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Occupy the Future ed. David B Grusky, Doug McAdam, Rob Reich, Debra Satz

Introduction

“We are the 99%” – Rallying cry of the occupy movement

“Given that the US has historically been quite tolerant of inequality, it’s not enough to proclaim that inequality has suddenly become too high. What precisely, makes it too high? Don’t we need to consider how so much inequality has been generated? Don’t we need to examine the consequences of rising inequality for other outcomes that we cherish, such as opportunities for political expression? Don’t we need to think carefully about the types and forms of inequality that are and aren’t legitimate? The simple agenda behind this book is to take on these and related questions and thereby develop a far-reaching and resonant narrative” (5)

This book is intended to offer a broad framework for understanding why rising inequality is the core problem of our time (7)

This is a book with an agenda, an Occupy-friendly agenda. Nonetheless, the authors of most of the chapters were asked to carefully ground their opinions in date of unimpeachable quality and provenance. (7)

“The closest we come to a consensus is our commitment to a vision of the United States as a country deeply committed to the principles laid out in our founding documents and upheld by a succession of leaders of every political party. We believe that everyone, not just eh rich should have the opportunity to get ahead or otherwise lead a good life. We believe that everyone, not just the rich, should have a right to be heard when our country makes decisions about its future. And we believe that everyone, not just the rich should have an opportunity to participate fully and meaningfully in society.

We don’t always live up to our most cherished ideals. Our country’s history has been driven instead by a tension between our principles and our practices. Now and then, the disjuncture between our ideals and our institutions has been exposed and led to dramatic reform. We’ve ended slavery. We’ve extended the franchise to women. And we’ve secured basic civil rights for all. Some of these projects remain works in profess. But the defining feature of our country is our commitment to making our most cherished principles real and meaningful rather than hollow.” (8)

The claim being advanced above is that poverty is a human rights issue just like slavery, segregation, women’s rights etc.

Five Sections (8-9):

I – empirical examination of inequality in the US and an explanation of what kinds of inequality are morally objectionable

II-V – the sources of inequality, who bears the brunt of inequality, relationship between inequality, politics, and democracy, the costs of inequality for the environment, health, culture, and the arts

“Throughout these essays, we link criticism of inequality to the aspirations embedded in American founding principles and in the American Dream.”

Claim – certain forms of inequality are inconsistent with the founding principles (constitution) of the US and more generally inconsistent with our shared values expressed in the “American Dream”

Section II – The Empirical and the Normative

We need both to make a case that there is a problem, we need the facts (empirical) and then we need a theory that states that the facts are morally problematic (normative)

4 Questions (14)

  1. How much inequality is there?
  2. Has there been a rapid increase in income and wealth inequality in the United States?
  3. IS the United States distinctively unequal?
  4. What are the main forces behind any changes in income inequality?

How much inequality is there? (15-16)

CBO’s conservative figures (after taxes, foodstamps, etc)

Bottom 20%  – 4.9%

Top 20% – 52.5%

The top 20 have an average income 10 times greater than the bottom 20

The top 1 earn 17.1% of all money

Wealth is much worse

Bottom 20 are negative in networth

Next 20 have .3% share

Top 20 have 87.2% share

Top 1 have 35.6% share

This seems to show “much inequality”, but is it too much? (17)

We need to compare it to:

a)    the past

b)   other countries

c)    some ideal world

The Past

Figure 3

A U shaped curve, inequality drops after the twenties, stays low for about 30 years and then rises pretty steeply starting in the 80s (19)

Figure 4 (20)

Shows that the top 1% exhibt the U shaped curve well, while the rest of the top 10% remain mostly flat

“the simple but dramatic conclusion emerging here is that the fluctuations of the top decile are mainly, but not entirely, due to the fluctuations within the top percentile.” (20)

“The foregoing results make it clear that, when the golden years of the 1940s, 1950s and 1960s serve as a comparison point, there’s no alternative but to characterize contemporary U.S. income inequality as extremely high.” (21)

However, wealth shares of the top 1% have not increased dramatically since the twenties like income shares have but they have increased dramatically for the top .0002% or the 400 richest families, and especially for the top 100 families (22-25)

I think what this shows is that even in the “golden era of the 40s. 50s and 60s we lived in society with much inequality in terms of wealth distribution because if you look back at figure 2 (16) you can see the huge disparity, which means that we basically has this same disparity since the 20s (and much worse before then). There was much better income equality but the top 1% still owned approximately 80% of the wealth of the country!

Cross National Comparison (25-30)

The authors compare the US to other English speaking countries and to Central European countries and Japan.

