Economic Inequality Subverts Democracy, Distorts Priorities


from the New Unionist, August 2002

Economic Inequality Subverts Democracy, Distorts Priorities

Nobody who knows anything denies there is a great disparity of wealth in the United States. And while the disparity is not as extreme in other industrialized countries, economic inequality is a built-in feature of every capitalist society.

While the system's defenders acknowledge the obvious, they refuse to acknowledge that economic inequality is a bad thing. In their view, capitalism rewards more those who contribute more to the process of "wealth creation." That's only fair, they say.

Moreover, people need the incentive of personal wealth to be creative and innovative. It is the business creativity of entrepreneurs, the story goes, that "grows" the economy and provides increased material well-being for the less-deserving multitude.

But, leaving aside the entrepreneurs for a moment, great wealth needn't come from active participation in managing a company. While stupendous new fortunes are made by monopolizing new industries, as in the case of Bill Gates, old fortunes are quietly passed down through the generations of the big stockholding families, the inheritors having to do nothing at all to receive their share of the booty.

The existence of big-money inheritance alone gives lie to the claim that wealth is the reward for productive activity. It is an ideological embarrassment to the capitalists themselves, who want and need to believe they deserve their wealth.

Thus a number of the superrich came together to oppose Bush's plan to eliminate the estate tax. While the Republicans pushed the repeal by saying it would help save family farms, hardly any family farmers - or any workers worth less than $600,000 - are subject to the tax. Repeal is obviously just another of W.'s tax giveaways to his megabuck pals who made him president.

But billionaires George Soros and Warren Buffett, along with millionaire Bill Gates Sr. (MicroBill's dad), came out publicly against repeal of the estate tax. While this seems like a selfless act for the public good, and may indeed have an element of altruism, their opposition reflects the common resentment of "self-made" men toward inherited wealth. Acquiring wealth without "earning" it diminishes the moral value they want to believe wealth imparts to people like themselves.

But just how did these folks "earn" their fortunes?

Soros and Buffett rose from relative poor-boy status to the top of the money heap through their own efforts. But those "efforts" did nothing to increase the wealth of society. Soros made his pile as a currency speculator, and Buffett as a stock speculator. Their "work" consisted of relieving other less clever speculators of their cash and adding it to their own bank balances.

Gates Sr. is a successful lawyer. The big legal fees come from representing corporations or wealthy individuals from the grasping mits of their competitors, angry consumers or the government. Here again, acquiring personal riches had nothing to do with the creation of wealth.

But what about Bill Jr.? He created the software giant Microsoft out of nothing, and no one can deny the tremendous increase in wealth that has resulted from the computer revolution.

Except Bill didn't single- handedly create Microsoft. While some of his first partners were creative engineers, Bill himself contributed virtually nothing to product development. He busied himself with the job of assuming control of the company, hiring smart software designers to work for him, and crushing the competitors.

Having thereby achieved de facto monopoly status in the market, Microsoft's fortunes soared, as did its stock price. As Bill had made sure he owned the biggest chunk of the stock, he rose to Numero Uno in the ranks of the world's moneybags.

While Microsoft is a real company making real profits, other new businesses of the computer revolution were more notable for losing money. However, this minor technicality didn't prevent their Bill Gates wannabes from amassing their own fortunes.

Helped along by the Wall Street hype artists, the stock prices of these doomed companies didn't drop - they soared! And as soon as it was legally permissible to do so, the insiders sold their shares for hundreds of millions to the poor schmucks who thought any outfit with in its name couldn't do anything but keep going up. And now these "people's capitalists" are the proud owners of stock hovering just above zero, if it's worth anything at all.

So, as is the case with most of the so-called libertarian "beliefs," the idea that personal wealth is capitalism's reward for producing economic value for society is an imaginative fairy tale. In fact, great personal wealth is either the reward for being born to wealthy parents, or for being the most singleminded and ruthless acquirers of other people's money, diminishing rather than uplifting the social good in the process.

By the same libertarian logic those with the smallest incomes must be making the least contribution to society. But even a casual look at the facts shows the opposite is true.

Food production is one endeavor no society can do without. But the people who do the work of producing food for consumption - farmworkers, slaughterhouse workers, cannery and processing workers, restaurant workers - mostly receive below average wages.

But the real chasm of inequality isn't between food-industry workers and higher-paid workers of other industries. It's between the productive workers of each industry and the major owners of each industry, the big stockholders who contribute no useful labor to production or distribution.

Nor is it a matter of lower-wage workers being more or less important than higher-paid workers. All the necessary jobs have to be done in order for the workplace, the industry, the economy to function.

For example, if the doctors in a hospital don't have the combined support of nurses, nursing assistants, various specialized technicians, clerical staff and custodial workers, they can't practice their advanced skills in healing patients. Take any group out of the mix and the hospital couldn't function.

On the other hand, remove the HMO and insurance company CEOs from the mix and the healthcare system would function much better! Administered instead as a democratic workplace community, with decisions made in a associated manner by all the workers of the workplace, what should be the top priority of a healthcare institution - patient care - would be the top priority.

The problem with economic inequality is not only that some people have great wealth while most are just getting by.

Just as harmful is the way it skews the priorities and goals of economic activity, since the profit-takers have to be fed in order for any economic activity to take place. If there's no profit for these few, the needs of the many, for which there are the economic resources to meet, must nevertheless go unmet.

In addition, for some people to attain great wealth without working, they must get it from people who are working and creating wealth. The existence of great inequalities is evidence of the existence of this exploitation.

Having to face these uncomfortable facts of capitalism, its defenders are left to their fallback position: "Any other system just wouldn't work because people are different and you can't make them equal."

First, this confuses two separate concepts: difference and equality.

Equality in its social sense does not mean sameness. Obviously, people are not the same. Whether by nature or nurture, or probably a combination of both, people have different potentials for different areas of physical and intellectual activity.

Changing the economic system won't change that. What it will do is insure that every individual has the opportunity to develop whatever potential talents and capabilities they do have.

As it is today, despite all the blather about "you can be whatever you choose to be," most people fall into a career out of economic necessity rather than choice, and then get stuck there out of continuing economic necessity.

Capitalism in reality blunts individuality rather than promotes it. Workers have to mold themselves to the needs of the system, which are determined by what is profitable in the marketplace, rather than themselves determining what their own needs are and how best to satisfy them.

Equality means having the equal opportunity to develop your own abilities, without having the "right" to advance at the expense of others. It means having the equal opportunity to influence the decisions and outcomes of the economy and society, the equality in government that can come about only in an democratically-controlled economic system.

But today, as a result of economic inequality, government is controlled by an elite of big wealthholders. Their corruption of politics is now so blatant that hardly anyone else believes their voice counts anymore. And they're right - it doesn't.

The liberals and reformers who think they can change this with campaign-finance reform or new voting machines are on a fool's errand. One way or the other big money always finds a way to control government. Just as it got around the post-Watergate reforms intended to limit its influence, it will maneuver around any new reforms that might somehow sneak through Congress.

Those who seek real democracy must attack the economic inequality that blocks its realization. The idea of economic equality may seem unrealistic to many people today.

But before 1776 the idea of political equality seemed unrealistic to most people too. Yet faced with an irreconcilable conflict of economic interest with Great Britain, Americans were forced to choose the only workable solution to the political stalemate - democratic revolution.

Likewise today. The aspirations of the majority for security and well-being, a clean environment and a peaceful world are blocked by the profit interests of a small minority.

The only way out of the impasse is to follow the example of our revolutionary forebears and create a new system of economics and government, one that can direct our resources to meeting human needs and solving human problems.