Friday, August 14, 2009
No Wonder the Poker Game is Ending: The Wealthiest Have Taken All of the Chips
A new report by University of California, Berkeley economics professor Emmanuel Saez concludes that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.
The report shows that:
- Income inequality is worse than it has been since at least 1917
- "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007"
- "In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth."
As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this. On the other hand, billionaires have never had it better.
As I wrote in September:
As Marc Weisbrot writes in the Guardian:The economy is like a poker game . . . it is human nature to want to get all of the chips, but - if one person does get all of the chips - the game ends.
In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone's money, the game ends.
The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed...
This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).
It is a question of focusing any government funding which is made to the majority of poker players - instead of the titans of finance - so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.
John Schmitt and Nathan Lane showed that the United States is not the nation of small businesses that it is regularly dressed up to be for electoral campaign speeches and editorials. If we look at what percentage of our overall labour force is self-employed, or what percentage of manufacturing workers or high-tech workers are employed in small businesses – well, the US ranks at or near the bottom among high-income countries.In other words, the idea that America has more small businesses than other countries is false. More small businesses would be good, as it would mean that more of the "little guys" would have poker chips to play the free market game with.
As economist Paul Krugman noted after reading the study: "One more American myth bites the dust."
Similarly, breaking up the big banks would lead to more competition and allow smaller banks to fill the lending needs of individuals and small businesses.
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Amen
ReplyDeleteThe fact that the top 1% has taken so much $ is mind boggling and that HAS to change if this country if ours is going to have any chance of a recovery after all the crap that has taken place over the last 30-40 years.
ReplyDeleteDo not just roll back the Bush 43 tax cuts, roll back the Reagan tax cuts too.
Make the top 1% pay their fair share for a change and we'll start to see a difference.
This should not be happening in the USA in the 21st century for God's sake.
The US is a plutocracy, or an oligarchy, but no longer a republic limited by the US Constitution. For example, the so-called bailout, as GW and others have documented, is a policy of the wealthy for the wealthy. A policy for the public would have opened hearings for independent analysis of how to best serve the public. The bailout refused hearings under threat from Treasury Secretary Hank Paulson (former CEO of Goldman Sachs) of martial law. A policy for the public would have protected deposits while allowing the banks to reorganize under Chapter 11 bankruptcy law or be nationalized. The bailout gave trillions of our collective dollars back to the banksters. Policy for the public would have criminally investigated the Fed and Congress for allowing bankrupted banks to operate and lie about the assets on their books, as explained by William Black who investigated the S&L crisis for the US government and recorded his experience in his book "The best way to rob a bank is to own one." I recommend his interview by Bill Moyers: http://www.pbs.org/moyers/journal/04032009/profile.html
ReplyDeleteThe separation of wealth to the extent that a million children die from preventable poverty every month is symptomatic of plutocratic evil. As documented in my paper "the economics of ending poverty:" http://www.examiner.com/x-18425-LA-County-Nonpartisan-Examiner , our plutocratic leaders refuse to honor their commitment for funding, allow public misperception of the amount of US aid to the poorest of the poor, and refuse to honor public will to end poverty. This is an example of a political philosophy that would rather have children die than spend 0.7% of our income to save their lives while reducing population increase. It is also an example of public irresponsibility to believe the plutocrats rather than look to the facts.
Wake up, if you haven't already. Take the actions your heart and mind call for you to contribute to a political and economic expression of the ideals in the Declaration of Independence that all people have God-given rights to life, liberty and pursuit of happiness. The economic policy response I suggest is in my brief on monetary reform, The heart of economics: http://classlink.lcusd.net/classlink/viewfiles.php?pid=4096
That top 1% (tip of the power-pyramid), would probably rather have the bottom 50% exterminated than give up any of their wealth.
ReplyDeleteThe American way is to never blame the corporate power elite for the disasters they cause. Blame yourself or the Jews, Mexicans, gays, liberals etc. It is the way the power of the 1% is perpetuated. It all comes down to divide and conquer and as suckers we fall for it every time...
ReplyDeleteThey want the game to end it's damn clear and Mike Whitney in an article on Smirking Chimp they planned they planned this and will be content when we pick up the hoe to till their beans, empty their asstrays and bring them a cold beer.
