Wealth Is Being Re-Distributed (To The Rich)

(Image was found at Canadian Investor Magazine.)

We hear a lot from the Republicans about how bad the re-distrubition of wealth is. They would have you think that the only re-distribution of wealth that's happening is the government taking money away from hard-working Americans to give it to the "lazy" people on welfare. That is so wrong that it would be laughable, if this silly argument wasn't being taken seriously by far too many Americans.

Those who believe that specious argument simply don't understand how our economy works. Money is being re-distributed every hour of every day in the United States. In fact, monetary re-distribution is an essential element of a capitalist "free enterprise" economy. Without it, capitalism could not exist -- since every time something is bought or sold, money is being re-distributed. And in a fair economy, money would be re-distributed both up and down.

The Republicans won't tell you this, because they want the re-distribution to work only one way -- from the poor, working-class, and middle-class to the rich. While they appeal to religion and patriotism to get votes, their real aim is to keep the economic policies they have passed -- policies that have tilted the economic playing field to favor the rich (and corporations, and insure that upward re-distribution is the only re-distribution allowed.

They tell us that this upward re-distribution will eventually result in money trickling back down to all Americans, but that has not happened in the past, and won't happen in the future. Their policy benefits only the rich, and increases the gap between the rich and the rest of America (as the money flows away from the 99% to the 1%).

Here is how Robert Reich describes this upward re-distribution:

You often hear inequality has widened because globalization and technological change have made most people less competitive, while making the best educated more competitive.

There’s some truth to this. The tasks most people used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.

But this common explanation overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs.

As I argue in my new book, “Saving Capitalism: For the Many, Not the Few” (out this week), this transformation has amounted to a pre-distribution upward.

Intellectual property rights—patents, trademarks, and copyrights—have been enlarged and extended, for example, creating windfalls for pharmaceutical companies.

Americans now pay the highest pharmaceutical costs of any advanced nation.

At the same time, antitrust laws have been relaxed for corporations with significant market power, such as big food companies, cable companies facing little or no broadband competition, big airlines, and the largest Wall Street banks.

As a result, Americans pay more for broadband Internet, food, airline tickets, and banking services than the citizens of any other advanced nation.

Bankruptcy laws have been loosened for large corporations—airlines, automobile manufacturers, even casino magnates like Donald Trump—allowing them to leave workers and communities stranded.

But bankruptcy has not been extended to homeowners burdened by mortgage debt or to graduates laden with student debt. Their debts won’t be forgiven.

The largest banks and auto manufacturers were bailed out in 2008, shifting the risks of economic failure onto the backs of average working people and taxpayers.

Contract laws have been altered to require mandatory arbitration before private judges selected by big corporations. Securities laws have been relaxed to allow insider trading of confidential information.

CEOs now use stock buybacks to boost share prices when they cash in their own stock options.

Tax laws have special loopholes for the partners of hedge funds and private-equity funds, special favors for the oil and gas industry, lower marginal income-tax rates on the highest incomes, and reduced estate taxes on great wealth.

Meanwhile, so-called “free trade” agreements, such as the pending Trans Pacific Partnership, give stronger protection to intellectual property and financial assets but less protection to the labor of average working Americans.

Today, nearly one out of every three working Americans is in a part-time job. Many are consultants, freelancers, and independent contractors. Two-thirds are living paycheck to paycheck.

And employment benefits have shriveled. The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent today.

Labor unions have been eviscerated. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker, backed by a strong union, earned $35 an hour in today’s dollars.

Now America’s largest employer is Walmart, and the typical entry-level Walmart worker, without a union, earns about $9 an hour. 

More states have adopted so-called “right-to-work” laws, designed to bust unions. The National Labor Relations Board, understaffed and overburdened, has barely enforced collective bargaining.

All of these changes have resulted in higher corporate profits, higher returns for shareholders, and higher pay for top corporate executives and Wall Street bankers – and lower pay and higher prices for most other Americans.

They amount to a giant pre-distribution upward to the rich. But we’re not aware of them because they’re hidden inside the market.

The underlying problem, then, is not just globalization and technological changes that have made most American workers less competitive. Nor is it that they lack enough education to be sufficiently productive.

The more basic problem is that the market itself has become tilted ever more in the direction of moneyed interests that have exerted disproportionate influence over it, while average workers have steadily lost bargaining power—both economic and political—to receive as large a portion of the economy’s gains as they commanded in the first three decades after World War II.

Reversing the scourge of widening inequality requires reversing the upward pre-distributions within the rules of the market, and giving average people the bargaining power they need to get a larger share of the gains from growth.

The answer to this problem is not found in economics. It is found in politics. Ultimately, the trend toward widening inequality in America, as elsewhere, can be reversed only if the vast majority join together to demand fundamental change.

The most important political competition over the next decades will not be between the right and left, or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground, and an economic elite that refuses to recognize or respond to its growing distress. 

(Cartoon image is by David Horsey in the Los Angeles Times)