#oren cass

[s-leary]

The Cost of Thriving

This is the best essay I've read on modern wages vs. cost of living vs. inflation. Why are we all struggling even though economists say wages are fine? Oren Cass has done the work. Here you go:

Twitter thread link

Full report link

Full report link again, ICYMI above!

[henchred]

…a compelling account of the economic engine that powered the British Empire and financed modernity: real, honest-to-goodness banking. People gave their savings to bankers. The bankers invested the capital, creating actual productive assets in the real world. Those useful endeavors generated profits, a portion of which were returned to the bankers, who paid some as interest and kept some for themselves, well earned for their consolidation and productive allocation of resources.

Since Mary Poppins’s day, the financial sector as a whole — investment banks, hedge funds, private equity firms, cryptocurrency platforms and all the rest of it — has exploded as a share of the United States’ gross domestic product. It now claims the highest share of corporate profits and attracts the highest share of top talent from top schools, in part by offering the highest compensation. But actual business investment has declined, to an average of 2.9 percent of G.D.P. over the past decade from 5.2 percent in the 1960s, when the film was released.

Unlike Dawes’s Fidelity Fiduciary Bank, a modern investment bank mostly earns its money in a way that not even the bravest lyricist would set to music: providing advisory services, executing complex financial engineering schemes, trading stocks and bonds, managing other people’s money, issuing credit cards and so on. Assets get bought and sold, divided and packaged, and the bank collects fees at each step.

David Solomon, the chief executive of Goldman Sachs, could not sing to young Michael about the many productive uses to which he might put the tuppence because Goldman Sachs rarely invests in anything at all. Fostering economic progress appears to be beside the point.

Less than 10 percent of Goldman’s work in 2024, measured by revenue, was helping businesses raise capital. Loans of Goldman’s own funds to operating businesses accounted for less than 2 percent of its assets. At JPMorgan Chase the figures were 4 and 5 percent; at Morgan Stanley, 7 and 2 percent. Even the efforts at helping to raise capital are misleading, because less than a tenth of it goes toward building anything new. The rest funds debt refinancing, balance sheet restructuring and mergers and acquisitions.

These are symptoms of financialization. That’s the term for making financial markets and transactions ends unto themselves, disconnected from — and often at the expense of — the societal benefits that support human flourishing and are capitalism’s proper purpose. Chief among those benefits are good jobs that support families, and products and services that improve people’s lives.

from The Finance Industry is a Grift. Let's Start Treating It That Way. by Oren Cass

[quyotes]

We must be willing to say that the hedge fund managers have no clothes and their parading about is an unpleasant sight for us all. Your daughter has taken a job at Blackstone? My condolences. When the accidental nudists of Wall Street respond that their critics simply lack the sophistication to understand the latest economic fashion, we can all laugh together.

Oren Cass, The Finance Industry Is a Grift. Let’s Start Treating It That Way.

[nosferdoc]

Oren Cass: "It's a catastrophe that young men earn the same as 50 years ago"

Former top Mitt Romney policy advisor on why the conventional wisdom about globalization and trade is all wrong

[axol0l]

"We really like capitalism, but we recognize it's not working right now" hkficjdebgicbdb i just choked on my water

[idroolinmysleep]

The Labor-Shortage Myth

Things are finally looking up for the American worker. Why does the government see that as a crisis?

In the coronavirus pandemic’s aftermath, for the first time in a long time, many employers are discovering that they can’t fill jobs at the low wages they’re accustomed to offering. “We hear from businesses every day that the worker shortage is their top challenge,” Neil Bradley, chief policy officer at U.S. Chamber of Commerce, said last May. This is the precise circumstance under which wages might finally rise. Instead, the business community is looking to government to get them out of a jam, and leaders on both sides of the aisle seem only too eager to help.

This is a grave mistake—politically, economically, and morally. If employers are struggling to find workers, they should offer better pay and conditions. If that comes at the expense of some profits, or requires some prices to rise, well, that’s how markets are supposed to work. In most other contexts, capitalism’s proponents celebrate how the market creates incentives for businesses to solve problems. In that respect, a labor shortage is a great problem to have. Only by challenging employers to improve job quality and boost productivity will we find out what the market’s awesome power can achieve for American workers and their families.

