Stiglitz: We have a government 'Of the 1%, by the 1%, and for the 1%

Here's a post from America Blog -- follow link to original
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Wednesday, April 06, 2011
Stiglitz: We have a government 'Of the 1%, by the 1%, and for the 1%'
by Gaius Publius on 4/06/2011 04:15:00 PM
That headline is the evaluation of Joseph Stiglitz, Nobel Prize winner and former Chief Economist of the World Bank. Not that this is news to many, but it's good that men of Stiglitz's reputation are making the point so publicly.

In a feature article in the May 2011 Vanity Fair, Stiglitz says baldly — We're now a government by the very very rich. The point is stark, and Stiglitz has the data (and the magazine space) to back it up.

For reference, the income of the top 1% starts at $500,000 and rises to several billion. Here's his opening (my emphasis throughout):

Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret. ... In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.

That time span starts mid-Reagan (the father of our woes) and ends in 2010. This translates as follows:

Total income of the top 1% grew from 12% to 25%.
Total wealth of the top 1% grew from 33% to 40%.

But doesn't a rising tide "lift all boats"? Aren't we all getting rich along with them? The answer would be No:

[The "rising tide"] response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran.

The article is terrific for the data; you can read it for that alone. But I'm interested in the consequences. I've been asking myself for months: Do the rich really need the rest of us? Do they think they still need us? And if not — if the very wealthy continue this process of wealth concentration — what's the outcome?

For Stiglitz, there are several outcomes. One is that, once the process reaches "critical mass" (my term), it continues almost on its own:

[W]e’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied.

And he notes this stark reality:

Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. ... [Thus when] pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

His conclusion sounds a warning bell, the Cairo-to-Wisconsin connection:

In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain. The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next? ... [T]here is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live.

On the last point, I think I disagree. Is their fate bound up with ours? I'm not sure.

I wonder if the super-rich haven't decided that they really can do without the rest of us, without middle-class America. After all, isn't that what villas in France are for? They're certainly doing everything in their power, via their eager operatives in both parties, to turn back the clock to the age of the robber barons, regardless of consequences.

Perhaps one of the following is true: Either they really don't need us any more (as we go offline as consumers, billions of Asians take our fading places). Or they simply think they don't need us.

Either way, it spells trouble for the new America, a world I once said could easily become "a faltering second-world economy with a useful first-world military." That's a dangerous combination for us left-behinds to deal with.