Inequality is as much a political problem as an economic one, one of America’s top economic journalists writes. Ignoring trillions in wasted individual investments while riling up anger over even minor waste in government is part of the problem—and so is the change in who reports the news.
A number of chapters in this volume document the shocking increase in inequality in America. My message is simple: it does not have to be that way. It does not have to be that way economically or politically.
The Right has a story to tell about inequality. It’s a simple story, which has been swallowed whole by elite opinion and a lot of ordinary Americans. If you want an economy that works efficiently, it says, you have to tolerate a great deal of inequality.
I’ve devoted much of my career as an economics writer and a polemicist to disproving that argument. The simplest refutation is to refer back to periods of American history when we had significantly greater equality, both of opportunity and of result, and stronger economic growth; we can also point to other countries that have much less inequality than the United States does and work better economically.
It’s not hard to see why they do. A prosperous economy demands investment in children, in health, in education, in job training, in public systems, in the commons generally. If you have tens of millions of people not living up to their potential as economic beings, by definition your society is going to be less productive than it could be. If you spend almost 18 percent of the gross domestic product on health care because private, profit-motivated insurance companies are taking thirty cents out of every premium dollar, you are not going to have a society that is as healthy as it ought to be.
Equality works. Extreme inequality does not. Out of the grotesque opportunism that we’ve seen among owners of great wealth in the past ten years has come a colossal waste of financial capital and human energy.
The stock-market bubble of the late 1990s induced investors to put vast resources into enterprises that never paid back a nickel of return; they only lined the pockets of insiders. If the government squandered money on this scale, conservatives and conservative investment bankers would be up in arms. But they’re not, of course. When the government wastes hundreds of dollars, they tell us it’s an outrage; when the market wastes trillions of dollars, it’s a lamentable glitch. This is not economics. This is ideology, pure and simple.
Why has our society become so much more unequal in the past twenty-five years? It’s a trick question. The technical or policy answer involves a systematic weakening of what might be called equalizing institutions, which defend the commonwealth against the forces of wealth and concentrated power. To maintain a social contract of the kind that existed in this country during the postwar decades, you need a government to administer it; to help people climb out of poverty, you have to tax the wealthy and put some of the proceeds into opportunity-making programs.
But in a global economy with no global government, there is no entity capable of enforcing rules or effectively collecting taxes and directing public investment. I am a citizen of the United States of America. I am not a citizen of the Republic of NAFTA. There is no Republic of NAFTA, and that is exactly the way big business wants it.
And so, in addition to the alleged economic efficiency of freer trade, business gets another benefit: it wipes away all of the social institutions that have been built through great struggle by ordinary people and their governments over the past hundred years.
That is really the insidious influence of globalization. It is not just that jobs move to countries where people are desperate enough to work for starvation wages, or where publics are too powerless to demand environmental standards. No, it is the fact that we are left with no democratically accountable institution capable of setting ground rules. We could have had a brand of globalization in which the ability to sell products to the United States depended on meeting certain social minimums, involving wages, organizing rights, environmental standards, treatment of children, and so on. But because that was not the globalization that corporate America sought, it is not what has evolved.
So the real answer to the question, “Why have we become so much more unequal?” has to be a political answer. The forces that yearn for a restoration of the kind of polity we had in the robber baron era of the late 1800s have become far stronger over the past quarter century; that, in essence, is why organized labor has shrunk since 1970 from 35 percent to 9.3 percent of the American workforce in 2012 and under 7 percent of private-sector workers.
That’s what encourages giant corporations to demand huge tax “incentives” before they move in anywhere, and then to move out with impunity as soon as another jurisdiction offers a better deal. That’s why, in so many areas, property rights now take precedence over human rights, social rights, and labor rights. The instruments and institutions that allow us to choose to become a more egalitarian society have simply been removed from the realm of democratic citizenship.
We cannot fully blame this change on one political faction or party. Too often, over the past twenty-five years, both parties have been drinking the same Kool-Aid. Too much of the time, Democrats have presented themselves as the “me too” party. “We do not really like government either,” they say. “We love big business, too. Let the free market decide.” We heard far too much of that from our last two Democratic presidents, Jimmy Carter and Bill Clinton.
There are several explanations for this self-defeating rhetoric. First of all, it is the result of money becoming paramount in politics—becoming the medium of politics. If you spend most of your waking hours courting the wealthy, you start talking their language; you instinctively seek to reassure your donors, and you cease paying attention to building, validating, and energizing your base. As the Democrats have become more artful fund-raisers, their message to the base has become muddy, and populism has become a dirty word.
The news media have abetted the process. When I started out in journalism, a reporter was a kind of average person who wore cheap suits and identified with the downtrodden. Today, the most influential journalists, who make six- and seven-figure incomes, with a few in the eight-figure class that starts at $10 million per year, give well-paid lectures to trade associations and hobnob with elites. Hardly any of them identify with ordinary people. One of the daunting tasks that faces us, in addition to taking back American politics, is taking back the American press so it does not contribute more to justifying our worsening inequality.
From Inequality Matters: The Growing Economic Divide in America and its Poisonous Consequences, ed. James Lardner and David A. Smith.