Interesting. The author, Oren Cass, had worked for Mitt Romney’s presidential campaign, was a fellow at the Manhattan Institute, and is a contributor the The Federalist Society, so he certainly has his conservative bona fides. Yet here he’s arguing for the same idea (“there is no labor shortage, only a shortage of people willing to suffer penurious wages”) that’s long been popular in left-leaning circles. I guess there’s more daylight between free-market true believers and Randian libertarians who only care about the ownership class than I had realized.

[newstfionline]

What the Working Class Is Still Trying to Tell Us

And how we can make a difference in their lives.

By David Brooks, NY Times, Nov. 8, 2018

I was ready for massive Democratic turnout for the election on Tuesday. But I was surprised how massive the Republican turnout was in response.

The Republicans who flooded to the polls weren’t college-educated suburbanites. Those people voted for Democrats this year.

They weren’t tax-cut fanatics. Half of the Republican members of the House Ways and Means Committee either left Congress, ran for other offices or were defeated.

They weren’t even small-government Republicans. The same red states that elected conservatives to office also--in Nebraska, Idaho and Utah--approved ballot initiatives to expand Medicaid. The same red states that elected conservatives also approved initiatives--in Arkansas and Missouri--to raise the minimum wage.

These were high-school-educated, working-class Republicans.

A lot of us pundits said Donald Trump should run a positive campaign bragging about all the economic growth. But Trump ran another American carnage campaign. That’s because American life still feels like carnage to many.

This is still a country in which nearly 20 percent of prime-age American men are not working full time. This is still a country in which only 37 percent of adults expect children to be better off financially than they are. This is still a country in which millions of new jobs are through “alternative work arrangements” like contracting or consulting--meaning no steady salary, no predictable hours and no security.

Working-class voters tried to send a message in 2016, and they are still trying to send it. The crucial question is whether America’s leaders will listen and respond.

One way to start doing that is to read Oren Cass’s absolutely brilliant new book, “The Once and Future Worker.” The first part of the book is about how we in the educated class have screwed up labor markets in ways that devalued work and made it harder for people in the working class to find a satisfying job.

Part of the problem is misplaced priorities. For the last several decades, American economic policy has been pinioned on one goal: expanding G.D.P. We measure G.D.P. We talk incessantly about economic growth. Between 1975 and 2015, American G.D.P. increased threefold. But what good is that growth if it means that a thick slice of America is discarded for efficiency reasons?

Similarly, for the last several decades American, welfare policy has focused on consumption--giving money to the poor so they can consume more. Yet we have not successfully helped poor people produce more so that they can take control of their own lives. We now spend more than $20,000 a year in means-tested government spending per person in poverty. And yet the average poverty rate for 2000 to 2015 was higher than it was for 1970 to 1985.

“What if people’s ability to produce matters more than how much they can consume?” Cass asks.

The bulk of his book is a series of ideas for how we can reform labor markets.

For example, Cass supports academic tracking. Right now, we have a one-size-fits-all education system. Everybody should go to college. The problem is that roughly one-fifth of our students fail to graduate high school in four years; roughly one-fifth take no further schooling after high school; roughly one-fifth drop out of college; roughly one-fifth get a job that doesn’t require the degree they just earned; and roughly one-fifth actually navigate the path the system is built around--from school to career.

We build a broken system and then ask people to try to fit into the system instead of tailoring a system around people’s actual needs.

Cass suggests that we instead do what nearly every other affluent nation does: Let students, starting in high school, decide whether they want to be on an apprenticeship track or an academic track. Vocational and technical schools are ubiquitous across the developed world, and yet that model is mostly rejected here.

Cass also supports worker co-ops. Today, we have an old, adversarial labor union model that is inappropriate for the gig economy and uninteresting to most private-sector workers. But co-ops, drawing on more successful models used in several European nations, could represent workers in negotiations, train and retrain workers as they moved from firm to firm and build a safety net for periods of unemployment. Shopping for a worker co-op would be more like buying a gym membership. Each co-op would be a community and service provider to address a range of each worker’s needs.

Cass has many other proposals--wage subsidies, immigration reforms. But he’s really trying to put work, and the dignity of work, at the center of our culture and concern. In the 1970s and 1980s, he points out, the Emmy Award-winning TV shows were about blue-collar families: “All in the Family,” “Taxi,” “Cheers,” “The Wonder Years.” Now the Emmy-winning shows are mostly about white-collar adults working in Los Angeles, Seattle, Boston, New York and Washington.

