How Do We Avoid the Pitchforks and Achieve Greater Economic Equality?

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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?

Annie

OK. The Dems Won the House. Now What?

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Well, there really was a blue wave—reportedly the greatest turnover since 1974—and a number of races remain too close to call or subject to a recount. These victories are especially impressive because of the gerrymandered districts and increased state restrictions that led to long lines at the very least and disenfranchisement of numbers of voters, mostly people of color. For a detailed look at what voters faced, read What It Takes to Win, published by the Brennan Center for Justice in October. 

As I stated in my last post, I view this not as a partisan issue—but as a critical win for our democracy. Unless/until the Republicans become better stewards of their Constitutional oaths, or are replaced by a new political force more willing to seek compromise for the good of the people, I hope Americans will continue to shun them in large numbers.

However, one of the consequences of this election was the defeat of some of the most moderate Republicans, increasing the likelihood that the party will become even more intransigent. 

And so, although I’m grateful that the Democrats can put the brakes on many of President Trump’s chaotic, sometimes horrific actions, I see reason for concern that to accomplish anything on the substantive issues needed to show voters they are delivering and to hold their majority, the Democrats face an uphill battle. 

Healthcare was the most important topic to voters according to exit polls, and the primary topic for many victorious new Representatives. Will even the hyperpartisan Mitch McConnell, who will face reelection himself in 2020, get the message and be willing to compromise—even if he’s likely to face a primary opponent to his right?

In essence, the Democrats will just have to forge ahead, showing the public where they want to go. Economics must be in the forefront. On the critical issue of income inequality, Michael Tomasky’s Op-Ed, The Democrats’ Next Job, which appeared in The New York Times days before the election, provides a terrific roadmap. 

Tomasky analyzes the void in the Democrats’ overarching message over the past several decades, and his prescription for the path forward is one of the clearest, most cogent, and sensible arguments I’ve read. Here are his opening paragraphs, and I quote him further, but I recommend the entire piece.

“Win, lose or draw on Tuesday, the Democratic Party will almost immediately turn its focus to the next presidential election and the fight between the establishment center and the left wing. But while the Democrats have that argument, they must also undertake the far more important task of thinking about what they agree on, and how they can construct a story about how the economy works and grows and spreads prosperity, a story that competes with—and defeats—the Republicans’ own narrative.

“For 40 years, with a few exceptions, Democrats have utterly failed to do so. Until they fix this, they will lose economic arguments to the Republicans—even though majorities disagree with the Republicans on many questions—because every economic debate will proceed from Republican assumptions that make it all but impossible for Democrats to argue their case forcefully.”

Tomasky eviscerates supply-side economics and then provides “the affirmative case for the Democratic theory of growth.” He stresses “expanding overtime pay, raising wages, even doing something about the enormous and under-discussed problems of wage theft.” And he stresses that the Democrats should say they make these arguments not “out of fairness or compassion or some desire to punish capitalists.

“We want to address them because putting more money in working- and middle-class people’s pockets is a better way to spur on the economy than giving rich people more tax cuts.”

Democrats, he adds, “should defend this argument because it’s what more and more economists argue and because it’s what Democrats believe.”

Importantly, he points out that Democrats who vary politically, such as Senator Joe Manchin of West Virginia and Representative Raul Grijalva of Arizona, can agree on this issue.

 “They’re both Democrats for a reason, and presumably that reason is they think government can be a force for good in people’s lives. So, if Democrats think it, they should say it. 

He is thereby offering a unifying position that is essential if the Democrats are to avoid defeat due to factionalism.

Tomasky accurately points out that this strong Democratic response to supply-side economics needs a name. I think the name is extremely important in garnering interest and enthusiasm for the effort. However, the one he mentions in passing, “middle-out economics,” leaves me cold. 

It does have the advantage of brevity, and Democrats are always accused of failing the bumper sticker test with their lengthy explanations of positions, but it’s neither intuitively comprehensible nor catchy. A considerable effort should be made, bringing in some of the most talented wordsmiths available, to arrive at a phrase that is concise and inspiring. 

If you have suggestions, please add them to the Comments section, and I will forward them to Tomasky. You can also forward them to your own representatives, explaining the context.

Two more takes on implications of the election results, both hot-button issues.

1. The speaker. I know all the arguments against Nancy Pelosi, and though I understand them, I think this is absolutely the wrong time to replace her. She’s the most powerful woman in the US government—and she has done her job with great success. She’s a prodigious fund-raising and vote-counter whose experience is essential in these wacky times. 

Plus, health care has been the cause of her life. Reports are that she had planned to retire after Hillary Clinton’s election, so I don’t think she’s doing this for her ego. I expect her to be an effective mentor for the newly elected women in her caucus and to seriously broaden the leadership bench of the Democratic Party. 

2. Impeachment. I fully support the Democratic House committees’ investigations into all the matters that the Republicans stonewalled or distorted. But the Democrats have an important balancing act to perform between conducting investigations and trying to enact meaningful legislation. 

As much as I would love to see the President removed from the Oval Office (and VP Pence investigated for his apparent lies), I oppose impeachment efforts at this time. Unless the Mueller probe’s findings or other investigations persuade enough Republican Senators that they must act, at last, ensuring conviction by the Senate, impeachment by the House will simply play into Trump’s hands, allowing him to play the victim, making him act even more erratically, and possibly strengthening his chances of reelection.

Ultimately, these issues demand the continued and enhanced participation of all of us in our democracy by our ongoing engagement with our elected representatives on all levels. 

Please let me know your thoughts on any or all of these issues. And please don’t forget to share, award stars below my name (one awful—five excellent), or like this post (if you’ve signed on via WordPress). Knowing you’re reading and considering these posts is very important to me. Thanks so much.

Annie