10th anniversary post: "Inequality for All"

 

 

Ten years ago this month, I saw the documentary film "Inequality for All," produced by Robert Reich, former Secretary of Labor and longtime advocate for progressive economic policies. In the film Reich argued that increasing economic inequality in America, driven by globalization and technology, was exacerbated by governmental deregulation; that it limited economic opportunity for many Americans; and that it was solvable only by shifting money from the rich to the middle class. 

Reich's film came out three years before Donald Trump stunned the world by getting elected President on a campaign fueled almost entirely by resentment. While analysts debate the source of Trump's sustained appeal, it surely draws to some degree on insecurity brought by economic inequality, as well as cultural nostalgia. Trump, an extraordinarily wealthy man who inherited his fortune, has sharp words for "elites," but of course it is the most vulnerable who suffered the most under his rhetoric and policies.

What has been the story of inequality in the eleven years since the film? FRED, the wondrous economic dashboard created by the St. Louis branch of the Federal Reserve, provides data on the Gini Index going back to 1963. By this measure, inequality declined through the 1960s and 70s, before rising from the mid-30s to around 40 in the early 1990s. It's hovered there ever since, declining a bit when recessions hit upper incomes. At the time "Inequality for All" came out, the single-year high was 41.4 in 2006; it recovered to 41.5 in 2014, and stayed around there through 2019 before COVID hit. It was 39.7 in 2021, the last year for which there are data. I'll lay odds it's back to at least 41.5, if not higher.

As of 2016 our Gini score of 41.1 was the highest in the developed world, with only Israel (39.0) within five points of it (The CIA World Factbook 2023-2024, p. 1007) . The UK scored 34.8, Canada 33.3, Japan 32.9, Germany 31.9, and France 31.6. So it's definitely a choice to be as unequal as we are.

Thomas Piketty's data go back farther, though he prefers to look at income shares rather than the Gini Index (see Piketty 2013: 266-267) the post-1963 pattern is virtually identical. At the time he published Capital in the Twenty-First Century (Belknap-Harvard, 2013), the share of US national income going to the top 10 percent had reached levels not seen since the 1920s (cf. Figure 1.1, p. 24, and Figure 8.7, p. 299). Moreover, those high shares were already sustained longer than they had been in the 1920s, and now of course have been sustained even longer. (The same can be said of the share of national income going to the top 1 percent, viz. Figure 8.8 on p. 300.)

So we're at historical levels of inequality in America. Reich concluded his film on a hopeful note: "History is on the side of positive social change." Certainly we can point to past examples of positive social change, and there's surely no point in being hopeless. But it's hard to see this story ending well without a sharp change of course. Right now the main available business models are far from inspiring: either to sell luxury items to the rich, or cheap crap to the poor. That leaves us with sprawl, unstable employment, unaffordable housing, stressed parents, vehicle gigantism, deaths of despair, and less opportunity for small business starts. And where does that take us? Social fragmentation, threats to democracy, violent outbreaks... the mind reels.

I guess the one thing I would say in 2024 is it's too bad more people didn't listen to Robert Reich back then instead of Donald Trump and his ilk. Positive social change is never easy, but community-building is always worth it.

Film Review: "Inequality for All"

Robert Reich's 2013 film, "Inequality for All," takes on the issue of economic opportunity, which I consider to be foremost among the core issues surrounding our common life in 21st century America. Using a similar approach to "An Inconvenient Truth," Al Gore's 2006 film on climate change, Reich mixes clips of his public presentations, interviews with people affected by current economic trends, data presented with snazzy graphics, and personal reflections. For people who realize that something is seriously wrong with the American economy, but who are not sure what it is, Reich makes a clear, accessible case that political decisions have reinforced rather than mitigated four decades of dislocating economic change. On the other hand, if you believe today's problems are caused by a corrupt presidential administration funneling money to the health care industry--the actual theme of a current media blitz by the Koch Brothers' Americans for Prosperity group--you will probably not find anything Reich says convincing.

