Wealth, Carbon, and Human Culture

by Brian T. Lynch, MSW

The rising accumulation of private wealth is to civilized governments as rising levels of CO2 are to Earth’s climate.

Screen Shot 2020-02-12 at 11.03.57 PMLet that sink in. Extremes accumulations of private wealth in human society and the extreme build-up of carbon dioxide in the Earth’s atmosphere are both transformative, disruptive of a complex equilibrium and ultimately destructive for humanity.

Human culture is both a cause and a barrier to solving these two great threats to our collective welfare. In fact, these two looming catastrophes of extreme wealth inequality and extreme climate change are different aspects of a singular human flaw – personal greed. More specifically, both of these threats are outcomes of a powerful cultural priority that places profits over people. We don’t do what is our health best for human society because the cost would reduce personal profits for those who profit the most. The idea that we would not sacrifice personal wealth to save our immediate family from ruin is unthinkable, yet in the abstract of corporate enterprise, the concept of sacrificing business profits to benefit society as a whole is equally unthinkable.

We are at the second great inflection point as a species. We once again face social deterioration and possible extinction, despite being at the apex of our success as a species.

Humanity’s first inflection point was over 50,000 years ago when we almost became extinct. We were down to a very small number of survivors in Ethiopia. As a species, we were incapable of self-sacrifice to benefit the survival of the clan. This nearly caused our extinction. In this regard, we were much like many other species in this regard.

Consider the wolf. In the presence of a kill, the strongest wolf defends its right to eat its fill. It cannot eat less in order to save some meat for members of the pack who are starving. This is how evolution ensures the survival of the fittest among these top predators. But humans were never top predators. Our strength as a species is in our social bonds and the coordination of our collective actions. We, as a species, needed to suppress our self-preservation instincts to achieve our survival as a species.

We are told that this genetic alteration happened at this point around 50,000 years ago. It allowed individuals to sacrifice their personal welfare for the sake of the welfare of the group. This great self-sacrifice gene has carried us forward to the present. It has allowed us to create this massively interdependent human culture we enjoy today.

But now our more primitive personal greed tendencies are finding expression in an inability to sacrifice corporate profit (a hypothetical construct, and not an actual reality) to benefit the welfare of human society as a whole. Our inability to sacrifice corporate profits is once again threatening our existence as a species.

It is my curse to see this so clearly when so many seem incapable of seeing it at all.

Why Democrats Should Care About People Who Don’t Vote

by Brian T. Lynch

IMG_1423

Both political parties in America, along with virtually all television pundits and political opinion polling companies focus entirely on 60% of likely voters. We all ignore 40% of potential voters who don’t vote. Polling surveys commissioned by both the Democratic and Republican Parties are always predicated on some variation of likely voters. The results are then grise for the mill of television and newspaper commentators and political party prognosticators. And so it is settled wisdom that all of our elections boil down to 7% of likely voters who are also the swing voters among us. Rightly or not, these much fawned over swing voters are considered most independent voters with centrist political ideology. These swing voters have a disproportionate influence over electoral strategies and policy positioning. As a result, we never hear from those who are disillusioned with politics.

The conventional wisdom is that these non-voters don’t care about politics, but it is equally true that the body politic doesn’t care about these non-voters. We have come to the point where non-voters are the largest block of eligible voters in America. But are they really unreachable? Or are they justifiably disengaged because they are neglected by both the Democratic and Republican Parties? What is the potential for re-engaging this huge block of the electorate, and which political party has the most to gain? Which of our current Presidential candidates have the best shot at reaching out to these non-voters? And who are they anyway?

Why Democrats should care more about non-voters than swing voters

  • Among likely voters, there are about 10 million swing voters or 7% of all likely voters according to Nate Silver at FiveThirtyEight
  • There were 91.7 million non-voters in the 2016 presidential election or 40% of all eligible voters. Non-voters are the largest group of eligible voters
  • 54% of non-voters (49.5 million votes) are Democrats or left-leaning non-voters
  • Another 10% of non-voters (14.7 million votes) have no political leaning
  • 52% of all non-voters (47.7 million votes) want more government services, not less
  • The 64.2 million non-voting Democrats, left-leaning or neutral eligible voters represent over 6.4 times the number of swing voters in the 2016 election
  • This compares with 65.9 million Democratic votes for Hillary Clinton in the 2016 election

Who are the eligible voters that are not engaged in voting?

