This post, and its accompanying fact sheet, are part of a presentation on economic inequality presented at the Cedar Valley Unitarian Universalists on April 12, 2015.
Please take a look at the fact sheet before reading the rest of the post.
FACT SHEET----ECONOMIC INEQUALITY IN
AMERICA.
1. Can inequality be quantified, or
defined objectively? Yes. The Gini Index does this. In 1912, an
Italian economist named Corrado Gini devised an index which integrates the
income data from an entire country into a single number, the Gini Index. If all of the income in a country went
to a single individual, the country would have an index equal to 1. If all income were divided perfectly
evenly, the country would have an index equal to 0. So all Gini indices fall between 0 and 1. (The higher the number, the more
inequality.) Since 1912, economists worldwide have used the Gini Index.
2. What is the U.S. Gini Index, and how
does this compare to other countries?
In 1985, the U.S. Gini Index was .419. Across Europe at that time, the index ranged from .200
to .300. Historically, at least
since WWII, income distribution in
Europe has been radically more equal than in the U.S.
3. Where do
Gini numbers come from? The
U.S. Census Bureau computes and publishes Gini Index numbers for the U.S. as a
whole, and for each Congressional District.
4. How has
the U.S. Gini Index changed through time? In 1968, the U.S. index was .386, the lowest ever
recorded. By 1975, it was .397. By 1985, it was .419. Today, it's .476.
To look at it
another way, in 2012, the top 1% got 23% of all income. This is the same percentage as in
1928---just before the start of the Great Depression. In case you were wondering why Wall Street investors
would care about inequality--now you know.
All Gini Index
numbers quoted here are from an article in the March 16 issue of The New
Yorker by Jill Lepore, entitled "Richer and Poorer." In this article she reviews three
recent books, including Robert Putnam's Our Kids: The American Dream in Crisis.
TAKING SIDES IN THE CLASS WAR........by Albert Browne
Last
summer, the Unitarian Universalist General Assembly ( the UU GA) chose"
Escalating Inequality" as its National Study and Action Issue. Yet the UU GA is not the
only voice speaking out on this subject. In the last few years, The International Monetary Fund,
(the IMF) has been saying that the main thing holding back the economic
recovery, worldwide, is economic
inequality in the US. The Pope also
talks about inequality, and President Obama had made remediation of inequality the centerpiece of his second
term, until world events pushed it onto a back burner. Keep in mind that the IMF is a syndicate
of international banking interests.
No one ever accused them of being a friend of working people
anywhere. Yet even they are
worried about inequality. They think if this problem remains
unchecked, it could bring down the whole Western economic system. Several editorials have been printed in
the Wall Street Journal
sharing that concern. What are the odds that the Pope, the IMF, and the UU GA would all
agree on something? Yet they are all concerned about inequality.
How
did we ever get to this level of inequality? Well, it is the predictable result of a 40 year class
war. Do we really have
a class war? Warren Buffet
says, "Yes, there is a class war---and unfortunately, my side is
winning." But before I try to persuade you of a moral
obligation to fight growing inequality
by doing something, I would like to examine the question of whether there is
any action you could take that would make a difference. If not, then you probably have no obligation
to do anything at all. We have all
spent most of our adult lives hearing that any attempt improve the lives of
those who are less successful is bound to fail, or would just make things
worse. Or we've heard that taxing billionaires to fund
benefits for the general public is counter-productive, because billionaires are the "job
creators," or because the confiscation of wealth through taxation might undermine the
incentive for investors to take risks.
We are told that even though our human instincts might spur us to help
others, we should resist this urge because it just makes things worse. We are told that the only thing society
can really do that helps is to repeal
taxation and regulation, and get government out of the way, so the "magic of the
market" can do its work. Well, since the meltdown of 2008, our
most recent experience with "the magic of the market," you might
wonder how anyone could still believe this stuff, but a lot of people do, and they
are not all uneducated or ignorant people. We are so immersed in this kind of "free-market
cheerleading" that most people accept it without ever examining why. Whether you call it "trickle
down" economics, or "supply side" economics, it's all the same
idea, and it's been around for a long time. The idea is actually based on the
theories of two Eighteenth Century economists; Adam Smith, who wrote the Wealth of Nations, and Jean-Baptist Say,
who gave us "Say's Law." People like to quote
Adam Smith, though most have not actually read Smith, and would not much
like what they saw if they ever did. But it's Say's Law that all reactionary
economic schemes really depend on.
