Can America Survive The Rich Getting Richer, Richer And Richer?
By Barrington M. Salmon
Since the United States stepped back from the abyss in the aftermath of the Great Recession in 2008-09, the American economy has performed at a steady clip.
The stock market climbed to dizzying heights, corporations, insurance companies, banks and the business elite are awash in billions. And significant portions of the nation’s wealth—with the help of congressional Republicans and other politicians—have been siphoned from the middle class and modestly wealthy and directed into the coffers of the uber-rich.
A recent report from the Economic Policy Institute says there are consequences and danger here: Material wealth that should come from the labor of working people is not and has not reached the majority of working Americans.
The end result for workers is nightmarish and the seeds of social upheaval and erosion of democracy loom, warns one of America’s leading economists.
The report’s author, Elise L. Gould, says rising wage inequality and sluggish hourly wage growth have defined the U.S. labor market for nearly four decades, despite steady growth in productivity.
“What we’ve seen is a disconnect between the growing economy and productivity, and what workers get in their pockets,” says Ms. Gould, the report’s author and EPI senior economist. “We used to see a translation in wages but not now. There has been an increasing demand for people with education, yet most of them haven’t seen higher wages. And the bottom 60 percent has been stagnant.”
Wage inequality worsened between 2000 and 2018, with the highest paid workers being the primary beneficiaries, she says.
Because of structural racism and other barriers to Black advancement and success, Blacks, in general, and Black women, in particular, are faring worst.
“Compared with White workers, Black workers have been losing ground since 2000, with larger black–white wage gaps across the entire distribution,” the report says. “In 2000, black wages at the median were 79.2 percent of white wages. By 2018, they were only 73.3 percent of white wages, representing an increase in the wage gap from 20.8 percent to 26.7 percent.”
“The data show not only rising inequality in general, but also the persistence, and in some cases worsening, of wage gaps by gender and race. What also stands out in this last year of data is that, while wages are growing for most workers, wage growth continues to be slower than would be expected in an economy with relatively low unemployment,” she says in the report. “Given this slow wage growth, policymakers should not presume that the economy has already achieved (or even surpassed, as some claim) full employment. Instead, policymakers should try to keep labor markets as tight as possible for as long as possible to see if wage growth lost during the Great Recession can be clawed back, and to see if wage disparities by gender and race can be reduced.”
America’s working class is caught in an economic vice fueled by decades of stagnant wages; the weakening of organized labor by Republican lawmakers; gaming of the system by politicians; minimum wages for fast food and service jobs; unemployment; the spiraling cost of food, medicine, and rent; gentrification, foreclosures, and the paucity of affordable housing.
“People need more jobs, jobs that have more hours and the pay needs to be higher. What people are earning is simply insufficient. We also need a better safety net for caregivers and students,” Pulitzer Prize-winning Economist Joseph E. Stiglitz said in an article, “The American Economy is Rigged. And What We Can Do About It.”
“It seems like people are working really hard and low-income workers are more educated than ever before. But the data make it clear that millions of people who are active participants in the labor market are unable to make ends meet, either due to insufficient hours or low wages,” he observes.
“The basic perquisites of a middle-class life, including a secure old age, are no longer attainable for most Americans,” he continues.
“We need to guarantee access to health care. We need to strengthen and reform retirement programs, which have put an increasing burden of risk management on workers (who are expected to manage their portfolios to guard simultaneously against the risks of inflation and market collapse) and opened them up to exploitation by our financial sector (which sells them products designed to maximize bank fees rather than retirement security).”
Seattle investor and businessman Nick Hanauer echoed Dr. Gould, who when asked, said that America’s capitalist model would be rendered unworkable if the middle and working classes make so little they can’t buy goods and services they need.
The “fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich business-people like us, the true job creators. … Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around,”insists Mr. Hanauer, who invested in Amazon as its first non-family investor when it was a start-up. He has founded, co-founded and funded more than 30 companies, including founding aQuantive, an Internet advertising company that he sold to Microsoft in 2007 for $6.4 billion cash.
