Why America’s inequality conversation is such a farce

Tuesday, Mar 31, 2015
“It’s your own damn fault!” The upcoming campaign is supposedly going to be about inequality. Here's why it's just another plutocratic charade
Elias Isquith

As I’ve noted previously, one of the stranger recent developments in American politics has been the swift arrival of a bipartisan consensus over economic inequality. For years and years — decades, even — the left and the right have quarreled over inequality’s very existence. But now, worrying about the maldistribution of income and wealth in the U.S. is utterly mainstream. Noting the widening chasm between the 1 percent and everyone else has become so anodyne, in fact, that even would-be presidents like Hillary Clinton, Jeb Bush, Ted Cruz, Rand Paul and Marco Rubio are doing it. It’s enough to make a longtime class-warrior think she’s winning.

That would be a mistake. Because although the political value of inequality is different today than was the case before the Great Recession, it’s mainly been rhetoric — and not policy — that has changed. We may talk more than we once did about the rich are, as Fitzgerald wrote, “not like you and me.” So far, very little’s been done on the national level to explicitly confront the problem. On the contrary, the economic recovery has been so full of McJobs that there’s reason to suspect the issue may only get worse in years to come.

But if the U.S. economy is just as iniquitous as ever, and if the near-total gutting of campaign finance regulation has made the U.S. political economy almost as plutocratic as ever, then how do we explain the rise of inequality as a mainstream topic of conversation? If the 1 and .01 percent still wields such a massively disproportionate degree of influence over our culture as well as our politics, wouldn’t talk of class remain verboten? Shouldn’t the super-rich be telling voters and the public in general to pay no attention to the moneybags behind the curtain?

You might think so; but that would only be true if the wealthy’s control of American politics was more direct (and ham-handed) than it actually is. As Noam Chomsky has argued, the way the wealthy and the powerful operate in a formal democracy is significantly different from how they act in an illiberal society. The discourse has its regulators and gate-keepers, of course. But rather than outright censorship, the powers-that-be in the U.S. tend to head-off opposition by setting the parameters of the debate — and doing so in such a way as to ensure their interests are never really threatened.

Noam Scheiber’s New York Times piece on Monday shows us what that process looks like in the real world. What we see in his report is a donor class that’s acquiesced to inequality being a major 2016 issue, partially because they’ve succeeded so far in rendering any serious responses to the problem out of the question. As Scheiber notes, strong majorities of Americans — including Republicans— are in favor of the government taking action to address the crisis, with redistribution from the 1 percent to the rest being an especially popular response. Yet for all their talk of inequality and opportunity, none of the declared or soon-to-declare presidential candidates of consequence have provided even a general endorsement of such a plan.

Unsurprisingly, their hesitation is shared by one significant group — donors. Citing the invaluable work of Benjamin Page, Jason Seawright and Larry Bartels, Scheiber notes that although a majority of the wealthy Chicago-area persons these researchers interviewed professed concern over inequality, too, they were dramatically less interested in any public policy solutions. “Only 13 percent of wealthy interview subjects” want to see government work to address the problem, Scheiber writes. And only 17 percent are supportive of policies that involve raising taxes on the rich.

And it’s not just tax hikes that the wealthy are keeping off the table. While two-out-of-three Americans think the government should help citizens find a job, provided they’re willing and able, fewer than one-out-of-five of wealthy respondents agree. “Forty percent of the wealthy,” Scheiber writes, want the minimum wage to be high enough to support a family; among the general public, support for that idea nearly doubles, coming out at 78 percent. Perhaps even more telling, though, is the way the overall philosophy of the very rich permeates the public discourse at large.

For example: According to interviews with the wealthy conducted by Fiona Chin, a Northwestern graduate student whom Scheiber describes as a Page “protégé,” the 1 percent is much more likely to believe that inequality is a byproduct of virtue and hard work, rather than any flaws in the U.S.’s economic system. The wealthy, Chin says, think inequality is “a story about individual hard work, effort and character.” Sure, the rich have some built-in advantages, they say. But they’re disadvantaged too; being born with means, after all, can make you less inclined to work.

If you didn’t strike it rich in America, these 1 percenters told Chin, it’s most likely because you “didn’t take advantage of the education system.” That, of course, is a euphemistic way of saying it’s your own damn fault. And while Scheiber’s report doesn’t bring up this angle directly, it’s not hard to see how there might be a connection between the 1 percent’s focus on education and the burgeoning movement to “reform” public schooling. A grand experiment in charter schools is fine. But reducing inequality by giving money to the people who need it? Not okay.

So we may now hear Bush — or Cruz, or Rubio, or Paul — talk about “opportunity” gaps; and we may soon listen as Clinton rails against cutting hedge fund managers’ taxes. But given the constraints the 1 percent establishes upfront, you can expect that most of the ideas to come from Bush, Rubio and, eventually, Clinton will differ little from what they would’ve proposed in the years before the Great Recession. And until they stop trying to sell the same-old policies under an inequality-themed banner, the politics of the issue will not be appreciably different. We’ll merely have transitioned from denial to a charade.

Corporations ‘the cancer’ that are slowly killing American middle-class, ‘Wire’ creator David Simon

John Mulholland, The Observer
28 Sep 2014

The writer’s next show, Show Me a Hero, is the true story of a battle over public housing that convulsed New York in the 80s. Here, on location in Manhattan, he talks about how money corrupts US politics, the erosion of the working class, why it’s a crime to be poor in America – and why he likes to argue

At the end of a long day scouting locations for his new TV miniseries, David Simon is sitting in his Upper West Side office in New York describing the type of person who needn’t bother tuning in to his new show. He’s speaking as a TV writer but also as a citizen angered by a political system that he thinks fails many of his fellow countrymen.

“People who think we’re being well governed at the moment… well, there’s no reason for them to watch. People who look at the inertia of Washington, at the partisanship, at the divisive and polarised discourse… people who think that’s the way to build a just society, well, don’t watch the show, because I got nothin’ for you.”

If, on the other hand, “You’re starting to believe that even the vernacular we’re using to argue about solutions to problems is dysfunctional, watch this show because I think it’s a perfect metaphor for what the American government is no longer capable of doing – addressing problems in a utilitarian fashion for the good of most people. American politics has left the room when it comes to finding solutions for our problems.”

Show Me a Hero, which will appear on screens late next year or in spring 2016, is based on a non-fiction book of the same name by former New York Times writer Lisa Belkin. It marks the time, says Simon, when American politics left the room.

The 1999 book’s subtitle, “a tale of murder, suicide, race and redemption” hints at the drama involved. Belkin documents the story through a series of interviews with many of the principals involved. It’s a tale of political and personal destruction that convulsed Yonkers, a city of 200,000 people just 40 minutes’ drive north of Manhattan. At its heart was a row about public housing for low-income residents being built in a part of Yonkers almost exclusively reserved for the wealthy.

Show Me a Hero shows how the fallout engulfed the New York body politic and ultimately brought unwanted national attention to Yonkers. When the dispute was finally settled the New York Times noted how the bitter row “had opened an ugly chapter in the city’s history, tearing apart neighbourhoods, building and destroying political careers and unleashing a heated court battle that nearly drove Yonkers to bankruptcy”.

On a bright, sunny morning last week the Schlobohm housing project, in west Yonkers, the largest low-income public housing site in the city and one of the principal locations for Show Me a Hero, is quiet. Except, that is, for Simon, his director Paul Haggis and other crew members who are here to scrutinise backgrounds, visualise scenes and figure out what angle offers the best view of the Hudson river in the near distance. Schlobohm is one of half a dozen stops they will make as they crisscross the city to finalise locations before four months of filming, which starts this week.

As the crew sweeps through a communal space that doubles as a car park, they pass by a mural. Painted on the side of a low wall that circles the area are five words in large, childlike lettering. They add colour to an urban landscape dominated by the red brick of the low- and high-rises. Spaced about a metre apart, they read “Unity”, “Harmony”, “Peace”, “Pride”, “Safe”.

But when the FBI’s New York field office writes about Schlobohm, it uses a different set of words. One of the most recent entries on its website is headed: “Three charged in connection with December 2013 homicide”. It lays bare the cycle of violence that is visited on places such as this when it notes that the arrest of two dozen gang members two years before had paved the way for a rival to thrive in their absence.

“In late June and early July 2012, federal authorities arrested 20 members of the Strip Boyz on charges of narcotics distribution and/or firearm offences… the arrests of the Strip Boyz left GMF [rival gang the Grimy Motherfuckers] dominant in the Schlobohm housing project.”

