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6 How Inequality Wrecks Everything We Care About

Collins, Chuck Berrett-Koehler Publishers ePub

The reality is that U.S. society is polarizing and its social arteries are hardening. The sumptuousness and bleakness of the respective lifestyles of rich and poor represents a scale of difference in opportunity and wealth that is almost medieval—and a standing offense to the American expectation that everyone has the opportunity for life, liberty and happiness.
—Will Hutton (b. 1951)

Inequality is wrecking the world. Not just poverty, which is destroying the lives of billions of people around the planet, but also inequality—the accelerating gap between the 99 percent and the 1 percent.

According to research in dozens of disciplines, the extreme disparities of wealth and power corrode our democratic system and public trust. They lead to a breakdown in civic cohesion and social solidarity, which in turn leads to worsened health outcomes.

Inequality undercuts social mobility and has disastrous effects on economic stability and growth. The notion of a “death spiral” may sound dramatic, but it captures the dynamic and reinforcing aspects of inequality. And these inequalities were a major contributing factor to the 1929 and 2008 economic downturns. What follows is the case against inequality.

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Collins, Chuck Berrett-Koehler Publishers ePub
Medium 9781609945923

4 Life in the 99 Percent

Collins, Chuck Berrett-Koehler Publishers ePub

Great accumulations of wealth cannot be justified on the basis of personal and family security… . In the last analysis, such accumulations amount to the perpetuation of great and undesirable concentration of control in a relatively few individuals… . Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government.
—Franklin Delano Roosevelt

The bottom 99 percent in the United States represents about 310 million people and over 150 million households.

The bottom 99 percent includes a wide spectrum of people, from those who are homeless and destitute all the way to relatively affluent households with a couple of million dollars in wealth. The higher they are in the 99 percent, the more they have benefited from rule changes in the economy that propelled the 1 percent. The further they are from the top, the less they have benefited.

Those in the 99 percent have seen their national share of income decline from 91 percent in 1976 to 79 percent in 2010.1 The share of wealth owned by the bottom 90 percent declined from 19.1 percent in 1962 to 12.8 percent in 2009.2 It is worth repeating that during 1983 and 2009, no wealth gains went to the bottom 60 percent of the U.S. population. In fact, their wealth declined since 1983. Meanwhile, 82 percent of all wealth gains flowed to the richest 5 percent.

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7 How Wealth Inequality Crashed the Economy

Collins, Chuck Berrett-Koehler Publishers ePub

An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar? It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007—the two years just preceding the biggest downturns.
—Robert Reich (b. 1946)

There are many theories about what triggered the 2008 economic meltdown. These explanations focus on bad actors such as the large banks and financial firms, the unregulated “shadow” financial sector, and unethical subprime mortgage pushers.1

But there is a missing lens to the story, one that shows how the economic meltdown was caused by excessive income and wealth inequality. The two triggers were consumption by the 99 percent based on borrowing rather than real wage growth, and reckless financial speculation by the 1 percent.

Real wages for the bottom 80 percent of households have remained relatively stagnant since the late 1970s. People survived these stagnant wages by working more hours, bringing more family members into the paid labor force, and borrowing more, thanks to easy access to credit. This put enormous stresses on many working families as they got caught on a work-consume-borrow treadmill. But for many, this was the only way to attain or maintain a middle-class standard of living.

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5 The Wall Street Inequality Machine

Collins, Chuck Berrett-Koehler Publishers ePub

The priority of the money system shifted from funding real investment for building community wealth to funding financial games designed solely to enrich Wall Street without the burden of producing anything of value.
—David Korten

When we talk about the 1 percent, it is tempting to personalize it, envisioning individual millionaires and specific people in the bottom 99 percent. This is reinforced by the photographs that thousands of people have posted on websites with their “I am the 99 percent” stories.

But, as we’ve discussed, a key explanation for the lopsided distribution of wealth is how the 1 percent teams up with leaders of large transnational corporations in the United States and the rest of the world. In fact, many of the leaders of large transnational corporations are members of the predatory, rule-rigging 1 percent. This corporate 1 percent owns a gigantic percentage of the globe’s private assets and transmits it though ownership flows to shareholders, most of whom are in the top 1 percent of individuals.

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