FROM: Mary-Ellen Pecci
DATE: February 13, 2018
SUBJECT: The present attempt to lift
our failing democracy will not work. Here is why.
Problem
Democracy
is in cardiac arrest because the United States Government is no longer “for the
people by the people.” The cause and effects of burgeoning economic inequality
in the U.S. has left us with no middle class. The gift given to large
corporations in the latest tax bill will not be spent on R&D, research and
development. It will be doled out to the
hierarchy. Historically this is true. Hence there will be no new jobs nor
increases in pay or benefits to create ‘again’ our middle class.
Discussion
Bodie
(2015) tells us that some consider welfare programs a distribution of wealth.
People who do not agree with this distribution of wealth say it robs us of the
economic incentive. Bodie (2015) also posits that the redistribution of income
has been functioning under the wrong model. His premise is that the
corporations are catering to the shareholder having moved away from the
workers. He indicates that our existing labor and employment laws are
insufficient to protect the worker. The National Labor Relations Act (NLRA) has
not solved the problem of imbalance of power in the corporation. The
corporation is our hope for the future but not as it exists today. Once formed
the operation of the corporation goes to the board of directors who in turn
pass on power to the CEO, the chief executive officer. In general employees
have no claims to profits. Bodie (2015) continues to tell us that in real terms
corporations have driven wages down over the past 35-40 years in favor of shareholder
wealth. The workers income has stagnated to acquiesce to the top 0.1%, of managers
and supervisors who have tripled their share of the national income. The mega
corps also share the wealth game by extending a hand to other corporations who
participate in the game. The NLRA does step in regarding bargaining power on
employee pay where most employees of large corporations are ‘employees at
will’. They can walk away or be fired with no warning. Bodie (2015) speaks of
the “Golden Era” of the 1950’s employee unions which were much stronger then
today. Unionized employees have shrunk from 35% in the 1950’s to 6.6 % today.
The power of the unions to tie down labor and employment laws is no longer
effective. We need to change how ‘corporate’ behaves. Employee ownership would
be great but employees can’t afford to purchase stock. Another suggestion was
for the corporation to invest in the global market instead of attacking
employee wages. Bodie (2015) also suggested an employee be placed on the board
of directors in order to promote equity. Employees voting for selectees for the
board of directors would prevent cronyism. Bodie (2015) concludes, income
inequality could be fixed if corporations changed to include employee
participation in governance of the firm. This fits in well with a liberal,
progressive even a democratic socialist agenda. The Golden Era of the 50’s
functioned in this manner.
The conservative, free-market
pushers are holding back progress, stretching out and pushing even stronger on
income inequality. This present administration is pushing Nationalism.
Solt (2011) tells us that
Nationalism is a diversion to keep us from realizing and attempting to do
anything about economic inequality. The state will purvey the myth that an individual
owes his/her life to the state. Tools are in place to create and maintain this
myth. Glorification by building monuments, statues, naming bridges, parks, and
even changing street names help ingrain this in the population. There is the
need to create legitimacy and that need goes up and down over time and economic
inequality plays a part. The more economic inequality the higher the level of
unrest amongst the population. Nationalism is used as a drug to control the
masses by making them forget their plight. It serves to bring groups together
in comradeship. Some will recognize the word “comrade” as one used in WWII
Germany and Russia. Communist governments use nationalism to control the
masses. Instead of changing to more distributive income schemes the government
prefers to anesthetize with nationalism. It does not work on all groups and
often there is “blow back” (Solt, 2011). National pride can lead to hostility
against ethnic and religious minorities. There is a difference between patriotism
and nationalism. Patriotism is all encompassing where nationalism is group
think. Bias can result from this psychological phenomenon, (Druckman 1994).
This leads to conflict unlike the responsibility for country and family that
comes from patriotism.
Where nationalism is fed by income
inequality, Gilman (2014) tells us that economist give four reasons for the
sharp rise in inequality since the 1980’s. Firstly, education has not kept up
with the pace of technology in that low skilled jobs are now computerized or
sent overseas. Second is a worn out safety net for those at the bottom with
scarce redistribution of wealth. Third is the fact that public policy favors
big money over the people and fourth is a lead on from this in that politics
also favor big money over the people, (Gilman 2014). The United States Supreme Court is leading the
parade.
Citizens United, is the SCOTUS
ruling granting corporations the rights of a citizen, Gilman (2014). The court also allowed unequal funding between
poor and wealthy schools. The courts upheld voter identification laws that
discriminate against the poor. Many of the courts pro-business decisions have
been class discriminatory. Government policies, with willfully blind
deliberation, created ghettos piling up poverty and discrimination. The
attitudinal model of SCOTUS judges is alive and well. If the ruling in a case is indeterminate
their personal preferences weigh in. Gilman (2014) concludes telling us that
the market does not cause inequality. The framework of inequality is designed
by government.