  • 66   million non-voters (72%) are under age 50. They are mostly younger voters
  • 59.6 million non-voters (65%) are dissatisfied with the way things are in the country
  • 54.1 million non-voters (59%) are White (non-Latino) citizens
  • 19.3 million non-voters (21%) are Latino citizens
  • 11   million non-voters (12%) are Black citizens
  • 55  million non-voters (60%) either graduated or dropped out of high school
  • 54.1 million non-voters (59%) are single
  • 46.8 million non-voters (51%) experienced unemployment in their household in the prior 12 months

39.4 million non-voters (43%) have household incomes of $30,000 or less per year

By far, the largest number of eligible non-voters are people who once made up the base of the Democratic Party. They are citizens for whom the rightward and upward shift of both political parties over the year has left them without a voice in government. It is not only the right thing to do to reconnect with these less-fortunate Americans, but it is also in the best interest of the Democratic Party and the Nation. These disillusions, often angry citizens are most vulnerable to the nationalistic authoritarian appeals to which they are being targeted.

Reaffirming Our Faith in This Republic

by Brian T. Lynch, MSW

This five-minute video message of actor Matthew Cooke, below, is worth a listen. It is a reaffirmation of faith in our republic at a time when it is most threatened and vulnerable. It articulates our founding principles, which contrasts sharply with current Republican behavior in Congress.

I try not to refer to Republicans as a “party” anymore because, despite any philosophical differences, political parties always maintain their fidelity to the nation’s constitution. That isn’t true of Congressional Republicans. Under Mitch McConnell, Republicans in Congress are more of a political movement to replace democracy with a plutocratic autocracy, a single “party” system that mostly represents a small but wealthy minority. So, it is time for each of us to stand up in unity to depose those for whom democracy, with its equitable distribution of power, is an obstacle to their corrupt designs.

How many more billionaires can we sustain before we collapse?

by Brian T. Lynch

The New York Times recently asked each of the Democratic primary candidates for President a series of identical questions. The last question on their list was, “Does anyone deserve to have a billion dollars?”

The trivial framing of that question bypassed the grave urgency for asking it in the first place. In a variant form of the question the Times was essentially asking, “Isn’t it OK to be a billionaire if you played by the rules and worked hard to earn it?”

The wording of the question pre-supposes that the laws and social rules in place, by which a person may accumulate a billion-dollars, are fair and open to anyone. It ignores whether inherited wealth is also deserved.  Most importantly, it treats wealth as if it is only a money count and not a measure of privilege and social power. By doing so, the question as it was posed ignored the essential problem that extreme private wealth is toxic to human society regardless of a person’s character or how they obtained it.

A more salient question would have been, “How many more billionaires can this human society sustain before it collapses?

In the 50,000-year history of human civilization, the concepts of private ownership and private wealth are recent developments. The full ramifications of these constructs on our social cohesion and collective welfare are still being revealed. The written history of civilizations offers no comfort. There are no examples of a happy, stable society where extremes of wealth inequality existed. The lessons of history seem to be that a suitable balance of power is required to sustain a healthy and stable society. Human populations simply cannot tolerate distributions of wealth/power that either force unnatural equality or permit unlimited extremes of private wealth.

There is no question that we crossed the Rubicon into a world where extreme wealth inequality is corrupting world governments and destroying the balance of nature. The questions we should be asking candidates for President and all our elected officials are, “What are your plans to rebalance the distribution of wealth and social power in America?”   And then the follow-up question, “What are you going to do to stabilize and rebalance the Earth’s damaged ecology?”

How many more billionaires can we sustain before we collapse?

by Brian T. Lynch

The New York Times recently asked each of the Democratic primary candidates for President a series of identical questions. The last question on their list was, “Does anyone deserve to have a billion dollars?”

