On July 8, 2017, Pedro Nicolai da Costa writes on Business Insider:
Destabilizing levels of income inequality, once a problem reserved for developing nations, is now a defining social and political issue in the United States.
Donald Trump seized on the issue during the presidential campaign, vowing to become a voice for forgotten Americans left behind by decades of widening wealth disparities.
While America’s enormous gap between rich and poor and the sorry state of its middle class are well-documented, a less prominent trend tells an equally important story about the American economy: the divide between the well-off and the stratospherically rich.
This particular pattern is especially important since some economists and conservative commentators have tried to blame inequality on educational levels, arguing that those with college degrees have fared well in the so-called knowledge economy while those with a high school diploma or less lack the skills to do the jobs available.
Others, however, point to runaway salaries for top executives in industries like energy and finance as the key underlying drivers of inflation, which has been characterized by huge gains at the very top of the income distribution. Executive compensation is driven in large part by corporate boards that have cozy relationships with firms’ CEOs, rather than market forces.
From Aspen, Colorado, the New York Times columnist David Brooks recently wrote:
“There is a structural flaw in modern capitalism. Tremendous income gains are going to those in the top 20 percent, but prospects are diminishing for those in the middle and working classes. This gigantic trend widens inequality, exacerbates social segmentation, fuels distrust and led to Donald Trump.”
Gabriel Zucman, an economist at the University of California, Berkeley and a preeminent researcher of inequality, wasted little time in countering the argument.
“Tremendous gains are not going to the top 20%. They are going to top 1%,” he tweeted at Brooks, adding that this is key to understanding the Republican Party’s agenda.
Richard Reeves, a senior fellow at the Brookings Institution, makes a similar case as Brooks.
“The strong whiff of entitlement coming from the top 20 percent has not been lost on everyone else,” he wrote in a recent opinion piece. His book is titled “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.”
Nicholas Buffie, an economic-policy researcher in Washington, eloquently took issue with the 20% argument in a blog he wrote when he was at the Center for Economic and Policy Research.
“The problem with this type of analysis is that it misleads readers into thinking that a large group of well-educated Americans have benefited from the rise in inequality,” Buffie said. “In reality, the ‘winners’ from increased inequality are really a much smaller group of incredibly rich Americans, not a large group of well-educated, upper-middle-class workers.”
In other words, blaming America’s wealth divide merely on educational differences may be easy, but not particularly useful.
Gary Reber Comments:
Interestingly, while to some degree all of the causes cited in the author’s article are true, the author does not zero in on why the rich and super-rich are wealthy. Simply, the reason they are rich is because they OWN the vast means of non-human, wealth-creating, income-producing capital assets. They will continue to get richer and richer as long as the system requires “past savings” to finance future capital asset formation,
One feasible way is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed (ala the Federal Housing Administration concept). This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.
We need to reevaluate our tax, monetary and central banking institutions, as well as, labor and welfare laws. We need to innovate in such ways that we lower the barriers to equal economic opportunity and create a level playing field based on anti-monopoly and anti-greed fairness and balance between production and consumption. In so doing, every citizen can begin to accumulate a viable capital estate without having to take away from those who now own by using the tax system to redistribute the income of capital owners. What the “haves” do lose is the productive capital ownership monopoly they enjoy under the present unjust system. A key descriptor of such innovation is to find the ways in which “have nots” can become “haves” without taking from the “haves.” Thus, the reform of the “system,” as binary economist Louis Kelso postulated, “must be structured so that eventually all citizens produce an expanding proportion of their income through their privately owned productive capital and simultaneously generate enough purchasing power to consume the economy’s output.”
We need leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every child, woman, and man as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every child, woman, and man to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.