By comparing the data from 1989, the first year they were collected, to 2018, the most recent set, and making adjustments for consumer durables (taking them out) and inflation (making all dollars equal over time), 3P shows that in the last 30 years the top one percent have increased their wealth by $21 trillion.
Over the same period the wealth of the bottom 50 percent has decreased (yes, decreased) by $900 billion.
RUNAWAY INEQUALITY—This is the most pressing issue that affects all working people and the poor. After World War II the US emerged as a super power because its economy built up a strong middle class. The system at that time saw the height of union involvement so workers could negotiate with business for improved wages and benefits. Government regulated businesses, banks and Wall Street. Corporations and the wealthy paid their fair share of taxes. Wages and productivity went up together, side by side. During those years, workers did a little better each year with raising wages and government programs began to reduce poverty.
But in the early 70’s, both political
parties were sold on a new economic system. They were encouraged to do away
with many regulations and cut taxes for corporations and the very rich. It
doesn’t matter if you call it neoliberalism, the Better Business Model, or
“Trickle Down Economics”. It has not worked for the benefit of workers in 40
years and it will never work. Money is not trickling down, it is gushing up and
the inequality has become so bad that just 3 individuals at the top now have as
much accumulated wealth as the entire bottom half. Shameful!
Runaway Inequality is a problem that
will not correct itself without working people making some political changes
while we still have a chance. The Southeastern NC Central Labor Council and the
Alliance for Economic Justice is available to provide workshops or hour long
presentations on this evil cancer in our economic system. Don’t be bedazzled by
wedge issues. This is the most significant problem
affecting all of us.
The SENC-CLC recently co-sponsored a
series of presentations by Les Leopold across North Carolina. If you missed
these presentations Southeastern NC Central Labor Council along with The
Alliance for Economic Justice, The NC Alliance of Retired Americans and the NC NAACP
are committed to making sure your group is supplied with a presentation and
information on Runaway Inequality. While on his NC book tour Les Leopold met
with Rev. Dr. T. Anthony Spearman, President of the NC NAACP. The NC NAACP is now a part of the outreach on Runaway
Inequality and showed their commitment to this issue by purchasing 6,000 volumes of Runaway
On Tuesday 11 June 19 President Harton will travel to
Salisbury to deliver a presentation on “RUNAWAY INEQUALITY” to AFGE Local 1738
If your local or group
would like a presentation on Runaway Inequality or a workshop please contact:
Lordstown is the poster child for modern financialized capitalism and runaway inequality
By Les Leopold
The vacant Lordstown General Motors facility is a frightening sight—6.2 million square feet of modern industrial might spread over 900 acres doing absolutely nothing except depressing the regional economy and the spirits of northeast Ohio. Just a few months ago it produced the Chevy Cruze and provided thousands of good paying industrial jobs with excellent benefits. Now it’s gone, and unless the Democrats have something meaningful to say about it, they too may be gone.
Lordstown is the poster child for modern financialized capitalism and runaway inequality. It symbolizes the kind of system in which the super-rich reap the rewards and the rest of us pay the price.
This new version of capitalism burst onto the scene when Wall Street deregulation took hold in the early 1980s, but it really came into full view when Wall Street’s insatiable greed took down the economy in 2007. The financial crash put GM on life support, and it quickly became crystal clear that textbook capitalism was a fiction.
Under the supposed rules of free markets, the corporations that cannot compete successfully should perish—what Schumpeter called creative destruction. In 2007, most of Wall Street’s big banks—as well as GM—would have gone down, but their size and the centrality of these mammoth institutions meant that their rapid demise (without government intervention) would crater the entire economy. They were, instead, the beneficiaries of taxpayer bailouts.
The mythical capitalism of creative destruction is long gone. There are new rules for financialized capitalism. One demands that we the taxpayers must bail out both the biggest Wall Street banks and the largest corporations, like GM, because they are far too big to fail. It’s the ultimate blackmail. Either we pay or we are all economically devastated.
A second new rule of the new capitalism dictates that not only must we bail them out, but we are not permitted to ask for anything substantial in return.
