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Life on the Plantation: Thoughts on Income inequality

  1. LIFE ON THE PLANTATION Thoughts on Income Inequality Jeoffry Gordon, MD, MPH References: La Jolla Democratic Club February, 2014
  2. Pope Francis called for renewal of the Roman Catholic Church and attacked unfettered capitalism as "a new tyranny", urging global leaders to fight poverty and growing inequality in the first major work he has authored alone as pontiff. The 84-page document, 'Evangelii Gaudium' known as an apostolic exhortation, amounted to an official platform for his papacy. In it, Francis went further than previous comments criticizing the global economic system, attacking the "idolatry of money" and beseeching politicians to guarantee all citizens "dignified work, education and healthcare". He also called on rich people to share their wealth. "Just as the commandment 'Thou shalt not kill' sets a clear limit in order to safeguard the value of human life, today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills," Francis wrote in the document issued on Tuesday. "How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses 2 points?"
  3. Richest 85 boast same wealth as half the world Eighty-five people control the same amount of wealth as half the world's population. That is 85 people compared with 3.5 billion. A new report from Oxfam has been published in time for the World Economic Forum in Davos this week. It shows the world's ultra-wealthy have not only recovered from the global financial crisis, they have positively blossomed. The report shows the wealth of the 1 per cent richest people in the worldis worth about $110 trillion, 65 times the total wealth of the bottom half of the world's population. It also shows the world's richest 85 people control about $1.7 trillion in wealth, equivalent to the bottom half of the world's population. And far from hindering the wealthy, the political response to the global financial crisis - including the actions of central banks and the austerity measures introduced by national governments - has made the rich fabulously richer. In the US, the wealthiest 1 per cent of the population grabbed 95 per cent of post-financial crisis growth between 2009 and 2012, while the bottom 90 per cent became poorer. But an Oxfam survey of six countries - the United States, UK, Spain, Brazil, India and South Africa - has found that the majority of people believe laws and regulations are skewed in favour of the rich, so people are noticing.
  5. There are several ways in which economic inequality undermines people’s well-being.(I don’t claim that mere awareness that others are better off makes people worse off: I don’t credit envy with a genuine grievance.) Economic inequality (1) makes the less well-off vulnerable to domination, (2) makes them vulnerable to stigmatization, and (3) causes governments to favor the better-off at the expense of the worse-off. Consider the problem of domination. People’s bargaining power is tied to their relative exit costs. This often enables people with superior wealth to dominate others. Women are more likely to submit to domestic abuse and control if the cost of leaving their partners is a drastic fall in material well-being. Low-wage workers are often unable to bargain for predictable work hours because they can’t afford to quit. Economic inequality can also lead to stigmatization. Adam Smith famously observed that, as the general level of consumption increases, so does the level of consumption needed by each individual to be able to appear in public without shame. The consumption of the better-off thereby raises the cost of living for the worse off. Economic inequality causes governments to make favorites of the better-off and neglect the interests of the worse-off. A recent study by Larry Bartels finds that the preferences of low-income constituents have no influence at all on senators’ votes, while the preferences of middle-income constituents have middling influence, and the views of high-income constituents had great influence. (His findings apply to Democratic as well as Republican senators.) In some cases, the state grants or extends monopoly privileges to the better off. The state grants the better-off legal loopholes or vast subsidies at the expense of the worse-off. Payday loans are largely exempt from usury laws. As economic inequality increases, the better off perceive fewer and fewer shared interests with the less well-off. Because they buy many critical goods — health insurance, education, security services, transportation, recreation facilities — individually from the private sector, or pool the provision of these goods within private gated communities or municipalities governed by zoning regulations designed to exclude the less well-off, they tend to oppose public provision of these goods to the wider population. At the same time, the ways they provide these goods for themselves raises the costs to the less well-off of obtaining them. When the better-off vote down public transportation because they own their own cars, the less well-off must buy cars too. W hen the better-off spend more on schooling, so too must the less well-off, to give their children a fighting chance to compete for better opportunities. By Elizabeth Anderson October 19, 2009
