Perhaps more than any other developed country in the world today, the United States of America has long harbored an antipathy towards so called “wealth redistribution” from the wealthy to the poor.
That attitude was largely responsible for our nearly
half a century Cold War against Communism. The United States
spent trillions of dollars on that war, very little of which actually went to defend our country. Rather, the money was spent mostly on building up our military far beyond our needs, and the overthrow of leftist governments throughout the world (
Iran,
Chile,
Guatemala,
Argentina,
Cambodia,
Laos,
South Vietnam,
Indonesia, the
Congo, and so many others), most or all of which we replaced with right wing governments that were far worse for the people they represented than the governments that they replaced. We did this with the excuse that we were trying to spread freedom and democracy and help those countries throw off the yolk of Communism.
Nevertheless, we went through a period beginning in 1933 with the presidency of Franklin Delano Roosevelt, and ending in 1980, in which it was generally recognized by most Americans that ensuring the opportunity for “life, liberty and the pursuit of happiness” for all of its citizenry is a legitimate function of government. But with the election of Ronald Reagan in 1980, the era of “small government” and trickle down economics arrived in this country, with the consequent continuous dismantling of FDR’s New Deal, and along with it, the end of the
greatest sustained economic boom in American history.
So here we are today, following 38 years of right wing “progress”, with the
largest degree of wealth inequality in our history. And following 38 years of what many would call the transfer of wealth from the poor and the middle class to the wealthy, the worst and
most corrupt President in the history of our nation is proposing that every citizen of our country contribute to the
bailout of the U.S. banking system – perhaps the largest redistribution of wealth from the poor and the middle class to the wealthy in our history.
What is redistribution of wealth?In order to assess
re-distribution of wealth, one first has to have an idea of where and how wealth originates. Ultimately, wealth is the resources that humans need and want. Food is grown by farmers. Minerals are mined by miners. Other things that we need or want are manufactured by laborers. Those who produce these things exchange them for $$$, which though it has no
intrinsic worth, in our system is the primary indicator of wealth, since it can be used to buy virtually anything. But farmers, miners, and other laborers generally are considerably less wealthy than so many other people in our country. Thus, a superficial assessment of our economy would suggest that wealth is primarily transferred from them (i.e. the poor and the middle class) to the wealthy, who rarely directly produce anything. Why then do people generally think of wealth as being transferred from the rich to the poor?
Of course, our economy is much more complicated than that. There are many types of
intellectual activity, which involve little or no physical labor, which do in fact improve peoples’ quality of life in one way or another, and therefore deserve to be highly compensated. I myself obtain money almost solely through intellectual activity, requiring virtually no physical labor, so I certainly don’t mean to disparage that kind of work. But when wealth disparity is as extreme as it is in our country today, with the top 1% of our population owning
38 times the wealth as the bottom 40% of our population combined; with
12.6% of Americans living in poverty; and given the fact that the vast majority of Americans who live in poverty are laborers or people who can’t find work, or the children of those people… I think that we should wonder about how fair our economic system really is.
So, how is wealth
re-distributed in the United States? Is it more from the rich to the poor or from the poor to the rich? Obviously, that is an extremely complex question. Wealth is
distributed in accordance with a vastly complex system of federal, state and local laws, which include tax laws, government programs and subsidies, contract laws, banking and credit laws, etc. It would require many volumes of books to even attempt to accurately answer that question, and still it would be unlikely that much consensus of opinion could be obtained on the subject. So I won’t even attempt to answer that question here.
But I do have a couple of observations on the subject that lead me to the
opinion that most wealth distribution goes from poor to rich rather than the other way around. The first is that it is extremely difficult for me to fathom, for example, how the average CEO
earns 431 the income of the average worker in his company. And secondly, we all know that the wealthy and the corporations that they represent exert a highly disproportionate influence on our political process. Does anyone believe that corporations spend their
billions of dollars in lobbying costs to propose legislation that redistributes income from the rich to the poor?
