Inequality in the US: (7) What To Do About It

I said there were six postings in this series. This one is a bonus that will undoubtedly save the world, or at the very least the country. Try to pay attention.

I have tried to outline the whys and wherefores of inequality in the US, adding information and suggestions from Thomas Piketty and his excellent book Capitalism in the Twenty-First Century to others’ and my own. This added essay suggests some possibilities for how inequality might be brought within tolerable limits, because it is already intolerable and getting rapidly worse. Very soon, extreme wealth may move democracy and equality completely out of our reach absent violent revolution. In fact, new info from Saez and Zucman (here) and (here) suggest that it’s already worse than we thought. Krugman says it is apparently the norm for the super-rich to hide significant amounts of their wealth offshore.

If nothing changes,
it will only take us another

two or three decades
to greatly exceed the
worst inequality levels in history.

As I suggested, doing something to allow the least wealthy half of the population to keep themselves out of destitution and poverty is relatively easy, because the primary things that are needed are nothing more than Living Wage, universal health care, and a viable savings plan for old age. This doesn’t make the poor wealthy, and that is not the goal. It only relieves their growing misery at not being able to provide for themselves by working full time, reassures them that not every medical problem will bring death, and they will not starve in old age. Not that achieving these changes would be simple, far from it, but what to do and how to get there are readily spelled out, lacking only resolving the details and passing the appropriate laws. These things are doable because they require only decisions.

But the more difficult part of reducing inequality will be to overcome the inherent tendencies of great wealth to increase without limit, which is part and parcel of capitalism. When capitalism works as expected, this is what we get.

Then there are the “small government” folk, who want to solve all our problems by reducing the size of government to practically nothing. Call it the Paul Ryan Planned Tax Disaster. Tax money in the US presently comes to about 30% of national income. Tax in the highly desirable Scandinavian and European countries lies more in the 50%-60% range, so the US already has low taxes. The minimalists want something more like the 10% we had in 1910.

It is very clear that only basic social functions such as police, courts, foreign affairs, etc., what Piketty calls “regalian” functions, can be funded with that level of taxation. It would accelerate the plutocrat/peasant split to make us almost overnight into a nation of poor, ruled over by earls and barons with vast wealth. I notice that none of the small government enthusiasts in Congress have so far suggested a 60% reduction in Congress’ size, staff, or pay.

The difficult part of reducing inequality
will be to overcome the inherent tendencies
of great wealth to increase without limit.

Ryan’s foolish budget would make at least 90% of citizens greatly underserved. Everything would be more difficult to do; everything would cost more. It would be a total disaster requiring half a century to recover from. Each person having to pay for everything individually is guaranteed to be more expensive. Have these people never heard of economy of scale, combined resources, spreading risk? Take treatment for practically any serious medical condition, each of which could cost $100,000, $200,000, or more, cash on the barrelhead. Only the rich have that kind of money. For the rest of us a serious diagnosis would be a death sentence, and not having to pay insurance premiums we couldn’t afford anyway would be of little comfort. Meantime, do we really want to revert to privately owned highways, bridges, airports? Owned by the rich, of course, with no government input such as regulations and standards.

Such a plan would do absolutely nothing to stem the rising fortunes of the extremely wealthy, and would increase their private ownership of the nation’s public wealth, eventually to the point where most of the national wealth would be in private hands. It would increase inequality so much that most of us, even the affluent, would be harshly affected.

Piketty’s book is built around the trait that leads inexorably to inequality: r > g. When the rate of return (r) is greater than the national rate of growth (g), which is the normal long-term condition, wealth grows inexorably. The highest returns, 6%-10%, are available only to the wealthiest 0.1%, 0.01%, and 0.001%—the absolute wealthiest people in the country. The rest of us, even the affluent, can earn nothing comparable. This puts an ever-increasing percentage of national wealth in ever fewer private hands.

Overcoming the extreme adverse effects of enormous wealth will require strong steps that the wealthy will label theft. But the question that must be answered in this regard is, Do we want the egalitarian democracy that the country was designed to be, or a country owned and managed by a self-selected oligarchy? Is it even possible to prevent the hijacking of the nation by plutocrats? It’s as stark as that.

Do we want the egalitarian democracy
that the country was designed to be,
or a country owned and managed
by a self-selected plutocracy?

All of this excessive wealth completely fails the test of social utility. It does not strengthen the country. It does not advance technology or education. It doesn’t help anyone, or accomplish much of anything else. It is useless even to those who own it. I call it “museum money”, there to look at, but ultimately useless to anyone.

What to do about it presents extraordinary challenges, but perhaps the least difficult suggestion would be to nationalize industries that should be the responsibility of the federal government in the first place, thus moving their earnings from the very rich to the public purse. A national bank is an obvious first target. A national bank should issue currency, manage debt, and a few other things that should be the sole responsibility of the government. For the most part we now farm these tasks out to private industry, that is, to the rich, which contributes to their further enrichment and creates private ownership of public goods. A real federal bank would obviously be less costly and more responsive to the needs of the population.

Is it even possible to prevent
the hijacking of the nation
by plutocrats?

