We live in an era of unparalleled inequality; how can we combat this?
The Economy That is a Predator
Rationally we could suppose that economics deals with the
transformation of the natural world into useful form for the
purpose of human survival and to aid humans to thrive and
express their creative nature. However at some point the
western nations took a turn away from this basic
manufacturing and production towards ‘financial
instruments’, which really meant aiding wealthy people to
multiply their wealth by convincing the middle class to invest
their money. Usually this meant huge passive income, without
much further labor on their part.
Service professions such as driving a bus or being a secretary
or a teacher are rightfully seen as part of the manufacturing
economy, because all these professions serve the actual
businesses that produce goods. Companies cannot function
without an educated workforce, without workers who can get
to work each day and perform their necessary functions.
However, the economy functions in a world where
there needs to be constant vigil against the tendencies
of individuals to appropriate for themselves what is
not rightfully theirs.
Over time people started to use their intellects to design ways
to divert money to themselves through various financial
instruments. This is not a huge problem if the financial realms
are well regulated and there are enough checks and balances,
but wherever transparency was lacking this type of
predatorial behavior flourished, until it started to threaten
major areas of the economy – for example, the Savings and
Loan scandal of the nineties and the sub-prime mortgage
induced financial crash of 2007.
Where this becomes truly unacceptable however is when it is
allowed to impact the very survival needs of people who are
not even wealthy enough to invest anything at all. If the
political system leaves everything vulnerable to predatory
behavior, then large numbers of people lose their homes and
lack their most basic needs.
Governments traditionally have tried to limit the exposure of
the regular retail economy to the actions of the investment
economy. However, as time progressed governments dropped
the ball by relaxing regulations and leaving whole financial
industries to regulate themselves, as they promised to do.
2007 brought the inevitable crash that followed the relaxing
of regulations and the exposure of the retail economy. Banks,
along with other supposedly trustworthy institutions, made it
blatantly clear for whose benefit they existed. Public
confidence in both the banking industry and government
cannot be regained without very serious structural and
political change.
Any new system must honor the inalienable birthright of
every human being, the right to housing and food security,
not to mention the right to pursue happiness. Alison Wakelin
Robber Barons Then and Now
From the Civil War to the end of the 19th century, considered
the second Industrial Revolution, there were people who had
become rich and powerful beyond imagination. They were
worth billions in today’s dollars. Railroads were connecting
the interior with the east and west, giving farmers, ranchers,
and mining companies access to markets and factories. A
train could go from New York to San Francisco in seven days, a
small fraction of the previous time and expense required for
transportation. It enabled minute divisions of labor and
phenomenal economies of scale as America industrialized and
cooperated in a national economy.
As productivity increased exponentially, a small number of
unscrupulous men were able to extract immense fortunes.
Some of these names are still in our memory. Astor, who had
first monopolized the fur trade, turned to New York City real-
estate; Vanderbilt and Stanford owned railroads; Carnegie,
steel mills; Rockefeller, oil production; Morgan, banking. They
merged or colluded with each other to destroy their
competition, and they bribed legislators to purchase
legislation that would enhance their operations. They got
government loans and direct subsidizes for the railroad, and
their executives even threatened to bypass towns if they
didn’t get ransom-like payments. They bribed legislators to
find out where the streets would be built next, and then
bought the land in its path. Often they bribed the politicians
to have the streets extended past land they already owned.
By 1890 the free-land frontier was about gone, and unskilled
wages were nearly static. Wages of skilled industrial labor
were high and increasing with the rapidly advancing
industries — drawing workers from Britain and Western
Europe. The phenomenal increase in productivity enabled the
richest one percent of Americans to acquire, what was
thought to be, over half the value of all real-estate and
personal wealth in the country. That is until the growth of
these fortunes were ameliorated with antitrust legislation and
the income tax in the Progressive Era.
Today we think of Bill Gates, Jeff Bezos, Elon Musk, etc. as the
Robber Barons. Apple, Microsoft, Google, Space X and
Amazon are the most visible companies that dominate these
prominent segments of the economy. Very wealthy people
are able to influence politicians with campaign contributions
and receive government contrasts. They get favorable
legislation so they can collude, consolidate, and diminish the
competition. Huge corporations control gas, electric, and the
internet in which there cannot reasonably be competition —
much as it was over a century ago.
But the population is five times larger, and invention,
innovation and new technologies have together increased the
Gross Domestic Product by more than 50 times since the
1890s. Now these titans of information, technology, and
internet sales are worth hundreds of billions of dollars each.
Suppose we could break up Amazon and Google. Suppose we
could stop collusion, price fixing, and thwarting of
competition wherever we see it. Suppose the internet cables
and the railroad tracks were treated like the highways, with
equal access by all competitors. Suppose the price of every
good and service was reduced between ten and fifty percent.
What would happen then? We need land to live and work on,
from which to grow our food, and make the things we
consume. There is no good free-land, and we cannot make it.
We must buy or rent the land we need from those who
already own it. Therefore, the rent of land would increase
until it consumed all the benefits. Because its value increases
with population, it is an appreciating asset, too often held un-
used and under-used like gold and silver — creating a scarcity
that causes unemployment, drives wages down, and the cost
of housing up.
The legal minimum wage can be used to protect workers, and
homeowners are protected from rising rents, but for more
than a third of Americans who rent, all the savings would be
taken in residential rents. Higher housing prices would reflect
all the savings in the price of everything else. The people at
the bottom would be no better off, and private property in
land would become the ultimate Baron who Robs them all.
The solution is to recognize that every piece of land is part of
the Earth, which belongs to us all. Charge for public purpose a
tax on the rental value of land — use it or lose it. Abolish all
other taxes; abolish all government-granted monopolies; have
the roads and all other amenities in which there cannot be
competition managed by the government. This will increase
the supply of land for employment and housing, rejuvenate
our cities, increase productivity, and raise wages by creating
more jobs than workers. Mike Curtis
How Inequality Took Our Wages
Nick Hanauer, entrepreneur and businessman, a consistent
voice warning of the dangers of inequality, quotes Price and
Edwards of the Rand Foundation to show how inequality has
transferred $50 trillion from the bottom 90% to the top 1%.
So much for all the opposition to redistribution that emerges
from the wealthy every time anyone wants to increase their
taxes in any way! Redistribution isn’t their problem, it’s the
direction in which it goes.
Their research shows that had inequality simply continued at
the level of the 1970s, the median income for full-year, full-
$me, prime-aged workers in 2018 would be $92,000. Instead
it was $50,000. The other $42,000 was redistributed upwards
to the top 1%. Wage reduction by a huge amount continues
until the top 5%.
Imagine having had an income close to double what people
have actually received! Houses could easily have been kept in
good repair, the vast majority would have comfortable
retirement incomes, workers would not have had to fit in
extra hours or extra jobs just to maintain their existence. Our
lives would be so different!
Do we have a reason why we have allowed this to happen?
Have we thought through how to make real changes to
reverse inequality in the future? AW
htpps://www.rand.org/pubs/working_papers/WRA516-1.html
Nick Hanauer: The Dirty Secret of Capitalism – and a New Way
Forward: htpps://www.youtube.com/watch?v=th3KE_H27bs
Delaware Thinks is a publication of Project 2045:
delawareproject45@gmail.com
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copies. Issue 2: December 2024