Unlike private investors, who provide capital to distressed companies, we taxpayers do not get any ownership rights with our investment, nor do we get a high rate of return on our money if things go well. We also do not have a say in how the bailed out enterprises do business, nor are we able to remove their predatory executives (and jail the ones who broke the law). In exchange for our financial guarantees, we are not permitted to demand that a corporation like GM keep its jobs in the U.S., nor may we insist that they refrain from giving future revenues via stock buybacks to their super-rich investors (who would have earned nothing without our largess). These bailed-out entities are instead returned to their private owners as soon as possible so that they can again be run by and for the wealthy.
What did GM do after we bailed them out?
As soon as GM could amass a sizable profit it engineered a $5 billion stock buyback to enrich their top officers and hedge fund investors. The pressure for the stock buybacks came from none other than Harry J. Wilson, a former member of the Obama bailout team. On our dime he had learned all there was to know about GM, which he then put to work to enrich himself. He formed an investment group of hedge funds to buy up GM shares and, when they had sufficient control, demanded the massive stock buyback. He prevailed and walked off with tens of millions of dollars. The financial strip-mining of GM workers and the communities so dependent on the company could then proceed in earnest.
Today, GM is a private enterprise constrained only by its union contracts. Its primary goal is to generate as much cash flow as possible in order to dole out more stock buybacks to enrich super-wealthy elites and its top officers, who are paid through stock incentives. That cash comes from slashing U.S. jobs and outsourcing as much production as possible to low wage areas around the world.
These corporate executives made a cold-blooded decision that the Chevy Cruze, although profitable, would not generate as much profit as SUVs and trucks. So they shut down Lordstown entirely, along with several other U.S. facilities.
There was an alternative. They could have put the new Chevy Blazer into these idle facilities, but they instead decided that more cash for stock buybacks could be generated by assembling the Blazer in Mexico.
What is the Democratic Party’s response?
For nearly a generation, the corporate wing of the Democratic Party has aided and abetted this financial strip-mining. Starting with Bill Clinton they have led the charge to deregulate Wall Street and promote trade deals that make it easier and easier to shift production abroad. They poured and drank the Wall Street Kool-Aid, which claimed that the rise of financialized capitalism would bring riches to us all. Instead, manufacturing collapsed, the average worker wage stalled and the CEO/worker wage gap rose from 45 to 1 in 1970 to an obscene 800 to 1 today.
Some liberal Democrats just throw up their hands and say there’s nothing much that can be done about all of this. Globalization is here to stay, they say, and automation is killing these jobs anyway, so the best we can do is provide retraining and cash subsidies for those who have been left behind.
Other liberals worry that if we try to keep these jobs in the U.S. we will be taking jobs away from poorer workers in less developed nations. They seem to believe that financialized capitalism is some kind of philanthropic organization designed to uplift the poor, rather than a machine designed to enrich elites.
Still others argue that we should not cater at all to these manufacturing workers, who are largely white males (though, actually less so each year). Instead they argue that Democrats should worry about women, people of color and the LGBTQ communities who will never work in the declining manufacturing sector.
Warning: Any candidate arguing anything like the above positions should stay clear of Lordstown.
The Fatalistic Fallacy
What unites these positions is an erroneous dogma. The decline of manufacturing in the U.S. is not an inevitable product of the global economy, no matter how often that false narrative is repeated by politicians and pundits. Germany, for example, is far more dependent on global trade than the U.S. and it has as least as much automation. Nevertheless, manufacturing in Germany is nearly twice as large a percentage of their economy—20.66 percent as of 2016 compared to only 11.6 percent for the U.S economy. And German workers earn more. The total compensation for a German manufacturing worker is $43.18 per hour versus $39.03 in the U.S.
Manufacturing jobs declined in the U.S. because both political parties joined hands in facilitating Wall Street deregulation, tax cuts on corporate and financial elites, and anti-worker trade deals that make it easier and easier to ship jobs abroad.
Do progressive Democrats have a plan?
It’s not easy to come up with a fix for Lordstown, Carrier and thousands of other profitable facilities that have been shuttered. To do so requires changing the most fundamental rules of financialized capitalism, something that only Bernie Sanders has so far addressed. Let’s think back to how it might work in the case of GM.
