The World in Numbers: 99 / 3.5 / 1.5

History is the sum of squandered opportunities. The wrong leaders in a time of crisis. Backward policies in a time of forward progress. Lessons forgotten or never learned.

Bad policies, lousy leaders, stupid mistakes. Self-inflicted political wounds happen all the time and can set nations on a disastrous course. But nothing alters political calculus more than war.

Russia’s invasion of Ukraine has shaken the world order and assumptions in a significant way. So I want to take this moment to reflect on some major themes we’ve covered, because certain ideas are now more in reach than previously thought, and others seem much further away.

As usual, there are competing narratives at play, and many are predictably false and misleading. So we’ll be doubling down on certain concepts in an attempt to elevate our conversation and offer insight on the periphery of the noise machine operating at full tilt right now.

In terms of the war in Ukraine, I’m once again offering the caveat that I have nothing useful to add with respect to how the war is being litigated, the future of the Ukrainian people or whether or not past western actions may or may not have played a role in Putin’s decision to invade Ukraine at this moment. But as I said last week, to explain is not to excuse. Vladimir Putin should be deposed by his own people and tried in the Hague for war crimes in defiance of international law.

In practical terms, I’m also not a war correspondent, so I’m choosing my sources very carefully and deliberately to understand the events as they unfold. Great war correspondents like the late Marie Colvin, Chris Hedges and Jeremy Scahill are a different breed.

For our part on UNFTR, I feel my role is to contextualize the economic fallout of this event and what it portends for the global citizenry. While it sounds callous, certain opportunities have opened up in light of Putin’s actions, and a savvy political and activist class will recognize this and hopefully seize the momentum before the class of bad neoliberal actors has a chance to mobilize its messaging.

So while we’re digging back into enormous themes, we’re breaking them into bite sized chunks to center our attention on three important concepts: economic inequality, mass mobilization and climate change. Preposterous for a Quickie, I know, but we have to timestamp what is happening right now and examine the ways in which Putin has unwittingly opened multiple doors to the left if only the left is focused and prepared enough to walk through them.

Part One

Economic Inequality - 99%

In the buildup to Russia’s invasion, the unlikely and ultimately unsuccessful diplomatic star on center stage was Emmanuel Macron. In the U.S., we like to think we’re the center of the world, and if you listen to our media, you’d think we have the largest stake in the conflict. But it’s Europe with the most on the line.

Sure, the ripple effects of any large scale conflict are typically felt around the globe, but this is very much a European conflict and sometimes we take for granted just how small the European universe is. The distance between Paris and Kyiv is about the same as driving from Portland, Maine to Orlando, Florida. From Berlin to Kyiv is like driving from Boston to Indianapolis.

Rather than talk about Macron, I want to shift our attention to another Frenchman.

“Hypercapitalism has gone much too far, and I am now convinced that we need to think about a new way of going beyond capitalism, a new form of socialism, participative and decentralized, federal and democratic, ecological, multiracial, and feminist.”

These are the words of Thomas Piketty. You already know I’m a fan of his, and I want to turn you onto his latest book Time For Socialism: Dispatches from a World on Fire, 2016-2021. It’s a far more accessible read than his seminal work Capital, and it pulls together his more recently published thoughts into a framework that incorporates the pandemic.

I’m starting with inequality and a discussion about the 99%, because nothing can happen without considering the economic interests of the masses.

Piketty is French and, as such, he writes a great deal about the French economy and the European Union in general. And many of his proposals are therefore couched in a more historically liberal framework than what we are capable of imagining in the United States. So, many of his proposals sound like they’re from another planet to modern American ears, though this wouldn’t have been the case from the Great Depression through the 1960s. As Unf*ckers know, one of the biggest achievements of the Chicago School and Mont Pelerin Society was to completely shift the narrative around participatory socialism and federalism.

Nevertheless, Piketty strikes an optimistic note with respect to long-term trends that we should preface our discussion with. As he says:

“Inequalities have been sharply reduced over the long term… the share of wealth of the richest 10% has fallen significantly, from 80–90% to around 50–60% (which is still considerable), but the share of the poorest 50% has never stopped being tiny.”

