By Robert Reich
You can see this video on YouTube directly at https://www.youtube.com/watch?v=II9-vdnP_Tw
You often hear inequality has widened because globalization and technological change have made most people less competitive, while making the best educated more competitive.
There’s some truth to this. The tasks most people
used to do can now be done more cheaply by lower-paid workers abroad or by
computer-driven machines.
But this common explanation overlooks a critically
important phenomenon: the increasing concentration of political power in a
corporate and financial elite that has been able to influence the rules by
which the economy runs.
As I argue in my new book, “Saving Capitalism: For
the Many, Not the Few” (out this week), this transformation has amounted to a pre-distribution
upward.
Intellectual property rights—patents, trademarks, and copyrights—have been enlarged and extended, for example, creating windfalls for pharmaceutical companies.
Americans now pay the highest pharmaceutical costs
of any advanced nation.
At the same time, antitrust laws have been relaxed
for corporations with significant market power, such as big food companies,
cable companies facing little or no broadband competition, big airlines, and
the largest Wall Street banks.
As a result, Americans pay more for broadband
Internet, food, airline tickets, and banking services than the citizens of any
other advanced nation.
Bankruptcy laws have been loosened for large
corporations—airlines, automobile manufacturers, even casino magnates like
Donald Trump—allowing them to leave workers and communities stranded.
But bankruptcy has not been extended to homeowners
burdened by mortgage debt or to graduates laden with student debt. Their debts
won’t be forgiven.
The largest banks and auto manufacturers were bailed
out in 2008, shifting the risks of economic failure onto the backs of average
working people and taxpayers.
Contract laws have been altered to require mandatory
arbitration before private judges selected by big corporations. Securities laws
have been relaxed to allow insider trading of confidential information.
CEOs now use stock buybacks to boost share prices
when they cash in their own stock options.
Tax laws have special loopholes for the partners of
hedge funds and private-equity funds, special favors for the oil and gas
industry, lower marginal income-tax rates on the highest incomes, and reduced
estate taxes on great wealth.
Meanwhile, so-called “free trade” agreements, such
as the pending Trans Pacific Partnership, give stronger protection to intellectual
property and financial assets but less protection to the labor of average
working Americans.
Today, nearly one out of every three working
Americans is in a part-time job. Many are consultants, freelancers, and
independent contractors. Two-thirds are living paycheck to paycheck.
And employment benefits have shriveled. The portion
of workers with any pension connected to their job has fallen from just over
half in 1979 to under 35 percent today.
Labor unions have been eviscerated. Fifty years ago,
when General Motors was the largest employer in America, the typical GM worker,
backed by a strong union, earned $35 an hour in today’s dollars.
Now America’s largest employer is Walmart, and the
typical entry-level Walmart worker, without a union, earns about $9 an
hour.
More states have adopted so-called “right-to-work”
laws, designed to bust unions. The National Labor Relations Board, understaffed
and overburdened, has barely enforced collective bargaining.
All of these changes have resulted in higher
corporate profits, higher returns for shareholders, and higher pay for top
corporate executives and Wall Street bankers – and lower pay and higher prices
for most other Americans.
They amount to a giant pre-distribution
upward to the rich. But we’re not aware of them because they’re hidden inside
the market.
The underlying problem, then, is not just globalization
and technological changes that have made most American workers less
competitive. Nor is it that they lack enough education to be sufficiently
productive.
The more basic problem is that the market itself has
become tilted ever more in the direction of moneyed interests that have exerted
disproportionate influence over it, while average workers have steadily lost
bargaining power—both economic and political—to receive as large a portion of
the economy’s gains as they commanded in the first three decades after World
War II.
Reversing the scourge of widening inequality
requires reversing the upward pre-distributions within the rules of the market,
and giving average people the bargaining power they need to get a larger share
of the gains from growth.
The answer to this problem is not found in
economics. It is found in politics. Ultimately, the trend toward widening
inequality in America, as elsewhere, can be reversed only if the vast majority
join together to demand fundamental change.
The most important political competition over the
next decades will not be between the right and left, or between Republicans and
Democrats. It will be between a majority of Americans who have been losing
ground, and an economic elite that refuses to recognize or respond to its
growing distress.
ROBERT B. REICH, Chancellor’s
Professor of Public Policy at the University of California at Berkeley and
Senior Fellow at the Blum Center for Developing Economies, was Secretary of
Labor in the Clinton administration. Time Magazine named him one of the ten
most effective cabinet secretaries of the twentieth century. He has written
fourteen books, including the best sellers “Aftershock, “The Work of
Nations," and"Beyond Outrage." He is also a founding editor of
the American Prospect magazine and chairman of Common Cause. His film,
INEQUALITY FOR ALL is available on Netflix, iTunes, Amazon. His new book,
"SAVING CAPITALISM: For the Many, Not the Few" is out 9/29.