If the FBI’s reports were reduced to five words they might read “Narcotics”, “Gangs”, “Murder”, “Shooting”, and “Trafficking”.

The story of Schlobohm to be told by David Simonstarts in 1980, when the local Yonkers branch of the National Association for the Advancement of Coloured People (NAACP), backed by the US justice department, sued the city of Yonkers. The lawsuit alleged that the city’s housing and school policies had, over a period of 40 years, purposely segregated black and Hispanic residents from its more affluent white neighbours. It claimed that Yonkers deliberately placed its poorer (non-white) residents in the west of the city, while the east side remained predominantly white.

In 1985, US federal court judge Leonard Sand ruled in favour of the NAACP and instructed Yonkers to build 200 units of public housing on the east side. That’s when the trouble started.

The six-part miniseries will follow what happened from 1987 to 1994 as local residents and politicians defied the court order in a series of increasingly vocal and public demonstrations that brought the issues of race, housing and deprivation in Yonkers on to the national agenda.

An ABC news report broadcast at the time gives a glimpse of how divisive the dispute was. It features one of the residents at a Save Yonkers meeting (a man named Jack Tracy) making his position clear: “I lived with blacks, I delivered newspapers to blacks, but I can’t live next to what the government has in these projects. If the government wants to put criminals and dope-pushers in the projects I can’t live next to them. The federal judge can find me guilty, the supreme court can find me guilty… but if they think they’re going to integrate with Jack Tracy and his family, they’re going to have to build projects 60 miles north, 80 miles north, they can build them in Maine or wherever they want but I will not live next to a project. And if it means going to Canada, or back to Ireland that is what I will do. That ain’t why I am living in this country.”

In the fury and noise that engulfed Yonkers’s east side, what Jack Tracy and others failed to hear was that the judge’s proposal was not for old style “projects” (ie large-scale, densely populated, high-rise public housing) but for 200 two-storey houses to be distributed in small groups across the east side.

Later in the morning, after we have left Schlobohm and passed on to the noticeably more affluent (and white) east side of Yonkers, Simon and his crew stop at another location. Simon points to a small row of innocuous two-storey houses on this pleasant, leafy street. He says: “Look. That’s them, those are some of the houses. That’s what Yonkers tore itself apart over. And you wouldn’t even know they were public housing.”

What attracted Simon to this story was not the issues of housing or race or deprivation but something more fundamental – the dysfunction of the American political system. The story, Simon says, is tailor-made for showing how US politics now runs on fear and money, two forces that are slowly corroding American society.

“What intrigued me about the story was that it’s an almost perfectly allegorical argument about how our political processes are no longer equipped to recognise or solve problems. You have this mid-size American city, Yonkers, that didn’t have terrifying racial dynamics before the controversy. It had problems like any city but there was no reason that fear should be such an effective currency in the political process. And yet fear and money are the only currencies in the American political process that get their due any more. Nothing makes people more stupid and foolish than money and fear.”

The effect was to split the city in half. The east side set about protecting the value of its homes, livelihoods, children and way of life from the perceived threat from the west side. Looking now at the small clusters of neat, low-rise homes that were eventually built on the east side, its difficult to understand why the fury reached such a pitch.

For Simon, the answer is clear. “Politicians can gain so much by invoking fear and because money is at the core of that fear and the people who are the most frightened were looking towards their real-estate values, the values of their neighbourhoods and what they might personally lose if the neighbourhood went south. Money and fear paralysed Yonkers politically, and caused untold damage to the city’s reputation.”

For Simon, the story of Yonkers is telling for another reason – its timing marks the period in American history when a consensus fractured. The social compact between capital and labour was starting to break. From the 1980s onwards capital won virtually all of its battles with the labour unions in America.

This is a point forcefully made by ex-Clinton labour secretary Robert Reich in his recent film, Inequality for All. He dates the busting of the labour unions and the rupture of the social compact to Ronald Reagan’s firing of 11,000 air traffic controllers in 1981. From then on, the idea that a market-driven society would mutually benefit those who held the capital and those who provided the labour was no longer in place, he says. For Simon, this is the point at which the shared community of interests that walked side by side as the American economy surged after the second world war came apart. The collective will that bound together communities, cities and, ultimately, America started to erode.

“What was required in Yonkers was to ask: ‘Are we all in this together or are we not all in this together?’ Is there a society or is there no society, because if there is no society, well, that’s the approach that says ‘Fuck ’em, I got mine’. And Yonkers coincides with the rise of ‘Fuck ’em I got mine’ in America.

“That’s the notion that the markets will solve everything. Leave me alone. I want maximum liberty, I want maximum freedom. Those words have such power in America. On the other hand ‘responsibility’ or ‘society’ or ‘community’ are words that are increasingly held in disfavour in the United States. And that’s a recipe for cooking up a second-rate society, one that does not engage with the notion of collective responsibility. We’re only as good a society as how we treat those who are most vulnerable and nobody’s more vulnerable than our poor. To be poor is not a crime, except in America.”

These are not new themes in Simon’s work. The Wire was a grand tour of the institutions that were failing Americans, from politics to journalism, and from education to the criminal justice system. It was also an indictment of how capital had decisively won its war against American labour, with enduring consequences for America’s working class. This is the issue that most exercises Simon.

In his long and brilliant introductory essay to the 2009 book The Wire: Truth Be Told (a collection of essays by people involved in the making of the series), Simon wrote: “The Wire depicts a world in which capital has triumphed completely, labour has been marginalised and moneyed interests have purchased enough political infrastructure to prevent reform. It is a world in which the rules and values of the free market and maximised profit have been mistaken for a social framework, a world where institutions themselves are paramount and everyday human beings matter less.

“Unemployed and under-employed, idle at a west Baltimore soup kitchen or dead-ended at some strip-mall cash register – these are the excess Americans. The economy staggers along without them, and without anyone in this society truly or sincerely regarding their desperation. Ex-steelworkers and ex-longshoremen, street dealers and street addicts, and an army of young men hired to chase and jail the dealers and addicts, whores and johns and men to run the whores and coerce the johns – and all of them unnecessary and apart from the new millennium economic model that long ago declared them irrelevant.

“This is the world of The Wire, the America left behind.”

But Simon acknowledges that this wider message may have been lost on some of those who watched the highly acclaimed series, set among the politicians, police, press and drug dealers of Baltimore.

“Sure, there’s people who watch The Wire and go ‘Man I love all these fuckin’ characters but I hate it when the politics comes on… I just want to see the badasses shoot each other.’ And it’s like yeah, well, OK, I get it, you know, I get it, but I didn’t leave journalism to write fuckin’ television for you because that’s just horrific.”

He expresses relief, and some amusement, that the cable channel HBO continues to commission his work in spite of the relatively low ratings his TV work attracts (The Wire, belatedly through word of mouth, drew in a healthy audience. Subsequent series, though highly acclaimed, including Generation Kill and Treme, fared less well).

He jokes about “getting a 2% share” of audience, but appears untroubled about how long his shelf life as a TV writer might be. “You got to commit to something. If you’re a writer you got to write something. You might as well believe in it.”

HBO seems to believe in it too. That much is clear the next day when Simon and co-writer Bill Zorzi (who has been working on Show Me a Hero, on and off, for 10 years) are the star attractions at a start of production meeting in HBO’s Manhattan headquarters. There are close to 50 people here, and another 10 are looped in on a screen from LA. Haggis jokes that “he’s never seen this many people in a room before”.

Before Simon addresses the room, senior HBO executive Kary Antholis steps forward to speak. One of the executives closest to Simon’s projects, he is wholehearted in his praise. “This project is among the most meaningful that David has ever done. In its reflections on race, politics and community, I think it will be a powerful story and will make an important contribution to this country’s social dialogue. It’s one of the great legacies of HBO that we make these contributions to our social dialogue… I believe that Treme lives in that legacy, so does Generation Kill, and The Wire. I am very proud and grateful that David is doing these series for HBO.”

When Simon speaks he emphasises why Show Me a Hero is so prescient. But he goes further too, in pointing out precisely what it is that has gummed up the US political machine. “The most dysfunctional part of the government is Congress, the most loathed institution in America (with approval ratings of 7%), but they are unrepentant about that. The reason to do this project is that it speaks exactly to what is wrong with our country. It happens that this story is about 200 houses that needed to be built, but substitute any other issue… immigration, budgetary issues, almost any foreign policy or environmental issue that requires any systematic action, or thought, and you see it. This is a country that can get nothing done.”