This idea gets resurrected about once every generation, and the reason
it always has believers is that some of its defenders always have impressive
credentials. Milton
Friedman, after all, was a Nobel laureate. Winning the Nobel Prize in Economics in 1976 made him the High-Priest of
Money, and his acolytes soon took
over the economics departments of many of our best colleges So if you have been influenced by
these ideas, and all of us have, then I should take the few minutes required to
demonstrate that Say's Law is all complete and utter nonsense before I try to
discuss how we might discharge our moral and ethical obligations to the
economic losers our society systematically creates. If you harbor even the
slightest doubt that attempts to improve the human condition have a good chance
of working, then my job should be to purge that doubt. Otherwise, when you get involved in a progressive
project, your heart will never be in it, because your head will be telling you
that it can't work.
Nobel Prize winning economists Paul Krugman, who writes for
the New York Times and Joseph Steiglitz,
former President of the IMF, disagree strongly with supply side economics. In fact, if they were all alive today,
you could fill a couple rooms with Nobel Prize winning economists who totally dismissed
supply side economics.
But
the economist who explains most clearly why supply side economics doesn't work,
is the late John Kenneth Galbraith.
Galbraith was economic advisor for four U.S. Presidents: Roosevelt, Truman, Kennedy and Johnson,
though he broke with the Johnson Administration in the mid 60s over the Viet
Nam War. Amazingly, every administration
he worked for saw an increase in the American standard of living for as many years
as he was part of the team. When
not advising presidents, he was a tenured professor at Harvard, and he wrote
over 30 books. When I was in
College, Galbraith was required reading in every economics class, and is still considered
the foremost authority on the causes of The Great Depression.
Galbraith
says that in 1930, you could not be
hired by any economics department in the country if you did not accept Say's
Law. But by 1935, you could not be hired if you did
accept it. Say's Law
basically says that production creates its own demand. That there could never be a glut, that
is, more goods on the market than purchasing power to buy it, because
production creates its own purchasing power. If Say's Law is true, then there is no need for government
to intervene in the economy to shore up demand, because demand is always there.
Since demand can take care of itself, then everything can be left to the market,
and there is no need for the government to become involved in the economy at
all. Yet one of Say's Law's corollaries
is that there can never be a depression. There might be a brief downturn, but
not a real depression. But by
1935, we had a real depression, and we'd had it for five years.
To
understand what happened, we need to look at what a depression is and how it
happens. Marx, writing in the
mid-nineteenth century, says that the culprit is profit. If a factory makes
something that sells for 100 bucks, and if the total wage paid to the
production workers, truckers, retail clerks, and all the other people who make
the sale possible adds up to 100 bucks, there is no problem. Every time another unit is dumped on
the market, another hundred
dollars of wages is also poured into the market, and there is enough buying power
to buy that unit. But if there is
a profit, even a small one, therein lies the seeds of a depression. According to Marx, if there is a 5%
profit, and that profit is hoarded rather than spent or re-invested, then only
95% of the production can be purchased, and the other 5% remains unsold. But
over the years, unsold things accumulate, and eventually stores stop re-ordering,
and factories lay off. And since
every lay off further decreases the aggregate purchasing power, the number of
laid off workers increases exponentially, and we have a depression. Marx was not the first to observe
this. These ideas had been around a while, and sixty years before Marx, Jean
Say had written a rebuttal. Why
does the IMF say that inequality produces a sluggish economy? Put simply, the reason is that if all
excess cash is concentrated into very few hands, then working people don't buy
much because they don't have the money, and the very rich don't spend a very
high percentage of what they have because they no longer need anything, nor
could anyone consume that much anyway. So when the IMF says that inequality is
holding back the recovery, they
are really saying that Marx was right, but I'm sure they don't like to put it
that way. But Say tells us that
profits do not get hoarded--they are deposited in banks, and banks always loan them out. Someone always borrows these monies and spends them-- on something.
One way or another, all of the
money is spent, so there can't ever be a depression.
