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.
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?
- Domhoff, G. William (2010, August). Wealth, income, and power. Who Rules America?
- Feller, Avi; & Stone, Chad (2009, September 9). Top 1 percent of Americans reaped two-thirds of income gains in last economic expansion. Washington, DC: Center on Budget and Policy Priorities.
- Piketty, Thomas; & Saez, Emmanuel (2003, February 1). Income inequality in the United States, 1913-1998. Quarterly Journal of Economics, 118, 1-39.