Figures 7 and 8 show:

1)   that the all the English speaking countries display the U shaped curved

2)   That in the central European countries and japan inequality goes down and stays down

3)   That among the English speaking countries the US has experienced the sharpest rise in inequality

“We started off the in the early 20th century with extreme inequality and also ended up in the early 21st century with especially extreme inequality. It was only in the middle of the 20th century, when the US has reached the bottom of its U-shaped cureve, that it registered a quite average amount of inequality and appeared to be a generic rich country. This now appears to have been an unusual and misleading moment in US history. Although there’s a wide class of countries that have followed the U-shaped form, the US has followed that form in an unusually extreme way.” (30)

The Sources of Inequality (30)

“The key question here is whether the extreme inequality in the United States may be understood as the price one pays for running a highly competitive economy in which individual contributions simply happen to be unequal. This question matters because many Americans would find inequality less troubling insofar as they could be assured that it’s simply a byproduct of our insistence on an efficient and competitive economy.” (30-31)

“Americans are willing to tolerate substantial inequality provided that it’s the outcome of an open, competitive, and fair contest and thus reflects the contributions that each individual has made to the economy (i.e. “marginal product”). If, however, there’s a substantial disjuncture between contribution and income, then many Americans will call the resulting inequality into question. This issue can be addressed by examining how various institutions have the capacity to make income higher or lower than one’s contribution to economic input.” (31)

What institutions do this?

Taxes

If the recent rise in inequality is due to cutting taxes conservatives would think the rise in inequality is just because it is due to a difference in marginal input, however for liberals a rise in inquality for the same reason is troubling because they think the government has an obligation to “compensate for unequal opportunities and provide a buffer against a harshly competitive market economy. “ (32)

“. . . federal taxes and transfers reduced inequality by 23 percent in 1979, whereas they reduced inequality only by 17 percent in 2007.” However “The takeoff (in inequality) is instead driven by various forces within the market that determin the distribution of income before taxes are assessed and transfers are made.” (34-35)

Unions

After taxes and transfers unions are the have the second most important means of reducing inequality

Unions reduce inequality because they:

1)   raise the wages of union members

2)   raise the wages of non-union members because companies wish to avoid unionization so they pay their employees enough so that they will not attempt to unionize

3)   they generate norms about what people ought to be paid (i.e. the moral economy effect)

“The differing slopes of the two lines ( fig. 10, 38) implies that approximately one third of the rise in inequality is attributable to the decline in unionization between 1973 and 2007” (37)

CEO Pay and College Education

One narrative see this merely as a result of a competitive economy and a changing workplace certain skills (computer, etc) are just that much more valuable.

The other sees the rise in inequality not due to market forces but due to artificial conditions which lower the availability of college educated workers i.e. those born into poverty don’t have the opportunity to succeed and get into college, which means the number of college educated workers is artificially low, and that therefore their pay is artificially high.

“If all children, even those born into poor families, had fair and open access to higher education, these excessive returns would disappear under the force of competition.” (41-42)

conclusion on us economy vs. ideal market economy

“at the bottom of the class structure, it’s the standard story of various “anti-competitive” protections for workers, such as unions, facing an increasingly hostile reception and playing an ever-diminished role. At the top of the class structure, the analogous “anti-competitive” practices (e.g. rationing education, CEO overpay) are largely hidden from view, have not been delegitimated, and may well be generating much illicit inequality.”

Translation: While taxes and unions are anti-competitive they are nonetheless necessary to combat other forces, like poverty, which are also anti-competive. A true, ideal, free market economy wouldn’t have taxes and transfers but it would also require a fair starting point where everyone has equal opportunity to succeed. In the absence of equal opportunity you get a situation where individuals compensations are not in line with marginal product.

Ethics and Inequality by Satz and Reich

“The 400 wealthiest Americans have more money than the bottom 50 percent of all Americans combined. Between 1979 and 2007, the incomes of the top one percent of the population grew by 275 percent while the incomes of the middle clase rose less than 40 percent. According to a newly relased 2011 measure, a staggering one in three Americans, or 100 million people, suffer in poverty or near poverty!” (47)

“Inequalities can – in this case do – raise ethical concerns, and we thinks citizens are right to outraged at the” gap between the 1% and the 99%” (48)

“Inequality in itself is not always wrong. . . Therefore it is important to ask what forms of inequality are morally objectionable.” (48)

Four Reasons to Object to Such Inequality (49)

Opportunity

“Social mobility is lower today than a generation ago. The accident of birth is highly predictive of one’s life chances; people increasingly occupy fixed and frozen positions and pass these positions down to their children. In other words, children born into poor families tend to stay poor and children born into wealthy families tend to stay rich. By contrast intergenerational mobility today is greater than in Canada, France, Germany, and the Scandinavian countries.”

