Inequality in most Northern European countries is not a major issue, but in the United States it a growing one of concern that needs to be addressed if we as Americans wish to have a growing economy and a humane society.
Anyone who has taken an economics course whether in high school or university has read or Cliffe noted Adam Smith’s landmark book The Wealth of Nations. Smith logically maintains that self-interest is the motivator for the “invisible hand” that guides our economic system. A truck driver does not rise on a cold 4 o’clock in the morning and drive goods to the market place for love or humanitarian seasons, but for personal gain. (In Smith’s day it would have been a horse and cart that was driven) For this inconvenience the driver is paid, and usually in the past paid well for his efforts. Similar routine acts of this sort perpetuated and encouraged a thriving economy and provided services to the people. In his book Smith hypothesized it is for private returns and social benefits, as well as an alignment of rewards, in other words it was private rewards, wages, and a fair social distribution to equals in society. Relative to this the rank and file employees with higher productivity were provided a higher pay well into the 1950’s and the economy prospered. We grew together. At the time the top 1% in our society receive a more an ample 12% of the national income. That is nowhere near the case today; they take home 22% and own 36.4 % of the nation’s wealth. Presently the average pay for the very top 1% has reached $1.3 million a year. For the bottom 20% it’s only $17,800 per year. But Adam Smith was then aware of one of the circumstances in which private and social returns differ and warned this difference was unnecessary, but could be inevitable.
Presently employees and management frequently meet separately or together in a kind of conspiracy or a contrivance against the public to raise costs and prices for their entities. These inclusions often fail to produce efficiency and desirable outcomes while disregarding the financial wellbeing for the needs of the general public. Each enterprise avoids competition, unions and as well as corporations, and prefers a monopoly for its products and services. In these encounters corporate management always, or nearly always, come out much better on behalf of owners, investment capitalist, and Wall Street. This is the main cause for our county’s inequality failures in the long-term, because unfair alignment of awards, wages and salaries for all are held in trust, known as the Social Contract, is ignored.
Our system unfortunately is built to periodically fail, and as it does inequality grows to unacceptable levels. The effect causes downturns, recessions, and crisis of which we have had several severe since 1980 due to the mis-alignment of rewards between the working, middle, and upper classes, and that One Percent. Wages for the first two levels have stagnated or significantly been diminished since the 1970, and the middle class hollowed out, while the upper most influential and politically powerful class have significantly benefited, rewarded beyond their wildest dreams. The average Wall Street financier and most CEOs are reimbursed with a salary of $7,000 and hour and the average CEO receives take home pay that is 357 times what his average $20 per hour employee makes. The leader of this greedy pack is estimated to earn $48,500 an hour. These salaries in a time of economic uncertainty, or at any time, are certainly outrageous. The old Depression saying “The rich are getting richer, the poor are getting poorer” is today more than just true, it is despicable and sad. This span of wealth is not predetermined, but it is likely to get worse before it gets better for the mass of citizens, because it begins and is self-inforced by administrations since before the great deregulator Ronald Reagan. Remember him “A rising tide lefts all boats.” It only did so for Wall Street. Reagan opened the government to the corporations and they have not at all withdrawn their influence, their lobbying, nor their friendly bribes.
Inequality’s apologists will argue giving tax relief to the rich will benefit everyone, because it would lead to more growth. It is the concept of Trickle-Down-Economics. It has been discredited. The idea is in effect today and it has not led to more growth. As we presently can see most Americans have not gained by it and incomes have sunk or stagnated. Perhaps, a Trickle-Up or Bubble-up idea would be better. I believe so.
(Remember the guys Reagan thru Bush 43 were the presidents who sold our industrial base to Communist China and violence prone Mexico; but, don’t be concerned, we can get those jobs right back. That is if we lower our minimum wage to $2.50 an hour)
Returning to academic basics, the root cause for the our economic divide is the teaching of a principle. Every Business University graduating MBA’s from Harvard to Hoboken emphasizes the theme of maximum profit, that bottom line of any financial report. This is the most desirable and sacrosanct line for the prosperity of any business enterprise or corporate director. Thus the bottom line measures the company’s performance and success in lieu to any other business competitor or compassionate moral goal. The premise devises profit over social interests and nurtures unethical practices. The pursuance of pure unregulated profit is not in our best interest, and has turned out to be disastrous to the rest of society. It didn’t happen by accident. Market Forces, Lobbyist, Congress, the Administrations past are complicit in allowing corporations to run slipshod over the rights and interests of the American people who placed them in their powerful positions. Those with influence and power use it to strengthen and ensure perpetuation of their political and economic positions.
The solution for national disparity is mind-boggling. Major governmental policies would have to be changed and the whole system would have to be revamped. May I suggest implementation of a third-party. No, no, no not the Tea Party.
All the Best.