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The Great Inequality

Economy Crumbles

In the early 1980s, I began telling my students that growing inequality of income and wealth would become the dominant political issue of the future. I did not think that the future meant thirty years, but better late than never. The Occupy Wall Street (OWS) uprising has put inequality squarely on the political agenda, with the brilliant slogan, “We are the 99%.” While the “99%” includes many rich persons, the focus on the “1%” at the top of the economic pyramid serves to shine a light on those who rule both the economy and the politics of the United States. The 1 percent is a diverse group, but among them, especially at the top, are the men and (a few) women who own controlling interests in our largest businesses, including the financial corporations whose actions precipitated the Great Recession, which officially began in December 2007 and ended in June 2009, and has since morphed into what looks like a long period of slow growth best termed stagnation. They are also the people whose campaign contributions and prominent positions in Congress, as advisors to the president, and on the Supreme Court have placed the government firmly on the side of the rich.

The Great Inequality

Michael D. Yates
Monthly Review
March 2012

In the early 1980s, I began telling my students that growing inequality of income and wealth would become the dominant political issue of the future. I did not think that the future meant thirty years, but better late than never. The Occupy Wall Street (OWS) uprising has put inequality squarely on the political agenda, with the brilliant slogan, “We are the 99%.” While the “99%” includes many rich persons, the focus on the “1%” at the top of the economic pyramid serves to shine a light on those who rule both the economy and the politics of the United States. The 1 percent is a diverse group, but among them, especially at the top, are the men and (a few) women who own controlling interests in our largest businesses, including the financial corporations whose actions precipitated the Great Recession, which officially began in December 2007 and ended in June 2009, and has since morphed into what looks like a long period of slow growth best termed stagnation. They are also the people whose campaign contributions and prominent positions in Congress, as advisors to the president, and on the Supreme Court have placed the government firmly on the side of the rich.

Given the prominence that OWS has given to inequality, it is useful to know what causes it.1 We cannot just look at the facts, dramatic as they might be, and say that something is wrong or that all we need is to take money from the rich and transfer it to the poor. What is needed is a theory of distribution, because this can give us guidance on what political strategy might best confront the underlying forces that generate inequality. Fortunately, economist Eric Schutz, in his timely book Inequality and Power: The Economics of Class provides us with such a theory. His argument is simple and straightforward. Those who are rich have advantages that keep them rich, while the poor suffer disadvantages that keep them poor. However, there is a relationship between the two groups, one in which the rich have power over the poor, and this relationship is built into the nature of a capitalist economy and continuously reproduced by it. The power of the dominant group reinforces the existing set of social/property relationships, which serves to further enhance the power of the dominant group relative to all others. It turns out, no surprise to readers of Monthly Review, that the rich are the capitalists, and the poor are the workers (what differentiates the book, however, from most radical works is that Schutz provides concrete examples and extremely clear exposition to give chapter and verse to Marxian, and particularly Gramscian, concepts). All sorts of complications must be considered, but these work in general to strengthen the basic power inequality. Therefore, attacking inequality will require nothing less than attacking capitalism itself. There are a host of pragmatic measures that can reduce inequality, but only those that address the system-generated power of the capitalists can strike down the structures that give rise to it in the first place.

Schutz’s book does not contain much data, just the bare bones. So let us preface our interrogation of his theoretical analysis with a more detailed look at the facts. They are startling. There are many kinds of inequality, but the two most obviously important ones are those of income and wealth. Incomes—normally in a money form but also “in kind,” as when part of a worker’s pay takes the form of room and board—are flows of cash (or “kind”) that go to persons over some period of time, such as a wage per hour or a yearly dividend. Incomes are always unevenly divided in a capitalist economy, and in the United States they are more unequal than in every other rich capitalist country. Since 1980, the year Ronald Reagan became president and helped engineer a savage attack on the working class, income inequality has risen considerably.

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