Kyle Fitzgibbons

1. Per capita real consumption of physical goods and services, outside of housing and health care,  has grown by only 10% since 2000, or an average of 0.6% annually.  By comparison, per capita real consumption of digital goods and services has skyrocketed, growing by 64%, or  3.4% annually.

2. In other words, to the extent that consumer living standards have been rising, the gains have been mainly driven by digital goods and services. For example, per capita real consumption of communication services–including internet, wireless, and cable–is up by 60% since 2000. This calculation is based only on government data, without taking into effect possible unmeasured gains in consumer surplus.

3..  By contrast, in the physical sector  per capita real purchases of motor vehicles and parts has risen by only 6% since 2000, or only 0.4% per year.  Similarly, per capita real purchases  of food and beverages for  home use has risen by only 4%, or 0.3% annually. It should be noted that food processing is a manufacturing industry which has shown no labor productivity growth in the past ten years.

4. The Digital Nation is mainly characterized by falling or flat consumer prices, while the Physical  Nation is mainly characterized by rising consumer prices.  In the digital sector, consumers spend less to get more, while in the physical sector, consumers spend more to get less. The price of communication services is basically flat since 2000, allowing even low and middle-income households to participate in the App Economy.

​IF YOU had only $2,222 to your name (adding together your bank deposits, financial investments and property holdings, and subtracting your debts) you might not think yourself terribly fortunate. But you would be wealthier than half the world’s population, according to this year’s Global Wealth Report by the Credit Suisse Research Institute. If you had $71,560 or more, you would be in the top tenth. If you were lucky enough to own over $744,400 you could count yourself a member of the global 1% that voters everywhere are rebelling against.
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Unlike many studies of prosperity and inequality, this one counts household assets rather than income. The data are patchy, particularly at the bottom and top of the scale. But with some assumptions, the institute calculates that the world’s households owned property and net financial assets worth almost $256trn in mid-2016. That is about 3.4 times the world’s annual GDP. If this wealth were divided equally it would come to $52,819 per adult. But in reality the top tenth own 89% of it.

Our research concludes that 20-30% of the working age population have spent time as independent workers. Extrapolating this to the US and 15 core EU countries, that’s as many as 162 million people, with up to 94 million in the 15 core EU countries alone. Government statistics show roughly half that headcount, putting the independent workforce at a mere 11% of the working age population in the US and 14% in the EU-15. The difference primarily comes from the fact that more than half of this non-traditional workforce is engaged in independent work part of the time, and also that, in recent years, the gig economy has indeed grown, but still represents only 15%, or about 24 million, of the independent workers in our study. About 9 million out of that 24 are exclusively using digital platforms for their independent work – a little less than 40% – while more than 60% are combining both digital and non-digital means to perform their work.
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The vast majority of independent workers, about 70%, whether primary or secondary job holders, say they engage in independent work by choice, preferring greater autonomy and flexibility than traditional jobs typically offer. And the majority of this group are indeed casual earners, using independent work to supplement other sources of income. Casual earners typically include students, retirees, or caregivers who combine work with other responsibilities and activities as well as some in traditional jobs, supplementing their income. And this segmentation is relatively stable between continents, e.g. contrasting US and Europe (Figure 1).

​Unfortunately, that still leaves 30% of independent workers who have no choice but to work independently. While they are a minority they tend to be more typically associated with the independent workforce. This group can be split into two categories – those who derive their primary income from independent work but would prefer a traditional job, and the financially strapped who would prefer not to work on the side but are forced to in order to make ends meet.
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While we found most characteristics of independent workers were shared across our group of 15 European countries, there were some variations. At one end of the scale were Sweden and the UK, with 74% choosing independent work versus 26% working independently out of necessity. At the other end we found Spain with 58% working by choice and 42% out of necessity. The highest shares of independent workers were found in Greece, Italy, Portugal, and Spain, where incomes are lower and economic growth persistently weak. In these countries, some 15 to 20% of the workforce is self-employed or in temporary employment. In some European countries, including Greece, Spain, Portugal, the Netherlands, and Portugal, more than three-quarters of temp workers are involuntary.

