Compassionate Social Transformation and Economic Justice

At the January 15 Compassionate Politics Workshop, one of the breakout groups will discuss: How can we contribute to compassionate social transformation by promoting economic justice?

The participants will respond to this question, listen to feedback, and then, if they want to, ask others to meet after the workshop to consider their idea more fully. Myself, I plan to present a summary of the following proposal and ask folks to join a team to improve and act on it.

My primary recommendation is that we first define the kind of national organization that we would ideally like to support. Structure and process are important. We need to be careful about how we organize. For many of us, our current methods may not be adequate because they are too impersonal. We want new, more compassionate models.

After we agree on what kind of organization we seek, we can then consider what to do next.

Your comments on our focus question and/or my proposal would be greatly appreciated. I’ll share your comments with workshop registrants beforehand and carefully review them, which may prompt me to amend my proposal prior to the workshop.

I believe a project focused on compassionate social transformation and economic justice needs to:

1. Establish that its governing board and staff will be inclusive, with strong representation from relatively disenfranchised communities. (Often white folks start a project and then try to recruit people of color to join them. In this case, concerning this proposal, I’ve consulted one-on-one primarily with people of color, who’ve been very supportive and helpful.)
2. Seek the comprehensive transformation of our society into a compassionate community dedicated to the common good of all humanity by fostering ongoing self-improvement, mutual support, and cultural change, as well as steady political and socio-economic improvements. (A comprehensive, holistic, systemic approach that nurtures simultaneous personal, social, and cultural change is essential. Having a long-term vision can help hold members together over time. At the same time, we need to be hardheaded and practical by concentrating on winnable, short-term goals.)
3. Promote efforts to establish the social conditions, including living-wage job opportunities, that individuals need to enjoy life, realize their potential, and participate fully in community affairs. (Providing everyone with adequate, decent opportunities to flourish is critical. The economy is the top concern among the general public. Popular movements need to address popular concerns.)
4. Declare that establishing those conditions is both a universal moral responsibility and in everyone’s enlightened self-interest. (Deepening moral commitments is important, but doing so does not preclude the acceptance of self-interest. We can love others as we love ourselves.)
5. Focus initially on promoting tax fairness in order to fund increased federal revenue sharing to local governments so they can hire more public-service workers to meet pressing social and environmental needs. (If tax rates for the superrich were the same as they were in 1970, we could hire millions of unemployed and underemployed individuals to do important work.)
6. Develop small home-based teams consisting of members who live in the same Congressional District and meet at least monthly to share a meal, report on their self-improvement efforts, support one another in those efforts if only by listening to those reports, and decide together how to support the work of the organization. (Such groups could provide members with the opportunity to participate fully in collective projects, grow deep social ties, and nurture spiritual strength through intentional efforts, all of which can help sustain activism over the long haul. Being based in Congressional Districts can facilitate building strong relationships with Congresspersons, who are particularly responsive to local pressure).
7. Enable all members to elect the governing board. (This can help ensure that the organization is member-controlled, which can boost enthusiasm because members know they have a voice in shaping the project.)
8. Be prepared to engage in nonviolent civil disobedience based on the principles of Martin Luther King if and when it helps achieve winnable goals. (King’s principles include a commitment to “justice and reconciliation—not victory.” This refusal to scapegoat “enemies” but rather love opponents is fundamental. However, if sincere efforts to elicit support from elected officials and key organizations are initially unsuccessful, respectful nonviolent actions such as sit-ins can gain their attention, garner public support, and lead to fruitful negotiations.)

Once we’ve agreed on the kind of organization that we want, we could look for one that meets our criteria, or is willing to move in that direction. If we’re unable to find one, we could incorporate a new organization. Or we could engage in public-education efforts to encourage the development of one, while asking individuals and organizations to pledge to actively support it if and when it launches.

This entire project is an ambitious undertaking. I make no assumptions about our prospects. But I believe this effort is urgently needed, want to give it my best shot, and hope that an inclusive team will form to pursue it. The San Francisco Bay Area has sparked new movements many times before. Perhaps we can do so again.

Tax fairness is going to be a major issue for years to come. If we lay the proper groundwork, we may help grow a grassroots movement that contributes to stronger legislation than would otherwise be the case, as a first step toward further reforms that benefit everyone.

Angry Populism and Compassionate Nonviolence

As inequality worsens, anger-driven populism increases. As one of many elements in the political arena, this component can play a constructive role. Progressive populists can help keep key issues in the air, place heat on others to address those issues, and make more acceptable centrist compromises that move society forward. This strategy, however, contains certain inherent constraints that limit its effectiveness.

Other approaches, including the nonviolent philosophy of Martin Luther King, also need to be strengthened. Clarifying the limits of progressive populism could boost the development of compassionate nonviolence, thereby minimizing the risk that progressive populism will undermine prospects for comprehensive social transformation.

