Tuesday, April 24, 2012


Many who believe in the free market want the rest of us to believe one thing. The growing gaps in wealth and income we see in America today are a result of the super rich being smarter, harder working, and more deserving than the rest of us. They deserve all the money they have because they earned it.

Nice try. But I don't buy this argument, and neither should you. Here's why.

The growing gaps in wealth and income we've seen in America since 1979 are a direct result of very specific policies that work against the interests of the middle class. Specifically, if we want to understand why the rich have gotten richer while the bottom half of America has seen their financial position stagnate or lose ground we can start by looking at how favorable legislation, generous tax cuts, and a series of market bailouts have redistributed wealth to the super rich in America.

If you want a picture of where these policies are taking us as a nation take a look ...

In graph form this what's actually been happening ...

The impact has been staggering as we are now seeing property and wealth gaps that are only rivaled by what we saw during the Gilded Age (but then again, at least the Robber Barons produced something tangible) ...

(If you prefer graph form ...)

What this means is that, yes, there is a massive redistribution of wealth going on in America. Only it's not going in the direction many believe it is.

Worse, these policies are deliberate, damaging and depriving the state of much needed resources to deal with the demands of society. This quote from Alternet.org synopsizes what's been happening succinctly ...

From 1947 until the mid-1970s, the fruits of our bountiful productivity were shared reasonably fairly with working people. As productivity rose so did workers’ real wage ... This wasn’t socialism. There were still plenty of rich people who earned a significant slice of the productivity harvest. But much of that wealth was plowed back into the economy through taxation rates that between 1947 and 1980 hovered between 70 to 91 percent on incomes over $3 million (in today’s dollars). Much of that money was used to build our physical and knowledge infrastructures, and to fight the Cold War. Unions were supported by public policy and workers' real wages rose steadily after accounting for inflation. Wall Street was tightly controlled and the middle-class grew like never before.

Then something happened.

It wasn’t an act of God, or the blind forces of technological change, or the mysterious movements of markets. Nor did the super-rich become enormously smarter than before. Instead, flesh-and-blood policy makers decided that deregulation and tax cuts should become the order of the day starting in the mid-1970s.

The decision to go after labor by attacking unions - which includes having the WTO pushing for and implementing uniform financial and investment codes globally, while winking and nodding at incoherent labor standards - is a big part of this strategy.

I bring all of this up because I've been getting correspondence from many people who continue to believe that we live in some kind of free market wonderland, where those with the most money are some kind of Economic Supermen. In their world market players have gotten smarter, stronger, and play by the rules.

Their logic for how the economy works is naive and goes something like this.

Because people want to make money they will act nice to you. This means they will do what they need to do to secure your trust. They will then produce goods you will like and then purchase. They will make good products because they want you to return to purchase more goods. Similarly, if you get a bad product you will not return and the merchant will go out of business. Homo Economicus rules the day, but Caveat Emptor!

If everyone understands and learns these lessons we all live happily ever after. The end.

I know. Kind of makes you feel warm and fuzzy all over, doesn't it? This is the way life is supposed to work according to our free marketeer proponents.

Unfortunately, according to the free marketeers who live in this market wonderland, the state ruins everything. How? The state gets in the way of all that is good and efficient because the state can't do anything right (yes, the logic is kind of circular).

This perspective is pushed in spite of a mountain of evidence to the contrary.

One of the incredible points lost on our free marketeers is that over the past 100 years the profit motive has not been behind some of humanities greatest inventions or achievements. Benjamin Franklin's lightening rod, penicillin, and Jonas Salk's polio vaccine are examples of this. The best selling gun in history was not produced in the USA, nor was it a product of the profit motive.

At the end of the day there is much more to the human spirit than trucking and bartering for profit. To see the world otherwise is silly. In fact, if you think about it, while it has done good the profit motive has also done much to perpetuate many kinds of social myths, market evils, and moral turpitude.

For example, throughout history market players have shown themselves to be perfectly happy living in a world where women are second class citizens. According to this mind-set, which was sanctioned by free marketeers, men are sturdier and must bring home the bacon so women can stay home and tend to their natural duties. That it kept women from competing in the workplace was a side benefit.

As well, slavery was once viewed as a natural product of efficient market forces. And it was sanctioned in the Bible too. If you can make money and God says it's OK why mess with someones property?

Even trafficking in drugs, Nazi goods, illegal arms, and females are often viewed as "just business." That these activities undermine the human condition should not matter, according to those who make money from these markets. The profit motive, the argument goes, should not be messed with.

The point is that humanity has found numerous ways to justify wealth accumulation and obnoxious gaps in social stature. Today our free market culture has latched on to the notion that current levels of accumulated wealth and outlandish compensation packages are tied to mysterious market forces. These market forces are justified because they have been determined by talent and initiative alone.

At least this is what you are supposed to believe.

The reality is quite different. The widening gaps in wealth and income that we have seen over the past 30 years are a direct result of specific policies that were designed to shift trillions of dollars in wealth from one class in America to another. These policies, as I point out in my book, are tied to favorable legislation, tax cuts for the rich, and a series of market bailouts that most Americans either don't understand, or don't make an effort to understand.

The result of this very deliberate race to the bottom strategy is that (1) gaps in wealth and income in America have increased, (2) America's richest class now pay marginal tax rates of 15% on phenomenal income gains (derived largely from financial bets backed by you and me), and (3) our nation now owes more than $15.6 trillion (up from $1 trillion in 1981) as a result of paying for unfunded tax cuts, reckless wars, and budget shortfalls due to the market collapse.

It's time for those who benefited most from our nation's failed experiment in deregulation and tax cuts for the rich to pay up.

More specifically, taxing the super rich is not class warfare. It's our way of saying you didn't really earn your money over the past 30 years. You now need to pay for the financial gains you received from our decades long experiment with favorable legislation, unfunded tax cuts, and market bailouts that collapsed our economy and created our budget nightmare.

It's really that simple.

- Mark

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