Sunday, April 24, 2011

Critical Theory (CK Liu)

Social Darwinism, endeared by our elite will never achieve its purported aim of allowing the best to emerge. Instead, scumbag and rascal are likely to survive under such condition by stepping on top of the virtuous.

Excerpts : [link]

Survival of the Fittest as a Social Myth
Herbert Spencer coined the phrase “survival of the fittest” in a socio-economic context in 1864, six decades after Kant’s death, reportedly after reading Charles Darwin's On the Origin of Species, published in 1859. 
From Darwin’s scientific law on natural selection, Spencer push the edge of the envelope beyond biological evolutionary phenomenon in its original context of the natural environment. Spencer’s claim of the validity of “the survival of the fittest” in a socio-economic context is a classic case of antimony. Unlike the natural environment which is not subject to fundamental restructuring by animals that are born into it, and therfore must adjust to it, the human social environment is an artificial construct created by men who have the ability to modify it as humanity evolves towards higher social purposes. Mankind has the intelligence and power to create and modify his social environment to nurture the fittest survivors in an ideal image, and not let a diseased social environment dictate a malignant evolutionary destiny on mankind. It is a struggle symbolized by the conflict between Spartan and Athens, by the conflict between Carlyle and Spencer. 
After the Revolutions of 1848 and political agitation in the United Kingdom, Carlyle published a collection of essays entitled "Latter-Day Pamphlets" (1850) in which he attacked democracy as an absurd social ideal, while equally condemning hereditary aristocratic leadership in favor of heroic meritocracy.
Spencer’s theory of  “cosmic evolution”, expounded in his Principles of Biology (1864), involves the scientific study of universal change. While cosmic evolution attempts to integrate within social science other scientific theories such as biological evolution, it is not itself a theory or a product of reproducible evidence that leads to acceptance by the scientific community. 
Spencer connected the biological findings of Jean-Baptiste Lamarck (1744-1829) that an organism could pass on to its offspring physical traits that it acquired to enhance its survivability during its life span, with the positive philosophy of Auguste Comte, who had proposed a theory of socio-cultural evolution that society progresses by a general Law of Three Stages, which states that society as a whole, and each particular science, develops through three mentally conceived stages: (1) the theocratic stage, (2) the metaphysical stage, and (3) the positive stage. The Positivity stage refers to scientific explanation based on observation, experiment, and comparison. Positive explanations rely upon a distinct scientific method, for its justification.
Socio-cultural evolution is the process by which structural reorganization of society is affected through the passage of time, eventually producing a social form or structure which is qualitatively different from the ancestral social form shaped by a primitive man less able to control his environment. Spencer saw human progress as being propelled by primeval savage competitive human traits reinforced by technology and sanitized by rituals, rather an evolution of a higher harmonious form of humanity conditioned by love and charity. To this regressive evolution of humanity, Spencer added the concepts of natural selection borrowed from zoological evolution as spelled out in Darwin’s influential 1859 book On the Origin of Species. 
To Darwin, natural selection, a key mechanism of biological evolution, is the process by which desirable physical traits in living species become more common in a population, due to consistent effects from the reproductive survival of the bearers of such traits. The natural genetic variation within a population of organisms may cause some individuals to survive and reproduce more successfully than others in their contemporary environment. Natural selection is not connected to issues of morality, only to probability of survival in a hostile environment. If the environment requires aggressiveness as a prerequisite for survival, natural selection will create a race of aggressors. 
To Darwin, species that evolve in harsh environments such as the desert, or the icy polar region, will produce species that would be more fit for such environments rather than gentle lamb on a peaceful perrie. Darwin was merely recording an observation, without moral preference. Evolution is a biological process, not a moral choice or value judgment for Darwin who saw every specie having a place in the sun and in the food chain as a fact of nature. Darwin certainly never advocated that human society should ape the natural environment. The entire history of human civilization involves human intervention on the natural to retain the good and to shed the bad.
One of the most important contribution made by science to human progress is the advancement of precise pharmaceutical counteraction to illnesses found in the natural environment, such as those caused by harmful bacteria. Medical intervention enable mankind to defy the law of the survival of the fittest by allowing the less fit to survive with the help of medicine and education. An analogy can be made between public health and socio-economic well being to show the preference for government non-intervention in a market economy as unjustifiable in terms of facilitating proper metabolism of human progress.
The Voodoo Science of Social Darwinism
Others who came after Darwin began to apply Darwin’s observation of nature as a natural philosophy for organizing human society under the banner of Social Darwinism, with an implied judgment that whatever survives is the outcome of progress and is above moral concerns. Survival of the fittest in a competitive social environment will eventually turn human society into a harsh and dangerous hell rather than a Garden of Eden. Survival of the fittest, as a human evolutionary process, will justify an escalating circular feedback loop of mutually reinforcement between increasingly more aggressive species and environments that increasingly require more aggressiveness for survival. 