There are undoubtedly other enterprises that concern only the government that might be profitably nationalized. Industries of the national infrastructure come to mind, and certain parts of the so-called defense industry. National industries to build certain military equipment would remove most of the obvious overcharging that private defense contractors currently enjoy, as well as the huge private fortunes built by it. Impossible? Well, France nationalized the Renault auto company for some 40 years after WWII. And how about a national roadway company to build and maintain the nation’s highways?

Naturally, the conservative position is that it’s not possible for any government enterprise to be either efficiently or profitably run, which is nonsense. There are dozens of such government enterprises, competently and efficiently run. National health care insurance should be one of them.

We should not shy from tax policies that prevent private ownership of national wealth. Such policies were not uncommon in the twentieth century, and taxes on income rose above 90% in some countries after the great disruption created by two world wars. But that was income that was taxed, not wealth, and it is mostly established wealth that builds inequality.

Piketty suggests that, among other things, a progressive tax on extreme wealth be instituted, with the proceeds earmarked for national debt reduction. This would be doubly productive, because it is the very rich who buy up the debt issued by the government, thus enriching themselves and making the country poorer at the same time. Such a tax would reverse the results of this process.

We should not shy
from tax policies that
prevent private ownership
of national wealth.

All attempts to address this very serious situation involve political decisions, which, as I said, will be bitterly resisted. But there is plenty of precedent. The question to ask is simply whether a change will be good for the country, and not just for the ultra-rich. To that end, economists, financial experts, and demographers have an important responsibility to provide dependable data and information. Much economic debate in the not-distant past was based largely on opinion, ideology, and shaky logic in the absence of solid evidence. Better data are available now. The more real and dependable the data that are available the more likely it is that responsible decisions will be taken.

As Piketty notes, our financial picture is still quite opaque in many ways, allowing private wealth to be shifted around and hidden (see Saez and Zucman, above). Ideally, global law would make all wealth transparent. This will not happen anytime soon, but a national law forbidding deposits in places that do not report their holdings to US tax authorities, for example, would have major benefits, and there is no rational reason we should not have it.

Inequality in the US: (6) Extreme Wealth

Unfortunately, it is the nature of great wealth itself that increases inequality most. Thomas Piketty’s new book, Capitalism in the Twenty-First Century (which in my opinion will probably be the most important economics book in the first half of this century) demonstrates repeatedly how wealth and inequality grow because of this simple term: r > g, where r is the return on investment and g is national growth. When the return on invested wealth is greater than national growth, wealth grows automatically and inexorably. And the greater the difference between the two, the faster wealth grows. This is the normal condition.

For example, if the rate of return is 6% and the rate of growth is 2%, every year investments earn 4%, less costs, which include investment management and living expenses. In the case of extreme wealth, the owner can easily live on a small fraction of his return, and the balance will double his wealth in some two or three decades or less. If the return is higher or growth is lower, his wealth increases faster.

There is no natural limit
to how much the wealth
of the very rich can grow.

The greater the size of the initial wealth, the higher the rate of return will be. This is largely because the very wealthy have investment opportunities that others do not, and can afford costly investment advice.

The effect is clearly illustrated with university endowments, which consist of billions of dollars, even hundreds of billions. Endowments are useful to study because they are one of the few places where the public can see every detail, in contrast to private wealth, which is largely hidden. These reports illustrate clearly that the largest endowments earn double the return available to smaller endowments.

Harvard, with the largest endowment, pays $100M per year management fees—which is only 0.3% of earnings—but consistently earns above 10% return, which would double the endowment size within a decade. The endowment is so huge that the $100M annual management expense is insignificant. By 2024, Harvard’s endowment will likely be roughly the current GDP of Switzerland.

The extremely wealthy
own an increasing amount
of the national wealth.

Spending $100M on investment advice allows Harvard to hire some people who are masters at investing in instruments not available to the public. These investments commonly earn returns considerably higher than what’s available on the market. Besides these exotic investments, great wealth allows huge chunks of investment that can demand better terms than are otherwise available. The overall effect is that the greater the initial wealth the higher the return.

The returns on great private wealth are a bit lower than those on the highest endowments, because $100M is not available to spend on top investment management. But it is still far above what’s available to the rest of us, and the poor are lucky if they can prevent their meager savings from actually losing value.

The extremely wealthy pay very little income tax, because most of their income comes in the form of return on investments, which are not taxed. All those whose income is at the extreme upper end have many ways to avoid paying taxes.

So it is an inherent trait of great wealth that it grows inexorably and at the highest rates, which are available only to the very rich. We don’t know when the natural limit to this concentration of wealth will be reached. Although it obviously cannot be infinite, the implications for democracy and equality are frightening. The inevitable result is that the extremely wealthy, solely because of the size of their initial fortune, control an increasingly large percentage of the national wealth with no apparent limits to their wealth or the percentage of the national wealth they own.

More and more wealth
is becoming
inherited wealth.

As time passes, more and more of this extreme wealth becomes inherited wealth as the elder family heads die off. At the same time, the percentage of national wealth in private hands increases, so that the national wealth is held by fewer and fewer people, all of them vastly rich. Inherited wealth based on land was for all practical purposes the only kind of great wealth in former centuries. Today the percentage of the most extreme inherited wealth is again growing, so that within half a century or less we will surpass the world record inequality last seen in 1910 France. In fact, recent research highlighting the huge amounts of wealth hidden offshore suggests we may already have achieved that dubious honor.

