Too Damn Big Fails Us

Last week a federal court approved the $85.4 billion merger of AT&T and Time Warner over the objection of the US Justice Department which, in President Trump’s words, opposed the deal “because it’s too much concentration of power in the hands of too few.”  (New York Times, 6/13/18).  District Court Justice Richard Leon dismissed the government’s case out of hand, arguing they failed to prove the consolidation would result in reduced choices or increased prices for consumers; he also warned that an appeal would be fruitless and recommended against it.  Immediately following the decision Comcast launched a $65 billion challenge to take over 21st Century Fox, topping Disney’s previous offer.  Analysts believe a wave of consolidations will surely follow, further entrenching power and profit at the top of the corporate pyramid.

Judge Leon’s consumer benefit theory of antitrust, originally hatched by conservative  scholar and failed Supreme Court nominee Robert Bork, is legally and morally suspect.  First, it’s hard to know what the effects on choice and price to the consumer will be before the deal is consummated, and probably not for many years to come.  Is anyone happy with their cable bill?  Second, many economists believe that corporate consolidation, excess profits and power are a key cause of stagnant wage growth and rising economic inequality in recent decades, as well as loss of political power of ordinary voters v. highly funded special interests.  Hence, even if consumer choices remain plentiful and prices reasonable (a big IF), workers are hurt by their loss of bargaining power and voters by their reduced influence at the ballot box.  This should be cause for concern among all of us.

A recent article in The Economist (no liberal rag) entitled “Profits Too High: America Needs a Giant Dose of Competition confirms these facts.  It reports American Airlines, nearly bankrupt a decade ago, earned $24 billion in profits last year – the same as Google! – following consolidation of the airline industry into four major players.  A similar pattern exists in other major industries.  US companies have engaged in $trillions of mergers over the past decade, with many more expected to follow, as they sit on over $800 billion in idle cash before the recent tax cut bonanza.

The article concludes that US company profits are too high, that most firms “are more adept at siphoning off cash than creating wealth, and that this deepens inequality by dampening wages and raising consumer prices above a competitive level.  Concentrated economic power also stifles innovation and retards the growth and formation of small businesses.  According to David Leonhardt of the New York Times (6/18/18) large companies now employ the majority of US workers, reversing historical trends.  As a result, over 2/3 of Americans, across the political spectrum, believe the economy is “rigged” (remember that word?) in favor of huge corporations and against them.  Similar or greater numbers doubtless exist for the U.S. political system, hence the dueling populisms and strange outcome of the 2016 election.

Americans are feeling an increasing sense of powerlessness and insecurity over their personal lives, which produces anxiety, anger and the search for a strongman to restore order and a lost, largely mythical “golden age.”  We have been through this before, in the Populist, Progressive and New Deal periods.  We have been able to increase democracy and dampen inequality through a combination of political and economic reforms that are still within our grasp, should we resolutely reach for them.  Higher progressive taxes, especially on huge individual fortunes and concentrated industries, jobs and training programs and income supports for lower paid workers are the obvious place to start.

Needless to say, it won’t be easy or quick.  The sheer bigness of business and their stranglehold on our politics (corporate spending on lobbying has doubled over the past decade, but only represents a tiny fraction of their profits) complicates but doesn’t negate the task.   Remember it took a century after the Civil War for African Americans, who helped win it, to gain legal equality.  Hopefully it won’t take as long for a just, sane, equitable, human economy to emerge from the ashes of late 20th and 21st century plutocratic capitalism.  With faith, determination, solidarity and persistence, perhaps we too shall overcome our current predicament.

 

 

 

How Inequality Harms Societies

I highly recommend this Ted Talk by Richard Wilkinson, “How Inequality Harms Societies.”  It’s based on his 2011 book with Kate Pickett, The Spirit Level: Why Greater Equality Makes Societies Stronger (love that title!).  Wilkinson and Pickett public health experts and specialists in epidemiology.  They analyzed reams of statistics from the UN, World Bank and national databases on over 50 categories of physical and mental health and social well being.  The overall message is more equal developed societies (Japan, Denmark, Sweden, Netherlands) have higher life expectancy, less social problems and greater child well being than less equal societies (UK, Portugal, Singapore and USA).  Look for how the USA is the negative outlier in almost every example!

