July 10, 2006

Inequality and Plutocracy in America

by Rodrigue Tremblay

 

"Democracy [is] when the indigent, and not the men of property, are the rulers."

Aristotle, (384-322 BC)

 

"Money becomes evil not when it is used to buy goods but when it is used to buy power... economic inequalities become evil when they are translated into political inequalities."

Samuel Huntington

 

 

One of the greatest benefits of a well functioning democracy is its capacity to bring about change: change of government, change of policies, change in the distribution of income and wealth, etc., and to avoid stagnation and immobilization. In any society, the tendency is for a few to concentrate power and wealth in their hands, leaving the many in a situation of dependence and despondency. The right to vote and to engage in political activity changes the balance of power in a country and opens the door for the establishment of a government, in Lincoln's words, "of the people, by the people, and for the people." However, too great a concentration of wealth inevitably brings forth corruption in government and a concentration of the tools of propaganda, both of which constitute the greatest threats to democracy.

 

The United States is technically a democratic republic, its leaders being elected at certain intervals. Economically, it is also a wealthy country, being endowed with a large and freely functioning domestic market. However, this is also a country where income and wealth inequalities are on the rise and where there is still a lot of poverty.

 

Some socio-economic indicators show that income and wealth inequalities are rising in the U. S. —For example, in 2005, chief executive officers (CEOs) in the United States earned 262 times the pay of an average worker, the second-highest level in the 40 years for which there is data. In other words, a CEO earned more in one workday than an average worker earned in the entire year. This was not always the case: In 1980, a CEO earned 42 times the average worker’s pay, and the ratio was 85 times in 1990. Wealth concentration and poverty follow income inequality. Today, the richest one percent of Americans owns 40 percent of the nation’s household wealth. On the other hand, one in five American children lives in deep poverty, while economic opportunity and the chances for social mobility are reduced for an ever-growing proportion of children.

 

The likelihood that a child born into a poor family will make it into the top five percent of income earners is just one percent, according to "Understanding Mobility in America", a study  by economist Tom Hertz from American University. By contrast, a child born in a rich family had a 22 percent chance of also being rich as an adult. In other words, the chances of getting rich are about 20 times higher if one is born rich than if one is born into a low-income family. Even for children born in middle-class families (family incomes of $42,000 to $54,300), their chances of one day attaining the top five percent of income earners are only 1.8 percent. This is lower than in most other democratic countries. For example, intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.

 

One of the main reasons for poverty in the USA is the high proportion of American families, even among those who have at least one member who is working, who have no health plan whatsoever. A study by the Commonwealth Fund indicates that, in 2005, 41 percent of American workers did not have health insurance coverage. This amounts to an estimated 48 million American adults who spent any time uninsured in the past year. As a consequence, more than half of uninsured Americans either had problems paying their medical bills or had to go into debt to pay them. This is in a country where health care spending is climbing by more than 7 percent per year.

 

Another reason for increased income inequality in the future is the shift taking place in pensions for workers. An established trend in many companies is to reduce, freeze or eliminate pensions for ordinary workers, while increasing the pensions reserved for executives.

 

There are social and political consequences when income and wealth disparities become too great. A wealth aristocracy can appear that will demand special privileges in controlling various institutions, not the least of them being the government.

 

Presently, ultra right-wing politicians, with the support of ultra conservative media, are busy building a wealth aristocracy in the United States. They are busy cutting taxes for the very wealthy and for large corporations, while reducing assistance, pensions and social services to the very poor. They are content tilting the tax code in favor of the very rich and against the working poor, while freezing the minimum wage and lowering—and even abolishing—the tax on large fortunes. Meanwhile, middle- and working-class families are being priced out of college education for their children, because of cuts in government grant aid and the failure to extend the college tuition tax deduction. The end result will be a work force badly prepared for the 21st century. That may be what the conservatives really want, i.e. an uneducated work force which can be more easily manipulated.

 

The move toward an obscene concentration of wealth was reinforced, on June 22, 2006, when the House of Representatives, supposedly there to represent the people, passed a law to substantially cut the estate tax, by an estimated $750 billion for the first 10 years of implementation, after 2010. President George W. Bush has sought the complete repeal of the tax on large inherited fortunes, even though his administration has built up public deficits and the public debt by $1.3 trillion, between 2002 and 2005.

 

As a consequence of rising income and wealth inequalities in the U. S., politics has become more and more a rich man’s game, supported by an army of lobbyists and their campaign cash, and a concentrated media spin machine. For example, in the 435-member House of Representatives, 123 elected officials earned at least one million dollars in 2005, according to released financial records made public each year. In the U. S. Senate, one third of them are millionaire income earners. By comparison, less than one percent of Americans make seven-figure incomes.

 

In conclusion, the United States seems to be moving more and more away from a government "of the people, by the people and for the people", towards a government of and for the rich and influential.

 

Rodrigue Tremblay lives in Montreal and can be reached at  rodrigue.tremblay@yahoo.com

Also visit his blog site at www.thenewamericanempire.com/blog.

Author's Website: www.thenewamericanempire.com/

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Posted, July 10, 2006, at 9:00 am

 

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