I am extremely fond of someone whose politics and world view differ significantly from mine. One text exchange with him really brought me up short. I had written what I consider a self-evident truth: unless we do something about the growing economic inequality in this country, it won’t be only the poor and struggling middle class who will suffer. Eventually, our fraying social fabric will tear completely, and the .01% will find society inhospitable to them as well.
My correspondent’s response stunned me. He said that what I’m suggesting will mean the end of a nation based on merit, and my grandchild will face a dismal future. I responded that I do worry about my grandchild’s dismal future, but it’s because of the ravages of climate change—not efforts to reduce inequality. And so our discussion ended.
I didn’t launch into all the evidence demonstrating that our society has never been based solely on merit—from the Original Sin of Slavery to the very 21st Century scandal of famous people bribing coaches to get their kids into the best colleges.
But the idea that any mention of redressing inequality could evoke such a reaction made me think that it’s time to talk about why the wealthiest among us should welcome steps to close the ever-widening economic gap, why some of them are advocating for just that, and what approaches might be feasible for us as a nation.
I realize once again I’m taking on a “you can’t cover such a mammoth, complex topic in a blog” subject. That’s why I won’t mention world economic inequality right now. I have some awareness of my limits, for goodness’ sake (!?). I must add a disclaimer, however: my formal education in economics is practically zero, so you should be skeptical of anything I write that I don’t attribute to others.
What I do have is a heart that hurts when I see so much suffering and anger in this land of plenty, a conviction that this growing economic inequity is unsustainable, and—I’ve been told—an analytical mind in addressing problems. And my blessed blog gives me a bit of a forum to try to evoke discussion of these views.
So here we go.
We’ll start with Nick Hanauer. I don’t know how many of you are familiar with him and his work, but I’ve attached a link to his 2014 TED Talk: “Beware, Fellow Plutocrats: The Pitchforks Are Coming.” It’s worth “eavesdropping” on Hanauer’s speech, which lays some of the groundwork for the reasons and ways to bring about positive economic change. (I’m not endorsing everything he’s ever said or written—simply focusing here on ideas that make great sense to me.)
I think this is especially important as the Democratic Party internally debates how moderate, progressive, or even (gasp!) socialistic its policies should be. Polls show that most voters—not just Democrats—want policies that are moderately progressive—though the word “progressive” may worry them (worries bolstered by the Trump-Republican push to make even the desire for healthcare sound like we’re racing toward the “evils of socialism.”)
Hanauer describes himself as a “plutocrat” and “proud and unapologetic capitalist” who has made a fortune. (He was the first non-family investor in Amazon, co-founded a company that Microsoft bought for $6.4 billion, etc.) But he says he’s neither the smartest nor hardest working person and was a mediocre student.
“Truly, my success is the consequence of spectacular luck, of birth, of circumstance and of timing. But I am actually pretty good at a couple of things. One, I have an unusually high tolerance for risk, and the other is I have a good sense, a good intuition about what will happen in the future, and I think that that intuition about the future is the essence of good entrepreneurship.”
“So what do I see in our future today, you ask? I see pitchforks, as in angry mobs with pitchforks, because while people like us plutocrats are living beyond the dreams of avarice, the other 99 percent of our fellow citizens are falling farther and farther behind.”
To me, that evaluation resonates strongly, and I hope his message is reaching at least some of his fellow plutocrats.
Hanauer stresses that although he believes some inequality is essential for what he calls a “high-functioning capitalist democracy,” inequality today is historically high and worsening daily. If this trend continues, he says, our society will become more like what 18th-century France had “before the revolution and the mobs with the pitchforks.”
“So I have a message for my fellow plutocrats and zillionaires and for anyone who lives in a gated bubble world: Wake up. Wake up. It cannot last. Because if we do not do something to fix the glaring economic inequities in our society, the pitchforks will come for us, for no free and open society can long sustain this kind of rising economic inequality. It has never happened.
There are no examples. You show me a highly unequal society, and I will show you a police state or an uprising.” [All the passages bolded for emphasis are mine.]
What’s more, he says, this inequality is bad for business. Throw out a belief in “trickle-down economics,” which never worked, Hanauer says, because economies aren’t efficient and don’t tend toward fairness. He advocates what he calls “middle-out economics,” which views economies as complex systems that can be effective only if they’re well-managed.
He gives a cogent illustration of why trickle-down economics can’t work.
“I earn 1,000 times the median wage, but I do not buy 1,000 times as much stuff, do I? I actually bought two pairs of these pants…I could have bought 2,000 pairs, but what would I do with them? How many haircuts can I get?…a few plutocrats…can never drive a great national economy. Only a thriving middle class can do that.”