Ideally, proponents of all of the various political strategies would respectfully recognize their differences and learn from each other.

Building a large, effective movement requires support from the mainstream. Physical and verbal violence undercut that goal. Many concerned Americans, turned off by negativity, withdraw from activism. Those who are mobilized by hate most often eventually burnout.

Driving taxi the day the Rodney King verdict came down, a number of my passengers spontaneously expressed outrage at the verdict. But the next day, as rioting spread in Los Angeles, my passengers directed their indignation at the rioters. Their attention to the flaws in our criminal justice system was diverted.

The same pattern applies to verbal violence. Leftist websites, pundits, and organizations that consistently hurl angry personal attacks turn away potential supporters, especially when those criticisms are directed at allies. Such “violence of the tongue” prompts many people to ignore those who are chronically harsh, immoderate, and rough.

In 2006 in “Goodbye to All That? Lescek Kolawski and the Marxist Legacy,” Tony Judt wrote,

The moral appeal of some refurbished version of Marxism is likely to grow…. And since no one seems to have anything very convincing to offer by way of a strategy for rectifying the inequities of modern capitalism, the field is once again left to those with the tidiest story to tell and the angriest prescription to offer (my italics).

American progressive populists say they intend to win the class war. With severe judgments, they aim to “kick ass” and defeat the enemy. They often want retribution, to retaliate, to inflict punishment.

Sometimes they want to fight regardless of the chances for short-term success. Moral victories, sending a message, and planting seeds for some distant future are sufficient for them, and at times they achieve those goals. Building a massive movement, however, requires winning concrete victories in the near term.

In addition, transforming our society into a more democratic society requires the development of democratic grassroots activist organizations. As reflected in the fact that few progressive populist organizations are member-controlled, once the right conditions prevail many progressive populists hope to lead the masses to victory with the strength of their wisdom, the power of their passion, their refusal to compromise, and their persistence.

With a deep-seated arrogance, these self-appointed vanguards aim to mobilize a top-down, impersonal machine. They assume they already know what needs to be done. The only problem is how to get others to do it. But when authoritarian organizations are victorious, they impose authoritarian regimes.

The leaders of our populist organizations often have some camaraderie with each other and their troops. Some of their followers form supportive friendships with one another. But check out their websites. Their organizations rarely explicitly affirm a commitment to ongoing self-improvement and mutual support. Nor do they clearly commit to the conscious cultivation of caring community.

Humble dedication to ongoing self-improvement is sorely lacking in activist circles. Though some talk about developing certain skills, very few activist organizations actively encourage constant, open-ended self-improvement (as defined by each individual). Nor do they intentionally foster mutual support for such efforts, which is critical.

This approach leaves many potential activists without the compassionate social support that is needed to sustain activism over the long haul.

Bertolt Brecht acknowledged the common attempt to justify unkind means with the hope of a future grand end when he said, “We, who wanted to prepare the ground for kindness / Could not be kind ourselves.” In The Rebel, Albert Camus detailed how rebellion that is originally morally grounded often morphs into a revolutionary fervor that contradicts the original impulse.

With his criticisms of the brutality of Soviet totalitarianism, Camus isolated himself from his comrades in what was a highly polarized country. Later, he became even further isolated when his commitment to nonviolence led him to refuse to support the brutal Algerian struggle for independence, though he had strongly criticized France’s own brutality for decades and continued to do so. His predictions about the disastrous consequences for Algeria proved true. Later, in South Africa Nelson Mandela successfully adopted very much the same path that Camus proposed for Algeria.

Now, in a highly polarized America, I identify with Camus and wonder if I too will become similarly isolated. These days, it’s hard to disagree on certain matters without being shunned.

Like Camus, I reject ideology. But many of my peers prefer to apply narrow, single-minded, linear, mechanical abstractions. They fail to appreciate that holistic, interactive systems require many-sided awareness. They talk about “the system,” but don’t engage in systems analysis.

Many populist firebrands charge that the problem is “the oligarchy,” which is "a form of government in which all power is vested in a few persons or in a dominant class." But no elite has all power.

Consider this scenario. The strongest student on the schoolyard brutally beats a weaker boy. Several boys watch and do nothing. Are those onlookers equally responsible? I say yes.

Or better yet, take the song, “Who Killed Davey Moore?” The choruses of that Bob Dylan song point to possible agents of responsibility for the death of a boxer: the referee, the angry crowd, the boxer’s manager, the gambling man, boxing writers, and the other fighter. Dylan thus illuminates that many factors interact to create social phenomena.

A social system is like an ecosystem; there is no single dominant cause. No one element controls a system. The American people collectively are as responsible as any other group. And each of us reinforces the system daily in countless ways.

The temptation to scapegoat is enormous. It feels good to vent. People get depressed, frustrated, and angry, and want to take it out on someone. The process often seems so driven by deep emotions it is beyond the power of reason.

