Twitter
StumbleUpon
Facebook
Delicious
Digg
Newsvine
Google
Yahoo
TechnoratiDepression-Era Inequality, Only Worse
A new study by Economist Emmanuel Saez revealed this week that
income inequality in the U.S. is more severe today than at any time
since World War I, and the current recession is taking its heaviest
toll on the worst-off members of our society. As our government
rebuilds the financial sector using taxpayers' money, it's important to
remember that both financiers and the government are responsible to our
communities, not just bank shareholders. If we want to strengthen our
country's economic foundation, we need to demand better wages for
workers and an end to all kinds of predatory lending.
Saez's new data on income inequality is, as Paul Krugman put it, "truly amazing."
Saez, who teaches at the University of California at Berkeley, found
that the top 0.01% of U.S. earners had 6% of total U.S. wages, more
than double the level in 2000. Earners in the top 10%, meanwhile, took
home an astonishing 49.7% of all wages. That gap is larger now than
during the Great Depression or the Gilded Age of the Roaring '20s.
"We're seeing Depression-era inequality again--only now it's slightly worse," writes
Steve Benen for The Washington Monthly. Benen also notes that this
level of inequality is not an inevitable consequence of a market
economy: It's an extreme historical aberration. In the U.S., prosperity
for much of the 20th Century was shared. But in 2007, at the economic
bubble's peak, the wealthy simply got wealthier.
In that context, it is beyond absurd that
the government is allowing 8-figure bonuses to be doled out by bailed
out banks. Writing for Salon, Robert Reich dissects
the policy implications of Citigroup's plans to pay its top executives
an average of $10 million this year and award over $100 million to its
top trader, a man who literally owns a castle in Germany. Citigroup was
one of the most reckless U.S. banks during the housing bubble, a major
subprime offender that received $45 billion in direct bailout money, as
well as hundreds of billions in federal guarantees. How much is $45
billion? With the median U.S. home price at $174,100,
that's the full market price of over 258,000 foreclosed homes. The
company says that $10 million a head is necessary to attract and
maintain top "talent," which Reich notes is a somewhat misleading term,
given recent history. The problem is not just that Citigroup and other
Wall Street firms are paying tons of money to a few people, it's that
these people are being rewarded for the same kind of activities that
got us into this mess to begin with: Risky, highly leveraged securities
trading.
"Over the last several years Wall Street has
exhibited a truly astonishing lack of talent," Reich says, noting that,
"The Street is back to the same, relentlessly untalented tactics that
made it lots of money before the meltdown--which also forced taxpayers
to bail it out, caused the world economy to melt down, and tens of
millions of people to lose big chunks of their life savings."
In truth, Reich argues, most large financial
firms in the U.S. are much more like public utility companies than
private-sector businesses. Even in good times, they depend on
government guarantees and other support systems to function. In bad
times, we bail them out. Instead of paying financiers tens of millions
of dollars to reinforce a flawed system, Reich argues that we should
impose rules that result in salaries similar to the public utilities
sector, where top earners are generally restricted to 6-figure
incomes.
The American Prospect features two pieces emphasizing problems
in the current financial sector. Under a law known as the Community
Reinvestment Act (CRA), enacted in 1977 we require banks to make loans
in communities where they collect deposits. The loans have to be to
dependable borrowers and they have to be relatively inexpensive. The
law works very well--institutions covered by it made only a tiny
fraction of the high-interest subprime loans that brought down the
financial sector, as National Community Reinvestment Coalition
President John Taylor notes for the Prospect. But CRA only applies to
actual banks. You know, the places where you deposit your paychecks.
CRA does not apply to subcompanies owned by the same corporation, and
it does not apply to giant Wall Street securities firms like Bear
Stearns and Goldman Sachs. Taylor says we need to expand CRA to cover
these other big players in the financial world.
Why? As Alyssa Katz details in a piece for
the Prospect, many Wall Street firms are bidding on foreclosed
properties and selling them at rip-off rates to low-income borrowers.