Darwin observed that natural selection acts on the phenotype, the observable characteristics of an organism, but the heritable genetic basis of any phenotype which gives a reproductive advantage will become more common in a population, a process known as allele frequency, which is the proportion of all copies of a gene that is made up of a particular gene variant allele, one of two or more forms of the DNA sequence of a particular gene. Each gene can have different alleles. Sometimes, different DNA sequences (alleles) can result in different physical traits, such as color and size, or non-physical trait such as intelligence and affinity. Other times, different alleles will have the same result in the expression of a gene. 
Over time, this process can lead to adaptations by specialized populations for particular ecological niches and may even eventually result in the emergence of new species. In other words, natural selection is an important, though not exclusive process by which evolution takes place within a population of organism in an environment beyond the control of the specie. 
Human Society and Natural Environment
As opposed to social selection, in which human societies favor and reinforce certain specific social traits over anti-social traits in the population through the social institution of marriage and other ritualistic institutions, in natural selection, the environment acts as a disinterested sieve through which only certain variations appropriate to environmental conditions can pass to fit into the environment. It is a process of surrendering the natural traits of a specie to the requirement of an unyieldingly rigid and hostile environment. 
But unlike the natural environment, the social environment is created by man, and it can be designed to enhance man’s ideal existence. In a social environment that rewards aggression and greed, as societies that adopt capitalist markets do, aggressively greedy individuals will be the fittest to survive. Most religions, with the exception of Calvinism, try to influence the social milieu to be less aggressive and greedy, by encouraging the image of God as loving and charitable. 
Calvinism and Capitalism
Calvinism has been identified by social historians as the driving force behind the rise of modern capitalism in a revolt against the medieval condemnation of usury and, implicitly, of unearned or passive profit.
Richard Henry Tawney (1880 – 1962), English Christian socialist, economic historian and social critic, wrote Religion and the Rise of Capitalism (1926), in which he explored the causal relationship between Protestantism and economic development in the 16th and 17th centuries. Tawney “bemoaned the division between commerce and social morality brought about by the Protestant Reformation, leading as it did to the subordination of Christian teaching to the pursuit of material wealth.” Tawney took up Max Weber’s thesis on the causal connection between the appearance of Protestantism and the rise of capitalism. Weber’s book: The Protestant Ethic and the Spirit of Capitalism, appeared in German in 1904-05, and was translated into English for the first time by Harvard sociologist Talcott Parsons only in 1930, four years after the publication of Tawney book on the same subject. 
Spencer’s Rationalization of Social Evolution
Spencer wrote that over time societies will progress, presumably towards Spencer’s vision of a higher state of civilization, and that human progress is accomplished through industrious competition. He defined progress narrowly as advancement of survival skills in a man-made socio-economic order, through technology and socio-political organization that will reward such skills, leaving unexplored the possibility that amoral technological skills could overwhelm the advancement of humanity to allow the malignant growth of cancerous agents that would metastasize the human spirit.
Spencer ignored factual evidence in history by labeling early human societies that survived through in-group cooperation and symbiotic co-existence with other species, and with the natural environment, as a “primitive” state, ignoring the fact that humanity as a whole has repeatedly enhanced its own survivability through cooperative arrangements among different human sub-groups and societies. 
Spencer stressed the role of the self-centered individual acting narrowly in his self interest, rather than the harmonious collective, as the unit of analysis (the basic entity in the analysis of social studies) in social evolution. Social evolution through natural and social selection affects social as well as biological phenomena. The antinomy in the concept of individualist “survival of the fittest” in human society is that it can lead to the survival of the most socially unfit human beings and the evolution of increasing vile ecosystems that would eventually wipe out all that is good and graceful in humanity. 
Scientific Darwinism Distorted as Political Philosophy
The publication of Darwin’s influential book: On the Origin of Species in 1859 unintendedly gave a holy bible to proponents of the controversial idea that socio-cultural evolution of human society is a process of survival of the fittest in the context of capitalist market fundamentalism. The idea of biological evolution of survival of the fittest in a hostile natural environment beyond the control of the biological inhabitants has been commandeered as convenient justification for the development of capitalistic market society for human beings whose natural traits are not naturally in sync with that society's requirements for survival. 
The implication of the acceptance of the laws of nature as a destiny rather than a tool of progress is that whatever survives in nature is considered as morally valid and good, rather than whatever is good and moral should survive in civilized society constructed by man of vision. Human civilization under the law of survival of the fittest competitive market capitalism will evolve away from that which is morally good and socially desirable in human beings because such human traits are often the most fragile and unfit for survival in a society where ethics is not only perceived as weakness, but is actually a impediment to survival. 
The revolutionary power of Mao Zedong rests not only on his political organizing skill, but on his unflinching belief that the oppressed, the poor, the underprivileged, the uncultured, the uneducated and the powerless, in other words, the socio-economically unfit, have an innate goodness and the invincible power to change society toward higher stages of civilization where oppression, poverty, inequality and ignorance will be vestiges of the uncivilized past because this group can be expected not to resist reform and revolution for they have little to protect or to lose. Marx places his faith in oppressed workers as the revolutionary force because they have “nothing to lose but heir chains”.