But it seems imperative to discuss these matters rationally. Stepping back and looking at our emotions from some distance helps us get a handle on them. In doing so, we can experience spiritual insight emerging from the depths of our soul that establishes a profoundly nonviolent perspective on these matters.

As one approach of many, this country needs a united, proactive, inspiring, joyous, grassroots movement dedicated to the proposition that we, as a society, are morally obligated to protect all of our people against the ravages of global market forces. When people must struggle to merely survive, they’re less able to contribute to society and often engage in anti-social behavior. Promoting the common good therefore involves enlightened self-interest as well as compassion.

Though free markets produce valuable goods and services, they cannot meet many needs that provide no chance for profit. And poorly regulated markets self-destruct. To ensure economic stability and security the federal government must play a major role.

Our Congresspersons and Senators therefore must establish the conditions that are necessary to assure that all people have a decent opportunity to enjoy life, develop their potential, and participate fully in community life. Doing so will benefit everyone.

To help us move in this direction, we need a movement to re-structure our economy for the common good with step-by-step realistic, positive solutions rather than idealistic dreams, anti-capitalistic rhetoric, personal attacks, and scapegoating.

As I addressed in “Nonviolence: Worldview, Strategy, and Lifestyle,” I’m returning to my roots: Martin Luther King’s nonviolent philosophy, which differs from progressive populism in key respects. This approach:

• Is directed against injustice, not the people who commit it.
• Does not seek to disgrace or defeat opponents, but to gain their understanding and cooperation while achieving both justice and reconciliation.
• Aims to persuade opponents they are wrong with moral appeals to their conscience.
• Involves a willingness to accept suffering without retaliating.
• Affirms that accepting suffering can contribute to a change in the heart and mind of opponents.
• Trusts that justice will eventually replace bitterness and hatred with love.

Active nonviolence requires constant striving in order to develop the emotional and spiritual abilities that are needed to resist injustice. Howard Thurman’s Jesus and the Disinherited, which King carried with him when he traveled, is a manual for how to develop this spiritual strength.

Thurman wrote, “The religion of Jesus says to the disinherited: ‘Love your enemy. Take the initiative in seeking ways by which you can have the experience of a common sharing of mutual worth and value. It may be hazardous, but you must do it.'”

Thurman declared that both privileged and underprivileged persons must liberate themselves from their assigned role in society, because “love is possible only between two freed spirits.” They must undo their conditioning, remove barriers, and create “real, natural, free” social situations that enable them to be “status free” and experience their common humanity.

Thurman said, “We are here dealing with a discipline, a method, …an over-all technique for loving one’s enemy.”  He called for those in need to cry out, “The [human being] in me appeals to the [human being] in you.” Whenever a need is “laid bare,” Thurman wrote, “those who stand in the presence of it can be confronted with the experience of universality that makes all class and race distinctions [irrelevant].” He insisted that this “personality confirmation” is essential for “lasting health” in a democracy.

Applying these principles to our current situation will be one of our greatest challenges. How can we create social situations that enable wealthy individuals and low- and moderate-income individuals to deeply encounter one another, witness their needs laid bare, and consider how they can work together to define fair and practical solutions? I’ll address that question next week.

Note

Last week, given the urgency we confront, after consulting some trusted community leaders, I tried to help jump-start a new project by posting “Tax Fairness: An Appeal for a Nonviolent Movement,” which opened with an introductory request for feedback. Seven individuals replied with generally favorable comments and no one expressed clear opposition to this draft proposal.

There’s reason for some encouragement in that response, but since I emailed the piece to about 1,000 individuals in my address book and only five clearly stated that they would endorse a final proposal with much the same substance, I consider the reaction weak. My expectations were low, however, so I’m not disappointed.

I’m sure there were many reasons for the limited enthusiasm. But I suspect a major reason is that the proposal was rooted in the compassionate desire for reconciliation rather than the widespread, angry, populist quest for victory over the hated elite.

I remain dedicated to King’s nonviolent principles and believe that with a new approach, we can attract many concerned individuals who are currently inactive. So in the next Wade’s Weekly I will start over with the basics and pose some open-ended questions that may help those of us who share a similar perspective to begin deciding how to deal with the state of our economy, our nation’s number one concern.

Then I’ll probably rework those questions and present them as the proposed agenda for a breakout group at the January 15 Compassionate Politics Workshop, at which the participants will be invited to determine our next steps. Your participation in this process, including feedback from afar, will be appreciated.

Tax Fairness: An Appeal for a Nonviolent Movement.

Dear Wade’s Weekly Subscribers:

I’d very much appreciate your thoughts concerning the following 1300-word article, “Tax Fairness: An Appeal for a Nonviolent Movement.”

My hope is that you will help improve this proposal and become involved in its implementation.

