The Crisis of Inequality

I f I recall correctly, both Greenspan and Bernanke made statements in 2005 that either the housing bubble was not necessarily going to be a problem, that no intervention was needed, and that drops in housing prices would have a limited effect on the broader economy. To those of us that have seen that this house of cards was going to crash and that it would have huge effects, this is, unfortunately, a moment of vindication.

But this is barely pessimistic guessing about our economy and financial systems future. This top-heavy house of cards has been building for decades not a few years. It is interesting that politicians, such as McCain last week, like to state that the economic “fundamentals” are sound, in their attempt to maintain confidence in a failing system. It becomes very clear in a situation like this that the economic fundamentals of this economy on are undermining themselves.

So-called pessimists have in fact developed a critical analysis of the systemic problems that face our social system. So even when economists and media pundits have lauded the growing economy, we have understood that it was based on smoke on mirrors. Record private and public debt, stagnating wages for working class, environmental destruction and mass exploitation, intimidation, and terrorization of peoples of the global South, have been some of the “fundamentals” that have propped up this system

This economy is built on the mass accumulation of wealth by a small class of investors and owners, as well as their close circles of associates. Interestingly, as record numbers of Americans are defaulting on loans, hundreds of thousand losing jobs, losing healthcare, struggling to pay the bills, the rich have never been richer. The easiest way to see this is by looking at census data for the last 40 or so years. This information comes from United States government data: Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households, All Races: 1967 to 2006.

Between 1967 and 2006 the share of income received by the top 5 percent grew from 17.2% to 22.3%; the top 20 percent from 43.6% to 55.5%. At the same time the middle fifth’s income dropped from 17.3 to 14.5 percent and the bottom 20 percent dropped from 4.0 to 3.4%. In fact every income group saw a drop in income (naturally, adjusted for inflation) except for the top 20 percent. This of course is only income and does not consider wealth, which includes all assets and income, and shows much greater disparities.


In a March 29, 2007 NY Times article entitled “Income Gap Is Widening, Data Shows” stated that

“Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.

The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression….

The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980….”

This growing inequality has impacted the American economy in countless ways. In one testimony to Congress, even Bernanke alluded to the fact that it may cause some problems, but didn't , as I recall, go into too much detail. However, I imagine that his problems are different than those that I have in mind. The fact of the matter is the system is geared towards exacerbating inequality. It is built on sucking wealth to the upper class. That is what it is, in essence, supposed to do.

This crisis is no different. Million or likely billions of dollars were being made based on speculation and when the game is over, we will suffer the consequences. The elite class made a killing on this speculation; everyone else will pay for it.

Unless we address these fundamentals, the fact that we have a economic system that thrives on wealth for the few and struggle for the many, these crisis will continue and the middle class and particularly the poor (global as well as American) will continue to suffer the effects of them. Borrow to make ends meet and increase debt. Get another credit card, consolidate debt, and take a second mortgage.

Obamanomics

Down below at the end of this I pasted something I sent out a while ago, but it very relevant right now. As the financial crisis comes to a head, we see that neither of the leading candidates has any real critique of the systemic problems that we face. McCain is, by his own admission, completely ignorant of these things. Although, he does know all about how to make war. So that is his contribution to the economy. Obama does not offer any real solutions either. Yesterday he said

"Today, I fully support the effort of Secretary Paulson and Federal Reserve Chairman Bernanke to work in a bipartisan spirit with Congress to find this kind of solution.
What we’re looking at right now is to provide the Treasury and the Federal Reserve with as broad authority as necessary to stabilize markets and maintain credit. We need a more institutional response to create a system that can manage some of the underlying problems with bad mortgages, help homeowners stay in their homes, protect the retirement and savings of working Americans."

He basically agrees with what the administration is doing to address the financial crisis. He agrees with Bush, Paulson, Bernanke, etc.. all Republicans. All people of the party that is supposed to be so different than the party that he represents. How strange. I don't know how it could be made clearer that they are all beholden to the same financial institutions, i.e. corporate america, i.e. the elite class, i.e. the capitalist class. This is a major problem and a major reason why Obama is not about real change. This is tied to a number of concerns including why we are fighting wars in the Middle East and why we are the only industrialized nation without a national healthcare system, why wages have stagnated for working americans, and why many of us are in so much debt.

The comments about home owners and working Americans is lip service. Ask yourself, who does this bailout stuff help? It helps the working class only in that we are stuck. Stuck trying to make ends meet in a system stacked against us. It surely helps the credit industry and huge finance corporations (think Golman-Sachs Paulson's old pals). McCain has been using the same jargon for political reasons, making them appear as populists. Partisan politics hears what it wants from its own side, and sadly buy this ridiculous rhetoric. But the the fact is that middle class people will be feeling the pain from this fall out for a long time to come.


Below are some quotes from an article about Obama from the NY Times, entitled Obamanomics.
The sub-title is " A Free-Market-Loving, Big-Spending, Fiscally-Conservative Wealth Redistributionist"

http://www.nytimes.com/2008/08/24/magazine/24Obamanomics-t.html?_r=1&oref=slogin&ref=magazine&pagewanted=print

Keeping it short, I think these two excerpts sum it up:

Compared with many other Democrats, Obama simply is more comfortable with the apparent successes of laissez-faire economics.
Sunstein, now on the faculty at Harvard, has a name for this approach: “I like to think of him as a ‘University of Chicago’ Democrat.”

...
He [Obama] paused for a few seconds and then said this:

“I think I can tell a pretty simple story. Ronald Reagan ushered in an era that reasserted the marketplace and freedom. He made people aware of the cost involved of government regulation or at least a command-and-control-style regulation regime. Bill Clinton to some extent continued that pattern, although he may have smoothed out the edges of it. And George Bush took Ronald Reagan’s insight and ran it over a cliff. And so I think the simple way of telling the story is that when Bill Clinton said the era of big government is over, he wasn’t arguing for an era of no government. So what we need to bring about is the end of the era of unresponsive and inefficient government and short-term thinking in government, so that the government is laying the groundwork, the framework, the foundation for the market to operate effectively and for every single individual to be able to be connected with that market and to succeed in that market. And it’s now a global marketplace."

The market will save us... Why didn't I think of that?! Put the liberal back in neoliberal!

This is not hope, but a hopeless situation unless we work towards addressing the roots of the problems.

Some questions?

So we can't afford a national health care system, but we can afford to bail out huge corporations, costs that will surely be over a trillion dollars? So, welfare mothers are burdening the system, not robber barons and war mongers? So, we pay too much in taxes because the government funds inefficient social programs? So we should privatize social programs like social security and education? So privatizing is more efficient and costs the taxpayers less money? So basically, we should believe everything that politicians, corporate leaders, talking heads, and the media tell us and ignore reality? So, we should not be outraged, right? Just checking.

The Universal Market online

I have officially started blogging! The title is taken from a chapter in Harry Braverman's famous book Labor and Monopoly Capital. Braverman was an amazing thinker and I am always reminded of this chapter as I watch history unfold. In that sense, I think it will be a fitting title for the type of discussions I plan to post. Maybe it sets the expectations too high.

I don't know how well I will keep up this blog, but I figured it was better than e-mailing thoughts, ideas, and political-economic tirades to friends and family. I hope that someone out there finds it of interest.