He’s analyzing data over two centuries, so context is crucial here. In the United States, the figures have worsened compared to other countries over the last half century. Nevertheless, the trendline is real and should allow us to think more broadly about inequality, lest we’re overwhelmed by pessimism. Piketty rightly points to investments in public education, changes to the legal framework and other mechanisms to level the playing field, then proposes something rather revolutionary. Inheritance for all. Before we dig into his idea, let’s hear from former Treasury Secretary and now, improbable social media darling Robert Reich to set the table on generational wealth transfer: 

“As income inequality has widened, the amount that the few high-earning households save—their wealth—has continued to grow. Their growing wealth has allowed them to pass on more and more wealth to their heirs. Take, for example, the Waltons—the family behind the Walmart empire—which has seven heirs on the Forbes billionaires list. Their children, and other rich millennials, will soon consolidate even more of the nation’s wealth. America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers pass on, somewhere between $30 and $70 trillion will go to their children over the next three decades. These children will be able to live off this wealth, and then leave the bulk of it, which will continue growing, to their own children—tax free. After a few generations of this, almost all of America’s wealth could be in the hands of a few thousand families.”

The topic of generational wealth transfer or inheritance tax is pretty much the third rail in the United States. The IRS has a useful PDF that reviews the history of the Estate Tax in the U.S. if you want to dig deeper into it. It has obviously been a political football and point of contention among the wealthy since inception. In fact, it was originally intended to be a revenue generation tool for the U.S. government during times of financial crisis and distress, but then it was basically accepted and normalized.

As with most issues surrounding taxation, there are myriad loopholes and exemptions, and several states have differing policies as well to complicate things further. But, broadly speaking, here’s the important takeaway for our discussion.

Democratic and Republican administrations and congresses have all played a part since the 1980s in cutting what’s owed in estate taxes. They’ve accomplished this by continually raising the exemption amount on what is taxable. So just like we unpacked the imbalance in Social Security deductions in our Reagan episode, the same logic applies here. Don’t look at the absolute tax amount. Look at the amount that is exempted. In simple math, and excluding spousal and intergenerational loopholes that have further muddied the water, here’s how it works.

1. You die and leave $100,000 to your kids.

2. The estate tax rate is 50%, but the exemption is $50,000.

3. That means you would pay the government $25,000, 50% of the non-exempt amount.

Again, the tax code is obviously waaaay more complicated, but I give you this to understand that the only two inputs that really matter are the tax rate and the exemption amount.

Now, let’s look at real figures.

In 2001—just a little over 20 years ago—the tax rate was 55%, and the exempted amount was $675,000. So if you died and left your kids $1,000,000, the taxable portion would be $325,000, which means you would owe the government $178,750. So the effective rate on that one million would be about 17%.

This year, in 2022, the estate tax rate is 40%. And it has been for the past decade. What’s changed more dramatically is the exemption. Remember, it was $675,000 in 2001.

Today, it’s $12 million.

That’s the tip of the iceberg as to how the wealthy get away with holding onto their money. No, you can’t take it with you, but you can sure as shit make sure no one else gets a hold of it. But, as I’ve said before, going after wealthy individuals isn’t my issue. Not directly, at least.

It’s not about taking money away from people who have it so that the government can fill its coffers to provide for others. We’ve dispensed with that argument many times over, starting with our MMT episode and oftentimes since. No, the bigger problem is that it creates larger and larger disparities among a particular class of people who are able to gain influence over the mechanisms of power in order to maintain an unjust and unequal system.

This is where the left needs a psychological edge to use the right’s logic against itself. This is where Piketty flips the script in an interesting way. To be clear, the current estate tax formula expires in 2025 and will revert slightly to prior year norms, but it’s still not enough. We should absolutely revisit the policy in a wholesale fashion to prevent such disproportionate generational wealth transfer and close massive loopholes. But Piketty has another solution that bears inspection:

“I support the idea of a more proactive solution, in the form of a minimum inheritance for all, which to give an idea, could be on the order of €120,000 (i.e., about 60% of average wealth per adult in France today) or $180,000 (i.e., about 60% of the average wealth per adult in the United States today) paid out at the age of twenty-five. Such an inheritance for all would represent an annual expenditure of around 5% of national income, which could be financed by a mixture of an annual progressive property tax (i.e., on real estate, financial, and professional assets, net of debts) and a progressive inheritance tax.”

