TPP to Piketty – The Slow War

Trans  Pacific Partnership, Retirement Security, and Piketty income inequality are backdrop to slow but very real warfare.

The TPP issue is not an isolated topic but part of deep background to an unspoken but real efforts to change the structure of the American republic.  We discuss it with 2 other issues. Our Outline:  TPPRetirement SecuritySaez Piketty inequality trends

The TPP negotiations are connected to the economic security now and in the future for retirees which is also tied to Thomas Piketty’s results on inequality. Click any image to see full resolution form.

TPP  Trans Pacific Partnership trade agreement

The TPP is desperately wanted by Obama and top Republicans.  There has been strong behind-the-scene maneuvering to give Obama fast track negotiation authority.

Barack Obama 2009-2016Barack Obama‘s fast-track negotiation authority has past through the House and Senate. He can now do with it as he wants.  He claims it will boost our trade, increase our net wealth, and be very good for the other signatories.

He may be right about that last point. You might agree with his other points, if you are one of the leaders of our largest corporations, or are the scion of one of our “old wealth” families.

Our Slow Revolution   It is bad for the rest of us, though.  The TPP is the current battle ground in our 35 year (and counting) struggle to convert our populist democracy into an hereditary oligarchy.  There has been much written about the trap TPP represents.

James Surowiecki

Fig 2 James Surowiecki, Columnist, New Yorker

Dean Baker

FIg 3  Dean Baker, Co-director, CEPR

James Surowiecki, Columnist for the New Yorker Financial Page, highlights  the frightening  issue of the Investor State Dispute Settlement (ISDS) mechanism.

Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), posted his analysis of TPP implications.

Our opposition follows both arguments.

•  Rich People’s Rules. Baker says RPR operates when congressional leadership loses on an issue that is a focus of their wealthy supporters; they rephrase and resubmit it until it passes. First vote allowing Obama to make fast track agreements on TPP did not pass the House of Representatives.  So they made revisions without fundamental change and got it through.  The Senate passed it and Obama will probably negotiate this poisoned pill for the lowest 99% of our income earners.  Ya gotta remember that RPR means that donations by the very rich have rigged the game to favor the giver.

•  ISDS.  Investor State Dispute Settlement.  Any company or its investors will be able sue the U.S. for allegedly unfair rules and regulations, arbitration to be settled  by a tribunal of 3 extra-judicial lawyers. (From which judicial tradition?) Repeat as necessary (à la RPR).

Senator Elizabeth Warren calls this “undermining U.S. sovereignty.”

The soap box platform for my presidential run would be the idea of Right Tariffing, presented here and here.  The ISDS provision works in opposition to the removal of all tariffs to countries that manufacture goods to at least U.S. standards.  Within 10 years we may see the end to our important EPA and OSHA agencies.   Read Surowiecki’s examples of how countries are stopped in their tracks by foreign rich.  And this was done under weaker rules – TPP was not operating!  Not only is ISDS ‘the’ big deal here, it is probably the biggest deal that rapacious companies will ever receive.

•  Currency Warfare.  Many or most TPP countries can use their severely undervalued currency as a weapon – this is never described as “warfare.”  The U.S. has been under real but undeclared economic warfare by China and Japan for decades

The Chinese renminbi (“people’s currency”), RMB, rose from 0.15 (2011) to 0.16 (2015). If RMB is undervalued, this 6.7% rise has to be good, right? But 0.16 RMB/US$ is so low that no local manufacturer can compete.

Slaves still make economic sense. Chinese workers have been reported housed in locked barracks and reports of worker treatment reminds me of how our Southern plantation owners treated their black slaves 160 years ago. Chinese factories can sell low, especially if the parts are made by throw-away people.  I have always thought that the RMB is at least 2× too low, but would not a rise by 10× be be a justified rebalance? No wonder U.S. CEOs want to relocate factories to China.

