A few night’s ago, I watched Robert Reich’s Inequality For All, followed by Netflix’s documentary on Mitt.
The only segments during which I was put off by Inequality for All were the personal stories from people who were struggling financially. In some cases they were moving stories (though I can’t recall any), but you can find one person in most any circumstance, and yet that doesn’t create a sufficient rationale for policy action. I get it though — put a personal face on what could be a dry economic argument.
What I found much more compelling were the descriptions of the virtuous cycle inherent in the progressive economic vision, and the explanation of the reasons for the rapidly increasing income inequality.
The virtuous cycle goes something like this:
- Pay good wages ->
- Workers have spending money ->
- Increased economic activity ->
- More jobs ->
- Increased tax revenue ->
- Increased capacity for government to invest in education and infrastructure ->
- Higher quality jobs that pay good wages…
It is easy to see the flip side, the vicious cycle, that results from pressing wages downward.
Reich explains that a variety of factors have resulted in the greatest level of income inequality since the Great Depression. After thirty years of relative prosperity and a strong middle class, things began to change in the late seventies.
Weakening labor unions resulted in a decline in average worker wages. More families struggled, and women began to enter the workforce in droves. The flood of new labor (and sexism, I assume) pushed wages down further.
Reagan slashed taxes, resulting in lower spending on infrastructure and education. Global supply chains meant companies could find cheaper labor elsewhere. Technological automation demanded a highly skilled work force, largely to be found in other countries.
While real wages declined, the real estate boom of the nineties encouraged homeowners to leverage their equity. After all, why not take out a new loan at 10% while your asset is appreciating at 20%? This was all encouraged by a rapacious and rapidly growing financial sector.
As similar phenomena preceded the Great Depression, the result of all this was the economic crisis of 2007-2008, from which we’re still reeling in a lot of ways.
Income inequality is inevitable and desirable, to a degree. After all, there must be a system of incentive and differentiation. But concentrating the wealth of the nation so extremely isn’t just unfair, it’s a prescription for broad economic calamity.
. . .
The Mitt Romney documentary was cringe-inducing. For all it will feed Mitt-bashers’ appetites, it also revealed him as a human being with a loving family and good intentions.