Monday, October 20, 2014

ECONOMIC INEQUALITY: THE POLITICAL DIMENSION

  By Ronald T. Fox  


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"We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both." 
                     Louis Brandeis

Is social inequality an inherent feature of free-market capitalism and if so is this necessarily a bad thing? Ideological liberals tend to think so. Most conservatives strongly disagree. To them inequality is a natural result of what happens in a free society where citizens possess vastly different levels of intelligence, education, talent, work ethics and personal drive. Soaring incomes at the top are seen as a just reward for initiatives taken and services rendered, like job creation. The investors of capital produce economic growth which provides economic opportunities for all. As the economy grows, all incomes will rise and an expanding middle class will enjoy a greater share of the national wealth.   

It would be great if this is how things really worked, but as is abundantly clear to most, save those living in the splendid insulation great wealth provides, the America of today presents quite a different picture. Social inequality in the United States is souring, reaching proportions not seen since the Gilded Age. The return on capital has increased much faster than economic growth and incomes have not only failed to rise, they’ve actually declined over the last couple of decades (median middle-class household income peaked at $56,080 in 1999 and it stands at roughly $50,017 now). This development finds average Americans struggling to grab a share of the American Dream. It also finds them increasingly marginalized in our political system. The wealth that has been accumulating at the top of our social strata has generated wide political inequality that is threatening the very foundation of our democratic system. It has turned America into a plutocracy.  

Extreme inequality is harming American society in many ways. I’ve written about some in previous posts (see: Does Economic Inequality Matter?  Economic Inequality and the Failure of ElitesEconomic Inequality and the Cheating Cultureand The Collapse of American Journalism and the Growth of Institutional Corruption). This essay will focus on the political dimension of economic inequality.


First a proviso: I believe social inequality is indeed inherent in free-market capitalism. It can reach extreme proportions when the return on capital exceeds the rate of growth and the state is either unwilling or unable to check the rising inequality tide. As wealth accumulates at the top, so does the political power of the super-rich.  Such is the situation we face in the United States.  It’s shameful that our political system has not risen to the challenges inequality presents.  

The connection between market capitalism and inequality has recently been historically validated by Thomas Piketty in his seminal book, Capital in the Twenty-First Century. Piketty’s main point about inequality is that as long as the rate of return on capital exceeds the rate of growth, the income and wealth of the rich will grow faster than income from work. The net result will be growing income inequality. As he puts it, an “apparently small gap between the return on capital and the rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamic of social inequality.” The recent spike in inequality in America, with the lion’s share of income growth residing with the top one percent (really the top .1 percent), best represents the predicted dynamic of Piketty’s thesis.   

Predictably progressives have been strongly supportive of Piketty’s work; conservatives, as expected, have been harshly critical. As is their bent, the conservative response has been mostly about name-calling, with a sprinkling of challenges to the validity of his data. They claim Piketty is a Marxist, as is anyone it seems who considers income and wealth inequality important issues. Such attacks allow them to avoid addressing Piketty’s main point that capitalism generates inequality and that extreme inequality is harmful to the social good. But inequality is an important issue, deserving of far more discussion than has occurred in the United States and a far more forthright response by the American Government.   

But this hasn’t happened. In the past our government has taken measures to ensure that the benefits of economic growth are fairly shared, or at least that the harmful effects of social inequality are mitigated. This time, however, the current spike in social inequality in America has been met with only a tepid response from our governing institutions, the Democratic Party, and even from struggling working people who have not shared in the striking rise in the nation’s wealth.

Simply put, our political system has been rendered impotent by the powerful sway of interested money in our politics. New research by Martin Gilens and Benjamin Page, who examined 1779 national policy outcomes over a period of twenty years, confirmed the obvious: “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”   

Inequality II
The result has been a plutocratic political system that responds overwhelmingly to the power of money, bestowed most lavishly by big corporations and a small number of extremely wealthy individuals, like the billionaire Koch brothers. The super-rich have demonstrated they will go to almost any length to advance their financial interests.  They don’t always get everything they want in a positive sense, but they have little trouble thwarting or watering-down government initiatives they find threatening.

Money has always spoken loudly in American politics, but perhaps never so much as today with the proliferation of so many avenues for money-backed influence peddling. Money now influences what we think about government, political issues, and even about each other. In the political arena, it largely determines who runs for office, what they advocate, who wins, and what happens after an election. The political money-giving season never ends.  