ReplyDeleteThey have not carried this out to a logical end, this ain't the old days , we tasted the honey and we are not going back to eating gruel. They have bitten off more than they will be able to chew. The Great Equalization is about to begin.
"If money is the root of all evil, then it is easy to see how Capitalism - the formalized worship of money - has led us into the financial and political 'situation' within which we find ourselves today." - Tom Dennen, author of 'Grand Theft, Planet'.
ReplyDeleteI took a few minutes to read the paper on which this article was based, and it immediately set off my B.S. alarm. Saez explains that the income of the top 10% was high in 1917, dropped drastically during WW2, rose during the 1970's, and skyrocketed starting about 25 years ago. He offers no explanation for this, except to say it isn't technological. Well, it just happens to follow the history of the income tax rate for the richest americans. The tax began in 1918, rose sky high in WW2, rose to 92% in the 50's, declined in the 70's, and was cut in half 25 years ago under the trickle-down theory. That a professional economist would not mention something so obvious has something of a foul odor to it.
ReplyDeleteGreed.
ReplyDeleteThe richest people on the world would trade everything , for just a little more !!!
Now, find the greediest group of people and you'll find the root of the problem.
Finis
We are in the endgame of an economic system that has degenerated into producing money rather than value. Most of the people at the top of the pyramid don't produce anything except money. (At the Federal Reserve Bank this concept reaches it's absurd conclusion) Yet you could say the same for someone working at Walmart or sitting in an office cubicle. The gap between what you actually produce and what you get paid for accumulates (somewhere) as debt, a black hole that sucks more and more value into itself in the form of interest.
ReplyDelete"Taxing the rich" will not help. The problem lies in the vast dark reservoirs of debt that underlie the global economy. At the top of the pyramid, income is equal to the interest we all pay on this debt. Taxing that income and diverting it from one unproductive activity to another is a waste of time, the debt still remains.
Only when all this debt is cleared, either by collapse or decree, will there be any reform, although the cure may well be worse than the disease.
@tjr
ReplyDeleteWe have so much debt because we have allowed the real money to flow to the top and away from the govt.
Right now I have credit accts that were 13% for a decade and then went to 30% interest though nothing changed, and I had no defaults.
One of the worst thing was the Bankruptcy bill that passed Congress that set this debt nearly in stone w/o asking debt sellers to give up anything. That was characterized as helping 'clear up debt'.
Now as everyone is scared and anyone who can is 'clearing up debt' by not spending our economy seems to have gone into a tailspin because of lack of consumer spending.
So telling everyone to clear up debt is more than a bit simplistic.
Govt. spending for bullet trains (lower energy, pollution, and rapid mass transit), funding alternative energy research and giving tax breaks for installation, funding more higher education, even road building where necessary are not unproductive activities.
Done now they don't have to be done in the future so it's money the govt doesn't have to spend in the future and the debt disappears except for interest which is low for the govt.
The only way that 'clearing up debt' could work is if we all declared bankruptcy.
We need to start ignoring the "stay the road" but clear up your own personal debt garbage we are getting from so many Wall Street related sources.
Those who will win are the uberrich if we are fooled again to the Bushist idea that cutting govt. spending and taxes (and now cutting personal spending) is all we need to do to get out of this.
It's time to just say no to those who consider themselves to be the intellectual elite on the economy and yet continue to distribute this junk economics talk.
@Bill Lerner - "... The only way that 'clearing up debt' could work is if we all declared bankruptcy."
ReplyDeleteIf anyone isn't able to service their debt load to zero within 6 months, they're effectively bankrupt. The income inequality is forced bankruptcy. Raising interest past 15% is deliberately intended to force default. There is no rational or monetary reason whatsoever for high fees or interest rates on borrowed money.
While I find all these comments interesting and useful after a fashion I still believe the French had the best answer to our current problems -- "Off with their heads!"
ReplyDeleteThe French had the right idea when they staged their revolution. Why do you think the spokesmouths of the wealthy always bash the French? It's because the French know how to deal with plutocrats. It's time to bring out the guillotine and chop off some billionaire heads.
ReplyDelete