Where is the Redistribution Debate?

The central issue of our contemporary economy is the enormous skew in the distribution of wealth and incomes towards those who run the place. Our economic system has been shifted to favor the elite group who wield the power. It is always thus of course. But periodically societies have the opportunity to take stock and make adjustments. Now is one of those times. Or it should be.

I am upset that we appear to be missing the opportunity.

One of the hopes I had two years ago when the Democrats took power was that the egregious bias towards the top echelon of our society would be redressed and a new balance put in place in order to re-open up the flow of wealth to a larger percentage of society. This hasn’t happened. Indeed every effort appears to have been made to preserve the status quo, with the possible exception of health care reform the success of which still hangs by a thread. Our leadership just didn’t see the need to enter into a public discussion about redistribution. It should have.

Why?

Because there is not such thing as neutrality in the distribution of wealth. It is always the outcome of an active process. Right now the dominant process is one that favors those who can distort markets and obtain extraordinary incomes. They have also been able to protect their various privileges in the tax code to ensure that they pay a smaller percentage of this extra income as tax. Whether it be rich individuals, hedge fund operators, large corporate CEO’s, or the entire army of professionals attending to their needs, this group has suborned a greater percentage of our wealth than at any other recent time. And they are clinging to it with an unmatched zeal.

I don’t blame them. To the winner goes the spoils. And they won the debate over ideology. We adopted their preferred approach to economic policy way back in the 1980’s. The consequences of which are now apparent. The top tier won. The masses lost. We have redistributed upwards relentlessly. They didn’t just earn it. They took it. The share of productivity gains taken as profit rather than as wages is sufficient to illustrate the shift in power. Last year was the best year since 1950 for profits. Wages are stagnant. And before you go crying about this not being a zero sum game: I agree. Productivity improvement should be a positive sum game. Why has it not been? I am not arguing that profits should not go up. I am arguing about the way we divvy up the gains. All profit and no wage is not sustainable in the long term. Greed is a short term strategy. It defeats itself eventually by sowing the seeds of its own destruction. A wiser elite shares. We do not have a wise elite.

This is skew not an accidental outcome of some primeval force we cannot tinker with. It was the outcome of a deliberate policy.

Again I don’t blame them.

I blame us.

We tolerated it it. We abetted it. We went along with it. In election after election we fell for the allure of lower taxes and the steady defunding of the programs that shift wealth our way. We have now arrived at the denouement where we are being told we can no longer afford the central planks of our social safety nets. Without those the collapse of the middle class will accelerate and the split in society will yawn ever wider.

The democratic process is our protection against exploitation. It is within our power to say no. We simply have to realize what is going on. Unfettered capitalism always channels incomes upwards. Democracy channels it towards the masses. A healthy balance is hard to find and arguments are always going on about where to pitch the separating point. That’s normal. What is not normal, in post war America, is the total domination of the elite and its ability to scoop up the gains almost exclusively.

We have had thirty years of redistribution upwards. We should be debating whether we want that to continue. But we are not.

It is time we did.