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WAGE STAGNATION, WEALTH STRATIFICATION AND SOCIAL COHESION – ARE WE GOING TO MAKE IT?

July 28, 2012

WAGE STAGNATION, WEALTH STRATIFICATION AND SOCIAL COHESION – ARE WE GOING TO MAKE IT?

My followers will note that I have been blogging recently on the potential loss of our social cohesion due to wage stagnation and wealth stratification. The primary problem is a failure of the rich and corporate class to share productivity and other gains with American workers, resulting (when adjusted for inflation) in falling wages for American workers. The rich (as I term it) hog all the productivity gains and refuse to share them with their workers. The underlying problem is, of course, greed; but greed that is adversely affecting America in many other ways.

When workers are paid less, they pay less in taxes. The government has less revenue; greater deficits loom. Ah, but you say, we will collect the shortfall from the rich and corporate class, who have received all of such productivity gains and can now well afford to pay a portion of such gains into our Treasury. Guess again. There stand the republicans, demanding TAX CUTS for these productivity hogs, denouncing people such as liberals like me as “pinko redistributionists.” The name calling has nothing to do with the question involved, of course, and is a convenient cover for republicans to avoid a discussion on the merits of the issue as to why productivity gains (much of which came about from labor) should not be shared with labor. The issue cries out for debate irrespective of my views.

 Labor is treated as a disposable item, much as a used Kleenix. (How many times have you read something in the business pages like this: “Huge corporation A merged with Huge corporation B yesterday; oh, and by the way, 15,000 people will be laid off in an efficiency measure announced by etc. etc. etc.) Labor is underpaid, right to worked, cheated out of productivity gains, laid off, you name it. (I just blogged recently on the fate of labor when the workers’ corporations take reorganization under Chapter 11 – end of pensions, end of healthcare, end of labor contract etc.).

We have always been privy to the old saw that the rich get richer and the poor get poorer, but never before in broad daylight under government sponsorship! The United States is at or near the top of the most economically stratified countries in the industrialized world. Case closed.

If you think that my fear of loss of cohesion with such grossly inequitable conduct by the rich and corporate class is something new which could bring the country down is off the mark, consider the following:

 (1) Economic growth (new wealth) doesn’t tell us much. Why? Because some 99% of that growth goes to the upper 20% – so the next time you see that we have had a spurt in economic growth, ask if anyone other than those in the rich and corporate class will see any of it – like you, for instance.

 (2) The danger to our continuation as a country is a matter of increasingly long standing and was noted long before it occurred to me. William McDonough, the president of the Federal Reserve Bank of New York (a position thereafter held by our current Secretary of the Treasury) called three dozen important bankers together to his New York Fed’s headquarters about 17 years ago to warn them of “the growing disparities in wages earned by different segments of our labor force.” He advised the group that the wage problem “raises profound issues for the United States – ISSUES OF EQUITY AND SOCIAL COHESION – (my emphasis), issues that affect the very temperament of the country. We are forced to face the question of whether we will be able to go forward together as a unified society with a confident outlook or as a society of diverse economic groups suspicious of both the future and each other.”

Wow! This from THE banker to Wall Street – and BEFORE Bush II and his trillions in tax giveaways to the rich and corporate class! One has to wonder how much worse shape we are in NOW than we were then with this relentless drive by republicans and their patrons to scoop up all the wealth in sight.

 The New York Fed president saw a possible end to this, and it is not a pretty sight. He correctly foresaw a real potential for this country to come apart into warring economic clans. I think he was on to something, but it doesn’t have to be that way.

We can adopt the mindset of this country immediately following WW II for some 25 years where productivity was shared, wages were regularly increased, and the country and its people and its businesses all prospered. Aggregate demand was out the roof and everybody was busy. Republicans and Democrats worked together and even co-sponsored bills that benefitted the entire country rather than one sector over another (as today).  We had social cohesion by the ton and a sense that we were “all in this together,” a feel we also had had in the just recently concluded WW II, and one we lost in the Nixon-Viet Nam twin debacles. Our nirvana ended, and with a whimper.

That was another day and age. Any hope we have for a return to such a day is lost in the pure greed of this day, so it appears that we are going to have to do what is fair and just the hard way – by statute, rule and regulation – rigidly enforced. It is time to see that the historic profits of the rich and corporate class are more equitably distributed to its workforce via wages, shares of productivity gains and the like. It is also time to see that all income is taxed alike, whether wages or so-called “business income.” Reasons for the distinction in treatment are artificial and need to be abolished. It is plainly a tax dodge.

We still have a choice – disintegration – and don’t take my word for it. Read the above from the banker to Wall Street, hardly a liberal Democrat, and noted some 17 years ago.

Taking the only alternative left to us is going to be messy and difficult, but so is what we have (incomprehensively) going on now, so let’s get on with it. First we must survive.  GERALD  E

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