It should be no surprise I am posting this as income/wealth inequality is something I feel very strongly about. Anytime I post something, I can be assured that William will respond with, "What a crock of shit that is". But this report basically echoes everything I have been saying for several years now going back to the MW site. I could quote endlessly from the article, but the salient point is simple. The gap in income between the top and bottom has grown to proportions not seen since right before the great depression, and rather than correcting itself, it is getting worse and even S&P has concluded that the massive concentration of wealth in the hands of just a few has created a vast mountain of "dead money" that is not remotely circulating in the economy. Hence, they are downgrading their expectations for growth in the US. I think the section that talks about the massive growth of inherited money is quite interesting.
Predictably, even though the article acknowledges that our tax policy has disproportionately benefitted those at the top of the economic bracket, and even though it acknowledges that taxes went from 70% in 1979 to 35% in 2012, they caution against "heavy handedly" dealing with this gap through taxation. Instead, they note that those with secondary degrees make more than twice as much as those without secondary degrees, and suggests that if we just increase the level of education of everyone who isn't already rich, this will start to correct the problem. I personally consider that to be magical thinking, though I have to admit that I think a lot of people would make different choices when they voted.
What I appreciate about the report is that it states the obvious, which is that regardless of the reason, it is a fact that the income gap has gotten so large, it is now a drag on the economy and it contributes to boom bust cycles like the one for the great recession. I also appreciate the fact only a complete idiot or complete ideologue can read this and still believe that trickle down economics is anything BUT the absolute scam that it has been called out to be. That said, I believe this report falls short on several fronts.
They note that in the 60's, the level of education beyond high school increased by about 1 year or so for everyone in the workforce and we've slid backwards since then. I think this has a lot to do with the Vietnam war and that was not mentioned at all. In that time frame, we also had a less skewed distribution of income period. We didn't have average CEO salaries that were greater than 200 times what the lower paid workers made. The other glaring elephant in the room is that 1979-1980 marks the sharp turning point on so much of this. Taxes fell, top end salaries skyrocketed, productivity of workers climbed, while their wages went flat and basically lost ground while all of their benefits have been chipped away. We can debate about what that means, but there is no denying that sharp reversals began in 1980. I wonder if there was anything significant that happened right about that time?
Going back to bitching about inherited wealth, Christy Walton in 2013 received $460 million dollars in Walmart dividends after taxes. This is the equivalent of 1.2 million dollars a day for having done nothing but marry well. That those dividends come from a company that so ruthlessly screws so many just to feed out mindless addiction to consumption makes it particularly galling. While she is an extreme, there are plenty others who are simply lucky to be born into or marry into wealth, who do nothing to earn it, but nonetheless get a free ride through life. Personally, I'm not kidding when I say I abhor the idea of basically creating a level of taxation that punishes those at the top from hoarding it. Yet, as the report shows, the same decisions made before the great depression were basically the same decisions made in recent times, and it brought the same result. Were it not for food stamps and other social programs, I shudder to think where we might be. The closer we get to pure capitalism, the greater the inequality in distribution of profit we create. It would be nice if society could decide for itself it wants equitable distribution of profit by choice. This doesn't seem to be human nature though.
We also had the same economic forces in effect during the Gilded Age. This lead t the rise of the hated Unions to stand up for the rights of working people. of course the unions of today have lost a lot of their power and as their power and influence falls income inequality rises. At the tail end of the gilded age we endured a financial meltdown in 1907 similar to 2007 and the federal reserve was born to take control of America's dollar out of the hands of the industrialists and into the hands of the reserve.
ReplyDeleteLike Max I fear what the great recession of 2007 would have looked like had we not learned over the years and created a safety net for troubling times.
I have genuine mixed feelings about unions. I can't say that I believe their decline is entirely because of greedy management. Still, I think there is plenty of evidence that shows what the world looks like with and without them. I've gotten into a lot of arguments (no surprise there) with people who are pretty far left and pretty far right who believe that pure free market economics or completely controlled economies can operate like perpetual motion machines. I've experienced the 80's, which was pretty much the end of the unions, and I saw a lot of things I didn't like about unions. that doesn't, however, negate decades of meaningful contributions they made to stability and equality in our society.
DeleteLikewise, on the other end, though we've never had pure capitalism, we have nonetheless gone through massive deregulation of every industry and watched as larger corporations simply gobbled up all their competition and adopted a Fuck You attitude toward their customers. The banking industry is one perfect example of this. What is always assumed of those of us who are progressive is that we believe in some utopian vision where everyone gets up works everyday, the birds all smile and God's special sunlight shines on all (Hmm, sounds a lot like Morning in America doesn't it?). I personally believe legislation and controls should be aimed at stopping excess.
We now have a pretty good idea of what extreme inequality looks like, and what creates it. We have the examples of what happened right before the great depression and what happened right before the most recent meltdown. We also have a pretty decent example of what the other extreme is, basically the 1970's. Finally, looking at what occurred after WW II, we also have an idea of how to create some stability. We've engorged the very top of our society, it's time to start unwinding that. Not by simply taking money away and handing it to the bottom, but by taxing and using the money for education and for fixing the shit that's falling apart in this country. It's also time to raise minimum wage and yes, it's time for the rest of us to stop demanding that we get flat screen TV's for 100 bucks. We can never fix the desire to trend towards a ruthlessly unequal society, and we should avoid trying to create an equality of outcomes. That said, I believe we can discourage extremes in both directions.
http://www.marketwatch.com/story/news-flash-the-rich-are-rich-and-the-poor-are-poor-2014-08-07?dist=beforebell
ReplyDeleteAnd it seems that we have been under estimating just how much the rich has.