INCOME INEQUALITY COSTS US MORE THAN WE REALIZE

–The Declaration of Independence says all men are created equal.

–In the 1964 President Johnson said all US citizens should have equal rights.

–Our Constitution says we all enjoy the right of equal protection under the law.

–Our collective national ethos says equal opportunity for all is a hallmark of our democracy.

But equal really means “as close as we can get.”  At best, our citizens, our government, our businesses, mass communication, and our cultural and educational institutions share a common goal of treating everyone the same in all our transactions, unless there is a valid reason for not doing so (e.g. special parking places for the handicapped) At worst, the goal is tossed aside and we enter a free-for-all of everyone for themselves.  Folks, we are rapidly approaching that worst.

Where you live, how much money you have, and the color of your skin are the first and foremost determinants of how fairly your equal rights will be applied, what kind of legal protection you will get, and what social and economic opportunities will be available to you.  Paradoxically, although we have put in place numerous laws designed to accomplish equal rights and equal opportunity—the Civil Rights Act of 1964 and affirmative action and equal opportunity requirements in hiring and admission to universities for example—actual opportunities between upper and lower income citizens are not fairly distributed.  This unfair distribution clearly parallels the income gap between upper and lower class wage earners, and like the income gap, the opportunity gap is also widening.   Because no matter how many laws are in place, in actual practice, the power of money to influence politics and social policy trumps actual enforcement of laws and regulations.

Consider a case the Supreme Court is currently debating.  The plaintiff contends that the University of Texas used racial preference to admit an affluent black applicant but denied admission to a white woman, who contended she was denied equal treatment.  The plaintiff’s lawyer argued that the issue is fairness, not racial preference. Commenting in a New York Times article, David Leonhardt notes that “Americans value diversity. But they value fairness more. Most people oppose a college or employer’s rejecting an applicant who appears qualified for the sake of creating a group that demographically resembles the country….The crucial choice that affirmative action proponents made long ago was to focus the program on race rather than more broadly on disadvantage.   By forgoing a broader view of disadvantage, colleges lost the ability to claim that their overriding goal was meritocracy…It is impossible to know whether affirmative action could have had a more enduring foundation were it base on a broader equal-opportunity approach.”1 IPPA’s mission includes highlighting the relevant ethical issues in current social and political problems. In this case of unequal opportunity, the principle is fairness.

Nobel Prize winner in Economics, Joseph Stiglitz, recently published “The Price of Inequality,” which outlines not only the causes and consequences of economic inequality in our country, but also the subtle price we all pay for excess inequality.2  What possible combination of circumstances could have brought us to such an extreme and dangerous situation?  Stiglitz describes many; among the most significant contributors are:

•Concentration of wealth in the hands of a few

•Excessive influence of campaign contributions and lobbyists on Congress and government regulators

•Erosion of fairness in the justice system

•Rapid changes in technology

•Globalization of the financial system

I would add two additional significant causes:

•Corruption in government and financial institutions; there’s always been some level of corruption in our local and national governments, in corporations and the mass media.  But in the last few decades not only has it seemed to increase dramatically, but has become more and more visible as the media gain access to more and more information.  The economic collapse of 2008, caused largely by fraudulent and illegal activities of our major financial institutions, was simply the cap on a long line of episodes of government and corporate corruption, previously brought to light during the Watergate scandal.

•Diminished influence of cultural institutions;  even though churches and synagogues seem as full as ever, and young people are attending educational institutions in increasing numbers, their influence relative to the influence of the mass media is much diminished.  It’s as if we live in two separate compartments:  one in which we learn and worship in relative harmony, and one in which competition is cutthroat, corporations care little for their workers, shareholders and consumers well-being, and changes in family composition and child-rearing practices are loosening the likelihood that lessons learned at home will have any effect on adult behavior toward others.