We in the college-educated sliver have built a culture, an economy and a political system that are all about ourselves. It’s time to pass labor market reforms that will make life decent for everybody.

[arcticdementor]

The Working Hypothesis - The American Interest

A consumption-oriented approach to economic policy has led America astray. Here's how we can recover.

Since the middle of the past century, our political economy has relied upon the insidious metaphor of the “economic pie,” which measures success by the amount of gross domestic product (GDP) available to every American for consumption. When serving a pie, each portion’s size depends on both the size of the dish and the share allocated to each slice. Likewise, the thinking goes, each person’s consumption depends on the size of the overall economy and the share he receives. Fighting over shares is a zero-sum game, but if we concentrate on baking an ever-larger pie, then everyone’s slice can grow. If some slices are too small, pie can be redistributed among the plates. And who doesn’t like pie?

…

But the things America thought she wanted have not made her happy. Her troubles are by now well known: decades of stagnant wages, a labor-force exodus, too many unstable families, and crumbling communities. Years before the financial crisis that sparked the Great Recession, a majority of Americans began telling Gallup that they are, “in general, dissatisfied with the way things are going in the United States at this time.”

…

Another defense holds that conditions are much better than the data indicate or people perceive. Incomes look better or worse, depending on the measure of inflation. Poverty levels look higher or lower, depending on the accounting for government benefits—for instance, Harvard professor Steven Pinker highlights our progress lifting people above the “consumption poverty line.” And so many people have iPhones! Such observations aren’t persuasive, though, because neither readjusted data nor celebration of gadgetry does anything to improve the reality of deteriorating individual, family, and community health. Claims that overall growth is robust and wages not so bad don’t remedy ongoing social collapse, reverse workforce abandonment, or lessen government dependence—they only underscore the disconnect between conventional economic measures and the quality of life for which those measures are supposed to provide proxies. If policy analysts ask, “Who are you going to believe, me or your lyin’ eyes?” Americans will—rightly—choose the latter.

What Americans increasingly see are their children struggling and their neighbors sick or dying. Half of Americans born in 1980 were earning less at age thirty than their parents had made at that age. Most Americans still do not complete even a community college degree, yet the median income of a high school graduate lifts a family of four less than 40 percent above the poverty line; in the 1970s, such an earner would have cleared that threshold by three times as much. That’s for people who are working. At the Great Recession’s end, Charles Murray reported in Coming Apart, barely half of working-class households had a full-time worker present.

…

In making GDP growth and rising consumption the central objectives of public policy, economic piety represents a truncated and ultimately self-undermining concept of prosperity. Workers have no standing in this view of the economy; neither do their families or communities. Households that see their economic prospects plummet or their livelihoods vanish should ask for a government check and be placated when they get one. Towns that can no longer sustain themselves become places that people should just leave. Politicians will pay lip service to the importance of education and retraining, but they will not hold themselves accountable for such programs actually working. The economic pie’s expansion, regardless of what or who gets left behind, is the goal; maintaining a healthy, inclusive society is a hoped-for by-product, not an end in itself.

Economic piety acknowledges the existence of economic losers but holds that any losses are exceeded by gains to winners, which means that with careful redistribution, everyone can emerge ahead. But what if people’s ability to produce matters more than how much they can consume? That ability cannot be redistributed. And what if smaller losses for those at the bottom of the economic ladder are much more consequential to them than the larger gains for those already on top? Under those conditions, rising GDP will not necessarily translate into rising prosperity.

Such considerations have deep implications for society’s longer-term trajectory. Even if gains exceed the costs initially, what happens if the losses undermine stable families, decimate entire communities, foster government dependence, and contribute to skyrocketing substance abuse and suicide rates? What if the next generation, raised in this environment, suffers as well—perhaps reaching adulthood with even lower productive capacity? What if, in the meantime, cheap capital from foreign savings has fueled enormous increases in government and consumer debt, while the industrial policies of foreign governments have left the American economy with fewer opportunities to create well-paying jobs for less-skilled workers? Such costs show up nowhere in GDP—at least initially. Sadly, they appear to have been much more than hypothetical, and have proved much costlier than anyone imagined.