“Within the United States, a great deal of povery is due to the institutional and social exclusion of the poor from a variety of settings: good schools, safe neighborhoods, quality day care, and health insurance. Astoundingly, about 30 million  Americas have below basic literacy skills and cannot perform simple everyday literacy activities such as understanding newspaper articles; this statistic includes some non-immigrant Americans who cannot fil lout a job application. Students from advantaged family backgrounds are 25 times more likely to attend a top tier college than students from disadvantaged backgrounds

“These deep intergenerational inequalities undermine the fairness of a system in which we expect people of roughly similar talent and motivation to have roughly similar  chances of success independent of their social origins. Diversities in class, race and/ or gender never justify the automatic assignment of anyone to lesser social positions. But the growing inequalities that characterize  American society today are at odds with equal opportunity. The result is a corrosion of meritocracy, the principle that mandates that economic positions an offices or influence are to be earned on the basis of merit.” (49-51)

aristocracy vs. meritocracy (history repeats itself)

Civic status

“In democracies there can be no caste system; citizens must posses the same status. As a pre-existing status, citizenship does not depend on individual fortune, virtuous behavior or even contribution to society. But, as we have just seen, very large differentials in income translate into systematic advantages: in political influence, in access to jobs and positions of authority, in health, in personal security, in the opportunity to develop one’s talents. When unequal wealth  can systematically purchase advantage in each of these domains, it is difficult to face each other as social equals. As inequality has grown, the fate of the few has become unhinged from the fate of the many, as the wealthy find security in cloistered neighborhoods, send their children to private schools, and attend sporting events in luxury skyboxes. . . We no longer stand in a relation of equality to each other as fellow citizens; instead, a small and wealthy minority dominate a larger and poorer majority.” (51-52)

1% of americans are millionairs but 47% of congress is (53)

Citizens United allows corporations and the super wealthy to contribute unlimited further amplifying the power of the wealthy

Fairness

The rise in inequality has largely been due to tax cuts for the rich and for corporations (54)

Nation’s  economic welfare

Inequality is bad for business (55)

“For us defending equality, and objecting to the outrageous inequalities between the “1%” and the “99%,” is based on the democratic imperative to create a community where every citizen has a fair chance at a decent life, an equal opportunity to develop their talents and an equal voice in political decisions. This aspiration for a “society of equals” finds its taproot not in envy or class resentment but in our country’s founding ideals and the democratic dreams of peoples everywhere” (56-57)

(And in Kantian ethics!)

Restarting History by Gary Segura

In the fall of 2011, UC-Davis campus police officers casually pepper sprayed defenseless students, seated peacefully on the ground, their “crime” being nothing more than refusing to leave the quadrangle. Like at Davis, police at UC-Berkeley, in Manhattan, and in locations across the country routinely used violence against non-violent OWS demonstrators. Elected officials and university administrators felt no compunction about using force to prevent the political dissent of these citizens and, in many instances, to keep these events obscured from the eyes and cameras of the press.” (126)

UC Davis Video: http://www.youtube.com/watch?v=6AdDLhPwpp4

“Contrast the treatment of OWS protestors by the authorities to the manner in which we, as a nation, have dealt with the investment bankers, mortgage lenders, and hedge fund managers who wrecked the world economy and brought it to the precipice of depression.

In late November 2011, Federal District Court judge Jed Rakoff rejected a proposed settlement between the Securities and Exchange Commission and Citigroup. He found the proposed penalty of $285 million – without admission of guilt – indefensible. Citibank is alleged to have intentionally misled customers into investing in mortgage back securities that they – Citibank themselves – were betting would fail. While there is some dispute regarding whether this is a public fraud – a determination that depends on the disclosure Citi made to its customers and presumably, was the purpose of the investigation – the SEC apparently had a case sufficient to push Citigroup into settlement. For Citicorp, the effect of this “penalty” is miniscule.

This pattern of settlement without admission of guilt is the rule, rather than the exception” (126-7)

Warren Video: http://www.youtube.com/watch?v=2F6YkBa_Tig

“The Occupy movement has provided a rare moment of clarity, when our attention is drawn to the very raw deal the our government is providing us, and voice of working people have been raised in protest. The wealthy right, in turn cries “class warfare” when they and their politicians have been responsible for a 60-year assault on the very reforms that saved capitalism from its excesses . . . . our future depends  on the willingness of American workers to “re-start” history, to reject the political reality where the only choices at eh ballot box are between crony capitalism and craven capitulation. They can begin this process by repeatedly and vigorously laying bare the true agenda of proposed legislation, and holding politicians of all stripes accountable for failing, in every way, assure political and legal systems that are fair.” (134-135)

http://www.youtube.com/watch?v=erZzPIYWnFY

(Warren 2016!)

Just for fun: http://www.youtube.com/watch?v=K800WHFqy1g

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