For the public, the primary domestic concern is the severe crisis of unemployment. Under prevailing circumstances, that critical problem could have been overcome only by a significant government stimulus, well beyond the one Obama initiated in 2009, which barely matched declines in state and local spending, though it still did probably save millions of jobs. For financial institutions, the primary concern is the deficit. Therefore, only the deficit is under discussion. A large majority of the population (72 percent) favor addressing the deficit by taxing the very rich. Cutting health programs is opposed by overwhelming majorities (69 percent in the case of Medicaid, 78 percent for Medicare). The likely outcome is therefore the opposite.

Reporting the results of a study of how the public would eliminate the deficit, Steven Kull, director of the Program for Public Consultation, which conducted the study, writes that “clearly both the administration and the Republican-led House are out of step with the public’s values and priorities in regard to the budget … The biggest difference in spending is that the public favored deep cuts in defense spending, while the administration and the House propose modest increases … The public also favored more spending on job training, education, and pollution control than did either the administration or the House.”

The deficit crisis has largely been manufactured as a weapon to destroy hated social programs on which a large part of the population relies. The highly respected economics correspondent Martin Wolf, of the Financial Times, writes, “It is not that tackling the US fiscal position is urgent.… The US is able to borrow on easy terms, with yields on 10-year bonds close to 3 per cent, as the few non-hysterics predicted. The fiscal challenge is long term, not immediate.” Significantly, he adds: “The astonishing feature of the federal fiscal position is that revenues are forecast to be a mere 14.4 per cent of GDP in 2011, far below their postwar average of close to 18 per cent. Individual income tax is forecast to be a mere 6.3 per cent of GDP in 2011. This non-American cannot understand what the fuss is about: in 1988, at the end of Ronald Reagan’s term, receipts were 18.2 per cent of GDP. Tax revenue has to rise substantially if the deficit is to close.” Astonishing indeed, but deficit reduction is the demand of the financial institutions and the superrich, and in a rapidly declining democracy, that’s what counts.

​Not even mentioned is the possibility, discussed by economist Dean Baker, that the deficit might be eliminated if the dysfunctional privatized health care system were replaced by one similar to those in other industrial societies, which have half the per capita costs and at least comparable health outcomes. 23 The financial institutions and the pharmaceutical industry, however, are far too powerful for such options even to be considered, though the thought seems hardly Utopian. Off the agenda for similar reasons are other economically sensible options, such as a small financial transactions tax. (pp. 61-63)

the point of this book is that the distribution of income can be hugely altered by restructuring the market to produce different outcomes. This doesn’t dismiss the value of tax and transfer policies, but if the market is rigged to redistribute ever more income upward, it will be difficult to design tax and transfer policies to reverse this effect. And if the rigging efforts are never challenged, then they will impose an ever greater burden on those trying to reduce inequality through tax and transfer policy.

Table 8-1 shows the range of the gains from restructuring the market. The total comes to almost $ 2 trillion in additional income in 2016 in the low-end case, $ 3.7 trillion in the high-end case. Expressed as units of SNAP spending (Figure 8-1), the low-end amount is equal to 27.1 units and the high-end amount just under 50. In short, there is a lot of money at stake here. (Kindle Locations 3134-3141)

The standard framing of economic debates divides the world into two schools. On the one hand, conservatives want to leave things to the market and have a minimal role for government. Liberals see a large role for government in alleviating poverty, reducing inequality, and correcting other perceived ill-effects of market outcomes. This book argues that this framing is fundamentally wrong. The point is that we don’t have “market outcomes” that we can decide whether to interfere with or not.

Government policy shapes market outcomes. It determines aggregate levels of output and employment, which in turn affect the bargaining power of different groups of workers. Government policy structures financial markets, and the policy giving the industry special protections allows for some individuals to get enormously rich. Government policy determines the extent to which individuals can claim ownership of technology and how much they can profit from it. Government policy sets up corporate governance structures that let top management enrich itself at the expense of shareholders. And government policy determines whether highly paid professionals enjoy special protection from foreign and domestic competition.

