The New York Times: Ain’t Inequality Just Awful?
|January 1, 2014||Posted by Staff under Editorials|
These two 2013 excerpts of the New York Times series about inequality, the Great Divide, are of (1) Dec 21, on trust by Joseph E. Stiglitz, and (2) Dec 22, on inequality by Bill Keller.
In No One We Trust
Trust is what makes contracts, plans, and everyday transactions possible; it facilitates the democratic process, from voting to law creation, and is necessary for social stability. It is essential for our lives. It is trust, more than money, that makes the world go round.
One of the reasons that the bubble’s bursting in 2007 led to such an enormous crisis was that no bank could trust another. Each bank knew the shenanigans it had been engaged in — the movement of liabilities off its balance sheets, the predatory and reckless lending — and so knew that it could not trust any other bank. Interbank lending froze, and the financial system came to the verge of collapse.
Bank managers and corporate executives still search out creative accounting devices to make their enterprises look good in the short run, even if their long-run prospects are compromised.
Without trust, life would be absurdly expensive; good information would be nearly unobtainable; fraud would be even more rampant than it is; and transaction and litigation costs would soar. Our society would be as frozen as the banks were when their years of dishonesty came to a head and the crisis broke in 2007.
America faces another formidable hurdle if it wants to restore a climate of trust: our out-of-control inequality. When 1 percent of the population takes home more than 22 percent of the country’s income — and 95 percent of the increase in income in the post-crisis recovery — some pretty basic things are at stake. Reasonable people can look at this absurd distribution and be pretty certain that the game is rigged.
When Americans see a tax system that taxes the wealthiest at a fraction of what they pay, they feel that they are fools to play along. All the more so when the wealthiest are able to move profits off shore. The fact that this can be done without breaking the law simply shows Americans that the financial and legal systems are designed by and for the rich.
We need higher norms for what constitutes acceptable behavior, like those embodied in the United Nations’ Guiding Principles on Business and Human Rights.
Inequality for Dummies
Some startling numbers: The top 10 percent of Americans used to take in a third of the national income. Now they gobble up half. The typical corporate C.E.O. used to make 30 times as much as the average worker. Now the boss makes 270 times as much as the minion.
The rich (and their children) stay rich, the poor (and their children) stay poor. A stratified society in which the bottom and top are mostly locked in place is not just morally offensive; it is unstable. Recessions are more frequent in such countries. The rich spend heavily on lobbyists and campaign donations to secure tax breaks and tariff advantages and bailouts that perpetuate their status. Not only does a dynamic economy stagnate, but the left-out citizenry becomes disillusioned and cynical.
The economy is not growing the way it did for most of the last century. The sluggish growth means that not only are the poorest stuck at the bottom, but the broad middle is in economic decline. Our economy is already 70 percent dependent on domestic consumers, way more than other developed countries.
Between now and 2030, the working-age population that pays into Social Security grows by 15 percent; the over-65 population that withdraws from Social Security grows by 65 percent.
We are overdue for a raise in the minimum wage. The public overwhelmingly supports it. It won’t help those with no jobs at all, but the best evidence is that it won’t kill jobs either, and it does help inequality by boosting the incomes of the working poor.
Ed. Notes: While the writers may be nice guys, their old ideas that have been used before — regulations and make-work jobs — were not able to prevent the recession and won’t be able to win us prosperity and justice for all. Yet these guys still want their old ways to prevail, rather than think outside the box. Outside the box you’ll find geonomics — share Earth’s worth instead of tax and spend like mad — and these novel Earth-focused reforms have always worked wherever tried, to the degree tried. You’d think the old media would take note, but I guess we’ll have to transform this economy so it serves us instead of we it without the oldsters on board — the way of the world.