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INEQUALITY – HOW IT STARTED AND WHY IT MUST END (PART II)

July 2, 2013

INEQUALITY – HOW IT STARTED AND WHY IT MUST END (PART II)

In Part I of this essay I referred to books written and just recently published by Jared Diamond, Pulitzer Prize winner, and Joseph Stiglitz, Nobel Prize winner and a former chief economist for the World Bank, both brilliant luminaries in their respective fields. In this part II I will make reference to the efforts of those intellectual giants and to a paperback book by an admitted non-luminary published in 1996, 17 years ago, by James Carville, a now well known operative in the Democratic Party and adviser to Bill Clinton during the latter’s eight years as president. His paperback is called, “We’re Right, They’re Wrong,” and is a short and folksy read; but don’t be misled by such seeming off-the-cuff banter.  He makes important points in the book in re inequality (racial, economic and political), and his book, though dated, seems amazingly topical – and there’s a reason why, as we shall see. Think ever-deepening inequality, an apparently permanent profit-making project of the Wall Street crowd of greed.

We know (via Diamond) from part I of this essay that we have had inequality since the advent of the chiefdom form of social organization millennia ago, and we know (via Stiglitz) that inequality (though always present since then) has waxed and waned since, depending upon local conditions. For instance, during the end of the 19th and into the 20th centuries during the robber baron era of trusts, the big monopolies owned Wall Street and the congress (until Teddy Roosevelt “busted” the trusts). This era featured a wild-west venture into capitalism’s worst features, where zillionaires ran roughshod over labor (which netted them a labor union movement) and any attempts to regulate their activities by government. (The fact that there was no income tax until 1913 – which the trusts fought tooth and nail – helped fund such efforts.) It can be safely said, in Stiglitz’s estimation, that this was a time when inequality was “waxing.”

Then came WW I and the Wall Street excesses of “The Roaring Twenties,” followed by the Great Depression, desperately needed New Deal reforms, and WW II. (That war and depression were both monstrous events in which, incidentally, I participated). Following WW II, and perhaps as a result of the “We’re all in this together” camaraderie we experienced during the war, there was a period of some thirty years where both Carville and Stiglitz agree that inequality was waning. There is some mild disagreement as to when the pace of inequality resumed its robber baron trek to deeper territory. I have blogged repeatedly that it began in 1974, give or take a year or two, but some of my fellow Keynesians date it before or after that.

Whenever – it happened – and at age 86 I can lay claim to some authority in recounting this tide of events since I experienced such events personally at the time and can serve as a repository of living history while, contemporaneously, I was securing degrees in economics and law. I can testify that we had a good thing going until Wall Street pulled the plug in the mid 70s and moved our economy back to a “waxing” of inequality, a waxing that (aside from a few “bubbles”) continues at a deepening pace and at an accelerated rate today, a rate that could spell the end of democracy as we know it sooner rather than later, and, as Carville might observe, “I’m not just whistling Dixie!”

What are some of the evidentiary cues that Wall Street was ready to abandon a postwar “feel-good” era of shared new wealth with labor and a roaring economy in favor of a “I’ve got mine and I’m going to get yours” mentality? I can recall (both personally and from what I have read) that productivity increases which led to better production which led to greater profits were NOT shared with labor as before. Suddenly the rich and corporate class wanted to hog all such productivity improvements instead of sharing them with those who were responsible for such increased production efficiencies that led to greater (though now) unshared profits. That modus operandi of unshared new wealth has continued to this day, aided and abetted by outsourcing, threats to outsource, and other such forms of reducing wages for labor designed to enhance Wall Street’s bottom line. During the late 60s and 70s there was also a spate of Wall Street-sponsored (so-called) Right to Work bills submitted to several legislatures which, contrary to Wall Street’s pretended concern for workers’ rights – material for a sick joke – was all about enlisting public cover for a continuing depression of not only labor’s fair share of the economic pie but their rights to even pursue their own interests as employees in organized fashion. Such efforts by Wall Street to destroy worker rights to effectively organize and seek better wages and working conditions goes beyond mere profit-seeking; it is an affront to the democratic process and a corruption of the whole idea of fair play where government is  the referee, not the dictator.

To reiterate (from Part I), deepening inequality cannot co-exist with democracy much longer – something has to give – and it can’t be the 99 percent. With decreasing family median income for some two decades now and Wall Street’s outsourcing of production of goods and services to keep the race to the bottom intact on domestic labor costs, the 99 percent has nothing left to give, and I for one see no reason why America should be impoverished by such inequality in order to further enrich the one percent. I think we are approaching a tipping point, as evidenced by civil commotion in Egypt and especially Brazil, where millions are congregated to question why billions are being spent to host the World Cup festivities to be held soon rather than being spent to help the poor – an excellent question.

Carville in year 1996: “I’m no economist…. but here’s a simple lesson that I can’t screw up. The key to getting wages up is productivity. In fact, there are few relationships in economics that are as tight as that between productivity and wages. When productivity goes up, so do wages. If productivity doesn’t go up, wages don’t go up either. Why? When workers produce more in a given hour, their companies can pay them more without taking losses in the process…. Over the last two years, however, productivity has been picking up big-time and the average worker’s paycheck hasn’t done much of anything….Almost all of the productivity gains are going into corporate profits…. The worker is getting cut out of the action…. By one estimate, between 1983 and 1989, more than 60 percent of the new wealth went to the top 1 percent of the population and 99 percent went to the top 20 percent. Did you catch that? NINETY-NINE PERCENT OF THE NEW WEALTH WENT TO THE TOP 20 PERCENT!”

These quotes from a 17-year old book are set forth here along with today’s quotes from Stiglitz in order to acquaint the reader with the fact that nothing has changed: Labor is still not only not sharing in the new wealth it creates with harder work and more efficient production techniques, it has on the contrary seen family median income REDUCED over the past two decades or so (adjusted for inflation). Workers are making less for more and better work, and Wall Street is stuffing the resulting profits in its bottom lines while outsourcing and sponsoring ALEC right to work and other such labor suppression initiatives under the guise of “labor rights.” Such ridiculous propaganda! Goebbels would be proud! I will have more Carville to serve up in part III of this essay shortly. Stay tuned.  GERALD  E

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