The Ferguson Story Is One About Subpar U.S. Growth
Last Tuesday, Missouri Governor Jay Nixon ordered an additional 2,200 National Guardsman to the city Ferguson, on top of mobilizations of 700 since Monday, to restore order.
Ferguson erupted after a 12-member grand jury did not indict Officer Darren Wilson on any of five possible counts, from first-degree murder to involuntary manslaughter, in the shooting death of 18-year-old Michael Brown. Wilson is white, Brown an African American.
Americans saw split-screen images of the unfolding events on CNN and other TV stations. On one side, President Obama declared, "We are a nation built on the rule of law." On the other side were live images from Ferguson of police using tear gas on crowds as mobs ran through the streets amid the fire, smoke and mayhem. Protesters burnt police cars, set fire to buildings and looted businesses. The Ferguson Fire Department said it fought 25 structure fires Monday night going into Tuesday morning. Efforts to extinguish those fires have been hampered because of gunfire.
Of course, riots in the past, such as following the 1992 Rodney King verdict, the 100 or so U.S. cities after Martin Luther King's assassination in 1968, Detroit in 1967 and Watts in 1965, dwarfed those that have erupted in Ferguson. But the pathology remains the same: those at the bottom of the American pyramid are not happy and their anger has boiled over into violent and senseless rage.
Jude Wanniski boiled down the major problem of our time as balancing the tension between income growth and redistribution. During the 1992 riots, he identified a scarcity of capital relative to labor as a major problem for the black inner city and a major source of tension in race relations. He noted, "When there is no capital available, the price of labor must drop to uncivilized lows to clear competitive levels." Certainly, until the scarcity of capital relative to labor is addressed, the American empire will remain vulnerable to the violent eruptions that have befallen Ferguson.
During the early 1990s, Jack Kemp's pursuit of enterprise zones in the inner city was a clear attempt to bridge the gap between growth and redistribution. The promise of enterprise zones was that their tax exemption on capital gains could attract the investment capital necessary so surplus labor (largely African American) could be pulled out of the streets and into increasingly productive, legal uses.
Today, it is Senator Rand Paul, who has visited Ferguson, who sounds like Kemp with his outreach initiatives to the black community. Similar to Kemp, he champions enterprise zones in the inner city. But he has taken the script further.
As veteran political columnist Ronald Brownstein noted this summer, Paul "has moved beyond the economic arguments that anchored previous outreach efforts to embrace criminal-justice reform with a passion unprecedented in modern Republican politics. Few Democrats, in fact, have matched the fervor of Paul's case against drug laws that have disproportionately incarcerated minority men."
At a gathering at the National Urban League Conference this past July, Paul made the point clearly, "Three out of four people in prison right now for nonviolent crimes are black or brown. Our prisons are bursting with young men of color, and our communities are full of broken families.... I won't sit idly by and watch our criminal justice system continue to consume, confine and define our young men. I say we take a stand and fight for justice now."
The outreach has even caught the attention of African American leaders such as Al Sharpton, who recently said of Paul's potential 2016 aspirations, "I think he knows it's unlikely someone like Al Sharpton would endorse him, but I can't ignore him. He's openly dealing with issues that [politicians] including people in the Democratic Party, haven't done."
But if history is any indication, such passions on the margins of the GOP for criminal justice reform can fall well short of execution. Kemp's own efforts to "wage a war on poverty" fell short in the bureaucratic battles of the White House of George H.W. Bush.
On the left, other than modest steps toward criminal justice reforms, it seems the best the Democratic Party can do for the employed and under-employed constituencies of the inner city is to promise to protect the value of labor via minimum-wage increases at the local, state and federal levels. And in the main, both Democratic and Republican parties have long since abandoned a commitment to stable money, historically a requisite condition for sustained income growth for those at the bottom of the pyramid.
This point has been made abundantly clear by Rich Lowrie of Put Growth First. Take the period between 1948 and 1971, during which the dollar was defined as 1/35th an ounce of gold: income growth for the bottom 90% of Americans rose 86%. After the U.S. abandoned the gold standard in 1971 and the Fed began to manipulate interest rates to keep prices and wages under control, wage growth for the bottom 90% of Americans was never the same. The Fed effectively put a lid on income growth for them.
In recent times, the situation has actually worsened. Since the 2008-2009 financial crisis, incomes for those among the top 10% have risen, while incomes for the bottom 90% have declined. Wages have stagnated for most Americans during the past four decades.
Of course, headline economic numbers, such as unemployment have been improving through the Obama presidency, so few Democrats have been willing to view the lack of wage growth for the majority of Americans as a major crisis. But it is.
Despite an unemployment rate that is on pace to hit the Fed's consensus estimate of "full employment" (5.5%) by February or March 2015, the labor situation remains stressed. According to the Peterson Institute, 1/5 of the work force now works part-time, with approximately 1.2 million working more than one part-time job. Those that work 35 hours a week or more (often without benefits) in total are considered full-time employees. Some of these part-timers may be due to Obamacare legislation that has resulted in fewer full-time hires, if only to reduce a higher labor cost. The electorate understands these headline improvements do not translate into improved living standards. The available pool of capital relative to labor remains too tight.
In the last election, Republicans won Senate seats in all four states where minimum-wage increases were on the ballot - South Dakota, Arkansas, Alaska, and Nebraska. Yet all those initiatives passed with wide margins. This suggests that while the electorate voted in a Republican Senate to check the redistributive policies of the Obama administration, it sought to address the plight of those at the bottom (who have seen their incomes stagnate or decline) with higher minimum wage initiatives, no matter how imperfect.
Combined with the deaths of Michael Brown and the 2012 killing of 17-year-old Trayvon Martin in Sanford, Florida, there may be the growing perception that justice, too, is also being rationed. Economically, Obama continues to follow the script that lost his party the Senate, and contributes to the despair in such cities as Ferguson.
