The rich get richer, and richer still: Soaring inequality in the US and why it matters

The United States is, by every reasonable measure, the most unequal of the world’s rich countries. For four decades, the US has been suffering from a crisis of inequality. After too many years of inaction and complicity, a growing number of Democrats seem to get it. Trump and the Republicans, on the other hand, are hell-bent on making it worse.

Evidence of extreme and rising economic inequality in the US is quite overwhelming. In 1979, the top 1% earned about 9% of all income; in 2017, the top 1% earned 22% of all income. More than half of all income growth since 1976 has ended up in the pockets of the top 1%. The incomes of the top 0.1% have grown even faster. In 1965 the typical CEO earned about 20 times as much as the average worker.  In 2017, this ratio was 311. And corporate profits continue to break records.

Meanwhile, the incomes of the shrinking middle class have stagnated, and the incomes of those with a high school education or less have fallen substantially. Since 1973, labor productivity – the market value of what the typical US worker produces in an hour – has increased by 75%, while real wages (what workers get paid for an hour of work) have barely budged.  The purchasing power of the minimum wage has fallen by nearly 30%. 13% of US residents (about one in eight) live in poverty.

And while much has been made of the (very real) hard times endured by the “white working class” in recent decades, profound racial inequality remains a defining feature of the US economy. The income of the median African American household is about 60% that of the median white household, and this ratio is lower than it was in 1960.  The wealth of the median African American household is one tenth that of the median white household. 23% of African Americans live in poverty—nearly three times the rate for whites—and a third of African American children live in poverty. This appalling racial inequality manifests itself in other realms of social life as well: education, health care, housing, employment, capital markets, the “criminal justice system,” exposure to toxins, and more.

Many millions are a lay-off, a health crisis, or a divorce away from bankruptcy and/or poverty. Tens of millions are without adequate health care. Our schools are under-funded, we work too hard, and the organization of economic life – the ways in which we produce, distribute and consume stuff – has put our bodies, our planet and our grandchildren’s prospects at risk.

And, by the way, the burdens of climate change are (and will continue to be) felt disproportionately by the poor – in the US, and around the world.

OK. But isn’t rising inequality inevitable in a capitalist economy? No!  It has not always been this way. Between 1948 and 1975, the income of the median US household doubled. The incomes of the bottom 20% actually grew a little faster than the incomes of the top 20% over this period. Between 1928 and 1950, the distribution of income in the US actually became dramatically more equal.

Why should we be concerned about inequality? America is about opportunity, not guarantees -- right? Actually, no. Among the world’s rich countries, the US is tied for last in class mobility; an American’s economic success is in fact very highly correlated with their parents’ wealth and status. Richard Wilkinson captures this sad reality perfectly: “If you want the American Dream, you’ll have to go to Denmark.”

And further, economic inequality inevitably means political inequality. The right-wing Koch brothers and their billionaire allies have spent hundreds of millions of dollars advancing their self-serving agenda: tax cuts, deregulation, union busting, climate change denial, cuts to Medicare, Medicaid and Social Security, voter suppression, appointments of right-wing justices (who reliably affirm the Koch agenda), and political hits on legislators who dare to step out of line. Increasingly, legislation is literally being written by corporate lobbyists. When asked why he – along with virtually every other Republican in the US Congress – would vote for President Trump’s massive (and widely unpopular) corporate tax cuts in 2017, Republican Chris Collins of New York answered: "My donors are basically saying ‘get it done, or don’t ever call me again.’”

There is also compelling evidence that inequality is socially corrosive. In their magnificent book, The Spirit Level, Richard Wilkinson and Kate Pickett show that unequal societies suffer from higher rates of violent crime, incarceration, infant mortality, stress, mental illness, substance abuse and suicide. Inequality is also associated with lower life expectancy, lower levels of educational performance and lower levels of trust. Inequality is not just bad for the poor.  It’s toxic.

Despite this grim reality, the Republican Party’s economic policy agenda has not changed for decades. Cut taxes for the 1 percent.   Reduce corporate accountability (“deregulation”) — so that banks can run wild and corporations can pollute with impunity. Attack the bargaining power of workers. And then blame the inevitable decline in workers’ incomes on people of color—"illegal immigrants," "welfare queens," food stamp recipients, and those who’ve “cut the line” thanks to "quotas" and "special preferences."

Sound familiar? After forty years, it should. This is trickle-down economics. The “logic” here is that the economy will grow if we provide a better “business climate” -- lower taxes and fewer regulations will liberate corporations to create jobs. The problem is that it doesn’t work. Nearly four decades of lower taxes and reckless deregulation have saddled us with soaring inequality, the financial meltdown of 2008, a devastating recession, rising tuition at our public universities, diminishing opportunities and eroding economic security for millions of Americans, and a planet in peril. And yet -- like a zombie that will not die – trickle-down economics is alive and well in the US, despite its long record of failure.  Ask a Republican about the economy, and he or she is likely to tell you that we need more of this toxic concoction.

The US economy doesn’t serve most of us because it is not designed to. It’s designed to generate profits – which it does extraordinarily well.  University of Cambridge economist Ha-Joon Chang hits this nail on the head: "Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are—a simple upward redistribution of income, rather than a way to make all of us richer, as we were told."

The lost income of workers of all sorts—union and non-union, black and white, male and female, public sector and private sector—can be found in the pockets of the 1 percent.

The US remains a very rich country.  We have the capacity to do much better. We have the capacity to deliver equitable, sustainable prosperity - and we know how to do it.  A detailed plan is beyond the scope of this short essay, but here’s a start: a tax on wealth; tax increases on corporations and the super-rich; a higher minimum wage; deliberate, active efforts to improve worker bargaining power; affordable health care for all; a well-funded effort to provide affordable housing for all; the promotion of renewable energy and sustainable production technologies, and affordable higher education – including the elimination of student debt. More generally, we need to reject the presumptions that (a) our well-being depends on growth and (b) prosperity requires that we pander to corporations.

Soaring inequality is not an economic inevitability – it’s not about the “inexorable” forces of globalization or technological change.  Inequality is, to a considerable degree, a political choice. And there are powerful forces out there fighting with all of their might and all of their abundant resources to preserve the status quo.  The US economy is working for them.

The construction of an economy that meets the needs of the 99% will require a determined, united, inspired political movement - a movement that presents an alternative vision for our economy, and recognizes that we have a monumental struggle on our hands, a struggle to dis-empower the entrenched, self-serving corporate elite that has had its way for too long.

The rest of us, as a great 19^th Century economist once said, have nothing to lose but our chains.