So in deciding what to do about inequality created by great wealth, the question is really how to (1) limit infinite greed, and (2) find equitable ways to control the inherent tendency of great wealth to create a new ruling class and inevitable gross inequality. It doesn’t take a great deal of imagination to realize how fraught with difficulties of all kinds this effort will be. We can be certain that formidable political power will fight each and every effort to improve equality.

Inequality in the US: (5) Where Great Wealth Comes From

It should be made clear at the outset that wealth per se is not the problem. It is true that people should be justly rewarded for their talents, ingenuity, and hard work, and earned wealth is one way to provide these rewards. Without such reward you get Cuban communism, where everybody is equal and poor and there is not much reason to excel.

But extreme wealth is a different animal altogether. Even with millions of us in the US still in dire financial straits since the 2008 crash, the wealth of the rich long ago recovered and reached new heights.

The sources of great wealth today are quite different from past centuries. Most great fortunes then were inherited fortunes based on land ownership, the original owner long deceased, the current heirs freed from any necessity to earn an income for their entire lives. The largest fortunes today are far more likely to be new, or at least not centuries old, and based on sky high salary and stock market investments.

Inheritance is becoming more and more important. Building great wealth takes many years, and the years of our lives have definite limits. The trend, therefore, is for more and more great fortunes to be inherited, especially since our laws favor passing on such wealth largely intact.

Wealth per se is not the problem.

Extreme wealth is never actually earned in any case. Today, extreme wealth comes from stratospheric pay as much as established wealth or inheritance. There are no conditions under which top managers, whose total compensation is the nation’s highest, can actually earn their mega-salaries. No matter how talented they might be, much of their income is determined by factors that have nothing to do with their managerial skills.

Often the income of top managers is determined by sheer luck, because top managers are universally well rewarded when the market goes up, no matter what they do. Some call it “pay for luck”. In many cases they are equally rewarded when their company loses money in a down market, and are frequently blessed with severance pay of tens of millions when they leave, even if they were on the job only a month or two.

Extreme wealth is never actually earned.

Other factors determining mega-salaries include a high-level “old boy network”. Top executive incomes are set by corporate boards, which consist largely of executives who also earn ultra-elevated salaries. The executive whose salary is being established likely sits on several of these boards that determine the salary of other executives in his price range. Naturally, they all approve of stratospheric compensation. 

Extreme wealth provides its owners with nothing they actually need, and has decided negative effects on the country. To appreciate just what these outsized incomes mean to the nation, consider this: The 2013 year-end bonuses of Wall Street bankers were equivalent to the entire annual earnings of every poor person in the country. This vast amount of money does absolutely nothing positive for the national wellbeing, but contributes heavily toward worsening inequality.

Even though these salary figures are amoral on top of being obscene, the money involved in mega-salaries of managers is not as great a threat to equality as established wealth.

Inequality in the US: (4) Health Care

Now let’s talk about another basic right, yet another one that Republicans do their best to deny to as many citizens as they can: health care.

Health care is a basic right in a modern democratic society, as is retirement income. It’s not a luxury, or a frill. Everyone will need professional health care at various times during their lives, and universal health care benefits the nation in numerous ways. It is essential, and should be available to everyone regardless of their income. There should be no one who is unable to obtain professional treatment for a health problem as needed, no matter how large or how small that problem is.

Health care is a basic right
in a modern democratic society.

Consider the following situation.

Penicillin came on the market in the 1930s, and remains one of the most useful and powerful medicines of all time. It and its successors are still standard treatment for a wide variety of conditions today. The current cost of treatment with one of these miracle drugs is roughly five dollars, practically a pittance—unless you are poor.

Now, suppose a very poor person, a person who can never afford even the luxury of a cup of brewed coffee at a café, came to a medical facility with a seriously infected cut on his leg. If this infection is not treated, there is a chance it will cost this person his foot, and maybe his life. Yet the essential Republican position is that this person does not deserve treatment with the inexpensive life saver that’s been readily available for over 80 years because he is black and lazy. Needless to say, this position is amoral and thoroughly un-Christian, not to mention that statistically this person is not likely to be black or lazy. Regardless, the social cost of not treating this person is far higher than the five bucks or more it would cost to cure him, even if he should require hospitalization.

In places like Haiti and many of the poorest African nations, people contact common diseases that are easily and inexpensively treated, but they die because they cannot afford even a treatment costing pennies. The US is the only advanced nation in which it is possible for a poor person to die from a simple but untreated condition because even basic medical treatment is unaffordable and unobtainable.

Serious conditions are a death sentence to the uninsured, who will either be unable to get treatment, or their treatment is so delayed that the condition is worsened. Deaths have in the recent past been estimated at over a hundred daily because of lack of medical insurance, each of which costs the country a substantial amount in dollars and lost production and costs the family and community much more in lost wellbeing.

