How Much Inequality?

A brief essay by Daniel Little on the website UnderstandingSociety asks the following questions, examining the issues of inequality in income and opportunity from moral, social justice, social cohesiveness, and utilitarian perspectives, with links to additional writings on each view.

How much inequality is too much?  Answers range from Gracchus Babeuf (all inequalities are unjust) to Ayn Rand (there is no moral limit on the extent of inequalities a society can embody). Is there any reasoned basis for answering the question?  What kinds of criteria might we use to try to answer this kind of question?

Ayn Rand’s novels appear to have infected a large number of people with the notion that moral considerations of inequality in a society are inappropriate when compared to the rights and motivations of the individual, which argument is helping fuel the divisive gridlock on economic matters policy makers are facing in States and the Federal government. The author of a budget proposal lacking a moral compass, Paul Ryan, is awarded a “fiscal responsibility” award, while legislation to aid job creation and to continue benefits for millions of the long-term unemployed is routinely blocked, growing an underclass of otherwise productive workers unable to return to their former areas of expertise or income levels. The States under growing budget constraints choose to cut revenues, primarily for those at the top of the income scale, while they reduce spending, placing the burden of strangled government on the shoulders of the unemployed, the elderly, children, the sick, and the disabled. It is not hard to see the moral inequality of these actions, and as Joseph Stiglitz in his commentary and latest book, The Price of Inequality, How Today’s Divided Society Endangers Our Future, points out social cohesiveness is at risk as those in the vice of unequal policy and advantage in society reject and resist such policy. (More here.)

America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.

And the driver of this alienation…? The “anything goes” philosophy from the right that has promoted security force violence against students and demonstrators protesting the effects of inequality, too big to fail industries that privatize their profits while socializing the risks they take to realize their profits, and unresponsive government unwilling and unable to represent the vast majority of people in their societies. Can we do better? Let us hope so…

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Dignity

What the financial crisis still rocking the world has taken from many middle and lower income people is not only their livelihoods, savings, or pensions, but their dignity. The Greek sovereign debt crisis has many causes, not the least of which are the structural weaknesses inherent in the European Union being an economic union but not a political union. The role of financial speculators such as Goldman Sachs has not been discussed in much depth in the mainstream corporate media, but its influences are without a doubt being felt along with the austerity imposed by the banking giants in Europe futilely, it would appear, trying to hold the EU together. If recent reports are correct, that will be increasingly difficult as the countries that make up that bloc retrench and weather the crisis that has yet to subside for a great many of the world’s people.

For one pensioner in Athens, the austerity imposed upon Greece by foreign creditors proved the last straw. Dimitris Christoulas , a retired 77 years old pharmacist took his own life in Syntagma Square in the center of Athens leaving the following note describing his actions:

In translation:

The collaborationist Tsolakoglou government has annihilated my ability  for my survival, which was based on a very dignified pension that I alone (without any state sponsoring) paid for 35 years.

Since my advanced age does not allow me a way of a dynamic reaction (although if a fellow Greek was to grab a Kalashnikov, I would be the second after him), I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance.

I believe that young people with no future, will one day take up arms and hang the traitors of this country at Syntagma square, just like the Italians did to Mussolini in 1945 (Piazza Loreto in Milan).

Dimitris’s death sparked riots in the streets of Athens as frustrated Greeks suffering under the heavy weight of austerity measures fought with police whom they accuse of being the enforcers of a fascist regime. The reference to “the collaborationist Tsolakoglou government” refers to the pro-Axis government of Georgios Tsolakoglou during the German occupation of Greece in 1941 – 1942. Chants following Dimitris Christoulas’s funeral included: “Fascists! Sons of Bitches! Here come the hangings!” When crowds descended on Syntagma Square an aggressive policeman opposing the mourners was badly beaten.

“I won’t pay.”

Renee Maltezou in ekathimerini.com writes:

Stunned Greeks asked if a flawed recipe of austerity cuts to save the country was pushing its citizens to the brink – and family and friends said that is exactly what Christoulas had hoped to accomplish.

“My father’s handwritten note leaves no room for misinterpretation. His whole life was spent as a leftist fighter, a selfless visionary,» his only daughter, Emy Christoula, 43, said in a statement.

“This final act was a conscious political act, entirely consistent with what he believed and did in his life.”

She recalled as a child attending a 1975 concert by Greek leftist composer Mikis Theodorakis, where she and her father sang together. For some dreamers, «committing suicide is not an escape but a cry of awakening», she said.

Friends and acquaintances describe Christoulas as a quiet and gentle man, but also a passionate leftist deeply shaken by the pain that the crisis had inflicted on his fellow citizens.

To many who knew him, «Makis» was a hero – a martyr who had jolted Greeks into asking whether spending and salary cuts prescribed by the foreign lenders in exchange for financial aid as Greece lurched towards bankruptcy had gone too far.

“The way he did it made the difference. It was a political act,» said 91-year old Thymios, a fellow-member of Christoulas’s neighbourhood association, who would not give his last name.

“Maybe the right thing would be to keep fighting but his act was symbolic: He went into the politicians’ ‘nest’ – parliament – and humiliated them.”

As foreign elites demand austerity in return for loans, and a compliant government bends to the wishes of those elites and enlists the security forces to enforce compliance from the public, a pensioner robbed of his pension commits a final act meant to preserve his dignity. The last book he read was Greece’s Pompeii, a comparison of Pompeii’s decadent, corrupt social system with modern Greece. Yet another stark example of the instability of inequality.

Occupy = Zapatistas

“The government will need to eliminate the Zapatistas to demonstrate their effective control of the national territory and security policy.” Mexico, Political Update, Chase Manhattan Bank.

