Note: I submitted this one to The Agonist a few weeks ago. Got a few comments on it there.
Thee Book to read these days is Thomas Piketty’s “Capital in the Twenty First Century”…, or so I have heard. But my bookcases are all overflowing and I mostly buy books on the Kindle now…, and am just finishing up Michael Hudson’s (highly recommended) “The Bubble and Beyond”…, so I don’t feel the need or desire to tackle Piketty’s “Capital…”. At 700 pages, it seems like a lot of space to tell me what David Michael Green told me on his blog a few years ago…, and that I shared with all The Agonistas around at the time.
Let me make it simple, in case anyone wants to share this essay with their idiotic, Republican (pardon the redundancy) cousin Buford: The story of American politics over the last generation is the story of the transfer of wealth from the people to the plutocrats. If you think there is anything else essential going on here, you don’t get it.
I got it right off. I guess it takes academics like Paul Krugman a few more pages…, say about 700 more…, before they get the point. PK seemed genuinely amazed, on the Bill Moyers show last week, to find out that there are some people getting filthy rich…, while some others are wishing they had the bottom of a barrel to scrape. He admitted that he should have “realized it” himself. I wanted to ask him if he realized that upwards of 90% of the additional Keynesian Stimulus money that he keeps wanting to throw at this Great Recession would go right into the pockets of those same plutocrats that have been sucking it up before it hits the masses for the last 40 years? I’m not sure he really “gets it”.
Harold Meyerson says in his article from The American Prospect, “The Forty-Year Slump”:
Hardly anyone paid attention to a story that seemed no more than a statistical oddity: That year [1974], for the first time since the end of World War II, Americans’ wages declined.
Since 1947, Americans at all points on the economic spectrum had become a little better off with each passing year. The economy’s rising tide, as President John F. Kennedy had famously said, was lifting all boats. Productivity had risen by 97 percent in the preceding quarter-century, and median wages had risen by 95 percent. As economist John Kenneth Galbraith noted in The Affluent Society, this newly middle-class nation had become more egalitarian. The poorest fifth had seen their incomes increase by 42 percent since the end of the war, while the wealthiest fifth had seen their incomes rise by just 8 percent. Economists have dubbed the period the “Great Compression".
During that time, median family income more than doubled.
What no one grasped at the time was that this wasn’t a one-year anomaly, that 1974 would mark a fundamental breakpoint in American economic history. In the years since, the tide has continued to rise, but a growing number of boats have been chained to the bottom. Productivity has increased by 80 percent, but median compensation (that’s wages plus benefits) has risen by just 11 percent during that time. The middle-income jobs of the nation’s postwar boom years have disproportionately vanished. Low-wage jobs have disproportionately burgeoned. Employment has become less secure. Benefits have been cut. The dictionary definition of “layoff” has changed, from denoting a temporary severance from one’s job to denoting a permanent severance.
As their incomes flat-lined, Americans struggled to maintain their standard of living. In most families, both adults entered the workforce. They worked longer hours. When paychecks stopped increasing, they tried to keep up by incurring an enormous amount of debt. The combination of skyrocketing debt and stagnating income proved predictably calamitous (though few predicted it). Since the crash of 2008, that debt has been called in.
All the factors that had slowly been eroding Americans’ economic lives over the preceding three decades—globalization, deunionization, financialization, Wal-Martization, robotization, the whole megillah of nefarious –izations—have now descended en masse on the American people. Since 2000, even as the economy has grown by 18 percent, the median income of households headed by people under 65 has declined by 12.4 percent. Since 2001, employment in low-wage occupations has increased by 8.7 percent while employment in middle-wage occupations has decreased by 7.3 percent. Since 2003, the median wage has not grown at all.
Over at CounterPunch, Robert Urie chimed in with, “Say Goodbye to Social Security”:
With corporations and the rich who own them receiving a larger proportion of what labor produces and paying less in taxes, there is now little left to pay for necessary social programs such as schools, health care and pensions. But this shortfall is no accident. It is the intended result of four decades of policies specifically designed to enrich the ruling class at the expense of labor, the middle class and the poor.
The economy is only a catastrophe for working people, the middle class and the poor. The ruling class is doing better than it has since the 1930s. Under the guidance of Republican and Democratic administrations, labor’s take in wages and salaries has fallen from 53% of GDP in 1970 to 44% in 2012 (link). The effective tax rate on corporations is currently half of what it was in 1970 (source: BEA). Likewise, tax rates on the wealthy have been dramatically reduced. And these policies have produced exactly the outcomes they were designed to produce.