INITIAL REQUEST FOR YOUR INPUT:

• Would you be willing to endorse this proposal if the substance remains the same as this draft? I am not asking for an endorsement now.

• Do you have suggested changes?
• If you can’t endorse it in its current form, would you be willing to do so if your suggested changes were incorporated?

Please post your comments below and share this post with associates.

After feedback from this email is incorporated, this proposal will be discussed at the January 15 Compassionate Politics Workshop in San Francisco in one of the many breakout groups that are envisioned for that workshop.

If you live in the Bay Area, you are invited to participate in the full workshop, which will be held Saturday, January 15, 8:30 am—5:00 pm at the Church for the Fellowship of All Peoples at 2041 Larkin (near Broadway), San Francisco. Please register in advance by sending an email to compassionate-politics-workshop AT googlegroups DOT com.

ACKNOWLEDGMENTS:

Fellowship Church, which was co-founded by Howard Thurman, a major mentor for Martin Luther King, inspired me to undertake this project. Its presiding minister, Rev. Dorsey Blake, provided precious moral support. Rev. Charlotte Myers, who leads its Engaged Spirituality class, helped write the following article. Jakada Imani, Executive Director of the Ella Baker Center for Human Rights which was founded by Van Jones, offered vigorous support and solid input. Mary Hudson and Melyssa Jo Kelly contributed valuable copyediting.

Yours,

Wade Hudson

+++++

Tax Fairness: An Appeal for a Nonviolent Movement

By Wade Hudson

Thanks to the federal government, for more than thirty years the superrich have been taking evermore of our nation’s income for themselves. Since 1974, the richest 115,000 households, the top one tenth of one percent, have seen their share of the nation’s total personal income grow from less than 3 percent to more than 12 percent, the highest level ever recorded. Contagious greed has corrupted our culture, poisoned our society with resentment, and created great hardship and insecurity.

To reverse those trends, ordinary Americans, with strong leadership, must change national economic policies by mobilizing a nonviolent movement focused on winnable objectives. To start with, we should lower taxes for most Americans and raise taxes on the richest one percent.

With this focus, we can improve economic opportunity for all Americans and help transform our society into a truly compassionate community dedicated to the common good of the entire human family.

Henry Ford famously said, “If I pay a man enough money to buy my car, he'll buy my car.” After World War Two, corporate America agreed with Ford. With support from both political parties, corporations shared a sizeable portion of their profits with organized labor. For decades, this agreement enabled the economy to steadily boost incomes at all levels at roughly the same rate.

Then, forty years ago, a radical faction of the wealthy elite resolved to overturn that post-war consensus. They steadily recruited more of the superrich to join them and eventually took over the Republican Party, with Democrats usually struggling to play catch up. With wealth-driven leadership, their well-oiled machine persuaded the federal government to raise taxes on most households, lower taxes on the superrich, help big business bust unions, deregulate entire sectors of the economy, allow campaign cash to flow freely, and let lobbyists move quickly back and forth between government and corporations. In short, the federal government restructured the economy to benefit the superrich, with little regard for others or the environment.

As a result, money that workers need for basic necessities now goes to people who don’t need it.

This extreme concentration of wealth makes our economy so top heavy it may be unable to stand because ordinary consumers don’t have enough income to sustain steady growth.

This development is due to politics, not natural economic forces. No other modern economy has witnessed a similar shift to the top.

Throughout this upward redistribution of wealth, most activist organizations have failed to address pocketbook issues of greatest concern to middle-class, working families. Those few organizations that do deal with national economic issues don’t engage in grassroots organizing.

The need is urgent therefore for middle-class and low-income workers and wealthy allies to grow a new, strong, democratic movement to promote broadly shared prosperity in the United States of America.

In building this movement, we should avoid placing blame on any one group. Everyone is responsible. Our society is a self-perpetuating social system. Any lasting solution must involve the comprehensive transformation of our institutions, our culture, and ourselves.

With this attitude, we should seek alliances with small business. What is good for Wall Street and giant corporations is not always good for Main Street.

Another key will be the recruitment and training of individuals who are prepared to engage in civil disobedience rooted in the nonviolent principles of Martin Luther King, Jr.—including a commitment to “justice and reconciliation, not victory.” Applying these principles to our tax fairness campaign will be one of our greatest challenges.

Development Strategy

The following scenario describes one way that this movement might develop. It suggests a basic framework to illustrate how we could move forward. As others get involved, they would likely modify this plan.

In early 2011, a strong, inclusive, representative governing board forms. The initial directors decide whom to invite to join. Later, active members elect the board.

