Of the 1%, By the 1%, For the 1%: Economic Justice in America
Reading: 5 Facts You Should Know About the Wealthiest One Percent of Americans
“What can we say,” asks economist and Nobel laureate Paul Krugman, “about the [Occupy Wall Street] protests? First things first: The protesters’ indictment of Wall Street as a destructive force, economically and politically, is completely right. A weary cynicism, a belief that justice will never get served, has taken over much of our political debate…. In the process, it has been easy to forget just how outrageous the story of our economic woes really is. So, in case you’ve forgotten, it was a play in three acts.
In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis. Given this history, how can you not applaud the protesters for finally taking a stand?”
That’s Paul Krugman, and he paints a picture of an economic world that is not so much trickle-down as trickle-up. We’ve already heard the statistics. In the past 30 years, the top 1% have gotten richer and richer—massive economic expansion at the top—while the middle class and the working class are just treading water, or worse. One of the examples of “worse” being: absorbing the costs of all the financial recklessness at the top. “Suffering for the consequences of the bankers’ sins.”
Just sit with this for a moment. Just absorb this big picture. Paul Krugman calls it “outrageous.” What do you think? What do you call it?
America is supposed to be something so very different than this. A land of opportunity. “Of the people, by the people, for the people.” Not just some people, but all…. That’s what it’s supposed to be….
But, as economist and Nobel Laureate Joseph Stiglitz points out, it’s more like Russia with its oligarchs. It’s more like Iran. In an article from last May, entitled “Of the 1%, By the 1%, and For the 1%,” he reminds us of how, recently, governments around the world have been toppled by people taking the streets in millions to protest political, economic, and social conditions. Egypt, Tunisia, Libya. “The ruling families elsewhere in the region,” he says, “look on nervously from their air-conditioned penthouses—will they be next? They are right to worry,” says Stiglitz. “These are societies where a minuscule fraction of the population—less than 1 percent—controls the lion’s share of the wealth; where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve life for people in general.” And then Joseph Stiglitz says, “As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places.”
It’s outrageous. A sorry, sad state of affairs…. No wonder we have the Occupy Movement, which Al Gore described as “a primal scream of democracy”…
So it’s a time for honesty. A time for speaking up. Dr. King once said that “our lives begin to end the day we become silent about things that matter.” “Every man,” he said, “must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness.”
That’s what he did. Dr. King. He broke the silence. He walked in the light of creative altruism. Listen to his words from a speech delivered the year of my birth, in 1967: “I’m simply saying that more and more, we’ve got to begin to ask questions about the whole society. We are called upon to help the discouraged beggars in life’s marketplace. But one day we must come to see that an edifice which produces beggars needs restructuring. It means that questions must be raised. And you see, my friends, when you deal with this you begin to ask the question, ‘Who owns the oil?’ You begin to ask the question, ‘Who owns the iron ore?’ You begin to ask the question, ‘Why is it that people have to pay water bills in a world that’s two-thirds water?’ These are words that must be said.”
Dr. King was passionate about economic justice in his day, and his words are still powerful for us in our day of continuing economic outrageousness. We’ve got to break the silence. Spirituality that’s real and authentic calls us to this. The Spirit of Life calls us to this. The God of the Hebrew prophets calls us to this. We’ve got to find a way to walk in the light of creative altruism. We’ve just got to.
“There are words that must be said.”
