Between the rich and the rest

Robert Reich has a good op-ed piece in The New York Times today, How to End the Great Recession. It’s a clear and convincing account of a major reason this recession resists all the usual remedies.

Reich asks how American families could manage to keep spending as if they were keeping pace with overall economic growth, and in turn fuel that  growth. There were three reasons: (1) more women joined the paid work force, (2) everyone put in more hours, and (3) families went deep into debt. The last was OK as long as home prices kept rising. But eventually the bubble burst, and there’s no reserve left to rebuild.

Now we’re left to deal with the underlying problem that we’ve avoided for decades. Even if nearly everyone was employed, the vast middle class still wouldn’t have enough money to buy what the economy is capable of producing.

But if the economy was growing, where did the money go?

Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

Note that the 23.5% figure is the highest since just before the stock market crash of 1929 and the Great Depression.

Some right-wing commentators have tried to equate social justice with communism. It is ironic that many in their audience see social justice as the final blow to their own economic survival, when in fact it is the lack of social justice that has put them in difficult straits.

In fact, social justice is the only thing that may save capitalism. Without it, even the top 1% will suffer, because their wealth can only be drawn from a healthy economy, and a healthy economy requires a more equitable distribution of wealth, through fair taxes (the US system enormously favors the wealthy), fair wages (real wages have been falling, except at the top), and improved social services, such as health care.

Stating it more broadly: How long can any political/economic system survive if it remains socially unjust?

References

2 thoughts on “Between the rich and the rest

  1. Another sign of our staggeringly unequal times . . .

    In 2007, the latest year with IRS stats available, America’s 400 highest-earning taxpayers collected an average $344.8 million each in income. They paid 16.6 percent of that, after exploiting all the loopholes they could find, in federal income taxes.

    In 1955, the top 400 collected on average, in 2007 inflation-adjusted dollars, just $12.8 million. They paid, after exploiting all available loopholes, 51.2 percent of that in taxes.

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