Nov 062012
Who's got the money in America - romney economics

Who's got the money in America - romney economics (Photo credit: EN2008)

“When I was a child . . . I thought like a child, I reasoned like a child. When I became a man, I put childish ways behind me.” The words of the apostle Paul resonate as truth – they cannot be refuted . . . at least not within the circles of those who have actually grown up.

And what’s the first lesson you learned as a child? What was that first major step of personal maturity? That thing, as a parent, you know you have to teach your child? That lesson that if not learned at home will, without doubt, be taught in a child’s first outside social contacts?

For me, and in my experience most others — that lesson was that we all have to “share.”

Everyone is taught this lesson at one time or another. For most of us it’s in kindergarten, at the absolute latest. But some people seem to learn this lesson much better than others. And some “others” deliberately put off “learning” the lesson, and instead decide to push the issue beyond that which would be tolerated in polite company.

Think about how you feel anytime somebody breaks your personally adopted code for sharing; it’s a serious matter. The person who empties half of the appetizer plate before others get a bite, or the guy who doesn’t seem to understand that traffic merges best when people take turns, or even the family member who just helps himself to your last soda, beer, whatever the item . . . without asking — all are viewed with a mixture of shock, dismay and sometimes contempt. The fact is, in a very personal way, breaking the code of sharing is tantamount to betrayal.

Indeed, our personal understanding of how we share is fundamental to all interaction. As we mature, what is originally understood as the simple fact that we have to share, expands and becomes a widespread set of rules of engagement. These rules provide a basic expectation of mutual respect, not only for the rules but for each other. They are at the deepest level an expression of our personal values, of how we wish to be treated.

So, if sharing is such a primary lesson, and we’re all instinctively aware of the importance of reaching an understanding regarding the acceptable rules, why is it that, as a people, we never address the issue directly? Why is it that our political debates always focus on doctrinal assertions but never on defining one of the most basic rules of engagement — how we want to divvy things up?

I submit that the reason is the stranglehold upon both government and media held by those people who very much don’t want an honest conversation about how we should share, those who never really learned the lesson in kindergarten. It’s far too profitable to stigmatize the opposition as envious, as lazy, as wanting to punish success, so they spew empty rhetoric  and turn the discourse toward entrenched positions of policy, where there’s no danger of the people actually threatening a real conversation, much less interrupting the status quo.

But the glaring truth is that unless We the People are content with the current state of rules governing how we share, the dialogue to directly address that issue is precisely what we need to have. The situation will only get worse if we do not.

So, are we collectively content with the status quo? I suspect not.

In fact, I have it on good authority that We the People have serious issues with the state of sharing in America. There are no better metrics with which to understand how we share than those measuring wealth distribution, and few Americans believe our current profile to be desirable. In a 2010 study conducted by researchers at Harvard and Duke, it was found that 92% — 90 freaking two percent — of Americans would prefer a more equitable distribution of wealth than what exists in our country today. And the results were consistent across demographics, across economic divisions, and across the political aisle.

The study shows clearly that once policies and politics are stripped away, Americans not only prefer a more equitable wealth distribution model, but are very surprised to find out how concentrated wealth actually is in the U.S.. When asked to estimate the share of wealth held here by the top 20%, the more than 5,500 study participants set the presumed share at 59%. The actual number is 84%, far above the average estimate, and nearly 50 percentage points above the 36% share found in the preferred Swedish model.

Even more alarming than the share of wealth held by our most well-off 20% is the share held by the truly rich. The lopsided nature of a system that rewards capital accumulation while suppressing labor compensation has increasingly handed the lion’s share of all income gains to the richest 1% of Americans. Such gains were once shared between business owners and the workers that made their wealth possible, but this is now the exception, rather than the rule . . . and the trend is accelerating.

The fact of the matter is that as recently as 1976, the top 1% took in about 9% of total income. But through the use of deregulation, privatization, offshoring and tax policy that favors the rich, each of our most recent economic expansions has handed increasingly lopsided shares to the most wealthy. During the Clinton expansion, the top 1% took 45% of all income gains; that share swelled to 65% during the Bush years and has now peaked at 93% as we climb out of the Great Recession. The U.S. now ranks 98th among the 136 nations measured for income inequality by the Gini index — worse than Iran or China — and the richest 1%, who now claim 24% of income, have managed to amass more financial wealth than the least wealthy 95% of Americans.

