The Growing Economic Divide – Examining Root Causes

The Growing Economic Divide – Examining Root Causes

News Al 1

By Al Markowitz

In spite of news that our economy keeps improving, times remain tough for many. In an article on the NorfolkMetro.com website entitled A Portrait of Poverty, Phillip Newswanger mentions “old men driving clunkers.” That’s me and right now my clunker’s driver side door only opens from the inside. With that dreaded inspection time drawing nigh, I need to work on this however I can. Inspections in our state, while important for public safety, are an obstacle for those with older cars and thin billfolds because honest garages are tough to find. One look at a funky clunker and you can almost see the big number estimates rolling behind those hungry eyes. Unlike our ABC stores where the heavy hand of the state limits consumer options, the problem with inspections is that doing them is left to garages with a vested interest in making repairs – needed or not. A practical solution would be state operated inspection stations that cannot make repairs.

This is just one example of how poverty actually costs more in this country. The poorer you are, the more things cost and the more difficult they are, from transportation to doing laundry. Many of our most impoverished citizens don’t have bank accounts and even if they do, on low wages they become entrapped in loans with criminally high interest rates in order to pay bills and eat. In Virginia interest is capped at 36%. In some states interest can be as high as 600% with car titles used as collateral. As Rep. Earl Blumenauer, D-Ore. noted, “The poor pay more for a gallon of milk; they pay more on a capital basis for inferior housing. The poor and 100 million who are struggling for the middle class actually end up paying more for transportation, for housing, for health care, for mortgages. They get steered to subprime lending. … The poor pay more for things middle-class America takes for granted.

Preying on the poor and even criminalizing poverty has become a big business. As Barbara Ehrenreich, writes, “Individually the poor are not too tempting to thieves, for obvious reasons, but the poor in aggregate provide a juicy target for anyone depraved enough to make a business of stealing from them. The trick is to rob them in ways that are systematic, impersonal, and almost impossible to trace to individual perpetrators. Employers, for example, can simply program their computers to shave a few dollars off each paycheck, or they can require workers to show up 30 minutes or more before the time clock starts ticking.”

Worse, it is not just corporations and banks that target the poorest citizens. In many cities, the court system has become increasingly dependent on the collection of court costs and fines with interest. A recent report I heard on NPR reported that in many jurisdictions defendants can be charged for a public defender, for their own parole and probation, the cost of a jury trial, “booking fees” and their stay in a jail cell. Poor folk often fall behind in fines and wind up with added fines and jail time perpetuating and endless trap of added fines and imprisonment. Though debtor’s prison was abolished long ago, it has in reality returned due to these practices. I know a hard working sometimes homeless man who has been in jail repeatedly for falling behind on child support due to joblessness.

We hear all the time from self-righteous “conservatives” that poverty is the result of poor choices, laziness and an “entitlement mentality” but the poor often work harder and for more hours than the middle class, much less the rich. Though the economy is improving when measured in corporate profits and Wall Street transactions, the shortage of jobs per able-bodied willing worker remains. Worse, the jobs themselves often perpetuate, rather than alleviate poverty.

Barbara Ehrenreich writes, “What I discovered (while writing Nickel and Dimed: On Not Getting By in America) is that in many ways, these jobs are a trap: They pay so little that you cannot accumulate even a couple of hundred dollars to help you make the transition to a better-paying job. They often give you no control over your work schedule, making it impossible to arrange for child care or take a second job. And in many of these jobs, even young women soon begin to experience the physical deterioration—especially knee and back problems—that can bring a painful end to their work life.” In reality many of the people you see working at Walmart, waiting tables or at other retail and low wage jobs are working two or three jobs without benefits. Many of them are degreed with exorbitant student loan debt. Many qualify for SNAP or, food stamps. Food stamps are essentially a corporate welfare program in which the government (and tax payers) subsidized both low wage jobs and agribusiness. In spite of the fears promoted by the companies you help subsidize to underpay workers, prices have not gone down because of low wages here or in China where most goods are produced and they won’t go up if we raise the minimum wage.

So, if poverty is increasingly endemic and, as economists have repeatedly shown, we are seeing the greatest disparity in wealth and poverty in our history, we have to ask how we, as the wealthiest, most powerful nation on earth got here. That dangerous question: why are there so many poor?

Thomas Piketty, in his popular thesis, “Capital in the Twenty-First Century” focuses on wealth disparity demonstrating that it is built in to the capitalist system of economics. He especially highlights the contrast between the rate of return on wealth (capital) and the economic growth rate of society defined by his now famous formula r > g, meaning return on wealth is greater than economic growth as a whole which leads to the pooling of greater wealth to the few at the expense of the many. While I agree that the aggregation of wealth to wealth is basic to capitalism, this really is not a new discovery. It is why big businesses consume smaller ones leading to monopolies and multinational corporations.

Government, acting in the public interest, has addressed this in the past. Our nation’s founders, having dealt with corporations like the East India Tea Company limited corporate charters in length to 20 or 30 years. Those corporations also were limited to one commodity, nor could they own stock in other companies. As Thomas Jefferson opined, “I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.” Abraham Lincoln, in a letter to to Col. Elkins presciently wrote, “As a result of the war, corporations have been enthroned, and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working on the prejudices of the people until all wealth is aggregated in a few hands, and the republic is destroyed.”