Yen per Dollar 5 years Yahoo

Fig 4  Exchange rate of yen for 1 US$.

The Japanese yen, ¥, has been politically maneuvered so that to  1 US$ = 124 ¥, up from the 8 year low of 76 ¥ in 2012.  Fig 4 presents Yahoo data for the past 5 years.

A Yen for War.   We added a 5% fluctuation band around the  80, 100 and 120 yen exchange rates.  Within the band, the exchange was 1 US$ = 80¥ for about 1½ years. Arch conservative Shinzo Abe became Prime Minister in December 2012 and the plateau at 80 shifted to 100. Japan waited about a year for response from the Obama administration, but got none.  So the rate pushed up to  120¥  where it has been oscillating within the 5% fluctuation band for last 7 or 8 months. No response from Washington, in fact the TPP rewards Abe for his Nippon-centric policies. The  ¥/US$ rate seems to be rising again.  Do the Rightists plan both TPP and 145? Great if you can do it.  Go guys, we Americans can’t disapprove.

Disclosure Automotive R&DWhat No One Calls Warfare.  20 years ago rate rose from 120 to 144 (1998), after the American rightists took power in congress.  This was when U.S. cars could no longer compete in price with equivalent Japanese cars and our automotive companies nearly failed. GM’s Jose Lopez became an automotive power and we all started offshoring to Mexico and China.  My personal experience with offshoring here.

By 2000, the rate was driven below 110. Our industry stabilized and we were told it was all due to our exceptional American Corporate leaders with their strong know-how and guidance.  Exchange rose again to above 120 until 2007, when it suddenly started dropping.  At 75 ¥/$ we released this sardonic post discussing the steady decline.

So, suppose a Japanese, Korean, Chinese or (?) company decided any effort to adjust extreme currency imbalance would hurt their profit.  TPP makes this a reason for legal action under ISDS protocols.

With TPP, we no longer could control our industry and our current inequitable treatment of young people in the workforce will become golden memories.

Many Seniors Between 65 and 75 Live Comfortably

Seniors live well

Fig 5  NY Times Front Page 2015-0615

Dionne Searcey and Robert Gebeloff published their article Seniors Prosper, Finding …   on the front page of the New York Times print edition, shown in Fig 5.

Some American seniors (older than 65) do live comfortably while some younger people really do live under stressed conditions.  S&G provides examples, and gives some reasons for the ‘sweet spot.”

Reasons not mentioned in S&G’s article

  • Most retirees under 75 saw their pension plans converted to 401k’s and corporate stock.  Only a few selected sectors still enjoy the classic defined-payment pension.  Wages did not rise to meet demand during the last 20 years. Unless you retired with the 2015-equivelent-dollar income of about $120,000, you probably could not afford to save – and without a large savings pool, investments are a sucker game.
  • Definition of CohortToday, people older than 66 can retire with social security and medicare.
  • If younger than 75 or  76, one can easily be healthy enough to take supplemental part-time jobs. 65-75 form S&G’s comfortable cohort of retirees.
  • After 80 your body becomes increasingly less able to survive that stress.  Maybe this is why those older than 75 are not as economically comfortable as the younger retirees.

Does comfort during the first decade of retirement depends on support services, good health and supplemental income?  Pre-retirement, there are fewer such resources.

Michael Wasielewski, a senior in Michigan, had his letter published Wednesday 2015 Jun 17.  All kinds of responses in the letters, but Wasielewski said it best. His points:  • The cohort of seniors being described were young when opportunity was much more open to all. • Not all who wanted an education could afford it even then, but many of us could go to college and beyond without entering into impossible debt.  • We could enter local industries whose products that ranked among the top in the world.  • We could be union members. • Then came NAFTA, Grover Norquist and the Tea Party.

Comment on Mr. W’s insight:  My cohort grew up in hard struggle for jobs.