The success of the Affordable Care Act (ACA, “Obamacare”) provides resounding proof of the need for affordable care. There is simply no rational reason to believe that health care should not be available to all. It costs more to not provide it than to provide it.

The success of  “Obamacare”
provides resounding proof
of the need for affordable care.

Moreover, the conservative belief that our system of private care is not only adequate but “the best in the world” is nonsense no matter how you look at it. It costs nearly twice as much as the best systems in the world. A comparison of costs in several countries puts US prices at the very top, costing significantly more for virtually every service. Nor is our medical demography any better. We lag behind in life expectancy, have far too high a rate of problem births, and have very high rates of diabetes, heart disease, certain cancers, and a number of other things. We are definitely not Number One.

The conservative Republican fear is that national health care will somehow “march us straight into Socialism”. Conservatives have been claiming that we are “marching straight into Socialism” every year since 1856, yet somehow, after 158 years of marching, Socialism is not even on the horizon. It simply is not “Socialism” to provide universal medical care, no matter how many times Republicans claim it is. Socialism is a system in which the government owns everything, including the medical structure. Think Cuba, the USSR, China. That definition does not remotely apply to the advanced nations that have national medical insurance, all of which are regularly judged to be better than our system.

Some Republicans have said that the poor don’t need health insurance because they can always go to the Emergency Room. It should not be necessary to inform them that the Emergency Room treats emergencies, but apparently it is. ER is not health care. Moreover, treatment of emergencies requires 24/7 services of highly trained medical personnel, an expensive physical plant, and trained transportation crews with specialized vehicles to bring in the patients. A sore throat would cost to treat as much as a compound fracture.

It should not be necessary to
inform Republicans that
the Emergency Room
treats emergencies.

Why national health care? Because it’s the most effective and efficient system possible. Nearly a third of our medical costs are paid to insurance companies, and have nothing whatever to do with health care. Costs where doctors are paid per service have the highest costs in the world.

Failure to protect the health of all citizens does not save money. Huge sums are pointlessly lost when workers’ untreated illnesses keep them from working, spread contagion, cause long-lasting changes to their health, and maybe cause them to lose their jobs or become chronically ill and unable to work. The malaise affects the whole family, and can easily burn through all their savings and cost them everything they own. Among the poor, a single serious medical condition can destroy the future of the entire family for at least a generation.

Medical bankruptcy is the most common kind of family financial disaster in the US, but medical bankruptcy does not exist in first world countries with a good national health care system. It only happens in the US.

The alternative to national health care is the highly expensive and uneconomical system we have now, a system in some ways no better than the non-system of a Third World nation. If we are to have a nation with any semblance of equality, health care for all citizens must be an essential part of it.

Inequality in the US: (3) Poor Pay

The poor are not poor because of any weakness of character or racial makeup, which is one of the major fantasies that Republican conservatives promote in order to avoid addressing the real issue. The poor are poor because they are not paid enough, and because lots of families lost everything after the 2008 crash (compliments of Wall Street criminals), and there is simply not enough work available, all of which are worsened by Republican policies.

This is not to deny that there are differences in intelligence and abilities between people, and that those who are not the brightest light on the tree will not be our highest earners. In all of economic history, the bottom 50% have owned essentially no wealth. The social goal should not be to give them wealth, but to make it impossible for their income to leave them destitute. They deserve to be fairly paid for their work, and they are not.

The poor are poor because
they are not paid enough.

A primary reason we are willing to pay paltry, inadequate wages is that our culture does not properly value work. This is more than a little ironic in light of frequent Republican pronouncements that the failure of the poor to embrace the dignity of work is what creates poverty. It would seem that somewhere along the line they would realize that there is no dignity in being exploited by cheapskate pay that leaves you in poverty, leaving aside the fact that zero job availability isn’t exactly dignified either.

Living Wage is one of the most important economic issues today. Living Wage means full time wages adequate to provide all necessities, but not luxuries. The topic is being almost totally ignored in political debate. Instead, Congress and state legislatures endlessly debate a minimum wage that is at least 250% inadequate to provide basic essentials. The millions of people who are paid only minimum wage must have multiple jobs, either themselves or within their families, if they are to stay off welfare roles and leave behind their lives of quiet desperation, which they all want to do.

There is no dignity in poverty pay.

Dignity of work, did you say, you Congressional freeloader who works the equivalent of two or three days a week, yet has income in the top 6%, subsidized health care insurance, and will receive equivalent lifetime retirement pay even after just a few years? You will never have to make the sorts of agonizing decisions the poor make every day: food, or medicine; shoes for the children or carfare.

We tend to believe that only work that requires advanced education and special skills should be paid well. We believe that poverty wages are adequate for common jobs such as cleaning and food service, not to mention agricultural field work. But it’s easy enough to understand the true value of such jobs when there is no one available to do them. This happened when the North Carolina legislature managed to scare most Mexicans and Mexican-Americans out of the state with despicable new laws, after which farmers had no way to harvest crops, which rotted in the fields.

I have stated several times that the hospital is an excellent place to observe the true value of work, because there every job is crucial and failures so mundane as inadequate cleaning literally endanger lives. Moreover, we fail to understand that even such primary work requires certain skills, one of which is the ability to perform the work on a continuous basis in spite of how uninspiring it can be.

