Less Has More

According to the Stanford [University] Study of Poverty and Inequality Mission, forty years ago the multiple differential between the earnings of the average American worker and the average CEO was 39; that was pretty powerful then, and perhaps only a shade less than outrageous. Today the average CEO makes 1039 times what the average worker makes. The change is startling. The Study goes on to note: “The U.S. poverty rate, according to the new National Academy of Science index, is estimated at 15.8 percent. Only one advanced economy, Mexico, has a higher relative poverty rate.” Stanford tells us that we are also second in this category to Mexico as to children in poverty (24.8% for Mexico, 21.9% for the U .S. and 2.8% for Finland). While to many, the big question mark is how so many poor folks exist in the richest country in the world – a good starting place – the more interesting lurking issue is exactly how rapidly the United States is breaking into haves and haves-not, how the nation is polarizing and losing so many members of its traditional middle class.

Rather than being about politics and opinions and slogans, true understanding begins with look at the fact – hard numbers from credible sources – and then looking around the country to “feel” the underlying meaning. The polarization is more evidenced by these statistic analyses from Stanford: The facts are stark...

• Income inequality is extreme and increasing: The top 1% of Americans control 23.5% of all the country's income, the highest share controlled by the top 1% since 1928
• The U.S. is exceptionally unequal: The U.S. ranks #3 among all the advanced economies in the amount of income inequality…

· [Wealth inequality continues to grow:] The ownership of wealth among households in the U.S. became somewhat more concentrated in the 1980s and 1990s. The top 10% of households controlled 68.3 percent of the total wealth in 1983 and 71.5% of the total wealth in 2001.

As we get through the latest Census statistics, gathered during a rather dismal economic time, preliminary indications tell us that all of the numbers evidencing polarization are growing stronger: those at the very top have more, and those in the middle and at the bottom have a whole lot less. Numbers.

So let’s look around us – not at the misery at the bottom – but at the growing voices in the middle complaining about their lot in life… and why. As the dollar continues to fall against many international currencies, we are watching commodities, from gasoline to groceries, rise more rapidly than we have seen in decades. For corporations with powerful international operations, getting paid for their products and services in stronger currencies but reporting the upside in softer dollars creates an inflation hedge for those who live off invested capital versus those who life off of true labor values. It doesn’t help that those U.S. corporations can avoid paying U.S. taxes simply by not repatriating foreign earnings; leaving them with massive capital to invest overseas (where they are r eally creating jobs) at the expense of domestic job growth. While we are seeing critics point to the fact that the U.S. has the highest corporate tax rate in the world, those same critics simply manage to skip noting that the actual taxes paid on such corporate profits are often less than a quarter of that rate.

Tea Party critics note that much of that inflation comes from government spending, and their observation is quite correct; they just forget why the government is spending so much, focusing only on the “entitlement” sections of our appropriations. They overlook the damages caused by the Wall Street elites who created the over-leveraged environment – and still want to be unregulated in order to continue such practices – who needed the government to “fix” their most difficult capital moments, and who tanked most consumers’ ability to spend the money that drives the economy by laying workers off and outsourcing jobs overseas… They forget that the government was attempting to replace that vital and evaporated consumer demand with government “stimulus” … a dirty word that has created a new movement to cut government spending almost across the board, including those long-term investments – education, infrastructure and research – that will give a future just like past generations invested to give us what we have today.

I did say “almost” because the military – which is accepting a modicum of cuts as a show of “good faith” – is pretty much a sacred cow, even though it consumes approximately 46% of the military budget of the entire planet. Lots of companies are selling lots of pricey hardware and providing a whole host of services to that military complex, but I have yet to have someone explain to me how we profit from our military expeditions in big venues like Iraq (which we effectively moved over to the Iranian sphere of influence) or Afghanistan (where the Taliban are stronger than they have been at any time since our invasion)

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First let’s make it clear that making lots of money from creating viable and sustainable values – even billions – is a good thing, clearly the American path to the American mega-dream. What isn’t a good thing is tilting the playing field to favor incumbent elites, to make them even richer and to concentrate the wealth even more in their corner, without creating the necessary underlying values to the nation as whole. It’s not OK to increase class size and tank the value of public education, because that actually prevents new value-creators from rising up and taking away some of that incumbent wealth. It’s not OK to impose costly regulations to raise money that favor those who can afford to pay for those outrageous compliance costs at the expense of dreamers at the bottom… while letting mega-funds escape meaningful regulation and pay vastly lower taxes.

When polarization gets extreme, when people give up hope after they have implemented what they think solutions are only to see… no change… after a period of “blame exchange,” governments start to erode, constituent confidence vaporizes… and nations fall. It may take time, but failing to repair those polarization enhancers earlier in the game is almost always fatal. “Let them eat cake!” The picture above, by the way, is of Marie Antoinette’s execution.

I’m Peter Dekom, and it is essential to level our economic playing field and incentivize the next generation of greatness.