It’s 2007 and GM is on life support. The government offers a $50 billion bailout. In exchange, however, “We the People” then set terms for this bailout:
No stock buybacks, period.
No profitable facility shall be shut down, ever.
As long as GM is viable, the current number of workers must be maintained in the U.S. or GM will lose any current and future government contracts, tax credits and state/local subsidies.
CEO salaries can be no higher than 12 times that of its average employee.
Unions, the government and community stakeholders shall have seats on the board of directors (as in Germany)
In effect this would be saying that any too-big-to-fail corporation that is bailed out becomes a joint enterprise among key stakeholders. In the case of banks, they would become public banks like the Bank of North Dakota.
Such terms would have stopped the closing of Lordstown and many other GM facilities. Writ large they would dramatically increase the production of decent paying jobs all over the U.S and reduce some of the financial strip-mining that produces runaway inequality.
Anything short of this—like praying another company will take over these mammoth facilities—will seem hollow to those who have been crushed by the strip mining process.
The choice is clear: Either we have the courage to interfere with financialized capitalism or we will once again abandon these workers to demagogues like Trump.
Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.
Think about how much your income would go up if you didn’t have to pay for healthcare at all. That would begin to close the gap between productivity and wages for the first time in a generation.
By Les Leopold
Pundits and politicians repeatedly warn us that the country cannot afford costly social services. They caution about the perils of a rising national debt, the supposed near bankruptcy of Medicare and Social Security, and the need to sell public services to the highest bidder in order to save them. We must tighten our belts sooner or later, they tell us, rather than spend on social goods like universal health care, free higher education and badly needed infrastructure.
To many Americans this sounds all too true because they are having an incredibly tough time making ends meet. According to the Federal Reserve, “Four in 10 adults in 2017 would either borrow, sell something, or not be able pay if faced with a $400 emergency expense.” To those who are so highly stressed financially, the idea of paying for a costly program like Medicare for All sounds impossible.
We are the richest country in the history of the world, however, and certainly could afford vastly expanded and improved vital public services if we had the will. What stands in the way is runaway inequality. Our nation’s wealth has been hijacked by the super-rich, with plenty of aid from their paid-for politicians.
Over the past 40 years the top fraction of the top one percent have systematically denied working people the fruits of their enormous productivity. The results of this wage theft can be seen clearly in the chart below which tracks productivity (output per hour of labor) and average weekly wages (after accounting for inflation) of non-supervisory and production workers (about 85 percent of the workforce).
The red line shows the rise of American productivity since WWII. While not a perfect measurement of the power of our economy, it does capture our overall level of knowledge, technical skills, worker effort, management systems, and technology. Ever-rising productivity is the key to the wealth of nations.
As we can see clearly in the chart above, the productivity trend has been ever upward. Today the average worker is nearly three times as productive per hour of labor as he or she was at the end of WWII. And the workforce is more than three times as large. That means we are a colossal economic powerhouse. But unless you are an economic elite, it doesn’t feel that way.
To understand why we need to look at the blue line – average real worker wages. From WWII to the late 1970s or so, as productivity rose so did the average real wage of nearly all American workers. Year by year most working people saw their standard of living rise. For every one percent increase in productivity, about two-thirds went to labor, and the remaining one-third went to capital investment and profits.
After the late 1970s, however, the story changes dramatically. Real wages stall for more than 40 years, while productivity continues to climb. Had wages and productivity continued to rise in tandem, the average weekly earnings of the American worker would be almost double what it is today, rising from today’s average of $746 per week to $1,377 per week.
What happened? Where did all the money go that once went to working people?
The fatalistic story sold to us by elite-funded think tanks is that the rise of international competition and the introduction of advanced technology crushed the wages of those without the highest skill levels. The typical worker, it is claimed, is now competing with cheap labor from around the world and hence sees his or her wages stall and even decline. And since there really isn’t much anyone can do about globalization or automation, there’s nothing we can do about the stalling wages. Such a convenient story to justify runaway inequality!
