.
    Official: You don’t make money, you cost money.
    Lawyer: what do you mean?
    Official: Engineers build useful things, doctors save people’s lives, ITs make phones and computers work. What do you make? You make trouble.
    Accounted: my job is important.
    Official: a profession that limits its self to one tool, a four function calculator, should not be called a useful profession.
    Lawyer: Did you go to college.
    Official: Yes. I am a graduate of your MIT. What college did you go to?
    Lawyer: grinning.
    Official: Have a good day cow jockey.

    America
    make things that work
    not paperwork.

  2. David Odell  April 22, 2017 at 8:08 am

    Another analysis by an academic that makes a simple point complicated. This is a major catalyst in the separation process and it is in every field. The poor cannot do their own taxes. Lawyers cannot even read an insurance contract. Most people have no clue what laws they are governed by. Police are not even sure what the laws are. Finance is not taught. After 13 years of forced mathematics communities cannot discern the predatory nature of insurance companies and the ridiculousness of “protection” sold by force. Income Equality or Income Inequality is something people understand and see every day. It is a simple and repetitive process that begins with corruption and education tainted by political bias. Liars.
    See, this report can be heard every day for free, but an academic spends hours and hours on top of expenses to produce and sell something that is the same, just much more complicated than it needs to be. That is the new American product. Complication of simplicity.

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