The trivial framing of that question bypassed the grave urgency for asking it in the first place. In a variant form of the question the Times was essentially asking, “Isn’t it OK to be a billionaire if you played by the rules and worked hard to earn it?”

The wording of the question pre-supposes that the laws and social rules in place, by which a person may accumulate a billion-dollars, are fair and open to anyone. It ignores whether inherited wealth is also deserved.  Most importantly, it treats wealth as if it is only a money count and not a measure of privilege and social power. By doing so, the question as it was posed ignored the essential problem that extreme private wealth is toxic to human society regardless of a person’s character or how they obtained it.

A more salient question would have been, “How many more billionaires can this human society sustain before it collapses?

In the 50,000-year history of human civilization, the concepts of private ownership and private wealth are recent developments. The full ramifications of these constructs on our social cohesion and collective welfare are still being revealed. The written history of civilizations offers no comfort. There are no examples of a happy, stable society where extremes of wealth inequality existed. The lessons of history seem to be that a suitable balance of power is required to sustain a healthy and stable society. Human populations simply cannot tolerate distributions of wealth/power that either force unnatural equality or permit unlimited extremes of private wealth.

There is no question that we crossed the Rubicon into a world where extreme wealth inequality is corrupting world governments and destroying the balance of nature. The questions we should be asking candidates for President and all our elected officials are, “What are your plans to rebalance the distribution of wealth and social power in America?”   And then the follow-up question, “What are you going to do to stabilize and rebalance the Earth’s damaged ecology?”

Humanizing the Minimum Wage

by Brian T. Lynch, MSW

A State Senator in New Jersey fears a $1 raise for the working poor in this state will be too much of a hardship for businesses if the economy slows down a little.

For some national context, New Jersey passed a minimum wage law last year that will boost the minimum to $15 per hour by the year 2024. After the initial jump this past January, the working poor will receive a one dollar per hour raise every January between now and January of 2024.

New Jersey is an expensive state in which to live. The northern half of the state is part of the New York City metropolis. The central sections of the state are within the Philadelphia metropolis. The latest Economic Policy Institute study estimates a family of two adults and two children in Morris County would need a combined income of $104,121 per year to live comfortably. That works out to $50 per hour, 40 hours per week for one breadwinner, or $25 per hour if both parents work full-time. It also means that a single mother making the current minimum wage of $8.85 per hour would have to work 25 hours per day, 9 days per week to live comfortably in Morris County.

State Senator Vin Gopal, a Democrat from Monmouth County, NJ, said the state minimum wage law was an “irresponsible bill” when it passed. He is sponsoring a bill that would suspend minimum wage hikes in the future if there are signs of an economic slowdown. He calls this, “a basic, common-sense precaution.”

Back when workers and business owners were neighbors, owners cared about what would happen to an employee’s family during economic downturns. They would make adjustments and only ask all of their workers to make a small temporary sacrifice if needed so that the business and workers could both survive.

In today’s callus corporate environments, workers are a commodity (labor) to be hired or fired as a way of fine-tuning profits. This jaded view of people is reflected in the pending NJ Senate bill, S3607, which would suspend future minimum wage increases when there are signs of a slowing economy.

This bill doesn’t ask every employee to sacrifice during hard times. It asks only the most vulnerable workers to take a hit for the company. And where is there any built-in expectation that businesses should make any temporary accommodations to their bottom line?

If a company is really so economically fragile that it can’t afford an extra $58 dollars a week for a low wage worker during a downturn, they should have an option to apply to the state for an economic bridge loan to cover the cost of the raise until the economy turns around. Increasing worker incomes during an economic downturn, after all, makes economic sense. It is what economists call an economic stimulus. It increases local spending which helps jumpstart the economy.

For businesses to shift the economic stress caused by the normal ups and downs of the business cycle onto the backs of the lowest-paid workers is repugnant to me.

Shadow Banking a Growing Threat to Global Financial Stability

by Brian T. Lynch, MSW

A Caribean Island Resort
A new global financial regulatory agency, the Financial Stability Board (FSB), quietly emerged from the dust of the Great Recession of 2007. “The FSB’s creation came after the G20 Summit in London in April 2009.

