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Are We a Kleptocracy and What Does That Mean Anyway?

Two articles consider what the real economic patterns we face are, and whether the big process we're undergoing is basically just a massive transfer of wealth.

Editor’s note: In some ways, the economic landscape we face  defies conventional explanation. It’s true that consumers aren’t spending a lot -- measures of consumer confidence are approaching their all-time low -- and businesses don’t have much taste for expansion. The foreclosure crisis -- all but forgotten in elite circles -- rages on unabated. But as Washington Post business reporter Steve Pearlstein noted recently, while “the jobs haven't returned, corporate profits surely have and, at $1.2 trillion annually, are now higher than they were at the height of the bubble. It turns out that companies have found ways to produce as much as they ever did, but with fewer workers.”

In an ordinary business cycle, once profits return, firms start investing in research and development and looking for new market opportunities. But as Steve Pearlstein reported, “after falling sharply for two years, such spending has only just begun to rebound, and much of it has focused on faster-growing markets outside the United States. Some of the cash has been used to pay down debt or buy back stock. But so far the one thing businesses haven't done is hire back full-time employees, preferring instead to contract for temporary workers or increase the hours of the workers they already have.”

Economist David Altig with the Federal reserve Bank of Atlanta noted that over the past few months, “the unemployment rate has far exceeded the level that would be predicted by the average correlation between unemployment and job vacancies over the past decade.” Altig looked at the number of job openings in April and May and concluded, “the unemployed would be expected to number about 10.4 million—not the nearly 15 million we actually saw.”

The backdrop against which the crisis is playing out is a long decline in the economic security of all but a rarified elite. In 2006, the New York Times reported, “wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960s.”

Between 1973 and 2006, the U.S. economy tripled in size. In 1973, the incomes of the bottom 90 percent averaged $32,135 dollars per year (adjusted to 2007 dollars). But despite that trebling of the economy, by 2006 the bottom 90 percent had taken a cut, pulling down an average income of $31,528. Despite thirty-three years of healthy growth in the economy, the vast majority of Americans earned a bit less than they had in 1973. This was an era in which we saw also saw a steep rise in the number of Americans who lack health-care, and the virtual end of fixed-benefit pensions

An increasingly polarized public is deeply divided over how we got here and where we should go from here. But most -- from the irate Tea-Partier to the disenchanted Obama fan -- agrees that it is some toxic combination of incompetence, corruption and misguided adherence to ideology on the part of our ruling class that is ultimately to blame. But two critical analyses, below, consider these dynamics from different angles. What if hollowing out the standards of citizens in the developed world is, if not part of a plan, at least a trend that benefits that ruling class?

Two articles published below consider this question in depth: What if we are seeing, in the words of Drake University Scholar Ismael Hossein-Zadeh in the first article, a “race to the bottom,” in which “the kleptocratic rulers in the US, EU, and other debt-burdened countries know exactly what they are doing” ? In the second piece, William Astore, a retired Air Force Colonel, gives a solid definition of what a kleptocracy is, and also surveys the same ravaged landscape. He wonders whether both the right and the left are distracted by images of creeping socialism and fascism, respectively, when the real ideological danger facing us today is the drift from nominal liberal democracy to the sort of kleptocracy that most identify with banana republics in the developing world.

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