But as Mary Kane notes
for The Washington Independent, banks have also devised several methods
of making money without making a loan. By charging tremendous fees on
borrowers for minor infractions, banks generate billions of dollars
without producing anything of social value. One of the worst forms of
abuse, Kane writes, comes in the form of overdraft fees. When you
withdraw too much money from your bank account, the bank fronts you the
money, and then charges you a fee for this "protection." The trick is,
banks almost never tell you that this has occurred, and often play
around with the timing of your charges and deposits to maximize the
fees they collect. Banks are on track to collect $38.5 billion in such
fees this year alone. The worst part is, the fees come from the poorest
customers--rich people don't overdraw their bank accounts, because they
have tons of money.
In the case of credit cards, banks routinely
slap borrowers with outrageous fees and interest rate hikes when the
borrowers are making payments on time. Over the years, banks have
targeted younger and younger credit card customers, as Adam Waxman notes
for WireTap. After years of declining wages for all but the wealthiest
citizens, consumers have been turning to pricey plastic to finance
basic necessities.
Sadly, corporate America does not seem very
focused on helping workers establish their financial independence. The
Real News talks with Richard Wolff, an economist with the New School
who emphasizes that, while worker productivity has jumped in recent
months, wages
have not made the corresponding increases. Quarterly productivity
numbers tend to jump around a lot, but the trend of not compensating
workers for improved efficiency has been around for years.
In a consumer-driven economy, major problems
can't be fixed by giving lots of money to a few people, especially if
those few people are already rich. To support broad, meaningful
economic growth, we need to tailor our policies that empower those on
the lower rungs of the economic ladder. And when we bail out giant
corporations with taxpayer money, we need to make sure those companies
arrange their business to improve the lot of taxpayers.
22 Comments so far
Show AllThe article's big whopper is: "It's an extreme historical aberration. In the U.S., prosperity for much of the 20th Century was shared."
If you look at Saiz' graph (http://krugman.blogs.nytimes.com/2009/08/13/even-more-gilded/)
what stands out is the difference between the period from WWII to the mid-1970s and what came before or after.
During the post-WWII period, there was low income inequality, with the richest 0.01% earning about 1.5% of all income. But it's this period that is anomalous -- the US had an expanding economy from the war itself and from the war's devastation.
Before and after this period, inequality was much greater and, although 2007 has literally the highest super-rich income shares, it is similar to peaks in 1916 and 1928. [Note that, even under Clinton, who's credited with raising middle-class incomes, the shares of the super-rich rose from 2.3% in 1993 to 5.1% in 2000 (and it was still 3.1% in 2002 after the dot-com bubble burst).]
This is no aberration: This is lassez-faire capitalism operating as we should expect it to operate -- syphoning wealth from the working class to the ruling class.
"Over the last several years Wall Street has exhibited a truly astonishing lack of talent,"...
Over the last "several" years? Is Reich kidding? This bubble has been building since the last one took place in the 1980s; and the inequality has been skyrocketing right along with it.
These people have no talent! The only things they have that most of us don't is sh!t-loads of money and access to buy off dirtbag politicians.
What's so astonishing about that? Whoever has the gold makes the rules!
Forgotten points:
Oligarchies have never needed a 'consumer' society for them to rule absolutely.
A literate middle class with leisure time and disposable income is the archenemy of every Oligarchy that has ever existed. Two eagles in the nest, one lives, one dies.
Which 'eagle' do you think is dying this time? And the last one,
On slave plantations there are only 3 classes: Masters, Overseers; and Slaves/Serfs. Master rules with impunity, Overseers xfer the wealth produced by the Slaves to Master, and Master never shares, and yes, he also likes to fuck the slave children, they are after all, his property. He may do with as he and god ordain....
Welcome to Angola Plantation, "Do not pray for lighter burdens. Pray for stronger backs." That's the American version of Arbeit Macht Frei.