Headquartered in Basel, Switzerland, the board includes all G20 major economies. The FSB consists of 68-member institutions. It comprises several central banks, ministries of finance, and supervisory and regulatory authorities from 25 jurisdictions, as well as 10 international organizations and six Regional Consultative Groups (RCGs). It’s stated purpose seems to be, “… policy work to enhance the resilience of non-bank financial intermediation… [focusing] on those parts of non-bank financial intermediation that perform economic functions which may give rise to bank-like financial stability risks.”

In other words, global shadow banking and finance networks have grown so large and powerful that they pose a threat to the whole nation-based international banking and finance system.

The Financial Stability Board says they are responsible for:

· Preparing annual reports on the implementation of reforms and their effects

· Coordinating financial sector policies

· Conducting outreach activities [To WHOM?]

· Building resilient financial institutions

· Addressing SIFIs [Systemically Important Financial Institutions]

· Making the derivates market safer [Which was the epicenter of the financial collapse in 2007]

· Enhancing the resilience of non-bank financial intermediation [NBFI]

· Formulating additional policies on specific areas of the global financial market

· Preparing progress reports to the G20

.  Conducting peer reviews

· Analyzing the effects of reforms

So, this is an autonomous international agency reporting to the G20, yet it is independent of the G20 or any other democratically elected government authority. It analyzes and proposes and monitors non-government enforced regulations of cross-border financial interactions between traditional international banking institutions and the global shadow banking institutions. It exists to keep the global economy on an even keel, and it prepares reports. Here is their 2018 report on the health and extent of global, non-standard financial institutions.  Global Monitoring Report on Non-Bank Financial Intermediation 2018 

Have you ever heard of NBFI, “Non-Bank Financial Intermediation?”

I first came across this term looking for information about a high-end tourist destination, a small, self-governing island in the Caribean, one of many such places. In addition to high-end tourism, its economy is also dependent on offshore financial services. Among the financial services listed on the internet about the Island’s economy is the ‘financial intermediation sector. (The what, I ask? )

Section #4 of the FSB report explains that financial intermediation: “… focuses on those parts of non-bank financial intermediation where bank-like financial stability risks may arise. The narrow measure of non-bank financial intermediation, which reflects an activity-based “economic function” assessment of risks, grew by 8.5% to $51.6 trillion in 2017, at a slightly slower pace than 2011-16. The narrow measure of non-bank financial intermediation, which reflects an activity-based “economic function” assessment of risks, grew by 8.5% to $51.6 trillion in 2017, at a slightly slower pace than 2011-16.

Since 2011, the Cayman Islands, China, Ireland, and Luxembourg together have accounted for over two-thirds of the dollar value increase. The narrow measure represents 14% of total global financial assets. Key components include:

· Collective investment vehicles (CIVs)

· Non-bank financial entities engaging in loan provision that is dependent on short-term funding

· Market intermediaries that depend on short-term funding or secured funding

· Securitisation-based credit intermediation

Section 2 provides an overview of, “Other Financial Intermediaries” (OFIs) aggregate, which includes all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions or financial auxiliaries. These alt-financial entities grew by 7.6% in 2017. OFIs’ growth exceeded that of banks, insurance corporations, and pension funds. With $116.6 trillion, OFI assets represent 30.5% of total global financial assets, the largest share on record.”

These invisible, unaccountable entities are apparently a go-to source for loans by the global banks and nation-based financial institutions. In November 2010, the FSB defined shadow banking as “credit intermediation involving entities and activities (fully or partly) outside of the regular banking system”

Then, On 22 October 2018, the FSB announced its decision to replace the term “shadow banking” with the term “non-bank financial intermediation,” a less sinister sounding accommodation.

So, what is really going on here? 

It seems that billionaires, oligarchs, and their self-dealing minions are growing an alternate financial network that is fully or partially outside of national boundaries. It is certainly outside the direct control of the traditional international banking and finance systems. Traditional international bank institutions appear to be both fearful of, and increasingly dependent on this dark money network the reach of nations. The FSB says, “Non-bank financing provides a valuable alternative to bank financing for many firms and households, fostering competition in the supply of financing and supporting economic activity.”
Competition indeed. The OFTs alone account for close to a third of all the world’s financial wealth. This appears to be a socially malignant private treasury of wealth with no direct productive value. It is accessible only to wealthy corporations and the very rich. The capital gains of this private wealth cannot be taxed for the benefit of any global society.

