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….

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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.

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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

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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>.)

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Editor’s Note

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