So today, let’s say some of them. Speak of our system of trickle-up economics. Speak of what this is doing to our nation. Speak of why it’s like this. Speak of how to, as Dr. King put it, “restructure the edifice which produces beggars.” Speak of where to go from here…
Starting with this historical observation, coming from Jacob Hacker and Paul Pierson in their excellent book entitled Winner-Take-All-Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class. Hacker and Pierson remind us that the period existing from the end of World War II until the early 1970s was a high-growth period, economically speaking. America busting out at the seams… And during this period, incomes grew at a slightly faster rate at the bottom and middle of the economic distribution than at top. If ever there was a time we could call the American economy “trickle down,” this is it. But starting in the 1970s, everything got flipped upside-down. Things started to stall, or go worse, for middle and working class folks, and the money started to flow with increasing speed straight to the top, to the upper class—the top 1 percent. Included in this 1 percent as a substantial majority are company executives and managers—the “working rich” of the executive world. Their share of income, says Hacker and Pierson, “has increased from around 8 percent in 1974 to more than 18 percent in 2007—a more than twofold increase. If you include capital gains like investments and dividend income, the share of the top 1 percent has gone from just over 9 percent to 23.5 percent.” It’s trickle-up economics. Has been since the 1970s. No more booming (and more egalitarian) economy of post World War II America. That’s long gone….
Now perhaps the situation wouldn’t be so dire if we could point to mitigating factors: say ease of social mobility, or abundance of workplace benefits, or availability of money to buy things. But we can’t. What we have is vanishing benefits instead, and regular people like you and me drowning in debt. As for the question of social mobility (want to spend just a little more time covering this one): Hacker and Pierson say that “American mobility may well have declined over the last generation, even as inequality has risen. This is true of both individual mobility (‘Am I richer than I was a decade ago?’) and of intergenerational mobility (‘Am I richer than my parents were?’). […] The American dream,” says Hacker and Pierson, “portrays the United States as a classless society where anyone can rise to the top, regardless of family background. Yet there is more intergenerational mobility in Australia, Sweden, Norway, Finland, Germany, Spain, France, and Canada. In fact, of affluent countries studied, only Britain and Italy have lower intergenerational mobility than the United States does (and they are basically even with the United States).”
(Our closest neighbor Canada is just sounding better and better, isn’t it?)
It’s a trickle-up economic system we live in. Hacker and Pierson call it “Richistan”—as opposed to “Broadland,” where incomes are growing at the same rate for everyone, and you’ve got social mobility, you’ve got solid workplace benefits, you’ve got free-and-clear money to buy stuff. That’s Broadland. But Richistan is a different place entirely. And Richistan is hurting America.
Now you know, some people just don’t believe it. The insight that a hyperconcentration of wealth in just 1 percent of a country like America is a bad thing is NOT necessarily obvious. New York Times writer Nicholas Kristof reminds us that “Economists used to believe that we had to hold our noses and put up with high inequality as the price of robust growth. But,” he goes on to say, “more recent research suggests the opposite: inequality not only stinks, but also damages economies. In his important new book, ‘The Darwin Economy,’ Robert H. Frank of Cornell University cites a study showing that among 65 industrial nations, the more unequal ones experience slower growth on average. Likewise, individual countries grow more rapidly in periods when incomes are more equal, and slow down when incomes are skewed.”
In other words: more equality, more growth. We saw this in post-World War II America, and we could see it again. But, you know, just because economists might be seeing the light doesn’t mean that the rest of America is. Ideas that the experts used to believe but which they now know as false still have staying power. They stick around. In public discourse, they continue to sound soo believable. So full of “truthiness.” Here’s an example of one: “If taxes are raised on the rich, job creation is going to stop.” I’m guessing you’ve heard this one before… This is just another way of saying something that economists used to believe, but no longer… We know Republicans believe it. Democrats, if they don’t also believe it, just don’t say anything… (By now you can see that neither Republicans nor Democrats are gonna come out of this sermon unscathed.) Both of them, saying: Don’t raise taxes on the rich, now. Don’t touch them. Do it, and the economy is going to crash….
But I like what business entrepreneur Nick Hanauer has to say about all this. First he introduces himself: “I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)” That’s Nick Hanauer. Not too shabby, right? (He could take all of us out for lunch everyday for the rest of our lives….) But now listen to what he says next: “Even so,” he says, “I’ve never been a ‘job creator.’ I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be. […] Middle-class consumers [are the ones who create jobs], and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.”