Piketty refers to this as a “universal capital endowment.” Now, the right in the U.S. will clearly object to “financing” this through a progressive estate tax, because this would signify a direct redistribution of wealth. So let’s just look at this in plain numbers. About 4,330,000 Americans will turn 25 years of age this year. If we gave each one of them $180,000 as Piketty states it would be a total outlay of 779 billion dollars.

99: Max. Be real. That’s an outrageous sum. I mean where on earth would we get that kind of money? What nation in its right fucking mind would spend that amount of money every year on a single program like this?

(Hint: The U.S. military budget is now $778 million annually.)

Part Two

Mass Mobilization - 3.5%

A couple of reasons for bringing this up. The first is that Chenoweth has continued to build on their thesis to provide necessary context and insight. The other reason is to determine the pretext for how the left will move forward, given the complexities of the world we live in and the quick paced nature of global change, as evidenced by the war in Ukraine.

One of Chenoweth’s key insights is to refrain from oversimplification. The concept of 3.5% does not simply mean that if 3.5% of a population takes to the streets seeking social change or even regime change that it will happen abruptly. Change of any magnitude requires broad coalition building. An event can certainly spark a movement, but it still requires political, social and legal maneuvering to capitalize at the right moment.

They also point to failure in Bahrain, which purportedly had 6% participation in its movement, as proof that the theory should be considered a tendency rather than law. And further proof that preparedness among the coalition of supporters is also required. Perhaps most importantly, Chenoweth clarifies that popular uprisings are oftentimes the culminating rather than the precipitating event. In other words, an extension of years of planning and cultivation.

This is truly the quickest of the Quickies, but something I wanted to put out into the ether so we can factor it into our discussions moving forward. Because, using Chenoweth’s research and conclusions, and to build on our numbers theme, we would theoretically need to mobilize between eight and ten million Americans in support of or against a particular cause—assuming we’re talking about the primary block of activist age groups. Our demands would have to be focused and clear. And we would need to be prepared to seize upon any momentum through legal and political channels.

One of the reasons it’s so difficult to move the needle on the left is because there is so much work to be done. We have pockets of important constituencies that have credible and necessary demands, but we lack the ability to build strong and related coalitions. Do we mobilize our millions in support of free college? Medicare for all? Universal Pre-K? Legal weed? Against discriminatory laws and practices? Tax cuts for the wealthy? Fossil fuel subsidies? Endless war? Perhaps Piketty’s idea of a universal inheritance? All of these things require advocacy, and yet the deck is so stacked and our attention so fragmented, it’s difficult to perceive a moment or movement.

It’s why minority voices have a chance to win and drown out the majority. The majority of the population wants universal healthcare. They want higher taxes on the rich. To end fossil fuel subsidies and foreign interventions. But this muddled mess of demands sounds like white noise compared to the bumper sticker ideology of the right. Tax cuts on job creators. The War on Terror. Don’t tread on me. Back the blue. Law and order. Freedom and liberty.

I stand behind the top five bills concept that we’ve been humping in prior weeks; using the simplified and creative patriotic language tactics of the right to push through a piecemeal agenda that will provide enormous benefits to the population. But these can only happen when you have control of Congress and the White House, as we do now. And we should absolutely pursue these policies while the window remains partially open before the midterms. But even these and the other critical initiatives that are on the table need to be part of a larger strategy. There has to be a focal point, just like there was for the neoliberal class guided by the Chicago Boys.