The board adopts a long-term mission statement, a name for the organization, and written policies to guide the project. These policies include the following:

• Our initial general focus will be to increase economic opportunity for all Americans by impacting national policy with regard to tax fairness.
• We will periodically adopt specific, short-term, winnable goals.
• Rather than scapegoating “enemies,” making personal attacks, and using hate to mobilize supporters, we’ll assure that our public communications are dignified and grounded in compassion.
• We’ll appeal to everyone’s enlightened self-interest in broadly shared prosperity and urge everyone to acknowledge their moral responsibilities to others and the environment.
• All members will sign a statement of nonviolent principles, including a commitment to engage regularly in self-development and support one another in those efforts.
• We’ll engage in nonviolent civil disobedience as a last resort in order to prompt key individuals to engage in serious negotiations concerning how to resolve our differences.
• The board will not micromanage but will focus on adopting written policies to guide the project, select the Executive Director (ED) or co-directors, and regularly evaluate the ED.
• Financially, we’ll rely primarily on members’ dues.

Once the board has selected the ED, the staff will:

• Compose a Tax Fairness Pledge, create a website, recruit partner organizations, and establish membership requirements.
• Write a Home-Based Team Manual with guidelines concerning how to form and sustain home-based teams, which will consist of members who live in the same Congressional District (CD) and meet in members’ homes or a community center at least monthly to:
• Share a meal.
• Report on their self-development efforts.
• Support one another in those efforts (if only by listening to those reports).
• Make decisions concerning how to advance the project’s primary focus.
• Establish methods for home-based teams to select representatives to a District Chapter and District Chapters to select representatives to a State Chapter.

The Launch

A nationally prominent individual announces the project in a widely circulated article that invites readers to sign the Tax Fairness Pledge, become members, and participate in the organization’s first membership meeting, which will stream live on the Web and be shown to gatherings of members in numerous cities. 

Following this meeting, the members gather signatures for the Pledge and the national staff forms a broad, representative, well-informed Legislative Task Force. While seeking input from the membership, this task force identifies one clear-cut legislative focus for the organization.

Chapters ask key officials, community leaders, opinion-shapers, and organizations in their region, including the local Chamber of Commerce, to sign the Pledge and support our top-priority legislation. In particular, chapters establish ongoing relationships with their Congressperson and Senators.

If and when a key official or organization fails to sign the Pledge, the chapter invites them to discuss the issue in a carefully structured, thoughtful, respectful public form. If they decline, the chapter organizes a series of demonstrations at their office and the media is notified. If they continue to decline to discuss the issue publicly, some members enter their office and refuse to leave, risking arrest, while seeking to enter into good-faith negotiations concerning our issues.

In 2012, the organization focuses on the November election, engages candidates for national office, and asks them to sign the Tax Fairness Pledge and support our top-priority legislation.

After the election, the organization evaluates prospects for the next session of Congress and the national office re-convenes the Legislative Task Force, which determines next year’s primary focus.

By speaking the truth, improving our own attitude, character, and skills, and developing small, supportive communities, we persistently focus in a disciplined manner on our goal to enhance economic opportunity for all Americans, as one way to grow a truly compassionate national community.

We’re all in this together. A true benefit to one benefits all. We must inspire our neighbors to step up and join us.

More Excerpts from Winner-Take-All-Politics

Chapter 2: How the Winner-Take-All Economy Works

…Most economists on both sides of the political spectrum argue that government policy is at best a sideshow to the inequality circus….

On the liberal side, economist and former Clinton Treasury official Brad DeLong of the University of California at Berkeley says: “I can’t see the mechanism by which changes in government policies bring about such huge swings in pre-tax income distribution.”

This skeptical response, however, makes three elemental mistakes.

The first is to miss the strong evidence that government…policy has grown much more generous toward the fortunate….

Equally, if not more, important is what we call “drift”—systematic, prolonged failures of government to respond to the shifting reality of a dynamic economy…turning the other way…when fast-moving economic changes make existing rules and regulations designed to rein in excess at the top obsolete….

The third problem…. Government rules make the market, and they powerfully shape how, and in whose interests, it operates….

Just stop for a moment to contemplate how different economic affairs would be in our nation without basic property rights or government regulated financial markets and you begin to appreciate how pervasive the role of government really is….

Computers, increased global capital flows, and the development of new financial instruments have made it possible for savvy investors to reap (or lose) huge fortunes almost instantly…. But such technologically driven explanations have little to say about why the hyperconcentration of income at the top has been so much more pronounced in the United States than elsewhere. Nor do they come close to explaining just how concentrated economic gains have become….

After all, plenty of the so-called financial innovations that their complex computer models helped spawn proved to be just fancier (and riskier) ways of gambling with other people’s money, making quick gains off unsophisticated consumers, or benefiting from short-term market swings…. Former Fed chairman Paul Volcker was no doubt channeling a widespread sentiment when he said in 2009 that the last truly helpful financial innovation was the ATM.