Reich is a professor of economic and social policy at the University of California, Berkeley, is a frequent commentator on public affairs programs, and has worked in several presidential administrations, most recently as Bill Clinton's Secretary of Labor. I first encountered him in The Work of Nations (1991), and a lot of those ideas reappear here. He sets out three goals for the film at the start: to describe what is happening; to explain why it is happening; and to determine whether the current degree of inequality has become too great. He jumps around among these three quickly, albeit engagingly, so you have either to pay close attention or else take notes (as I did) to be able to reconstruct the whole argument.

Reich's argument, in very brief:

1. What is happening: The problem is not inequality per se, but widespread loss of economic opportunity as inequality widens. The U.S. economy has grown a lot since 1978, but nearly all of those gains have been concentrated at the top levels of incomes, while the real income of the typical male worker has actually dropped. 1 percent of the population (knowledge/tech workers, CEOs and financial whizzes) now makes 23 percent of national income, a record high. Most of that income is invested, flowing all over the world without regard to where the investors happen to live. Down at the level where the rest of us are, companies have cut jobs and paid as little as possible in order to stay profitable and competitive; ordinary families have tried to keep up with these trends by moving moms out of the home and into the workforce, working longer hours, and borrowing against the value of their homes, but each of these tactics has played itself out.
2. Why it is happening: The most basic causes are globalization and technology, which mean that most production can be done more cheaply with fewer workers or moving operations overseas. New jobs pay less well on the whole. Opportunities for displaced workers to get better-paying jobs are limited by the government's declining investment in workforce education and training. (Here the U.S. response contrasts with western European countries and Japan, who are graduating a larger proportion of their youth from college.) Meanwhile, the government, which always sets the rules for the marketplace ("no such thing as a purely free market," claims Reich) has in the U.S. catalyzed this process by extensive deregulation. The new superrich have used their wealth to lobby for bailouts, subsidies and tax laws that entrench their wealth, abetted by court decisions that have struck down campaign finance and lobbying restrictions on free speech grounds.
3. Is this a problem?: Yes. Reich and his interviewees argue that economic opportunity is only created when the middle class has money to spend. (They pointedly take issue with conservative sanctification of rich "job-creators.") A president of a company that makes pillows points out that CEOs who make many times the salary of the average worker [331x according to the latest data] don't buy 331 times as many pillows, and calls for a "middle-out" economics instead of "trickle-down." He draws parallels between economic inequality now and that which preceded economic upheavals in the 1890s and 1920s. He further notes that the current round economic stress has brought characteristic political stresses: increased partisan polarization, middle class protest movements, and incidents of hate attacks. 

Reich concludes on a positive note, telling the final session of a class at Berkeley to "consider where we [in the United States] have been.... History is on the side of positive social change." I hope he's right. But I can think of ways that our currently bad situation can get horribly worse: frustration turning to widespread violence (Russia in 1917 or Germany in 1933), or else political quiescence and social stagnation thanks to successful smoke-blowing by empowered super PACs. 

MORE AT

"Inequality for All" website, http://inequalityforall.com/

"What the 1% Don't Want You to Know," Moyers & Company, 18 April 2014, http://billmoyers.com/episode/what-the-1-dont-want-you-to-know-2/ [discussing Capital in the 21st Century by Thomas Piketty with Paul Krugman]

Peter Fisher, "Basic Needs and the Minimum Wage," Iowa Policy Points, 10 April 2014, http://iowapolicypoints.org/2014/04/10/basic-needs-and-the-minimum-wage/

I have previously addressed inequality in "Is There a Natural Minimum Wage?", 15 March 2014, https://brucefnesmith.blogspot.com/b/post-preview?token=6_i3h0UBAAA.EJrIbUCcHdjx8sUmj232kw.IkRQAX4y8p8ZHblsIZ7smQ&postId=3005452853159856565&type=POST