What has caused the growing inequality of income and wealth, and what can be done about it?
The root cause can be found in the nature of capitalism, in the endless and relentless drive by businesses to extract profits from the labor of their workers and to use these profits to expand their enterprises.After the Second World War, intense class struggle won for a significant part of the U.S. working class, higher wages and benefits, along with greater social welfare spending by the federal government. These allowed for a greater sense of security and power within the working class.
However, U.S. capital faced very favorable global circumstances after the war, mainly a near total domination of global trade. But once Europe and Japan rebuilt their economies, U.S. corporations began to face intense competition and a decline in profits. Sensing a labor movement weakened by years of class collaboration and cooperation, capital responded to the profit crisis by mounting an attack upon workers and their unions. This took the form of both direct assault (for example, the use of sca bs during strikes, and gross violations of weakly enforced labor laws), an ideological onslaught (the formation of think tanks, the financing of academic departments and professorships), and a ramping up of political lobbying to win deregulation of all sorts of industries and the right to move capital at will around the globe.
The labor movement proved either incapable or unwilling to defend the interests of workers, and as a consequence, capital emerged victorious in its class war. Antilabor politicians like Ronald Reagan were elected to office and immediately did capital’s bidding. Deregulation, the privatization of public services, free trade agreements, the elimination of restrictions on international capital flows, and cuts in social welfare spending proceeded rapidly. As these things happened, the living standards of the working class stagnated, with real wages now not much higher than they were forty years ago.
At the same time, the spread of capital around the globe led to the invention of new financial instruments and the growing financialization of the global economy. New credit and debt instruments were invented and huckstered to the gullible in quantities that boggle the mind. Some of these were foisted upon working people who began to borrow enormous sums of money through their credit cards and homes to make up for the failure of their wages to rise.
In effect, workers made themselves more dependent of their class rulers, who pocketed a growing proportion of working class incomes (interest payments on debt). The explosion of finance brought with it gargantuan fortunes for those who controlled the financial sector of the economy and great political influence as well. Incomes flowed from bottom to top, with the result that incomes and wealth are now more unequally distributed than at any time since the onset of the
Contrary to what mainstream economists and the Federal Reserve chairmen believed, the U.S. economy was made more vulnerable to deep downturns because of the neoliberal programs implemented by capital and its political allies. Disaster struck with full force in 2007 and 2008, and we have yet to recover. After weak attempts to ameliorate turmoil generated by the Great Recession, the Obama administration is now committed to deepening the chasm between rich and poor, with cries for austerity similar to those we see in the rest of the world.
There are many things that could be done to reverse the growth of inequality. Here is a list of possibilities, ranging from the least to the most radical:
1. Traditional measures: more progressive income taxes; greater reliance on estate and gift taxes; higher and inflation-indexed minimum wages; expanded social security, workers’ compensation, and unemployment compensation; more aid to needy persons and families; strengthening of medicare and medicaid; affirmative action to reduce discrimination; and greater regulation of the media to ensure a broader spectrum of viewpoints.
2. More progressive measures: ceilings on executive compensation; encouragement of labor unions (through enforcement of existing laws and amendments to these laws to make organizing workers less burdensome); a universal pension system; universal health care; compensatory spending on local public education and more federal aid for higher education; abolition of corporate personhood; a pluralistic media system; proportional political representation; and a full-employment jobs policy or a basic income entitlement to help break the jobs-income nexus.
3. More radical changes: socialized investment aimed at the public interest as determined by some sort of democratic decision-making process; a close look at socialist economies to see what they did and have done right (after recovery from the Second World War, there was no unemployment, homelessness, or illiteracy in the Soviet Union); and consideration of moving toward some form of socialism, such as democratic worker-managed firms (the Yugoslav experience offers a good deal of encouragement to proponents of this).
It is one thing to propose policies to reduce inequality and another to get them implemented. However, this much is certain. If inequality is rooted in the nature of capitalism, a normal outcome of its modus operandi, then it will only be militant class struggle, with an anti-capitalist and working class ideology, that has any chance of success.
The Wisconsin Uprising of 2011 and the OWS movement offer us both hope and a warning. They show us the way forward: mass actions, coalitions, nonhierarchical and democratic decision-making, and direct confrontation with our class enemies. But they also can be subverted by those who pretend to support us but are more concerned with maintaining own power. The top leaders of most U.S. labor unions and all of those atop the Democratic Party have no intention of waging class war.
So whatever happens in the future, we must strive to build our own independent, democratic, and radical organizations, willing to make tactical alliances but committed to a radical transformation of society.