What is more, government policy not only failed to push back against the rising tide at the top in finance, corporate pay, and other winner-take-all domains, but also repeatedly promoted it. Government put its thumb on the scale, hard. What’s so striking is that it did so on the side of those who already had more weight. We can see this most clearly in the most transparent case of government abetting inequality: the gutting, over the course of three decades, of progressive taxation at the top of the economic ladder….

When you take into account all federal taxes—including payroll taxes, which only hit the rich lightly, and corporate and estate taxes, which once hit the rich much harder than they do today—tax rates on the rich have fallen dramatically….

[Looking at] the effective average federal rate—what people actually pay—those in the top 1 percent pay rates that are a full third than they used to be despite the fact that they are much richer….

The federal tax code is still progressive overall. But what used to be a key feature of the code—its steep progressivity at the very top income levels—has simply disappeared. The richest of the rich now pay about the same overall rate as those who are merely rich. Indeed…, the upper middle class…are paying an average federal tax rate not much lower than that paid by the superrich….

If the effect of taxes on their income had been frozen in place in 1970, a very big chunk of the growing distance between the superrich and everyone else would disappear.

This dramatic change in tax policy didn’t happen magically….

In 1939, as the nation still grappled with the Great Depression, 35 percent of Americans agreed with the (very strongly worded) statement that “government should redistribute wealth by heavy taxes on the rich.” In 1998, 45 percent agreed; and in 2007, 56 percent did….

Just as Willie Sutton robbed banks because “that’s where the money is,” tax evasion by the rich is where the money is…. Yet…audits of high-income taxpayers and businesses have plummeted….

Another way:… loopholes… Take one of the more egregious examples: the ability of private equity and hedge fund managers to treat much of their extraordinary income as capital gains, subject only to a 15 percent tax rate….

Policy has become less generous toward the vast majority of Americans who have been on the losing side of rising inequality….

In the majority of rich nations for which we have evidence…, inequality created by the market has been significantly softened by a greater government role….

Can the absence of a government response to rising inequality really be treated as a forum of policy? Absolutely—when it takes the form of “drift,” the deliberate failure to adapt public policies to the shifting realities of a dynamic economy….

Government has rewritten the rules of the market in ways that favor those at the top….

Governments do redistribute what people earn. But government policies also shape what people earn in the first place, as well as many other fundamental economic decisions that consumers, businesses, and workers make. Practically every aspect of labor and financial markets is shaped by government policy, for good or ill….

Even the word “redistribution”…suggests the refashioning of a natural order by meddling politicians…

Beyond the stunning shifts in taxation already described, there were three main areas where government authority gave a huge impetus to the winner-take-all economy: government’s treatment of unions, the regulation of executive pay, and the policing of financial markets….

In the private sector,… unionization plummeted from nearly a quarter of workers in the early 1970s to just over 7 percent today….

In 2005, more than half of nonunionized private-sector workers said they wanted a union in their workplace….

In short, American unions did not just happen to be in the way of a fast-moving economic train. They were pushed onto the tracks by American political leaders….

The pay-without-performance world of executive compensation….

In 1965, the average chief executive officer (CEO) of a large U.S. corporation made around twenty-four times the earnings of the typical worker. By 2007, average CEO pay was accelerating towards three hundred times typical earnings….

CEOs have been able to take advantage of a corporate governance system….

Stock options are used in other nations too, but they are much more often linked to long-term rather than short-term performance, as well as to firm performance relative to industry norms….

The financier John Bogle has contended that instead of an “ownership society” in which managers serve owners, the United States is moving toward an “agency society” in which managers serve themselves….

Another possible check on managerial autonomy, private litigation, was radically scaled back by mid-1990s legislation engineered by congressional Republicans….

When the Financial Accounting Standards Board, which oversees accounting practices, tried to make firms report the costs of stock options like other compensation in the early 1990s, it was beaten back by a bipartisan coalition in the Senate galvanized by industry opposition….

Corporations were able to beat back the sorts of reforms that would have put the most effective checks on managerial autonomy…. They quite effectively resisted efforts to increase the ability of shareholders to influence the governance of firms, including compensation practices….

…complex new financial products that, for most Americans, offered limited benefits and sometimes real economic risks. For the financial sector, however, the new instruments and expanding freedom to use them created astonishing opportunities: to increase the number of transactions (with intermediaries taking a cut on each one), to ratchet up leverage (and thus potential profits), and to increase the complexity and opacity in ways that advantaged insiders. Not coincidentally, all of these developments increased the risk to the system as a whole…. As Martin Wolf of the Financial Times observed acerbically in 2008, “No industry has a comparable talent for privatizing gains and socializing losses.”…

The net effect was not an idealized free market, but a playing field tilted in favor of those with power, connections, lack of scruples, and the ability to play the profitable but systematically risky new game….

Suddenly, and increasingly, financial professionals were earning much more than similarly educated workers. Perhaps as much as half of their expanding pay premium, Philippon and Reshef calculate, can be linked to the deregulation wave….

