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Do We Need To Fear Oligarchs? Part 2.

I have decided to extend this story beyond 2 posts.

Worse than promoting an analysis about the so-called wage ‘gap’ which hides more than it explains, Reich is using that argument to go beyond economics and make a political argument which is also not only half baked but is completely wrong. And the argument is how both the American economy and now the American political system is increasingly controlled by an oligarchy of wealth and power which is slowly but surely erasing the democratic principles which protect the average American both at work and at home.

Reich’s argument is spelled out in his book, The System, Who Rigged It and How We Fix It, which came out during the Pandemic uses examples from Trump’s response to Covid-19 to explain how and why oligarchical control has loused everything up. His proof about the dangers of oligarchy is the degree to which the working class was offered little protection from the ravages of the virus, hence the United States had the highest mortality of any country at all.

Of course, it goes without saying, although Reich finds multiple ways to say it, that the disparities in medical care between the rich and the poor is simply another example of how the oligarchs get everything and the rest of us get little or nothing in a society based on wealth and power to the extreme, i.e., what America has become particularly in the Age of Trump.

Contrasting the difference in health outcomes between the upper class and the lower class might have some kind of argumentative value to show the poor getting screwed except for the fact that so much of what determines health is a function of behavioral choices which cannot be just explained by poor people not getting the same access to health care as the health facilities available to the upper class. In states which have not cut back on Medicaid enrollments, the levels of obesity, tobacco use and alcohol consumption still increase in direct proportion to the decrease in average family income and such trends cannot simply be ascribed to the lack of lower-class medical care.

Unless, of course, you want to believe, a la Robert Reich, that as the economy becomes more concentrated due to the growth of mega-corporations and the lack of financial muscle exercised by the little guys, that this trend is simply another example of how the oligarchical structures of today’s unchecked capitalism is what is leading us to economic collapse or worse.

In this respect, Reich relies on work published by another academic-turned-spieler, David Wessel, who published a long article in the Harvard Business Review which claimed that the lack of competition was stifling the ability of new, smaller companies to enter certain markets, which prevent rivals from “emerging and thriving.” Wessel cites four sectors – airlines, beer, pharmaceuticals, hospitals – which wield market power to prevent competitors to enter and bring innovative challenges that would promote economic growth.

Here's how Wessel sums it all up: “The preponderance of evidence across the proliferating body of research suggests that industry consolidation is causing a troubling decline in competition, limiting the country’s capacity to innovate, create jobs, and sustain overall economic health.” Robert Reich would certainly agree with that bleak outlook.

The problem which Reich and Wessel both overlook, however, is whether or not the degree to which the big companies increasingly prevent smaller, newer companies from entering the market impacts the growth and financial value of available jobs. Because when all is said and done, the only way to measure an economy’s strength is to measure how many people are working and how much they get paid.

The commonly-held view, which happens to be backed up by no real research at all, is that jobs are added to the economy primarily by what is referred to as ‘small business,’ which means business operations smaller than big businesses, although how both ‘small’ and ‘large’ business organizations are defined differently all the time.

The term ‘small business’ is akin to motherhood ad apple pie. You never say anything negative about small business, particularly if you hold public office and depend for your employment not on business but on votes.

The problem with trying to understand whether the big guys oligarchically get together to screw over the little guys, however, is that while it is always assumed (without ay evidence) that it’s the little guys that create all the jobs, what nobody including Robert Reich ever seems to do is try to distinguish between more jobs as opposed to new jobs, or more exactly, new kids of jobs.

About ten years ago, Home Depot opened one of their mega-stores near where I live. The day the store started up, the local lumber yard and one of two hardware stores in town shut down. I’m assuming that the people who were working in the local stores which closed got jobs at the new big store – maybe yes, maybe no.

But if the people who had been employed at the local hardware were now working at the Home Depot, they were probably doing the exact, same kind of work tasks that they had been performing before.

How many more jobs did the Home Depot create in my town and the nearby towns? Probably some, but it’s not as if anyone ever published a specific number. Whatever the number of additional jobs were added with this new store, the people who now worked at the Home Depot instead of at the local hardware store were doing the same kind of work using the same kinds of skills that they had been using in their previous place of work.

Several months ago, I took a front-end job at Wal Mart to see what working for the big chain was all about. What I learned about the modern service economy and the role played by the mega-stores in that economy is the next story to be posted tomorrow.

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