Proudhon: Property is Theft! 
Thirty-three years before Kropotkin, Pierre-Joseph Proudhon (1809-1865), French mutualist philosopher and socialist member of the French Parliament, was reportedly the first philosopher to proudly wear the label “anarchist”. After the Revolutions of 1848, Proudhon began to call himself a federalist.
Proudhon’s best-known assertion is that Property is Theft!, contained in his first major work, What is Property? Or, an Inquiry into the Principle of Right and Government (Qu'est-ce que la propriété? Recherche sur le principe du droit et du gouvernement), published in 1840. The book’s publication attracted the hostile attention of the French authorities. It also attracted the sympathetic scrutiny of Marx, who started a correspondence with its author. 
Proudhon and Marx influenced each other: they met in Paris while Marx was exiled there. Their friendship finally ended when Marx responded to Proudhon's The System of Economic Contradictions, or The Philosophy of Povertywith the provocatively titled The Poverty of Philosophy. The dispute became one of the sources of the ideological split between the anarchist and Marxist wings of the International Working Men's Association. 
Proudhon favored workers associations or co-operatives, as well as individual worker/peasant possession, over private ownership or the nationalization of land and workplaces. He considered that social revolution could be achieved in a peaceful manner. In The Confessions of a Revolutionary Proudhon asserted that, Anarchy is Order, the phrase which much later inspired, in the view of some, the anarchist circled-A symbol, today “one of the most common graffiti on the urban landscape.” He unsuccessfully tried to create a national bank, to be funded by what became an abortive attempt at an income tax on capitalists and stockholders. Similar in some respects to a credit union, it would have given interest-free loans.
Proudhon published his own perspective for reform which was completed in 1849, Solution du problème social(Solution of the Social Problem), in which he laid out a program of mutual financial cooperation among workers to transfer control of the economy from capitalists and financiers to workers. The central part of his plan was the establishment of a bank to provide low interest rate credit with the issuing exchange notes to replace money based on gold.
Proudhon ran for the constituent assembly in April 1848, but was not elected. He was successful, in the complementary elections of June 4, and served as a deputy during the debates over the National Workshops, created by the February 25, 1848, decree passed by Republican Louis Blanc. The Workshops were to give work to the unemployed. Proudhon was never enthusiastic about such Workshops, perceiving them to be essentially charitable institutions that did not resolve the unemployment problem of the economic system. But he was against their elimination unless an alternative could be found for the workers who relied on the Workshops for subsistence.
As a consequence of his opposition to profit, wage labor, worker exploitation, ownership of land and capital, as well as to state property, Proudhon rejected both capitalism and communism. He adopted the term mutualism for his brand of anarchism, which involved control of the means of production by the workers. Proudhon opposed the charging of interest and rent, but did not seek to abolish them by law. 
Proudhon was a revolutionary, but his revolution did not mean violent upheaval or civil war, but rather the transformation of society. This transformation was essentially moral in nature and demanded the highest ethics from those who sought change. It was monetary reform, combined with organizing a credit bank and workers associations, that Proudhon proposed to use as a lever to bring about the organization of society along new lines. He did not suggest how the monetary institutions would cope with the problem of inflation and with the need for the efficient and equitable allocation of scarce resources.