Their overarching theme and north star was free markets. Everything flowed from here. Tax cuts? A cornerstone of free market capitalism. Building the military industrial complex? Simply spreading democracy and opening global markets. Affirmative action? Contrary to free market meritocracy. Privatization of everything from water to prisons? The free market can do it better than the government. Almost every bad policy could be explained away through a free market rationale. That’s the central planning nerve Chenoweth speaks of. The higher ideal. The coalescing narrative.

Those on the left already know the answer to what comes next. There’s only one coalescing narrative that matters any longer. One goal that Trumps all others.

99: Word choice, please.

One goal that supersedes all others, because if we get it wrong nothing else matters: 1.5°.

One never knows where the spark comes from or when it might catch. But the war in Ukraine got me wondering if one of the opportunistic consequences of this war might be that a cold blooded psychopath inadvertently created the spark we need.

Part Three

Climate Change - 1.5°

“A general conclusion—we have to take inequality very seriously if we want to fight the biggest challenges we have to confront in the world today, which in my view are rising inequality and global warming.”

So Piketty recognizes, as do many in public policy and academia, that inequality and climate change are two of the biggest, if not the biggest crises that we face as a species. What I appreciate about Piketty’s work of late is his ability to connect the two. When he dug deeper into the causes of carbon emissions, he was able to definitively conclude that the average emissions of the bottom 50% and middle 40% of humans are substantially lower than the emissions of the top 10% of global citizens. And that if we simply met the existing standard of this 90%, we would likely match our 1.5° target.

By the way, for sobering reading, I’m including a link to the comprehensive IPCC report that was finally just released to the public. During any other normal time, as if that even exists anymore, it would be front page news because it demonstrates just how seriously fucked we are and how we cannot afford to take our eye off the ball for a minute with respect to climate change. Of course, these aren’t normal times. There’s a war going on, so you won’t hear much about the most important story in history right now.

But let’s thread together our concepts

Piketty argues that our economic and political solutions to achieving the 1.5° target cannot be leveled evenly across the board because 90% of the planet isn’t responsible for the bulk of the problem. This is a problem of the top 10% and therefore any measures to curtail high emitting behavior or activities should fall more proportionally on this class. This might seem like an obvious statement but it’s not. In order to achieve the IPCC goals the masses are going to have to pressure the global elites to change their behaviors.

We have to change the laws. Alter the incentives. Punish bad behavior and reward good behavior. We need to sanction the worst corporate actors and incentivize clean corporations.

Now think about Chenoweth for a second. Think about energy, human energy. Think about the things that matter to you as an activist.

Poverty. The top 1% has received the vast majority of the economic gains over the past 50 years.

Racism. Within nations like the United States, racism exists within the structures of society and in our culture. Zoom out, and you see that the global south has been treated viciously by the global north. Examine the top 10% of carbon emission culprits in Piketty’s chart to reveal a common profile and characteristic that tracks along racial lines.

Gender inequality. Same logic applies here. Women are disproportionately underrepresented in the top income and wealth distribution globally.

The point is that when it comes to climate issues, there is a great level of interconnectedness between climate justice and other societal ills. Climate justice is the one unifying force that has a shot of awakening 3.5% of a nation’s population, or perhaps the world. If we’re clear in our demands. And that’s where Putin might have unwittingly moved the needle.

You see, we’re so fucked up in the United States that we actually had a portion of the pundit class coming to the defense of the fossil fuel industry as we covered last week. Remember how Biden asked the oil and gas companies not to price gouge in a time of war and Larry Kudlow was like, “How dare he go after our beloved fossil fuel industry!” Talk about gaslighting.

Remember, they’re not oil and gas companies anymore. They’re casinos. People were surprised over the past couple weeks when oil came down almost $20 per barrel. As of this recording, it just jumped another $5, and it’s likely to see-saw like that for as long as they can get away with it. Because, as Unf*ckers know, they make money when prices go up and down because they’re in control of the pricing and derivatives. Volatility means way more to them than stability.

So what opening has Putin given to the world?

Well for one, these situations force us out of normative policy stances. For example, normalizing relations with Venezuela. Will this hold? Who knows. But it wouldn’t be happening otherwise. We’re even closer to re-ratifying the Iran Nuclear Deal, which is a critical step in normalizing relations in the Middle East.