The insatiable thirst for cash to run today’s high-tech election campaigns has intensified the power of money over elections. Aided and abetted by Supreme Court decisions in Citizens United, and more recently in McCutcheon, which have affirmed the principle that political money is free speech protected by the First Amendment, the voices of the rich now drowned out those of ordinary Americans.  The power of money to buy influence has become the defining characteristic of our politics. 

Through such instruments as PACS, Super-PACS, independent groups, foundations, individual campaign contributions, lobbying, and working a compliant mass media, the super-rich now have many paths available for influence peddling.  The Koch Brothers' cooptation of the Tea Party movement, documented by Theda Skocpol and Vanessa Williamson in The Tea Party and the Remaking of Republican Conservatism, has given the wealthy a potent political ally in local as well as national politics.   

The economic elite are adept at winning tax breaks, subsidies, deregulations, and all kinds of special treatments.  They've also proven they can beat back government actions they oppose.  The perversion of their political money has virtually eliminated any chance that serious national action can be undertaken to reduce our absurdly skewed social inequality or ameliorate its harmful consequences for the overwhelming majority of our citizens.   

It has also neutered the Democratic Party, whose traditional role has been to act on behalf of the working class. With money often being the deciding factor in elections, Democrats have proven themselves to be as determined, if less successful, in the money grab as Republicans. This has prevented them from taking strong positions on issues opposed by big givers. It has also kept them from talking seriously about inequality.   

The Democrat Party today defines itself more by identity politics, such as gay marriage, minority rights, women’s rights, and their support for regulations on guns and the environment, than on a commitment to narrow the inequality gap or promote the economic interests of working people. These things, however worthy, don’t resonate so well in Kansas, as they say, which helps explain why Democrats despite strong majority support for most of their economic positions don’t dominate elections. One would think that given the broad unpopularity of GOP stances on cutting taxes for the rich, gutting social programs, opposing a rise in the minimum wage and unemployment benefits—that is, on bread-and-butter issues—that Democrats would have a big electoral edge. Not so; in offering little more than a choice of a least of evils, they have missed an opportunity to mobilize disgruntled masses.   

In the past, growing wealth and income inequality stirred grassroots uprisings that spurred the Democratic Party, and even some Republicans, into corrective action, as occurred during the Progressive Era, New Deal, and civil rights movement. The inequality that has taken off since the Reagan revolution, however, has not inspired an effective counter-movement.   

Why haven’t the American masses put up a fight like they did in years past? Other than the fleeting Occupy Wall Street episode, there has been relatively little grassroots organizing on the left, certainly nothing close to matching what the Tea Party has accomplished. I’ve already written on this subject in a previous post (While the Right Organizes, the Left Slumbers) so I won’t add more on it here, except to reiterate that the only way to overcome organized money is with organized people. If the 99+ percent don’t demand fairer treatment, and hold the feet of politicians, especially Democrats, to the fire, things just ain’t gonna change. The one-percenters are counting on this.


































3 comments:

  1. Eloquent and truthful! The only bright spot that I see in this dismal picture is that Janet Yellen, the Chair of the Federal Reserve, has publicly linked the phrase "income inequality" with the Fed's role in managing the economy. Although Yellen is unlikely to publicly reveal her political leanings, she cares about the 99+ percenters.

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  2. Ray Miles, Emeritus Professor, UC BerkeleyOctober 21, 2014 at 12:01 PM

    Chuck,

    Fox is on the right target -- but we have had income inequality over the last two decades of the 19th century and then during the 1920s and ever since Reagan in this century. Indeed, the only time we didn't have increasing inequality was the latter 1930s, the 40s, and through the 70s. Even Nixon taxed the rich. Reagan turned the clock back to the 19th century in order to defeat the Ruskies. Not sure we will be able to turn it back without a deep depression and economists with the willpower to point to the villains. By the way Janet Yellen is doing her best to point out the fox in the henhouse.

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  3. Chuck and Ray,

    It should be noted that the period from the end of World War II through the 1970s, we experienced impressive growth in both the economy and medium incomes. Inequality remained modest even though social spending and taxes on the wealthy were high. What does this say about the Republican dogma (subscribed to by many Democrats as well) that cutting taxes and spending are necessary to stimulate economic growth?

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