Simon argues forcefully that it’s the US Congress which smothers the body politic and destroys its capacity for action. Money has tilted the balance of power by inserting itself into the political system and now has the power to influence Congress – and the legislation that governs how society organises itself.

“You can buy congressmen so fast. Ideas have nothing to do with it. And that’s the part that’s broken. And that was the part that was broken in Yonkers.

“It has to change. When capital also is entitled to buy the government, that same government that might in some way create the basic standards of behaviour, everything from child labour to environmental protection, to workplace safety, to minimum wages that are consistent with the cost of living… Well eventually it’s going to get to the point where it’s so fuckin’ bad that people are going to throw a brick.”

Simon, at 54, is driven. Driven to write about the issues that exercise him. And driven to engage in intellectual combat. He relishes argument, and thrives on the mental exercise that debate provides. You get a strong sense that, left to his own devices and left all alone, it wouldn’t be long before he was picking a fight with himself. It’s a thirst for intellectual friction, and appetite for a dialectic, that drives all of his work. Plots, characters and narrative are all very well, but only in that they are part of a toolkit needed to construct an argument. Simon is never going to sit down and write a TV drama about people per se: his work will always be about something more elemental, more structural.

Writing in 2009 about the impulses that drove The Wire, he said: “The Wire had ambitions elsewhere. Character is essential for all good drama, and plotting is just as fundamental. But ultimately, the storytelling that speaks to our current condition, that grapples with the basic realities and contradictions of our immediate world – these are stories that, in the end, have some chance of presenting a social, and even political, argument. And to be honest, The Wire was not merely trying to tell a good story or two. We were very much trying to pick a fight.”

Simon has been picking fights since he was a young kid growing up in Washington. He learned his way around an argument at an early age while sitting at his family dinner table. It was how you gained your spurs (your “moxie”) in the Simon family: by holding your own in intellectual fisticuffs. “I lived in a house where argument was sport. Dinner discussions were about what was going on in the world. Not everybody was expected to agree, because then you couldn’t have a good argument, but if people didn’t agree, then you could have a good argument.”

Simon remembers the day he came of age intellectually. In his telling, it sounds like a duel, a rite-of-passage moment. “I was having an argument in my uncle Hank’s house in New York, and I would stake myself out against my father and two of my uncles. I must have been 17 and I just knew they were wrong. And I held them off to a draw for about an hour and a half in my uncle’s den. And I remember my uncle Hank turning to my father and saying, “Who knew he had a brain?” It was the biggest thing for my uncle Hank; it was how you earned moxie in my house.”

The web has given Simon another place to pick fights. Having lain dormant and then only been used for professional announcements, davidsimon.com has now become a place where Simon has, over the last few years, written occasional often coruscating posts on anything from the NSA to the policing of the Ferguson riots. Given time he will engage at length with some of those who post comments. The engagement is robust. He pushes, and is willing to be pushed, if he thinks contributors (and he himself) will learn, develop and mature their argument. It’s the family dinner table again.

When he was setting out what davidsimon.com would become, he wrote, with unerring honesty: “Those who know me understand that while it’s refreshing to meet people with no opinions, I’m not that fellow – I like to argue. I don’t like to argue personally, but rather I like pursuing a good ranging argument.”

Although limited by time and a work schedule that, alongside Show Me a Hero, sees Simon wrestling with three other development projects for HBO, including one about the New York sex industry in the 70s (not to mention a theatre project involving the songs of the Pogues), he still finds time for occasional posts. What he relishes is the opportunity to write in long-form and to develop an argument, see a thought grow, mature and ripen. “I guess what you’re hoping, the equivalent of what often resulted at my family’s dinner table, was that the argument goes somewhere, that it has legs. This is why you engage with people on ideas. At its best ideas can build, arguments can develop.”

The fight that David Simon has most often picked in recent years – and one he will address when he delivers the keynote talk at the Observer Ideas festival next month – is how the power of the market has trumped all other priorities in his country, and destroyed the values that brought America together.

“My conviction is that what made us great as an economic power was transforming our working class into a middle class and making them this economic engine that not only bought all the shit that they needed, but a lot of stuff they didn’t. By the middle of the century, or a little later, the American workforce had been launched into middle-class status and had discretionary income and the ability to construct a future that allowed the next generation to maintain that upward mobility and even advance further on it. That’s a pretty good dream. That’s more than a dream. But it’s no longer true. We’ve been disassembling that middle class slowly by degrees.”

For typical middle-class Americans, the squeeze is on. The certainties they had come to expect no longer exist. Late capitalism is unable to provide the generation-on-generation wealth advances that many had come to assume was normal. The new normal is something very different.

“Now you have an existing upper middle class or upper class that is politically powerful, quite moneyed and is larger than at any time. It’s not just the 1%, it’s the 10%, the 20% that have been carried higher up on the pyramid and who are in those industries that have caught the wave of the information age and for them the American dream seems uninterrupted. What they’re not noticing is that the people who used to be able to send their kids to college and hold down a mortgage on a factory wage or on a mid-level administrative [job] or on a civil servant’s salary, that they’re being crushed.”

Simon is not an outlier in his criticism of the American body politic or in his reflections on unfettered capitalism and the rise of inequality. What is marked is how many voices have joined this debate in the US.

For the last two years the New York Times has been running a series on inequality, curated by the venerable economist Joseph Stiglitz, entitled The Great Divide. It has featured contributions from academics, business people and politicians.

Stiglitz recently wrote about the fracturing of the same postwar consensus, and how it came about. “Corporate interests argued for getting rid of regulations, even when those regulations had done so much to protect and improve our environment, our safety, our health and the economy itself.

“But this ideology was hypocritical. The bankers, among the strongest advocates of laissez-faire economics, were only too willing to accept hundreds of billions of dollars from the government in the bailouts that have been a recurring feature of the global economy since the beginning of the Thatcher-Reagan era of ‘free’ markets and deregulation.

“The American political system is overrun by money. Economic inequality translates into political inequality, and political inequality yields increasing economic inequality.”

More recently, Robert Reich contributed an essay to Salon.com entitled “American democracy is diseased – how we can wrest back power from our corporate overlords”, in which he addresses the same issue. “We entered a vicious cycle in which political power became more concentrated in moneyed interests that used the power to their advantage – getting tax cuts, expanding tax loopholes, benefiting from corporate welfare and free-trade agreements, slicing safety nets, enacting anti-union legislation, and reducing public investments. These moves further concentrated economic gains at the top, while leaving out most of the rest of America.”

Simon is not sanguine about what it will take for corporate and political America (increasingly one and the same) to recognise that if the story continues in this vein it will not end well.

“I think in some ways the cancer is going to have to go a little higher. It’s going to start crawling up above the knee and people are going to have to start looking around and thinking ‘I thought I was exempt. I didn’t know they were coming for me’.

“It’s happened to the manufacturing class, it’s happened to the poor. Now it’s happening to reporters and schoolteachers and firefighters and cops and social workers and state employees and even certain levels of academics. And that’s new. That’s not the American dream.”

Simon reserves particular contempt for the forces in America that have helped strip labour of its dignity, who refuse to see the benefits, or necessity, of people collectively organising in order to protect their interest.

“Unions are part of the equation. They’re not the whole equation – the unions needed to lose as many battles as they won, but they needed to win some. And the demonisation of them has been an astonishing achievement of political disrepute in the west, and particularly in my country.”

Back in his Upper West Side office, Simon is now starting to seem fatigued by a long day of scouting locations, of being photographed, of being interviewed and, frankly, of being angry. It’s time to bring a close to the interview. But Simon’s sense of humour and self-deprecation is still very much intact.

When, at the very close of the conversation, he is asked how, or when, this TV career ends, he replies: “Well, I have enough to keep writing these miniseries nobody will watch for as long as HBO will allow nobody to watch them.” When it’s put to him that the story in development about New York’s sex industry is a sure winner, he retorts: “Just watch that one not get made either.”

In his 2009 introduction to The Wire: Truth Be Told, Simon concluded his essay by referring to The Wire as “an angry show, but that anger comes honestly”.

It’s difficult to think of a more fitting way to describe David Simon.

