What can happen when debt is used to buy a troubled business and financial manipulation ensues. The bankruptcy of Toys R Us.
After two printings and more than 50,000 copies sold, Runaway Inequality will get a new introduction and a new printing early in 2018. While we discussed a new title for the book, Runaway Inequality in the Age of Trump, we decided to not change the name, but the draft of the new introduction, which follows, discusses what we’ve been doing to reverse runaway inequality, and the changes our new president has brought to the nation. Since you’re likely already familiar with the book and our education program, we’re interested in hearing your reactions. Please use the form at the right to leave whatever comments you want to make. Thank you.
Preface to the Third Printing
By Les Leopold
Runaway Inequality has sold 50,000 copies. The book, and the accompanying curriculum, are being used in hundreds of workshops, conferences and discussion groups for unions, church groups, immigrant worker centers and environmental organizations. A Spanish print and e-book edition is now available as well. Thousands of people have joined the RunawayInequality.org educational network and hundreds have volunteered to become runaway inequality trainers. (All training materials in Spanish and English are available free of charge at runawayinequality.org. All royalties from book sales go back into the project).
It’s a good start but much more is needed. Runaway inequality has been festering for more than a generation, growing more severe under both political parties. The election of Donald Trump is making it worse. That’s why we’ve added “in the Age of Trump” to the title. However, this book is not a diatribe against Trump nor an attack on all of those who voted for him. Rather, it lays out the facts about runaway inequality, how it ties together so many crucial issues we all face, and why it can unite us in building a movement for economic fairness and justice. The facts in this book will highlight how rule by financial elites is ruining all that we hold dear. We think that message also can reach many who voted for Trump out of sheer frustration.
Many working people hoped that Donald Trump would bring a new voice to politics and the economy by ending anti-labor trade deals, protecting decent paying jobs, and generally improving wages and working conditions. Those wishes are not being fulfilled. Rather, Trump is exacerbating runaway inequality.
As part of the billionaire class, he is acting true to form. That class believes that the super-rich are the heart and soul of the economy — the job creators. Trump and his fellow financial elites truly believe they should be liberated from all burdensome regulations and taxes. They believe that public services should be turned over to the private sector and run for profit. To the richest of the rich, runaway inequality is a sign of great achievement — a blessing, not a plague on our economy. They feel it entitles them to a privileged position in every area of life.
It is not an accident that the Trump administration is loaded with super-rich Wall Street and corporate elites. It is not an accident that he is calling for enormous tax cuts on corporations claiming that they will lead automatically to increases in wages. But as this book shows as clearly as possible, Trump has it backwards. Tax cuts for the wealthy and corporations lead to more wealth for the few. It does not trickle down. Instead the rich grow richer and richer while worker wages stall. That’s been the case for more than a generation.
The Great Distraction
As this book makes clear, runaway inequality predates Trump by more than four decades and transcends both political parties. Democrats and Republicans alike have supported policies that accelerate inequality. However, Trump is adding a highly negative element that can not be brushed aside — race-bating — the age old American practice of using race to attract white supremacists, divide working people and distract us from the pursuit of economic fairness. Historically, in-your-face race-baiting (not the subtle dog-whistles like “getting tough on crime”) usually has been confined to fringe candidates from the Jim Crow South. But Trump is reviving that tradition with gusto. He is the first president ever to tacitly welcome the support both of neo-Nazis and the Klan.
Race-baiting is nothing new for Trump.
- In 1989, he called for the death penalty for the Central Park Five — five young black men who Trump erroneously claimed had committed rape. (They were exonerated of the crime when DNA led the police to the real culprit.)
- He was the leading advocate of the “Birther” movement to which white supremacists flocked. It falsely claimed that President Obama was not a U.S. citizen and therefore not a legitimate president.
- During his 2016 campaign, Trump attacked a sitting federal judge because of his Hispanic heritage. As far as we know, that’s a first for a sitting president.
- Trump launched his entire presidential campaign by attacking Mexican immigrants whom he called rapists and murderers.
- After the Charlottesville supremacist riot in the summer of 2017, he virtually exonerated the Nazi and KKK thugs who chanted racist and anti-Semitic slogans, beat-up counter-demonstrators and murdered one.
- Later in 2017, he also pardoned ex-Sherriff Joe Arpaio who was held in contempt of court for overtly refusing to halt practices that violated the constitutional rights of thousands of Latinos. In 2007, Arpaio said to Lou Dobbs on television that it was an honor to be compared to the KKK.
Some Trump supporters try to write all this off as refreshing defiance of stultifying political correctness — “He’s just saying stuff out loud that we are thinking and afraid to say.” But it is a grave error to give Trump or anyone else a pass when race, religion or ethnicity is used to play us against each other. In each case, Trump is promoting himself and trying to bring closer to him those who believe the world should be ordered by skin color. At the same time, race-baiting moves the national conversation further away from reversing runaway inequality. It serves as a great distraction from mobilizing against the rule of financial elites.
“Playing a Symphony on that White Skin”
Historically, race-baiting has been used to protect the privileges of economic elites by dividing workers (as we show in detail in our curriculum and in Chapter 9 of this book).
