Blog # 55c – The Blocked Questions on Inequality.
[Blog #55a has tried, in outline form, to explain the existence of inequality in the U.S.A.]
[Blog #55b has asked mores specifically how that inequality came about and why it is tolerated in a democracy.]
This Blog #55c gives three examples, from different points of view, of how challenges to that inequality are blocked in the discourse about it.
The limits of Piketty.
Thomas Piketty’s work has received deserved acclaim among economists in the mainstream, and even among some on the left. He clearly relates increased inequality to the growth of wealth and capital, Iin other words, inequality is increasing because the 1%’s share of growth is increasing. Historically, Piketty argues, as Steven Pressman, in a review in the “social justice and economic democracy committed” journal Dollars and Sense, summarizes it, although inequality had been declining, “in the 1970’s or1980’s…the moneyed class revolted and began to influence policy. Top income-tax rates fell, income and wealth inequality rose rapidly.” The focus is clearly on the 1%. The conclusion is to tax it more heavily again, both its wealth and its income. But, Piketty concedes, an unlikely immediate development. Period.
What Piketty brings to the discussion is very much; what is surprisingly missing is as great. His analysis seems to cry out for answers to questions he does not ask: how does that wealth of the 1% come to them in the first place, what in the process of production that Miller refers to gives them their wealth, how come when the moneyed class revolted it was able to influence policy so strongly, why is it unlikely to be taxed down? “When the rate of return to capital (r) exceeds the growth rate of the economy (g)… more money flows to those at the top and inequality increases.” Obviously; that’s simply stating a tautology: when capital gets more of growth, non-capital gets less. Money seems to flow up-hill quite naturally, in such an economy. Wouldn’t the logical next question be, if the concern is for inequality, how could one reverse the flow? But the existence, and propriety, of the reverse gravity is simply taken for granted.
And the progressive economist reviewing Piketty has no better conclusion than to wish for “even more fire in [Piketty’s] soul for a global wealth tax.” His consolation for Piketty’s pessimism is that Malthus was pessimistic too, and look, he was wrong; maybe Piketty will be wrong too. The problem is not so much that Piketty’s recommendations, or the reviewer’s wishes are wrong. Indeed a global wealth tax is well worth fighting for. The problem is that neither is pushing their questions to the next logical level of inquiry: how the difference in wealth between the 1% and the 99%, capital and non-capital, comes about in the first place.
Leveling down or leveling up.
We read in a brief summary of how to deal with inequality dealing with “the underlying causes of our continuing high degree of poverty and inequality,” by a well and properly respected liberal sociologist and veteran of the anti-poverty wars, that the choice is between two approaches: Leveling Down the 1% or Leveling up the 99%. Leveling Down, in the form of “increasing tax rates on the 1% would… ineffectively combat the continuing production of wide-ranging poverties and inequalities.. .” The simple idea that levelling down the 1% might in fact be the best way to leveling up the 99%, because the profits of the 1% are built on the lower wages of the 99%, simply does not appear in the discussion. Miller might well agree that it is so; he points out that financial industries captured 40% of all business profits…and they certainly did not provide 40% of all jobs, while making a substantial contribution to income and wealth disparities.” But the logical conclusion that limiting the profits of the business sector might help level up the incomes and wealth of the 99% is not pursued.
But what are underlying causes of our continuing high degree of poverty? “The American Economy is shaping up as a low-wage economy producing …” poverty. “…the production of these low-wage jobs is a great obstacle to… contraction of poverties and inequalities.” These jobs are in the “low-wage service sector.” “Yes, we should definitely seek to improve wages in that sector,” but the better route is to reduce the role of those jobs and rather foster jobs in construction, for instance, where the pay is better.
The point here is not that Miller is wrong in his recommendations; they should be supported as part of a broad effort to reduce inequality. The point is that what is missing in his discussion is any confrontation with the simple fact that the wealth and income of the 1% are related to the lack of wealth and incomes of so many of the 99%.
Low wage jobs are simply accepted as low-wage jobs; the wages should be higher, but low wage is simply what those jobs are. The financial industry makes 40% of the profits of business. That’s too much, but it’s not an “underlying cause of inequality.” And the jobs that need creating are not simply jobs that pay well, but jobs that do useful work, not speculate better or privatize more.
No larger pie. The New York Times’ Eduardo Porter, in his Economic Scene column in that mainstream paper, believes he has the answer, gotten by “Taking a Hard-Eyed Look At U.S. Income Inequality and the Problems Behind it.” At various points he quotes, apparently approvingly, Gregory Mankiw, an economic advisor to President George W. Bush and Mitt Romney, advocates focusing on “increasing educational attainment,” and holds, in as forthright a conservative statement as one would want, that “Inequality itself is the wrong thing to look at… The question is, how do we help people at the bottom, rather than thwart people at the top? … “Policies that address the symptom rather than the cause include higher taxes and a more generous social safety net,” says Mankiw. So helping people at the bottom doesn’t work, perhaps because it might thwart those at the top? “The best way to address inequality is to focus on increasing educational attainment [because] technological progress has benefitted well educated workers.” But then there are a series of comments pointing out that “education isn’t doing it” either. Nor does “technological progress” seem to be the answer either, for “the real problem is slow growth.” according to Mankiw‘s presumably hard-eyed look.
But, Porter says at the end of his discussion, apparently sympathetically, getting to “the nub of the issue,” that, “as the richest Americans capture a larger and larger share of the fruits of growth, for many people the essential question becomes: What is the point of creating a larger pie?” Well! So it is the division of the pie that counts, after all, and maybe those at the top do need to be thwarted, if the nub is to be dealt with?
Although Porter has thus gone much further than the avowedly liberal Miller in linking the growing wealth of the 1% to the poverty of the poor, charging that the rich are capturing – presumably from the poor – a large part of the pie, he seems to go back to an earlier comment in the middle of his piece, said more or less in passing: “even avowedly liberal social scientists have had a tough time figure out the negative consequences of the rise of the 1 percent.” Without noticing that he has himself just figured it out, he concludes with a classic cop-out: “That’s the post-Great Recession reality.”
 “Piketting Wealth Inequality,” July/August 2014, p. 26.
 P. 37
 S.M. Miller, “Breaking the Low-Wage Syndrome, Poverty & Race, vol. 23, No. 4, July/August 2014, p. 9.
 Miller also properly points out that the effort to tax the 1% has been largely unsuccessful but does not address the question of why that is, the main point raised here.
 July 30, 2014, p. B1, B8.