Thursday, May 22, 2014

Income Inequality in America -- Notes for a Lecture, "E Pluribus Unum? What Keeps America United"

Piketty’s Reality? The Revolution Will Not Be Televised - Peter Van Buren, WE Mean Well (May 22, 2014)

Robert Reich, once Clinton the First’s Secretary of Labor and now a professor of Public Policy at the University of California at Berkeley, has emerged as one of the clearest pre-Piketty voices on income inequality and how it is affecting America. He asks why, in the face of incontrovertible evidence of their coming demise, our middle class remains complacent.

So why is there no revolution brewing?

Reich’s reasons– a working class paralyzed with fear it will lose the jobs and wages it already has, debt-laden students who are no longer a major force for social change, and an American public so cynical about government that many no longer think reform is possible– are valid. His idea that somehow some kind of reform is still possible is less so. Let’s look into this.

The Reality of Wealth

The gap between most Americans and those who sit atop our economy continues to grow. For two decades after 1960, real incomes of the top five percent and the remaining 95 percent increased at almost the same rate, about four percent a year. But incomes diverged between 1980 and 2007, with those at the bottom seeing annual increases only half of that of those at the top.

This is not some aberration. Instead, lower savings and hyper-available credit (remember fraudulent Countrywide mortgages and usurous re-fi’s?) put the middle and bottom portions of our society on an unsustainable financial path that increased spending until it triggered the Great Recession of 2008. Meanwhile, America’s the top earners’ wealth grew even as those responsible for the collapse were never punished and the companies involved received federal bail-out money (the money came from taxes paid in part by those destroyed in the Recession.) In the U.S., the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom ninety percent became poorer. The recession represented the largest redistribution of wealth in a century.

How did the most wealthy achieve this? The reality of possession.

The Reality of Possession

A rising tide lifts all yachts, as historian Morris Berman observed. Less than half of Americans do not own any stock at all. The wealthiest of Americans own over 80 percent of all stock, and 40 percent of America’s land.

It is worse on an international scale. Only 85 human beings own half of all the world’s wealth. Seven out of ten people live in countries where economic inequality has increased in the last 30 years.

Short answer: The rich just get richer. They have no interest in reform or change. Things are working just fine for them. It is the reality of the system.

The Reality of the System

Walmart associates make minimum wage. Most associates are nowhere near full-time, so their take home pay is well below the poverty threshold.

In return for paying below-poverty wages, Walmart makes over $18,000 per employee, including $13,000 in pre-tax profits, after paying salaries, plus taxpayer subsidies of $5,815 per worker in the form of food stamps paid by the government to keep the workers nearer the poverty line than below it, and tax breaks given to “create jobs.”

The top four members of the Walmart family made a combined $28.9 billion from their investments last year. Less than a third of that would have given every U.S. Walmart worker a $3.00 raise, enough to end the public subsidy, though the four Walmart scions would have to make due with only $20 billion a year. But why bother to change when the reality of politics is so much in the company’s favor?

Essentially the interests of the 99 percent are in direct conflict with those of the one percent. The only hope lies in the reality of politics.

The Reality of Politics

Over large swaths of the earth, there are no elections. In some of the wealthiest countries in the Middle East and Asia, there is not even the pretext of anyone choosing a government. Most governments are controlled by family ascension, not unlike the scene in the Middle Ages. In many other places, elections are simply public stage plays, with the actual winners decided by corruption and manipulation. Under such circumstances, it is not surprising that power and wealth work together.

Such is the case now in the United States. According to Professor Lawrence Lessing, that with the concentration of wealth, 132 people in the U.S. essentially control elections. They do so by donating, just that handful of people, over 60 percent of the SuperPac money. Those 132 people represent 0.000042 percent of the total number of voters; most other contributions to candidates are small, many below $200. How much is your vote worth?

It is not a coincidence that in 2016 the presidential race will likely again be a Clinton versus a Bush.

By reducing the ostensible choices to two, and by making the choice a false one as both candidates will differ little in their practices toward wealth and corporate profits, a very few super rich (indeed, a tiny subset of even the vaunted one percent) control the government. It is impossible under such circumstances for the government to create laws again the interests of the wealthy; after all, they work for them. The reality of change is that there is no reason to change.

The Reality of Change

The world has seen this before, for the West, during the Middle Ages, when feudalism was the dominant social and political state. A very, very few owned most everything of value. The 99 percent majority– serfs then, associates now– worked for whatever the feudal lords allowed them to have. In our more modern version of society, even the skilled artisan class that helped lift us out of the dark times may not exist as those activities (programming, services to the rich, medicine) are largely outsourced to places on earth were the pay even for skilled work is low.

Spayed, we’ll all accept it. Noisy but ineffective dissent will exist as a kind of entertainment, a diversion. The few real leaders among us will fall quickly under an almost-complete surveillance state coupled with militarized police. There thus, with apologies to Reich and Piketty, may be no means to foment a revolution, nor real reform. It remains possible, if not likely, that our nation will find itself in a new birth of feudalism, progress and growth a mere historical blip.

Still don’t believe me? Remember, at the fall of Rome and the beginning of the Middle Ages only two thousand people owned all the land between the Rhine and Euphrates rivers. In 2014, 85 people own half of the world’s wealth.

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