​Pretending that the distribution of income and wealth that results from a long set of policy decisions is somehow the natural workings of the market is not a serious position. (Kindle Locations 3169-3179)

This strengthening of copyright law and altering its structure to adjust to digital technology and the Internet is interesting not only because of the costs involved for the larger economy but also because it highlights alternative ways in which society adapts to technological change. Technological change has destroyed many sectors of the economy. The spread of digital cameras essentially destroyed the traditional film industry, causing the collapse of two major U.S. corporations, Kodak and Polaroid, and leading to the loss of tens of thousands of jobs. While the collapse of these companies and the job losses were unfortunate, no one would have considered it a reasonable strategy to block the spread of digital cameras.

​On the other hand, when the development of digital technologies and the Internet threatened the business model of the entertainment industry, the response was to pass laws to contain these technologies to preserve the sector’s mode of doing business. This is a great example of how it is not technology itself that is determining the distribution of income, but rather how various interest groups are able to write the laws governing the use of technology. (Kindle Locations 1793-1801)

Table 5-6 shows projected 2016 spending and potential savings in areas where the costs of current monopolies are likely to be largest. Savings for recorded music and video material as well as recreational books are pegged here at 50 percent, under the assumption that the tax-credit system will make available a vast amount of free writing, music, and video material. Savings on educational books are pegged at 70 percent, under the assumption that the bulk of textbooks will be produced through the publicly funded system. The savings for prescription drugs are based on the calculation in Table 5-3 (see below). Savings in newspapers and periodicals, motion pictures, and cable TV are pegged at 20 percent. (With cable, many people may opt to rely on the Internet and cancel cable subscriptions.) The figure for medical equipment is loosely derived from the earlier calculation in Table 5-3; it is larger here because this figure reflects spending to purchase the equipment rather than the fees charged to patients. The total potential savings are $ 435 billion, or 2.4 percent of GDP.

The calculations shown in Table 5-6 are speculative, of course, because there is no way to determine in advance the effectiveness of an alternative funding mechanism to replace patents and copyrights. There are good reasons for believing that an alternative would be at least as effective, especially in the case of patents. The prospect of having fully open research, where the incentive is for dissemination rather than secrecy, would almost certainly lead to more rapid progress than the current patent system.

More importantly, bringing prices in line with production costs would offer enormous gains, especially in the case of drugs and medical equipment. It is difficult to understand the logic of paying for innovation at the point where a patient needs a drug or access to medical equipment. Monopoly pricing imposes an enormous burden on people at precisely the time when they are least able to bear it. A payment system should be structured to let patients and their families focus on getting well, not paying for their health care. No one would propose determining payments for firefighters when they show up at a burning house, but this is effectively what we are doing with patent monopolies in the medical sector. The absurdity is heightened by the fact that the ultimate payment is almost always a political decision, not a matter of consumer choice, so proponents of the patent system can’t use the classic justification for market outcomes.

​Weakening or eliminating patent and copyright support for innovation and creative work would radically reduce waste. In a market system, the best way to make profits should be to produce better products, not to run to court. But the patent system increasingly supports this second path to profits. (Kindle Locations 1883-1905)

By picking Betsy DeVos — a billionaire education philanthropist and activist — as his education secretary appointee, President-elect Donald Trump sent a strong message about what his education priority will be: school vouchers.
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Unlike others Trump was reportedly considering for the post, including education reform advocate Michelle Rhee and former state superintendents from Indiana and Florida, DeVos has never been formally involved with public education. She hasn’t been a teacher or principal, or run a school district or state education agency. She’s never even taken a public position on Common Core, the education standards that Trump railed against on the campaign trail.

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the education secretary will also oversee higher education, an area where DeVos has no expertise or history of activism — including overseeing the $127 billion annual federal student loans and Pell Grants program.

