“The three decades following the Second World War saw a period of economic growth that was shared across the income distribution, but inequality in taxable income has increased substantially over the last four decades.”
“On top of the near-$50 trillion train robbery, the international economy (‘globalization’) has been structured to set American working people in competition with those in low-wage countries with no workers’ rights while the very rich are granted protection from market forces, by exorbitant patent rights, to take one example.”
“Less educated workers may not know the details or understand the mechanisms that have been designed to undermine their lives, but they see the outcomes.”
“So we see—daily—the silly carnival of US politics. But we don’t see any serious analysis in the media—a serious analysis would reveal the mechanics of money and policy and power and would contextualize the theatrics.”
I just want to use this short piece to discuss the upward transfer that we’ve seen during the neoliberal period—this upward transfer contextualizes the noise and fire and fury that you see in Washington and it’s really hard to understand Washington without understanding this upward transfer.
The Maxim
Adam Smith wrote the following in 1776 in The Wealth of Nations:
The introduction of the feudal law, so far from extending, may be regarded as an attempt to moderate, the authority of the great allodial lords. It established a regular subordination, accompanied with a long train of services and duties, from the king down to the smallest proprietor. During the minority of the proprietor, the rent, together with the management of his lands, fell into the hands of his immediate superior; and, consequently, those of all great proprietors into the hands of the king, who was charged with the maintenance and education of the pupil, and who, from his authority as guardian, was supposed to have a right of disposing of him in marriage, provided it was in a manner not unsuitable to his rank. But though this institution necessarily tended to strengthen the authority of the king, and to weaken that of the great proprietors, it could not do either sufficiently for establishing order and good government among the inhabitants of the country; because it could not alter sufficiently that state of property and manners from which the disorders arose. The authority of government still continued to be, as before, too weak in the head, and too strong in the inferior members; and the excessive strength of the inferior members was the cause of the weakness of the head. After the institution of feudal subordination, the king was as incapable of restraining the violence of the great lords as before. They still continued to make war according to their own discretion, almost continually upon one another, and very frequently upon the king; and the open country still continued to be a scene of violence, rapine, and disorder.
But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves, without sharing it either with tenants or retainers. All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or, what is the same thing, the price of the maintenance of 1000 men for a year, and with it the whole weight and authority which it could give them. The buckles, however, were to be all their own, and no other human creature was to have any share of them; whereas, in the more ancient method of expense, they must have shared with at least 1000 people. With the judges that were to determine the preference, this difference was perfectly decisive; and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities they gradually bartered their whole power and authority.
Let me spotlight this part:
All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.
This “vile maxim” applies to the current “age of the world”—the neoliberal period has been a striking illustration of the “vile maxim”.
“Not Small Change”
You can see a great illustration of the “vile maxim” if you look at the following report from Carter C. Price and Kathryn A. Edwards:
“Trends in Income From 1975 to 2018” (20 November 2020)
I took some notes on the 20 November 2020 report:
“The three decades following the Second World War saw a period of economic growth that was shared across the income distribution, but inequality in taxable income has increased substantially over the last four decades.”
“This work seeks to quantify the scale of income gap created by rising inequality compared to a counterfactual in which growth was shared more broadly.”
“We introduce a time-period and income-level agnostic measure of inequality that relates income growth to economic growth.”
“This new metric can be applied over long stretches of time, applied to subgroups of interest, and easily calculated.”
“We document the cumulative effect of four decades of income growth below the growth of per capita gross national income and estimate that aggregate income for the population below the 90th percentile over this time period would have been $2.5 trillion (67 percent) higher in 2018 had income growth since 1975 remained as equitable as it was in the first two post-War decades.”
“From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.”
“We further explore trends in inequality by applying this metric within and across business cycles from 1975 to 2018 and also by demographic attributes such as race, gender, and education level.”
“Policy research is needed to identify interventions that can help the full population benefit from economic growth rather than strictly those at the top.”
And Noam Chomsky has a fantastic 2020 piece that everyone should read:
“Chomsky: Voting Is Not the End of Our Work. It’s Only the Beginning.” (7 November 2020)
I took notes on the 2020 piece:
“Trump has shown political genius in tapping the poisonous currents that run right below the surface of American society.”
“He has skillfully nourished and amplified the currents of white supremacy, racism and xenophobia that have deep roots in American history and culture, now exacerbated by fear that ‘they’ will take over ‘our’ country with its shrinking white majority.”
“And the concerns are deep.”
“A careful study by political scientist Larry Bartels reveals that Republicans feel that ‘the traditional American way of life is disappearing so fast that we may have to use force to save it,’ and more than 40 percent agree that ‘a time will come when patriotic Americans have to take the law into their own hands.’”
“Trump has also skillfully tapped reservoirs of anger and economic resentment among the working and middle classes who have been subjected to the bipartisan neoliberal assault of the last 40 years.”
“If they feel that they have been robbed, they have good reason.”