Sunday, April 10, 2011

For 2nd time Icelanders' victory against bankster

Under a deal, tax payer is to foot the bill for the debt incurred by Icelandic banks, US$5 billion to UK and Dutch banks. The deal was defeated by popular vote. [link]

Icelander has just shown the world what capitalism is all about. When banks incur bad debt, they would have to be penalized for their folly instead of letting tax payer foot the bill.
Collapsed Icesave was the online arm of Landsbanki -- the British government says it has "an obligation to get that money back."

Tax the Super Rich now or face a revolution


Paul B. FarrellRevolutions build over long periods — to critical mass, a flash point. Then they ignite suddenly, unpredictably. Like Egypt, started on a young Google executive’s Facebook page. Then it goes viral, raging uncontrollably. Can’t be stopped. Here in America the set-up is our nation’s pervasive “Super-Rich Delusion.

We know the Super Rich don’t care. Not about you. Nor the American public. They can’t see. Can’t hear. Stay trapped in their Forbes-400 bubble. An echo chamber that isolates them. They see the public as faceless workers, customers, taxpayers. See GOP power on the ascent. Reaganomics is back. Unions on the run. Clueless masses are easily manipulated.

Even Obama is secretly working with the GOP, will never touch his Super Rich donors. Yes, the Super-Rich Delusion is that powerful, infecting all America.

Here’s how one savvy insider who knows described this Super-Rich Delusion: “The top 1% live privileged lives, aren’t worried about much. Families vacation at the best resorts. Their big concerns are finding the best Pilates teacher, best masseuse, best surgeons, best private schools. They aren’t concerned with the underlying deterioration of America or the world, except in the abstract, because they aren’t directly affected by it. That’s not to say they aren’t sympathetic, aware, or don’t talk about the issues you bring up. They are largely concerned with protecting and enhancing their socio-economic positions, ensuring their families live well. And nothing you write about will change things.”

Warning, in 2011 that attitude is delusional, deadly, yet pervasive in America.

Super Rich replaying “Great Gatsby” age, won’t learn till it’s too late

Our top 1% honestly believe they’re immune, protected from the unintended consequences of beating down average Americans for three decades with the free-market, trickle-down Reaganomics doctrines that made them Super Rich.

They honestly believe those same doctrines will protect them in the next depression. Why? Because they have megabucks stashed away. Provisions for the long haul. Live in gated compounds with mercenaries guarding them.

