Inequality Revisited: The Rise of the Individual is Always at the Expense of Community

By June Carbone

The debate over inequality has shifted.    It is no longer whether greater inequality exists (it indisputably does) or whether it is a good thing (even David Brooks and Marco Rubio concede that it is not).  Instead, the big issue is whether the rise of the top one tenth of one percent with their extraordinary concentration of wealth has anything to do with the rise of inequality between the middle and the bottom.    The answer is, of course it does, in ways that are both simple and complex.  Let us begin to count the ways . . . .

First, the rise of winner-take-all compensation systems creates incentives to short-change the center.   Empirical correlations and studies in undergraduate psych labs show that the more the CEO makes, the greater his willingness to lay off workers and to refuse to invest in employee training or retention. It is not just that greater pay makes top executives greedier, though it does seem to do that among undergraduates in lab experiments given a role to play. It’s also that the increase in top salaries and bonuses tend to be justified by a focus on short term earnings that influence stock prices.  The competitive pressure to increase earnings and the focus on the short term rather than the long term health of the company increases the pressures to shortchange worker interests – and to rig the system more generally.  (Lynne L. Dallas, Short-Termism, The Financial Crisis, and Corporate Governance, 37 J. Corp. L. 265, 316 (2012), also available on ssrn)

Second, winner-take-all-politics has produced class warfare and as Warren Buffett commented, his class won.  Paul Pierson and Jacob Hacker explain in Winner Take All Politics that the conservative movement took hold in 1978, before Ronald Reagan’s presidency, and it began with the Chamber of Commerce’s single-minded effort to marshal campaign contributions to fight for business interests.  Over the next decade, conservatives won a remarkable number of closely contested elections through the ability to shift resources to the electoral contests in play.  These successes ultimately increased the influence in both parties of the wealthiest campaign donors while declining voter turnout has lessened the influence of those outside the elite.  The difference between the 2008 election, which Democrats dominated, and the 2010 election, which Republicans swept, was a difference in who showed up at the polls, with dramatically higher turnout by wealthier voters in the Republican sweep.  Political scientist Larry Bartels concludes that today no one in Congress consistently votes to advance the interests of the bottom third of the country.  Politics has become a game in which the wealthy advance their interests not only at the expense of the poor, but at the expense of any pretense to democratic (with a small “d”) governance.

Third, winner-take-all systems produce winner-take-all families.  Naomi Cahn and I argue in Marriage Markets: How Inequality is Remaking the American Family (Oxford: 2014) that what greater inequality does is to change the ways men and women match up.  There are more high income men than high income women.  Indeed, women college graduates as a group have lost ground to college graduate men even as the gendered wage gap has shrunk for other women.  At the same time, more unequal societies in the United States and elsewhere write off a high percentage of low income men as unmarriageable due to the chronic unemployment, mass incarceration and high rates of substance abuse that correlate with greater inequality.  (The Spirit Level).  The result: more stable marriages and two parent families at the top and greater family instability at the bottom.  Impressive cross-cultural studies indicate that when family behavior at the top and bottom move in divergent directions, the contrasting patterns typically reflect differences in the availability of jobs and the different availability of marriageable men in different communities.  Family differences in turn affect the resources available for investment in children, which increase differences in educational performance.

Fourth, winner take all systems undermine communities.  Studies show that when a plant closes in a community, it affects the educational performance both of those children whose parents lost their jobs and those children whose parents were not laid off.  American Apartheid showed in the eighties that the loss of jobs in inner city communities disproportionately affected African-American neighborhoods, increasing crime rates, teen births, and community health more generally.  Today, new studies show the same consequences for all communities.  In contrast, greater societal equality creates more resilient communities.

Finally, these effects are synergistic.  Greater conservative success at the polls did produce class warfare.  Taxes fell for the top while regressive sales taxes born disproportionately by the poor have risen.  Conservatives have slashed support for public education, infrastructure improvements, food stamps and unemployment assistance while fighting tooth and nail to protect farm subsidies for big agriculture, a health care system that gives the greatest tax subsidies to those in the top tax brackets and a host of mostly invisible measures that benefit hedge funds, oil companies, “too big to fail” banks, and other business interests.  These measures simultaneously protect entrenched interests and make social mobility that much more difficult.  Business lobbyists have undermined the measures that once produced greater economy stability for the country as a whole.  These include, as Paul Krugman emphasizes, countercyclical government spending that produces the stimulus needed to encourage full employment.  The efforts extend to structural measures such as repeal of the requirement that investment banks be held as partnerships that retrained financial risk-taking.  Perhaps most critically, greater inequality undermines any sense that we are in this together.  Mitt Romney dramatically underscored that point when he described 47% of the country as moochers.

The one percent are responsible for the fate of the country and the decline of the middle class. Their failure to accept responsibility for the consequences makes it impossible to address the country’s needs.  It is time for everyone else to fight back.  “Class warfare” in the sense of objection to the course of events that undermines our institutions, our families and our communities is the necessary order of the day.

9 responses to “Inequality Revisited: The Rise of the Individual is Always at the Expense of Community

  1. Well, it seems that class warfare is between the financialists on one side, and industrialists and workers on the other side.

