The term ‘income inequality’ suggests the inevitability of a natural process, a division of winners from losers along the lines of hair loss or disproportionate body mass that corporate researchers are working to solve for the sake of the self-esteem of the losers. Some people are tall, others short, some people have pleasant dispositions, others not so much. Otherwise, it almost certainly isn’t the ‘winners’ for whom inequality is a problem, is it?
The term is liberal in the sense it takes the distribution of income as given while implying that it would be nice if some nebulous ‘we’ adjusted nature as an act of social comity. Apparently unbeknownst here is that a favorite saying of economists is ‘the road to hell is paved with good intentions.’ What they mean by this is that society’s losers would be better off if concentrated income were put toward capital formation rather than charity.
However, those in the know recognize out-of-date social technologies when they see them. Banks were given the sovereign’s right to create money to fund business endeavors (in exchange for promises to repay it) for this very purpose. In contemporary practice the picture is a bit more cluttered because of ‘markets,’ if not that much more complicated. So, instead of claiming that ‘we all’ benefit from concentrated wealth, the explanation is now that the rich ‘earned it.’
Herein we find the paradox that vexes liberals: 1) income is distributed according to the intrinsic virtue of one’s undertakings in this world (we ‘earn’ it) and 2) this distribution nevertheless has the stink of greed and malevolence all over it. On the one hand, there is an agreement made to exchange labor for pay, meaning that we earn it. One the other, there is a class that uses its political and economic power to pay itself more by paying everyone else less. And there is an additional time component: CEOs and Bank executives tend to be paid the most just before their actions kill the economy for a decade of more.
Here it helps to have a passing knowledge of communist propaganda. Virtue doesn’t hand out the paychecks. In fact, without the commitment of virtually unlimited state resources from 2009 through today, today’s billionaires would be closer to hundredaires. The billionaires advising the DNC to dump Bernie Sanders and Elizabeth Warren would instead be wondering how they ended up living in a country so shithole that sick people get surprise medical bills— that these billionaires thought up.
Billionaires are made billionaires through a variety of mechanisms including inheritance, finance and real estate and ownership and / or control of business enterprises. If there is no money, these have no monetary value. If there is a lot of money, these have a lot of monetary value. In 2008, money was in short supply. Federal Reserve policies and the Bush-Obama bailouts flooded the world with money. This flood of money gave the assets and enterprises the rich own trillions of dollars in monetary value. Welcome to America.
This doesn’t correspond to mainstream explanations of economic growth for a few reasons. That storyline suggests small variations around a fixed and mostly stable ‘economy.’ However, the neoliberal revolution that was launched in the mid-1970s gave it a broad direction. Since then, what has emerged from economic recessions has been more insistent versions of the neoliberal ideal. Since the late 1980s, ‘asset’ prices have been the target of government policies. And most assets are owned by the rich.
What emerged from the 2009 Wall Street bailouts is a Frankenstein economy, a stock market that never goes down, a commensurate rise in the value of bank assets, and the resurrection of the speculative economy. Housing and stock values are back to pre-Great recession levels. But a stock market that never goes down isn’t a market— it is a giveaway to the already rich (graph above). And as the graph below suggests, the claim that ‘we all’ benefited from the bailouts finds the fortunes of the rich recovered while the poverty rate is where it was in 1969.
To tie this back to the widely loathed Trump: Donald Trump is the archetypal beneficiary of these policies— an inheritance wastrel who ‘achieved’ what a chimpanzee with a mediocre accountant could have over the same time frame. Lest this seem an unduly harsh, let me explain: a passive investment in New York real estate* would have put Mr. Trump’s inheritance at well over $3 billion today. Forbes estimates Mr. Trump’s fortune at $3.1 billion. And Mr. Trump benefited most from the policies of Ronald Reagan, Bill Clinton and Barack Obama.
