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Transcript #158 "We have to tolerate inequality to achieve greater prosperity and opportunity for all": The Right-Wing Mind's Strained Relation To Reality Partially hyperlinked to
sources. For all sources, see the data
resources page. Your sources today include:
thinkprogress.org, the New York Times, taxfoundation.org, commondreams.org, CNN,
the Wall Street Journal, equalitytrust.org.uk, and bloomberg.com. Sometimes escaping from the mouth of
a right-winger is an utterance so jaw-dropping, that it merits an entire show. Brian Griffiths is a Goldman, Sachs
international advisor. He was recently discussing
Wall Street salaries and bonuses. You've
probably heard that the financial industry is all set to award itself a record
$140 billion in total compensation this year.
Goldman, Sachs all by its lonesome will pass out $23
billion in bonuses. Griffiths said in defense of such
numbers: We have to tolerate the
inequality as a way to achieve greater prosperity and opportunity for all In case your brain has the same
reaction mine did the first time I heard that -- this doesn't compute, this
doesn't compute -- let me repeat it. This former advisor to Margaret
Thatcher said with a straight face: We have to tolerate the
inequality as a way to achieve greater prosperity and opportunity for all Ah, trickle-down economics.
Thatchernomics. Reaganomics.
Right-wing economics. Let me
become filthy rich, it will be better for you also, better for everyone. Really? I think not. The Wall Street guys did become
filthy rich. Back in 1985, the
average Wall Street bonus was a bit less than the average annual salary of a
U.S. worker. By 2006, Wall Street
bonuses were fourteen times greater than the average salary of everyone else. And everyone else's annual salaries
essentially stagnated over those decades. More recently, from 2000-2007, the
situation got
even worse. The median income of
working age households actually fell almost $2000.
Went backwards. Where's the
trickle-down? Thanks, George W.
Bush. And there's no relief in sight.
Since the 2008 financial crisis, pay
cuts outside of the financial industry "are occurring more frequently than
at any
time since the Great Depression." Where are you, oh trickle-down
effect? The right-wing promised us
you'd be here. Nothing trickled down.
According to Griffiths, we should have the greatest prosperity of all
time, since we have the just about the greatest
economic inequality since the Great Depression. Two overall stats here illustrate
where trickle-down economics has really left us. Since 1980, the richest 1% of
Americans have nearly tripled their share of the national income pie.
They went from about 8
˝% when Reagan took office, to 23
˝ in 2006. Now, wealth is excess income
accumulated over time. So the wealth
inequality is far, far worse even than the year-to-year income inequality. When I first saw the following
statistic, I couldn't believe it, even though the writer was a reliably
solid source. Maybe she added a
few zeros by accident somewhere? So
I went and checked the underlying original data, from Forbes magazine and the
U.S. Department of Commerce. Yup,
the writer, Holly Sklar, was dead-on accurate as always. Get a load of this: The 400 richest American families in
2006 had as much wealth, as the entire bottom half of the nation. The 400 richest American families had
as much wealth, as 57 million American households. Again, I ask you: where oh where is
Griffith's prosperity for all, now that there is such severe economic
inequality? I don't want to get into a long
discussion about the various theoretical shortcomings of this absurd right-wing
construct, trickle-down economics. Just one theoretical point should
suffice. Our economy is 70%
consumer spending. Someone making $20,000, $30,000,
$50,000 will spend virtually all their income.
They can't and don't save much.
Every penny they get, is going to rev up the economy as they contribute
to that 70% consumer spending sector. But someone making $20 million, $30
million, $50 million, sure they're going to spend a lot, but no way are they
going to spend all their income, or even a majority of it.
Most won't go towards that 70% consumer segment.
And don't tell me about how they'll
invest the money and create jobs. Most
of that money will be used, as it always has been, for speculation: hedge funds,
foreign stock exchanges and the like. Ever heard of derivatives and how
they almost brought down the world's financial system?