Why Can't the Unemployed Get Off Their Couches? And Eight Other Critical Questions for Americans

Tuesday, 03 June 2014
By Peter Van Buren, TomDispatch

Last year eight Americans -- the four Waltons of Walmart fame, the two Koch brothers, Bill Gates, and Warren Buffett -- made more money than 3.6 million American minimum-wage workers combined. The median pay for CEOs at America's large corporations rose to $10 million per year, while a typical chief executive now makes about 257 times the average worker's salary, up sharply from 181 times in 2009. Overall, 1% of Americans own more than a third of the country’s wealth.

As the United States slips from its status as the globe's number one economic power, small numbers of Americans continue to amass staggering amounts of wealth, while simultaneously inequality trends toward historic levels. At what appears to be a critical juncture in our history and the history of inequality in this country, here are nine questions we need to ask about who we are and what will become of us. Let's start with a French economist who has emerged as an important voice on what’s happening in America today.

1) What does Thomas Piketty have to do with the 99%?

French economist Thomas Piketty’s surprise bestseller, Capital in the Twenty-First Century, is an unlikely beach read, though it’s selling like one. A careful parsing of massive amounts of data distilled into “only” 700 pages, it outlines the economic basis for the 1%-99% divide in the United States. (Conservative critics, of course, disagree.)

Just in case you aren’t yet rock-bottom certain about the reality of that divide, here are some stats: the top 1% of Americans hold 35% of the nation's net worth; the bottom 80%, only 11% percent. The United States has such an unequal distribution of wealth that, in global rankings, it falls among the planet’s kleptocracies, not the developed nations that were once its peers. The mathematical measure of wealth-inequality is called "Gini," and the higher it is, the more extreme a nation's wealth-inequality. The Gini for the U.S. is 85; for Germany, 77; Canada, 72; and Bangladesh, 64. Nations more unequal than the U.S. include Kazakhstan at 86 and the Ukraine at 90. The African continent tips in at just under 85. Odd company for the self-proclaimed “indispensable nation.”

Piketty shows that such inequality is driven by two complementary forces. By owning more of everything (capital), rich people have a mechanism for getting ever richer than the rest of us, because the rate of return on investment is higher than the rate of economic growth. In other words, money made from investments grows faster than money made from wages. Piketty claims the wealth of the wealthiest Americans is rising at 6%-7% a year, more than three times as fast as the economy the rest of us live in.

At the same time, wages for middle and lower income Americans are sinking, driven by factors also largely under the control of the wealthy. These include the application of new technology to eliminate human jobs, the crushing of unions, and a decline in the inflation-adjusted minimum wage that more and more Americans depend on for survival.

The short version: A rising tide lifts all yachts.

 

2) So why don't the unemployed/underemployed simply find better jobs?

Another way of phrasing this question is: Why don't we just blame the poor for their plight? Mention unemployment or underemployment and someone will inevitably invoke the old "pull yourself up by your bootstraps" line. If workers don't like retail or minimum-wage jobs, or if they can't find good paying jobs in their area, why don’t they just move? Quit retail or quit Pittsburgh (Detroit, Cleveland, St. Louis) and...

Move to where to do what? Our country lost one-third of all decent factory jobs -- almost six million of them -- between 2000 and 2009, and wherever "there" is supposed to be, piles of people are already in line. In addition, many who lost their jobs don't have the means to move or a friend with a couch to sleep on when they get to Colorado. Some have lived for generations in the places where the jobs have disappeared. As for the jobs that are left, what do they pay? One out of four working Americans earn less than $10 per hour. At 25%, the U.S. has the highest percentage of low-wage workers in the developed world. (Canada and Great Britain have 20%, Japan under 15%, and France 11%.)

One in six men, 10.4 million Americans aged 25 to 64, the prime working years, don't have jobs at all, a portion of the male population that has almost tripled in the past four decades. They are neither all lazy nor all unskilled, and at present they await news of the uncharted places in the U.S. where those 10 million unfilled jobs are hidden.

Moving “there” to find better work isn't an option.

3) But aren't there small-scale versions of economic “rebirths” occurring all over America?

Travel through some of the old Rust Belt towns of this country and you’ll quickly notice that “economic rebirth” seems to mean repurposing buildings that once housed factories and shipping depots as bars and boutiques. Abandoned warehouses are now trendy restaurants; a former radiator factory is an artisanal coffee shop. In other words, in a place where a manufacturing plant once employed hundreds of skilled workers at union wages, a handful of part-timers are now serving tapas at minimum wage plus tips.

In Maryland, an ice cream plant that once employed 400 people with benefits and salaries pegged at around $40,000 a year closed its doors in 2012. Under a "rebirth" program, a smaller ice cream packer reopened the place with only 16 jobs at low wages and without benefits. The new operation had 1,600 applicants for those 16 jobs. The area around the ice cream plant once produced airplanes, pipe organs, and leather car seats. No more. There were roughly 14,000 factory jobs in the area in 2000; today, there are 8,000.

General Electric’s Appliance Park, in Louisville, Kentucky, employed 23,000 union workers at its peak in 1973. By 2011, the sputtering plant held onto only about 1,800 workers. What was left of the union there agreed to a two-tier wage scale, and today 70% of the jobs are on the lower tier -- at $13.50 an hour, almost $8 less than what the starting wage used to be. A full-time worker makes about $28,000 a year before taxes and deductions. The poverty line for a family of four in Kentucky is $23,000. Food stamp benefits are available to people who earn up to 130% of the poverty line, so a full-timer in Kentucky with a family still qualifies. Even if a worker moved to Kentucky and lucked out by landing a job at the plant, standing on your tiptoes with your lips just above sea level is not much of a step up.

Low paying jobs are not a rebirth. 

 

4) Can't people just get off their couches and get back to work?

There are 3.8 million Americans who have been out of work for 27 weeks or more. These are the country’s long-term unemployed, as defined by the Department of Labor. Statistically, the longer you are unemployed, the less likely it is that you'll ever find work again. Between 2008 and 2012, only 11% of those unemployed 15 months or more found a full-time job, and research shows that those who do find a job are less likely to retain it. Think of it as a snowball effect: more unemployment creates more unemployable people.

And how hard is it to land even a minimum-wage job? This year, the Ivy League college admissions acceptance rate was 8.9%. Last year, when Walmart opened its first store in Washington, D.C., there were more than 23,000 applications for 600 jobs, which resulted in an acceptance rate of 2.6%, making the big box store about twice as selective as Harvard and five times as choosy as Cornell.

Telling unemployed people to get off their couches (or out of the cars they live in or the shelters where they sleep) and get a job makes as much sense as telling them to go study at Harvard. 

 

5) Why can't former factory workers retrain into new jobs?

Janesville, Wisconsin, had the oldest General Motors car factory in America, one that candidate Obama visited in 2007 and insisted would be there for another 100 years. Two days before Christmas that year and just before Obama's inauguration, the plant closed forever, throwing 5,000 people out of work. This devastated the town, because you either worked in the plant or in a business that depended on people working in the plant. The new president and Congress quickly paid for a two-million-dollar Janesville retraining program, using state community colleges the way the government once used trade schools built to teach new immigrants the skills needed by that Janesville factory a century ago.

This time around, however, those who finished their retraining programs simply became trained unemployables rather than untrained ones. It turned out that having a certificate in “heating and ventilation” did not automatically lead to a job in the field. There were already plenty of people out there with such certificates, never mind actual college degrees. And those who did find work in some field saw their take-home pay drop by 36%. This, it seems, is increasingly typical in twenty-first-century America (though retraining programs have been little studied in recent years).

Manufacturing is dead and the future lies in a high-tech, information-based economy, some say. So why can't former factory workers be trained to do that? Maybe some percentage could, but the U.S. graduated 1,606,000 students with bachelor's degrees in 2014, many of whom already have such skills.

Bottom Line: Jobs create the need for training. Training does not create jobs. 

 

6) Should we cut public assistance and force people into the job market?

At some point in any discussion of jobs, someone will drop the nuclear option: cut federal and state benefits and do away with most public assistance. That'll motivate people to find jobs -- or starve. Unemployment money and food stamps (now called the Supplemental Nutrition Assistance Program, or SNAP) encourage people to be lazy. Why should tax dollars be used to give food to people who won't work for it? “If you’re able-bodied, you should be willing to work,” House Majority Leader Eric Cantor said discussing food stamp cuts.

The problem with such statements is 73% of those enrolled in the country’s major public benefits programs are, in fact, from working families -- just in jobs whose paychecks don’t cover life’s basic necessities. McDonald’s workers alone receive $1.2 billion in federal assistance per year.