They believe they’ll continue living just fine in a depression. But you won’t. Nor will your retirement. Neither will the rest of America. And still the Super Rich don’t care, “except in the abstract, because they aren’t directly affected.”

Warning: The Super-Rich Delusion has pushed us to the edge of a great precipice: Remember the Roaring Twenties? The Crash of 1929? Great Depression? Just days before the crash one leading economist, Irving Fisher, predicted that stocks had “reached what looks like a permanently high plateau.”

Yes, he was trapped in the “Great Gatsby Syndrome,” an earlier version of today’s Super-Rich Delusion. It was so blinding in 1929 that the president, Wall Street, all America were sucked in … until the critical mass hit a mysterious flash point, triggering the crash.

Yes, we’re reliving that past — never learn, can’t hear. And oddly it’s not just the GOP’s overreach, the endlessly compromising Obama, too-greedy-to-fail Wall Street banksters, U.S. Chamber of Commerce billionaires and arrogant Forbes 400. America’s entire political, financial and economic psyche is infected, as if our DNA has been rewired.

The Collective American Brain is trapped in this Super-Rich Delusion, replaying the run-up to the ’29 Crash.

Nobody predicted 2011 revolutions in the oil-rich Arab world either

Warning: Mubarak, Gaddafi, Ali, Assad, even the Saudis also lived in the Super-Rich Delusion. Have for a long time. Were vulnerable. Ripe for a revolution. They, too, honestly believed they were divinely protected, chosen for great earthly wealth, enjoyed great armies.

Then, suddenly, out of the blue, a new “educated, unemployed and frustrated” generation turned on them, is now rebelling, demanding their share of economic benefits, opportunities, triggering revolutions, seeking retribution.

Still, you don’t believe there’s a depression ahead here in America? The third great market crash of the 21st century? A new economic revolution about to blow up in our faces? No, you don’t believe, can’t believe … you, me, we are all infected by the Super-Rich Delusion, just as Americans were in the Roaring Twenties.

Check the stats folks: The last time America’s wealth gap between the Super Rich and the other 99% was this big was just before the 1929 Crash and the Great Depression.

You can’t remember? Or you won’t? America is trapped in “terminal denial,” a setup for failure. Too many still live in the false hope of this Super-Rich Delusion. Do you believe government stats hyping a recovery? Believe Wall Street’s nonsense about a new bull market ahead? Believe Exxon-Mobile’s misleading ads about energy stocks. Believe Bill Gross’ when he says dump Treasurys, and buy his emerging country bonds? Dream on.

Start preparing for the third meltdown of the 21st Century, and depression

Denial and lies. Remember, 93% of what you hear about markets, finance and the economy are guesses, wishful thinking and lies intended to manipulate you into making decisions that suck money from your pockets into Wall Street. They get rich telling lies about securities. They hate any SEC fiduciary rules forcing them to tell the truth.

But the fact is, on an inflation-adjusted basis, Wall Street lost 20% of your retirement money in the decade from 2000 to 2010, over $10 trillion. And “Irrational Exuberance’s” Robert Shiller warns of a third meltdown coming. You better start preparing now.

Before you start betting any more at Wall Street’s rigged casinos, think long and hard about these six megatoxins lurking in America’s Super-Rich Delusion, a mind-altering pandemic infecting our nation’s leadership in Washington, Corporate America and Wall Street … but also “trickling down,” infecting many Americans. Listen:

1. Warning: Super Rich want tax cuts, creating youth unemployment

Bloomberg warns: “The Kids Are Not Alright.” Worldwide, youth unemployment is fueling the revolution. In a New York Times column, Matthew Klein, a 24-year-old Council on Foreign Relations researcher, draws a parallel between the 25% unemployment among Egypt’s young revolutionaries and the 21% for young American workers: “The young will bear the brunt of the pain” as governments rebalance budgets. Taxes on workers will be raised and spending on education will be cut while mortgage subsidies and entitlements for the elderly are untouchable,” as will tax cuts for the rich. Opportunities lost. “How much longer until the rest of the rich world” explodes like Egypt?

