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[Vanity Fair] Of the 1%, by the 1%, for the 1%

Discussion in 'BBS Hangout: Debate & Discussion' started by Xerobull, Apr 1, 2011.

  1. Xerobull

    Xerobull You son of a b!tch! I'm in!

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    link (pretty much sums up what I've been feeling for a few years)

    Of the 1%, by the 1%, for the 1%

    Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.

    It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

    Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.

    Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.

    First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.

    Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

    None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.

    Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.

    But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

    When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

    America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.

    Or, more accurately, they think they don’t. Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.

    In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain. The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next? They are right to worry. These are societies where a minuscule fraction of the population—less than 1 percent—controls the lion’s share of the wealth; where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve life for people in general.

    As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places.

    Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.

    The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.
     
  2. Mathloom

    Mathloom Shameless Optimist
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    The main problem I see with this system is that it just moves poverty out, and there seems to be an assumption that it is gone for good.

    In reality, the jobs of the lowest earners are shifted to another place where the same pay is above what they would normally expect. So working in sweatshops was moved, for example, to Indonesia. But the people who were doing that in the US are still alive and don't have the skills to move up, at least until the following generation.

    Now in Indonesia, there are people who are happy with the sweatshop because it quadruples their pay. So they will take it happily, and develop, until one day they want a poorer country to accommodate sweatshops for them. So on and so forth.

    Unfortunately, there are a limited number of countries or poor places. So whoever is holding the ball last will have to keep it, because the people who already passed the sweatshops over don't want to go back. This is where the structure will tumble. This is where the richer countries will have to bully the poorer countries and keep them poorer.

    This is essentially why, for example, China is manufacturing everything, and also why China's economic growth is alarming. Because they are climbing the ladder, rather than accelerating at a normal rate which keeps them at their rank. Climbing the ladder will annoy the people ranked above.

    Now what is creating that 1% is this: when that sweatshop leaves, there are a bunch of people who are less well off in their own country, and a company that is financially making more money. If this cycle keeps repeating itself, corporations will gather wealth faster than the poorest people can recover their lost wealth.

    At some point in the future in a "knowledge economy" structure, the point is for the brains to be in the US and the rest of the body to be spread around the world. Money, mind and management stays in the US, everything else shifts outside and contributes to the money, mind and management. That's a great thing to have, but it ignores the reality that the rest of the body is in the hands of other nations who will soon have their own ambitions, and sometimes conflicting ambitions. So in order to ensure the security of this structure, you have to make sure that "sovereign" nations align themselves with the strategy, and anyone who doesn't is viewed as the cancer in the body and has to be cut out.

    Obviously, this is not a person or group of people or a population doing it. IMO this is just the natural flow of this structure given that there is no independent authority to weed out conflicts of interest. It's not America-specific. It's just how things end up with this mixture of capitalism and power. It's unfortunate, but I've long believed that it's something that has to happen and destroy itself. I don't think it's something that will be corrected in our lifetimes, and I don't think it's any worse than pure communism or whatever other inflexible system.
     
  3. pgabriel

    pgabriel Educated Negro

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    there are a couple thoughts that come to my mind. first of all, how much of that income for the top 1% has come from the stock market explosion, which obviously has slowed down in the last 4 years but still.

    americans will not protest because the middle class do live comfortably and everyone believes they can be rich one day.
     
  4. ipaman

    ipaman Contributing Member

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    in this country a few of them actually will. but only a few.
     
  5. Rocket River

    Rocket River Member

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    What is considered MIDDLE CLASS nowadays?

    Rocket River
     
  6. Steve_Francis_rules

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    I believe according to John McCain, it was everyone who makes less than $5 million per year.
     
  7. Xerobull

    Xerobull You son of a b!tch! I'm in!

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    Well, F, sign me up for 4mil.
     
    1 person likes this.
  8. Dubious

    Dubious Contributing Member

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    Meet he new feudalism
    Same as the old feudalism

    It is the natural order that the fittest animal uses his advantages to increase his dominion. It's the evolutionary imperative, to expand his own progeny. The advancement of Civilization has always been in opposition to that 'natural' order; the conflict between the dualities of man as an animal or as something of a higher order (that may be real or may be an illusion). The Visceral vs. The Cerebral.

    Religion is cerebral, Democratic government is cerebral, socialistc economics are cerebral.
     
  9. Steve_Francis_rules

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    When we've set up a system that allows a person to guarantee the wealth and success of his descendants for generations no matter how inept they are, that's no longer natural.
     