The real story is far more complex and troubling. Yes, globalization and automation contribute to stagnant wages. But as the International Labor Organization shows in their remarkable 2012 study, only about 30 percent of this wage stagnation can be attributed to technology and globalization. The main cause is the neo-liberal policy agenda of deregulation of finance, cuts in social spending and attacks on labor unions. And within that mix the biggest driver of wage stagnation can be attributed to financialization – the deregulation of Wall Street which permitted — for the first time since the Great Depression — the rapacious financial strip-mining of workers, students, families and communities. Put simply, the neo-liberal model ushered in by Thatcher and Reagan, and then intensified by Clinton and Blair, moved the wealth that once flowed to working people to financial and corporate elites. (For a more thorough account see Professor William Lazonick’s “Profits without Prosperity.” )
How much money are we losing?
More than we can imagine. Here’s a back-of-the-envelope estimate for just the most recent year on the chart, 2017: The gap between the productivity wage and the current average wage is $631 per week. That is, if the average weekly wage continued to rise with productivity, it would be $631 higher than the current average wage. In 2017, there are 103 million of these workers. So the total amount of “lost” wages that flowed to economic elites is a whopping $3.4 trillion! (103 million x $631 x 52 weeks) And that’s just for one year.
Here’s how to pay for Medicare for All
Current estimates for a single payer system come in at about $3 trillion per year. Americans already are paying $1.9 trillion in payroll and income taxes that go to Medicare, Medicaid and other government health programs. So, we would need to raise another $1.1 trillion to provide universal healthcare and prescription drugs with no co-pays, no deductibles and no premiums.
In the name of fairness, that additional $1.1 trillion to pay for Medicare for All should be raised by taxing back a portion of the $3.4 trillion in wealth that has flowed to the super rich instead of to working people. After all, working people have not had a real wage increase in more than forty years as economic elites have siphoned away tens of trillions of dollars of income that once went to working people, (the gap between the two lines). Wouldn’t it be more than fair to ask the superrich to pay the $1.1 trillion needed for Medicare for All?
There are numerous ways for these economic elites pay their fair share:
>Financial transaction tax on stock, bond and derivative transactions;
>Wealth tax on those with over $50 million in wealth;
>Minimum corporate tax of 35 percent on all corporations with over $100 million in profits who now pay little or nothing like Amazon did this past year;
>Raise the marginal tax bracket to 70 percent on all income over $10 million per year;
>Increase the inheritance tax on the super-rich to prevent the creation of a permanent oligarchy…and so on.
The point is to give Americans what they have been long denied – high quality universal healthcare AND a real wage increase by providing Medicare for All with no co-pays, no deductibles and no premiums.
Think about how much your income would go up if you didn’t have to pay for healthcare at all. That would begin to close the gap between productivity and wages for the first time in a generation.
Wait! Shouldn’t working people pay something for health care coverage?
We already are. We pay payroll taxes for Medicare and a portion of our regular taxes go to fund Medicaid and other public health programs for veterans, Native Americans and public health-related research and regulation.
So next time you hear someone say we can’t afford a public good, that we need to tighten our belts and get used to austerity, think about all that wealth that has flowed to the very top. Think about that big fat gap between productivity and real wages. Think about how runaway inequality has allowed the wealth of the richest nation in history to be hijacked by the super-rich.
It’s time the American people got a real wage increase and Medicare for All would deliver just that.
According to conventional wisdom, the Democrats must appeal to middle-of-the-road swing voters in order to defeat Trump in 2020. Supposedly these voters want a moderate who “crosses the partisan divide,” “finds common ground with all classes and income groups,” “removes barriers to advancement,” “builds public/private partnerships,” “works for the common good against all special interests,” “avoids the extremes of the right and the left,” and “shuns costly pie-in-the-sky programs.”
Mounting evidence suggests that the swing voter is one who faces the stark daily realities of rising inequality and all its related issues — expensive or non-existent health care, astronomical student debt, unaffordable housing, and a generation’s worth of wage stagnation. As the New York Times recently reports (“For Democrats Aiming Taxes at the Superrich, ‘the Moment Belongs to the Bold’”)
The soak-the-rich plans — ones that were only recently considered ridiculously far-fetched or political poison — have received serious and sober treatment, even by critics, and remarkably broad encouragement from the electorate. Roughly three out of four registered voters surveyed in recent polls supported higher taxes on the wealthy. Even a majority of Republicans back higher rates on those earning more than $10 million, according to a Fox News poll conducted in mid-January.
