Inequality 101

For a political science symposium, I've been asked to respond to a new book by Jacob S. Hacker and Paul Pierson. They aren't Marxists or theorists (they don't use the word neoliberalism and appear not to have read David Harvey). Still, their book, Winner-Take-All Politics, has the potential to reach the pundits and politicians who proceed as if the far left doesn't exist (maybe I'm being too optimistic; after all, Keith is out and the Obama administration pays little heed to Krugman and Stiglitz). Another possibility: this is the kind of book that could reach concerned, educated middle class readers unlikely to come across or connect with contemporary left theory.

Their thesis: the dramatic inequality in the US over the last thirty years is the result of political decisions. It's political. "The transformation of Wall Street reflected the repeated, aggressive, application of political power" (68)In different words, it's the result of class struggle where the top one percent use the state to benefit themselves and screw everyone else. Politics matters. Without political choices and decisions, the top one percent would not have been able to make out like bandits. And how did they get so rich? Tax cuts. Tax cuts. Tax cuts.

That this is news rather than obvious is an indication of the disastrous sway of neoliberal ideology.

Hacker and Pierson rely on a compelling accumulation of economic facts:

1.  Between 2001 and 2006 the top one percent took over 53 percent of US income gains. There was an economic expansion (particularly from 1979 to 2006) but the goodies went to the top one percent. The middle benefited a bit (slightly less than one percent a year) but only if one discounts the fact that they were working more (2 income families) and more hours. Without that additional work, the incomes of the middle would have barely budged. The income of those in the bottom would have fallen.

2.  If the economy had grown at the same rate that it actually did and if inequality had stayed at its 1979 levels, the average income of households in the middle would be more than 12,000 dollars a month higher than it is now. Differently put, the rich took our money.

3.  US economic growth wasn't exceptional. Most of the European economies grew at the same rate. The primary difference: our inequality soared. Another difference: we were working more hours. Put that way, their economies were actually stronger (GDP per hour worked rose faster). And, we should keep in mind that they have more secure retirement and health benefits.

2.  The top .1% collectively rake in more than a trillion dollars a year. Also, most of the executives in this tier get amazing retirement packages--even when most workers have no defined benefits (so we hear all sorts of crap about the cost of pension funds for workers in the auto industry, for example, and nothing about the massive resource suck of executive perks, particularly executive perks for retirees).

3.  A substantial majority of the top .1% are executives and managers (corporate and finance bad guys, the same one's rolling in the dough right now). In the US gains at the top are driven by outrageous executive compensation and low taxes:  "markets have been politically reconstructed to aid the privileged" (45). In 2007, average CEO pay for the top 350 companies was 12 million dollars a year.

4.  The shift toward the super rich is a trend that begins in 1980 and continues to steadily increase (hmm...1980. What--or who--could have started this??). Tax rates on the rich have fallen dramatically. The rich are richer because they are taxed less heavily than they used to be (and our infrastructures are crumbling, schools are failing, people are dying because the rich are taxed less heavily than they used to be). Hacker and Pierson write: "if the effects of taxation on income at the top had been frozen in place in 1970, a very big chunk of the growing distance between the superrich and everyone else would disappear" (49).

5.  And get this: this diminution of taxes for the rich happened even as support was growing for taxing them more. In 1939, 35% of Americans supported making the rich pay more taxes; in 1998 45% did; in 2007 56% did.

6.  Taxes aren't the only factor. Another is the decline in unions, again a decline that ocurred even as more and more private sectors workers said they wanted a union. This decline also has political causes, most significantly the failure of a major labor law to pass in 1978 not to mention Reagan's stacking of the National Labor Relations Board with pro management appointees.

Well, how did we get here? The politicians did it.

The seeming paradox with any explanation that emphasizes political decisions is that the US is a representative democracy. Those guys are elected. So how could they vote for policies that screw the majority of their voters?  I should add here what I see as a weakness in Hacker and Pierson's discussion--ideology doesn't matter; that is, their explanation does see ideology as a factor. But I wonder whether this makes their discussion more radical, more compelling: ideology doesn't matter because of the disconnect between voters and the folks they elect. So it isn't even necessary to persuade voters; the views of voters simply don't matter.

I'll explore this further in a later post.

Comments

[Alain]

I love to here about these type of books - I consider myself one of the "concerned, educated middle class readers" you describe. But not to be a bummer but Krugman's best seller from a few years ago, Conscience of a Liberal came to the same conclusion. That the enormous increase in an inequality of the last 30 years could largely be explained by political decisions. It seemed at the time that democrats were in tune to this argument, even if they weren't crazy about the policy implications.

[Christinathena]

I remember reading old predictions of the future from the mid-20th century. Many of them predicted shorter workweeks, some predicting as little as 20 hours a week. I think I remember seeing one even shorter than 20! People ask how they got it so wrong. Well, this is the answer. If economic growth had been distributed evenly, we WOULD be able to work much shorter workweeks.