Why do so many of the employed need food stamps? It’s not complicated. Workers in the minimum-wage economy often need them simply to survive. All in all, 47 million people get SNAP nationwide because without it they would go hungry.

In Ohio, where I did some of the research for my book Ghosts of Tom Joad, the state pays out benefits on the first of each month. Pay Day, Food Day, Mother’s Day, people call it. SNAP is distributed in the form of an Electronic Bank Transfer card, or EBT, which, recipients will tell you, stands for “Eat Better Tonight.” EBT-friendly stores open early and stay open late on the first of the month because most people are pretty hungry come the Day.

A single person with nothing to her name in the lower 48 states would qualify for no more than $189 a month in SNAP. If she works, her net monthly income is multiplied by .3, and the result is subtracted from the maximum allotment. Less than fifty bucks a week for food isn’t exactly luxury fare. Sure, she can skip a meal if she needs to, and she likely does. However, she may have kids; almost two-thirds of SNAP children live in single-parent households. Twenty percent or more of the child population in 37 states lived in “food insecure households” in 2011, with New Mexico (30.6%) and the District of Columbia (30%) topping the list. And it's not just kids. Households with disabled people account for 16% of SNAP benefits, while 9% go to households with senior citizens.

Almost 22% of American children under age 18 lived in poverty in 2012; for those under age five, it’s more than 25%. Almost 1 in 10 live in extreme poverty.

Our system is trending toward asking kids (and the disabled, and the elderly) to go to hell if they're hungry. Many are already there.

7) Why are Walmart and other businesses opposed to SNAP cuts?

Public benefits are now a huge part of the profits of certain major corporations. In a filing with the Securities and Exchange Commission, Walmart was oddly blunt about what SNAP cuts could do to its bottom line:

“Our business operations are subject to numerous risks, factors, and uncertainties, domestically and internationally, which are outside our control. These factors include... changes in the amount of payments made under the Supplemental Nutrition Assistance Plan and other public assistance plans, [and] changes in the eligibility requirements of public assistance plans.”

How much profit do such businesses make from public assistance? Short answer: big bucks. In one year, nine Walmart Supercenters in Massachusetts received more than $33 million in SNAP dollars -- more than four times the SNAP money spent at farmers' markets nationwide. In two years, Walmart received about half of the one billion dollars in SNAP expenditures in Oklahoma. Overall, 18% of all food benefits money is spent at Walmart.

Pepsi, Coke, and the grocery chain Kroger lobbied for food stamps, an indication of how much they rely on the money. The CEO of Kraft admitted that the mac n’ cheese maker opposed food stamp cuts because users were “a big part of our audience.” One-sixth of Kraft’s revenues come from food stamp purchases. Yum Brands, the operator of KFC, Taco Bell, and Pizza Hut, tried to convince lawmakers in several states to allow its restaurants to accept food stamps. Products eligible for SNAP purchases are supposed to be limited to “healthy foods.” Yet lobbying by the soda industry keeps sugary drinks on the approved list, while companies like Coke and Pepsi pull in four billion dollars a year in revenues from SNAP money.

Poverty is big business.

8) Should We Raise the Minimum Wage?

One important reason to raise the minimum wage to a living one is that people who can afford to feed themselves will not need food stamps paid for by taxpayers. Companies who profit off their workers' labor will be forced to pay a fair price for it, and not get by on taxpayer-subsidized low wages. Just as important, people who can afford to feed themselves earn not just money, but self-respect. The connection between working and taking care of yourself and your family has increasingly gone missing in America, creating a society that no longer believes in itself. Rock bottom is a poor foundation for building anything human.

But won't higher wages cause higher prices? The way taxpayers functionally subsidize companies paying low-wages to workers -- essentially ponying up the difference between what McDonald's and its ilk pay and what those workers need to live via SNAP and other benefits -- is a hidden cost squirreled away in plain sight. You're already paying higher prices via higher taxes; you just may not know it.

Even if taxes go down, won't companies pass on their costs? Maybe, but they are unlikely to be significant. For example, if McDonald’s doubled the salaries of its employees to a semi-livable $14.50 an hour, not only would most of them go off public benefits, but so would the company -- and yet a Big Mac would cost just 68 cents more. In general, only about 20% of the money you pay for a Big Mac goes to labor costs. At Walmart, increasing wages to $12 per hour would cost the company only about one percent of its annual sales.

Despite labor costs not being the most significant factor in the way low-wage businesses set their prices, one of the more common objections to raising the minimum wage is that companies, facing higher labor costs, will cut back on jobs. Don’t believe it.

The Los Angeles Economic Round Table concluded that raising the hourly minimum to $15 in that city would generate an additional $9.2 billion in annual sales and create more than 50,000 jobs. A Paychex/IHS survey, which looks at employment in small businesses, found that the state with the highest percentage of annual job growth was Washington, which also has the highest statewide minimum wage in the nation. The area with the highest percentage of annual job growth was San Francisco, the city with the highest minimum wage in the nation. Higher wages do not automatically lead to fewer jobs. Many large grocery chains, including Safeway and Kroger, are unionized and pay well-above-minimum wage. They compete as equals against their non-union rivals, despite the higher wages.

Will employers leave a state if it raises its minimum wage independent of a nationwide hike? Unlikely. Most minimum-wage employers are service businesses that are tied to where their customers are. People are not likely to drive across state lines for a burger. A report on businesses on the Washington-Idaho border at a time when Washington’s minimum wage was nearly three bucks higher than Idaho’s found that the ones in Washington were flourishing.

While some businesses could indeed decide to close or cut back if the minimum wage rose, the net macro gains would be significant. Even a small hike to $10.10 an hour would put some $24 billion a year into workers' hands to spend and lift 900,000 Americans above the poverty line. Consumer spending drives 70% of our economy. More money in the hands of consumers would likely increase the demand for goods and services, creating jobs.

Yes, raise the minimum wage. Double it or more. We can't afford not to.

9) Okay, after the minimum wage is raised, what else can we do?

To end such an article, it’s traditional to suggest reforms, changes, solutions. It is, in fact, especially American to assume that every problem has a "solution." So my instant suggestion: raise the minimum wage. Tomorrow. In a big way. And maybe appoint Thomas Piketty to the board of directors of Walmart.

But while higher wages are good, they are likely only to soften the blows still to come. What if the hyper-rich like being ever more hyper-rich and, with so many new ways to influence and control our political system and the economy, never plan to give up any of their advantages? What if they don't want to share, not even a little more, not when it comes to the minimum wage or anything else?

The striking trend lines of social and economic disparity that have developed over the last 50 years are clearly no accident; nor have disemboweled unions, a deindustrialized America, wages heading for the basement (with profits still on the rise), and the widest gap between rich and poor since the slavery era been the work of the invisible hand. It seems far more likely that a remarkably small but powerful crew wanted it that way, knowing that a nation of fast food workers isn’t heading for the barricades any time soon. Think of it all as a kind of “Game of Thrones” played out over many years. A super-wealthy few have succeeded in defeating all of their rivals -- unions, regulators, the media, honest politicians, environmentalists -- and now are free to do as they wish.

What most likely lies ahead is not a series of satisfying American-style solutions to the economic problems of the 99%, but a boiling frog’s journey into a form of twenty-first-century feudalism in which a wealthy and powerful few live well off the labors of a vast mass of the working poor.

Once upon a time, the original 99% percent, the serfs, worked for whatever their feudal lords allowed them to have. Now, Walmart “associates” do the same. Then, a few artisans lived slightly better, an economic step or two up the feudal ladder. Now, a technocratic class of programmers, teachers, and engineers with shrinking possibilities for upward mobility function similarly amid the declining middle class. Absent a change in America beyond my ability to imagine, that's likely to be my future -- and yours.

Back to the Dark Ages of Feudalism

The Crushing Force of Capitalism
by GILBERT MERCIER


History never repeats itself, but from time to time, consciously or not, some influential men attempt to force us into the monstrosity of their imaginary time machines to try to reverse decades, and in the case of feudalism, almost a millenium of social progress. The mid-20th century brought the years of collective psychosis of Adolf Hitler’s “thousand year Reich,” and more recently what can be viewed as the United States of America’s imperialist manifesto or so-called “Project for the New American Century”, concocted in 1997 but still in effect today under the current administration, with the self-proclaimed objective to “promote American global leadership” resolutely and by military force, if necessary.

