Photo Credit: shutterstock.com
September 12, 2013
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Warning: This story is going to make you very angry.
New research
from inequality experts Thomas Piketty and Emmanuel Saez has revealed
that we now have the biggest gap between the rich and rest of America
since economists began tracking data a century ago.
This
isn’t supposed to happen following an economic crisis. After the Great
Depression, Roosevelt’s New Deal programs worked to prevent wealth from
piling back up at the top. And over the past two decades, the percentage
of income claimed by the wealthy dropped after each recession. But in
the aftermath of the Great Recession, the top 1 percent has gobbled up
nearly all of the income gains in the first three years of the
“recovery" — a stupifying 95 percent. Economic inequality is even worse
than it was before the crash. In fact, last year the rich took home the
largest share of income since 1917 with the exception of only one year:
1928.
Is this an accident?
Let's take a
look at the years from 2009 -2012. While working people were sweating
it, the richest Americans have enjoyed a fabulous ride. For example, if
you were in the top 1 percent in 2012, lucky you — your income soared on
average by 20 percent
.And if you were in the top 0.01 percent,
you probably bought a bigger yacht because your income was up by more
than 32 percent on average
. As for everybody else? They shared a measly 1 percent rise.
In other words, the rich are getting richer, and the rest of us are frozen in economic purgatory.
For
despite all the talk of the Federal Reserve’s “quantitative easing”
driving soaring stock markets and a post-crisis economic boom, 99
percenters have seen their real incomes going down and their living
standards depressed. Ordinary, hard-working people are not getting a
slice of the pie, they're barely getting a sliver. (Cue Obama’s apparent
pick for the next Federal Reserve chair, the crony capitalist,
bank-loving Larry Summers.)
The bailouts, which handed boatloads
of money to bankers, can’t be blamed entirely on President Obama. But
ever since then, the policies of his administration have pretty much
fixed things so that those who caused the crisis have benefited, while
those who didn’t paid for it. He has surrounded himself with Wall Street
apologists as economic advisors, despite the existence of extraordinary
economic minds like Nobel laureate Joseph Stiglitz who could offer
sound and sensible guidance. Every chance Obama has to correct this
mistake, he seems to double down and brings on another 1 percenter.
To
be fair, Republicans have been the most ardent promoters of
“trickle-down” economics and austerity policies that leave regular
people behind. But centrist Democrats have done little to forge a
different path. A few courageous progressive voices, like Elizabeth
Warren's, get drowned out by a chorus of “Let’s Make a Deal” politicians
eager to screw the bulk of the population and reward the rich while
filling their campaign coffers. Policies like cutting our social
insurance programs and allowing the rich to evade taxes are hidden
behind clever marketing campaigns: For hedge fund billionaire Pete
Peterson, for example, who counts deficit committee co-chairs Alan
Simpson and Erskine Bowles as his errand boys, the name of the game is
“fixing the debt.”
What these plutocrats are really doing is
fixing your financial future so that more money can be sucked out of
your pockets to line theirs. Obama’s decision to focus on deficit
reduction rather than job creation is the sure sign his administration
sings the tune of the wealthy. The wealthy wanted deficit reduction,
while the rest of us wanted investment in jobs, schools and
infrastructure, as Northwestern University’s Benjamin Page and his team
of social scientists have
shown in their extensive research on public opinon. But we didn’t get it. Instead we got job insecurity and nightmare retirement prospects.
Making the rich richer is a terrible idea.
Making
the rich richer is a terrible idea for several reasons. For one thing,
it kills jobs. When regular people have money in their pockets to pay
for things like food, clothing, or going to the movies, they are
actually creating jobs. The taco stand can hire another cashier when
people come in to spend their money on tacos.
But there are only
so many tacos you can buy. If you have much more money than you can
possibly spend, you’ll likely sock it away or invest in financial assets
or start doing risky speculation, which doesn’t create any jobs. With
banks deleveraging (cutting back on loans) and many companies fearful of
borrowing given anemic rates of economic growth, your savings won’t be
recycled. Even if you’re a rich person who builds a company, chances are
you’re not creating very good jobs, and you’re also destroying plenty
of them. High unemployment makes it easy to hold wages down and squeeze
more and more work from desperate workers. Apple executives like to
brag about all the American jobs they create, but a great many of them are
crappy retail jobs featuring $26,000 salaries and little chance of a long-term career.
An economist might say that the economic return to capitalists has gone up at the expense of economic return to labor.
As Nick Hanauer, founder of Second Avenue Partners,
told Bloomberg:
“I
can say with confidence that rich people don’t create jobs, nor do
businesses, large or small. What does lead to more employment is the
feedback loop between customers and businesses. And only consumers can
set in motion a virtuous cycle that allows companies to survive and
thrive and business owners to hire. An ordinary middle-class consumer is
far more of a job creator than I ever have been or ever will be.”
You
can see the truth of Hanauer’s statement when you realize that while
the concentration of wealth in America has been heating up for the last
couple of decades, the job market has been pretty bleak. That’s what
happens when Washington policy becomes “Who Wants to Help a
Millionaire?”
If making the rich richer is destructive, why do we
do it? We’re not supposed to be a country of aristocrats and peasants
who labor at the pleasure of the wealthy. We’re supposed to be free and
proud citizens whose labor, investment and idea drive the economy.
What’s
happened is that the rich have been using the fairy tale of “rugged
individualism” and our healthy skepticism of too much government to
convince many of us that we shouldn’t have programs designed to promote
economic equality and benefit ordinary people rather than the rich. And,
of course, they’ve unleashed their bankrolls in Washington, where,
since Newt Gingrich came on the scene, Congress has turned into what
political economist Thomas Ferguson
describes in the Financial Times
as a “Best Buy system” where positions of power go to whoever can raise
the most cash. “Uniquely among legislatures in the developed world, US
congressional parties now post prices for key slots in the lawmaking
process,” writes Ferguson. “The practice makes cash flow the basic
determinant of the very structure of lawmaking.”
The rich are
getting richer in that they control our legal and political systems.
They aren’t going to give up this control voluntarily.
If we
continue on this path of functional feudalism, we can look to history
for hints as to what might happen. In the late 18th century, peasants in
France expressed their anger at the brutes who were extracting their
wealth by rounding them up in the Place de la Concorde and separating
their heads from their bodies. Hopefully we can go a more peaceful
route, joining forces in a mass movement that pushes our elected
officials to get our economy and society back into balance through fair
taxes, a robust social safety net, investment in working people, rules
of the road that curb Wall Street’s excesses, and a plan to bring the
financial sector back to a manageable size.
The Occupy movement
was a hint that this might be possible. It was also a warning that the
Powers That Be will do everything they can to shut such a movement down.
But if we maintain the current path, at some point, the 99 percent will be pushed too far.
Lynn Parramore is an
AlterNet senior editor. She is cofounder of Recessionwire, founding
editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt
in Nineteenth-Century Literary Culture.' She received her Ph.d in
English and Cultural Theory from NYU, where she has taught essay writing
and semiotics. She is the Director of AlterNet's New Economic Dialogue
Project. Follow her on Twitter @LynnParramore.
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