This whole development may be more than a financial risk to the global economy. It may be a burgeoning threat to the sovereignty of nations and the sanctity of self-governing democracies everywhere. It is a development worthy of our attention and vigilance.

Read the full FSB report here:https://www.fsb.org/wp-content/uploads/P040219.pdf

The Rise of a Disloyal Opposition

by Brian T. Lynch, MSW

It isn’t too radical to say that the Republican Party establishment is no longer compatible with the democratic ideals on which our republic was founded. If that shocks you or disturbs you, you are in good company. This isn’t how most of us picture things. For well over a hundred years politicians in both parties have been unquestioningly loyal to democratic principles, to this republic, the Constitution, and the rule of law. This truth is the source of the phrase “the loyal opposition.” Members of the “other side” were always opponents, not enemies.

But politics isn’t static, of course. It evolves, and our understanding of how governments and society have changed must change as well. This is difficult because most changes unfold very slowly. We keep up by taking the occasional mental snap-shots of the surroundings, but the tendency to hold on to these images is strong as we struggle to manage our busy lives. We reconcile our views of events from day to day until one day some event or a crisis comes along that scrambles how we pictured things. We are living in one of those times.

Tracing the details of how our politics changed is too broad a topic. Seeing one essential feature, the decline of majority rule in government, is the point here. To help do that, the rise of the Christian-right in politics provides a helpful starting point. To be clear, these trends and changes impact every aspect of our politics, including the growing tensions now on display in the Democratic primary. But the impact is most obvious in the GOP as the majority of us struggle to understand the Republican response to the current impeachment inquiry.

The political rise of the Christian-right at the end of the Twentieth-century is not in dispute. Of the primary reasons for this shift, their views on legal abortion predominate. The standard means of resolving religious differences involves evangelizing until the majority viewpoint of citizens are swayed. In the 1980s the religious right came to realize that anti-abortion sentiment may never predominate in a modern, pluralistic democracy. That inability to convince the majority to willingly outlaw abortion is what brought the Christian-right into politics. They sought, and still seek to legislate what they cannot attain through indoctrination or persuasion.

But politics and power have a corrupting influence on religion. After gaining political influence and even after gaining positions as elected officials, the Christian-right was still unable to pass their unpopular legislation within a system based on majority rule. They would eventually compromise certain Christian and democratic values to join a coalition of other minority interests and fringe political groups under the umbrella of the GOP. Secular pluralism would come to be seen by fundamentalist Christians as American society’s moral decay, and government by majority rule would come to symbolize evil in the eyes of some fundamentalist Christians.

These same hard lessons about majority rule also frustrated the economic caste of America’s wealthiest elites. In the corporate world where decision making is proportional to one’s ownership share (or wealth). One person-one vote was a significant barrier to enacting laws and policies that the industrial elite favored because they are so few in number.

But money is power. The Barrons of industry resorted to buying government influence in order to reshape state and federal rules so they could buy even more influence over time. They corrupted politicians with campaign cash and perks. This is particularly true in the Republican Party where the industrial elite focused most of their attention. Now the Republicans in Congress routinely pass and implement policies favorable to the rich regardless of how unpopular or harmful to the general population.

As stated above, this transition is a feature in both political parties, but it is especially evident in the GOP where frustration with majority rule has passed the tipping point.

Frustration with majority rule has become a unifying feature that transformed the GOP into an odd coalition of minority and fringe interest groups united by their desire to overcome the majority in order to achieve their unpopular agendas. The rise of Donald Trump and his corrupt, authoritarian style of leadership has accelerated this transition.

Just as the Christian-right has had to make some unchristian compromises, so have the industrial elites and every other minority or fringe interest group within the Republican coalition. In the process, the GOP has morphed into an anti-democratic movement that will do whatever it takes towards a totalitarian rule. This coalition of disgruntled minority interest groups will even propagate Russian disinformation talking points if it excites their base and wins over their support.