In the reverso-world politics of late, liberals and some fair portion of the left argue that saving Wall Street— rather than converting it to a heavily regulated public utility, was necessary. Through the neoliberal lens that has virtue guiding the distribution of income, the actual mechanisms of economic distribution have been rendered invisible. One might imagine that through simple reverse osmosis the system that so enriched the likes of Donald Trump would prove that capitalism doesn’t operate as claimed. However, with the professional class now comprising the Democrat’s primary constituency, reverso-world is here to stay.
On the other side of the government institutions and policies designed to protect and benefit the already rich are working people and the poor who have been left to their own devices by Democrats and Republicans alike. While the rich, some fair portion of whom actively participated in creating the Great Recession, saw their fortunes quickly restored, it took a decade for unemployment rates to return to pre-Great Recession levels. And even then, the quality of the jobs is substantially degraded.
Technology— subsidized and financed by the Federal government, has wrought algorithmic scheduling, zero hour contracts and robotic micro-management. These technologies, developed in colonial sweatshops, are now common in domestic production. Add in electronic surveillance, 24/7 contact devices and full spectrum monitoring of employee activities away from work, and a more intrusive hellscape for labor is difficult to imagine. Tiered wages were codified by Barack Obama in the automaker bailouts.
While doing everything within the power of government to restore the fortunes of the Donald Trumps of the world and protect them from taxation, Barack Obama operated the levers of government in a different direction for working and poor people. By 2010— as the bailouts were still in full swing, austerity was made the order of the day. In practice, this meant that the people hired to mow the grass and shine the shoes of the rich were unable to command decent wages because there were long lines of unemployed behind them who would work for less.
Economist Dean Baker, who is bright and seemingly quite a decent fellow, made the point that ten years later, wages are finally starting to rise for working class labor. While I don’t dispute the direction of wages, the ‘base effect’ makes rates of change an inappropriate measure in this context. For example, if a worker earning $1 per hour gets a raise to $2 per hour, this is a 100% increase. If a worker making $100 per hour gets the same $1 increase, this is a 1% increase. The question is: do people have what they need to live fully realized lives?
For those who weren’t there, when Ronald Reagan promised to get government out of people’s lives, there was some sense that finally the rich were going to have to work for a living. Ralph Nader— fighting the good fight for sixty-plus years now, was all over what was at the time called ‘corporate welfare.’ Welfare, corporate and otherwise, shows up in the public budget. Using the Federal government, the Federal Reserve and Wall Street to make the rich richer doesn’t. In this sense— and many others, the Federal ‘budget deficit’ is a fraud with a political purpose.
This should all be ancient history by now. But Joe Biden, Hillary Clinton, Nancy Pelosi, Michael Bloomberg and the billionaires advising the DNC, are all trying to claim it as the future. The analysis that leads to the conclusion that Democrats have ever lost an election because they moved too far left is spurious. In the1980 presidential election usually cited, Jimmy Carter intentionally caused the worst recession since the Great Depression (at that time) to end inflation linked to a capitalist oil strike. (WWs I and II explain war inflations, Vietnam doesn’t). If you want to win an election, don’t cause massive economic misery. Mr. Carter’s loss had nothing to do with ‘moving left.’
It would be greatly preferable that Democrats are being cynical by arguing this ‘moving left’ point than the more probable case that they really are that stupid. With Medicare for All, a robust Green New Deal, a Job Guarantee and progressive taxation being popular with a majority of citizens across the political spectrum, good luck with that austerity schtick. If Donald Trump does win a second term, the establishment Democrats who oppose these programs will be wholly responsible— just like they were in 2016.
*The challenge with this calculation is finding a representative index. Most real estate indices cover wide areas and / or relate to specific to types of real estate. I looked at a variety of real estate and stock indices and the one linked to is conservative. Mr. Trump inherited $200 million in cash and real estate holdings in the early-mid 1970s. Given where and when, — New York real estate was near Great Depression levels in the early 1970s, these increased in value between 100 and 300 times. As I wrote above, a chimpanzee with a mediocre accountant.