Bill Knight column for Thurs., Fri., or Sat., Feb. 28, March 1 or 2
If government economic policies restore purchasing power to everyday Americans, growth will result from increased consumption of the goods and services that the wealthy produce by investing in new factories and new technologies, and corporations will profit, too. However, rather than moving to that tried-and-true method of recovery – and prospering together – the debate in Washington has been hijacked by vested interests who want short-term gains regardless of long-term costs.
It’s unfair – a colossal understatement.
Two books – “The Age of Austerity: How Scarcity Will Remake American Politics” by Thomas Byrne Edsall, and “The Price of Inequality: How Today’s Divided Society Endangers Our Future” by Joseph E. Stiglitz – together illustrate the link between austerity and inequality, and manipulation by what Stiglitz calls “rent-seeking” – a way to get windfall profits, or “rents,” by means of political privilege and advantage.
“Conservatives are willing to inflict harm on adversaries and more readily see conflicts in zero-sum terms,” Stiglitz writes.
Edsall – for decades a Washington Post political correspondent – use his journalistic skills to show how the GOP switched the focus of U.S. politics to debt and austerity, especially concerning social programs. Stiglitz agrees, noting that conservative extremists and their corporate patrons succeeded in “framing the debate” to their advantage; that is, persuading Capitol Hill that it’s acceptable to use taxpayer money to bail out failed banks, but that it’s folly to help small businesses, workers or homeowners whose mortgages are under water.
The debate about taxes and spending despite the country mired in recession and slow growth is so strong in the media echo chamber that it won’t end quickly.
“The country needs to invest in education and rebuilding infrastructure,” Edsall writes, but such “initiatives are in large part precluded in a political environment that places top priority on deficit and debt reduction.”
Stiglitz agrees and notes that economic inequality correlates with reductions in public investment to infrastructure and education, “massive distortions in the economy, in law, and in regulations.”
“The Price of Inequality” disproves conservatives’ conventional wisdom that incomes or accumulated wealth stem from productive contributions to society. Instead, Stiglitz shows that much of the amazing concentration of affluence at the top stems from using and abusing wealth and power for political and even more financial gain.
Indeed, instead of creating new wealth from new products or services or new technology, innovative marketing or streamlined production, too many corporations or whole industries manipulate politics through campaign contributions and lobbying to influence government.
Throughout, Stiglitz documents the inequality, traces its roots and explains its branches.
The causes of economic inequality, Stiglitz says, are 1) rent-seeking activity, 2) tax policy, 3) macroeconomic policy 4) corporate governance and regulation (or its absence), 5) a decline in unionization, 6) globalization, 7) technological change, and 8) education.
Three-fourths of those causes have nothing to do with a “free-market” economy.
“Market forces help shape the degree of inequality,” he notes, but “government policies shape those market forces. Much of the inequality that exists today is a result of government policy, both what the government does and what it does not do.”
Basically, a small elite over the last three decades has successfully begun “buying” laws benefiting their interests at the expense of everyone else – an unprecedented shift in class equality.
“While the top 1 percent was doing fantastically, most Americans were actually growing worse-off,” he says. “Most American male full-time workers have seen their income go down.
“The top 1 percent of Americans gained 93 percent of the additional income created in the country in 2010, as compared with 2009,” he adds.
(Think of that in terms of a group of 100 baseball fans heading to the ballpark for a game. As part of a group, the 100 people together get 100 ballpark franks. However, one guy eats 93 hot dogs and the other 99 fans share the 7 left over.)
Such wealth and income inequality is not destined, the authors show. This is a problem with solutions. For instance, Stiglitz says the 99% must make the 1% pay their taxes. Further, government must curb the rich taking advantage of government (tax breaks, free bank monies, below-market natural resource leases on federal lands, etc. And regulations on campaign finance and lobbying must be restored.
“This book is not about the politics of envy,” Stigliz writes. “The bottom 99% by and large are not jealous of the social contributions that some of those among the 1% have made.”
But fair is fair.
And unfair is unfair.