There are still millions of Americans who believe in the disproven idea that there are such things as biological races with different traits including intelligence. That entire idea has been scientifically disproven again and again. In fact, the idea of a separate biological race of “negro” was created by southern elites to justify the institution of slavery. After the Civil War, there was a virtual second civil conflict lasting twenty years between the former plantation elites and poor white/black farmers for control of civil society. It was not until nearly 1900 that the white supremacists fully recaptured power and instituted the Jim Crow laws.
In his novel Freedom Road, Howard Fast (best known for Spartacus) graphically describes how the manipulation of skin color paved the road to power for Southern elites after the Civil War. In this selection from his fictional account, a former plantation owner describes how to reclaim their riches by creating a violent army from those who are fixated on their skin color:
… there’ll be men enough, the scum that we used for overseers, the trash that bought and sold slaves and bred them, the kind who were men with bullwhips and filth without one, the kind who have only one virtue, a white skin. Gentlemen, we’ll play a symphony on that white skin, we’ll make it a badge of honor. We’ll put a premium on that white skin. We’ll dredge the sewers and the swamps for candidates, and we’ll give them their white skin – and in return, gentlemen, they will give us back what we lost through this insane war, yes, all of it.
Playing “a symphony on that white skin” also was the tactic of choice used by the steel industry to break strikes and prevent unionization after WWI. Management consultants and academics developed an entire pseudo-science of racial/ethnic/religious hierarchies to determine which groups are best suited for different kinds of work. This 1925 chart from a steel facility in Pittsburgh is a classic example of how race, religion and ethnicity were used to carve up the workforce. (The darker the shade of the box, the less fit that group supposedly is for a given task.) The goal was clear — keep workers divided.
What do you think about the new introduction?
Rachel Sherman, an academic, had confidential conversations with rich people about their money and their lives. She wrote a book about what they said, and this article about why it matters.
The New York Times looks at a janitor at Kodak in 1987 and compares it to the same job at Apple in 2017.
Wages in the two jobs are similar after adjusting for inflation, but the differences in benefits and opportunities go a long way toward explaining how and why inequality has become entrenched.
(This article was sent to subscribers to RunawayInequality.org. If you would like to receive more content via email about inequality and how to reverse it, sign up here.)
How does Wall Street financially strip-mine a country, territory or state? It loans governments more and more money knowing that, no matter what, they have to pay it back — even if it means closing schools, cutting thousands of jobs and turning day-to-day life into misery for working people and the poor.
The US territory of Puerto Rico has run up massive debts (approximately $123 billion) in the last 15 years. Programs designed to help the island, such as tax breaks that encouraged pharmaceutical companies to set up factories there, at first benefited Puerto Rico, but when the breaks were rescinded in 2005, jobs and capital fled. (John Oliver explains what happened in an often profane and funny but clear description of the process, while Manuel Lin Miranda adds a song.)
With the loss of jobs, tax revenues collapsed, leading to more and more borrowing to fill the budget gap. Despite a crumbling credit rating, Puerto Rico had no trouble finding new loans, thanks to special tax rules dating back to 1917 that made the bonds of US territories triple-tax free.
“The 100-year-old law stipulates that no one — not any state, not any county or city, not the District of Columbia, not any other territories, not even Puerto Rico itself — can tax the interest that Puerto Rico pays its investors. This has spurred people with eyes on easy profits to dive in for decades,” the New York Times reported in May.
Investors also relied on a Puerto Rican constitutional requirement that the territory pay creditors before it spends money to provide government services, a promise the territory’s government recently could not keep. A struggling economy was pushed towards ruin, as the NY Times reported.
In the summer of 2016, Congress passed Promesa, a law that gave US territories a way to seek court protection from creditors. The idea was to help struggling territories reorganize their burdensome debt while making sure that the most deserving creditors moved to the head of the line. Puerto Rico sought protection in May of this year, but now a hedge fund, Aurelius Capital, is suing to reverse Promesa. A NY Times article from August explains the process.
There have been other problems over the years. While the multinational pharmaceutical companies created jobs, they also collected $477.5 million in wage subsidies from Puerto Rico, tapping a program intended to help farmers pay farmhands a higher wage, reports Common Dreams, because the US Department of Agriculture classified them as farmers. Yet those same companies were allowed to use far more land than other foreign farming companies because the Puerto Rican government didn’t consider them to be farms. The companies had advantages coming and going, while Puerto Rico struggled.
Hedge funds like Aurelius Capital bought up Puerto Rican debt for pennies on the dollar in recent years, and are now insisting on full repayment. Illinois and the US Virgin Islands are also weathering similar attacks from vulture hedge funds, textbook examples of how wealth is stripped from a company (or a territory) and shifted to enrich the wealthy.
Financial strip-mining by vulture hedge funds won’t stop until we build a movement to change the laws and stop it.
We’re petitioning to the American political establishment to support policies that will help reverse the runaway inequality that undermines our democracy. Follow the link to read our petition, and please sign and share if you agree.
And follow this link to learn more about all the issues.