According to Chalkbeat, DeVos’s family poured $1.45 million into an effort to prevent Michigan from adding oversight for charter schools. That effort ultimately failed. DeVos and her husband have been supporters of charter schools for decades and longtime opponents of regulation. And according to Chalkbeat, around 80 percent of the state’s charter schools are run by private companies. The lack of oversight has prompted concern from the Obama administration that some bad charters were being allowed to operate without improving or being forced to close. Civil-rights groups like the NAACP have also expressed concern that low-income children and children of color suffer when oversight is scaled back.

The DeVos family belongs to the deeply conservative Dutch Reformed Church, and has pushed for years to breach the wall between church and state on education, among other issues. Betsy, who served as the chairwoman of the Michigan Republican Party in the late nineties and again in the early aughts, spent more than two million dollars of the family’s money on a failed school-vouchers referendum in 2000, which would have allowed Michigan residents to use public funds to pay for tuition at religious schools. The family then spent thirty-five million dollars, in 2006, on Dick DeVos’s unsuccessful campaign to unseat Jennifer Granholm, then the Democratic governor of the state. After that campaign, the DeVos family doubled down on political contributions and support for conservative Christian causes. Members of the family, including Betsy and Dick DeVos, have spent heavily in opposition to same-sex-marriage laws in several states. According to the Michigan L.G.B.T. publication PrideSource.com, Devos and her husband led the successful campaign to pass an anti-gay-marriage ballot referendum in the state in 2004, contributing more than two hundred thousand dollars to the effort. Dick Devos reportedly gave a hundred thousand dollars, in 2008, to an amendment that banned same-sex marriage in Florida. That year, Elsa Prince Broekhuizen, Betsy Devos’s mother, was a major contributor to the effort to pass Proposition 8, which made same-sex marriage illegal in California.

Trump may have run against big money in politics, but his choice for Education Secretary has made no apologies about her family’s political spending. Betsy DeVos has been a major financial backer of legal efforts to overturn campaign-spending limits. In 1997, she brashly explained her opposition to campaign-finance-reform measures that were aimed at cleaning up so-called “soft money,” a predecessor to today’s unlimited “dark money” election spending. “My family is the biggest contributor of soft money to the Republican National Committee,” she wrote in the Capitol Hill newspaper Roll Call. “I have decided to stop taking offense,” she wrote, “at the suggestion that we are buying influence. Now I simply concede the point. They are right. We do expect something in return. We expect to foster a conservative governing philosophy consisting of limited government and respect for traditional American virtues. We expect a return on our investment.”
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“People like us,” she added archly, “must surely be stopped.”

Interestingly enough, red states, which tend to advocate for a lesser influence by the federal government, are much more dependent on the federal government than blue states. Red states combined to form an average ranking of 18.3 (with 1 being most dependent and 50 being least dependent), while blue states combined to rank 33.2 overall.​

The National Association of Evangelicals is a voice for its 30,000,000 members, who make up a quarter of the American electorate, and a leading organization of the religious right with a political voice. This is true too of the Christian Coalition, which supported some 36 senators and 243 members of the House of Representatives, half of whom received a score of 10 percent or lower on the environmental scorecard of the League of Conservation Voters. (Kindle Locations 2109-2112)

According to a 2010 Pew Research Center report, 41 percent of all Americans believe the Second Coming “probably” or “definitely” will happen by the year 2050. Given automation and corporate offshoring, real wages of high school– educated American men have fallen 40 percent since 1970. For the whole bottom 90 percent of workers, average wages have flattened since 1980. Many older white men are in despair. Indeed, such men suffer a higher than average death rate due to alcohol, drugs, and even suicide. Although life expectancy for nearly every other group is rising, between 1990 and 2008 the life expectancy of older white men without high school diplomas has been shortened by three years— and truly, it seems, by despair. In their tough secular lives, life may well feel like “end times.” (Kindle Locations 2147-2157)