The GOP is no longer faithful to democratic principles or even the rule of law. We have lost the consent of the minority to majority rule. Political opponents are cast as political enemies in an all-out battle for Unitarian control. The opposition is no longer loyal.

Understanding the truth is the first step in identifying ways to save our republican form of government.

———————————————————-

Further Reading:

Coup d’état – The Revolution Has Been Televised for Years

The Rise of a Disloyal Opposition

by Brian T. Lynch, MSW

It isn’t too radical to say that the Republican Party establishment is no longer compatible with the democratic ideals on which our republic was founded. If that shocks you or disturbs you, you are in good company. This isn’t how most of us picture things. For well over a hundred years politicians in both parties have been unquestioningly loyal to democratic principles, to this republic, the Constitution, and the rule of law. This truth is the source of the phrase “the loyal opposition.” Members of the “other side” were always opponents, not enemies.

But politics isn’t static, of course. It evolves, and our understanding of how governments and society have changed must change as well. This is difficult because most changes unfold very slowly. We keep up by taking the occasional mental snap-shots of the surroundings, but the tendency to hold on to these images is strong as we struggle to manage our busy lives. We reconcile our views of events from day to day until one day some event or a crisis comes along that scrambles how we pictured things. We are living in one of those times.

Tracing the details of how our politics changed is too broad a topic. Seeing one essential feature, the decline of majority rule in government is the point here. To help do that, the rise of the Christian-right in politics provides a helpful starting point. To be clear, these trends and changes impact every aspect of our politics, including the growing tensions now on display in the Democratic primary. But the impact is most obvious in the GOP as the majority of us struggle to understand the Republican response to the current impeachment inquiry.

The political rise of the Christian-right at the end of the Twentieth-century is not in dispute. Of the primary reasons for this shift, their views on legal abortion predominate. The standard means of resolving religious differences involves evangelizing until the majority viewpoint of citizens are swayed. In the 1980s the religious right came to realize that anti-abortion sentiment may never predominate in a modern, pluralistic democracy. That inability to convince the majority to willingly outlaw abortion is what brought the Christian-right into politics. They sought, and still seek to legislate what they cannot attain through indoctrination or persuasion.

But politics and power have a corrupting influence on religion. After gaining political influence and even after gaining positions as elected officials, the Christian-right was still unable to pass their unpopular legislation within a system based on majority rule. They would eventually compromise certain Christian and democratic values to join a coalition of other minority interests and fringe political groups under the umbrella of the GOP. Secular pluralism would come to be seen by fundamentalist Christians as American society’s moral decay, and government by majority rule would come to symbolize evil in the eyes of some fundamentalist Christians.

These same hard lessons about majority rule also frustrated the economic caste of America’s wealthiest elites. In the corporate world where decision making is proportional to one’s ownership share (or wealth). One person-one vote was a significant barrier to enacting laws and policies that the industrial elite favored because they are so few in number.

But money is power. The Barrons of industry resorted to buying government influence in order to reshape state and federal rules so they could buy even more influence over time. They corrupted politicians with campaign cash and perks. This is particularly true in the Republican Party where the industrial elite focused most of their attention. Now the Republicans in Congress routinely pass and implement policies favorable to the rich regardless of how unpopular or harmful to the general population.

As stated above, this transition is a feature in both political parties, but it is especially evident in the GOP where frustration with majority rule has passed the tipping point.

Frustration with majority rule has become a unifying feature that transformed the GOP into an odd coalition of minority and fringe interest groups united by their desire to overcome the majority in order to achieve their unpopular agendas. The rise of Donald Trump and his corrupt, authoritarian style of leadership has accelerated this transition.

Just as the Christian-right has had to make some unchristian compromises, so have the industrial elites and every other minority or fringe interest group within the Republican coalition. In the process, the GOP has morphed into an anti-democratic movement that will do whatever it takes towards a totalitarian rule. This coalition of disgruntled minority interest groups will even propagate Russian disinformation talking points if it excites their base and wins over their support.