  6. An updated study by the prominent economists Emmanuel Saez and Thomas Piketty shows that the top 1 percent of earners took more than one-fifth of the country’s total income in 2012, one of the highest levels recorded in the century that the government has collected the relevant data.The top 10 percent of earners took more than half of all income. That is the highest recorded level ever. The income share of the top 1 percent of earners in 2012 returned to the same level as before both the Great Recession and the Great Depression: just above 20 percent, jumping to about 22.5 percent in 2012 from 19.7 percent in 2011. The new data shows that incomes for the top 1 percent of earners declined about 36 percent during the recession, and rebounded about 31 percent in the recovery. The incomes of the other 99 percent plunged about 12 percent in the recession and have barely grown since then, on aggregate. Thus, the 1 percent have captured about 95 percent of the income gains since the recession ended. The figures underscore that even after the recession the country remains in a kind of new Gilded Age, with income as concentrated as it was in the years that preceded the Great Depression,
  7. The end of the American dream? by Steve Schifferes BBC News Website, September 4, 2006 IT DOES NOT HAVE TO BE THIS WAY: THE HIDDEN ROOT CAUSE
  8. Rising income inequality corresponds almost exactly with the rise in household debt relative to income Factors that are often overlooked in the current policy debates: 1. The potentially devastating consequences for growth and job creation of wage stagnation for the bottom 95% of the income distribution were largely ignored prior to the crash as their effect on consumption and economic growth were masked because households compensated for slow wage growth by depleting their savings and by borrowing heavily, particularly against the steadily inflating value of their homes. 2. The bursting of the housing bubble, accompanied by the financial meltdown, kicked the props out from under consumption by the 95%. 3. The way the economy generated the demand it needed to grow jobs in the period before 2007 was unsustainable. Even if we fix finance, we will still need to increase wages for the bottom 95% to ensure adequate and sustainable economic growth in the future. 4. With little change in the conditions and policies that have led to wage stagnation and rising income inequality, optimistic forecasts about economic growth in 2014 (and beyond) should be viewed skeptically. -----Barry Cynamon and Steven Fazzari, “Inequality, the Great Recession and Slow Recovery.”
  9. In January, 2014 the Center for American Progress and Half in Ten commissioned a poll to ask 2000 Americans what they really think about poverty in the United States. One-quarter to one-third of Americans—and even higher percentages of Millennials and people of color—continue to experience direct economic hardship. Sixty-one percent of Americans say their family’s income is falling behind the cost of living, compared to just 8 percent who feel they are getting ahead and 29 percent who feel they are staying even.
  10. The Populist Imperative Paul Krugman, THE NEW YORK TIMES, JAN. 23, 2014 “The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” John Maynard Keynes wrote that in 1936, but it applies to our own time, too. And, in a better world, our leaders would be doing all they could to address both faults. Unfortunately, the world we actually live in falls far short of that ideal. In fact, we should count ourselves lucky when leaders confront even one of our two great economic failures. If, as has been widely reported, President Obama devotes much of his State of the Union address to inequality, everyone should be cheering him on. They won’t, of course. The usual suspects on the right will, as always when questions of income distribution come up, shriek “Class warfare! Jobs and inequality are closely linked if not identical issues. There’s a pretty good although not ironclad case that soaring inequality helped set the stage for our economic crisis, and that the highly unequal distribution of income since the crisis has perpetuated the slump, especially by making it hard for families in debt to work their way out. Moreover, there’s an even stronger case to be made that high unemployment — by destroying workers’ bargaining power — has become a major source of rising inequality and stagnating incomes even for those lucky enough to have jobs. Beyond that, as a political matter, inequality and macroeconomic policy are already inseparably linked. It has been obvious for a long time that the deficit obsession that has exerted such a destructive effect on policy these past few years isn’t really driven by worries about the federal debt. It is, instead, mainly an effort to use debt fears to scare and bully the nation into slashing social programs — especially programs that help the poor. You can argue that Mr. Obama should have tried harder to get these ideas across; But, even if he had tried, it’s doubtful that he would have succeeded. Consider what happened in 1936. F.D.R. had just won a smashing reelection victory, largely because of the success of his deficit-spending policies. It’s often forgotten now, but the public remained wedded to economic orthodoxy: by a more than 2-to-1 majority, voters surveyed by Gallup just after the election called for a balanced budget. And F.D.R., unfortunately, listened; his attempt to balance the budget soon plunged America back into recession.