Montesquieu and his colleagues of the mid-18th century, such as Voltaire, Diderot and Rousseau of the Age of Enlightenment, denounced feudalism as being a system exclusively dominated by aristocrats who possess all financial, political and social power. During that time, which incubated the French Revolution and built its ideological foundations, feudalism became synonymous with the French monarchy. To the Enlightenment writers, feudalism symbolized everything that was wrong with a system based on birth privilege, inequality and brutal exploitation. In August 1789, shortly after the takeover of La Bastille on July 14, one of the first action of the Assemblee Constituante was to proclaim the official abolition of the “feudal regime.”

Ironically, feudalism is making a comeback in the latest evolution and under the impulse of predatory global capitalism. After all, Karl Marx, in the mid-19th century, considered feudalism to be a precursor of capitalism. Typically a feudal system can be defined as a society with inherited social rank. In the Middle Ages, wealth came exclusively from agriculture: the aristocracy strictly assumed ownership of the land while the serfs provided the labor.

The feudal system of the Dark Ages was the social and economic exploitation of peasants by lords. This led to an economy always marked by poverty, sometimes famine, extreme exploitation and wide gaps between rich and poor. The feudal era relation of a serf to his lord is essentially identical to the relation of a so-called WalMart associate to a heir of the Walton family. If one looks objectively at the power stratum in the US circa 2013, and the one of, let’s say, France circa 1750, it is hard to ignore the startling similarity. For example, attendance at Ivy-League schools in the US is principally an inherited privilege; the same can be said for elected positions in Congress. The concept of dynasties rules, not personal merit.

A powerful network of oligarchs worldwide seems to be pursuing the objective to set back the social clock to before the era of Enlightenment so as to return us to the Dark Ages of lords and serfs: a new era of global slavery to benefit Wall Street’s “masters of the universe.” Compared to the Middle Ages, today’s servitude is more insidious: the International Monetary Fund (IMF), World Bank, and many private banks operate like mega drug dealers. The IMF and World Bank do so with countries, while the banks do so with individuals. Once Greece, Detroit or John Doe is addicted to its fix — loans in this case — the trick is done. After a while, money must be borrowed even to service the debt.

In a recent cynical opinion piece titled “Detroit, the New Greece”, New York Times columnist and Nobel-prize winning economist Paul Krugman reasoned more like a callous Wall Street operator than someone with the self-proclaimed humanist “conscience of a liberal” by casually calling Detroit a “victim of market forces.”

“Sometimes the losers from economic change are individuals whose skills have become redundant; sometimes they are companies serving a market niche that no longer exist; and sometimes they are whole cities that lose their place in the economic ecosystem,” writes Krugman, forgetting Greece in his laundry list of “innocent victim of these mysterious “market forces.” Krugman concludes his paragraph with: “Decline happens,” as if this is a physical phenomenon, like gravity or magnetism. Like most of the leading international economists, Krugman has adamantly supported the North America Free Trade Agreement (NAFTA) and the World Trade Organization (WTO). Detroit and Greece are not some sort of collateral damage of “market forces” in Krugman’s “decline happens” scenario. Detroit was demolished wholesale by NAFTA, and Greece was enticed to borrow money to join the EURO zone.

The IMF itself recently conceded that the policies it has implemented for Greece resulted in “notable failures.” The IMF failed to push for an immediate restructuring of Greece’s debt, but didn’t prevent money owed by the country before 2010 to private-sector creditors from being fully repaid at the onset of the fiscal crisis. Greece’s overall debt level remained the same, except it was now owned to the Euro-zone taxpayers and the IMF instead of banks and hedge funds. Both Greece and Detroit were targets of a predatory capitalism that sought to downgrade and then shut down all public sectors of an economy.

The “market forces” are not physical phenomena; they are the hyenas and vultures from Wall Street who dismantle and then feed on the carcasses of a city or country. Decline does not just happen; it is engineered by the corporate entities of global capitalism to maximize profit without regard for human costs. It is ultimately up to us, for the common good of human kind, to put wrenches into the well-oiled wheels of this global corporate machine that is breaking our backs by grinding and crushing our accomplishments of more than 250 years to return us to the servitude of feudalism.

The Great Economic Misdirection

Off With Their Heads, Redux

by ROB URIE

 

A central challenge for left critiques of capitalism as it exists today is the distance between the mythologies that craft understanding of the issues for the great majority and more probable explanations based on examination and analysis. The issues are that concentrated wealth is claims on social resources; that wealth ‘creation’ is an artifact of particular arrangement of social circumstances / relations and that wealth distribution is the social distribution of economic and political power. Concentrated wealth as it exists is hardly likely to distribute this power away from itself. And conspicuously missing is class-consciousness in any revolutionary sense amongst the poor and middle classes whose circumstances in the ‘developed’ West are in rapid decline. Taken together this is a formula for escalating consolidation of economic and political power against people who have little apparent understanding of the economic forces that are overtaking them. Were it not for the risk of growing political and economic dysfunction and its likely effects in social and environmental catastrophes— wars for resources to benefit the residual plutocracy, the inability to address global warming because doing so lowers corporate ‘profits’ and the increasing immiseration of a broadening swath of the socially dis-empowered, concern might rightly be considered effete.

For instance, a survey of public perceptions of wealth distribution undertaken by Michael Norton and Dan Ariely in 2011 found wide disparities between wealth distribution as it is perceived and as it actually is. Even that study grossly understated the concentration of income and wealth because the researchers were working with overly broad categories—quintiles, or fifths, of wealth distribution when the real concentration is at the very top. On the other side of public perceptions is the tiny group of very wealthy who see their wealth, even inherited wealth, as deserved, and who frame challenges to the idea that it is in psychological terms, as ‘envy.’ Adding to social misdirection is the mainstream economic frame that views concentrated ‘capital’ in some confused conflagration of money, quasi-money and things as the prerequisite to economic production. The predominant economic mythologies surrounding income and wealth distribution clearly work the service of the very rich.

Graph (1) above: Most people have no conception of how concentrated incomes and wealth are at the very top. When Norton and Ariely (link above) asked people what they believed this concentration to be respondents tended to underestimate concentration in the top 20%. Illustrated above is that even within the top 10% of incomes average executive compensation is so great that the average top incomes are barely visible. With the extremes illustrated in this graph as evidence, looking at the issue in quintiles, as Norton and Ariely did, obscures more than it illuminates. But this written, the authors found that even when viewed in quintiles there was broad objection to such concentrated incomes and wealth. One can only imagine responses if the issue were more precisely framed. Sources are the Federal Reserve Survey of Consumer Finances and Forbes. Units are in thousands of dollars.

Capitalist mythology has it that incomes and wealth are largely ‘earned.’ This myth unites the wages of the poor and middle classes in social understanding with those of the very wealthy in a hierarchy of justly differentiated outcomes—the incomes and wealth of hedge fund managers and corporate executives are perceived to be analogous to the paychecks received by truck drivers and service workers, only larger. In fact, through expression of social power in ‘public’ policies that decide which industries get subsidized and bailed out and through granting monopoly and cartel privileges to favored industries and industrialists, the incomes and wealth of the wealthy are not commensurate with the wages of labor in either type or scale. The contrived division of economic and political power that is a central precept of capitalist democracy serves to hide the role of concentrated wealth in crafting ‘political’ decisions that benefit the already wealthy. This is the central factor driving perceptions of political dysfunction in the West when the political system is working just as the plutocracy wishes it to work.

Graph (2) above: The growth of finance and the rise in financial asset prices has played a large role in inflating executive compensation. Captive Boards of Directors grant huge stock options to corporate executives who now earn hundreds of times more than their workers do. The mythology that the stock market reflects the ‘true’ value of companies ignores the role of the Federal government and the Federal Reserve in subsidizing corporate profits and in raising stock prices through monetary policies specifically designed to do so. Source: Forbes.