Note also how all data strongly correlates with degrees of in/equality in these nations, and NONE with simple GDP per capita or economic growth.  The USA, despite our riches, scores extremely low on ALL measures of well being, including social trust, mental illness and addiction, violence, incarceration, high school drop outs and social mobility.  Despite our reputation as the “land of opportunity,” the ability to move from one class to another is far higher in Western Europe than the USA.  Indeed, Wilkinson states, “If you want to live the American Dream, move to Denmark!”  Touche!

In conclusion, there are two paths to a more equal future.  First, the Japanese model, which begins with low inequality and less need for higher taxes and redistribution.  Second, the Swedish model, which starts with higher inequality and corrects it with higher progressive taxes and more redistribution.  The USA seems to fall into the second camp – higher progressive taxes, anyone?

 

The Kerner Commission Report Turns 50

Just finished re-reading an op ed, “The Unmet Promise of Equality,” in the New York Times on March 1.  It’s co-author is Fred Harris, the last surviving member of the Kerner Commission, tasked by President Johnson with examining the roots and suggesting reforms for the 1967 urban riots that afflicted Detroit, Newark and over 100 other cities.  Published on March 1, 1968, it began with the ominous warning, “Our nation is moving toward two societies, one black, one white -separate and unequal (moving toward?  What were the previous 300+ years of slavery and segregation about?).   LBJ, beleaguered by the Vietnam War, battered by domestic unrest and soon to abandon his reelection effort, largely ignored and shelved the report.  Yet it sold over two million copies, sparked some national debate and is fondly remembered by liberal historians and pundits.

The Commission concluded that “White society is deeply implicated in the ghetto,” which it created and maintained and called for “massive and sustained” investments in jobs and education to reduce poverty, inequality and prevent future riots.   Fifty years later, the authors find:

Re-segregation: The percentage of students in highly segregated (90% minority) schools declined by approximately 50% from 1968-88, then reverted to the mean following the ending of court mandated integration orders.  Today’s schools are as segregated or worse today than they were in 1968.   The biggest offenders are the Democratic states, led by New York (65% of black students in highly segregated schools), followed by Illinois (61%), Maryland (53%) and New Jersey (50%).  The most segregated region in the country is the Northeast (51%), followed by Mid West (43%), South and West (34% each).  So, it seems, in liberal “Blue” states, “Black Lives Matter,” so long as they don’t live and attend school in white neighborhoods!

Shocking Inequality: Since 1968, the number of Americans living in extreme poverty (less than 50% of the official poverty line) has increased substantially,  while the overall poverty rate remains basically unchanged.  The rich have grown much richer – the top 1% get 52% of all new income and controls over 80% of national wealth – a huge increase since 1968.  Black median household income is 60% of whites, but whites own 10 times more wealth.  CEO pay has exploded, from 24 times the average worker in 1968 to nearly 300 times today.

Mass Incarceration: Around 200,000 people were behind bars in federal, state and local facilities in 1968; today the number is 1.4 million, the highest incarceration rate in the world.  African Americans are jailed at a rate 7 times higher than whites, especially for drug offenses, though blacks and whites use and sell drugs at roughly the same rate.  The article states “Mass incarceration has become a new kind of housing policy for the poor” (and mentally ill).  Given the lack of affordable housing and subsidies for the poor (fewer than 1/5 of those eligible receive assistance) this is an understandable, though shockingly expensive and inefficient, alternative.

Do What Works: Harris and Curtis say we have learned much about what works and doesn’t in fighting poverty and inequality over the past 50 years, and could reach the Kerner Commission’s goals if only we had the political will (world’s rarest commodity) to  embrace its guiding ethos of “Everyone does better when everyone does better” (i.e. the common good) rather than the neoliberal creed, “You’re on your own” (individual selfishness).   A litany of liberal policy remedies follow: universal, single payer health coverage; significantly raising the minimum wage and EITC; strengthening labor unions and job training; actively pursuing racial integration (unclear how); fully funding public schools; housing subsidies for all eligible; enforce fair housing laws; community based policing and alternative sentencing for non violent crimes, among others.