  11. Jacob S. Hacker and Paul Pierson Politics & Society June 2010 38: 152-204 Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States JUNE 28, 2010
  12. Princeton professor Larry M. Bartels’ most significant finding is that there is a partisan pattern to the size of the gap between the rich and the poor. Over the past half-century, he concludes, Republican presidents have allowed income inequality to expand, while Democratic presidents generally have not. Bartels goes to great pains in his introduction to preempt the counterattack he expects from critics on the right. "I began the project as an unusually apolitical political scientist," he writes, noting that the last time he voted was in 1984, "and that was for Ronald Reagan." He adds that in doing this work, "I was quite surprised to discover how often and how profoundly partisan differences in ideologies and values have shaped key policy decisions and economic outcomes. I have done my best to follow my evidence where it led me." UNEQUAL DEMOCRACY :The Political Economy of the New Gilded Age, By Larry M. Bartels, Princeton Univ. 325 pp. 2013
  13. An Empire at Risk We won the cold war and weathered 9/11. But now economic weakness is endangering our global power. By Niall Ferguson | NEWSWEEK Published Nov 28, 2009 From magazine issue dated Dec 7, 2009 …if the United States succumbs to a fiscal crisis, as an increasing number of economic experts fear it may, then the entire balance of global economic power could shift. Military experts talk as if the president's decision about whether to send an additional 40,000 troops to Afghanistan is a make-or-break moment. In reality, his indecision about the deficit could matter much more for the country's long-term national security. Call the United States what you like—superpower, hegemon, or empire—but its ability to manage its finances is closely tied to its ability to remain the predominant global military power.
  14. The billionaire investor Tom Perkins, a founding member of the venture capital firm Kleiner Perkins Caufield & Byers. In a letter to the editor of The Wall Street Journal, Mr. Perkins lamented public criticism of the “one percent” — and compared such criticism to Nazi attacks on the Jews, suggesting that we are on the road to another Kristallnacht. Back in 2010 Stephen Schwarzman, the chairman and chief executive of the Blackstone Group, declared that proposals to eliminate tax loopholes for hedge fund and privateequity managers were “like when Hitler invaded Poland in 1939.” The very rich, and those on Wall Street in particular, are in fact doing worse under Mr. Obama. Between the partial rollback of the Bush tax cuts and the tax hike that partly pays for health reform, tax rates on the 1 percent have gone more or less back to pre-Reagan levels. Also, financial reformers have won some surprising victories over the past year, and this is bad news for wheeler-dealers whose wealth comes largely from exploiting weak regulation. So you can make the case that the 1 percent have lost some important policy battles.
  15. This chart* shows the federal effective tax rate, which is Washington's actual cut of your income. Effective rates matter more than marginal rates. In 1979, for instance, the top marginal tax rate was 70 percent, but it affected very little income, so the average total tax rate for the 1 percent was about half that figure. The fiscal cliff deal may not have pleased a number of liberals. But at the very least, they can say America's richest families will likely be taxed more than any time since Jimmy Carter was president.