This article really drills to the point in its first paragraph. Stylistically, I get lost in the latter part. Having written a fair amount myself--too much as a matter of fact--I know how hard it is to summarize when the point to be made is so extensive.
Income disparities are a major feature of the Bush-era Amerika, at whose helm Obama now sits. With inequity comes more crime and poverty for the poor yet even the rich suffer, gated in their Handmaid Tale's type compounds though they might be, guarded and well-stocked. The rich are the new villains.
How to elevate the masses is the next logical conquest for those who are tired of simply complaining (we had eight years of that under Bush.) Socialism--the right kind not simple bigger government--means the workers own the means of production. Downsizing and other blights which form the ruin of lower class economic isolation can be resisted, but only if the community comes together, gets educated/stays informed and participates politically and just doesn't cave in with apathy over what's basically a one-party ruling class, the War Party, disguised as competing political parties.
www.jbpeebles.blogspot.com
So...what do "We the People" do to increase financial parity? (I mean those of us that are awake.) How do we gather the forces of peaceful revolution beyond the long-standing program of fear thrown at us for decades? Anyone? I'm ready to sign on if you give me a direction. Computer complaining alone ain't gonna change a thing.
If you want real change for the better in this country, do the following:
1) Live 50% below your means.
2) Save that 50% in a credit union.
3) Convince two other people to do the same.
If one third of our population does that, it will destroy most of the corporate profits in this country. The corporations, in turn, will no longer be able to buy our politicians. Then we could use the force of the credit unions to provide government reforms (the money we collectively had there could wield influence) including humane security nets in retirement, healthcare and poverty eradication.
And of course, most important of all, we could force the government to end the fucking wars.
If we all become frugal, our nation might become free again. Remember that independent people can't be coerced or bribed as easily as people in debt with insecure jobs. We need to get there and continue a healthy distrust of all large corporate organizations that promise the moon and deliver an asteroid impact. It's a long road but we can do it. Start now. You don't just stop drinking that expensive coffee at starbucks because you want to save money; you do it because you are at war with corporate glitzy bullshit that promotes war and killing as easily as a new brand of toothpaste. Death to the corporations. Engrave it on your bathroom mirror. It is our only chance of survival as a species.
Then again, you can say I'm a moronic radical that eschews a quality life for a quixotic quest. In that case, go watch some more Oprah and be happy.
Brilliant. I hope you don't mind if I pass this on or re-post it elsewhere.
Excellent advice. I would have to sell my house in order to live 50% below my means and I don't see that happening given the current housing market. Nonetheless it is a goal of mine. Some other things that people can do today:
1. Eat less meat. Agri-business in America is immoral and out of control. Watch Earthlings to get an idea. In addition, it is extremely resource intensive. My goal is to eventually eliminate it from my diet.
2. Watch what you buy with every dollar you have. Do you want your money going to American corporations that use slaves to make their profits?
3. Drive the speed limit.
4. 50% or not, try to consume less of everything. Do you really need that shiny piece of plastic junk? Breaking this consumer culture is going to be difficult and painful.
5. Repair and reuse. With the resources found on the internet, much of what I own and require can often be repaired with help from people in cyberspace. Cars, washing machines, etc.
I suspect we need more than a third of the population but I think it is doable.
If you'd like to shortcut the process of giving up eating our mammalian and avian relatives, buy yourself good cookbooks from the traditions of China, Japan, and India, and dig in. China is the least-veg of the three, but their cookery repertoire is so enormous that it hardly matters.
I just this moment finished dinner: a big bowl of "twice-cooked" homestyle doufu, a traditional recipe from Hunan Province in China. It's aromatic, juicy, rich, savory, and filling, cold beer goes good with it, and no animals or birds needed to be sacrificed for me to have a superb meal.