That’s Nick Hanauer. Besides injecting some needed wisdom into the conversation, he also reminds us that we can’t stereotype members of the 1 percent, we can’t automatically assume anything about them. Being wealthy is just not an intrinsically evil thing. So … if you are a member of the 1 percent and you’re here today, I want to ease your mind … you don’t have to be worried about being tarred and feathered… I say this because some of the Occupy Wall Street “primal scream” rhetoric can get pretty hot and heavy… And also because it’s just human nature to want to scapegoat.
OK, let’s press pause for a moment. Take stock. Whoo! How many books and scholars and authors do you think I’ve quoted from in this sermon so far? Twenty bucks to the person who gets the right answer…. Just kidding! But there’s so much to say, so many voices wanting to be heard. And I’m only just scratching the surface! It’s not a simple issue, this issue of economic justice. Requires the kind of spiritual practice that involves a lot of reading and a lot of research and a lot of underlining…
And now, in our remaining time together, just two more things: what explains this outrageous economic inequality, and where to go from here… (Small issues, I know… saving the best for last!)
Hacker and Pierson, in their book Winner-Take-All-Politics, speak powerfully to the question of why. Why the trickle-up system, why Richistan? What causes it all? The orthodox answer is to point to abstract economic forces that are beyond anyone’s control. Laborsaving technologies, which have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization, which has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Abstract economic forces like this, beyond anyone’s control. This is the orthodox view, the standard view.
And Hacker and Pierson reject it, see it as nothing less than propaganda that both disempowers and empowers: disempowers the many who want to create a more just and fair economy, and empowers the few who love Richistan and want more of it—enables them to get off scott free…
Hacker and Pierson’s argument is fundamentally a historical one. A shift towards Richistan occurred in the 1970s—during the Carter administration—because business and the super-rich began a process of political organization, enabling them to pool their wealth and contacts to achieve dominant political influence. One statistic Hacker and Pierson cite refers to the number of companies with registered lobbyists in Washington. That number grew from 175 in 1971 to nearly 2,500 in 1982. Money poured into lobbying firms, political campaigns, and ideological think tanks, and this is what powered the Republicans throughout the 1980s, gave them a clear advantage over the Democrats. As for the Democrats: they’ve been able to reduce that advantage only by becoming more like Republicans: more business-friendly, more anti-tax, and more dependent on money from the super-rich. That dependency has severely limited both their ability and their desire to fight back on behalf of the middle class (let alone the poor).
I love me my Obama, but can we honestly say that his administration is fighting the trickle-up, Richistan reality of our economy the way it needs to be fought? Can we?
The root cause is the money game in politics. The evolution in the nature of the vote in our democracy. “From one propertied man, one vote; to one man, one vote; to one person, one vote; trending to one dollar, one vote.” The language here comes from Nobel Prize-winning economist Michael Spence. His colleague Joseph Stiglitz agrees: “Wealth,” he says, “begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.” That’s Joseph Stiglitz.
And this takes us to where to go from here. The reason for where we are now is not outside of our control. We can take control. We can turn this thing around before it is too late. Absolutely, we can talk about specific policy goals—and when the Occupy Wall Street movement starts doing this, it’ll be more powerful. Creating a truly effective wall of separation between our elected representatives and business lobbyists. Debt relief for working Americans. Investments in infrastructure to help create jobs. No more tax cuts for the wealthy. Specific goals like this. Call on our elected politicians to champion them, or throw the bums out of office. Call on the Obama administration to do more.
But even more important than all this is the central moral decision each of us must make in our hearts, to help create a more just society. “Every man,” says Dr. King, “must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness.” It is about light. Got to keep shining a light on what’s happening. Got to enlighten people. Nick Hanauer, one of the exalted 1 percent, gets it, and that gives me hope. He knows that his fate is bound up with the fate of the 99 percent. “We must live together as brothers or perish together as fools.” Listen to Dr. King! The greater the inequality, the worse off we all are. It slows down economic growth. It prevents job creation. Trickle-up and Richistan are bad for the 99 percent and ultimately bad for the 1 percent—and you better believe, the people who used to be the 1 percent in Egypt know this all too well. They know. We need to know it too. Greed is not good.