Galbraith
explains how there can be a depression. Obama has been criticized for saving the banks
first. But FDR did the same
thing. The economy cannot
operate without the free flow of borrowing and lending. But Galbraith says that after FDR's
first year, money was available to
any credit-worthy costumer, at low interest rates---but there was little
borrowing or lending. And the
depression continued for another 7 years. Why?
Suppose you owned a
factory, and your warehouse was stacked to the ceiling with unsold merchandise,
and half your workers were laid off. Would you be likely pick that moment to go into debt
to build another factory? If you
owned a chain of stores and half of them were boarded up, would you take on debt to build more
stores? When the economy is
sluggish, not all of the money gets
loaned out and spent----some of
it just sits there. American
corporations are now sitting on a huge hoard of cash---over a trillion
dollars. They aren't likely to
spend it until the economy improves, and the economy is not likely to improve
until they spend it. We had
the same situation in the 30's, and the man who figured out how to solve it was
John Maynard Keynes. Adam Smith had believed that if the market was completely
unencumbered by government, it would produce a paradise for everyone. He was wrong. When Marx lived in England, the country
had espoused the principles of Adam Smith for half a century. Marx saw children sold to factories by
their desperate parents, locked inside factories for 15 hours a day, and
starved or whipped if they couldn't work fast enough. To Marx, this did not
look much like paradise.
Marx believed that if the government
confiscated all facilities of production--then--there would be a paradise. He was wrong too. When Barbara Ehrenreich
was asked why the Communist experiment failed, she said, "Because--people are no damn good." I suppose humanity is a flawed
species. Some would blame it on
original sin, but I'm not sure I agree.
When I commit sins, they are not usually all that original.
Keynes said that there is no need for
government to own or control production, but he accepted that governments must
set rules, especially for the financial sector. And there must be other rules: a minimum wage,
maximum hours, safety standards, child labor laws, anti-trust laws, laws guaranteeing the right to belong to a union, and laws
regulating foreign trade. But Keynes felt that government had a function that
went beyond simple rule setting.
In his 1935 classic, The General Theory of Employment, Interest, and
Money, he explained that the
government must also carefully monitor the economy and ensure that at any point
in time, the aggregate purchasing power is precisely equal to the quantity of
goods for sale. Too many dollars chasing too few goods
results in inflation, too few dollars results in depression. Government continually adjusts this
balance through its role as the country's largest consumer. Government can add dollars to the
economy by deliberately running a deficit--by putting more dollars into the
economy through spending than it takes out in taxes. It can subtract dollars by running a surplus, and taxing
more than it spends. This
deliberate use of fiscal policy is now called Keynesianism.
All of the post war boom, in every county that had a boom, was run on
this principle. It appealed to all
political parties because it spared them the embarrassment of taking sides in a
class war. When John Kennedy said,
"A rising tide lifts all boats," he was telling the truth. Back then, if an administration could bring
about a 3% growth in real GDP, everyone ended up with 3% more of everything.
But in the 1970s, we saw the beginnings
of a class war, and its main tools
were union-busting and globalization.
So after 40 years of shipping jobs to third world countries,
de-regulation, and union-busting, we have a situation where 95% of any increase in GDP is skimmed
off at the top. Harold Meyerson, writing in the July/Aug 2014 issue of the
American Prospect Magazine, points out that from 1947 to 1972, productivity rose
97%, and compensation rose by nearly the same amount. The reason was that we had powerful unions then. When
workers noticed that their employer had a huge gain in productivity due to
their own efficiency and sweat, they were in a position to demand a share of
it. But today it doesn't work that
way. The Obama Administration spent nearly a trillion dollars to stimulate the
economy, and it worked. We did not slide into the great depression everyone
thought was coming. But Meyerson
says that 95% of the income growth since then has accrued to the wealthiest
1%.