“It is time for us to see this in a larger context. Decisions are made in place like Geneva that impact on the poorest of the poor in Mexico. They decide that the conditionality of a loan to Mexico is going to include the export of meat from Mexico, that means that the land that the Mexicans have used to grow corn is now used to grow cattle. And that cattle is sold to make fast food in the United States. That’s a decision not made by the Mexicans, it’s made by a world trade organization. Who is the enforcer of this? Well of course, the US military becomes the enforcer of a non-democratic, even anti-democratic, corporate effort to control the world economy.” Blasé Bonpane, Director, Office of the Americas.

“We are in this era of a global economy. We are in this era where corporations want to be able to go anywhere in the world, pay as little as they can pay, exploit workers as much as they can exploit them, then move on to the next place. It is very, very convenient to have this big body of dispensable workers right across the border. So I think Mexico is a goldmine for US corporations, and they’re still in the process of figuring out how to tap that goldmine. And the things like the uprising in Chiapas become a real inconvenience for them. “   Medea Benjamin, Co-director, Global Exchange.

“The day the North American Free Trade Agreement (NAFTA) comes into effect, several thousand soldiers take over half the state of Chiapas, declaring a war against the global corporate power they say rules Mexico. They call themselves the Zapatista National Liberation Army. Zapatista shows this uprising, the story of a peasant rebellion, armed and up against the first world military. It is the story of a movement that transformed Mexican and international political culture forever …”  thoughtmaybe.com

Watch the nearly one hour video here.

Another View on the Politics Prolonging the Lesser Depression

This VOXEU article discusses the politics that arise in the aftermath of financial crises on a broader scale, not just our current one.

Political environments appear systematically different in the aftermath of a financial crisis relative to before the crisis. This column argues that the ensuing gridlock and the delay in potentially beneficial policy reforms should come as no surprise.

Financial crises of all colours (banking, currency, inflation, or debt crises) leave deep marks on an economy. Deep economic contractions, both in output and employment, are systematic in the interim and in the aftermath of financial crises, as thoroughly documented in research by Reinhart and Rogoff (2009) and Reinhart and Reinhart (2010).

Sustained waves of volatility, often resulting in secondary crises (e.g. debt crises following banking crashes), are almost the norm in the post-crisis period (Reinhart and Rogoff 2011).

What exactly occurs in the aftermath of financial crises that makes recovering from such shocks so hard? This column argues that the answer may lie mostly with the politics, not the economics.

I might disagree with the authors that the Occupy movement is primarily a “leftist” movement, but the overwhelming weight of this analysis that the politics of the extremes are at play here is difficult to dismiss. With the dominant culture favoring the corporatist alignments of corporation, wealth, and the elite political class the extreme politics prolonging the current Lesser Depression, as Paul Krugman describes our present economic status, can be best described as that which favors inequality at the expense of the vast majority of the public in the world’s nations today. Austerity in Europe is pushing the EU into a recession, and while the Federal government in the US has largely avoided the drastic austerity crippling Britain, Spain, Ireland, Portugal,  and Greece states and local municipalities in the US are being forced into austere budget cuts that defy logic, are counter-productive to growth, largely rooted in extreme political economics espoused by both parties that for the past 40 years has helped create the difficulties and inequality we are now experiencing.

 

What We Have Become…

                                                               Pavel Constantin, Cagle Cartoons, Romania

 

What does it say about democracy in the US when this cartoon coming out of a former communist country in Eastern Europe so clearly describes our corporatist state where an elite political class enjoys the benefits of police state protections against the people? Stay in line, and nobody will get hurt…

On Breaking the Power of the 1%

Advocates of non-violent resistance and change in our society look to the labor and farm struggles of Sweden and Norway in the 1920’s and 1930’s for inspiration. George Lakey, visiting professor at Swarthmore College,  published an essay recently on the Waging NonViolence website, cross-posted on Common Dreams, How the Swedes and Norwegians Broke the Power of the 1%. Neither Sweden nor Norway are without their own problems but both have largely avoided the catastrophe much of the rest of the world has suffered at the hands of predatory, crony capitalism by providing their citizens with strong safety nets and a thriving middle class, the hallmarks of stable societies (see).

The Instability of Inequality by Nouriel Roubini, Or, What Is Stirring in the Working and Middle Classes around the World?

The essay, The Instability of Inequality, appeared back in October just after the beginning of the occupation of Zuccotti Park in NYC and the rapid spread of the Occupy Movement nationwide. As Chairman of Roubini Global Economics, and as Professor of Economics at the Stern School of Business, New York University Mr. Roubini often takes a global view of the day’s events, taking in the broad ranging threads of history and place that cast their influence on societies and their economies. This essay is no exception.

It has been long understood that inequality tends toward instability. Inequality in opportunity, income and wealth, corruption, unemployment and underemployment are all factors found at the root of the civil unrest that has spread across the Middle East, in Europe, and the US, much of the world in fact with students in Chile and workers in India and in China agitating against conditions that make their lives and futures increasingly tenuous.

Liberal democracies that adopt policies that make for a strong middle class and a level playing field of opportunity, while providing a strong safety net to catch those that feel the upsets of economic fluctuations have tools to maintain stable societies if there is the political will to use them. In today’s world of outsized corporate dominance of the liberal democracies that now exist unrest is increasing because the stabilizing factors are falling to the rent-seeking, profit-taking priorities of corporations. If it continues, it cannot end well.

“Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare.” Nouriel Roubini

This just landed in my email box as I finished this posting and relates inequality with the instability in financial markets:

http://nsc.newamerica.net/publications/policy/unequal_and_unstable

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