See podcast 149.
Who do you think bought all those trillions of dollars of derivatives?
Not the average working or middle class guy, I'll guarantee you that. So putting money not into the hands
of the super-wealthy, but of the working and middle class, that's the way to gin
up economic growth and shared prosperity. But let's get beyond theory.
Anyone can come up with a theory. Or
a counter-theory. The proof is in
the real life results. And the real
life results for trickle-down economics are truly disastrous. Trickle-down
theory…predicts a positive correlation between inequality and economic growth,
the idea being that income disparities strengthen motivation to get ahead. Yet
when researchers track the data within individual countries over time, they find
a negative correlation. For example, after World War II there
was low economic inequality over the next few decades.
Yet we saw extremely high growth rates in most industrial countries.
Then economic inequality started
increasing. And what happened?
Growth rates fell almost by half. As one reporter [correction: should be "economist"] nicely summed it all
up: Again and again, the
observed pattern is the opposite of the one predicted by trickle-down theory. In other words, the rich wind up with
a larger and larger share, of an economic pie that is smaller than it otherwise
would have been. Nice. If you're a long-time listener, you
know one of my mantras: whatever a
right-winger says, the exact opposite is true.
Nowhere more so, as illustrated here, than when money is involved. In a moment, some other disastrous
effects of trickle-down economics and economic inequality.
Stick around. BREAK Unfortunately for all the
non-super-wealthy rest of us, slower growth and less opportunity and prosperity
are not the only negative results when right-wing trickle-down policies hold
sway. A book, already out in the United
Kingdom, will be published
next month here in the United States. It's
called "The Spirit Level: Why Greater Equality Makes Societies
Stronger." The authors, Richard Wilkinson and
Kate Pickett, have a website, equalitytrust.org.uk. What they have found, is that
economic inequality within a society is the single most powerful determinant of
whether that society will have more or less of a host of social ills. No one can summarize their research
better than they in their own words. From
their website: Great inequality is the
scourge of modern societies. We provide the evidence on each of eleven
different health and social problems: physical health, mental health, drug
abuse, education, imprisonment, obesity, social mobility, trust and community
life, violence, teenage births, and child well-being. For all eleven of these
health and social problems, outcomes are very substantially worse in more
unequal societies. We have checked the
relationships wherever possible in two independent test beds: internationally
among the rich countries, and then again among the 50 states of the USA. In
almost every case we find the same tendency for outcomes to be much worse in
more unequal societies. As the book's publisher put
it, in reference to the United States in particular: Almost every modern social
problem—ill-health, violence, lack of community life, teen pregnancy, mental
illness—is more likely to occur in a less-equal society. This is why America,
by most measures the richest country on earth, has per capita shorter average
lifespan, more cases of mental illness, more obesity, and more of its citizens
in prison than any other developed nation. Do you get the picture? And, all this would be bad enough, if
our own tax dollars weren't contributing to our own destruction. How galling is it, that socialism for
the ultra-rich, at taxpayer expense, is helping fuel the Wall Street
mega-compensation and increasing economic inequality we've been talking about
this entire show. We’re talking bailouts here. The Wall Streeters are getting money
cheaply from the Fed, and then loaning it back to governments at higher
interest. Or using that cheap money
to make huge risky bets, with the security of knowing that their companies are
too big for the government to let fail. So
they feel comfortable betting the house. With
our money. With our financial
backstop. Ok, sometimes right-wingers write in
and say all I do is complain, and don't offer solutions. Wrong. I've repeatedly called for the
trickle-down economic, right-wing economic policies that got us in our woeful
current situation, to be reversed, and for progressive policies to be
implemented. In previous podcasts I've talked
about the need to once again heavily regulate Wall Street, to prevent the abuses
that led to the financial crisis. I've also advocated in the past that
the minimum wage be
raised substantially,
that the earned income tax credit be increased,
and that the income tax rate on the wealthiest tiers be hiked.