I
said that the tools of class warfare were globalization and union-busting. But
globalization itself is used as a tool of union-busting. Suppose that a few years after
NAFTA was passed, a large manufacturing company approaches its union and says,
" Why don't we have a two-tier wage, and pay all new hires half of what
you guys are making. (Assume that in this case, the company is not some
struggling loser that is hanging on by its fingernails. It is highly profitable
because its union work force has made it that way.) The union replies, "Why would we ever agree to
that? Wouldn't we be selling out our kids?" The company explains: We have already moved one department to
Mexico. If you do not agree, we
will move the rest of the plant, and your kids will have no jobs at all. So-- they agree. This scenario was played out over and
over in every industrial city in
the country. It happened right here in Waterloo. People are still mad at Bill Clinton for telling us that
NAFTA would bring 100,000 jobs into the US, without mentioning that it would
cause 400,000 jobs to leave the country, for a net loss of 300,000 jobs. But losing 300,000 jobs is
nothing. The real problem is not
the jobs that actually left the country---it's the 10 million jobs that were
converted from high paying jobs to low paying jobs under the threat of being moved out of the
country. That's what NAFTA was all about.
Organized labor tried to warn America about this, but nobody listened.
Today, both the benefit of productivity
growth and of government spending mostly flows to the top. So political parties no longer have the
luxury of avoiding class confrontation if they wish to deliver economic
security to the 99%, since this
can now be done only at the expense of the 1%. Not all billionaires would resist this. Warren Buffet says, "The trouble
with this country is that rich people like me don't pay enough taxes." Bill Gates is giving his money away,
and George Soros backs liberal causes all the time. But most billionaires would rather spend a dollar on
electoral propaganda than pay a dime in taxes. So any politician who isn't willing to stand toe to toe with
the richest, most powerful people in the country should stop trying to pretend
he's going to change anything.
Some
years ago, a group of physicians in a poor neighborhood in New York organized a
citizens' group to force slum landlords to improve housing standards,
especially, to get rid of the rats.
When the doctors were interviewed on TV, they were asked why they got
involved. One doctor answered,
"For years we were treating children with rat bites. Finally, one day, one of us asked,
"Instead of just treating the rat bites, why don't we do something about
the rats?"
Most
of the social action we UUs engage in involves treating the effects of the
class war. We donate to the food
bank. This is a good thing to
do---I do it myself, and I plan to keep doing it. Yet the institutions we
support only treat the symptoms of the class war. Sooner or later, we are going
to have join the ranks and fight that class war and win it. UUs, as a group, have always been
activists in progressive causes.
Go to any meeting of progressive activists and you will see a few UUs in
the room.
We are fighting, but we have not yet
won, and now we are playing against a stacked deck, especially after Citizens
United. Not only do we fight
against unlimited corporate campaign money, we face voter suppression and
gerrymandering. Consider the
requirement for a photo ID.
The only Photo ID they usually accept is a driver's license. Now who would be affected by this
requirement? Old people who do not see well enough to drive. People who live in urban centers, where
cars are not practical. Poor people, who cannot afford a car, and also women. Why women? Most driver's licenses are issued for 4 years. If a woman has been married,
divorced, or widowed in that time, she may be living under a different name
than appears on her driver's license.
Guess what? The state of
Texas does not plan to let her vote. Up to 400,000
women may be turned away from the polls in the US for this reason. Why
don't they want women to vote?
Women tend to be moderates or liberals---they won't usually back some
tea party ultra-conservative. So
if that's who you're planning to run, you have to suppress the female
vote. And the effect of
gerrymandering can't be overlooked. Far more voters in America voted for a
Democrat for Congress than for a Republican in the last election, yet the
Republicans control the House.
This is mostly due to deliberate gerrymandering, though we liberals
sometimes voluntarily gerrymander ourselves by moving away from battleground
states like Iowa, where our votes
make a difference, to solidly blue states where they don't. But though it's an unfair fight, we
have to fight anyway, and we have to teach our children to fight---because it
won't be won in our lifetime.
So,
if we are to join the battle in the class war, where can we begin? I have given this a great deal of
thought, and I believe that if you were to do only one thing, the thing that
would make the most difference would be to support labor unions---all of them---even
if you don't belong to one.
Ask yourself this: When did we ever have much equality in this country,
and where did it come from? In the
50s and 60s, we had quite a bit of equality, and opportunity for working class
Americans. And most of it came out
of the labor movement. The
"good union job," the
chance to work under a union contract and earn a good wage, is what built the
American middle class. The 40 hour week, the minimum wage, and unemployment
compensation all came out of the labor movement. It's true that the Democratic Party passed these things into
law, but only after the labor movement pushed them into doing it, and only
after labor votes got them elected in the first place.
