In their 2010 book, “Winner-Take-All Politics: How Washington Made
the Rich Richer – and Turned Its Back on the Middle Class,” Yale
Professor Jacob Hacker and U.C. Berkeley Professor Paul Pierson would
seem to add additional support to Stiglitz’s conclusion. As reported by Bob Herbert in The New York Times,
they argued that “the economic struggles of the middle and working
classes in the U.S. since the late-1970s were not primarily the result
of globalization and technological changes but rather a long series of
policy changes in government that overwhelmingly favored the rich.”
Although there is certainly significant substance to Stiglitz’s
argument – policy decisions can have profound impacts on economic
outcomes – nevertheless capitalism is far more responsible for economic
inequality because of its inherent nature and its extended reach in the
area of policy decisions than Stiglitz is willing to concede.
To begin with, in capitalist society it is much easier to make
money if you already have money, and much more difficult if you are
poor. So, for example, a rich person can buy up a number of foreclosed
houses and rent them out to desperate tenants at ridiculously high
rates. Then, each time rent is paid, the landlord becomes richer and the
tenant becomes poorer, and inequalities in wealth grow.
More importantly, at the very heart of capitalism lies an incentive
that leads to the increase of inequalities. Capitalism is based on the
principle of competition, and businesses must compete with one another
in order to survive. Each company, therefore, strives to maximize its
profits in order to achieve a competitive advantage. For example, they
can use extra profits to offset lowering the price of their product,
undersell their opponents, and push them out of the market.
But in order to maximize profits, businesses must keep productive
costs to a minimum. And a major portion of productive costs includes
labor. Consequently, as a general rule, in order for a business to
survive, it must push labor costs to a minimum. And that is why, of
course, so many businesses migrate from the U.S. and relocate in
countries like China, Viet Nam, Mexico, and Bangladesh where wages are a
mere pittance.
This inherent tendency to maximize profits while minimizing the
cost of labor directly results in growing inequalities. Stiglitz himself
mentions that C.E.O’s today “enjoy incomes that are on average 295
times that of the typical worker, a much higher ratio than in the past.”
In fact, in 1970, the ratio was roughly 40 times. C.E.O.s who succeed
in suppressing wages are routinely rewarded for their efforts. Hence,
not only is there an incentive to keep wages low for the survival of the
business, there is a personal incentive in play as well.
While Stiglitz is correct in arguing that politicians can influence
economic outcomes by policy decisions, what he fails to acknowledge is
that these policy decisions themselves are heavily influenced by the
economic relations established by capitalism. There is no firewall
between the economy and politics. Those who have acquired money from the
economic sector can then put this money to work in the political sector
by lobbying and showering politicians with campaign contributions.
Although politicians religiously deny that these contributions have any
influence on their decisions, it is inconceivable that businesses –
always obsessed with their “bottom line” – would continue these
contributions without a “return on their investment.”
Study after study has confirmed the influence of money on political decisions. The San Francisco Chronicle reported, for example: “In a state with nearly 38 million people, few have more influence than the top 100 donors to
California campaigns - a powerful club that has contributed
overwhelmingly to Democrats and spent $1.25 billion to influence voters
over the past dozen years. These big spenders represent a tiny fraction
of the hundreds of thousands of individuals and groups that donated to
California campaigns from 2001 through 2011. But they supplied about
one-third of the $3.67 billion given to state campaigns during that
time, campaign records show. With a few exceptions, these campaign
elites have gotten their money's worth, according to California Watch's
analysis of campaign data from state finance records and the nonpartisan
National Institute on Money in State Politics, which tracks the
influence of campaign money on state elections.”
Even beyond campaign contributions, political decisions are not
crafted in a vacuum, remote from capitalism. Capitalism is a way of
life, and for that reason it generates its own peculiar culture and
world view that envelopes every other social sphere, a culture that
includes competition, individualism, materialism in the form of
consumerism, operating in one’s self-interest without consideration for
the needs of others, and so on. This culture infects everyone to one
degree or another; it is like an ether that all those in its proximity
inhale. It encourages people to evaluate one another according to their
degree of wealth and power. It rewards those who doggedly pursue their
narrow self-interests at the expense of others.
The culture of capitalism, because of its hyper individualism, also
produces an extraordinarily narrow vision of the world. Viewing the
world from an isolated standpoint, individuals tend to assume that they
are self-made persons, not the products of their surrounding culture and
social relations. So the rich assume that their wealth has been
acquired through their personal talents alone, while they see those
mired in poverty as lacking the ambition and willingness to work hard.
People are unable to see the complexities underlying human behavior
because of the atomization of social life. But the disciplines of
psychology, sociology, and anthropology all concur that individuals are
overwhelmingly a product of their social environment to their very core.
In 1947, for example, the American Anthropological Association argued in its Statement on Human Rights:
“If we begin, as we must, with the individual, we find that from the
moment of his birth not only his behavior, but his very thought, his
hopes, aspirations, the moral values which direct his action and justify
and give meaning to his life in his own eyes and those of his fellow,
are shaped by the body of custom of the group of which he becomes a
member.”
It is in this more subtle way that capitalism induces growing
income inequalities. Because of their intensely competitive environment,
politicians are more vulnerable to this capitalist culture than most.
Capitalist culture engenders a mindset among politicians that leads them
to craft public policies in favor of the good people, the rich and
powerful, and turn their backs on the poor or punish them with mass
incarceration. They think it entirely natural to accept money from the
wealthy in order to fund their re-election campaigns. And the more the
inequalities in wealth grow, the more this mindset blinds politicians to
the destructive implications of these “natural” decisions.
In 2011, Stiglitz wrote a compelling article, “Of the 1%, by the 1%, for the 1%,” in
which he argued forcefully that large inequalities in wealth are in no
one’s interest. But since then the politicians have continued to accept
campaign contributions from the rich, socialize with them, and do their
bidding. They ritually denounce the shamelessly low taxes on the 1%, but
have done nothing to alter them. The culture of capitalism trumps
logical arguments, and thus the inequalities in wealth continue to
expand. Capitalism has an iron grip on the political process.
Stiglitz concluded his article with this prophetic statement: “The
top 1 percent have the best houses, the best educations, the best
doctors, and the best lifestyles, but there is one thing that money
doesn’t seem to have bought: an understanding that their fate is bound
up with how the other 99 percent live. Throughout history, this is
something that the top 1 percent eventually do learn. Too late.”
While Stiglitz’s arguments have had no impact on growing
inequalities, thanks to the power of capitalism, nevertheless capitalism
gets credit for producing the one force that can put a stop to these
destructive trends: the working class. As Karl Marx argued, capitalism
produces its own “gravediggers.” In the 1930s workers massively
organized unions and fought militant battles to defend their right to
unionize and their right to fair compensation. These unions, which
Stiglitz fails to mention, played a decisive role in reining in
inequalities and unleashing a period in which the ranks of “the middle
class” grew.
As Marx noted in his “Contribution to a Critique of Hegel’s Philosophy of Right,”
“The weapon of criticism cannot, of course, replace criticism of the
weapon, material force must be overthrown by material force; but theory
also becomes a material force as soon as it has gripped the masses.”
Stiglitz’s criticisms of growing inequality will have little impact
on policy decisions until they are embraced by the masses, the working
class, those that capitalism cruelly exploits and who are so easily
dismissed by politicians and academics. At that point the working class
will finally stand up and collectively declare enough is enough.
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