    Marx and other thinkers from the left traditionally place the workers against the industrialists, however my readings since my MMT driven financial awakening made me incline more and more towards the first point of view, which I also read somewhere on this blog.

    • I think this is mostly right – the big divide in terms of class interests seems to be between those in the financial sector and everyone else. If someone could clearly articulate that (Occupy was a start but only a start) it might create a framework for addressing it.

    • The problem in Marx’s day and the present remains essentially the same; a small segment of the population are able to take in a substantive unearned increment provided by the labors of others. It’s just the new segment at the top have become almost completely removed from the production because of financialization, preferring to seek economic rent opportunities instead. Michael Hudson writes about the history of this evolution and it’s consequences extensively.

      It seems certain that we won’t return to the old style industrial models because improvements in technology have greatly diminished the demand for simple labor as a production input. The laborer as consumer idea that Henry Ford hit upon with it’s buoyant effect on living standards, has lost it’s momentum because labor is able to afford less and less, and relies more and more on credit as if the situation might improve in the future.

      The financialization and rent seeking are moving what remains of the tangible wealth of the working middle class to those at the top now. So we really are at a point were a post industrial, post financialized model is needed soon. MMT doesn’t tell us explicitly what that model will be but it does tell us that we can pursue it when we find it, and that vast numbers of people and community should not have to suffer until we do.

  2. Excellent piece. It is a step toward defining MMT as a commons focused political/economic paradigm. thank-you

  3. “today no one in Congress consistently votes to advance the interests of the bottom third of the country. ”

    Are the interests, economic or otherwise, of the bottom third of the country, identical for each individual? While the members of Congress are simply an aggregation of pompous thieves, even if they were 100% altruists, how could they possibly implement programs that would advance the interests of all of the bottom third? And why should they be able to do so?

    The reality is that the nation/state itself has successfully isolated the individual from other segments of society that may rival that individual’s allegiance to the state. The federal government wants to be the sole dispenser of benefits, justice, punishment and education to the individual and wants the states, tribes, families to be subservient, if not gone forever. However, since the nation/state cannot tailor a program for each of the deracinated individuals under its control, it must assign them to classes. Ergo programs are designed, in exchange for votes, to aide the single mommy class, the unemployed mill worker class, the unfunded student class, the uninsured unhealthy and so on.

    • Are the interests, economic or otherwise, of the bottom third of the country, identical for each individual? Yes. They don’t have enough money. The best way to get money and wealth for an individual or society is a job doing constructive things. If the jobs are left to trickle down from the rich, usually people who’ve got theirs from the government already, then there will be vast numbers unemployed. There is no magic that makes capitalist economies fully employ, rather than destroy colossal resources. This destruction is insane, so the government should provide jobs for anyone who want to do something constructive, in addition to the eternal welfare-for-the-rich.

      Ergo programs are designed, in exchange for votes, to aide the single mommy class, the unemployed mill worker class, the unfunded student class, the uninsured unhealthy and so on. Umm, no. Be nice if that were true, but nowadays the only programs designed are welfare-for-the-rich programs. The rich use them to prey on those other classes who do all the work, while destroying the existing programs for those classes.

  4. A good way I find of framing this particular debate, which I’m using more frequently now, is to put it forward as an issue of ‘undemocratic power’ vs ‘democratic power’ – undemocratic power gives a small number of people, disproportionate power over politics/economics and society, in a way that ultimately harms the integrity of democratic institutions themselves, whereas democratic power is power held accountable (at least in some way) to the public, in a democratic way (i.e. particularly through government).

    The sources of undemocratic power? Largely excessive amounts of money, and disproportionate control over money (which doesn’t have to have much to do, with how much someone has personally – e.g. such as those in control over money creation/distribution), which plays a key part in allowing the corruption of politics, allowing those controlling greater amounts of money, to have a disproportionate influence over politics.

    I find that this, undemocratic power vs democratic power, is a far more useful and less divisive way of framing this, than issues of rich vs poor and class warfare in general.

    It’s also a good framework for exercising critical thinking upon all areas of economics/politics; for example, a new way of framing the problem of money creation:
    Private control over money creation, confers an enormous amount of power to the people in control of that privilege, and these people are not held accountable to the public, or to a democratic process – this is a huge amount of undemocratic power, which gives these people great disproportionate/undemocratic influence, over politics, the economy, and society overall.
    In order to ensure that this power is exercised democratically, and in a way that does not erode democracy, it must be brought under government control, where use of this privilege can be held as democratically accountable, by the public.

    It’s a really nice way of framing these issues tbh – who’s going to credibly argue against democracy? (and it gets to the very root of how these issues are unjust – not by speaking in, often very complicated, economic terminology, but just by emphasizing how undemocratic it is)

    • “who’s going to credibly argue against democracy? ”

      Many intelligent and well-educated people have. The idea that half the voters + 1 have the right to tell 50% -1 how to live their lives and punish them if they fail to submit is beyond ridiculous. How about we allow competing private currencies and let the people decide? Isn’t that real democracy?

      • Markets don’t equal democracy or democratic outcomes. Competing private currencies just hand the power over to the people controlling any given currency – that’s even less democratic, because there isn’t even any public/democratic accountability placed on the currency then.