The explanation for why economic piety steered the nation off course, and the roadmap to recovery, are encapsulated in what I call the Working Hypothesis: that a labor market in which workers can support strong families and communities is the central determinant of long-term prosperity and should be the central focus of public policy.

…

Economic growth and rising material living standards are laudable goals, but they by no means guarantee the health of a labor market that will meet society’s long-term needs. If we pursue growth in ways that erode the labor market’s health, and then redistribute income from the winners to the losers, we can produce impressive-looking economic statistics—for a while. But we will not generate the genuine and sustainable prosperity we want. Growth that consumes its own prerequisites leads inevitably to stagnation.

…

Without work—the quintessential productive activity—self-esteem declines and a sense of helplessness increases; people become depressed. Where fewer men work, fewer marriages form. Unemployment also doubles the risk of divorce, and male joblessness appears the primary culprit. These outcomes likely result from the damage to both economic prospects and individual well-being associated with being out of work, which strain existing marriages and make men less attractive as marriage partners.

Work is both a nexus of community and a prerequisite for it. Work relationships represent a crucial source of social capital, establishing a base from which people can engage in the broader community. Communities that lack work, by contrast, suffer maladies that degrade social capital and lead to persistent poverty. Crime and addiction increase, their participants in turn becoming ever less employable; investments in housing and communal assets decline; a downward spiral is set in motion.

…

Regrettably, neither of the two major political parties has genuinely concerned itself with work for decades. Politicians on all sides talk incessantly about “good jobs,” but the policies they pursue speak louder. What a coincidence that cutting taxes and shrinking government, expanding health care entitlements and fighting climate change, all were supposedly jobs programs as well!

Republicans have generally trusted that free markets will benefit all participants, prized the higher output associated with an “efficient” outcome, and expressed skepticism that political actors could identify and pursue better outcomes, even if any existed. Their labor-market policy could best be described as one of benign neglect.

Democrats, by contrast, can sound committed to a more worker-centric model of growth, but rather than trusting the market too much, they trample it. The party’s actual agenda centers on the interests advanced by its coalition of labor unions, environmentalists, and identity groups. Its policies rely on an expectation that government mandates and programs will deliver what the market does not. This agenda inserts countless regulatory wedges that aim to improve the conditions of employment but in the process raise its cost, driving apart the players that the market is attempting to connect. Better market outcomes require better market conditions; government cannot command that workers be more valuable or employment relationships be more attractive; by trying, it can bring about the reverse.

…

The political upheaval of 2016 should have triggered a rethinking of priorities and agendas on all sides. Yet rather than embrace that opportunity, or even acknowledge the need to change course, many people pleased with the status quo reacted to the expressed ungratefulness of the masses with equal measures of indignation and obstinacy. Some concluded that typical voters must be either too stupid to recognize how good they have it or else too closed-minded to put aside their provincial fears and embrace the wonderful modern world that has been created for them, without anyone having asked them about the particulars. Others took the dissatisfaction more seriously but attributed it to inadequate implementation of existing approaches.

One prevalent narrative emphasized “globalization” as both the catalyst for disruption and the axis of political realignment. “The new divide in rich countries is not between left and right,” asserted the Economist, “but between open and closed. . . . Welcome immigrants or keep them out? Open up to foreign trade or protect domestic industries? Embrace cultural change or resist it?” Washington Post columnist Fareed Zakaria, among others, endorsed the same open-versus-closed framing, lauding former British prime minister Tony Blair’s “remarkably prescient” view to this effect.

…

Yet how does the open agenda, which has already characterized the past generation of American policy, address the critical challenges facing the nation? It does not. Rather, the standard response is that this openness must be paired with a renewed commitment to helping those left behind, as if only a lack of focus and resources has prevented government programs from transforming people’s prospects. Invariably, the suggested solution is education. Zakaria calls his approach “open and armed,” because it requires “a far more ambitious set of government programs” to equip Americans with “a bristling armory of tools and training.”

The vision is supposed to be an inspiring one, in which people are lifted upward to greater opportunity. Its real implications are less exalted: If the economy no longer works for the average worker, it is he who needs to transform into something it likes better. If government programs could change human capabilities to match whatever the market might compensate highly, public policy would become rather easy. But the insufficiency of this approach as a response to the nation’s challenges recalls the joke about the economist’s solution to finding himself shipwrecked among boxes of canned goods: “First, assume a can opener.”