Living Wage would remove
everyone with a job
from welfare rolls.

Taking only those who presently have such ordinary jobs, consider what would happen if every working person earned enough through full time work to provide for all of the basic elements of living: shelter, clothing, good food, medical care, retirement. The result would be that more money would be circulated in the economy because these people could afford all of the necessities, and even an occasional minor luxury that they can’t afford now. This not only makes them taxpayers, rather than welfare recipients, but it creates additional jobs to satisfy the added commercial market they generate. Since this cohort is so large—half the population—the effect could be substantial.

Enactment of a fair Living Wage law would go a long way toward lessening the record inequality we are experiencing. There is such a huge difference between the $10/hr minimum wage Congress is considering and the actual wage needed—in the neighborhood of $25/hr—that it would take time for the country to adjust. Probably, Living Wage would best be instituted over several years for that reason.

Australia has had great success with the Living Wage laws they have had in place for over a century, and there is no reason such laws in the US would be any less successful. Australians are pleased with their incomes, and scornful of visitors from the US who want to tip them. Rather like tipping your dentist. Yet some Republicans think the current federal minimum of $2.13 for food servers is adequate, since tips are presumed to bring their pay up to the $7.25 minimum.

There are additional ways to lessen unemployment, including economic stimulus to support the unemployed, who will spend every penny of it, thus putting more cash in circulation. Government programs similar to those that helped drag the economy out of the Depression would also help. One of the most obvious is the restoration of our dangerously aging infrastructure—roadways, bridges, public buildings, communications systems, sewers, the electric grid—that suffer from decades of deferred maintenance and are sometimes a century old. Work that must be done; workers who need work. Seems like a no-brainer. Another is planting of trees and other plants nationwide, which has multiple benefits, including improved environment, economic enhancement, and appearance. We still have many excellent works of art that were sponsored by government during the Depression, and there are lots of other ideas.

But until the lower half of our population can earn enough to live decently on with the jobs they already have, we have not addressed inequality.

Inequality in the US: (2) The Moochers

Let’s begin our discussion of inequality by separating out the least sympathetic citizens, the lazy moochers, so that we can clarify a few things about them and move on to more important matters.

The ongoing Republican conservative claim is that most poverty in the US is the result of the natural inferiority of a large population of urban African-Americans, who are assumed to be lazy, unmarried and irresponsible teen mothers, uneducated drop-outs, drug-dealing gang members, etc., who want only to collect welfare checks forever without actually working. This is repeated endlessly by numerous Republican politicians, and it is absolutely false. It is one of those zombie beliefs that will not die no matter how many times the facts disprove it. That’s because it is based on faith and racism, not evidence.

The large cohort of
lazy inner city blacks
that is a central belief of Republicans
does not exist.

Poverty is not the result of a large population of lazy inner city black people. In fact, no such cohort exists. This will be disappointing to conservative Republicans because it means they have no convenient scapegoat for their racist, anti-democratic, intolerant, anti-compassionate, anti-Christian beliefs. The poor are found among every culture in the country, city and rural, with no regard for race. Unfortunately, Republicans will not accept this truth because it is not what they believe, and they are rarely convinced by the facts or by reality.

But there is a small cohort of people, usually poor, who are unlikely to elicit much sympathy from most of us. These are the various bums and addicts who have somehow managed to make all the wrong choices and pretty much ruin their own lives. These people do exist and are all too easily seen in cities, but they are nothing new. They come from all cultural groups, every race, urban or rural, male and female, young and old. They cost us exorbitant amounts of money. Still, no matter what else, they are all human, and therefore deserve at least that elemental level of respect. As for government resources, we must provide basic support even for these people, because not to do so is more expensive for us, as well as immoral.

Failure to provide support
for undesirable people
is more expensive for us.

A good example of the importance of necessary egalitarian treatment is an alcoholic who has TB, which is not uncommon among such addicts. The chances are good that unless this person is cured, he will infect at least one other person, maybe more, which could lead to a costly epidemic that we would have no choice but to address. Worse, if this addict has multiple-drug-resistant TB, he will need an expensive all-out attack on the disease, and the failure to cure it could have serious consequences for the community. Russia has been battling this exact condition in their prisons for years. The same danger is true of any communicable disease, and there are many. Failure to treat the case and arrest the disease before it becomes epidemic creates high costs for society as a whole.

This cohort of the least liked is real and small, but expensive, visible, and irritating to us all. It’s hard to feel sympathy for such people. In addition to the bums and addicts there are the mentally ill, who are often found in the same places as these undesirables, and are not getting nearly enough medical attention. They can be equally upsetting. 

But these are not the poor. The poor we are concerned with are a different group, the group that is most affected by rising inequality.

Inequality in the US: (1) The Problem

President Obama has called for his administration and the Congress to address inequality as the most pressing domestic problem we currently face. The next six essays are my take on various aspects of the difficult and complex problem of inequality in the US. Readers who want a thorough discourse on the topic should read Thomas Piketty’s outstanding new book, Capital in the Twenty-First Century.

Inequality in the US
is at record levels.

