Inequality alive and well in U.S.

Posted Feb. 02, 2009, at 6:39 p.m.

President Obama and the Democratic majority in Congress face one overriding domestic challenge. Can they reverse a generation-long plunge toward economic inequality not seen since the Gilded Age?

During the campaign, Democrats argued that working and middle-class citizens would be better off under their tax proposals. This debate is important, but it obscures one quintessentially American trait. More workers in the U.S. than in other nations are convinced they are going to become rich. They identify with the interests and ideas of the rich. It is important to reduce taxes on the working class. Nonetheless, fair taxation and economic justice are less likely as long as many believe they are only a little more hard work — or one lottery ticket — away from wealth.

Recent studies show that rags to riches stories, so widely publicized here, are actually less common than in much-reviled and more egalitarian European social democracies. Nonetheless, statistical attacks on mythology often fail to address the gut level concerns that feed it. Reformers must counter Horatio Alger tales of fortune tapping the hardworking for great wealth. Many of the largest modern fortunes are not the result of work or clever invention but insider deals that harm ordinary workers and even investors.

Hank Paulson’s bailout was administered by Wall Street insiders, who showered billions of dollars on a narrow cadre of investment bankers. These banks in turn plot more mergers even as they abstain from lending to productive enterprises. The income investment bankers make from marketing exotic derivatives that destabilize the world economy is then taxed at about half the rate of plumbers’ incomes. The plumber trying to start a business is paying more taxes so that investment bankers can pay less.

Vivid portrayals of the origins of many modern fortunes serve two purposes. They show much wealth as a consequence of actions with which many citizens do not identify. The wealthy themselves may seem like a less endearing group. They also suggest how implausible rags-to-riches dreams are.

Over the longer term, reforms must address not only pocketbook inequality but also quality of life issues. Even during the ’50s and ’60s, when more workers enjoyed union protections and a better safety net, corporate enterprise was extremely hierarchical. Workers had security but no voice in the structure of their jobs, let alone the broader corporate policies. Labor writer Jane Slaughter points out: “The factories continued to be, in [Walter] Reuther’s words, ‘gold-plated sweatshops.’ … The mind-numbing drudgery, the high injury rates, the heat and smoke … led many workers to hit the bottle — and, in one famous case, led black Detroit Chrysler worker James Johnson to pick up a gun and shoot two supervisors and a co-worker. A jury after a plant tour, found that brutal working conditions and Chrysler’s shop-floor racism had literally driven Johnson insane.”

With unions under an unprincipled corporate attack today, workers lack even minimal security. Absent a political movement that can advance broader — and in fact more productive — forms of enterprise in which workers share in profits, participate in product design and financial planning, and have representation on boards, it is not surprising that in addition to or instead of the bottle or the gun, aspirations to and dreams of wealth take root.

If becoming rich is the only game in town, some may continue to embrace that dream. Let’s emphasize and enable the choice of other possible dreams. Just as workers seek challenging workplaces, they also need the right to consider work sharing as a short-term strategy to avoid or reduce layoffs. Longer term they should be able to take future productivity gains in the form of reduced working hours rather than higher total wages. (More on this in a subsequent column.)

Oppressive time demands, such as crushing levels of debt, are a lurking instability that could be potentially mobilized toward progressive ends. Debt relief coupled with providing and celebrating the opportunities afforded by getting off the work/debt/consumption treadmill is essential. If we enhance opportunities to enjoy daily life and present more sympathetic and diverse portrayals of the joys afforded by family and leisure activities, fewer citizens may imbibe the Horatio Alger nectar.

John Buell is a political economist who lives in Southwest Harbor. Readers may reach him at jbuell@acadia.net.

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