I remember being at professional meetings where the job interview lines stretched through of the main auditorium, out the door and down the hall.  The atmosphere of panic and depression was very real. You could not always find your dream job, and many people applied for jobs without finding work.  Almost all of us agreed that our old age would not be as comfortable as our parents’.

Yeah, we struggled hard and not one of us thought we were privileged to be young in such a golden age.  – But we were! –  These were the decades prior to the Saez-Piketty hocky-stick income shift (1981).

Saez-Piketty Inequality – our  Slow Revolution

click for our discussions on economic inequality

The net results from actions over the past 35 years  has been the decrease in income share by everyone bringing home less than the top earning 10% of our population.  The Slow Revolution is what happened over the past 4 decades, partly from direction by inherited wealth, partly by chaotic self-assembly from the melange that was American politics.

Median Wage definitionFig 6 shows Census Bureau data (dark blue) for the middle 1/5 of our wage earners (40% to 60% of the population).  Median wage is a property of the population, not the numeric amount, but for reference, it was about $56K in 2012, and about $63k today.

Mid20_gph

Fig 6  Fraction of total income earned by the 20% of the population who earn near the 50:50 median income. (Light blue, income of the top earning 10% of the population, from the Saez-Piketty data base.)

Wasserman's economic escalator

Fig 7   The Economic Escalator.     Source: Wasserman, http://www.Bostonglobe.com

Fig 7 is possibly the shortest, quickest explanation for the trends of Fig 6.  Used with permission, Daniel Wasserman, Boston Globe.

Census Bureau Data – Dark Blue   (Data are not available prior to 1968)

  • Those households in the median bracket, lost ground since 1970 (18% down).
  • The bottom earning 1/5 of all workers lost even more  (22% down).

Saez-Piketty Data – Light Blue   (Discussed in earlier posts, as in  Zero Sum Game)

  • Wage fraction of the 90th percentile (highest earning 10% in our population) rose by a factor of 1.5×   (50% increase)  Light Blue on Fig 6
  • Wage fraction of those in the 90th to 94th percentile have been essentially flat (0% average change) between 1975 and today.
  • Wage fraction of those in the ultra high 0.01 percentile  rose by a factor of   (400%)

    This “0.01%” are the top-of-the-top: those 12,000 highest income households out of the total 120 million working households.  These are the 33,000 people classified as ultra rich in the U.S. total population of 330 million.

TPP represents ignition of the next Saez-Piketty stage of the escalator for our privileged few. It may be very close to the last stage.  It boosts monopolist companies and inherited wealth.

TPP Through S-P Inequality – Our Slow Revolution

click for our discussions on economic inequality

It is NOT just an American problem – Piketty’s database shows similar trends for every country studied. And the ultras  call themselves “citizens of the world.”  TPP will effect every country engaged in the loop of export and import. It is an evil promise for the retirement comfort of those entering the workplace today.

First the instigators had to get public credibility.  Then they had to get elected.  Then they had to soften up popular acceptance of the old order to be destroyed. They had to do this without being identified as anti-American, anti-democracy, anti-worker; it had to be a “stealth” transmogrification of government. They have plenty of time for each step; recall the RPR (rich people’s rules) way of winning

Opinion:  they believe they have nearly completed the intermediate stuff and are ready to finish the revolution.  TPP may be the end game strategy.

The near-passage of the monster TPP is being reported as a triumph of international fairness.  But there is nothing fair in comparing a society that supports its workers and those that exploit them for profit.

……………………………….

Charles J. Armentrout, Ann Arbor
2015 June 24
This is listed under  Economics  thread > Inequality
Have a comment? Click on the title of this post, go to bottom, let us know.
Related posts: Click the INDEX button under the Banner picture

About LastTechAge

I am a physicist with years of work in fusion labs, industry labs, and teaching (physics and math). I have watched the tech scene, watched societal trends and am alarmed. My interest is to help us all improve or maintain that which we worked so hard to achieve.
This entry was posted in Economics and tagged , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s