Inequality in the US presently stands at record levels for the nation, and may soon rise above the world record set by France in the early 20th century. Two main groups of people are involved in the discussion of inequality: the poor and the extremely rich. Inequality is created by a kind of stretching of the distance between them. The poor get increasingly poor; the rich increasingly rich. There is a gross imbalance of size between the two groups, as the poor are half of the population, and the extremely rich are some fraction of the richest 1%.

With poverty,
inequality is all political, and simple.

Of the two situations, addressing the challenge of poverty is relatively simple, even though literally half of the population is involved. Almost all of the difficulties are political, and have little to do with the actual economics, fairness, or democracy of the issue. The answer I subscribe to will go a long way, but of course will not by any means end poverty.

Addressing the inequality created by the wealth of the very rich, on the other hand, is fraught with numerous difficulties, and it’s hard to say which of them provide the greatest challenge. 

For great wealth,
solutions are difficult and complex. 

To begin with, wealth in itself is not the problem, and solutions like Cuban communism are not fruitful. The Cuban communist system does provide a high level of equality—but that’s because everyone is poor, hardly a satisfactory solution. Ultimately, the only wealth available to the rich in the short term comes from the poor, in a process called extraction. Greed plays a significant part, but it’s not the most important element. Pure greed of the rich does contribute to inequality for the simple reason that greed is infinite, and there is no point where “enough” is reached. But the biggest problems for equality stem from the inherent nature of wealth itself.

Poison the Kids

Kids, especially the youngest, and even the unborn, are hypersensitive to toxic substances. Trace amounts of these things can have radical undesirable effects. Nearly undetectable levels can affect whole populations, and exact enormous costs on us all.

My first realization of this criticality came from reading about environmental lead. The government program to remove lead paint from older housing had spectacular benefits, both in the lives of children who might have been permanently brain-damaged but were instead normal, and in the huge economic savings that resulted.

Very young children and the unborn
are hypersensitive to poisons.

Now it’s becoming ever more obvious that the rising incidence of many other illnesses and conditions affecting kids is also due to environmental substances they encounter. “Warning Signs”, by Susan Freinkel [The Nation, March 31, 2014] gives us an excellent summary of findings from research on the families of agricultural workers in the Salinas Valley. The photo below accompanies the article, and tells it all.


Workers are warned not to go into fields that have been recently sprayed, but of course there is no way to avoid the tons of poisons constantly dumped on these food crops, and they carry the residues home, where they harm their children. The article shows what happens to their kids because of this. 

A senior researcher profiled in the article sympathizes with the growers, who are supposedly trapped into using 400% more poison spray than they did several decades ago. I disagree. A little outside-the-box thinking is all that’s required.

Blanket application of poisons is rarely necessary. First, as every old-fashioned farmer knows, crop rotation controls many pests, yet factory farms tend to plant the same crop in the same place year after year, thus encouraging insect and disease resistance. Second, the blanket drenching of fields with deadly poison is rarely necessary. Every large grower should have a staff that inspects crops full time, and controls pests only when and where they are found. There should be many services that do exactly this, but they are rare. Such a plan could probably remove 90% of the pesticides from agriculture and save a ton of money in the process, not to mention the lives of children who would otherwise be seriously injured. There is great debate about drones these days. This would be an excellent use for small helicopter drones for precision pesticide application.

There are better options
than ever-increasing use of poisons.

At the same time that the findings were released for the study Freinkel tells us about, another study on the effect of pesticides used for cockroaches in the inner city showed nearly the same effects on urban children. In fact, we may have stumbled upon the answer to a whole lot of disease problems. In China, closing of a belching coal plant ten years ago led to a reduction of compromised brain development in children. A number of studies suggest that our factory food with all its additives and preservatives may be responsible for the increasing incidence of a whole series of food sensitivities, chronic diseases, autism, and other mysterious conditions.

The urban poor often live in parts of the city with more pollution, quite aside from lead. From dirty power and manufacturing plants, former military bases, industrial warehouses, etc. There is an abnormal incidence of asthma, allergy, and other conditions in such places. It seems obvious to me that these urban findings and agricultural findings result because fetuses, infants, and children are far more sensitive to chemical insult than we had thought.

It looks like environmental toxins
could be causing a whole range
of serious injuries to children.

The social cost of subtle damage to children is probably far greater than we presumed. The loss of several IQ points in a large part of the population is of national concern. The added medical cost of a widespread condition such as asthma is significant. Brain damage that eventually causes more crime is hugely costly to the country. The incidence of autism appears to be on the rise, and some link it to environmental conditions. If we could save even a fraction of what lead abatement has saved by limiting environmental toxins, the benefits in economic costs alone would be vast. But it is the human savings and the benefits to society as a whole that would be the true measure of success.

Please Show Me How I’m Wrong

We in the US are suffering from injustice and inequality unlike any other advanced country in the world today, and there is a very clear cause.

Specifically, the continuous transfer of wealth to the most wealthy people in the country has been extracted from the wealth of 60% of us, especially the poorest.

Money is finite. The government can create more as needed, but does not do so lightly because there are dangers in that. What this means is that in the shorter run of a few decades any concentration of wealth creates a loss of wealth at the other end of the wealth distribution.