One reasonably well-known example of the public sources of corporate ‘profits’ is Wal-Mart, which is dependent upon government subsidies of both its customers and its employees. The heirs to the Wal-Mart ‘fortune’ are individually amongst the richest people in the world. Wal-Mart employees are the largest beneficiaries of Medicaid and food stamp expenditures in a number of states and the company has admitted (link above) that its sales and revenues are dependent on food stamp (SNAP– Supplemental Nutrition Assistance Program) payments to its customers. Another way of saying this is that many Wal-Mart employees couldn’t afford to work for the company if Federal and state governments weren’t subsidizing their paychecks and many of its customers couldn’t afford to shop at Wal-Mart if they didn’t receive food assistance. Left un-addressed is the use of coerced and / or sweatshop labor to manufacture the products Wal-Mart and the rest of ‘retail’ America sells. The use of overseas labor requires a subsidized global infrastructure for the transfer of resources, a standing army to assure repatriation of profits and the social means of coercing labor at ‘profitable’ wages. Historical examples of this latter tendency can be seen in U.S. military invasions throughout Central and South America and Haiti when the institution of higher minimum wages was threatened.

Graph (3) above: The pretense / premise of Western economics is that ‘we are all in this economy together.’ This was / is the improbable foundation that has kept variations on ‘trickle-down’ economics alive in economics departments across the West. Without apparent irony or much public comment is that executive compensation and the need for food assistance have risen in tandem since the 1980s. The need for food assistance is evidence of severe poverty. Not illustrated is the rapid increase in those living at half of the poverty level or less since financial asset prices and executive compensation began to ‘recover’ in 2009. Sources: U.S. Department of Agriculture and Forbes.

As can be seen in Graph (2) above, in addition to government bailouts, subsidies and protections that boost corporate profits, a rising stock market also contributes to inflated executive compensation. Many people believe / assume that the stock market is unaffected by ‘external’ factors and therefore reflects ‘true’ market values for company stock. In fact, in recent decades the ‘monetary’ policies of the Federal Reserve have been designed to inflate the values of financial assets.  Low interest rates affect the price of the borrowing (leverage) used to buy financial assets on margin and quantitative easing (QE) is the direct purchase of financial assets by the Federal Reserve. Interest rates intentionally kept low by former Fed Chair Alan Greenspan inflated the dot-com and housing bubbles and the policies of subsequent Fed Chairs Ben Bernanke and Janet Yellen have re-inflated financial asset prices since 2009. There is nothing ‘natural’ about these sequential bubbles. Through the role that rising stock prices play in inflating executive compensation and the salaries and bonuses of bankers and hedge fund managers a tiny group of connected insiders has been made wealthy beyond the conception of most people. And the low interest rate policies of the Federal Reserve can also be seen as a subsidy of corporate profits through lowering the borrowing costs of corporations.

Graph (4) above: There are multiple ways of valuing the stock market. Most of those in use today incorporate the extreme valuations of the dot-com bubble of the 1990s and 2000s thereby making recent valuations appear more typical than they really are. When compared to long term corporate earnings (CAPE—Cyclically Adjusted Price Earnings) ‘cycles’ over one-hundred and thirty-five years of stock market history today’s valuations are very far above typical valuation levels and are currently at levels only seen a few times before in history at bubble peaks. With executive compensation coming from bubble level stock market valuations corporate executives can try to claim that they’ve ‘earned’ their compensation. But the more plausible explanation is that the Federal Reserve and a financial system run amok are far more responsible for it. Source: Robert Shiller.

Graph (5) above: Part of the explanation that the Federal Reserve gives for policies favoring the rise in financial asset prices is the ‘wealth effect,’ the tendency for people to spend more because they feel richer when stock prices rise. While some statistical analyses suggest that this may be true, who benefits from rising stock markets are the people who own stocks. As is illustrated above, the richest twenty-percent of households own almost all of the stock market. Again, as with income distribution, the true concentration of ownership of financial assets is at the very top of the top ten percent. Federal Reserve policies to raise stock prices overwhelmingly benefit already wealthy households. As Graph (3) illustrates, the contention that everyone benefits from policies to make the rich richer faces the reality that extreme poverty is rising as the rich are being made richer.

The great misdirection of Western economics in recent decades is conflation of financial wealth with economic ‘value’ creation. Apparently left unconsidered by much of the ‘income inequality’ crowd is that were financial asset prices to implode, as they did in 2001 and again in 2008, some fair proportion of the mechanism of concentrated income and wealth distribution would implode with it. This goes far in explaining the complete devotion of the political and financial establishments to resurrecting banking and finance since 2008 while ignoring the plight of the vast majority on the other side of this system. Many of the homes of the housing boom and bust are still standing but under new ownership by the financiers who took them, the role of finance in economic production exists as facilitator and not as producer. The role of facilitator could come straight from Western governments through their ability to create and distribute fiat currency ‘out of thin air.’ That this wasn’t the route taken from 2008 forward illustrates the control that the existing plutocracy has over ‘political’ policies. The real tragedy is still underway— the incapacity for social and environmental reconciliation without major social upheaval. Anyone who doubts this should spend time with the flaccid hallucinations posed as economic ‘explanation’ coming from the banker ghettoes in New York and London.

8 Headlines the Mainstream Media Doesn’t Have the Balls to Print

Paul Buchheit
RINF Alternative News

The following are all relevant, fact-based issues, the “hard news” stories that the media has a responsibility to report. But the business-oriented press generally avoids them.

1. U.S. Wealth Up $34 Trillion Since Recession. 93% of You Got Almost None of It.

That’s an average of $100,000 for every American. But the people who already own most of the stocks took almost all of it. For them, the average gain was well over a million dollars — tax-free as long as they don’t cash it in. Details available here.

2. Eight Rich Americans Made More Than 3.6 Million Minimum Wage Workers

A recent report stated that no full-time minimum wage worker in the U.S. can afford a one-bedroom or two-bedroom rental at fair market rent. There are 3.6 million such workers, and their total (combined) 2013 earnings is less than the 2013 stock market gains of just eight Americans, all of whom take more than their share from society: the four Waltons, the two Kochs, Bill Gates, and Warren Buffett.

3. News Sources Speak for the 5%

It would be refreshing to read an honest editorial: “We dearly value the 5 to 7 percent of our readers who make a lot of money and believe that their growing riches are helping everyone else.”

Instead, the business media seems unable to differentiate between the top 5 percent and the rest of society. The Wall Street Journal exclaimed, “Middle-class Americans have more buying power than ever before,” and then went on to sputter: “What Recession?…The economy has bounced back from recession, unemployment has declined..”

The Chicago Tribune may be even further out of touch with its less privileged readers, asking them: “What’s so terrible about the infusion of so much money into the presidential campaign?”

4. TV News Dumbed Down for American Viewers

A 2009 survey by the European Journal of Communication compared the U.S. to Denmark, Finland, and the UK in the awareness and reporting of domestic vs. international news, and of ‘hard’ news (politics, public administration, the economy, science, technology) vs. ‘soft’ news (celebrities, human interest, sport and entertainment). 

The results:

• Americans [are] especially uninformed about international public affairs.
• American respondents also underperformed in relation to domestic-related hard news stories.
• American television reports much less international news than Finnish, Danish and British television;
• American television network newscasts also report much less hard news than Finnish and Danish television.

Surprisingly, the report states that “our sample of American newspapers was more oriented towards hard news than their counterparts in the European countries.” Too bad Americans are reading less newspapers.

5. News Execs among White Male Boomers Who Owe Trillions to Society

The hype about the “self-made man” is fantasy. In the early 1970s, we privileged white males were spirited out of college to waiting jobs in management and finance, technology was inventing new ways for us to make money, tax rates were about to tumble, and visions of bonuses and capital gains danced in our heads.

While we were in school the Defense Department had been preparing the Internet for Microsoft and Apple, the National Science Foundation was funding the Digital Library Initiativeresearch that would be adopted as the Google model, and the National Institute of Health was doing the early laboratory testing for companies like Merck and Pfizer. Government research labs and public universities trained thousands of chemists, physicists, chip designers, programmers, engineers, production line workers, market analysts, testers, troubleshooters, etc., etc.

All we created on our own was a disdainful attitude, like that of Steve Jobs: “We have always been shameless about stealing great ideas.”

6. Funding Plummets for Schools and Pensions as Corporations Stop Paying Taxes

Three separate studies have shown that corporations pay less than half of their required state taxes, which are the main source of K-12 educational funding and a significant part of pension funding. Most recently, the report ”The Disappearing Corporate Tax Base” found that the percentage of corporate profits paid as state income taxes has dropped from 7 percent in 1980 to about 3 percent today.

7. Companies Based in the U.S. Paying Most of their Taxes Overseas

Citigroup had 42% of its 2011-13 revenue in North America (almost all U.S.) and made $32 billion in profits, but received a U.S. current income tax benefit all three years.