Solution
The
United States Government is the agent in this failure and the middle class is
the principle. Here in lies the problem. Unless the government forces income to
be more equal democracy will not be revived. This problem can be solved by
strongly incentivizing corporations to trickle down their profits to the
employee instead of spreading the wealth to the already burgeoning .01% of
autocratic mega giants who control government. This can be done by pay raises,
end of year dividends or ownership rights. The following tables and charts will
enlighten as to an understanding of where the middle class and where the mega
giants were in the 1950’s compared to today, (all charts and tables, Dumhoff
2017). It is imperative we achieve that balance again. The incentive for large
corporations to do this will have to be by punishment. Government policy will
have to change. Our legislators need to enact rules that essentially say, “If
the corporation does not trickle profit down to its workers they will be taxed
at the same value they should have awarded the workers. If workers are not
raised up, the communities and small businesses around them will fail. Get out
the defibrillator.
Table
1: Income and net worth in the U.S.
by class, 2013
|
Wealth
or income class
|
Mean
household income
|
Mean
household net worth
|
|
Top 1 percent
|
$1,679,000
|
$18,623,400
|
|
Top 20 percent
|
$257,200
|
$2,260,300
|
|
60th-80th percentile
|
$76,500
|
$236,400
|
|
40th-60th percentile
|
$46,000
|
$68,100
|
|
Bottom 40 percent
|
$20,300
|
-$10,800
|
From Wolff (2014); only mean figures
are available, not medians. Note that income and wealth are separate
measures; so, for example, the top 1% of income-earners is not exactly the same
group of people as the top 1% of wealth-holders, although there is considerable
overlap.
Table
2: Distribution of net worth and
financial wealth in the United States, 1983-2013
|
|
Total
Net Worth
|
||
|
|
Top
1 percent
|
Next
19 percent
|
Bottom
80 percent
|
|
1983
|
33.8%
|
47.5%
|
18.7%
|
|
1989
|
37.4%
|
46.2%
|
16.5%
|
|
1992
|
37.2%
|
46.6%
|
16.2%
|
|
1995
|
38.5%
|
45.4%
|
16.1%
|
|
1998
|
38.1%
|
45.3%
|
16.6%
|
|
2001
|
33.4%
|
51.0%
|
15.6%
|
|
2004
|
34.3%
|
50.3%
|
15.3%
|
|
2007
|
34.6%
|
50.5%
|
15.0%
|
|
2010
|
35.1%
|
53.5%
|
11.4%
|
Table
3: Wealth distribution by type of
asset, 2013
|
|
Investment
Assets
|
||
|
|
Top
1 percent
|
Next
9 percent
|
Bottom
90 percent
|
|
Business equity
|
62.8%
|
31.0%
|
6.2%
|
|
Financial securities
|
54.7%
|
39.6%
|
5.7%
|
|
Stocks and mutual funds
|
49.8%
|
41.2%
|
9.1%
|
|
Trusts
|
49.5%
|
34.0%
|
16.5%
|
|
Non-home real estate
|
33.7%
|
44.1%
|
22.2%
|
|
TOTAL investment assets
|
51.5%
|
37.0%
|
11.5%
|
|
|
Housing, Liquid Assets, Pension
Assets, and Debt
|
||
|
|
Top
1 percent
|
Next
9 percent
|
Bottom
90 percent
|
|
Principal residence
|
9.8%
|
31.1%
|
59.2%
|
|
Deposits
|
24.8%
|
42.4%
|
32.8%
|
|
Life insurance
|
30.0%
|
35.3%
|
34.7%
|
|
Pension accounts
|
17.8%
|
47.5%
|
34.8%
|
|
TOTAL other assets
|
14.5%
|
37.6%
|
47.9%
|
|
Debt
|
5.4%
|
21.1%
|
73.5%
|
Sources: From
Wolff (2014).