The real story…is what our national political elites have done for those at the top, both through their actions and through their deliberate failures to act….

Americans have found themselves buffeted by dislocating market forces while their government has seemed mired in gridlock and beholden to concentrated economic power….

+++

From Winner-Take-All Politics: How Washington Made the Rich Richer--And Turned Its Back on the Middle Class, by Jacob S. Hacker and Paul Pierson.

December 1, 2010

CONTENTS:

--Excerpts from Winner-Take-All Politics

--Reader’s Comments

--Frankly Quoted

--Editor’s Note

Excerpts from Winner-Take-All Politics

Selected by Wade Lee Hudson

INTRODUCTORY COMMENT:

To grow a massive, grassroots movement that is able to make a real, positive impact in this country, it is imperative to meet the greatest number of people where they are at, on their own terms.

Clearly the issue of greatest concern in this country is the economy.

Most of the American people realize that the superrich are manipulating the government to shape the economy for their own apparent short-term benefit, with little or no regard for others or the environment.

Middle- and working-class people hold progressive positions on issues of economic policy and they constitute a decisive majority. If public policy reflected their opinions, our country would be greatly improved.

So with great interest I recently read Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class by Jacob S. Hacker and Paul Pierson, an excellent, important book.

Following are some excerpts.

Introduction: The Thirty-Year War

For those working on Wall Street, 2009 was a very good year. At the thirty-eight biggest companies, investors and executives earned a staggering $140 billion in all—the highest number on record…. That same year the top twenty-five hedge fund managers raked in $892 million on average….

Consider the astonishing statistic. From 1979 until the eve of the Great Recession, the top one percent received 36 percent of all gains in household income—even after taking into account the value of employer-sponsored health insurance, all federal taxes, and all government benefits….

[Paraphrase:] From 1979 to 2005, the top 100,000 households received more of the nation’s total income gains than the bottom 60 million households.

Like a raging fever that announces a more serious underlying disease, rising inequality is only the clearest indicator of an economic transformation that has touched virtually every aspect of Americans’ standard of living….

Corporate managers…along with Wall Street bigwigs, make up more than half of the top 0.1 percent….

+++

Part One: The Puzzling Politics of Winner-Take-All

Chapter 1: The Winner-Take-All Economy

Those on the very highest rungs of the economic ladder…are, in general, no better educated or obviously more skilled than those on the rungs just below, who have experienced little or none of these meteoric gains….

They have managed to restructure the economy to shift the risks of their new economic playground downward, saddling Americans with greater debt, tearing new holes in the safety net, and imposing broad financial risks on Americans as workers, investors, and taxpayers…. Our economy stopped working to provide security and prosperity for the broad middle class….

[From 1974 to 2007,] if you include capital gains like investment and dividend income, the share of the top 1 percent has gone from just over 9 percent to 23.5 percent….

The top 0.1 percent (the richest one in a thousand households) collectively rake in more than $1 trillion a year including capital gains—which works out to an average annual income of more than $7.1 million…. In terms of the share of national income earned, the top 0.1 percent have seen their slice of the pie grow from 2.7 percent to 12.3 percent of income—a more than fourfold increase….

From less than $4 million in average annual income in 1974, the average member of this select group [the top 0.01 percent ] now earns more than $35 million…. This is the highest share of income going to this group since the data began to be collected in 1913….

The rising share of national income captured by the richest Americans is a long-term trend beginning around 1980. It is a trend, moreover, that is not obviously related to either the business cycle or the shifting partisan occupancy of the White House….

Most Americans experienced extremely modes gains over the era in which the rewards at the top multiplies…. The fallout of the winner-take-all economy has reached broadly and deeply into the security of the middle class—and, as recent events reveal, the entire American economy….

The rich are closing the locks behind them to capture resources that would otherwise have enhanced the living standards of everyone else….

The bottom went nowhere, the middle saw a modest gain, and the top ran away with the grand prize….

American households are working many more hours today than they were in the late 1970s…. (406 hours) in 2000, as compared with 1979….

The average after-tax income of the richest 1 percent of households rose from $337,100 a year in 1979 to more than $1.2 million in 2006—an increase of nearly 260 percent….

Between 1979 and 2005…, the average after-tax income of households in the top 0.01 percent increased from just over $4 million to nearly $24.3 million….

If the economy had grown at the same rate as it actually did yet inequality had not increased, the average income of the middle fifth of households would be over $12,000 higher today….

GDP per hour worked—perhaps the best single measure of a country’s economic health—actually rose faster in Europe than in the United States between 1979 and 2006….

The 2000s…were awful even before the economy began to crumble in late 2007….

American [upward] mobility may well have declined since the last generation, even as inequality has risen…. In 2004…only around one in ten [in the top 1 percent] had risen from the bottom 80 percent—down from around one in seven in the 1970s.