The number of vegetarian recipes is so great in those traditions that I'd never in my life have to eat the same thing twice if I didn't want to. And if I could safely eat carbohydrates, I could include cookery from other delicious veg traditions too, like Mexico.
Gandhi, when on a hunger strike, was asked why he is putting the people who love him through the ordeal of watching him slowly starve himself to death. He responded by suggesting that his enemies don't care if he dies - they don't care if he starves himself to death. He said the hunger strike was not against people who hate him, it was to mobilize the people who love him into action of their own.
Drop out, proudly. Then tell everyone.
The unthinkable is a revolutionary overthrow.
When a majority bottom now exists on miserly zero.
The top to bottom ratio is measured as infinite.
When those at the top live on a different planet.
Compared to reality, old policy is punitively so far out
Results could not be expected, if any fruits did come about.
Expensive civilization exploits the finite world of rising entropy.
No miracle can save its denizens who take it as free.
Billions of humans around the earth, will die from disease and starvation.
Or mercifully blown to bits by some high tech Arms dealers salvation.
Even as that once flourishing and verdent Eden, nourished by the Suns beneficent rays,
Is now overrun by human kind and seeing the last of its days.
The capital profiteer parties still swank on merrily at the top,
So long as the world pays for their drinks and food, they are not going to stop.
Their systems funnel to them all the takings, and they do scoop up the lot,
They think they made the rules, so why not disabuse them of their plot?
It is interesting to see how the language of false cooperation penetrates even such clearly informed discourse as this article.
Several instances stand out:
" . . . it's important to remember that both financiers and the government are responsible to our communities, not just bank shareholders . . . ."
---(Ah, were this so well established that the question were whether it had slipped some CEO's mind!)
"Benen also notes that this level of inequality is not an inevitable consequence of a market economy"
--- (Benen's wrong: just because it is not a constant among hybrid economies does not mean it is not an inevitable result of the corporatocracy that the unqualified phrase "free market" must be taken to mean in current discourse.)
"'. . . Wall Street has exhibited a truly astonishing lack of talent,' Reich says . . ."
---- Citing Reich thus uncritically suggests that more talented CEO's would concentrate money in their own and their stockholders' pockets less effectively. The rest of Carter's article, however, suggests that he knows quite well that CE0's and corporations measure "talent" rather differently.
While Carter's astute observations and excellent suggestions contradict most of this, the imprecision in these phrases borrowed from less astute or less honest discourse could be misleading.
I suggest that those of us who do not accept the false premises of discourse that currently passes for MOR make a sustained effort to reframe these discussions by dropping or exploding such phrases.
It is interesting to see how the language of false cooperation penetrates even such clearly informed discourse as this article.
Several instances stand out:
" . . . it's important to remember that both financiers and the government are responsible to our communities, not just bank shareholders . . . ."
---(Ah, were this so well established that the question were whether it had slipped some CEO's mind!)
"Benen also notes that this level of inequality is not an inevitable consequence of a market economy"
--- (Benen's wrong: just because it is not a constant among hybrid economies does not mean it is not an inevitable result of the corporatocracy that the unqualified phrase "free market" must be taken to mean in current discourse.)
"'. . . Wall Street has exhibited a truly astonishing lack of talent,' Reich says . . ."
---- Citing Reich thus uncritically suggests that more talented CEO's would concentrate money in their own and their stockholders' pockets less effectively. The rest of Carter's article, however, suggests that he knows quite well that CE0's and corporations measure "talent" rather differently.
While Carter's astute observations and excellent suggestions contradict most of this, the imprecision in these phrases borrowed from less astute or less honest discourse could be misleading.
I suggest that those of us who do not accept the false premises of discourse that currently passes for MOR make a sustained effort to reframe these discussions by dropping or exploding such phrases.
The "marketplace" will not address this problem. It will only make matters worse. The more the market left to its own devices, the more distorting it becomes.
