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Recently I was encouraged to take a look at an important book that has some answers for the future of our society and democracy. The book is Capital in the Twenty-First Century by Thomas Piketty, a political economist. It seemed to shock the pundits of the talk shows, but to me it explained the obvious, backed up with three centuries of data from 20 countries.
Capital is wealth. Capitalism is the accumulation of wealth. Corporate capitalism is the system that has created the 1% and the 99% classes. I know this is a simplification, but it helps me to keep things in perspective.
How unequal are we? Here’s some info adding to what we already intrinsically know:
- We’re not recovering from the “Great Recession.” The lowest 93% of households lost 4% of their worth, but the top 7% grew by 28%. Worldwide the wealthiest 1% got 95% of the growth from the post-financial crisis since 2009.
- Huge amounts of capital are often amassed by off shore corporations not paying their fair share of taxes, shifting the tax burden to you and me.
- We can’t get ahead. The cost of living is higher than our incomes so we are going deeper in debt, even though many families have three jobs.
- Minimum wages are becoming more and more minimum. Did you know the minimum wage (adjusted for inflation) in the 1970s is the same as the proposed hike to $10.10?
- The great obscene gap between the wealthy 1% and the rest of us is now worldwide and has been growing worse since 2009. The wealthy 1% controls about 50% of the world’s wealth, and the 85 wealthiest families control the same portion of wealth as 3.5 billion of the poorest people. Did you know that 49% of members of Congress are millionaires compared to 1% of the general population? This just in – the top 3% now controls 54% of our country’s wealth.
- The wealthy are buying our politicians. Disparity of wealth makes democracy undemocratic, especially after the Supreme Court ruling allowing unlimited campaign spending by corporations.
Piketty’s research demonstrates that a so-called self-regulating market-based system has a built-in bias favoring those with capital assets over those living on wages alone. His conclusion is that, without fundamental system change or politically prescribed adjustments, the distribution of wealth will tend inevitably to concentrate in fewer and fewer hands with all the social and economic problems that such disparity causes.
The result has been a dangerous unequal distribution of wealth. The main reason for inequality is that the returns on capital exceed economic growth involving production and wages. When inequalities reach the extreme levels that they are at now, it threatens our democracy and may result in frequent civil unrest movements.
Political action by our government corrected most of the dangerous inequalities after the last great Wall Street collapse and the Great Depression. Roosevelt’s New Deal and WWII got us out of the last economic jam, but it took years of hardship recovery for us to get to the golden years of economic life, 1945-1975. What will it take to get the economic ball rolling uphill again?
What’s in store for US/us?
- Another collapse, stock markets or the tech industry, like the housing bubble but probably much worse?
- More and bigger revolts and riots involving the unemployed and striking minimum wagers?
- Replacing corporate capitalism by changing into a steady-state economy or changing to a “social capitalism” system as in Scandinavian countries?
- Tax on wealth as suggested by Thomas Piketty. Tax salaries over $500,000 at 80% worldwide and tax wealth at 15% worldwide. Corporate capitalism is global, so capitalist countries must cooperate, or the wealth will just flow to the place of lower taxes.
- In the US, we could encourage employee-owned businesses, social enterprises where money earned is used for social purposes, traditional co-ops, community development corporations, land trusts, government-owned and operated businesses, transformation of the “too big to fail” banks into public utilities and replacing Wall Street.
Both our political and economic systems are highly dysfunctional. And, here’s another important issue: eminent scientists think that revamping our economic system is integral to dealing with climate change. I fear that any action to improve climate will be too late to save our grandkids from hardships. This fear is not mine alone but shared by many.
Try reading: Agenda for a New Economy, 2nd Edition, by David C. Korton
Capital in the Twenty-First Century by Thomas Piketty
What Then Must We Do? By Gar Alperovitz
Who Stole the American Dream by Hendrick Smith
Who Rules America by William Domholf, http://whorulesamerica.net/power/wealth.html
Wayne Kessler is the former owner of Shambani Organics, former Peace Corps volunteer, and founding member of Growing Local.