11 Chapters
Medium 9781609945923

9 Reversing the Inequality Death Spiral

Collins, Chuck Berrett-Koehler Publishers ePub

The form of law which I propose would be as follows: In a state which is desirous of being saved from the greatest of all plagues—not faction, but rather distraction—there should exist among the citizens neither extreme poverty nor, again, excessive wealth, for both are productive of great evil… . Now the legislator should determine what is to be the limit of poverty or of wealth.
—Plato (c. 424–348 BCE)

How can we reverse the inequality death spiral that is wrecking the world? What must we do? What actions and policies will make the biggest difference?

A century ago, people reversed the excessive inequalities of the first Gilded Age. People learned the truth about the economy, got organized, built powerful social movements, and pressed for change. It took a generation, just as it took a generation for present-day inequalities to reach extreme levels.

This time around will be very different, as the world has changed. We must not only press for policies that reduce inequality but also make a nimble transition to a new economy based on an entirely different model of economic growth.

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2 Who Is the 1 Percent?

Collins, Chuck Berrett-Koehler Publishers ePub

We can have concentrated wealth in the hands of a few or
we can have democracy. But we cannot have both.
—Louis Brandeis (1856–1941)

The “1 percent” framework is a useful lens for understanding the dramatic changes that have occurred in the last several decades. It is a real demographic we can pinpoint and picture as well as a symbolic reference to those primarily responsible for the polarization of wealth in our Union.

The “1 percent” icon has obvious limitations, too. It suggests we should focus on wealthy individuals when we also should be thinking about the role of the wealthiest corporations, sometimes summarized as “Wall Street.” In chapter 5, we will discuss the Wall Street inequality machine and the interaction between the individual 1 percent and corporations.

The other limitation with the concept “99 to 1” is it presumes that everyone in the 1 percent thinks and acts the same. Within the 1 percent are some people who have dedicated their lives to building a better world for the 100 percent. The focus of our wrath should be on the segment of the 1 percent—the game riggers and rule fixers—who use their wealth and power selfishly to perpetuate their own privilege, wealth, and power.

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8 The Sleeping 99 Percent Giant Wakes Up

Collins, Chuck Berrett-Koehler Publishers ePub

A true revolution of values will soon cause us to question the fairness and justice of many of our past and present policies… . A true revolution of values will soon look uneasily on the glaring contrast of poverty and wealth.
—Martin Luther King Jr. (1929–1968)

A sleeping giant has awoken. After being told that there is nothing we can do to stop the greed, looting, and growing inequalities, the 99 percent now knows the world doesn’t have to be this way.

The global 1 percent has recovered; their wealth is largely intact and they are back at the speculative gaming table. Meanwhile, the rest of the world is reeling from deep unemployment, anxious employment, diminished wealth, and insecurity.1

In January 2012, Time magazine named the protester as its Person of the Year. All around us are signs of emerging social movements, pointing the way toward a new economy. After seeing their dreams shattered, the 99 percent got organized.

Now the streets are filled with chants and signs: WALL STREET GOT BAILED OUT, WE GOT FORECLOSED. Vast numbers of Americans identify with the rallying cry “We are the 99 percent.”

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3 How the 1 Percent Rigs the Rules of the Economy

Collins, Chuck Berrett-Koehler Publishers ePub

A State divided into a small number of rich and a large number of poor will always develop a government manipulated by the rich to protect the amenities represented by their property.
—Harold Laski (1893–1950)

How does the 1 percent use its power?

Within the 1 percent, there are people who use their economic and political power differently. In one respect, the 1 percent is not much different from the population at large in that only a small segment is engaged in politics and actively advocating on policy matters. Some in the 1 percent care about the 100 percent and work for a fair and sustainable economy. Others are rule fixers, focused on rigging government policies in their favor to get more wealth and power. But the majority are unengaged and happy to watch their wealth accumulate without weighing in one way or another.

The game fixers maintain a worldview that justifies using every tool at their disposal to perpetuate and expand their wealth. Most believe they are the engines of the economic train, creating enterprises and wealth that pull everyone else along. This worldview is well captured in the introduction to the 2010 Forbes 400 survey.

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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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