For forty years the rich and connected, the ruling class, have used their representatives in government to take exactly what they wanted. Tax cuts, executive payouts and stock dividends were paid instead of promised pension contributions. Social institutions such as schools have been turned into cash cows for connected capitalists who have no intention of educating our children. Environmental standards have been gutted in return for promised jobs that never materialized. And while the ruling class has taken what it wanted without apology, the chattering class—liberals and progressives, has acted as if it’s at a debate club meeting.
Robert Reich has been hitting this theme hard as well…, and even has a new film out on the topic called “Inequality For All”:
…the rich have been getting a larger and larger portion of total income. From 9 percent in 1980, the top 1 percent’s take increased to 23.5 percent by 2007. CEOs who in the 1970s took home 40 times the compensation of average workers now rake in 350 times.” (“Confessions of a Class Warrior,” August 22, 2010).
Yet even as their share of the nation’s total income has withered, the tax burden on average workers has grown. They’re shelling out a far bigger chunk of incomes in payroll taxes, sales taxes and property taxes than 30 years ago. It’s just the opposite for the superrich. Over the last three decades, the richest 1 percent’s share of national income has doubled (from 10 percent in 1981 to well over 20 percent now). The share going to the richest one-tenth of 1 percent has tripled. And they’re doing better than ever. The median pay for top executives at 200 major companies was $9.6 million last year, topping pre-recession highs. Total compensation on Wall Street hit a record $135 billion. The heads of the top 25 hedge funds made almost $1 billion each. Yet, remarkably, tax rates on the very rich have plummeted. From the 1940s until 1980, the top income-tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are paying a far lower share of their incomes in taxes than at any time since World War II” (“Wealthy Americans not paying fair share of taxes,” April 17, 2011).
Yeah…, everybody has an opinion regarding what the hell happened. There were numerous factors that combined to get us here. Maybe Piketty hits them all in his long winded attempt to explain it all…, globalization, financialization, foreign competition, NAFTA, out sourcing of jobs, technology, robotics, credit, debt, liar’s loans, NINJA loans, adjustable interest loans, no interest loans, not enough loans, unearned income, economic rent, carried interest, tax breaks, loopholes, offshore bank accounts, bonuses, stock buybacks, regulation, de-regulation, CO2, methane, ocean acidification, ozone, global warming, climate change, peak oil, military-industrial complex, unions, non-unions, pensions, Social Security, Medicare, welfare, food stamps, Republicans, Democrats, Federal Reserve, Glass-Steagall, nannycrats, plutocrats, and oligarchs. From what I can gather, Piketty seems to be saying that it is just a natural outcome of the capitalist system…, that the rich are going to get richer and everyone else is going to get poorer when the rate of return on capital exceeds the rate of growth. Paul Krugman seems to think that Piketty has discovered the magic bullet.
I haven’t read the book…, but the reviews that I have read don’t seem to mention that the plutocrats and oligarchs have made a conscious and concerted effort over the last forty years to buy the judges and politicians who make and break the laws that allow the economic elite to pay a lower tax rate on their multi-millions…, if they pay taxes at all after taking advantage of all the tax breaks and loopholes…, than the tax rate us ordinary people pay on our low tens of thousands…, if we are lucky enough to still have a job that is. And it wasn’t just tax laws that were rewritten…, it was a whole host of financial laws and policies that were rewritten or repealed that created a wealth shift the likes of which the world has never seen…, well…, at least since the roaring ‘20’s. Everybody knows what happened in 1929. It wasn’t some accident or law of economics that has created the current inequality and rising oligarchy…, it was a well-designed and executed plan that was laid out by a Lewis F. Powell Jr. in a 1971 memo…, not long before he was appointed Supreme Court justice. If you haven’t checked out the film, “Heist: Who Stole the American Dream”…, you need to. It was on Link TV recently. From Wiki:
Heist: Who Stole the American Dream? is a 2011 documentary film which argues that government deregulation led to the Great Recession. It was directed and produced by Donald Goldmacher and journalist Frances Causey and narrated by Thom Hartmann. The documentary is partially based on Jeff Faux's 2006 book The Global Class War.[1] The film traces the roots of the Great Recession to Virginia lawyer Lewis F. Powell, Jr., whose 1971 memo to the United States Chamber of Commerce urged corporate America to become more aggressive in molding politics and law.