Beyond that, perhaps consideration of some historical and current day examples of what appears to me to be distribution of wealth from poor to rich would be revealing:
SOME EXAMPLES OF WEALTH TRANSFER FROM THE POOR TO THE WEALTHYSlavery in the United StatesPerhaps the most obvious example is slavery. The slaves supplied the labor, and the plantation owners reaped all the benefits. In retrospect it seems so clear. Yet one would be hard pressed to find a slave owner who believed that slavery was a system for the distribution of wealth from the poor to the wealthy – or one who would
admit to it. Noam Chomsky explains the psychology of this phenomenon in his book, “
What we Say Goes”:
When you conquer somebody and suppress them, you have to have a reason. You can’t just say, “I’m a son of a bitch and I want to rob them.” You have to say it’s for their good, they deserve it, or they actually benefit from it. We’re helping them. That was the attitude of slave owners. Most of them didn’t say, “Look, I’m enslaving these people because I want easily exploitable, cheap labor for my own benefit.” They said, “We’re doing them a favor. They need it.”
The bailout of Wall Street by the U.S. governmentThis issue is much more complex and difficult to assess than slavery. We currently have our economic titans, such as U.S. Treasury Secretary Henry Paulson, saying that a bailout of Wall Street is absolutely necessary at this time. I watched Paulson explain his reasoning on
Meet the Press this morning. Beyond a bunch of economic jargon, Paulson said that it was “unthinkable” that the U.S. government
not bailout Wall Street. Well, if it’s “unthinkable”, I guess that means that there’s no point in thinking about it – which is clearly what Paulson meant to convey.
Since I am not an economist, I certainly am not in a position to dispute the opinion of our Treasury Secretary with technical intelligent argument. But that shouldn’t stop me from being highly suspicious of his ideas.
Asked about the cost of the bailout, Paulson denied that the true cost would be what
many are estimating as $700 billion. He explained that the U.S. government is not simply putting out taxpayer money, but rather we are getting something substantial in return. Oh really? Then why isn’t anyone from the private sector willing to buy these failing banks?
And what happened to the right wing ideology that despises socialism and believes that the “free market” should handle everything without government interference? Why not let the “free market” take care of this? Why is socialism suddenly acceptable to our radical right wing government when it involves socializing the
risks of the wealthy, to be paid for by the poor and the middle class?
And isn’t it funny that the people who are being saved, including the investors in and managers of these banks, are generally much more prosperous than the average American taxpayer. Whenever someone proposes something like a national health care program to ensure that all Americans get the health care that they need, they’re intensively questioned by our corporate news media as to where we will find the money for it. But now we’re told by the U.S. Treasury Secretary simply that it’s “unthinkable” not to bail out these banks. In other words, it’s “unthinkable” that banks and their investors will lose a heap of money, but it’s not unthinkable that 43 million Americans lack any health insurance whatsoever. Why is that?
This sounds to me like a massive transfer of wealth from the poor and the middle class to the wealthy.
The privatization of water in BoliviaAntonia Juhasz, in her book, “
http://www.google.com/search%3Fhl%3Den%26q%3Dthe%2Bbush%2Bagenda%2Bjuhasz%26btnG%3DSearch&sa=X&oi=print&ct=title&cad=one-book-with-thumbnail">The Bush Agenda – Invading the World One Economy at a Time”, describes many instances of how force and violence are used by third world governments, with the support of the United States or international institutions largely controlled by the United States, to protect corporate interests. One of her examples involved the privatization of water in Bolivia:
Cochabamba is the 3rd largest city in Bolivia… In late 1999, the World Bank required that Bolivia privatize Cochabamba’s water in return for reduction of its debts. Bechtel – one of the top ten water privatization companies in the world – won the contract.
Immediately after Bechtel took over the Cochabamba water system, and before any of the promised investments in infrastructure were made to improve or expand services, the company raised the price of water… by 100%... Many were simply forced to do without running water… The same law that privatized the water system also privatized any collected water, including rainwater collected in barrels…
The majority of the people voted for the cancellation of the contract with Bechtel. When this demand was met with silence from government officials, the citizens went on a citywide strike… the Bolivian government defended Bechtel’s right to privatize by
sending armed military troops into the streets to disperse the crowds. At least one 17-year-old boy was shot and killed and hundreds more were injured…
Does that constitute wealth transfer from the rich to the poor?
