Bill Gross and Defining “Normalcy”….

In my previous blog on income inequality   I quoted  Bill Gross, the founder and chief investment officer of PIMCO who in a USA Today article   eschewed present-day excesses in the market place and called for a return to “normalcy”.  Not surprisingly, conservatives who dominated the comment thread implied that Gross presumed a great deal  when he attempted to define “normalcy”.

Just because slavery or indentured servitude are historically “normal” – doesn’t make it right…

Few would probably disagree with the heading above.  However, many commenters questioned Gross’s  definition of normalcy.  “Who’s to say what is normal anyway?”  asked one commenter.  To his credit, Gross defined what was NOT “normal” with our current system and his criteria seemed spot-on to me:

  • After-tax corporate profits at 10% of the GDP  (exceeding the roaring 20’s).
  • American wages at 42.5% of GDP (it was 57.5% in 1970).
  • A national minimum wage of $7.25/hour.  (It should be closer to $22/hour).

But looking at that definition of  “normal” from  an historical standpoint I have to admit that the commenter has a point.  Throughout history most societies could be defined as  “extractive” (to use the term coined by Robinson and Acemoglu in Why Nations Fail)  as opposed to “inclusive”.  In extractive societies there is little to no middle class.  Some are feudal in nature with serfs working practically for free, other such societies permit slavery or other forms of indenture.   These societies are bifurcated and the misery index is very high.  They are societies dominated by a few haves and multitudes of have nots.  There is little or no  social mobility.

“Normalcy” in a modern democracy and inclusive society…

However, I can’t imagine that this is the type of society that Bill Gross had in mind when he was talking about “normalcy”.  What Bill Gross was probably had in mind was something that was “normal” for  a vibrant “inclusive” society, a democracy where there is a thriving middle class and an aspiring working class. Indeed this is how we should be defining normalcy in the 21st century.

The irony is that too much freedom can create a route to slavery…

My point here is simple.  There are those who believe markets just need to be “set free” because markets are “self correcting”. But right now,  these are the very people who are also claiming that extreme inequality is “normal” and therefore should not be feared.  Taken to its obvious extremes, this is a dangerous notion. Bill Gross made an assumption: that we had moved beyond a society of serfs and lords.  That no one in their right mind was yearning for the return of things like slavery.  Perhaps he assumed too much.

The pretzel logic and willful ignorance of this line of  bull-headed thinking is baffling and idiotic.   Its a prime example of how any ideology taken to its extreme state can be dangerous.  It may be that massive inequality and lack of mobility are the economic  “norm” that all societies drift towards when left to their own devices.  I’m leand towards that theory personally.  But  shouldn’t the vast majority of the population then be promoting and seeking regulations that would push back against the natural formation of oligarchy?   Is everyone so enamored with their own “abilities” that they think that they can become part of the ruling class?  Since there is about a 1/1000 chance of becoming part of the 0.1% and a 1/10,000 chance of becoming part of the 0.01/% .  Even 90% of the top 10% are eventually marginalized under this scenario. Or are they so imbued with their ideology that facts are not relevant?  I’m just asking….

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