There is a very clear cause
for our record injustice and inequality.

This is precisely why the US is devolving from a democracy to a plutocracy, needing only a few more steps to complete the transformation. Unfortunately, those who fight for justice and equality have had to battle the false reasoning that has so mesmerized the right, which seems impervious to fact.

Now, the lobby is not automatically an evil institution. There are lobbyists tasked with bringing accurate information to Congress about the people they represent, who may be teachers, publishers, or any number of things. But they are vastly outnumbered by lobbyists who represent extreme wealth and corporate interests, and these are tasked with obtaining ever increasing favors for the rich. Laws that should benefit everyone are altered so they result instead in transfer of wealth to those who are already rich. The lobbyists have been very successful with these legislative purchases because they can easily buy such favors with hidden money for re-election.

Any concentration of wealth
creates a loss of wealth elsewhere.

There are over 12,000 registered lobbyists in DC now, and an estimated twice as many who lobby representing wealth, but are not registered. There are eight lobbyists from the banking industry for every person in Congress.

There are only a few lobbyists representing the more than 150,000,000 people in the lower half of the income scale. The majority of Congress are millionaires. They do not focus on the problems of people who can’t come to Washington to complain that they can’t find work at all, or can’t make ends meet with their inadequate full time wages.

Wealthy conservatives believe that nothing should stand in the way of their accumulation of wealth. They try to convince us of this by claiming that they create wealth for the country. Since the Wall Street crash their wealth has grown exponentially because all new wealth has literally gone only to them, and the only new jobs pay poorly. In order to shield their consciences from their personal responsibility for the raging inequality that threatens to destroy the country, the rich right embraces a myth to justify their endless greed. This is it:

The poor are black inner city moochers—druggies, gang members, unwed mothers, drug dealers—who want government to keep them forever in the lap of luxury with undeserved welfare checks. Ronald Reagan’s mythical Cadillac-driving welfare queen with a dozen illegitimate kids and multiple false identities is alive and well. (In an update, they are an actual white couple from Minnesota who got $167K in welfare while living on their yacht “someplace warm”. The feds would like to talk to them.)

But if poverty is primarily created by racial inferiority, the incidence of poverty would be stable over time. Instead, we find that the incidence of poverty is closely related to changes in opportunity. This does not deny the dismal conditions of the inner city, which resists improvement for various reasons. It simply points out that racial ratios are relatively constant, while the incidence of poverty is much more unstable.

The rich right embraces a myth
to justify their endless greed.
This is it:
The poor are black inner city moochers.

Paul Ryan, the darling of the reality-challenged right, is the perfect representative of conservative Republican fantasythink, and the use of “dog-whistle” rhetoric (supposedly only hearable by the racist right). It’s more than a little ironic that this man whose family fled the Irish Potato Famine used virtually the same words as the Englishman Charles Trevelyan–”Dependence on charity is not to be made into an agreeable mode of life”–whose anti-compassion helped convince the English to allow a million Irish to die of starvation rather than help. For his contribution Trevelyan was knighted. (See Timothy Egan’s take on this in the NYT here.)

Ever diminishing government assistance keeps millions from starving, but no member of Congress who tried has been able to survive more than a week on such slim pickins. They found it very difficult, and after a few days went back to their rib eye and salad, whereas the poor struggle every single day, and can’t afford such luxuries as a cup of coffee at Starbucky’s. Republicans who make phony claims about the poor have no clue about the actual people or the difficulties they face. They endlessly repeat their chant, deaf to the fact that they are on the wrong page and in the wrong key.

In the Bankster crash of 2008, millions of responsible workers lost everything they had—their jobs, their health insurance, their savings, their homes, and all hope. What little work has been available since then has been concentrated in part-time, poorly paid service jobs without benefits. Yet at the same time Wall Street has seen fit to reward bankers who should be in prison with tens of billions in year-end bonuses—bonuses equal to the total annual earnings of the entire poor population of the nation. This is a staggering injustice.

Wall Street bonuses are
equal to the annual earnings
of the entire poor population.

Yet Republicans routinely tell us these millions are the lazy ones—the ones who go without dinner so their children can eat—and they deserve nothing.

Ryan and the rest are wrong about virtually everything. Most of the poor are not black, do not live in the inner city, are not drug addicts, are not promiscuous, do not belong to gangs, and so on. Nor do they expect to become millionaires. They are just ordinary people, who want to earn a little bit of the fast-vanishing American Dream that the hyper-rich are taking from them. In the wealthiest country in the history of the world, they just want wages adequate to live a decent life, and in this they are being thwarted, their livelihoods and their families destroyed by the amoral actions of plutocrats.

Conservatives are utterly wrong about the causes of poverty. Poverty is caused by the maldistribution of wealth. Maldistribution of wealth is directly created by corrupt manipulation of politicians by the ultra-wealthy, which prevents ordinary people from earning a decent living. They are wrong about the poor too. The economy was destroyed by criminal bankers, for which they are rewarded with billions. What little work the poor can find keeps them in deep poverty.