“The Rand Corporation recently estimated transfer of wealth from the lower 90 percent to the very rich during the four neoliberal decades: $47 trillion, not small change.”
“Looking more closely, the transfer was primarily to a small fraction of the very rich.”
“Since Reagan, the top 0.1 percent has doubled their share of the country’s wealth to an astonishing 20 percent.”
“These outcomes are not the result of principles of economics or laws of history but of deliberate policy decisions.”
“If decisions are shifted from government (‘government is the problem,’ as Reagan claimed) they do not disappear.”
“They are placed in the hands of the corporate sector, which must be guided solely by greed (per neoliberal economic guru Milton Friedman).”
“With such guidelines in place, results are not hard to anticipate.”
“On top of the near-$50 trillion train robbery, the international economy (‘globalization’) has been structured to set American working people in competition with those in low-wage countries with no workers’ rights while the very rich are granted protection from market forces, by exorbitant patent rights, to take one example.”
“Again, the effects of this bipartisan enterprise are not a surprise.”
“Less educated workers may not know the details or understand the mechanisms that have been designed to undermine their lives, but they see the outcomes.”
“The Democrats offer them nothing.”
“They long ago abandoned the working class and have been full collaborators in the racket.”
“Trump in fact harms workers even more than the opposition, but he excoriates ‘elites’—while slavishly serving the super-rich and corporate sector, as his legislative program and executive orders amply demonstrate.”
So Chomsky has harsh words about the upward transfer—he calls it a “near-$50 trillion train robbery” and a “racket”.
Hacker and Pierson
Winner-Take-All Politics is a must-read 2010 book—from Jacob S. Hacker and Paul Pierson—that discusses the neoliberal assault on the population. I took these notes based on the book:
“Over the last generation, more and more of the rewards of growth have gone to the rich and superrich.”
“The rest of America, from the poor through the upper middle class, has fallen further and further behind.”
“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.”
“Economic growth was even more skewed between 2001 and 2006, during which the share of income gains going to the top one percent was over 53 percent.”
“That’s right: More than 50 cents of every dollar in additional income pocketed by Americans over this half decade accrued to the richest 1 in 100 households.”
“Even more striking, the top 0.1 percent—one out of every thousand households—received over 20 percent of all after-tax income gains between 1979 and 2005, compared with the 13.5 percent enjoyed by the bottom 60 percent of households.”
“If the total income growth of these years were a pie, in other words, the slice enjoyed by the roughly 300,000 people in the top tenth of 1 percent would be half again as large as the slice enjoyed by the roughly 180 million in the bottom 60 percent.”
“These mind-boggling differences have no precedent in the forty years of shared prosperity that marked the U.S. economy before the late 1970s.”
“Nor do they have any real parallel elsewhere in the advanced industrial world.”
“A generation ago, the United States was a recognizable, if somewhat more unequal, member of the cluster of affluent democracies known as mixed economies, where fast growth was widely shared.”
“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.”
“From the erosion of job security to the declining reach of health insurance, from the rising toll of home foreclosures to the growing numbers of personal bankruptcies, from the stagnation of upward social mobility to the skyrocketing of personal debt, the American economy that has delivered so much to the fortunate has worked much less well for most Americans.”
“Winner-take-all has become the defining feature of American economic life.”
“How can hedge-fund managers who are pulling down billions sometimes pay a lower tax rate than do their secretaries?”
“And why, in an era of increased economic uncertainty, is it so hard for their secretaries to form or join a union?”
“How have corporate managers—who, along with Wall Street bigwigs, make up more than half of the top 0.1 percent—ascended from pay levels twenty to thirty times that of a typical worker to levels two to three hundred times as great?”
“And why, over a generation in which most Americans have experienced modest economic gains, have politicians slashed taxes on the rich even as the riches of the rich have exploded?”
“Step by step and debate by debate, America’s public officials have rewritten the rules of American politics and the American economy in ways that have benefited the few at the expense of the many.”
“for reasons we shall explain and with consequences we will unveil, all of America’s political class have felt the increasing pull of the winner-take-all economy”
“Our story unfolds in three parts.”
the first part explores “what has really happened in the American marketplace over the last generation” and “who’s won and who’s lost in the thirty-year war” and “how government has played an integral role in creating these new economic realities”
the second part explores the “subterranean roots of the winner-take-all economy, which lie, against common expectations, in the political transformations of the 1970s”
the third part explores the “new world of American politics forged in this crucible” and “how Republicans and Democrats have both responded, in different ways, to the political pull of America’s superrich”
So we see—daily—the silly carnival of US politics. But we don’t see any serious analysis in the media—a serious analysis would reveal the mechanics of money and policy and power and would contextualize the theatrics.
Great big picture piece. To change the Big Transfer, one needs to show another system is possible and that is the "predistribution" (Packer) shift to more employee ownership of firms.--in addition to redistriibutive measures to put the created wealth back into the hands of those who created. it.