The recent report on inflation in the US published by the Bureau of Labor Statistics indicated that inflation rose by only 2.7% in November. The number was surprising given the anecdotal evidence we have about consumer dissatisfaction with rising prices.
A closer look at the data reveals that the number is not trustworthy. The Bureau publishes the data it uses to calculate the monthly inflation number and the chart from November is filled with holes.
Note that there was no data for many of the components for both October and November, which means that those components were set to zero prices. Critically, the shelter component, which is a very large part of the formula. CNBC reports:
“Economists were zooming in on one particularly important subset in the data as problematic: owners’ equivalent rent. This is a key part of calculating the inflation seen in the housing market.
“UBS economist Alan Detmeister said the price changes in October for the OER appear to have been ‘set to zero.’
“Evercore ISI’s Krishna Guha, digging deeper, said it appears the BLS ‘put in zero inflation in multiple categories’ while calculating the OER for the approximately one-third of cities used.
“’To the extent that it introduces a downward bias, the Fed would be mindful of the risk of taking the data on housing services inflation at face value,’ he wrote in a Thursday note.”
The report is worthless, and it would be a serious mistake to use the 2.7% increase as the basis for any economic decision. The Bureau of Labor Statistics should simply admit that it lacked the data and withdraw the report. Bad data is significantly worse than no data.
President Biden, in his final address to the nation as President, warned citizens against the danger of living in an oligarchy: “Today, an oligarchy is taking shape in America of extreme wealth, power and influence that literally threatens our entire democracy, our basic rights and freedoms, and a fair shot for everyone to get ahead.” He was not the first President to warn of this danger. John Adams, in a letter to Thomas Jefferson, wrote the following:
“9 July 1813
“Your “” [aristocrats] are the most difficult Animals to manage, of anything in the whole Theory and practice of Government. They will not suffer themselves to be governed. They not only exert all their own Subtilty Industry and courage, but they employ the Commonalty, to knock to pieces every Plan and Model that the most honest Architects in Legislation can invent to keep them within bounds. Both Patricians and Plebeians are as furious as the Workmen in England to demolish labour-saving Machinery.
“But who are these ““? Who shall judge? Who shall select these choice Spirits from the rest of the Congregation? Themselves? We must first find out and determine who themselves are. Shall the congregation choose? Ask Xenophon. Perhaps hereafter I may quote you Greek. Too much in a hurry at present, english must suffice. Xenophon says that the ecclesia, always chooses the worst Men they can find, because none others will do their dirty work. This wicked Motive is worse than Birth or Wealth. Here I want to quote Greek again. But the day before I received your Letter of June 27. I gave the Book to George Washington Adams going to the Accadamy at Hingham. The Title is a Collection of Moral Sentences from all the most Ancien[t] Greek Poets. In one of the oldest of them I read in greek that I cannot repeat, a couplet the Sense of which was
“‘Nobility in Men is worth as much as it is in Horses Asses or Rams: but the meanest blooded Puppy, in the World, if he gets a little money, is as good a man as the best of them.’ Yet Birth and Wealth together have prevailed over Virtue and Talents in all ages. The Many, will acknowledge no other ““. Your Experience of This Truth, will not much differ from that of your old Friend.”
Most Americans are unfamiliar with the word “oligarchy” since the Republic has tried very hard since its inception to convey the sense of equality best expressed in Jefferson’s Declaration of Independence. It would be years before any American President emphasized the idea of equality over that of freedom. Lincoln did so in his second Inaugural Address. For the first time, an American President declared that slavery was incompatible with the values of the American people, notwithstanding the inclusion of slavery in the Constitution.
An oligarchy is a political system in which the wealthy direct the machinery of government to protect and enhance their interests as opposed to the interests of the citizenry. Brooke Harrington, a Sociology Professor at Dartmouth College wrote this for the Washington Post at the beginning of Trump’s first term:
“There are no laws against a president and his super-wealthy Cabinet using their power to benefit their own class. There is nothing that compels them to look beyond their privilege to address the needs of the citizenry.
“The problem with these prospective leaders is not their money. It’s that they — like Trump — seem more interested in what their country can do for them than in what they can do for their country.”
The concentration of wealth in the second Trump administration is staggering. The following table gives an idea of how concentrated wealth has become in recent years. Many of the people listed, like Musk, Bezos, and Zuckerberg, have actively solicited Trump on various matters and represent business interests that clearly constitute conflicts of interest with a number of important policy issues like freedom of speech in a digital world.
Source: Bloomberg, “Bloomberg Billionaires Index”, 18 January 2025, accessed at: Bloomberg Billionaires Index, on 19 January 2025
Many of these people have contributed a great deal of money to Trump’s inauguration and several of them have been quite visible in the upcoming Trump Administration. We also have a hard time realizing exactly what these numbers represent: a billion of anything is far removed from anything we come into daily contact. One way to comprehend these numbers is to translate them into more accessible terms:
If someone made one million dollars a year, they would make about $480.77 per hour and $3,846.15 per day.