These would be solutions that would mightily contribute to leveling our
Himalayan peaks of economic inequality. Here let me give you a few steps we
could take that would specifically target Wall Street money-grabbing. You can use any or all of these to go
on the offensive against your friendly local right-winger, challenging them to
tell you why these measures shouldn't be taken. First off, how about a windfall
profits tax? Even the Wall Street
Journal recently ran an op-ed
piece supporting this step: A windfall tax is blunt,
arbitrary and something supporters of free markets usually instinctively avoid.
Even so, following news that Goldman Sachs Group has already set aside a $16.7
billion bonus pool for 2009, the case for windfall taxes on banks that pay giant
bonuses is becoming unanswerable. This year's bank profits
are windfalls in the purest sense. They aren't the due rewards for exceptional
skill but gifts from taxpayers. Many banks are earning huge, risk-free profits
borrowing from central banks at ultra-low interest rates and lending back to
governments at much-higher rates. If this giant, hidden subsidy was being used
to support new lending, fair enough. Instead, it looks destined for bankers'
pockets. Next,
add on a financial transactions tax. Ralph
Nader wrote a great piece
arguing the case for this. A financial transactions tax would be
miniscule in each instance, a
one-tenth to one quarter of a percent tax on each financial market transaction.
It could be stock trades, currency trades, derivatives trades, or some
combination of them. Those investing for the medium and
long-term wouldn't even notice it. But
short-term speculators would, having to pay the tax over and over again, each
time they want to buy and quickly sell, buy and quickly sell. The amounts that could be painlessly
and even beneficially raised are humungous. Estimates range from $100 to $500
billion dollars a year! Yes, $100 to $500 billion dollars a
year. We actually had such a tax for over
50 years, starting in 1914. Japan, Great Britain and dozens of
other nations currently utilize such a tax. Nader wrote a great line.
He said this tax would make the Wall Street crooks and gamblers pay for their own Washington
bailout. How could anyone be opposed to that?
Even you right-wingers: personal responsibility is called for, isn't it? Lastly, the international community
could impose globally what is called a Tobin
tax.
T-o-b-i-n. It's also a
financial transactions tax, imposed on international financial transactions,
like currency trading. It's named
after Nobel Prize winner James Tobin who proposed such a measure in 1971.
Some argue that its receipts should be used for financial assistance to
Third World nations. In a moment, we'll expand the frame
in a couple of ways, to really get inside the right-wing psyche.
Stay tuned. BREAK Expanding the frame a bit, guess what
the topic was that Brian Griffith's panel was discussing? It was "What is the place of
morality in the marketplace" If this were an email, I'd type in
the capital letters ROTFLMAO. Griffiths urged bankers to increase
their contributions to charity, invoking the Biblical injunction that "To
whom much is given much is expected." There is definitely an important
place for charitable giving. It acts
as a tourniquet, an emergency ambulance to get the patient through to live
another day. But to solve the problems that cause
the patient to be in such bad shape that charitable intervention becomes
necessary, more systemic intervention is required. Last
podcast I told you about Catholic social doctrine and its concept of "structures
of sin," which are economic mechanisms that make the rich richer and
the poor poorer. I think under the definition of
structures of sin in the theological dictionary, must be the example of
trickle-down economic policies. Grabbing all of society's wealth with
one hand, and with the other hand, giving a few alms, or even many alms, to
those you've stolen from, that's hardly a mode of behavior in accord with
Christian morals, or the morals of any other true religion. How about we expand the frame in
another way? When you get up each day and look in
the mirror, you certainly want to avoid having an irrepressible urge to punch
yourself in the face. If you thought
you were doing something evil, you might be tempted to do just that.