Just a few months ago, economic observers and politicians around the world were pointing to the Chinese-Russian economic alliance as the greatest threat to the United States in the vacuum and void created by the Trump administration. Now, China is in a real conundrum, as the entire world has turned against Putin. Not just the United States. But the world. Including critical Asian economic allies, such as Japan, who is the chief clearinghouse of Chinese debt.

Perhaps one of the most stunning developments is Europe’s general “fuck this guy” attitude. According to a recent Al Jazeera article:

“The International Energy Agency (IEA) this month issued a 10-point plan to reduce Russian gas imports by 63bcm, approximately half of what Europe imported last year, through a mixture of diversification and economy. The organisation says these measures could be enacted in the next year, without building new infrastructure.

 

“A few days after the IEA’s statement, the European Commission announced an even more ambitious plan to reduce reliance on Russian gas by two-thirds before Christmas, and abolish all Russian fossil fuels—including coal and oil—by 2030.

 

“‘We simply cannot rely on a supplier who explicitly threatens us,’ said EC President Ursula von der Leyen, unveiling the plan on March 8.”

Paul Krugman recently teased out the numbers a little further in his Times column. But he approached it in purely economic terms. Essentially, what would have to happen to the price of gas for the German people to cut their reliance upon it. He quotes German economists who have been puzzling this idea, saying:

“Yet, even with those pessimistic assumptions, they find that Germany could, in fact, do without Russian natural gas, precisely because the country currently spends so little on Russian imports. The costs would be serious: German real income might fall by around 2 percent, the equivalent of a moderate recession. But it wouldn’t be the end of the world.”

This wouldn’t ultimately be the most sustainable path, as it would induce a recession and prices will eventually come down. But it demonstrates once again just how much power is actually in our hands. In the hands of the bottom 90%. Collectively, we have more sway than we realize.

Now, I know I’ve talked a lot about the financialization of the commodities markets, specifically oil and gas, over the last couple of months, so I won’t go much further into it right now. But a quick review is in order because the financialization of commodities is more important than the left realizes. We need to get our stories straight.

For example, one of the most widely accepted ideas on the left is to nationalize oil and gas companies here and around the world. I think it’s a great idea, but wholly impractical. Plus, there’s an easier way to do it than to try and stamp out a global private industry. Defund it. Take away their ability to profit on price volatility. The reason the left doesn’t like this conceptually is because high oil and gas prices cause consumer pain and outrage. The left loves high gas prices because it makes people mad and refocuses our attention on renewables. That’s what’s happening in Germany.

But we’re stupid and irrational here in the U.S. Prices go up, and we lose our minds. So they force them down, take short positions to extract profit on the decline, and we go back to our lives like nothing ever happened. They play us like a fiddle.

I say don’t stop the music, just break their bow. Delist oil and gas. Take it off the exchanges. Regulate pricing.

Here’s the economic reality. The cost of renewable energy manufacturing and production continues to lower and the more we retrofit our economy to leverage this type of energy the more profitable it will be. If we shift the oil and gas subsidies to renewable subsidies, regardless of who gets them so long as you can demonstrate the funds go toward renewable production, then we will have artificially and naturally supported an economic transition without going to war with an industry.

Remember that part of the 3.5% equation is the planning, preparation and education that goes into establishing a rallying point and a demand. There’s nothing positive about war, and the people of Ukraine deserve our sympathy and support, and the global community should do whatever it can to support the Russian people in ousting Putin. But that doesn’t mean you stop planning and working to stave off the unyielding catastrophe that awaits our species if we turn a blind eye to climate change.

So it’s imperative that we continue to speak the language of progress and to inform ourselves. To understand that inequality, racism and poverty are all tributaries of climate justice. Because if we’re going to get 3.5% of the 99% motivated to hit the 1.5° target, we better know what we’re asking for, otherwise we’ll all be in our little corners of the world shouting at the acid rain and changing nothing.

Read Piketty. Defund Fossil fuel companies. Love your mother. (Both of them.)

Here endeth the Quickie.