Former FAMU law professor Dr. Cori Harvey said she has been watching the relentless hollowing out of the middle with growing concern.
The drumbeat of challenges could lead to its collapse, but she says she’s optimistic conditions will improve— but only after they get worse.
“The working class, middle class and the poor are collapsing in,” she adds. “At the top, these are all the same people who hang out together, eat steak dinners, go to the same schools and marry each other. Most of them would drop dead where they stand if their daughter brought a policeman or fireman home.”
“I think that when people are ‘robbing Peter to pay Paul,’ which a lot of us are familiar with, we make bad short term decisions that are catastrophic in the long run—such as cutting out insurance payments which can be ruinous,” she notes. “Specifically, with Black families, the erosion of the middle class cuts deeper because they have fewer layers of protection and support networks and less equity to pull out of their homes.”
Dr. Harvey, a legal consultant and former a former Philadelphia public defender, argues it is incumbent on Black Americans to change their habits and behaviors, start watching news programs and read about how to make money, make good choices and prioritize their spending, get involved politically and vote wisely.
Prof. Stiglitz has been a frequent and caustic critic of the American political and economic system, saying not just that the U.S. economy is rigged, but also warning of the toxic fallout to individuals and institutions if nothing is done.
“Wealth is even less equally distributed, with just three percent of Americans having as much as the bottom 50 percent—testimony to how much money there is at the top and how little there is at the bottom,” he wrote in the article, “The American Economy Is Rigged. And What We Can Do About It.”
“Families in the bottom 50 percent hardly have the cash reserves to meet an emergency. Newspapers are replete with stories of those for whom the breakdown of a car or an illness starts a downward spiral from which they never recover.”
Professor Stiglitz, who won the Nobel Prize in 2001 and who teaches at Columbia University, has been sounding the alarm for years.
He argues that the 1 Percent have accumulated so much political power and wealth in recent decades—using dark money, gerrymandering and voter suppression—that the U.S. has paid a high price and its democracy is imperiled.
The ability of those with modest means to enjoy social mobility have dissipated for the most part, he argues.
“It’s no use pretending that what has obviously happened has not in fact happened,” he writes in another article titled, “Of the 1%, by the 1%, for the 1%.” “The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year,” he says.
Even as workers struggle to make ends meet, a 2016 EPI report showed that CEOs in Fortune 500 and other top companies made more in two days than an average employee did in a year.
Chief executives at 350 companies made $15.6 million on average in 2016—271 times what the typical worker earns.
And even though CEO compensation has fallen slightly in the past few years, it has increased by more than 930 percent since 1978. The report notes that CEO pay has grown faster than the stock market.
Mega-corporations like Amazon illustrate the perverse nature of the current economic system: Owner Jeff Bezos is the richest man in the world with a net worth of $132 billion but his company and others like Walmart and McDonalds, pay their employees so little that they’re often forced to rely on food stamps, Medicaid, and other public assistance to make ends meet.
Doug Smith, a former partner at the McKinsey Management Consulting Firm, in discussing the stunning pay gap between CEOs and employees, argues the economic costs of huge pay gaps go far beyond the problems of low employee morale and high turnover.
“Instead of building a real economy beneficial to all,” he said, “these unethical pay practices spread outsourcing, offshoring, tax avoidance, downsizing, and the substitution of good-paying permanent jobs with temporary, precarious employment.”
Prof. Stiglitz, author of a bestselling book, “The Price of Inequality,” notes, “Most Americans want a higher minimum wage, they want gun control, they want access to healthcare, they want stronger financial regulation—the polling on some of these issues is, you know, 75% or more —and yet our democracy can’t deliver it,” he continued. “Those on the other side have to undermine democracy if they’re going to thwart the will of such a large majority, so they undermine it by disenfranchisement and disempowerment.”
Mr. Hanauer, in a 2014 Politico magazine article sends a message to “his fellow zillionaires.”
“Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution. And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last,” he warns.
“If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counter-examples. None. It’s not if, it’s when.”