How do we achieve that thriving middle class? One way, which Hanauer sparked, is to raise the minimum wage. Less than one year after his article “The Capitalist’s Case for a $15 Minimum Wage” was published—and Forbes called it “Nick Hanauer’s near-insane proposal”—Seattle did just that: raised the minimum wage to $15 an hour, more than twice the existing federal rate.
“It happened because a group of us reminded the middle class that they are the source of growth and prosperity in capitalist economies…that when workers have more money, businesses have more customers, and need more employees…that when businesses pay workers a living wage, taxpayers are relieved of the burden of funding the poverty programs like food stamps and medical assistance and rent assistance that those workers need. We reminded them that low-wage workers make terrible taxpayers, and that when you raise the minimum wage…all businesses benefit yet all can compete.”
To those who insist this approach is economically disastrous, he points out that Seattle is doing very well, thank you, and is one of the fastest growing cities in the US, with a booming restaurant business, where the restaurant workers can afford to eat where they work (despite restaurateurs who had said they’d have to close their doors).
Hanauer acknowledges these issues are more complex than he can depict in one speech but says there’s simply no evidence that increasing wages will harm both workers and the economy.
“The most insidious thing about trickle-down economics is not the claim that if the rich get richer, everyone is better off. It is the claim made by those who oppose any increase in the minimum wage that if the poor get richer, that will be bad for the economy. This is nonsense.”
When President Bill Clinton said “the era of big government is over,” we had already been on a trajectory that sees government as a necessary evil at best, or pure evil at worst. (Notably, Clinton had added: “but we cannot go back to a time when our citizens were left to fend for themselves.”) Without mentioning those sentiments, Hanauer calls for “a new politics, a new capitalism”:
“Let’s by all means shrink the size of government, but not by slashing the poverty programs, but by ensuring that workers are paid enough so that they actually don’t need those programs…Government does create prosperity and growth, by creating the conditions that allow both entrepreneurs and their customers to thrive.”
“Balancing the power of capitalists like me and workers isn’t bad for capitalism. It’s essential to it. Programs like a reasonable minimum wage, affordable healthcare, paid sick leave, and the progressive taxation necessary to pay for the important infrastructure necessary for the middle class like education, R and D, these are indispensable tools shrewd capitalists should embrace to drive growth, because no one benefits from it like us.”
He concludes with a message to his fellow plutocrats that it’s time to “recommit to our country”—and to a more inclusive and efficient capitalism…
“…a capitalism that will ensure that America’s economy remains the most dynamic and prosperous in the world. Let’s secure the future for ourselves, our children and their children. Or alternatively, we could do nothing, hide in our gated communities and private schools, enjoy our planes and yachts — they’re fun — and wait for the pitchforks.”
Since this speech, Hanauer has continued to push for change. His podcast, Pitchfork Economics, is widely available. I listened to a segment in which US Senator and 2020 Presidential candidate Cory Booker discussed his proposed bill concerning stock buybacks, explained here. May sound dull, but I found it fascinating.
Before 1982, I learned, stock buybacks were illegal: using corporate profits to buy back stocks, thereby raising the price of those stocks, was viewed as market manipulation. Doesn’t that make sense? But now it’s standard practice, contributing nothing to economic growth except what goes into the stockholders’ pockets. The workers whose increased productivity made those profits possible receive zilch; their wages remain stagnant, as wages have since the late 1970s.
Even worse, there are disincentives to corporations trying to be fair.
Booker cites American Airlines. After having a great quarter last year, he says, “they announced long overdue pay raises to the pilots and flight attendants.” But analysts looked askance at this move, and Morgan Stanley downgraded American’s shares, complaining its action established a worrying precedent for American Airlines and the industry.
So they were essentially punished for trying to be fair to their workers. Is that not an example of an economy gone seriously awry?
Booker’s bill, the “Workers Dividend Act,” says that if corporations plan to engage in stock buybacks, they must give a commensurate share to their employees. He stresses that this bill is not intended to “vilify” wealth, but simply to ensure that everyone has more.
Importantly, he points out why it’s needed:
“We make moral and value decisions with how we structure our tax codes, shortchanging workers, adding to wealth disparity, and weakening our democracy as a whole.”
To me, the big question is: How do we get the plutocrats to change direction before our democracy is further weakened—and/or the pitchforks are activated?
I’d be remiss if I didn’t mention Michael Tomasky’s Op-Ed, published today in The New York Times: “Is America Becoming an Oligarchy?,” which echoes the concerns expressed here. Tomasky writes:
“Democracy can’t flourish in a context of grotesque concentration of wealth. This idea is neither new nor radical nor alien. It is old, mainstream and as American as Thomas Jefferson.”
Many writers have examined this topic lately, and I think it’s one that we must face as a nation. I plan to explore some of the ideas in subsequent posts.
Are you with me in having this discussion—whether you agree or disagree?