Is Inequality Systemically Inevitable?
Citing reputable research, The New York Times (2/11/14) says that in 2012, the average household in the bottom 90 percent of income distribution earned about $30,997. For the average household in the top 1 percent, the figure is $1,264,065, and for the top 0.1 percent, about $6,373,782. . . our 0.1 percent household made about 206 times, and our 1 percent household about 41 times, what our average household did. That gap has yawned over time. In 1990, for instance, the same multiples were 87 and 21. In 1980, they were 47 and 14. As appalling as those disparities are, they pale compared to the 0.01 percent at the top of the pyramid who earned on average $31 million in 2012.
What these discouraging statistics don't reveal is that every cent of this concentrated wealth is profit that comes from either the productive sector that sells its commodities - cars, food, computers, etc. - at a profit, or from the financial sector where capital itself is the profit-producing commodity. So inequality is actually a rush of profit to an elite through its simultaneous drain from the majority. Therefore profit, the sacrosanct bulwark of capitalism, is the substance of inequality that is, in turn, one of the root causes of social disruption.
In the early stages of capitalism, profit could be justified as the means of generating capital needed for the expansion of industry. If one were to invest in an enterprise, only the promise of profit could justify the risk, and an enterprise could expand only if sufficient profit could be accumulated as new capital for reinvestment. Capital that is not reinvested in productive forces accumulates in the hands of its owners while it deprives society of employment. For over thirty years, investment in productive forces has steadily decreased while profit has increased, and so capital has accumulated excessively. Depressed wages, robotization, and idle capacity due to industry's technical ability to produce far more than can be consumed, all play a part. Profit not reinvested in productive forces searches for a place to reproduce itself, and speculation is the answer. To accommodate this unprecedented influx of money, the financial sector created ever new and more complex instruments for profits, such as hedge funds and the barely comprehensible maze of derivatives. The growth of this sector has been staggering, accounting for an unprecedented 40 percent of total domestic corporate profit by 2004, while it had accounted for only 2 percent forty years earlier. The more money someone has, the more he can make; the more he makes, the more he can invest and the more he can leverage even greater investments - a surefire recipe for an upward-moving spiral that exponentially multiplies wealth in the hands of an elite ever more removed from the majority that has no capital to invest.
Since profit is the cause of inequality, the only way to solve the problem is to address profit, and there are several ways of doing that: 1. End profit as the exclusive motive for production and eliminate speculation - a socialist solution impossible at this juncture of history, although much that can't be discussed here militates for it; 2. Limit the rate of profit, which would return money to the people by dramatically lowering the costs of commodities - a politically difficult solution since it would incur vehement corporate opposition and put a decisive crimp in financial markets; 3. Impose heavy progressive taxation on profit - corporate and personal - that would redistribute profit to the greater society through the government. This is suggested by Thomas Piketty in his best-selling book, "Capital in the Twenty-First Century" - a solution that the wealthy also fight against; 4. Redistribute profit to workers. The New York Times (6/08/14) shows that the average income of the 200 top-earning U. S. CEOs is $20.7 million a year - a total of $4.1 billion. Were the individual incomes of these CEOs limited to a more-than-sufficient $4.1 million yearly, the total payout would be reduced to $820 million, leaving $3.2 billion to be redistributed to other employees. And that's in only 200 companies. Most of CEO income is in the form of stock and stock options. Since these would be part of the income redistribution to the workers, it would give workers some ownership that they don't currently have in the corporations in which they work. This is also a socialist-type solution that could be accomplished only through government edict, since the corporate wealthy would strenuously oppose this, too. However, this method of profit redistribution in tandem with the taxation suggested above would result in a society-changing reduction in inequality.
Clearly, all of the above require government intervention, since there is no currently operative mechanism within the capitalist system to recycle accumulated profit to the public. This could be branded as essentially - socialist - but outside of "socialist" solutions, does anyone have an answer to the inequality that's destroying our society?
Andrew Torre lives in Landgrove.
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