Filmmakers Goldmacher and Causey started work on Heist in 2006 after they had been investigating the exploitation of undocumented workers near the Arizona border.[3] Heist explores the premise that Roosevelt's New Deal is being dismantled piecewise. It documents the aggressive push for free trade agreements such as the North American Free Trade Agreement as well as the deregulation of financial products as evidenced by the repeal of the Glass–Steagall Act and the passage of the Commodity Futures Modernization Act of 2000.[2] Heist lays the blame for the crisis on the cozy relationship between politicians and corporations, citing the Reagan administration as well as the actions of Presidents Clinton and Obama.[4] The documentary ends with suggestions for how people might organize, including tactics employed by Occupy Wall Street.
Morris Berman reviewed it over at CounterPunch:
Beyond generating dialogue, Heist provides an alternative narrative to what’s been going on in this country since 1981. “Reaganomics,” or what we now call “neoliberalism,” is the philosophy that economic growth is the answer to all our problems, because as the rich make more money, some of that will supposedly “trickle down” to the rest of us. This has been the dominant narrative in this country for the last thirty years, and what Heist clearly demonstrates is that it’s nothing more than pure kaka. What actually happened under this narrative was that wealth got transferred upward; that the rich got richer and the poor got poorer; that virtually nothing “trickled down”; that unions were busted, public services gutted, American manufacturing crippled, the media collapsed into six major corporations and turned into corporate propaganda mouthpieces, and so on. In other words, Reagonomics gave us the America we have today, in which 1 out of every 5 of us is without work and without prospect of same for at least a decade, and in which 2 out of every 3 of us lives from paycheck to paycheck, hoping that some major accident won’t occur in our lives and put us underwater for good.
Heist is thus an exercise in counter-brainwashing: Reagan and his ilk, the Powell Memorandum and the so-called think tanks (read: propaganda machines) of the political Right (American Heritage Foundation, American Enterprise Institute, Cato Institute, etc.) all sold us a bill of goods, stole the American Dream out from under us, and we need to recognize that we’ve been economically and intellectually fleeced. Unless we can debunk the dominant narrative, and realize what really went down since 1981, we will not be able to take back the American Dream—which Causey and Goldmacher define as everyone getting a fair share of the economic pie.
Yeah…, if Piketty thinks that diagnosing the intricacies of economic theory and coming up with a simple solution of “taxing away” the wealth of the plutocrats and oligarchs that have spent the last 40 years securing the legal and political means of acquiring and keeping that wealth…, well…, he’s just dreaming. And I am not sure Krugman has woken up since I called him, "Kick the Can Krugman” here at The Agonist five or six years ago. We need nothing short of wholesale Senate and House cleaning and meaningful campaign finance reform to just begin to undo the damage already done. Who knows what it will take to repair the coming damage.
A few comments from Joe Bageant ought to fit in well here:
Yes, it looks big time from the cheap seats. But the truth is that when we are looking at the political elite, we are looking at the dancing monkey, not the organ grinder who calls the tune. Washington's political class is about as upwardly removed from ordinary citizens as the ruling class is from the political class. For instance, they do not work for a living in the normal sense of a job, but rather obtain their income from abstractions such as investment and law, neither of which ever gave anybody a hernia or carpal tunnel. By comparison, the ruling class does not work at all.
Yessiree, it was gonna be a "systemic collapse," by god, and if you needed proof, just look at the way both George Bush and Barack Obama agreed that some American corporations were too big to let sink, therefore it was time for the public to start bailing out the boat. Meanwhile, the royal economists were unanimous in that this "rescue" was going to require another 10 trillion bucks somewhere down the pike -- a very short pike. So it must all be damned serious and we gotta do this thing. Right folks?
In an unusual display of common sense, the American public said "Bullshit," by margins of three or four to one, depending upon region. That did not bother political and economic elites much. What the fuck do the proles know anyway?
No…, there is no magic bullet economic theory…, not even 700 pages of it…, that will cure our ills. But I will say…, I am glad that Piketty’s book is bringing attention to the problem and am glad that Krugman is helping spread the word…, however misguided their solutions are. I hope Krugman is finally…, at least starting…, to “get it”.
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