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January 21, 2015


Recently I published a blog in which I quoted an AP report that incomes of the richest Americans soared 31 percent in a period from 2009 to 2012 while incomes for the rest of us “soared” 0.4 percent, both after adjustment for inflation (a ratio of 77.5 to 1 relative increase). The difference between raises in income for the superrich and the rest of us for that period can fairly be described, respectively, as “stratospheric” and “anemic,” or barely worth mentioning. Indeed even the 0.4 statistic is misleading because it is just a three year statistic out of a some 40-year period of wage stagnation since 1974 in which the family median wage has not moved up at all while the Dow has gone from 700 to 18,000!

I thought at the time that this was an outrageous failure to share the marginal productivity of labor and still think so, but guess what? New numbers are out and I now find that my numbers are obsolete and that the plundering of the economy to the benefit of the superrich and impoverishment of the rest of us are far worse than my earlier report suggests, and with wage inequality all the rage in corporate boardrooms, there is not even a pretense of a sharing of worker productivity (as there was after WW II up to 1974 when America boomed). Corporate employers simply hog worker productivity, ignore the workers’ desperate need for additional income, frustrate increases in aggregate demand, and pay out the plundered efforts of their workers to shareholders and executive bonuses and buy-back stock purchases (purchases, among other things, that enhance shareholder dividend and capital gain opportunities as well as enhancing the value of stock options of executives as a part of their compensation packages). They are sharing the wealth, all right, but only among themselves.

An Oxfam report published by the Deutsche Presse-Agentur shows that what is happening in America is happening on a global level and is far worse than I reported earlier on this three year interim report. Though this British charity’s report deals with wealth rather than year-to-year income, it clearly demonstrates that both such measures are being gobbled up by the superrich around the world (including America) while the rest of us in America are living in a different economy, one in which we suffer malaise (accentuated by dead-end fiscal austerity) while the superrich are gathering not only more wealth but at a faster rate of accumulation.

What the world needs badly is exposure to a “Piketty Moment” in which we can foresee and avoid capitalism’s ultimate systemic failure via his r > g formula if we don’t change course from present maldistribution of both income and wealth from the world’s economies to a fairer and more equitable division of such wealth (via wages, more liberal social policies etc.) to those corporate workers whose marginal productivity has in part made such profits available for distribution in the first place.

Oxfam  (based on data from a series of Credit Suisse reports) found that the share of the world’ wealth owned by the richest 1 percent rose from 44 percent in 2009 to 48 percent last year, and that 2015 would see half the world’s wealth in the hands of just 1 percent. Perhaps worse in numerical terms, Oxfam’s report also finds that over half the remaining wealth NOT OWNED by the richest 1 percent belongs to the richest 20 percent. This means that over 75 percent of the world’s wealth in 2015 will be owned per this report by the richest 20 percent and that less than 25 percent of the world’s wealth will be owned by the remaining 80 percent, and even worse, that the pace of accumulation by the superrich is itself speeding up, which means that the meager less than 25 percent the 80 percent have now will dwindle not only further but at an accelerated rate, thus following Piketty’s dour prediction of capitalism’s demise itself down the road when there is finally little or nothing more to gobble up.

The rich and corporate class are not having malaise in their operations, temporary reduction in oil pricing notwithstanding, as the Dow continues to stretch out its upward spiral in their (not our) economy, and speaking of the price of oil, it is interesting to see socialist Venezuela and capitalist America on the same side in begging the Saudis to reduce their output so as to bring supply and demand (and thus pricing) back into equilibrium. This ends any further PR pretense of supply and demand in the petroleum industry. It is clearly a managed monopoly and any discussion of supply and demand (in Adam Smith’s version of a “free trade” economy) has finally been unmasked as they are attempting to manage the supply in a decidedly “un-free trade-like” fashion. We now know that Big Oil’s pontifications in re supply and demand are what they always were – pure propaganda designed to mislead consumers and government regulators. The “magic of the market” sometimes needs monopolistic management.

Global wealth (the r in Piketty’s formula of r > g) is clearly being corralled by the superrich at a faster rate than it has been in years past, which leaves less for the rest of us, who are not only suffering a corresponding loss but a loss at an accelerating rate as well. This leaves us with another disturbing global statistic to worry about, to wit: Global population is increasing rapidly while the wealth and income such larger numbers command is rapidly decreasing, which necessarily assures us of a per capita   increase in poverty with more people and less assets to share. I think that situation contains the potential for civil disorder leading to new and dangerous political outcomes in organized societies.

Winnie Byanyimi, head of Oxfam, says it best. She stated that “The poor are hurt twice by rising inequality; they get a smaller share of the economic pie and, because extreme inequality hurts growth, there’s less pie to be shared around.” She is right. She also issued a concluding statement as follows: “It’s time our leaders took on the powerful vested interests that stand in the way of a fairer and more prosperous world.” She is again right.

Who besides Byanyimi and Piketty (the same Piketty whose three centuries of unassailable research  predicts the end of capitalism with his r > g proof “unless we attend to these matters”) will stand up to and challenge these “powerful vested interests?” Somewhere there must be an FDR lurking, willing to take on the vested interests and doing what is right for all Americans. Where is he or she? Where is another FDR who, when told he was a “traitor to his class” and that the rich and corporate class hated him answered: “I welcome their hatred” and then proceeded to do what was right and best for all Americans with his Keynesian solutions to America’s economic problems during the Great Depression?

Whoever he or she may be and of whatever political stripe – I will vote for him or her. There is more at stake than a looming failure of capitalism destined to consume itself in its present trajectory per Piketty; there is also the question of corporate control of all of America’s institutions and loss of our democracy in some yet-to-be reincarnation of Orwell’s 1984 society. Where is our secular messiah? We need help beyond further “economic growth,” a “spectacular Dow” and other totems. We need a new mindset in how to equitably distribute the fruits of our economic efforts – now – before it’s too late.   GERALD    E

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