On the other hand, making a billion dollars per year would mean about $480,769 per hour and $3,846,153.85 per day.
These 20 individuals possess more wealth than most countries in the world. Indeed, there are only 7 countries with GDPs larger than $3 trillion:
There are 186 countries in the world with GDPs less than $3 trillion. The combined population of these countries comprises 56% of the global population. But 20 people have more wealth than each of the 186 countries.
Concentrations of wealth lead inevitably to a distorted political system. Adam Smith was well aware of the dangers of concentrated wealth to the public interest:
“Not only the prejudices of the publick, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it. Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; were the former to animate their soldiers, in the same manner as the latter enflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest publick services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.”
This pattern was present as the Roman Republic began its descent into dictatorship. It was also evident in 13th Century Venice and in late-19th Century America. It is happening again, not only in the US, but in India, Russia, China, the low-population oil producers such as Kuwait, and Brazil. It is difficult to see how democracy can persist under these conditions. Active steps must be taken to create a more just distribution of wealth globally.
President-Elect Trump has nominated a distinctive group of individuals to serve in his Cabinet: With some exceptions, they are all wealthy individuals with little or no government experience but a lot of experience as hedge fund managers. We will have to wait to see how these individuals fare in the confirmation process, but their nominations suggest that Trump believes that such people will manage the economy well. That assumption will likely prove to be very wrong.
We have historical examples of similar decisions. For example, Venice was once a powerful city-state and a dominant force in the global economy in the 13th-15th Centuries. That wealth was based upon international trade and Venice’s ability to link Europe to Asia through the Silk Trade routes.
“This brings us to the great puzzle of Venetian history. During the period 1297–1323, a defining epoch in Venetian history known as the Serrata or “closure,” Venetian politics came under the control of a tightly knit cabal of the richest families. It was, in Norwich’s (1977, p. 181) words, the triumph of the oligarchs. Furthermore, by the early 1330s this political closure had spilled over into an economic closure that excluded poorer families from participation in the most lucrative aspects of international trade. Finally, by 1400 the political and economic closure had created a society characterized by a new emphasis on rank and hierarchy. In short, after 1323 there was a fundamental societal shift away from political openness, economic competition, and social mobility and toward political closure, extreme inequality, and social stratification.”
Ultimately, more dynamic economic centers emerged, such as Portugal, Spain, the Dutch, and Great Britain, finding a way to bypass the Venetian chokehold on the Silk Trade by finding alternative routes to Asia. Venice lost its economic vitality and declined into nothing more than a footnote in the history of the global economy.
The argument is straightforward: rather than continuing to innnovate under the pressures of competition (such as the need to find a sea route to Asia), wealthy individuals tend to use political power to protect their interests through laws. That political power is then used to insulate existing techniques and technologies from externally induced change. Those industries become less efficient over time and economic growth slows as a result.
That same process seems to be in play in the US today. Robert Reich outlines the process in the YouTube video, “Wealth Inequality Explained”:
The composition of Trump’s Cabinet fits into this mold perfectly. In a broader cocntext, the process seems to be affecting many different countries in the world, as globalization produces distorted economic outcomes. Trevor Jackson describes the dynamic in his recent essay on theNew York Review of Books:
“For decades now, the ideology of free-market liberalism has obfuscated the ongoing distributive conflicts of the world, but it has not blunted the material suffering of the people on the losing end. Since the 2008 crisis, the reality of ruthless distributive conflict has become impossible to ignore, but the failure of market liberalism to reconcile political equality and economic inequality has produced a global crisis of legitimacy and a growing constituency amenable to antiliberal figures like Trump, Orbán, Modi, and Bolsonaro.”
The anger against the prevailing patterns of wealth distribution is not only found in political outcomes. The astonishing amount of support for the alleged assassin, Luigi Mangione, reflects the degree of animosity toward the “undeserving” rich. If the Democratic Party needs to make a decision about how to orient its platform for the future, it would be well-advised to concentrate exclusively on the process of redistributing wealth and breaking up the political power of economic interests.
” [aristocrats] are the most difficult Animals to manage, of anything in the whole Theory and practice of Government. They will not suffer themselves to be governed. They not only exert all their own Subtilty Industry and courage, but they employ the Commonalty, to knock to pieces every Plan and Model that the most honest Architects in Legislation can invent to keep them within bounds. Both Patricians and Plebeians are as furious as the Workmen in England to demolish labour-saving Machinery.
a Collection of Moral Sentences from all the most Ancien[t] Greek Poets. In one of the oldest of them I read in greek that I cannot repeat, a couplet the Sense of which was
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