Pfizer had 40% of its 2011-13 revenues and nearly half of its physical assets in the U.S., but declared almost $10 billion in U.S. losses to go along with nearly $50 billion in foreign profits.

In 2013 Exxon had about 43% of management, 36% of sales, 40% of long-lived assets, and 70-90% of its productive oil and gas wells in the U.S., yet only paid about 2 percent of its total income in U.S. income taxes, and most of that was something called a “theoretical” tax.

8. Restaurant Servers Go Without Raise for 30 Years

An evaluation by Michelle Chen showed that the minimum wage for tipped workers has been approximately $2 an hour since the 1980s. She also notes that about 40 percent of these workers are people of color, and about two-thirds are women.

Why Society Is More Unequal Than Ever

Sunday, March 9, 2014 by The Guardian

Five years after The Spirit Level, its authors argue that research backs up their views on the iniquity of inequality

by Richard Wilkinson and Kate Pickett

 

A lot has happened in the five years since we published our book, The Spirit Level. New Labour were still perhaps too relaxed about people becoming "filthy rich". And there was an assumption that inequality mattered only if it increased poverty, and that for most people "real" poverty was a thing of the past.

But so much has changed. In the aftermath of the financial crash and the emergence of Occupy, there has been a resurgence of interest in inequality. Around 80% of Britons now think the income gap is too large, and the message has been taken up by world leaders.

According to Barack Obama, income inequality is the "defining challenge of our times", while Pope Francis states that "inequality is the roots of social ills".

The unexpected success of The Spirit Level owes more to luck than judgment. Although serious non-fiction books rarely sell well, for a week or so we even outsold Jeremy Clarkson. We now feel a bit like the dog being wagged by its tail: in the past five years, we've given over 700 seminars and conference lectures. We've talked to academics, religious groups, thinktanks of both right and left, and to international agencies such as the UN, WHO, OECD, EU and ILO.

The truth is that human beings have deep-seated psychological responses to inequality and social hierarchy. The tendency to equate outward wealth with inner worth means that inequality colours our social perceptions. It invokes feelings of superiority and inferiority, dominance and subordination – which affect the way we relate to and treat each other.

As we looked at the data, it became clear that, as well as health and violence, almost all the problems that are more common at the bottom of the social ladder are more common in more unequal societies – including mental illness, drug addiction, obesity, loss of community life, imprisonment, unequal opportunities and poorer wellbeing for children. The effects of inequality are not confined to the poor. A growing body of research shows that inequality damages the social fabric of the whole society. When he found how far up the income scale the health effects of inequality went, Harvard professor Ichiro Kawachi, one of the foremost researchers in this field, described inequality as a social pollutant. The health and social problems we looked at are between twice and 10 times as common in more unequal societies. The differences are so large because inequality affects such a large proportion of the population.

To the political defenders of inequality, the idea that too much inequality was an obstacle to a better society was a monstrous suggestion. They accused us of conjuring up the evidence with smoke and mirrors.
But since our book, research confirming both the basic pattern and the social mechanisms has mushroomed. It's not just rich countries or US states where greater equality is beneficial, it is also important in poorer countries. Even the more equal provinces of China do better than the less equal ones.

Most important has been the rapid accumulation of evidence confirming the psychosocial processes through which inequality gets under the skin. When we were writing, evidence of causality often relied on psychological experiments that showed how extraordinarily sensitive people are to being looked down on and regarded as inferior.

They demonstrated that social relationships, insecurities about social status and how others see us have powerful effects on stress, cognitive performance and the emotions. Almost absent were studies explicitly linking income inequality to these psychological states in whole societies. But new studies have now filled that gap. That inequality damages family life is shown by higher rates of child abuse, and increased status competition is likely to explain the higher rates of bullying confirmed in schools in more unequal countries.
We showed that mental illnesses are more prevalent in more unequal societies: this has now been confirmed by more specific studies of depression and schizophrenia, as well as by evidence that your income ranking is a better predictor of developing illness than your absolute income.

Strengthening community life is hampered by the difficulty of breaking the ice between people, but greater inequality amplifies the impression that some people are worth so much more than others, making us all more anxious about how we are seen and judged. Some are so overcome by lack of confidence that social contact becomes an ordeal. Others try instead to enhance self-presentation and how they appear to others. US data also show that narcissism increased in line with inequality. The economic effects of inequality have also gained more attention. Research has shown that greater inequality leads to shorter spells of economic expansion and more frequent and severe boom-and-bust cycles that make economies more vulnerable to crisis. The International Monetary Fund suggests that reducing inequality and bolstering longer-term economic growth may be "two sides of the same coin". And development experts point out how inequality compromises poverty reduction.

Lastly, inequality is being taken up as an important environmental issue; because it drives status competition, it intensifies consumerism and adds to personal debt.

In Britain, one of the few signs of real progress are the fairness commissions set up by local government in many cities to recommend ways of reducing inequalities. Partly as a result, many local authorities and companies now pay the living wage. But the coalition government has failed to reverse the continuing tendency for the richest 1% to get richer faster than the rest of society. The Equality Trust calculates that the richest 100 people in Britain now have as much wealth as the poorest 30% of households. The top-to-bottom pay ratios of around 300:1 in the FTSE 100 companies is not diminishing.

It is hard to think of a more powerful way of telling people at the bottom that they are almost worthless than to pay them one-third of one percent of what the CEO in the same company gets. Politicians must recognise that reducing inequality is about improving the psychosocial wellbeing of the whole society.

Another Huge Wealth Grab by the Rich

Monday, January 20, 2014 by Common Dreams

by Paul Buchheit

 

It was shown in a recent report that the richest Americans have made millions from their stock holdings since the recession.

 It's getting worse. The facts are summarized here, and presented in greater detail at Us Against Greed.

1. Just 13 Americans Made More from Their Investments in 2013 than the Entire SNAP Budget

Some wealthy Americans like to refer to themselves as "makers," and food stamp recipients as "takers," even though most of the latter are children, the elderly, or low-wage workers. Many of the top 13 on the Forbes list did not make anything of significance in 2013. Yet by being heavily invested in the stock market they were able to take $80 billion among them, more than a year of food stamps for almost 50 million people.

2. The Richest 400 Took $300 Billion in 2013, Approximately the ENTIRE Safety Net
The total budget for SNAP, WIC (Women, Infants, children), Child Nutrition, Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families, and Housing is less than the $300 billion 'earned' by the Forbes 400.

3. The Richest 12,000 Families are Estimated to have Each Made $40 Million in the Past Year
The stock market grew by $4.7 trillion in 2013. The richest 1% owns about 38% of all stocks, or about $1.8 trillion of the 2013 gain.

At the lofty levels of the unimaginably rich, the takings of the .1% (120,000 households), and even moreso of the .01% (12,000 households), become progressively greater and greater for the very richest households (unlike their taxes). According to wealth data compiled by Kopczuk and Saez, each member of the elite .01% group owns about 40 times the wealth of an average member of the richest one percent. Assuming that this ratio holds for accumulated 2013 wealth, each of the 12,000 super-rich American families made about $40 million in just one year. This is not an unreasonable conclusion, in light of the average gain of $750 million for each member of the Forbes 400.

4. The Richest 400 Individuals Own More Than Three-Fifths of America
The richest 400 now own over $2 trillion among them, or about 2.8% of the country's wealth of $72 trillion. This is more than the holdings of three-fifths of America, or 72 million families.

Conclusion: The System Is Broken
The overall calculations reveal that, to the best approximation:

--The richest 400 individuals made an average of $750,000,000 each in 2013.
--The .01% (12,000 families) made about $40,000,000 each.
--The .1% (120,000 families) made about $3,600,000 each.
--The rest of the 1% (1,068,000 families) made over $830,000 each.
--The 2-5% (4,800,000 households) made about $300,000 each.
--The 6-10% (6,000,000 households) made about $95,000 each.
--The 11-20% (12,000,000 households) made about $39,000 each.
--The 21-40% (24,000,000 households) made about $13,000 each.
--The 41-60% (24,000,000 households) made about $4,000 each.
--The 61-80% (24,000,000 households) made about $333 each.
--The bottom 20% (24,000,000 households) made nothing.

Capitalism is supposed to provide everyone the opportunity to benefit from our country's productivity. But it hasn't worked that way for the past 35 years. Today only the people who already have money can increase their wealth. Congress doesn't seem to recognize, or doesn't care, that the system is horribly distorted in favor of a small group of people who need to do very little to take most of the wealth.