Table
4: Share of wealth held by the Bottom
99% and Top 1% in the United States, 1922-2013.
|
|
Bottom
99 percent
|
Top
1 percent
|
|
1922
|
63.3%
|
36.7%
|
|
1929
|
55.8%
|
44.2%
|
|
1933
|
66.7%
|
33.3%
|
|
1939
|
63.6%
|
36.4%
|
|
1945
|
70.2%
|
29.8%
|
|
1949
|
72.9%
|
27.1%
|
|
1953
|
68.8%
|
31.2%
|
|
1962
|
68.2%
|
31.8%
|
|
1965
|
65.6%
|
34.4%
|
|
1969
|
68.9%
|
31.1%
|
|
1972
|
70.9%
|
29.1%
|
|
1976
|
80.1%
|
19.9%
|
|
1979
|
79.5%
|
20.5%
|
|
1981
|
75.2%
|
24.8%
|
|
1983
|
69.1%
|
30.9%
|
|
1986
|
68.1%
|
31.9%
|
|
1989
|
64.3%
|
35.7%
|
|
1992
|
62.8%
|
37.2%
|
|
1995
|
61.5%
|
38.5%
|
|
1998
|
61.9%
|
38.1%
|
|
2001
|
66.6%
|
33.4%
|
|
2004
|
65.7%
|
34.3%
|
|
2007
|
65.4%
|
34.6%
|
|
2010
|
64.6%
|
35.4%
|
|
2013
|
63.3%
|
36.7%
|
Sources:
1922-1989 data from Wolff (1996). 1992-2013 data from Wolff (2014).
Table
6a: Concentration of stock ownership
in the United States, 2001-2010
|
|
Percent
of all stock owned:
|
|||
|
Wealth class
|
2001
|
2004
|
2007
|
2010
|
|
Top 1%
|
33.5%
|
36.7%
|
38.3%
|
35.0%
|
|
Next 19%
|
55.8%
|
53.9%
|
52.8%
|
56.6%
|
|
Bottom 80%
|
10.7%
|
9.4%
|
8.9%
|
8.4%
|
Table 6b: Amount of stock owned by
various wealth classes in the U.S., 2010
|
|
Percent
of households owning stocks worth:
|
||
|
Wealth class
|
$0
(no stocks)
|
$1-$9,999
|
$10,000
or more
|
|
Top 1%
|
5.1%
|
0.6%
|
94.3%
|
|
95-99%
|
6.9%
|
4.0%
|
89.1%
|
|
90-95%
|
11.8%
|
4.8%
|
83.4%
|
|
80-90%
|
21.0%
|
8.5%
|
70.5%
|
|
60-80%
|
41.3%
|
15.6%
|
44.1%
|
|
40-60%
|
55.4%
|
19.9%
|
24.7%
|
|
20-40%
|
76.1%
|
17.4%
|
6.5%
|
|
Bottom 20%
|
79.2%
|
17.3%
|
4.5%
|
|
TOTAL
|
53.1%
|
17.5%
|
31.6%
|
Both tables' data derived from Wolff
(2007, 2010, & 2012). Includes direct ownership of stock shares and
indirect ownership through mutual funds, trusts, and IRAs, Keogh plans, 401(k)
plans, and other retirement accounts. All figures are in 2010 dollars.
Figure 9: CEOs' pay as a
multiple of the average worker's pay, 1960-2007
Source: Executive Excess 2008, the
15th Annual CEO Compensation Survey from the Institute for Policy Studies and
United for a Fair Economy.
Figure
8: Top income shares in the U.S. and Sweden, 1950-2009. Source: Alvaredo et
al. (2012), World Top Incomes Database.
Source: Alvaredo et al. (2012), World Top Incomes Database.
Figure
10: CEOs' average pay, production workers' average pay, the S&P 500
Index, corporate profits, and the federal minimum wage, 1990-2005 (all figures
adjusted for inflation). Source: Executive Excess 2006, the 13th Annual
CEO Compensation Survey from the Institute for Policy Studies and United for a
Fair Economy.
Source: Executive Excess 2006,
the 13th Annual CEO Compensation Survey from the Institute for Policy Studies
and United for a Fair Economy.
References
Bodie, M. T. (2015). Income inequality and corporate
structure. Stetson Law Review 45(1), 69-90. Retrieved from http://heinonline.org.lib.kaplan.edu/HOL/Page?handle=hein.journals/stet45&div=9&start_page=69&collection=journals&set_as_cursor=2&men_tab=srchresu
Domhoff, W.G. (2017). Wealth, Income, and Power. Who
Rules America, University of California Santa Cruz. Retrieved from http://www2.ucsc.edu/whorulesamerica/power/wealth.html
Druckman, D. (1994). Nationalism,
Patriotism, and Group Loyalty: A Social Psychological Perspective. Mershon International Studies Review, Vol.
38, No. 1, pp. 43-68. Retrieved from
Gilman, M.E. (2014). A Court for the
One Percent: How the Supreme Court Contributes to Economic Inequality, 2 Utah L. Rev. Retrieved from
Solt,
F. (2011). Diversionary
Nationalism: Economic Inequality and the Formation of National Pride. The Journal of
Politics 73:3, 821-830. Retrieved from https://eds-a-ebscohost-com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?vid=1&sid=d0f3612a-ae84-4de7-b75b-417eff9543e8%40sessionmgr4007
