Voices in finance, religion warn of income inequality

Bill Knight column for Mon., Tues. or Wed., Aug. 4, 5 or 6

Last month, the Dow Jones Industrial Average topped 17000 for the first time, closing 14 percent higher than a year earlier, and the S&P finished that week at 1985.44 – its 25th record high in 2014.

However, changes in pay have been disappointing (despite last week’s odd announcement that a 0.6 percent in the second quarter was a positive signal). On July 22, the Bureau of Labor Statistics reported continued lousy news for earnings.

“Real average weekly earnings declined 0.1 percent over the month due to the decrease in real average hourly earnings combined with an unchanged average work week,” the BLS said.

Factoring in inflation since 1982-84, the real average weekly earnings for all non-farm employees is $354.88, down a value of 40 cents from a year ago.

That’s not right. Nor smart.

The economy needs consumers, who need decent wages to be able to spend.

“Wages for working people, not the wealth of the rich, corporate income, or banking profits are what both drive and sustain an economy,” wrote Thom Hartmann, author of “The Crash of 2016.”

“As long as those wages remain stagnant or falling,” he continued, “there will not be sufficient demand to keep an economy from collapsing under the weight of its own high-end gamblers and the growing debt of its young and working-class people just trying to get by.”

That’s noticed by savvy businesspeople and perceptive faith leaders, who increasingly advocate for reforms to save commerce by making the economy work for more people, and to restore governments to responsive systems.

For years, billionaire Warren Buffett has expressed such concerns, saying, “There has been class warfare waged, and my class has won.”

That opinion is echoed in other board rooms.

Pimco founder and CIO William Gross told Yahoo Finance writer Lauren Lyster, "Labor and capital have to share in the rewards of a productive economy and for the past 25 years labor has gotten the short end of the stick."

Indeed, economist Robert Reich, whose new film is “Inequality for All,” says the “self-made” American, symbol of our meritocracy, is vanishing.

“Six of today’s 10 wealthiest Americans are heirs to prominent fortunes,” Reich writes. “Six Walmart heirs have more wealth than the bottom 42 percent of Americans.

“Both political parties have encouraged this great wealth transfer, as beneficiaries provide a growing share of campaign contributions,” he continued. “It’s dangerous to our democracy. Dynastic wealth inevitably accumulates political influence.”

Nobel Prize-winning former World Bank chief economist Joseph Stiglitz said, “It is not the inexorable laws of economics that have led to America’s great divide, [but] our policies and our politics.

“Economic inequality translates into political inequality, and political inequality yields increasing economic inequality,” he continued, offering examples:

“Corporate welfare increases as we curtail welfare for the poor. Congress maintains subsidies for rich farmers as we cut back on nutritional support for the needy. Drug companies have been given hundreds of billions of dollars as we limit Medicaid benefits. The banks that brought on the global financial crisis got billions while a pittance went to the homeowners and victims of the same banks.”

Income inequality is “responsible for the divisions in the country,” said Goldman Sachs CEO Lloyd Blankfein. “Too much of the Gross Domestic Product over the last generation has gone to too few of the people.”

Everyday people’s frustrations while enduring income inequality can lead to unhelpful distractions such as blaming other victims, like immigrants, minorities or women, creating social tension.

“There is an unrest in democracy today because the world economy took world politics [hostage],” said Catholic Cardinal Oscar Rodriguez Maradiaga. “Now, politics are subservient to money and not the common good.”

Rabbi Joshua Chasan of the Ohavi Zedek Synagogue in Burlington, Vt., said, “As the power of wealth in our country is concentrated in the hands of a very few, democracy is falling apart.”

In New York City, a Protestant pastor agreed.

“Many people like to boast that job growth has returned to peak levels prior to the start of the Great Recession six years ago,” said the Rev. Dr. James A. Forbes, with New York’s Riverside Church, “but a recent report from the National Employment Law Project (NELP) found the ‘new’ jobs are largely in low-paying industries. Low-wage industries accounted for 44 percent of job growth, but made up just 22 percent of the losses in the recession.

“In a speech to striking sanitation workers in Memphis just days before he was assassinated, Dr. Martin Luther King said, ‘...it is criminal to have people working on a full-time basis and a full-time job getting part-time income’,” Forbes added. “It was criminal then. It is criminal today.”

[PICTURED: Poster from economist Robert Reich's critically praised film "Inequality for All."]