Are Americans getting better benefits tied to their jobs? Not when it comes to retirement benefits….

In 2004, the wealthiest 1% of households had an average net worth of nearly $15 million….

Strikingly, over the entire period between 1983 and 2004, only 10 percent of all wealth gains went to the bottom 80 percent of Americans, an even more skewed pattern of growth than seen in income….

For government was no mere bystander in many of these developments. It actually pushed them along. Why?…

Tune into the cable money stations or read the business press and you are likely to hear an account of rising inequality that goes something like this:

“Education is the key to understanding broad inequality trends.”

“To explain increasing inequality we must explain why the economic return to education and to the development of skills more generally has continue to rise.”

“We have an economy that increasingly rewards education and skills because of that education.”

Those quotes were not chosen at random. They are the pronouncements, respectively, of the former head of President George W. Bush’s Council of Economic Advisers, Gregory Mankiw, a Harvard economist, Fed chairman Ben Bernanke (another economist, formerly of Princeton), and, finally, former President George W. Bush himself….

The fact is, however, that these three quotes express what was, until recently at least, the overwhelming consensus view on inequality among economists, a view somewhat summarized in the ungainly acronym SBTC….”skill-based technological change.”…

Those are the top are often highly educated, yes, but so, too, are those just below them who have been left increasingly behind.

There’s more: The college educated did well relative to those below them, but not because they experienced massive economic gain. Rather, they merely managed to avoid the devastatingly slow growth at the bottom….

If SBTC did it here [in the U.S.], it should have done it elsewhere, where the same technological and global shifts were taking place…. Yet gaps in skills, as measured by years of schooling, are not larger in the United States than they are in other affluent nations….

SBTC’s alibi appears even stronger when it comes to the meteoric rise of earnings at the very top, because that rise has been substantially more meteoric in the United States than in other rich nations….

The United States did not look at that exceptional in the early 1970s….

The English-speaking world has certainly emulated the American pattern more closely than other nations have. But this is hardly proof that government policy doesn’t matter, since these nations have also generally emulated U.S public policy more than other nations have….

Companies in English-speaking nations compete for these workers, and thus have faced the most pressure to match the massive salaries on offer in the States….

The hyperconcentration of income in the United States—the proximate cause of the death of America’s broad-based prosperity—is a relatively recent development. It is also a development that sets the United States apart from other rich nations, calling into serious doubt the usual explanation for America’s winner-take-all economy, SBTC.

But if SBTC didn’t do it, who did? Enter the unusual suspect: American politics.

+++++

Reader’s Comments

Concerning “Esalen Celebrates Dick Price,”: http://wadeleehudson.blogspot.com/2010/11/wades-weekly-nov-24-2010.html

Thank you Wade ! Great to meet you and share in the celebration of Dick's work and his legacy ! A lovely day it was...more sweet than bitter, for sure !!!

-- Johnnycoyo

   

Wow! Wish I could've been there. Thanks for sharing it in this post.

-- Steven

I am so grateful that you shared this moment, this precious piece of life, with all of us. May we hold this treasure in our hearts, for an eternity, with love.

-- John Callahan

A general comment:

Thought you might be interested in this. I volunteered a lot on this campaign, holding a house party in late July, working 3 precincts in my neighborhood and walking in parts of a number of others, from wealthy Trestle Glen to blue-collar-to-grinding-poverty in the San Pablo-Golden Gate neighborhood flatlands and the area west of the MacArthur BART. Jean Quan http://www.jeanquanforoakland.org/ beat Don Perata and his political machine money, in spite of being outspent by 7:1 (and maybe as much as 10:1--the final campaign donation and expenditure reports have not been submitted to the Secretary of State and the City Clerk). She is now the first woman mayor in Oakland's 158 years, and the first Asian-American mayor of a major U.S. city.

In the meantime, I am proud of Oakland. We did not allow ourselves to be bought. A thousand volunteers outweighed nearly $3 million and a lot of hit pieces in the mail.

I am unable to participate in your more global-scope project, but I assure you that I am not sitting at home eating bon-bons!

All the best,
--Valerie Winemiller

+++

Frankly Quoted

A safe maxim might be, “If you have to ask if it’s right or wrong, it’s probably wrong.”

--Andrew Ross Sorkin

(From Leonard Roy Frank’s monthly column. To subscribe, email <lfrank AT igc DOT org>.)

+++

Editor’s Note

Please share this post with others. To do so, you copy and paste into an email the link embedded in the title above. Or you can go to the blog at http://wadeleehudson.blogspot.com/ and click on one of the buttons at the bottom of the post, such as Facebook to add it your feed.

You can publicly comment on a post by clicking on the "comments" link at the bottom of the post at http://wadeleehudson.blogspot.com/ .