Economic Inequality Is Expensive… And Destructive

Lately you've been hearing a few political leaders, particularly Elizabeth Warren, Jeff Merkley, Brian Schatz and Bernie Sanders in the Senate and some of the Progressive Caucus members in the House, talking about steeply rising income inequality. They're talking about the kind of inequality that's part of vicious cycle that inevitably leads to oligarchy, plutocracy or outright fascism, in which a few families, through an accumulation of wealth and power, can dictate the laws and even the societal norms and control the mechanisms of enforcement to such an extent that they can virtually enslave an entire passive population.

It can't happen here? The manifestations are already undeniable. The greed and rapacity of the .01% has become so overbearing and their refusal to pay their fair share of taxes so debilitating that a UNICEF report I ran across this morning, a report that would have scandalized an empowered middle class anytime between the time Harry Truman was president until the beginning of the new normal under Ronald Reagan. The report goes a lot deeper than the shocking chart at top of the page which ranks 29 developed countries according to the overall well-being of their children. The 5 countries ranked at the very bottom include 4 of the poorest-- Latvia, Lithuania, Romania and Greece-- plus the U.S., which is both one of the richest and one with the least economic equality. Those 5 countries, along with Italy, Portugal and Spain, have child poverty rates higher than 15%. The only countries that have allowed the child poverty gap to widen to more than 30%. are Bulgaria, Ireland, Italy, Japan, Lithuania, Romania, Slovakia, Spain and, of course, the United States.

Some of the manifestations of America's rush to the bottom:





The video above is Goldman Sachs CEO Lloyd Blankfein on CBS' This Morning on Thursday. At the 4.30 mark he was asked what he thinks about income inequality. Keep in mind he has done more than almost anyone else in the country to accelerate economic inequality, paying his bankers an average of close to $400,000 annually-- and taking annual compensation for himself of tens of millions of dollars. After a couple of seconds of stutters and stammers he said "Income inequality is a very destabilizing thing in the country. In other words, it's responsible for the divisions in the country. The divisions could get wider. If you can't legislate, you can't deal with problems. If you can't deal with problems you can't drive growth and you can't drive the success of the country. It's a very big issue and something that has to be dealt with. One of the ways of dealing with it is to make the pie grow and people are better at making the pie grow but I have to say too much of the GDP over the last generation has gone to too few of the people… If you grow the pie but too few people enjoy the benefits of it in the fruit, then you'll have an unstable society."

About 2 weeks earlier CBS' Money Watch sat down to interview economist Thomas Piketty about the implications of his new book, Capital in the Twenty-First Century. They began, "Piketty's thesis: that the rate of return on capital, such as real estate, dividends and other financial assets, is racing away from the rate of growth required to maintain a healthy economy. If that trend continues for an extended period of time-- if wealth becomes ever more concentrated in the hands of a few-- then inequality is likely to get worse… (I)nequality is evident in what are by now a host of familiar symptoms. Stagnant pay, except among the super-rich. Soaring health care and education costs. The diminished expectations commonly found in young, especially those lacking college degrees, and old alike, as retirement becomes something to endure rather than to enjoy. And at the bottom of the income distribution, a road to nowhere as the avenues of upward mobility that once led to the American Dream are closed off. In the U.S., the gap between rich and poor has today reached 'spectacular' heights, Piketty says in an interview, rising to levels not seen in a hundred years. And America, a self-described classless society, has been revealed as far more socioeconomically stratified than 'old Europe,' notwithstanding its ancient history of inherited wealth."

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