Lincoln’s fears have come to fruition. Thanks to the influence of corporate money on politics, we have a Supreme Court that has granted corporations “personhood” and declared money to be speech. The influence of corporate power acting in its own interest has shaped labor law as well as the economic theory and direction of our country from academe to government policy at the highest levels. We could sure use a “Trust Buster” like Teddy Roosevelt again! What is really behind the economic decline, not of our country as a whole but, of our working and former middle class is the application of “Neo-liberal economics.” What exactly is this?

Neo-liberal economics began with the Austrian economist Friedrich von Hayek who, backed by big business interests, put forward the idea that economic activity should be based on competition devoid of interference from the State, except to insure the conditions of competition. It also called for the privatization of all public services. This may sounds good to naive libertarians and fans of Ayn Rand but it is blind to the very real difference in bargaining power between rich and poor, or bosses and employees. In reality it empowers wealth and undermines democracy and the political power of citizens, creating a corporate oligarchy with the necessity of a police state to protect the property of the wealthy few from the desperate many. In my discussions with a local libertarian I have pointed out this out calling it “anarcho-faschism.”

Neo-liberalism inevitably leads to the selling off of public services and infrastructure to profit based business, deregulation, lowering of wages, and the growth of poverty – the aggregation of wealth Piketty writes about – as well as global monopolization and corporate colonialism in poorer countries. This form of colonialism is based on debt. The World Bank and IMF provide loans for infrastructure development to leaders of poor countries who accept them or find themselves deposed and replaced by someone more cooperative. The immense debt incurred by those countries with heavy interest can by design, never be repaid. These countries become corporate colonies subservient to multinationals who extract needed resources and cheap labor. Austerity and privatization are also imposed which further impoverish the residents. For more on this, I would recommend reading “Confessions of an Economic Hit Man” by John Perkins.

The domestic application of these same policies was taken up by national leaders like Augusto Pinochet in Chile, Margaret Thatcher in the UK, and Ronald Reagan here in the US. It was exacerbated by corporate friendly trade agreements which led to the export of productive work and the busting of unions. This set American workers in hopeless downward competition with workers in China, Mexico, The Marshall Islands, Vietnam, India and wherever else labor was cheapest and safety regulations least. This process continues with the ongoing Trans-Pacific Partnership negotiations.

I’ll bet you are in debt. I’ll bet you have credit cards that keep you tenuously afloat from month to month. I’ll even guess that if you have a job, you are worried about keeping it and are only a few paychecks from terrifying destitution. Your boss knows it too and you’d better be careful what you say, ingest, or post on Facebook. Isn’t neo-liberal “democracy” grand? If you’re like me, in the growing number of those discarded by the market – the surplus workers no longer needed, nurturing old clunkers around town, welcome to the third world. The reality is that the same policies that have impoverished Mexico, Argentina, Ireland, Spain and Greece are being foisted on you.

What are our alternatives? A tough question given the overwhelming global power of big business. The alternative pushed by politically liberal economists like Robert Reich is a return to Keynesian economics which sees consumers, not producers, as the driving force of economics and supports better wages and a major role for government via the safety net and public services. This is a much more preferable and socially responsible model than Neo-liberalism, but it is limited by the realities of today’s population, shortage of jobs due to technology, and climate reality.

The most important first step for doing anything truly effective is understanding the nature of the system we live in: that the capitalist system requires poverty and exploitation of people and the environment. We need to understand that system based on endless growth in a limited environment is unsustainable and we are living in a time when resources are getting scarcer and the effects of two centuries of industrialization have created a global environmental crisis that threatens our future.

In the short term we need to be aware of efforts like “Move to Amend” to legally assert that corporations are NOT people and of efforts which confront dangerous corporate influence. You won’t find these in the corporate press. We need to be aware of and to expose candidates backed by the biggest and most reactionary industries and corporate fronts. We need to confront our cities about policies that criminalize and exploit poverty. Though most of us feel helpless on our own, we increase our power exponentially when we work together through organizations like Virginia Organizing, the Sierra Club, and other political and issue oriented groups to advocate for our own interest. Wrenching back and defending our rights requires the strengthening of labor laws which empower employees. We also need to break our dependence on wage slavery through cooperative business models that empower us as well as giving us some economic security.

Ultimately, we must understand that this economic system has lived beyond its usefulness to all but a few and has little but ecological destruction, war, and misery left to offer. It’s time for a paradigm shift that moves us beyond the rule of multinational corporations. We need to separate wealth from power. We need sustainable economics that foster democracy and put human needs and ecological sanity before profits. We do not have to be serfs driven to destitution and worse. Breaking the chains of debt bondage and corrupt corporate power requires a massive movement of informed, organized citizens. For each of us, this is easier and more gratifying than it sounds as communities of solidarity grow. All things considered, doing nothing is much riskier than doing something.