"The economy’s failure to ensure that typical workers benefit from growth is evident in the widening gap between productivity and median wages. In the first few decades after World War II, productivity and median wages grew in tandem. But between 1979 and 2011, productivity—the ability to produce more goods and services per hour worked—grew 69.2 percent, while median hourly compensation (wages and benefits) grew just 7.0 percent." -- The State of Working America. 12th Edition.Between 1979 and 2011, new wealth generated by increases in productivity was overwhelmingly funneled to the top richest people in the country. This seems to have been no accident. Rather, the main cause of the wealth inequality appears to be government policies.
Wealth Inequality and Productivity
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Do you have any specific policies in mind? I think the overall creeping-in of Oligarchy is a real problem.
ReplyDeleteI agree that oligarchy seems to be at the very root of the problem. Once you reach a point where an oligarchy can buy the politicians and policies they want, the rest follows.
DeleteAs for specific policies, see Cujo's first reply to TWF below.
I'm not sure I know what you mean. Would you mind elaborating?
ReplyDeleteFrom page 4 of the link:
Deletestart quote:
Since the late 1970s, economic policy has increasingly served the interests of those with the most wealth, income, and political power and effectively shifted economic returns from typical American families to the already well-off. A range of economic policy choices—both actions and failures to act—in the last three decades have had the completely predictable effect of increasing income inequality. These choices include letting inflation consistently erode the purchasing power of the minimum wage, and allowing employer practices hostile to unionization efforts to tilt the playing field against workers. U.S. policies have also hastened integration of the U.S. economy and the much poorer global economy on terms harmful to U.S. workers, refused to manage clearly destructive international trade
imbalances, and targeted rates of unemployment too high to provide reliably tight labor markets for low- and middle-wage workers.
Industry deregulation (of trucking, communications, airlines, and so on) and privatization have also put downward pressure on wages of middle-class workers. Meanwhile, deregulation of the financial sector—without a withdrawal of the government guarantees that allow private interests to take excessive risks—has provided the opportunity for well-placed economic actors to claim an ever-larger share of economic growth. An increasingly well-paid financial sector and policies
regarding executive compensation fueled wage growth at the top and the rise of the top 1 percent’s incomes. Large reductions in tax rates provided a motive for well-placed actors to take these risks and also fueled the after-tax income growth at the top.
Although these post-1979 economic policies predictably redistributed wages, income, and wealth upward, there was no corresponding benefit in the form of faster overall economic growth. In fact, economic growth from the 1970s onward was slower than the economic growth in the prior 30 years. Besides resulting in slower growth, economic policy decisions also contributed to the fragility of the U.S. economy in the run-up to the Great Recession. For example, otherwise-anemic economic growth in the mid-2000s was driven by a housing bubble made possible largely through a deregulated financial sector that was hid-
ing, not managing, the growing risk that home prices would fall. This economic fragility proved catastrophic when confronted with the shock of plummeting demand after the housing bubble burst and destroyed families’ housing wealth.
More equitable and stable economic growth can only occur if there is a marked change in the direction of U.S. economic policy.
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The changes in inequality have been deliberate and, at least since the start of the Clinton Administration, they've had bi-partisan support. The deregulation of many industries, particularly the banks, and the lowering of the top rates of income taxes are just the most obvious and egregious examples.
Thanks, Cujo! You beat me to it!
DeleteIsn't it CEO greed?
ReplyDeleteI think CEO greed is an important factor in it, Diane. But for that greed to be turned into wealth inequality, the CEOs (and others in the top 1% wealthiest Americans) had to buy the politicians that would create the government policies that created the wealth inequality.
DeleteI would favor Diane's take. There is a significant difference between a cause and a facilitating mechanism. Not to downplay the impact of the legislation changes, but ultimately it is up to the leadership at the individual companies how they will treat themselves and their employees. The "buck" doesn't stop at congress, even if critical thinking often does.
ReplyDeleteI think the greed of the top 1% wealthiest people (and their helpers) is behind the politics that created the means (i.e. government policies) for redistributing the wealth of this country upwards to the top 1%. Without that greed, the same politics could have come about by accident, but most likely would not have. At least in my opinion.
DeleteBlaming CEO greed for this downturn is like blaming water vapor in the atmosphere for rain. CEOs are greedy - that's why they get the jobs. Labeling government policy that transfers wealth from everyone else to the rich, which is what TARP, the Fed bailouts, the lack of prosecution of the financial sectors' leaders, and the decrease in tax rates for the wealthy were, as "facilitating mechanisms" is patently absurd. CEOs ran their companies, and many ran them badly and greedily. They did that during the Great Depression, too. But in the aftermath, the government tried to regulate the banks, and made sure that the folks who ran them didn't profit from their failures. It tried to employ people, instead of doing a half-assed stimulus that wasn't a quarter what it needed to be while it was spending whatever it had to to make sure that the banks didn't go into receivership. And what happened? Income was redistributed so it was less unequal. Amazing! How could such magic happen?
ReplyDeleteThis post got me to wondering where the term came from, "The rich get richer and the poor get poorer."
ReplyDeleteThat's a good question, Anna Maria. I managed to find this Wikipedia article on the subject. But if you want to double check the article, then I recommend contacting Dr. Garson O'Toole through his blog dedicated to tracing quotations. That blog can be found here. I hope this helps.
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