Friday, March 28, 2014

What Upward Mobility?

            Recently, a team of economists led by Harvard's Raj Chetty released a report claiming that upward economic mobility in America  has not really declined in the last 30 years. Robert Kuttner, writing in the Mar/Apr issue of The American Prospect, and James Surowiecki, writing in the Mar 3, 2014 issue of The New Yorker both commented on this report.  Kuttner and Surowiecki  both make the same point:  Yes, mobility has not declined much in the last 30 years---because by 30 years ago it was already nearly zero.  In fact, although there was considerable mobility in the late nineteenth century, by WWI most people were destined to die in the same class they were born in.  But until about 1973, this was no cause for alarm. In order to improve your condition, you need not escape the class you were born in if the standard of living of your whole class is rapidly rising.  With the rise of labor unions in the 30s and 40s,  and the GI Bill after WWII, the American worker gained a higher income, more access to education, and more income security than his parents had ever dreamed of---and he did it mostly without leaving the class he was born in.  You do not need to change busses to get to where you wish to go, if the bus you are on is already taking you there.
            But since about 1973,  real  wages in America have been stagnant or falling.  In the post-war era up until 1973,  there were huge gains in productivity, and this productivity gain was always shared with the workers  whose sweat and genius made it possible.  But since that time, there has been a ruthless war against the middle class. The elites---Organized Money is a better term---began breaking unions, and taking over media outlets and pouring money into political campaigns, with the aim of electing anti-union, right-wing puppets who would pass anti-union legislation, appoint anti-union, right-wing judges and sign trade treaties allowing corporations to sidestep American labor standards by transferring production to low wage countries.  (Just the threat of such a transfer allows corporations to extort drastic wage concessions, whether the plant is moved or not.)  As a result, the good, middle-class job is becoming a thing of the past.  There are very few decent employment prospects left in manufacturing, mining, or agriculture in the U.S. today.  When you kill the bottom of the food chain, you kill the whole ecosystem. And  historically, good union jobs in these sectors were the foundation of the "food chain" that sustained the whole middle class.  
            There have been massive productivity gains since 1973, but none of it has been shared with labor.  If it had been, the U.S. median household income level would be about $82,000 per year, and not $42,000.  At that wage, the class mobility question would become moot.  With a median household income of $82,000,  most people would have a livable wage where they're at.

Wednesday, March 5, 2014

Pipeline Projects Abandoned

   In the Tuesday, March 4, 2014 issue of the Wall Street Journal,  was an article entitled Who Wants an Oil Pipeline?   Trains Bring in More Money.  The article, by Alison Sider,  reports that Koch Pipeline Company walked away from a pipeline project because of "tepid interest"  form oil producers. And a year earlier, Oneok Partners canceled a planed line from North Dakota to Oklahoma for the same reasons.  The oil producers, at least for the present, prefer to just keep shipping by rail.
    Rail costs much more per barrel to ship oil than any pipelines.  But a pipeline, once built, locks the builder into shipping to only one destination.  And all the oil producers who have signed long term contracts agreeing to use that pipeline are locked into that same destination.  But markets can shift over time---in fact, they can shift from day to day.  But when you load oil into a railcar,  you can send it to any place on the continent.
    The proposed proposed pipelines would all ship oil from the Midwest to Texas and Louisiana, where refineries are already oversupplied with oil from local shale.  North Dakota oil is low sulphur oil, of the same type that East Coast refiners are paying $104 per barrel to import.  Yet Midwest producers received only $74 per barrel in January.  So even though pipelines ship oil more cheaply than rail, having a pipeline to Texas is not what the oil producers really want right now.  They don't want to ship to Texas--they want to ship to New Jersey, and will find it profitable to do so, even at a rail freight cost of $5-$15 per barrel.   And next year, they may wish to ship somewhere else.  But no new pipelines will be built without  oil producers signing long term contracts to commit to shipping a specific volume  for a specific number of years.   The article quotes one analyst as saying, "Making a pipeline volume commitment is like getting married.  Shipping by rail is like a one night stand........"