How to Know

I didn’t really believe it when my Phil 101 prof said there are two ways of knowing: evidence and faith. I still don’t believe it. Knowing requires objective knowledge. If something is true, it has to be available for anyone and everyone to prove to themselves why it is true. If actual evidence shows it’s false, it’s not true. If there is no actual evidence, assertions of truth do not make it so. Thus, science shows truth; religion and superstition do not, because they rely completely on the fact that “someone said so”, and cannot be demonstrated with fact.

If something is true,
it has to be provable,
with actual evidence.

The problem is that at least half the world knows things, including stuff about politics, because they believe them, contrary evidence be damned. Here in the US, most of these people are Republicans.

There is a fundamental difference between what science shows and what religion and superstition show. The difference is that science shows evidence that exists completely outside of human knowledge or belief. It is there for us to discover, and when we do, we cannot simply disbelieve what we find. We may have to adjust our understanding to accommodate the new facts, but whether we “believe” them is simply of no importance. The truth is still there. In religion, what we believe is all there is and there are no new discoveries that could disprove our beliefs.

The greatest conflict in politics today is between those who act entirely on what they believe, and those who act on the actual evidence. The true believer will never change because his mind is firmly made up by what he already believes, but the scientific person is open to change when actual evidence demands it.

Those of us who base our lives on evidence, on what science has shown, on proofs that can be replicated by anyone who wants to take the trouble to do it, are dismayed by people who are simply unwilling to consider any possibility that contradicts their religious faith, recorded many centuries ago when we had only a very limited understanding of the universe and our place in it. They seem like eternal children who believe fairy tales.

“To argue with a man who has
renounced the use of reason is like
administering medicine to the dead.”
Thomas Paine

They believe the bible tells us everything we need to know. But the bible says nothing about GPS. The distance to the sun was not part of the holy word, nor was the exact elliptical shape of the planetary orbits. Not to mention that the church burned people at the stake who didn’t think the Earth was the center of the universe, or who realized that humans are just another mammal and don’t actually look like God. Science is what allows us to send unmanned vehicles through the vastness of space to rendezvous in a planetary orbit many months later. Science is how we know about our distant ancestry from a million years ago. Science is how we grow better food, and make life-saving medicine. Faith says nothing about these things.

Some of these believers were elected to Congress, where they try to impose beliefs that simply do not exist in the real world on the rest of us. I guess that’s what Bush the Younger meant by “faith based” politics—the politics of fantasy, beliefs that cannot be proven. Unfortunately, policy based on fantasy guarantees disaster because things will not behave in impossible ways just because of their beliefs.

On a more mundane level, take the series of Koch-financed ads that demonstrate beyond a shadow of a doubt that Obamacare is a disaster that will kill us all. Except, of course, in every single case they trotted out, the person who was supposed to suffer under the ACA actually paid less and was completely covered. “That can’t be true”, said one, because the facts contradicted her Republican faith. So what should she base her life on, her Koch-fed belief that “that can’t be true”, or the actual fact that it is true? Unfortunately, a lot of people will accept the lies of rich Republicans about their health care and won’t even find out for themselves. Some will die because of it.

Koch-financed TV ads claim to show
that the ACA is a disaster.
But in every case they trotted out,
the insured was better off with Obamacare.
Fact vs. faith.

Maybe the most disconcerting are certain wingnuts of the right who discount all of science, that is, everything humanity has learned in the past four or five hundred years. They call solid scientific evidence “so-called” science, or “unproven”, or “opinion”, or even “a world-wide conspiracy”. They try to make laws that disallow the teaching of evolution, for example. Unfortunately for them, evolution does not depend on laws. Disbelieving what we know of the universe because they believe the Earth is at it’s center, and is 4,000 years old, is not markedly different from, say, believing that cookies are made by fairies in the northern woods on the full moon.

These same people use their cell phones, GPS, and often fly in huge airliners that are controlled by computers. Do they believe that these things somehow exist without science? The alarming thing is that they have power over our lives, yet their world is only tentatively connected with reality.

Joe Baron, a Republican from Texas, is a fount of stupidity and an all too common example of denial. An outspoken climate change denier and a senior Republican science person, he is the single person most responsible for the inaction of Congress on the climate issue for decades. Since the US is the world’s worst polluter, Baron is personally responsible for more pollution than anyone else in the world. Among other things, he claims that CO2 cannot be responsible for global warming because it’s not poisonous. He claims that wind generators slow down the wind, and therefore contribute to global warming (if there were such a thing, one assumes). His stupidity breaches other fields as well. The Economist, hardly a liberal medium, featured him in its “Profiles in Stupidity” column. What does it say about a party that would place such a fool in a position of responsibility where he can cause serious damage to every person on the planet?

So, Republicans claim superiority for their view of science, their understanding of economics, their superior humanitarianism, and much else. But they believe science must yield to faith, their economics pretty much boils down to unshakeable faith that the Free Market cures all ills, their social conscience tells them that people are poor because they are all inherently lazy and black.

They have managed to convince millions of people to act against their own interests by telling them outright fabrications and appealing to their ignorance about what constitutes truth. The direction they travel is backwards through time, to an age of plutocracy, in which they, the rich, own practically everything, and the rest go through life ignorant and poor.


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