“Trade liberalization” in IraqJuhasz also discusses in her book the economic plans imposed by the Bush administration upon Iraq following our invasion of their country in 2003. One of the first actions of L. Paul Bremer, the administrator of the Coalition Provisional Authority, was to impose his “
Trade Liberalization Policy” upon Iraq, which immediately suspended tariffs, subsidies, and other measures designed to protect the Iraqi economy and people, thus devastating local industries and businesses. Juhasz describes Bremer’s thinking on the issue:
In a November 2001 paper entitled “
New Risks in International Business,” Bremer outlined the risks to multinational corporations associated with the implementation of corporate globalization policies. Every policy Bremer describes in this paper was among those he himself implemented in Iraq a year and a half later. Bremer walks through the devastating impacts of each policy on the local population – the same impacts that his policies would inflict on Iraq. Bremer warns companies that “the painful consequences of globalization are felt long before its benefits are clear”
(translation: long before the corporate profits have time to trickle down to the local population). Bremer cites several specific globalization policies, such as privatization of state enterprises, deregulation of controlled industries, and reductions of tariffs and nontariff barriers to open up trade in goods and services. In the paper, Bremer explains that “privatization of basic services, for example, almost always leads to price increases for those services, which in turn often lead to protests or even physical violence against the operator.” As for economic equality, Bremer says, “the process of globalization has a disparate impact on incomes,”
which in turn causes “political and social tensions.” The harmful impact… on local producers causes “enormous pressure on… trade monopolies” when “opening markets to foreign trade…
Bremer was therefore well aware that his policies would, at a minimum, reduce access to basic services and support for local businesses in favor of foreign businesses. He also knew the policies would increase inequality and political and social tension. However, he believed that he knew how to protect U.S. multinationals from the impact of these policies and therefore the policies went forward, ever clear on who the intended beneficiaries were…
Another example of wealth re-distribution?
Oil pipeline in EcuadorJohn Perkins, in “
The Secret History of the American Empire - Economic Hit Men, Jackals, and the Truth”, talks about the destruction of vast areas of Ecuador’s rain forests, the transformation of rivers into cesspools, and the disappearance of several animal species in Ecuador as the result of a $1.3 billion
oil pipeline constructed there. He notes that for every $100 of oil taken from the Amazon forests, $75 goes to the oil companies, $18 goes to pay off the debt, and only $3 goes to the people who need the money the most. Since 1968, the nation’s debt grew from a quarter billion dollars to $16 billion, poverty level grew from 50% to 70%, and under- or unemployment grew from 15% to 70%.
In 2003, Perkins came back to Ecuador to try to prevent
a war that he held himself partially responsible for provoking. This would be a war fought against indigenous Ecuadorians by the Ecuadorian Army assisted by U.S. Special Forces advisors, on behalf of oil companies who accused an indigenous community of taking its workers hostage, as an excuse for war. Lawyers who represented the indigenous community in an effort to get the oil companies off their land had recently died in a plane crash.
Deregulation in the United StatesSince the onset of the
Progressive Era in the United States, numerous federal and state statutes have been enacted and institutions developed to protect the citizens of our country against corporate abuse. These have included: laws for the
protection of labor; the
Food and Drug Administration to ensure the safety of our foods and drugs; the
Consumer Product Safety Commission to ensure the safety of other consumer products;
anti-trust laws to ensure fair competition; the
Communications Act of 1934 to ensure fair access for our citizens to radio communications; the
Security and Exchange Commission to ensure the fairness of a wide variety of economic transactions; and many many more.
Most Americans have traditionally seen these statutes and institutions as a necessary means for government to protect the vulnerable (that is, just about all of us) against the powerful. I like what Chris Weigant recently had to say about the need for government regulation, so I’ll repeat an excerpt from
his post here:
Does everyone know how to play basketball? Good! You see, basketball is a game that has certain rules. Players have to follow the rules, or else there's a penalty. Now imagine playing a die-hard game of basketball without any rules or penalties. You know what happens if you play basketball -- or any sport, really -- without any rules? Somebody usually winds up getting hurt. That's why we have the rules in the first place -- to allow for hard play but not dangerous play. And to keep the game fair for everyone.
What is happening now on Wall Street is the result of basic Republican dogma, which is to "deregulate" everything in sight. Now, the word "deregulate" is just a fancy way of saying "playing without rules." Regulations are the rules which governments lay down for businesses to follow. These rules are there for a reason -- to avoid injury, and to keep the game fair for everyone. But the Republican way of thinking has always been to just throw out the rulebook. That's right -- just chuck it out!