2. Warning: rich get richer on commodity prices, poor get angrier

USA Today’s John Waggoner warns: “Soaring food prices send millions into poverty, hunger: Corn up 52% in 12 months. Sugar 60%. Soybeans 41%. Wheat 24%. For 44 million the “rise in food prices means a descent into extreme poverty and hunger, warns the World Bank.” Many causes: Speculators. Soaring oil prices. Trade policies. Population explosion. But altogether they expose “the underlying inequalities and issues related to the standard of living that boil beneath the surface,” says a Pimco manager.

3. Warning: Global poor ticking time bomb targeting Super Rich

A Time special report, “Poor vs. Rich: A New Global Conflict” warned that a “conflict between two worlds — one rich, one poor — is developing, and the battlefield is the globe itself.” Just 25 developed nations of 750 million citizens consume most of the world’s resources, produce most of its manufactured goods and enjoy history’s highest standard of living.” But they’re now facing 100 underdeveloped poor nations with 2 billion people with hundreds of millions living in poverty all demanding “an ever larger share of that wealth.” Think Egypt. British leader calls this a “time bomb for the human race.”

4. Warning: Next revolution coming across ‘Third World America’

We are ripe for one: In “Third World America” Arianna Huffington warns: “Washington rushed to the rescue of Wall Street but forgot about Main Street … One in five Americans unemployed or underemployed. One in nine families unable to make the minimum payment on their credit cards. One in eight mortgages in default or foreclosure. One in eight Americans on food stamps. Upward mobility has always been at the center of the American Dream … that promise has been broken… The American Dream is becoming a nightmare.” Soon it will implode. a meltdown, revolution, depression.

5. Warning: Super Rich must be detoxed of their greed addiction

In “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You With the Bill),” David Cay Johnston, warns that the rich are like addicts, and to “the addicted, money is like cocaine, too much is never enough.” A few years ago an elite 300,000 Americans in “the top tenth of 1% of income had nearly as much income as all 150 million Americans who make up the economic lower half of our population.” The Super Rich Delusion is an addiction that requires a painful detox.

6. Warning: Politicians infected by Super-Rich Delusion, revolution

In “Washington’s Suicide Pact,” Newsweek’s Ezra Klein warns: “Congress is careening toward the worst of all worlds: massive job losses and an exploding deficit.” How bad? As many as 700,000 more jobs lost, says Moody’s chief economist, Mark Zandi. What a twist: Remember vice president Dick Cheney said “deficits don’t matter.” Today the GOP is so blinded by its obsession to destroy Obama’s presidency, deficits are now the only thing they say matters.

Wake up folks. The Super-Rich Delusion is destroying the American Dream for the rest of us. The Super Rich don’t care about you. They’re already stockpiling for the economic time bomb dead ahead. Don’t say you weren’t warned. Time for you to plan ahead for the coming revolution, for another depression

Unemployment in USA

Unemployment rate in USA is more than 20%, even the government admit 16% in U6. Meanwhile, the mainstream media spins unemployment at 10%.

People get unemployed in this modern nation because it fits the interest of groups and cartel. These people could have been put into productive labor such as farming that would create wealth for the country.

There is a high possibility that the moral decay of the elite would render the country into civil war.


Inflation in US

Real US inflation is around 10% while the government (BLS) massage it to 2.5%. So can Singaporean trust our government regarding inflation statistic?

Of the 1%, by the 1%, for the 1%

Is wealth inequality occurs for reason that some people are more capable than the others, or because of systemic corruption?

Joseph E. Stiglitz

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.
Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in whichmost citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.
First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.
Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.
But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.
America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries forworkers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.
Or, more accurately, they think they don’t. Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.