Big
business will always have massive power and influence. But back when there was such a
thing as Big Labor, it provided a counterbalance to that influence. Can you
think of anything that will provide such a counterbalance if organized labor
ever disappears? I can't. And
without your support, the labor movement could easily disappear in your
lifetime. But won't the labor
movement die anyway? Aren't labor
unions dinosaurs---outdated and irrelevant institutions?
This is what big business would like you to believe, but nothing could
be further from the truth. Canada has an economy very similar to ours, and the
labor movement there is doing just fine. What's the difference? Different labor laws.
The
Taft-Hartley Law, passed by a Republican congress over Harry Truman's veto, was
mainly an anti-labor law. But it did provide, at least on paper, a guarantee
that any group of workers could have a union if they wanted one. But its enforcement mechanisms
were weak, and difficult to enforce.
And by now the anti-labor lawyers and conservative courts have had 65
years to find ways to circumvent even the meager protections which the law did
provide. Polls have consistently
shown that about 87 % of non-union workers would prefer to work under a union
contract if given a choice. But
big business makes sure they're never given a choice. Most union organizers won't even begin
an organizing campaign unless they have signed cards requesting union
representation from 80% of the work force. But in the end, most organizing campaigns fail.
If
you would like to see how this works, read Thomas Geohagan's book, Which
Side Are You On?
Geohagen was a labor lawyer for 40 years. He explains the tactics used by union-busting lawyers
to thwart organizing campaigns. If
you were an anti-union employer whose business was targeted for organization,
you could call one of these people, and they would promise that they could,
absolutely, keep the union out of your plant---for a price. The game plan is this: When the NLRB informs you that a
clear majority of your work force has requested union representation, you
demand a vote. This in itself can
cause a delay of over six months. But just before the election date comes due,
you pick a quarrel with some aspect of the election, and demand another
delay. You object that the janitors
were included in the proposed bargaining unit, or that they were not included,
or that the security guards were included, or whatever. It doesn't matter what you object
to---you just object to something.
And when the re-scheduled election date comes due, you object to
something else. By using
such stalling tactics, an election can be delayed for three or four years. What do you do with that
time? You begin
systematically firing any worker you suspect of having pro-union sympathies,
always pretending that they were fired for something else. And you continue to barrage your
workers with anti-union propaganda.
That's the game plan. After
a few years, after you are sure that half the workers who wanted a union are
gone, you allow the election and it fails.
After
hearing this plan, the employer might ask, "Isn't that illegal?" The
union-buster replies, "Of course it's illegal. You do it anyway---and you get caught and pay the fine. And you keep on doing it and keep on
paying the fines. You accept the
fines as a cost of doing business, and your plant stays non-union." The lawyer goes
on: " The law clearly
requires you to allow the workers to have a union if they want one. If you want to obey the law, fine. Sign a union contract. But you didn't bring me here to
show you how to obey the law---you asked me to show you how to keep the union
out of your company---and I did."
The
unions are not on a level playing field,
but we can change that. How
do we help? There are the usual
ways: we can respect picket
lines, we can write letters to the editor, we can obtain from the union hall a
list of union-made products and make an attempt to buy union when
possible. When there is a
prolonged labor dispute, you can get on the union's web site and see if there
is a place for donation to the strike fund or to the legal defense fund. Every little bit helps. But what you can really do is
help politically. Back
candidates who support organized labor, and vote against those who don't. So-- how do we know who supports
labor? They all say they do. Well, you don't ask the candidate
if he is friendly to labor---you ask labor. State labor organizations know exactly
who our friends are. They
keep records on how politicians vote on all important issues.
But
when I say we should support labor-friendly candidates, I don't just mean vote
for them, I mean support
them. In any winnable
race, make a personal commitment
to do whaever you can to see that they win. Contribute whatever money you can afford to the campaign, and
contribute your time. Man
phone banks, knock on doors, write letters to editors---make the winning of that
campaign your personal contribution towards a building better world.
We
didn't ask for this class war, and we didn't start it. And the right wing billionaires who did
start it were certainly under no obligation to do so. At the beginning of the Reagan administration,
the New Deal had been a matter of settled law for two generations, and had been
accepted by eight consecutive presidents, including three Republicans. Nonetheless, we now have a class war,
and we've had it for forty years----and I suggest that we'd better win it.
