[Peace-discuss] Fwd: Rising Inequality and Liberal Myopia

[David Johnson via Peace-discuss]

http://www.counterpunch.org/2014/11/14/rising-inequality-and-liberal-myopia/

Forward to the Past: Next Stop, the 19th Century!
*Rising Inequality and Liberal Myopia*
by PETE DOLACK

If capitalism is taking us back to feudalism, we’ll have to pass through 
the 19th century on our way. In terms of wealth inequality, we’re on 
course to return to the century of robber barons. Back then, the 
public-relations industry hadn’t developed, so at least they were called 
by an honest name, instead of "captains of industry" or "entrepreneurs" 
as they are today. Although "heir" would frequently be far more accurate 
than "entrepreneur."

We’re not at the 19th century yet, but we have arrived at the 1920s on 
our trip to the past. The level of inequality of wealth in the United 
States today has not been seen since the decade that led to the Great 
Depression.

The top 0.1 percent — that is, the uppermost tenth of the 1% — have 
about as much wealth as the bottom 90 percent of United Statesians. To 
put it another way, approximately 320,000 people possess as much as do 
more than 280 million. It takes at least $20 million in assets to be 
among the top 0.1 percent, a total that is steadily rising.

Emmanuel Saez, an economics professor at the University of California, 
and Gabriel Zucman, a professor at the London School of Economics, 
examined income-tax data to reveal these numbers. They write that they 
combined that data with other sources to reach what they believe is the 
most accurate accounting of wealth distribution yet, one that shows 
inequality to be wider than previously imagined. The authors define 
wealth as "the current market value of all the assets owned by 
households net of all their debts," including the values of retirement 
plans with the exception of unfunded defined-benefit pensions and Social 
Security. (The reason for that exclusion is that those moneys do not yet 
exist but are promises to be kept sometime in the future.)

The authors’ paper, "Wealth Equality in the United States since 1913: 
Evidence from Capitalized Income Data," reports that, for the bottom 90 
percent, there was no change in wealth from 1986 to 2012, while the 
wealth of the top 0.1 percent increased by more than five percent 
annually — the latter reaped half of total wealth accumulation.

The 22 percent of total wealth owned by the top 0.1 percent is almost 
equal to what that cohort owned at the peak of inequality in 1916 and 
1929. Afterward, their total fell to as low as seven percent in 1978 but 
has been rising ever since. At the same time, the combined wealth of the 
bottom 90 percent rose from about 20 percent in the 1920s to a peak of 
35 percent in the mid-1980s, but has been declining ever since. Although 
pension wealth has increased since then, Professors Saez and Zucman 
report, the increase in mortgage, consumer-credit and student debt has 
been greater.

Nonetheless, this might still be an underestimation — the authors write 
that they "still face limitations when measuring wealth inequality" 
because of the ability of the wealthy to hide assets off shore or park 
them in trusts and foundations.

Inequality on the rise

Although rising throughout the developing world, inequality is 
particularly acute in the United States. Among the nearly three dozen 
countries that make up the Organisation for Economic Co-operation and 
Development, only three (Chile, Mexico and Turkey) have worse inequality 
than does the U.S., measured by the gini coefficient. The standard 
measure of inequality, the more unequal a country the closer it is to 
one on the gini scale of zero (everybody has the same) to one (one 
person has everything).

Of course, were we to measure inequality on a global scale, the results 
would be more revealing. Even the U.S. gini coefficient of 0.39 in 2012 
pales in comparison to the global gini coefficient of 0.52 as calculated 
by the Conference Board of Canada. To put it another way, global 
inequality is comparable to the inequality within the world’s most 
unequal countries, such as South Africa or Uganda.

How to reverse this? Professors Saez and Zucman offer reforms that 
amount to a return to Keynesianism. They advocate "progressive wealth 
taxation," [page 39] such as an estate tax; access to education; and 
"policies shifting bargaining power away from shareholders and 
management toward workers." Such policies would surely be better than 
the austerity that has been on offer, but the authors’ wish that this 
can simply be willed into existence is quite divorced from capitalist 
reality.

Indeed, the authors go on to lament that one factor in stagnant incomes 
is that "many individuals … do not know how to invest optimally." It is 
difficult to believe that these two learned economists are unaware of 
the relentless chicanery of the financial industry. How does one invest 
"optimally" in a rigged casino stacked against you?

The past is not the future

Fond wishes for the return of Keynesianism will not bring those days 
back. (And, of course, if you weren’t a white male those days weren’t 
necessarily golden anyway.) The Keynesian consensus of the mid-20th 
century was a product of a particular set of circumstances that no 
longer exist. Keynesianism then depended on an industrial base and 
market expansion. A repeat of history isn’t possible because the 
industrial base of the advanced capitalist countries has been hollowed 
out, transferred to low-wage developing countries, and there is almost 
no place remaining to which to expand. Moreover, capitalists who are 
saved by Keynesian spending programs amass enough power to later impose 
their preferred neoliberal policies.

Capitalists tolerated such policies because profits could be maintained 
through expansion of markets and social peace bought. This equilibrium, 
however, could only be temporary because the new financial center of 
capitalism, the U.S., possessed a towering economic dominance following 
World War II that could not last. When markets can’t be expanded at a 
rate sufficiently robust to maintain or increase profit margins, 
capitalists cease tolerating paying increased wages.

And, not least, the massive social movements of the 1930s, when 
communists, socialists and militant unions scared capitalists into 
granting concessions and prompted the Roosevelt administration to bring 
forth the New Deal, were a fresh memory. But the movements then settled 
for reforms, and once capitalists no longer felt pressure from social 
movements and their profit rates were increasingly squeezed, the turn to 
neoliberalism was the response.

Nobody decreed "We shall now have neoliberalism" and nobody can decree 
"We shall now have Keynesianism." Capitalist market forces — once again, 
simply the aggregate interests of the most powerful industrialists and 
financiers — that are the product of relentless competitive pressures 
have led the world to its present state and the massive inequality that 
goes with it.

Even if mass social movements build to a point where they could force 
the imposition of Keynesian reforms, the reforms would eventually be 
taken back just as the reforms of the 20th century have been taken back. 
The massive effort to build and sustain movements capable of pushing 
back significantly against the tsunami of neoliberal austerity would be 
better mobilized toward a different economic system, one based on human 
need rather than private profit.

Reforming what is ultimately unreformable is Sisyphean. Going back to 
the mid-20th century Keynesian era, even were it possible, would be no 
more than a detour on the way to the 19th century. Building a better 
world beats nostalgia.

Pete Dolack writes the Systemic Disorder blog. He has been an activist 
with several groups.



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