A wonderful menu of New Deal/Great Society programs and, as a liberal Democrat, I endorse them all!  Yet we live in a country that inexplicably elected Donald Trump president, with a Republican majority in the House, Senate and two thirds of state legislatures.  None of this will fly in the current political climate, which I don’t expect to change radically in the foreseeable future (though one never knows).  We need an anti-poverty, pro equality plan that can appeal to large numbers across the political spectrum.  Does anyone have the slightest clue what that would look like?

 

 

Rising Inequality, Part 3

Having reviewed the shocking extent of economic inequality in our world (8 men have as much wealth as the bottom 3.6 billion people!) and the reasons it’s a problem (unjust, inefficient, undemocratic, unhealthy etc.) it’s time to examine some possible solutions.  Caveat emptor: conservatives will be enraged by these suggestions, which basically boil down to tax, regulate and redistribute – aka “big government.”  Well, what did you expect?  Conservative “neoliberal” economic policies (cut taxes on the wealthy and corporations, maximize shareholder value and CEO pay, freeze wages and kill labor unions etc.) are largely responsible for the vast increase in inequality since the late 1970s – my entire adult life.  In a world where a few rich men and large corporations control more resources than most countries, what force except democratic government can check and restrain the power of the plutocrats?

There are many steps toward creating a more “human economy,” based on the welfare of the bottom 99% of the world’s population, especially the majority poor.  They include, in no particular order:

  • Set concrete targets & guidelines to reduce inequality so that the top 10% receives no more than 40% of national income – a level a little higher than Western Europe (37%), but lower than USA/Canada (47%) and Brazil/India (55%).  Given the high residual inequality, this is hardly “socialism.”
  • Increase taxes on the wealthiest individuals and corporations and use the revenue to fully fund health, education and social programs designed to increase opportunity for all, especially the lower 50%.
  • Close tax loopholes and offshore tax havens, where the rich currently stash over $7 trillion in ill gotten gains, depriving the poor of desperately needed tax revenue for health, welfare and income support.  This will probably require an international tax agreement and a global tax body (like the World Trade Organization) to enforce.
  • Institute or increase wealth taxes (one of my favorite ideas), including property, inheritance, capital gains and levees on great fortunes (say over $10 million).  Redistribute the revenue to underpaid workers who produced the surplus in the first place, by providing a living (not minimum) wage for all workers, especially women, who are universally underpaid.
  • Redesign business models away from shareholder maximization and CEO excess to more worker oriented forms, such as cooperatives, employee ownership, fair trade and profit sharing.
  • Cap CEO pay at 20X that of an average worker.  Prohibit dividends, bonuses, stock buyouts and other giveaways to the rich until all workers receive a living wage, arrived at through democratic deliberation and expert analysis for that region.
  • Promote and protect labor unions and other civil society groups working to increase wages, improve working conditions and increase educational and occupational opportunities for the bottom 80% of the population.

Quite a list, and it’s only partial.  Of course all these suggestions will meet with hysterical resistance from the monied and corporate elite and their shills in both political parties.  We currently have one major party (Republican) whose bedrock belief is redistribution from the middle and working classes to the top 10% – witness the current “tax reform” fiasco, 80% of which benefits the wealthy and corporations rather than the “forgotten Americans” Trump hoodwinked into voting for him.  The Democratic party seems focused on preserving existing programs and regaining power, without a coherent vision of a more just society.  The Sanders wing offers some hope, but hasn’t been able to cohere into an organized, pragmatic force with reasonable plans that don’t bankrupt the Treasury more than our current, irresponsible fiscal course.

Public opinion is on our side, if weakly.  The Oxfam survey in Post #1 indicates that 2/3 to 3/4 of people worldwide believe inequality is too high and an urgent problem that governments should directly address.   Yet very few people organize around or vote on these issues, believing (with much justification) they have little chance to be addressed in a stacked game rigged by the elites for their benefit.  In our political system an intense minority can easily thwart a lukewarm majority – witness the NRA’s stranglehold on gun legislation, despite the mass shootings that occur with shocking regularity.  The vast majority of Americans support universal background checks and eliminating the sale of military assault weapons, but do these prevail?  Nooooooo!