So there no REAL way of addressing this without changes in Government Policies. Yet when the same people benefiting most all but OWN That same Government there little urgency to act and in fact pressure put on that same Government for even laxer regulations.
Pressure for change can also come form the electorate but they have been "dumbed down" and have isolated themselves into an "Us" versus "them" camp .Ideology prevents them from thinking rationaly. They are like some sort of rabid sports fan whose team is in last place and filled with medicore players yet convincing themselves that said players really have far more talent then that of the team in first.
In Wrath of Khan Kirk concludes that Khan thinks in two dimensions....left or right.
This is the problem with the voter...they keep looking left or right and pointing their fingers of blame at either side.
They should in fact be looking UP at those elites wielding all the power.
"So there no REAL way of addressing this without changes in Government Policies. Yet when the same people benefiting most all but OWN That same Government there little urgency to act and in fact pressure put on that same Government for even laxer regulations."
Absolutely.
Though I believe many people from all sides are lookingg at the culprits you cite.
By the way, whats up with your new guy at Health Care saying the Canadian system is in big trouble? True? Or is it just BS to get more money?
There are a group of people within our various Governments at the Provincial and Federal levels who would like to see more "Privatization" occur inside the health Care system.
In order to achieve this goal they have to "break the system" first because trying to dismantle it openly will lose them big time at the polls.
They used the old bait and switch. First they cut taxes because "people deserve more of their own money and tax cuts always lead to more growth and revenues"
Then the budgets become unblanced going into deficit so they have to "Cut spending".
They cut spending in Health Care leading to the problems the head of the CMA cites.
They then come back with "we have to fix healthcare and should look at the private option".
I am NOT totally opposed to a mix of private/public such as france has BUT this has to be sold on its own merits and not arrived at through such underhanded means. I would first like to see if they can fix our system first.
As in lets be HONEST about our own system. If it unsustainable show us why and how another system will be better.
Thanks very much for clearing that up. I sort of suspected that might be the case. Sounds very much like the push here.
"As in lets be HONEST about our own system. If it unsustainable show us why and how another system will be better."
Boy! You could throw that right in the middle of our fight here!! France's system does look attractive as does Sweden's and Denmark's.
I'm afraid these weasels have put any chance of real reform in the ditch here.
"As our government rebuilds the financial sector using taxpayers' money"
They aren't rebuilding anything. Just handing out money.
They have done nothing to rebuild our industrial base, rid the country of people (both legal and illegal) stealing American jobs, refused to correct our bad trade policies, etc.
They are addressing policies and items that are not urgent nor critical for the American citizen.
The US has ceased being a "nation of laws," to the extent it ever was one. More than ever it is now run by vicious, ruthless gangs of elite thugs who make, interpret, or enforce the laws according to their own interests. The left must find a step between traditional civil disobedience and full-scale violent revolution. Stopping traffic can be useful, but it must be the right kind of traffic (Hint: Not that found on the streets).
Yes! Stop paying those credit card bills. Stop using them, stop giving them money.
Stop refinancing. Stop borrowing. Stop buying crap you don't need. Grow some of your own food. Barter with like minded people.
Stop being part of the problem!
Darn, its not quite "that" bad yet. Yes we need to insist that laws that are being ignored now be enforced. Yes we need to rid ourselves of the dictator types like the Cheney's and Rove's but also the Pelosi's and Reid's.
I'd suggest to you that there is a better chance of Conservatives and Moderates finding that "spot" first. These idiots that insist that its just a few troublemakers or right wingnuts at these Townhalls or resisting the healthcare push, Cap and Tax and Amnesty are downright blind, engaging in wishful thinking or stupid.
I'd say there is a good chance to get single payer if we could hook up with them.
The current income wealth gaps are, at the very least, disturbing. Today's numbers are quite a bit different from those of the 50's, 60,s and early 70's. As Warren Buffet says - "there is a class war going on and my side is winning."
For the record, Buffet finds today's situation very worrisome and claims the 'system' is anything but fair.