Remember Thomas Picketty’s new economic treatise “Capitol in the 21st Century?” I didn’t read it (not the whole thing anyway), but I read a bunch of reviews—positive and negative—and by all accounts, Picketty argument is that income and wealth inequality will continue to accelerate, because the most rich and powerful people in the world are also running it. In other words, we’re headed back to a world in which inherited wealth runs the show. Think monarchy without titles.
The negative reviews brought up some interesting considerations, although, most of their arguments are philosophical in nature, rather than substantive. For example, take the “if we raise taxes on the rich, it will reduce their incentive to work” argument (David Brooks did so recently regarding Bernie Sanders’ policies, and I was reminded why I don’t read him anymore–what a tired, tired, sad human being he is); it’s a dumb argument and doesn’t even apply in this case.
One of the central points Picketty—and other clear thinking economists—have made, is that these people aren’t really “working” so to speak. They’re collecting dividends and returns on investment—and many of these are people who never worked; remember, six out of the top ten richest people in America are Walton’s or Koch’s. No, what really reduces the incentive to work is the current state of the economy, in which wages are depressed and a greater level of productivity by labor doesn’t mean that those who “work” actually get paid more.
Moreover, critics of Picketty and others who’ve been highlighting the rising tide of income and wealth inequality can’t escape the facts: 50 million Americans live in poverty, and at the same time, the richest 1% in America own 43% of it’s wealth. Corporate profits are near all time highs, and 95% of income gains since 2009 have gone to that same wealthiest 1%. But for some reason conservatives continue to say we shouldn’t raise the minimum wage, that corporate and income taxes are too high, and that we shouldn’t raise taxes on stocks and dividends, because it will hurt the economy, or “reduce the incentive to work.” What Brooks and conservatives actually mean is that it will hurt rich people by making them slightly less rich.
Which reminds me of something a good friend said about wealth inequality and the current state of affairs. Essentially, he argues, the economy is something like a Monopoly game. At the beginning, everyone starts off equal (obviously that never happened—but if you look at wealth distribution in say, the 1950’s or 60’s, it was much more equal), but as the game moves along, people’s fortunes change based on luck and the decisions they make, resulting in greater levels of inequality.
At the beginning of the game, most everyone does well—you get $200 every time you make the trip around the board, and accrue properties on the way. Somewhere in the middle, however, things change. Most of the property gets bought up and players begin to consolidate their holdings so that they can build houses and hotels, which consequently allows them to charge higher rents.
The game then very quickly becomes a battle to see who can collect the most money from the other players, using that money, naturally, to gain further advantage. On the other side, the losing players begin mortgaging properties and going through the slow decline that occurs when the game has become unwinnable. The only question at the end is at what point do people quit and/or smash the pieces off the board (which I’ve done on multiple occasions).
Now, board smashing aside, this is fine, because Monopoly’s just a game: the whole point is of playing is to try to win—ruthlessly if necessary. The problem is that when it comes to our economy, we don’t want the game to end. Even if we suppose, in our economy, that victory is primarily based on hard work and skill, we still don’t want the game to end, because the game ending results in the same scenario: the people that go bankrupt either quit and/or smash the board (read: come in the night with torches and pitchforks to haul the winners out of their castles). Luckily, we’re not at that point quite yet, but the game has advanced well beyond the point where the conclusion is in much doubt. We know who is going to win, because they’re the ones winning now. To put it more dramatically: THE END IS NIGH!
Seriously though, we’re getting to the point where one player (think the top 1%, or really, the top 0.1%) has most of the resources, is consolidating and expanding constantly to collect more rents, and is able to exert tremendous financial pressure on everyone else. It’s key, at this juncture, to remember that at this point in the game, the player’s hard work or skill has nothing to do with their ongoing collection of rents; last time I checked, it doesn’t take a genius to build hotels on Boardwalk and charge people when they land there. Yet, the rent collection goes on, businesses continue to merge and consolidate holdings, and the money piles up. Meanwhile, the other players are starting to go broke.
What’s interesting here is that all that money that’s being piled up by the winners in real life is essentially as valueless as the Monopoly money that’s used in the game. That’s not because it doesn’t have value, but because it’s not being put into use—it’s just sitting on the sidelines, hoarded away in corporate accounts and tax-exempt safe havens. Estimates vary, but analysts say that the super rich are hiding somewhere between $20 and $30 trillion (possibly more) in tax havens. Again, until that capital is taken out of hoarding mode and spent, it’s essentially valueless.
The question then, is how long can the game go on if most of our economic growth goes to the top 1 or 0.1%, who then turn around and take that money out of play? This is what people who support trickle-down/supply-side economics don’t seem to understand; sure, the concept works in theory, but in practice, corporations and the wealthy DON’T reinvest their profits in the economy to create jobs—at least, not to the degree necessary to warrant supporting such policies. Instead, the rich hoard their money offshore so that they don’t have to pay taxes, and corporations do the same—that or invest it in factories and manufacturing overseas, in places like China and Southeast Asia. The irony is that at any time, the wealthy people and businessmen that support supply-side policies could prove their theory right. But it doesn’t work, because they don’t.
What’s unfortunate is that the salesmen who’ve been promoting trickle-down policies and supply-side economics have been so successful, that despite the evidence that we’re rapidly becoming a banana Republic, many Americans and politicians continue to argue that traveling down this path is somehow good. State and local governments are constantly bending over backward to lower corporate taxes through special exemptions and sweetheart deals, and what do we hear every time anyone suggests raising taxes on the rich: “oh no, we can’t do that, they’re job creators, they’ll close up shop and leave, they’ll punish us somehow.”
And all of this is just pure bullshit, because as anyone who has the smallest grasp on capitalism should understand, demand exists whether or not it’s being satisfied; in other words, who cares if a business cries foul and leaves? The demand is still there, which just means that someone else can move into that niche. And if we actually had sane governance of our tariff laws and interstate commerce, the threat of leaving for greener pastures wouldn’t even be an option.
The bottom line is that unless corporations create good paying jobs and the rich pay their taxes—at least at the same rates as the rest of us—then it’s insane to kowtow to them as if their the Masters of the Universe (thanks Paul).
Because they’re not, and they don’t. They’re the winners of a life-sized game of Monopoly, and they’re finishing the game—a game no one should want to end.