The key seems to be in mobilizing an active, intense minority that pushes for a more fair, just and sane economy.  This is tough because there is no single, identifiable group (like women, gays, African Americans etc.) who can claim special suffering from economic inequality, with an intense group interest in reversing it.  People will fight mightily to advance the rights and interests of themselves and their groups.  Mobilizing the masses around the “common good” is a much harder affair.

Efforts must be made, in education and organizing, to tie people’s economic plight directly to inequality and demonstrate concretely how they’d be better off under a fairer distribution.  A real social movement must emerge – with leaders and specific policy demands – to demand these changes.  It must go well beyond the adolescent rebellion of the Occupy movement, which lacked plan and purpose.  It’s a tall order and seemingly thankless task, though invaluable for the health and well being of our people and planet in the long run.  I have little to lose and nothing better to do, so I’m willing to take a shot.  Will anyone join and help me, or is there someone I should join and help?

 

 

 

 

 

 

Rising Inequality, Part 2: Why it’s a Problem

So inequality is alive, well and growing worse, approaching or exceeding the levels of the Gilded Age at the turn of the century – what’s the problem?  Hasn’t inequality, as Jesus says of the poor in the Gospels, always been with us?  Even if inequality is rising, haven’t the lives of the poor and middle class been improving as well?  Doesn’t “a rising tide lift all boats” and don’t the rich deserve their “success,” as the creators of wealth and jobs?

In a word, “no.”  Rising inequality is problematic, even deadly, on several levels.  It is:

Immoral & Unjust: Catholic social teaching and all mainstream religion is grounded on the principle of the basic dignity and worth of each individual, created equal in the eyes of God.  This is affirmed in secular form by our Declaration of Independence.  If the Creator intends equality, our gross inequality amounts to heresy and extreme social sin.  By what right should a US CEO earn more in a day than his average worker earns in a year?  Why should a Bangladeshi garment factory owner make more in a week than his typical worker gets in a lifetime?  By what moral logic or ethical principle is this justified?

Undemocratic & Oppressive:  Concentrated economic power is easily converted to political influence through lobbying, campaign contributions, bribes and influence peddling.  It is no accident that, over a year into the Trump presidency, the only major piece of legislation to pass Congress is a tax “reform” that drastically cuts rates on corporations and wealthy individuals.  Polls continually show widespread distrust of our political institutions, a sense that “the game is rigged” against average citizens by wealthy special interests.  This leads to further disengagement from the system and lower civic engagement, ceding the public sphere to the fortunate few.  As former Supreme Court Justice Louis Brandeis well said, “We can have democracy in this country, or we can have great wealth concentrated in the hands of the few; we can’t have both.”

Unpopular & Resented: The Oxfam report cites a survey of 70,000 citizens in ten representative countries that reveals over 3/4 of respondents agree/strongly that economic inequality is a serious problem in their countries that should be “urgently” addressed by their governments.  Most people vastly underestimate the degree of inequality in their society and, when asked, express a desire for levels far lower than exist anywhere in the world.  Today, February 21, is the anniversary of The Communist Manifesto by Marx & Engels, written in response to the mass inequality of the early Industrial Revolution in Europe.  It eventually sparked revolutions that established communist-oriented governments in nearly half the world by 1950.  Gross inequality has been the source of most violent revolutions throughout history.

Unearned & Untaxed:  Economic incentives to study and work hard, take risks and make investments are justified when they are proportional to the effort exerted and the benefits rendered.  Yet no one can plausibly argue that the few should live in limitless luxury while the world’s majority survives on less than $10 a day (with 800 million under $2 per day).   Moreover, much of this wealth is not earned in any meaningful sense.  Oxfam estimates that 2/3 of great fortunes are the product of inheritance, monopoly control and political cronyism.  To add insult to injury, the super rich then engage in widespread tax avoidance schemes, shielding some $7.6 trillion worldwide from national governments, as the recent Panama and Paradise Papers scandals have shown.  This is an unpatriotic theft of education, health care and social services from the poorer citizens of the very societies that privileged them.

Economically Inefficient & Wasteful: The recent World Inequality Report shows the top 1% captured 27% of total global income (and over 80% of wealth) from 1980 – 2016.  The top 10% got 42%, while the bottom 50% received just 12 cents of each extra dollar.  Under this level of inequality, the global economy would have to grow to 175 times its present level to lift everyone in the world above $5 a day!  This is not only absurd but impossible, as the biosphere would collapse long before then.   