Without education as a deus ex machina, a commitment to openness turns out to mean little more than merging together and doubling down on existing programs of growth and redistribution, offering a veritable buffet of warmed-over policies—all served with a heaping side of self-righteousness. “I’m for globalization and a strong safety net” seems likely to become for the next generation of insulated but determinedly respectable professionals what “I’m socially liberal and fiscally conservative” was for the last.

…

But if the Working Hypothesis is correct, a basic income would be entirely unresponsive to the nation’s challenges; indeed, the idea represents an explosive charge planted directly at the weakest points in society’s foundation. It would make work optional and render self-reliance moot; consumption would become an entitlement officially disconnected from production. A community in which people capable of making positive contributions are not expected to do so is unlikely to be one that thrives on any dimension in which productive contributions are needed.

…

What really underlies pessimism about the American worker’s future is the assumption that we cannot possibly make concessions on any of our other priorities. True enough, if the preferences of the typical urban professional are always the most valid and important, if the maximization of economic efficiency and material consumption is inviolable, if businesses retain the incentive to find the cheapest possible workers anywhere in the world, then the future of the American labor market indeed looks grim. But all this merely begs the question of what should our priorities be. In the past, our society was much less affluent, and yet the typical worker could support a family. How could it be that, as we have grown wealthier as a society, we have lost the ability to make that kind of arrangement work? Or do we just not really want to?

…

At the very least, we should not dismiss as impossible the renewal of work and family, sustained by a healthy labor market, before we even try. Nor can we dismiss it as too expensive, unless we know the alternative’s real cost. Departing from the market’s default outcome will always appear expensive if the “efficient” default is defined as the overriding social goal. But if some other outcome is better for society, then the efficient outcome is actually the more expensive one.

…

The American education system has skewed its focus and resources toward the college pathway to such an absurd degree that even vocational programs see themselves as a stepping stone in that direction. Yet for the vast majority of students, the journey ends in failure. Fewer than one in five travel smoothly from high school to college to career. High school test scores have not improved in decades; neither has the share of 25-year olds earning a bachelor’s degree.

America needs a co-equal vocational track that prepares students to move from high school into the labor force and that, when necessary, gives those students priority over ones headed for college.

…

Society must choose between proceeding with a charade and acknowledging honestly the limitations it faces. Pretending against all evidence that every student should prepare for college sustains the fiction that government programs can compensate for various background disadvantages and thus deliver “equal opportunity,” defined as equality of life chances. Pushing every student in that direction yields the occasional Horatio Alger story, which warms the heart and stands for the proposition that the same could happen to anyone, even though its rarity in fact underscores the opposite. The approach is most useful to those least affected by it, who benefit from innate and environmental advantages, who can flourish in college, and who can now justify a broad array of economic policies that further benefit themselves by claiming that everyone else can follow their path, too. It is most harmful to those already disadvantaged, who must now navigate a system that has proven repeatedly its inability to meet their needs.

…

Neither economic growth nor economic redistribution will rescue America from its current predicament. If the Working Hypothesis is correct, then we will need to create the social and economic conditions for a robust labor market in which all able Americans can be contributors, achieve self-sufficiency, and support strong families and communities.

A genuine commitment to that kind of inclusive society requires a willingness to shape institutions to that end, even when doing so is for the benefit of others or when it creates tension with other values. Such concessions are of a different character from the taxes and spending that are often confused for compassion in American politics. “Don’t tell me what you value,” former Vice President Joe Biden liked to say. “Show me your budget and I’ll tell you what you value.” But taxes are easy, and deficit spending is even easier, compared with reordering social priorities—reconsidering whether to tolerate more pollutants in the air we breathe, determining whose children our schools are oriented toward, deciding what constraints our national borders should impose, and, ultimately, defining what we expect of and owe to one another.

…

A useful question for programs of reform in today’s America is whether the reformer has proposed any concessions whatsoever on behalf of the average American worker. If the only thing on offer is tax dollars, the program is not a serious one. If the path forward is for the workers to change themselves to fit better into the reformer’s preferred society, the program is not a serious one. We now have decades upon decades of overwhelming evidence that neither outright redistribution nor investments in education provide the help promised—to the contrary, massive influxes of resources toward both have coincided precisely with the economic and social declines that have brought the nation to its present predicament.