If this current trajectory is allowed to continue, it won’t be long before the Top 1% claim for themselves more income than the Duke/Harvard study shows the average American believes should go to the top 20%. This is clearly not an outcome congruent with ideals that promote fairness as a virtue, but the truth of the matter is that such concentration is far more than merely inequitable and much more serious than a purely moral analysis might suggest.

What should be of concern to all Americans, even those who presently benefit from the rigging of our economic system, is that this dynamic is parasitoid in nature, and if allowed to continue will kill its host. People need to understand that there are two very distinct and alarmingly separate American economies in operation today, and only one of those systems serves to strengthen our nation — the other presents a threat more grievously dangerous than all the wannabe terrorists and nuclear armed foes combined.

You see, when it comes down to it, there are really only two sources of real wealth — natural resources and labor. These are primary, and when combined, they’re capable of producing the valuable secondary wealth (those things we make) that we all strive to obtain and put to use. Taken together, this process forms the system that is the productive economy of any nation, the part of the economy that fuels the engines of growth. Our economy works just like any other engine: when properly fueled and maintained, it cranks along doing its job, but when starved of fuel or neglected for maintenance, it clanks and sputters, and if not given proper attention — eventually grinds to a halt.

Henry Ford is probably the industrialist most credited for understanding this dynamic. It was 1914 when he doubled the wages of his workers, fully appreciating the symbiotic relationship between workers and business owners, between labor and capital — understanding that only workers could provide the demand needed to spur increasing supply. In his 1922 book, “My Life and Work,” Ford stated “We wanted to pay these wages so that the business would be on a lasting foundation,” and continued, “A low wage business is always insecure.”

Somehow, nearly a century later, this fundamental wisdom is seemingly lost in American society. Somehow, Americans now believe the basic absurdity that our economic engines can keep running without fuel and require no maintenance whatsoever. Somehow, a large sector of the American populace stepped through the looking glass to support the idiotic notion that extractive polices that suck wealth away from the productive economy and feed it into a tertiary system of paper assets and financial casino operations will, by some magical means, restart the very engines they starved of fuel in the first place.

Well, it ain’t gonna happen people!

The harsh truth is that the tertiary financial economy that once served to provide capital for productive investment has been almost entirely replaced by a system of vulture capitalism that is quite literally sucking the lifeblood out of the American economy. Adjusted for inflation, the wages for American workers have been flat for nearly 40 years, while CEOs who made 24 times the average salary in the 1960s now make hundreds of times what their workers are paid. Median household income recently declined for the first time since 1967, while corporate profits hit all-time highs. Even upward mobility, the measure of how well a system facilitates people moving up the economic ladder, is all but gone in the U.S.. That old “pull yourself up by your bootstraps” thing . . . it’s no longer so much about getting ahead as just getting a job — likely one that doesn’t pay enough for food and shelter much less a yearly vacation and a comfortable retirement.

These are far from being indicators of a healthy economy. When the economic engines are humming, as they did for the better part of the time from World War II up until the energy issues of the 1970s, everyone moves ahead. Successful businesses reward the employees who toil to bring them success, thereby funding the demand that spurs increased production. Those same businesses then invest in increased capacity, creating more jobs, spurring more demand, and a virtuous cycle is formed — one where all stakeholders prosper.

But when the benefits of increased productivity, the type achieved by American workers who now produce 50% more per hour than they did in 1973, go entirely to only the most wealthy among us, it’s a vicious cycle that’s formed instead. When jobs are sent overseas where workers labor under abysmal conditions for wages of a $1/hour, that vicious cycle is reinforced. And when the profits of productive enterprise are siphoned off instead of reinvested in labor and additional capacity, the vicious cycle becomes a death spiral, one that if not addressed, can have only one end — the eventual total collapse of our economy.