There is growing concern among government leaders and respected economists that income inequality and concentration of wealth in the hands of a few will slow recovery from the Great Recession, not only in the short run, but for years to come.  A recent New York Times article cites a number of studies showing that income inequality continues to worsen.  Politicians from both sides of the political spectrum agree that policies that encourage growth also cause inequality, in part, Stiglitz says, because we are caught in a vicious cycle that repeats itself.3

And what is the price we are all paying for this state of affairs? “ Stiglitz’s book is devoted to demonstrating that excessive inequality “. . .creates volatility, fuels[financial] crises, undermines productivity and retards growth; inadequate schooling, housing and neighborhood conditions for large numbers of people, acts in a similarly destructive fashion, [because our nation fails] to make the best use of all its citizens.”

And perhaps worst of all, the vicious cycle of economic inequality feeding political inequality and back again, along with ongoing news of fraudulent and illegal practices in the financial industry, fuels the erosion of our national identity.  In an interview about his book, Stiglitz describes it thus:

. . . the United States has distinguished itself as having the highest level of inequality of any of the advanced countries. But even perhaps more disturbing is that it has become the country with the least equality of opportunity. And what that means is the chances of somebody going from the bottom to the middle, bottom to the top, or the top down, are lower than in any of the other advanced countries. An implication of that of course is that a child’s life prospects are more dependent on the income and education of his parents than in any of the other advanced countries. This is actually disturbing for at least two reasons. . . One is that it means that we are not using our most valuable resource, the talents of our young people, as well as we should. . . . The second reason why it’s so disturbing is that it’s part of our national self-identity that we are the land of opportunity, land of equality.2

Many others have observed in other contexts that unfairness in distribution of resources is eroding our national identity.  It is not possible to reconcile what we have learned from the media about, on the one hand, the outrageous behavior of the captains of American industry and, on the other hand, our government’s failure both to make most of them accountable to the American people, and to develop policies and practices to avoid such excesses in the future.

Stiglitz doesn’t come right out and say it, but what one can deduce from his descriptions is that all the economic mechanisms fueling economic inequality lead right back to one most important situation:  the influence of excessive campaign contributions and aggressive lobbyists on the decisions of lawmakers, policymakers, and regulators is the single most important variable affecting social and economic inequality.

The implication of that is clear: the only really effective way out of the morass we have created is campaign finance reform and restriction on lobbyists from the financial industry.  Without those two changes, it seems like all the other details are meaningless. The only hope we have of achieving the reforms we need is by exercising the greatest gift of a democracy—the right to vote for the candidates that have our best interest at heart and the citizens’ duty to be informed about the issues.  Although some control of lobbying may be feasible, the biggest problem in our democracy is the exploding use of election financing by the huge and growing political  action committees that claim to be independent of the issues or candidates they are promoting. They are now generating an avalanche of campaign donations from corporations and very wealthy individuals. The situation will get only worse. The process was set in motion in 2010 by the US Supreme Court Citizens United Decision, establishing that corporations have the same political rights of free speech as ordinary individual citizens. If this wasn’t bad enough the court in 2011 declared unconstitutional the key provision of Montana’s public financing law. The only solution is to pass a constitutional amendment establishing once and for all that corporations are not “persons” and also mandating significant limits on campaign spending. Admittedly, passing an amendment is difficult. But it is well established that a significant majority of citizens in the country agree with the basic premise, so it should be possible. It addresses the fundamental problem of the corruption of government as well as the democratic election process by massive amounts of unregulated campaign contributions. 5 This might clear the way for public financing for elections to become a viable option again.

1. Leonhardt, David.  “Rethinking Affirmative Action, NY Times, Oct. 14, 2012, Sunday Review, p. 4 (nytimes.com/2012/10/14/sunday-review/rethinking-affirmative-action.html?pagewanted=all)

2. Stiglitz, Joseph E. The Price of Inequality.  How Today’s Divided Society Endangers Our Future.  W. W. Norton & Co. 2012

3. Lowrey, Anne.  “Income Inequality May Take Toll on Growth.”  NY Times, October 16, 2012, Business, p. 2 (nytimes.com/2012/10/17/business/economy/income-inequality-may-take-toll-on-growth.html?pagewanted=2)

4. Interview between Stiglitz and Russ, EconLib (http://www.econtalk.org/archives/2012/07/stiglitz_on_ine.html)

5. Faux, Jeff. The Servant of Society. John Wiley and Sons, 2012, 258-260

 


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