Right wing Republicans have always been very hostile to corporate regulation because they see that as an infringement upon the freedom of the wealthy to make unlimited profits. Especially with the onset of the “Reagan Revolution” in 1981, the right wing view that these programs constitute “big government” and impinge upon the “free market” began to gain traction, and consequently we have seen a gradual but almost continuous wave of deregulation since then. One major consequence of that deregulation was the
Savings and Loan scandal and bailout of the late 1980s, which cost U.S. taxpayers several hundred billion dollars. But the deregulation just kept on coming, though with a substantial slow down during Bill Clintons Presidency.
John McCain has always been
an avid deregulator, except when it has been politically inconvenient to be so – like right now. Obviously, he is not about to admit that his consistent advocacy of deregulation over his whole Senate career
has anything to do with our current financial crisis.
CONCLUSIONThe question of how wealth is distributed in our society is a crucially important one because it determines how we will proceed from here. The wealthy, who control most of our telecommunications, would like us to believe that most redistribution of wealth in our country is from rich to poor. To the extent that Americans believe that, they are likely to passively accept the status quo or even to demand cuts in social programs that benefit the poor and the working and middle class at the expense of the wealthy. On the other hand, I suspect that if most Americans knew how much our system works to benefit the wealthy they would demand countermeasures be taken to distribute wealth more fairly in our country.
Since FDR, perhaps more than any other U.S. President (with the possible exception of Lincoln) recognized, gave voice to, and developed policies to counteract the redistribution of wealth from the poor and working and middle class to the wealthy, I’ll end this post with some excerpts from his great
speech at the Democratic National Convention of 1936, which is just as relevant today as it was then:
Out of this modern civilization economic royalists carved new dynasties. New kingdoms were built upon concentration of control over material things. Through new uses of corporations, banks and securities, new machinery of industry and agriculture, of labor and capital-all undreamed of by the fathers-the whole structure of modern life was impressed into this royal service…
There was no place among this royalty for our many thousands of small business men and merchants who sought to make a worthy use of the American system of initiative and profit. They were no more free than the worker or the farmer…
It was natural and perhaps human that the privileged princes of these new economic dynasties, thirsting for power, reached out for control over Government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service new mercenaries sought to regiment the people, their labor, and their property. And as a result the average man once more confronts the problem that faced the Minute Man.
The hours men and women worked, the wages they received, the conditions of their labor-these had passed beyond the control of the people, and were imposed by this new industrial dictatorship. The savings of the average family, the capital of the small business man, the investments set aside for old age-other people's money-these were tools which the new economic royalty used to dig itself in.
Those who tilled the soil no longer reaped the rewards which were their right. The small measure of their gains was decreed by men in distant cities. Throughout the Nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise.
An old English judge once said: "Necessitous men are not free men." Liberty requires opportunity to make a living-a living decent according to the standard of the time, a living which gives man not only enough to live by, but something to live for.
For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor-other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.
Against economic tyranny such as this, the American citizen could appeal only to the organized power of Government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people's mandate to end it. Under that mandate it is being ended.
The royalists of the economic order have conceded that political freedom was the business of the Government, but they have maintained that economic slavery was nobody's business. They granted that the Government could protect the citizen in his right to vote, but they denied that the Government could do anything to protect the citizen in his right to work and his right to live.
Today we stand committed to the proposition that freedom is no half-and-half affair. If the average citizen is guaranteed equal opportunity in the polling place, he must have equal opportunity in the market place.
These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power. In vain they seek to hide behind the Flag and the Constitution. In their blindness they forget what the Flag and the Constitution stand for. Now, as always, they stand for democracy, not tyranny; for freedom, not subjection; and against a dictatorship by mob rule and the over-privileged alike…
We are poor indeed if this Nation cannot afford to lift from every recess of American life the dread fear of the unemployed that they are not needed in the world. We cannot afford to accumulate a deficit in the books of human fortitude….Better the occasional faults of a Government that lives in a spirit of charity than the consistent omissions of a Government frozen in the ice of its own indifference….
Here in America we are waging a great and successful war (FDR is not talking here of WW II, which had not yet started, but rather the war against our own “Economic Royalists”, as he called them – the forerunners of today’s Republican Party). It is not alone a war against want and destitution and economic demoralization. It is more than that; it is a war for the survival of democracy. We are fighting to save a great and precious form of government for ourselves and for the world.
I accept the commission you have tendered me. I join with you. I am enlisted for the duration of the war.
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