So everyone has the need to be able to justify to themselves their own
actions. When Brian Griffiths or any other
right-wing ideologue wakes up and looks in the mirror, he needs to like who he
sees. Now he knows he advocates a
philosophy whereby a select few amass huge wealth, at the expense of the rest of
society. So that's why he latches onto an
economic theory -- and I use that term loosely -- an economic theory that says,
let me become filthy rich, and don't worry, it will work out better not just for
me, but for you and everyone else. No need to punch myself in the face,
I'm really helping everyone else by getting ever richer and richer and richer. This rationalizing fits in perfectly
with what John Kenneth Galbraith, the noted late economist, once said.
It's one of my favorite quotes.
He wrote: The modern conservative is
engaged in one of man's oldest exercises in moral philosophy; that is, the
search for a superior moral justification for selfishness. Could there be a better example of
this than trickle-down economics? As long as you and I are talking
about moral justifications for selfishness, let me briefly mention another
right-wing entry in this category. It's
the doctrine of Social Darwinism. Here's radio talk show host Bill
Cunningham: audio: Bill Cunningham The reason people are poor
in America is not because they lack money, it's because poor people in America
lack values, character, and the ability to work hard. The inimitable Bill O'Reilly, shortly
after Hurricane Katrina: audio: Bill O'Reilly Every American kid should
be required to watch videotape of the poor in New Orleans and see how they
suffered because they couldn't get out of town.
And then every teacher should tell the students, "If you refuse to
learn, if you refuse to work hard, if you become addicted, if you live a gangsta
life, you will be poor and powerless just like man of those in New
Orleans." Yes, Social Darwinism teaches
that the poor are poor because they're unintelligent, lazy and immoral.
The rich are rich because, of course, they possess the opposite virtues.
Allow the rich to become more rich, and their virtue will increase.
Helping the poor is morally wrong because it will induce them to worsen
their bad habits. Almost makes trickle-down economics
seem benign, doesn't it? Anyway, back to trickle-down
economics. Increasing economic inequality is its
purpose. It's all in service of that
prime right-wing directive: transfer wealth from everyone else to the already
rich. This directive applies not just
domestically, but internationally among countries as well. That's why, the right is so
apoplectic about progressive leaders like Hugo Chavez of Venezuela and Evo
Morales of Ecuador. Such leaders are
working not only to reduce economic injustice within their own borders, but
internationally as well, for example, in the form of securing fairer deals with
multinationals for their natural resources. What a great sin!
They want to stop the suffering and dying of the hungry who have no food,
the sick who have no medical care. Preventing
multinationals from continuing to loot and economically pillage their nations is
absolutely necessary to accomplish that. Let me put that 23 billion dollars in
bonuses that Brian Griffiths' company is awarding itself, in perspective.
Every year a little under 9 million children around the world die
unnecessarily from hunger and preventable disease.
That $23 billion works out to $2,600 per child.
That amount is often far more than a year's earnings in those countries.
It's far more than enough to save those children's lives. Every child in the world could be
saved with a small fraction of just that one Wall Street company's bonuses. These are the kinds of disparities
that drive me crazy. Listen, especially any right-winger
before you write in, the inequality I condemn, or better put the lesser
inequality I seek, is not some arithmetical division into perfectly equal shares
for every person. Of course not. That would be an ideologically-driven
stance. I don't hold to any
particular ideology. I consider
myself a humanitarian pragmatist. If those at the bottom who are
willing to work and live by society's rules, are able to earn a decent living
and feed their families, get adequate medical care, put their kids through
college, have some vacation time, save for retirement -- if they have that, then
frankly, I don't care how rich those at the top are. Those 400 richest families, they
could have more wealth than everyone else on earth combined, I don't care. But when there's just not enough
wealth to go around at any given point in time, and those at the bottom can not
earn enough to gain a decent standard of living, or even to survive, well, then,
that's where I draw the line. We're
at a level of inequality that is morally repugnant, and it must be corrected. All I seek, all we progressives seek,
is a lessening of economic inequality sufficient so that those at the bottom are
able to live a reasonably decent life. In
our country, and around the world. How could anyone object to that?
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