Unhealthy & Deadly: According to Dr. David Ansell in The Death Gap: How Inequality Kills (2017), residents of the poor Chicago neighborhood where he works live 20 fewer years, on average, than those of a wealthy area one mile down the road.  Michael Marmott, in The Health Gap: Challenge of an Unequal World (2015), finds the same 20 year differential in cites worldwide, while David Johnston (Divided: The Perils of our Growing Inequality, 2014), cites a recent Harvard study that links 1/3 of all US deaths to a rising inequality, which “kills through structural violence.”  He notes that, despite comprising 42% of all global health spending (with only 4.5% of world population!), “Americans die younger than people in all other rich nations.”  Imagine the outcomes in a country like India, with 1.3 billion souls (800 million desperately poor) and no national health program to speak of.  Pope Francis was regrettably right: “inequality (quite literally) kills.”

Postscript: Having reviewed the recent rise in inequality and the reasons it’s a problem, I will move to some possible solutions.  I warn those of a conservative bent they may make you unhappy.  All involve increased taxation of the wealthy and redistribution (I know how you hate that word!) of resources to the lower classes.  How could it be otherwise?  I know of no “free market” solution to  rising inequality – how can you cure the disease with the cause?  Yet perhaps, like inoculating  a vaccine with a dose of the germ, we can find a way to harness the growth potential of the markets without the horrible maldistribution of rewards in our current system.  In fact, if we adhered to Adam Smith’s vision of early capitalism, based on free competition among many small enterprises, we might already be there.

 

 

 

 

 

 

 

 

 

As Martin Luther King Jr. said, “injustice anywhere is a threat to justice everywhere

 

Oxfam Documents the Extent of the Problem

According to the new Oxfam report, “Reward Work, Not Wealth,” economic inequality is alive, well and growing worse worldwide.  These reports are published annually in January, just prior to the World Economic Forum in Davos, Switzerland, in the vain hope of positively impacting the plutocrats, elites and political lackeys there gathered.   It never seems to matter much.  “It is hard to find a political or business leader these days who is not saying they are worried about inequality,” the report chastises.  “Yet actions, not words, are what count, and here most of our leaders are lacking.  Indeed, many are active promoting policies that increase inequality” (like the recent Republican tax cut, which mainly benefits rich individuals and large corporations).  Some high (neigh, low) lights of the report include:

  • More new billionaires were minted in 2017 than any year in history.  There are now over 2000 worldwide, with another created every two days.  9/10 are men.
  • In the last year their wealth increased by $762 billion.  This is enough to end extreme poverty worldwide 7 times over!
  • 82% of all growth in global wealth was captured by the top 1%, while the bottom 50% received exactly nothing, though their labor was the source of most of it.
  • 42 individuals worldwide own as much wealth as the bottom half of the globe – 3.7 billion souls.
  • The richest 1% own as much wealth as the whole rest of humanity.
  • The 3 richest people in the USA (Bill Gates, Warren Buffet and ?) have as much wealth as the bottom 50% of the population (160,000,000 people).

Inequality, of course, is as old as civilization itself, dating to the dawn of agriculture, when man first learned to accumulate and differentially distribute a surplus.  It thrives in a range of societies, from authoritarian to “democratic” capitalism, anywhere vast differentials of power and influence are allowed to reign unchecked.  It has dramatically worsened over my adult lifetime under the pressures of globalization, automation, the financialization of the economy and neoliberal policies designed to shower the rich with tax cuts in the hope that a few drops will “trickle down” to the masses.

I’ve been helplessly watching this for forty years, talking, thinking, teaching, stewing, grousing, gnashing my teeth, annoying those around me, most of whom couldn’t care less or couldn’t conceive of anything different.    Like Howard Beale in the 1970s movie Network, “I’m mad as hell and I’m not going to take it anymore!”  Will you join me?  Future posts will explore how.

PS: I am aware of and saddened by allegations of misbehavior by Oxfam field staff and a cover up by leadership.  This does not, in my view, negate all the good work done by this fine organization over the decades or cast doubt of the validity of the analysis in their report.