This observation is further confirmed by a fascinating chart prepared by Lee Drutman, (“Political Divisions in 2016 and Beyond“) based on survey data from 8,000 Clinton and Trump voters compiled by the Voter Survey Group. A significant split emerged around two main clusters of opinion — economic populism and identity politics. (Unlike exit polls this survey is more than 10 times larger a sample and contains many more questions, and therefore should not be dismissed as just another poll.)
The horizontal axis shows the strength of the responses based on economic populism. The further left you are on that axis, the more you worry about inequality and favor redistributive policies.
The vertical axis measures beliefs on what could be called cultural issues like gun rights, abortion, women’s equality, immigration, LGBTQ rights and attitudes towards African-Americans. The higher you are on that axis the more uncomfortable you are with these kinds of cultural issues.
Let’s call the bottom left quadrant, “Progressive Populists” who want both liberal social and economic policies. The top left are the “Culturally Conservative Populists,” who lean right on social issues and left on economic issues. The top right contains all “Arch Conservatives” who are both socially and economically conservative. And the bottom right are the media darlings — “Culturally Liberal/Fiscally Conservatives.” (For more about this quadrant see “Beware of the Moderate Democrat.”)
Here are the 2016 voter percentage breakdowns:
Progressive Populists account for 44.6 percent of the electorate according to this study.
28.9 percent are Culturally Conservative Populists.
Arch Conservatives account for another 22.7 percent.
And a miniscule 3.8 percent for the Culturally Liberal/Fiscal Conservatives.
Dig in or Reach Out?
Jamelle Bouie, New York Times opinion writer, argues that Democrats should not be “fighting on the president’s terrain, trying to cast themselves as the authentic representatives of white working-class America.”
But if the Voter Survey chart is correct, that’s where the swing voters (of all colors) are, and that’s precisely where the battle will be waged again.
Every Democratic candidate will claim to fight both for social and economic justice. But this could become problematic for Biden, Booker, Gillibrand and Harris, who want to maintain their close fundraising ties with corporate Democrats. As the New York Times puts it:
The left-leaning Ms. Ocasio-Cortez, Ms. Warren and Mr. Sanders are all viewed as less business-friendly than Ms. Gillibrand, Mr. Booker and Ms. Harris, who have not made taxes on the rich a centerpiece of their public pitches. In that sense the latter trio is following the example set by Hillary Clinton in the 2016 campaign and President Barack Obama before her, with comparatively establishment-minded thinking on progressive taxation.
It’s painfully obvious what Trump will and must do. There are not enough Arch Conservatives to elect him dog catcher. So he needs win over again the culturally conservative economic populists (top left quadrant). And the only way to do so is by fanning the flames of division, stomping all over social issues, and provoking the Democrats to debate Confederate monuments and bathrooms. And then red-bait to hell any Democrat who dares propose big economic reforms.
Which way do we go?
The Democratic Party can never, and should never, abandon its deep commitment to the full range of social justice issues. Despite the Trump-led rise of racism, homophobia, and nativism, the rights of women, minorities and the LGBTQ communities have increased enormously over the past half century. The Democrats should be given significant credit for the promotion and enhancement of these human rights. But the Democratic Party also must become, once again, the party of working people, and this requires taking on Wall Street and the billionaire class with bold economic programs – from Medicare for All to a Green New Deal.
Those who worry about going too far on economic issues should remember the fire that FDR brought to the Democratic Party when in 1936 he took on the oligarchs:
We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred.
I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.
Today, a similar common denominator unites every identity group with every economic populist: All have much to gain from policies that address rising inequality, the stagnation of wages, the lack of true universal health care, the obscene levels of student debt and the ways in which both the economy and government are rigged by bankers and billionaires.
Forty years of runaway inequality have taken their toll. We voters are not a happy bunch. We long for candidates with FDR’s passion for fairness and justice, and we are hungry for the big ideas to get us there.
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