The good news is that the degree of wealth concentration present in the is not the result of market economics but rather the product of policies designed to rig the system. Contrary to conservative myth, it wasn’t shady home buyers who caused the housing market to crash but rather unregulated banks that bled the economy dry in order to increase their profits. And although the privatization wave that’s swept across government services for the past many years has swelled the bank accounts of countless contractors, it’s largely been at increased cost to American taxpayers — on average 1.83 times the cost, according to a recent study. But as intuitive as it should be, even to the most casual observer, it is tax policy that’s contributed more than any other factor to the gutting of the American economy.

Trickle down economics has never worked, not in the 1890s when it was graphically referred to as “horse and sparrow,” where the more oats fed to the horse, the more edible matter available in their droppings, and it surely doesn’t work today. Wealthy individuals don’t invest more in additional capacity because they have more money leftover after taxes — they do so when increases in demand require increases in supply. It’s really that simple: in order to rev up the economic engines, you need to increase demand, and it doesn’t take a quantum physicist to understand how that’s best accomplished —through policies that benefit the middle class.

Of course, the plutocrats, those wealthy few who run our nation by exercising the influence that only money can buy, will do everything in their power to further rig the game. With today’s global economy, they have decent odds that they can actually survive and prosper by betting against the good old U.S.of A.. They’re already hard at work counseling workers to accept the new normal of low wages and scarce benefits. But it doesn’t have to be that way, not if workers band together once again, not if the American people drop their differences and once again stand united against a common foe, against those who would take everything for themselves, regardless of the consequences to people and country.

Make no mistake about it — concentration of wealth is the problem, and only a united populace can fix it. The only path back to true economic prosperity is through regulation, investment, and increased effectiveness of government. We need regulations that ensure businesses pay all their costs and stop dumping, back onto taxpayers, those they can legally avoid — like damage to the environment and the health of our citizens. We need the investments in infrastructure, education, and energy that will help lubricate and maintain our economic engines, while strengthening the middle class and providing the fuel our economy needs. And we need changes in tax policy that will put some of the massive wealth accumulated by the richest Americans back into productive use by funding these needed investments. There is no other way, and anyone who professes otherwise is quite simply lying.

Greed is indeed a motivational factor present in humanity, but contrary to the doctrine of Ayn Rand acolytes, like vice-presidential candidate Paul Ryan, selfishness is not a virtue — it is in truth the destructive force at the core of all wrongdoing. From a societal perspective, there is nothing positive that can be said about an economy where the richest 400 people have more wealth than the poorest half of the population — 150 million citizens. Our nation was founded on opposition to exactly the type of system that fosters this form of wealth concentration, a system that was ruled by a wealthy aristocracy that had no real idea of the lives and hardships of everyday people.

Effective distribution of wealth is a concern for all Americans. The rules needed to achieve it are the responsibility of government, and those who oppose the establishment of said rules are the people who failed to learn that kindergarten lesson about sharing. They’ll frame “redistribution of wealth” as a pejorative, ignoring completely the fact that wealth was already “redistributed” when workers were underpaid for their labor or shared resources, both natural and man-made, were utilized in generating their profits. These kindergarten dropouts will just keep taking unless their insatiable addiction for “more” is curbed by the rules of a society that’s taken the time to define how they choose to share.

Thomas Jefferson, the author of the Declaration of Independence and vociferous defender of personal property rights, obviously passed kindergarten with flying colors. He was fully aware of the dangers of concentrated wealth, once arguing that “Whenever there is in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right.” One of his counterparts, the Father of the Constitution, James Madison, was in full agreement, arguing for “the silent operation of laws which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigence towards a state of comfort.” And Adam Smith, the father of modern economics, helped to define the foundation of the system for which Madison argued, “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion” — progressive taxation.

The bottom line is that those of us who learned to share need to stand up and demand that those who didn’t repeat kindergarten until they do. The wealth distribution model identified as optimum by those Americans participating in the Duke/Harvard study is not merely the moral best case — it’s also the superior economic model by far. Fortunately, the only reason it’s not a fact of life inAmericais because We the People haven’t demanded it. All we have do to make it once again a reality is to accept the gift given to us by the Founding Fathers — a government of, for and by the People. Such a government was then and will always be the solution.

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