  16. “THERE’S BEEN A COUP D’ETAT IN THE UNITED STATES AND GOLDMAN SACHS WON” George Soros harshly criticizes true believers in the wonders of unregulated free markets, an ideology he calls "market fundamentalism.“ Soros attacks market ideology on several grounds, ranging from amorality to its role in fostering financial instability. On ethics, he said: "Market values express what one participant is willing to pay another in a free exchange. They do not reflect social values, nor do they express many of the intrinsic values that people hold dear..." Soros disputes the fundamental claim of American textbook economics, that the "invisible hand" of selfish individual behavior will be good for everyone: "Market fundamentalists... [claim] that the common interest is best served by everybody looking out for his own interests. This claim is false... There are many political and social objectives which are not properly served by the market mechanism... These include the preservation of competition and of stability in financial markets, not to mention issues like the environment and social justice." Soros further argues that free-market ideology threatens political democracy: "By promoting market values into a governing principle, market fundamentalism has undermined our society. Representative democracy presupposes moral values, such as honesty and integrity, particularly in our representatives. When success takes precedence over integrity, and politics is dominated by money, the political process deteriorates."
  17. The government is the only reason U.S. inequality is so high
  18. In the 2012 election, 28 percent of all disclosed political contributions came from just 31,385 people. In a nation of 313.85 million, these donors represent the 1% of the 1%, an elite class that increasingly serves as the gatekeepers of public office in the United States. More than a quarter of the nearly $6 billion in contributions from identifiable sources in the last campaign cycle came from just 31,385 individuals, a number equal to one ten-thousandth of the U.S. population. In the first presidential election cycle since the Supreme Court's decision in Citizens United v. FEC, candidates got more money from a smaller percentage of the population than any year for which we have data, a new analysis of 2012 campaign finance giving by the Sunlight Foundation shows.
  19. Koch Brothers Fund Tea Party C harles and David Koch are owners of a primary funders for the tea party and other extreme conservative groups. They are worth $34.5 billion each making them the 8th and 9th richest people in the world and controlling stockholders for Koch Industries Inc. They are a private global conglomerate located in over 60 countries, including interests in oil, refining, pipelines, paper products, chemicals, fertilizer and commodities trading with annual revenues around $100 billion. A review of documents and tax records for frequently connected interconnected web of corporate front groups, supported by the Koch brothers, shows how dangerous these groups espousing free markets and liberty have become to society. The Koch brothers’ decision to create a nonprofit network dates back to 1977 when Charles Koch founded the Cato Institute, an organization the Koch foundations continue to fund. According to Cato’s web site, David Koch continues to sit on its board along with Kevin Gentry, Vice President for Strategic Development at the Charles G. Koch Charitable Foundation and chief honcho of the secret, annual strategy meetings of the Kochtopi.
  20. The mission of the American Legislative Exchange Council (ALEC) is…to advance the Jeffersonian principles of free markets, limited government, federalism, and individual liberty, through a nonpartisan public-private partnership of America’s state legislators, members of the private sector, the federal government, and general public. … to promote these principles by developing policies that ensure the powers of government are derived from, and assigned to, first the People, then the States, and finally, the Federal Government. … to enlist state legislators from all parties and members of the private sector who share ALEC’s mission.
  21. Americans have a distorted sense of the level of inequality in their society—but not in the direction one might expect. Associate professor of business Michael I. Norton has found that respondents to his surveys universally think that wealth is more evenly distributed in the United States than it actually is—and what’s more, respondents say they would prefer for the wealth to be still more evenly spread around. Norton and his coauthor, Dan Ariely (author of the popular title Predictably Irrational and a professor of behavioral economics at Duke), believe that one reason perceptions are so skewed is because the easy availability of credit masks people’s real financial situation.
  22. Ill Fares the Land, By Tony Judt, THE NEW YORK REVIEW OF BOOKS, APRIL 29, 2010 Something is profoundly wrong with the way we live today. For thirty years we have made a virtue out of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose. We know what things cost but have no idea what they are worth. We no longer ask of a judicial ruling or a legislative act: Is it good? Is it fair? Is it just? Is it right? Will it help bring about a better society or a better world? Those used to be the political questions, even if they invited no easy answers. We must learn once again to pose them. The materialistic and selfish quality of contemporary life is not inherent in the human condition. Much of what appears "natural" today dates from the 1980s: the obsession with wealth creation, the cult of privatization and the private sector, the growing disparities of rich and poor. And above all, the rhetoric that accompanies these: uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth. We cannot go on living like this….But if we do no more than pick up the pieces and carry on as before, we can look forward to greater upheavals in years to come. And yet we seem unable to conceive of alternatives. This too is something new.