The GOP is no longer faithful to democratic principles or even the rule of law. We have lost the consent of the minority to majority rule. Political opponents are cast as political enemies in an all-out battle for Unitarian control. The opposition is no longer loyal.

Understanding the truth is the first step in identifying ways to save our republican form of government.

———————————————————-

Further Reading:

Coup d’état – The Revolution Has Been Televised for Years

Both the Economy and Society Benefit When Poor Families Have More to Spend

by Brian T. Lynch, MSW

Enhancing the human dignity of employment is an obvious, self-evident social benefit of raising minimum wages. It is both empowering and ennobling when breadwinners are able to provide for the needs of their family on their own, without government or extended family supports. This is reason enough to enact a living wage law. The minimum fair exchange for a full-weeks work ought to be a self-sufficient minimum wage. The burden for this minimum standard of living should rightly be on employers and not on the taxpayers who currently help support full-time low wage earners.

Corporations and business owners enjoy the benefits of government-subsidized labor and don’t want to give it up. Most of their arguments opposing higher wage standards rely on business-friendly economists whose academic theories and scholarly studies plum the detrimental impacts on businesses from higher labor costs. It is current practice to treat workers as a labor commodity separate from workers and their families as consumers and social beings with basic human needs. It is also current practice to take a business view of the economy without consideration of the broader context of the overall social economy within which commerce operates. All this results in flawed and biased arguments against self-sufficient minimum wages.

The overall beneficial impacts of increasing the purchasing power among poor families are rarely studied. Now a major new study has found that the ripple effects when direct, substantial cash assistance is given to poor families have, “… large positive spillovers on non-recipient households and firms, and minimal price inflation. The researchers in this large-scale experiment in Kenya estimated that a direct cash payment of $1,000 US dollars to poor families within randomly selected communities resulted in a local fiscal multiplier of 2.6 times within the local communities.

In addition to measured improvements in the welfare of the children and families who received an infusion of cash, the experiment reinforced the relationship between income and increased consumption to the benefits of both businesses and the families who did not receive cash payments. Here is an excerpt from the study:

“A large-scale cash transfer program in rural Kenya led to sharp increases in the consumption expenditures of treated households, and extensive broader effects on the local economy, including large revenue gains for local firms (that line up in magnitude with household consumption gains), as well as similar increases in consumption expenditures for untreated and treated households approximately a year and a half after the initial transfers. Local firms do not show meaningful increases in investment, and there is minimal local price inflation, with quite precisely estimated effects of far less than 1% on average across a wide range of goods.” [snip]… The consumption expenditures of untreated households and firms rise substantially in areas receiving large cash transfers…”

The infusion of cash payments to poor families in the study did not come from employers, and the economy of Kenya is very different than the economy here in the US. Directly extrapolating the results isn’t possible. Nevertheless, these findings are hopeful. The high fiscal multiplier stimulus effect on local businesses from increased consumption by poor families appear to mirrored results found here within states and municipalities that have raised minimum wage standards. While the burden of cash transfers from higher minimum wages is on businesses, the literature I’ve seen so far suggests there is still a positive fiscal multiplier within the business community coupled with little increase in unemployment and negligible increases in inflation.

A broader look at the spillover effects of increased base wages might show similarly positive results for the business economy and those workers who are already self-sufficient wage earners. Future studies of communities where the wage base is improved should also look at the wellbeing and overall welfare of children living in low wage households as well as the social wellbeing of the wage earners themselves.

_____________________________________

Further Reading

Debunking the Myth That It’s Your Fault You’re Poorhttps://aseyeseesit.blogspot.com/2015/09/debunking-myth-that-its-your-fault.html

Myth Busting Data RE: Minimum Wage Increaseshttps://aseyeseesit.blogspot.com/2012/09/myth-busting-data-re-minimum-wage.html

Making the Case for a Living Wage  https://aseyeseesit.blogspot.com/2012/07/making-case-for-living-wage.html

NPR –

Researchers Find A Remarkable Ripple Effect When You Give Cash To Poor Families

 https://www.npr.org/sections/goatsandsoda/2019/12/02/781152563/researchers-find-a-remarkable-ripple-effect-when-you-give-cash-to-poor-families