    1 person likes this.
  10. FranchiseBlade

    FranchiseBlade Contributing Member
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    There's no doubt we need more mobility in our society. We need a better chance for people to work, rise, and climb. We should look at what nations like Denmark, Canada, France, and Spain are doing that makes their citizens have better chance at upward mobility than our own citizens.
     
  11. Dubious

    Dubious Contributing Member

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  12. glynch

    glynch Contributing Member

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    Keep the faith. Don't be tempted by envy or class warfare -- or liberal do gooders, who will try to fool you with poiinting out the details of the lives of losers like the poor and much of the middle class.

    Scientific economics proves that wealth will eventually trickle down and then we will be as well off as is absolutely possible. It is true that such interferences with the economy as the existence of government and large corporations and non-believers, who immorally refuse to submit to the market and engage in acquring political power, may ruin the model , but we are working on that.

    Keep the faith brothers. Remember: we are the best country ever; we are economically better off than Mexico and have more freedom than North Korea and even China.

    Sincerly yours,



    A devout libertarian/ economic conservative
     
  13. Dubious

    Dubious Contributing Member

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    Today is the second. You can't April Fool us today Glynch.

    How is the greed of the poor for more of the worlds assets, any different than the richman's greed for more of the world's assets? One side has capital as it's advantage to exploit and one side has numbers (votes or expendable people) as it's advantage to exploit.

    It make sense that the rich would use expensive Pscy-ops since they are lacking in numbers: controling the message, buying the votes, buying politicians, bait and switch, making a weak but loud cases masquerading as the opposition.

    Social networking looks to be the new weapon for the masses. It can bypass the traditional corporate and government controls on information and reach huge numbers with whatever message strikes a chord with the majority .. like " the time is now, it's now or never".

    Could be a new age in the Toffler sense, a global ethos, calculated, the lowest common denominator for huge numbers of people; a global of peer review of ethics or politics.
     
    #13 Dubious, Apr 2, 2011
    Last edited: Apr 3, 2011
  14. Northside Storm

    Northside Storm Contributing Member

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    Don't worry. The generation you are passing the torch to is the counter-punch to Generation X, and one prone to bouts of activism.

    http://www.americanprogress.org/issues/2009/05/opinion_0518.html

    [​IMG]

    [​IMG]

    If you compare this group to Generation X back when they were in the same 18-29 range, there's a marked swing from the conservative politics of yesterday to the progressive politics of today.

    This is also a group of individuals who obviously lean Democrat---but also refuse to be categorized as such, and much prefer independent alternatives if they pop up.

    Millennials also tend to action when their voices are unheard---the best case of course being the young leaders of the revolution in Egypt---but you can also see a developing trend in even the most industrialized of nations.

    http://www.thenation.com/blog/158597/wisconsin-students-protest-governors-attack-unions
    http://www.bbc.co.uk/news/education-11829102
    http://mostlywater.org/student_protest_festive_and_pacifist_montreal_police_attacks_video (I was at this btw---friend has two stun grenades the cops threw at us kept in his room somewhere now)
     
  15. Wakko67

    Wakko67 Contributing Member

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    Let's hope the next generation to come to power is smarter than the current or past ones. Greed is going to be the downfall of America.

    Great article, thanks for sharing.

    On a similar note, isn't rep on here kind of the same? The guys with a ton of rep seem to get it a lot quicker than us up and comers. Clutchfans revolution in the making! :mad:

    :grin:
     
  16. mateo

    mateo Contributing Member

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    "Middle class" "Top 1%"...these mean nothing without actual dollar amounts.
     
  17. Rocket River

    Rocket River Member

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    Basically. These are thrown around without any real definition.

    Rocket River
     
  18. Wakko67

    Wakko67 Contributing Member

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    How is "top 1%" undefined? :confused:

    I don't get it. What's probably worse is other areas these terms are thrown around in like the Final Four game tonight. They said a Kentucky player shoots 63% from the free throw line. Whatever that means. Stupid liberal commentators. :rolleyes:
     
  19. Dubious

    Dubious Contributing Member

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    They are are the ones that will have to live with the consequences.
     
  20. Steve_Francis_rules

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    I agree that there's no standard definition for "middle class," mostly because almost everyone likes to consider themselves middle class.

    But top 1%? How is that confusing to you? Those would be the people with more wealth than the other 99% of the population. In terms of household income, the top 1% starts at somewhere around $300k.
     

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