The Grand Illusion
Recent data and reports by a number of economists and financial institutions tend to confirm what last Tuesday’s election results also suggested – that the United States effectively has an economy with two branches, one for those who have decent-paying jobs and financial reserves and another for those who have neither, a condition described as K-shaped, where the same financial conditions have differing impacts for different people.
Higher interest rates and rising stock prices benefit those who can save and invest, but those higher interest rates punish those with mortgages, credit card balances, and student loan debt. Higher interest rates also discourage businesses from hiring and encourage streamlining and economizing, which usually means layoffs.
The youth (ages 16-24) unemployment rate increased to 10.5% by this past September, and that’s three times the rate for Gen X and Millennials. Average new car prices topped $50,000 for the first time ever, and an indication of the impact on the less fortunate is car repossessions, which have increased 16% over last year and are at the highest rate since 2009. Add to that the rising cost of student loan repayments, which have increased by six percent over last year.
When you consider that the average cost of a basic one-bedroom apartment in New York City is $4,000 a month, that might just explain the results of the recent mayoral election.
On the other side, the gross profit margin of the pharmaceutical industry is over 70%, compared to 2% for the pharmacies that dispense and sell those prescription drugs, which might explain why the pharmacy clerks are having a hard time of it, while the drug company executives are rolling in dough… and why more than a few people, primarily younger adults, still openly back Luigi Mangione… and why Zohran Mamdani managed to attract over 90,000 largely youthful volunteers to support his successful campaign for NYC Mayor.
Considering how many of those pharmacies are going out of business – to the point that many areas of the country that are less densely populated are becoming ‘pharmacy deserts,’ 70% seems not only excessive, but eventually self-harming (to the pharmaceutical companies) because they won’t have anywhere to sell the meds. People’s health has become a way for big companies to make ridiculous profits. It’s just as bad with insurance and medical device makers.
When does a nation’s collective health become the responsibility of the shareholders and venture capitalists who skim all the wealth off it?
full disclosure: I’m an ED physician who has been around long enough to see that people can’t afford even routine health care these days. My work overflows not only with emergencies but also routine stuff for people who have not a single other place to turn.
You are raise an interesting point. It is the difference between micro and macro economics. Micro-economics is the corporate business model and assumes unlimited markets. Macro-economics is the overall perspective. Often macro-economics seems like communism but it works. It takes into account limited markets and the governments role in markets. People pushing extreme wealth don’t understand macro-economics
Jimmy Carter was a great man but a lousy president. Reagan was like a breath of fresh air in some respects…but his trickle-down economics started us on the path to the increasingly gross wealth inequality we have going today.
I don’t see the trend as sustainable. To me it’s an open question whether it ends in socialism here…or Blade Runner.
Just a thought or two on wealth distribution and ‘socialism’. If one believes that government intervention to address ANY aspect of regulating the markets, unfair business practices, or the health/hunger/housing of portions of its population is socialism, then the US has had socialism in its policies for a very long time indeed. Antimonopoly policies of the early 1900s broke up the extreme wealth concentrations that had emerged after the late 1800s ‘Gay Nineties”. FDR programs after the Great Depression and the war years elevated millions into the middle class and concurrently kept the wealthy class from reconcentration all economic activity that surged post war (the 50s). Regulatory activity from states and governments helped correct or prevent harm from environmentally damaging business practices by large and small businesses from modern age chemicals and technologies.
In an ever more crowded world and with ever increasing technologies, an every man for himself government mindset just doesn’t provide enough political stability to make sense. That type of strategy then requires use of armed force to keep the citizens ‘in line’. Even then the people will sometimes rise up and revolt and retake the government (Poland, Ukraine, Egypt, etc.). I believe modern democracies understand this and have therefore used socialist policies, if you will, to provide against the natural tendency for wealth accumulation by the rich and powerful. And I’m glad for that. If the label fits, wear it.