  23. How a New Jobless Era Will Transform America by Don Peck THE ATLANTIC, March 2010 The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come… One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year. We are in a very deep hole, and we’ve been in it for a relatively long time already….We are living through a slow-motion social catastrophe, one that could stain our culture and weaken our nation for many, many years to come. We have a civic— and indeed a moral—responsibility to do everything in our power to stop it now, before it gets even worse.
  25. The Wrecking Crew by Thomas Frank Holt Paperbacks, August 2009
  26. Religious and Free-Market Fundamentalism Have More in Common Than Their Fans in the Tea Party Because fundamentalists are ideologically driven, they tend to reject basic facts that do not comport with their ideology. Religious fundamentalists have unyielding faith in the literal veracity of the Bible and consequently dispute all conflicting science, such as the theory of evolution. By the same token, freemarket fundamentalists dispute basic facts that call into question the efficiency and fairness of strict laissez-faire economics. Since the fundamentalists' extreme views usually do not square with the facts, they commonly proceed to make up their own facts, resorting to disinformation and conspiracy theories. As such, religious fundamentalists have claimed that the theory of evolution is a "fraud," that there is no consensus in the scientific community about its validity, and that creationism is accepted by many scientists. Free-market fundamentalists have likewise resorted to glaring misrepresentations in order to defend their ideology. Partisans of deregulation have notably challenged the Obama administration's health care reform by claiming that America provides better and cheaper access to medical treatment than nations with universal health care, whose systems are less market-driven and more regulated. While fundamentalists are adamant that an unregulated market efficiently provides for everyone's health care, the opposite is true. America is the only developed country allowing insurance companies to profit from basic health coverage. Until the Democratic reform, it was also the only one that let insurance companies deny coverage to people with "pre-existing medical conditions," such as cardiac problems or lupus. These arguments have heavily shaped opposition to "Obamacare," plausibly even more than claims about its unconstitutionality, which the Supreme Court has now largely rejected, albeit by a narrow majority. Indifference toward the plight of the uninsured illustrates a salient feature of fundamentalism: obliviousness towards the social costs of ideological purity. Religious fundamentalists have displayed an equivalent indifference to the social costs of their purist ideology. By Mugambi Jouet, Truthout Saturday, 21 July 2012
  27. GEORGE LAKOFF “The moral of Katrina is mostly being missed….The cause was political through and through �- a matter of values and principles. The progressive-liberal values are America's values, and we need to go back to them. The heart of progressive-liberal values is simple: empathy (caring about and for people) and responsibility (acting responsibly on that empathy). These values translate into a simple principle: Use the common wealth for the common good to better all our lives. In short, promoting the common good is the central role of government.”
  28. Franklin D. Roosevelt “The Economic Bill of Rights” Excerpt from 11 January 1944 message to Congress on the State of the Union “We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. “Necessitous men are not free men.” People who are hungry and out of a job are the stuff of which dictatorships are made. In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all— regardless of station, race, or creed. Among these are: The right to a useful and remunerative job in the industries or shops or farms or mines of the nation; The right to earn enough to provide adequate food and clothing and recreation; The right of every farmer to raise and sell his products at a return which will give him and his family a decent living; The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad; The right of every family to a decent home; The right to adequate medical care and the opportunity to achieve and enjoy good health; The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment; The right to a good education. All of these rights spell security….America’s own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens.”

Notas do Editor

  1. What accounts for this, chief economist at Point Loma Nazarene University in San Diego, Lynn Reaser, suggested to The Huffington Post in March, is that companies have been able to bring their production levels back to pre-recession levels without hiring. "We have now recovered all of the output lost in the recession, but we are still down by 7.5 million workers," she said.