Friday, September 27, 2013

Inequality For All: Robert Reich’s Powerful Message: Not "Trickle Down," But "Middle Up"

My Article For Voice Of Russia

The documentary Inequality For All, directed by Jacob Kornbluth, features Robert Reich, former Secretary Of Labor under Bill Clinton, author of Aftershock: The Next Economy and America’s Future, in an impassioned exposé on why the chasm between the rich and the poor has much further reaching implications than a mere income gap.
In and of itself, Reich points out, inequality can be viewed as an inherent part of an incentive-driven capitalist system, but Inequality For All asks when inequality becomes a problem. This question takes on particular urgency when we consider that of all the developed nations, the United States has the greatest degree of wealth disparity. Much like The Corporation, Inequality For All is broad in its scope, and clearly shows the interconnectedness of a number of seemingly disparate phenomena. Filmed in the style of other policy lecture documentaries, Inequality For All uses Reich’s Wealth And Poverty class at UC Berkeley as the platform for some rather hair-raising revelations (a lot of them new even to those very familiar with the Occupy movement’s platform), yet the tone of the film remains optimistic about disrupting this status quo.
Just how consolidated is wealth at the top, you might ask? Put simply, 400 people in the top income bracket earn the same amount as 150 million in the lower tiers. Reich homes in on a recent study by Pikkety and Saez that analyzed tax data dating back to 1913, when the income tax was first instituted. The study finds that 1928 and 2007 were the peak years of income concentration at the top, creating a graph that resembles a suspension bridge. Both years were followed by calamitous market crashes — a parallel that Reich thinks is not random at all. As income got more concentrated at the top, the rich turned to the financial sector for investment, creating a speculative bubble. And as middle class income was stagnating, that in turn created a debt bubble, conditions that inevitably precipitated economic crises.
The crux of Reich’s argument is that what makes an economy stable is a strong middle class. And while his assertion that consumer spending makes up 70% of economic activity is contestable, there can be no denying that the middle class plays an integral role in the economy. The rich alone are not spending enough to generate the requisite level of economic activity. Inequality For All features venture capitalist/1%-er Nick Hanauer who debunks the myth of the rich as “job creators” in favor of a feedback loop theory that Reich also espouses (he calls it the virtuous cycle). If there is one sound bite to emerge from the film, it is that Reich supports “middle up” rather than “trickle down” economics. If the middle class is not doing well enough to create healthy consumer spending levels, then the economy as a whole will suffer—in other words, as the film rightly notes, one doesn’t have to be a bleeding heart liberal to understand that this is not merely a social justice issue. Reich argues that even from a cynical and self-serving perspective, the top 1% should have an interest in how well the middle class is doing as they drive spending in a rather significant way.
Was there an idyllic time that was different from the current abysmal state of affairs? Reich points to the years between 1947 and 1977 as the golden age of great prosperity and very low inequality. What were we doing right then? Public higher education spending was much more of a priority and the proportion of people who were able to receive a college degree without being saddled with mountains of debt was much higher than today. With decimated federal funding for higher education nowadays, little is trickling down to the states, he argues, causing unparalleled spikes in tuition costs. Unions were also very strong, ensuring that worker wages remained robust. With the decline of unions, Reich argues, wages and rights have suffered a crushing blow. Not only have wages remained stagnant, but upward mobility is also equally imperiled. 42% of children born in poverty will never leave poverty behind. No other developed nation, Reich argues, even the UK with its vestiges of a monarchic system, has less social mobility than that.
Inequality For All covers a number of other plucked-from-the-headlines issues thoroughly as well, such as the shockingly low tax rate most of the rich actually pay, and how the tax code has increasingly evolved to the benefit of the haves. It also talks about the impact globalization has had on worker wages and the fact that which countries’ workers add the most value determines what country reaps the benefits. A prime example is that even though iPods are assembled in China, it only earns 3.6% of the value of an iPod, with Germany and Japan taking much more significant portions because the parts come from there.
The ultimate upshot of inequality is that its deleterious effects ripple outward, profoundly disrupting a healthy economic cycle. Reich calls equal opportunity the “the moral foundation stone on which this country and our democracy are built,” and that is not mere exaggeration or partisan-minded alarmism. When money starts to infect politics, as it has done now with lobbyists and PACs, it undermines democracy and paves the way to plutocracy. Inequality For All offers plenty to get outraged over, but Reich remains measured in his rhetoric. Instead of portraying inequality as an “us versus them” zero-sum game, he explains that is in our interest and in our power in to disrupt the status quo by demanding change.

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