Friday, March 30, 2007


Income Disparity Keeps Increasing

My first blog in May of 2006 was about income disparity. According to an article in the New York Times (Thursday, March 29, 2007) things are getting even worse. A study based on IRS returns showed in increase in the gap between the very rich and the rest of the population. The authors point out that the gap is likely to be even bigger because the IRS "estimates that is able to tax accurately 99% of wage income but it captures only about 70% of business and investment income."

On Sunday, April 1, the New York Times published an article about the problems of the auto workers. While payments for those forced to early retirement have eased their pain, the fact remains that thousands of well paying blue color jobs have disappeared. This does not bode well for the future and income disparity is likely to increase. Many middle class jobs have been outsourced.

I pointed out in last week's blog that, historically, states with large income disparity have not fared well. Of course, by the time the situation becomes critical it is too late to do anything about it. It may be difficult to keep some well paying industrial jobs in the United States or, for that matter anywhere (because of automation). But having a trully progressive tax that produces revenue that can be used for universal health care, subsidized college education, and the like should help to reduce the income disparity.

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Sunday, March 25, 2007


How an Empire was Destroyed by Outsourcing

I have been meaning to write more about Greek/Turkish relations and that led me to read about the history of the Greek Byzantine Empire that supposedly was destroyed by the Turks and I was struck by the similarity between developments in the Empire and the modern United States.

The Byzantine Empire was officially known as the Roman Empire because it was a successor state to the ancient Roman Empire. Until the 11th century it was a powerful state whose territory included present day Turkey, Greece, and large parts of the Balkan states. Then, in 1071 in Manzikert (in Armenia) ,the emperor Romanus was defeated by the Seljuk Turk sultan Alp Arslan and was captured as prisoner. As a result Asia Minor was lost to the Byzantines and that was the beginning of the end of the state. The final end came in 1453 when the Ottoman Turks captured Constantinople. Most historians agree that the crucial event was the 1071 defeat so we may look at what caused it. The story below is based on a book by Vryonis [1].

The Byzantine army used to consist of soldier/farmers who in exchange for having a piece of land they were obligated to provide military service. By the 11th century rich landowners (who were also the military leaders) had taken over the soldier farms and the farmers had no longer a military obligation. As a result the Byzantines had to rely extensively on mercenaries whose loyalties were at best doubtful. A second factor was extensive civil wars between the "civil bureaucracy in the capital and the military magnates in the provinces" [1, p. 71]. As a result parts of the Byzantine army were fighting each other, rather than external enemies. Finally around 1060-65 the Christian Syrians and Armenians were pressured to accept the doctrine of the church of Constantinople (Chalcedonian creed) antagonizing those ethnic groups. Vryonis [1] gives quite a grim account of the campaign that ended in Manzikert. Amongst other disasters, the Byzantines relied on Turkish mercenaries who switched sides during the battle.

I am afraid that we see a repetition of the first factor today in the United States. Today the power of a state lies less in its army and more in its industrial capacity. Many American companies have been moving their manifacturing as well as many administrative functions overseas. As a result their former employees are left poorer while the upper management (and owners) of the companies become richer. The increased income discrepancy and its importance as a predictor of decline has been note by several authors including Phillips [2]. But we may also notice the dependence on unreliable "mercenaries." What assurance does a company A have that country X may one day decide to take over the facilities of A located in X?

I suspect that there may never be an overt takeover, the action may be more subtle. But the effect will be the same. The end of the industrial hegemony of the United States.

  1. Speros Vryonis, Jr. The Decline of Medieval Hellenism in Asia Minor and the Process of Islamization from the Eleventh through the Fifteenth Century, Univ. of California Press, 1971. (The book is kept in print by ACLS and it can be purchased directly from ACLS or from Amazon. It contains numerous references and quotes from texts of that period.)

  2. Kevin Phillips, American Theocracy, Viking, 2006.

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