What Can/Should be Done?

February 11, 2016

About inequality, that is. I am arguing that inequality is the biggest problem facing America. My previous posts detail how extreme it has become. So much is written about the issue, but so little is offered in prescriptions–what can be done? Those who do offer solutions are venturing into the unknown and are subjected to a multiple of criticisms beyond those who just write about the problem. Here is a short opinion piece based on some of the few brave who dare to venture there.

As to the question above, it’s really two questions, isn’t it? What should be done is probably different from what can be done, considering today’s politics.

The Republican Presidential candidates often start by denying the problem, like what many of them do with carbon emissions. If any acknowledgement is given, their prescriptions can largely be boiled down to one: increase growth in the economy. They are only half right–it’s nearly impossible to reduce inequality without growth. But, they are wrong that growth alone is sufficient. Growth is necessary, but not sufficient. The “trickle down” theory has been disproved across several periods of strong growth since 1980, when Conservative policies began to dominate US economics. During such strong growth periods, inequality continued to steadily advance. That has also been true in another major economy where GDP growth was about 10% annually for 30 years–China. China’s inequality has increased steadily across that time, and now is about equal to ours. Poverty was dramatically reduced, but inequality rose.

And, not to mention just “how” do they intend to increase growth–in what is increasingly clearly a low growth global environment.

In his 800 page Capitalism in the Twenty-First Century, Thomas Piketty said the best prescription would be a global wealth tax. I like that, but even Piketty admitted it could not be done.

Bernie Sanders has some prescriptions. Here are a few that fall under Inequality, the #1 issue on his website:

  • Increase taxes on the wealthy
  • Prohibit US Corporations from sheltering profits overseas
  • Raise the minimum wage to $15
  • Putting millions of Americans to work in fixing our infrastructure

All of these make sense, provided we debate and negotiate exactly how they are done. For example, future increases in the minimum wage should be based on local cost of living in each city and state. Some places are much cheaper to live in than others. Increased taxes on the wealthy need not be raised to levels that would seriously affect motivation–e.g., from the US 39% max tax rate to Germany’s 47% seems a reasonable example.

Dr. Robert Reich has a number of prescriptions in his Saving Capitalism, an excellent new book:

  • Turn back laws favoring business vs. labor
  • Strengthen the rights of debtors vs. creditors (allowing bankruptcy for home loans and student loans)
  • A broad series of measures intended to return corporations to an earlier era in which they sought to serve not only shareholders, but also customers and employees
  • Reverse Citizens United, which allows big money to heavily influence elections
  • Essentially, overhaul the rules governing these five foundations of the capitalistic system: property, contracts, bankruptcy, monopolies, and enforcement

Can policies such as these, enough of them, actually make it through the highly divisive US political process to enactment in some meaningful form? Would they collectively create a current version of FDR’s New Deal or Lyndon Johnson’s Great Society, which served sustain a period of relative equality and opportunity? It happened then, and made a huge positive difference.

Great Society Chart

It is clear now that inequality will not resolve itself. It will not be solved by growth alone. It will only be solved by some form of intervention by government. And Conservatives have established a formidable political objection to government. As Robert Reich makes clear in his excellent book, the Conservative message is that government is the enemy of freedom. In concert with that message, step by step, most of the mid century social support programs have been substantially weakened or eliminated.

Thomas Piketty agrees with Professor Chris Bramall, under whom I studied at SOAS 2012/13. Bramall is a China expert, and understands the costs and benefits of revolution. Piketty and Bramall agree–governmental intervention to reduce inequality is not going to happen without a cataclysmic event. To get to the Great Society, the world had to experience WWII and the US had to experience the Great Depression. Piketty and my professor were talking not only about the US, but looking at similar trends in inequality and similarly prohibitive political attitudes in many developed countries. They feel we must either await some similar cataclysmic event, or the reversal will only come with revolution.

Reich is more optimistic. He sees evidence in the criticisms on both sides of the aisle for Wall Street, hedge fund managers, and generally for anything identified as “the establishment.” He feels that it doesn’t matter that some of this is political necessity, lacking genuine commitment from the Right regarding the need to attack inequality. He feels this rhetoric reflects a growing awareness that the voters want change. I would add that the support Bernie Sanders is getting suggests growing strength at this time in support for upturning the halls of power and money.

As for me, I gave my first political contribution of the current cycle last week–$500 to Bernie Sanders. They said the 13th Amendment abolishing slavery could never be approved in 1865. It won by 2 votes. I gotta support what I think we should do, and later we’ll try to get what we can do as close to that as possible.


i think i can