The undeserving rich

[Celerity]

Putting the bank bailout in context

https://robertreich.substack.com/p/the-undeserving-rich

Last week’s bailout of small banks (and it was a bank bailout) needs to be seen in the larger context of America’s soaring inequality. The standard conservative explanation for why inequality has widened is that individuals are paid what they’re “worth” — and that a few Americans at the top are now worth extraordinary sums while most Americans are not. Their argument is easily confused with a moral claim that people deserve what they are paid in the market. Yet the amounts people are paid are morally justifiable only if the legal and political institutions defining the market are morally justifiable, which they are not.

Markets depend on who has the power to design and enforce them — deciding what can be owned and sold and under what terms, who can join together to gain additional market power, what happens if someone cannot pay up, how to pay for what is held in common, and who gets bailed out. These are fundamentally moral judgments. Different societies at different times have decided these questions differently. It was once thought acceptable to own and trade human beings, to take the land of indigenous people by force, to put debtors in prison, and to exercise vast monopoly power.



So we need to ask: Is it morally acceptable that the typical worker’s wage has stagnated for the last 40 years while most of the economy’s gains have gone to the top? Do we believe that people who are rich are succeeding because of their own inherent worthiness or because the game is rigged in their favor? Have people who are poor failed, or has the system failed them? Is it morally acceptable that the pay of American CEOs has gone from an average of 20 times that of the typical worker 40 years ago to over 300 times today? Are the denizens of Wall Street — who in the 1950s and 1960s earned modest sums but are now paid tens or hundreds of millions annually — really “worth” that much more now than they were worth then?

Inequality in America began widening in the late 1970s and then took off. Inequality hasn’t widened nearly as much in other advanced economies. Why not? Corporate and financial executives in America have done everything possible to prevent the wages of most American workers from rising in tandem with productivity, in order that more of the gains go instead into corporate profits and stock prices. Their major strategy has been to make workers less secure so they accept lower real wages (adjusted for inflation).

snip