President Obama recently gave a speech in which he decried growing inequality in America, and minorly touched on the subject again during his State of the Union address (though he chose to focus much more on "creating jobs"). Since Obama's December speech on inequality, the topic of economic inequality has become more common in popular media, but again it seems that the vast majority of people fail to understand the basic root causes of inequality. One thing that I've commonly heard is the claim that inequality can be reduced simply by reducing unemployment. This is not only completely false, but is in fact the opposite of the truth.
The chart below shows both the unemployment rate and the percentage of income going to the top 1% of receivers over roughly the past 100 years.
The low unemployment rate in 1916 and 1917 was a product of World War I. This does not correspond to a rise in inequality for two reasons: 1) because unionization spiked during this time and 2) during war time various economic regulations were put in place to reduce profit taking (though large profiteering was still not eliminated). Following World War I, however, we see a sharp spike in unemployment, followed by a sharp fall in unemployment during the relatively unregulated 1920s. The area shaded in blue shows the inverse correlation between the unemployment rate and income inequality. As the unemployment rate fell during the 1920s, the percentage of income going to the top 1% of receivers increased. During this time unionization was declining because of government policies and public attitudes resulting from fears of communism following the Russian Revolution of 1917. There was no federal minimum wage at this time. We also see that as the unemployment rate began going back up in the late 1920s, income inequality began declining. What this shows basically is that we had peak income inequality during the period of lowest unemployment.
Following that we have the area shaded in yellow, which goes basically from World War II to 1980. This was the "Golden Age" of the American middle-class. During this period we saw relatively low sustained unemployment, high GDP, and low income inequality. But was the low inequality a product of low unemployment? No, not at all. It was a product of government policies. As you can see in the chart, this was a period of rising minimum wages and high unionization. The rise in unionization during that time was a product of government policy and support. In addition to those factors, this was also a period of heavy economic regulation, with government imposed economic controls over many industries, like aviation, energy, banking, etc. This was also the period of maximum progressive taxation, with effective tax rates on the highest incomes approaching 90% in the 1950s and 1960s.
In fact even during this period we see an overall trend of rising unemployment and declining income inequality, showing that income inequality wasn't a product of low unemployment. In fact declining income inequality is more closely correlated to the minimum wage during this period than the unemployment rate.
Then we have the period shaded in red. This is the period of de-regulation, accompanied by declining unionization, a falling minimum wage, and a marked decline of progressive income taxation. As you can also see in the first chart, there is a clear correlation between the unemployment rate and income inequality. As the unemployment rate declined during this period, income inequality rose. The periods of especially low unemployment in the late 90s and early 2000s are accompanied by spikes in inequality.
People (like the president) who claim that "creating jobs" is a way to address economic inequality are completely wrong. "Creating jobs" is one way to reduce poverty, yes, that is true, but reducing poverty is not the same thing as reducing inequality. I have seen multiple people claim that a "full employment" policy would reduce inequality. Totally false. The belief among these people is that when unemployment rates get very low, the labor market hardens, resulting in rising wages, which will, on their own, reduce inequality. This simply isn't the case, as the data shows, and understanding why this isn't the case is very important.
The only times in American history that we've seen both low unemployment rates and reduced income inequality has been during World War I and World War II. Those are the only two times. Both of those periods were accompanied by high unionization rates and heavy economic controls imposed by the government, including regulation of profits. Those are the only conditions in American history in which low unemployment has been accompanied by reduced income inequality, and both of those times the unemployment rate fell below 2%, heavily influenced by the fact that tens of thousands of working age men and women were taken out of the labor pool to fight in the wars.
The reason why low unemployment rates, by themselves, don't reduce income inequality is quite simple. It's because no matter what the labor market conditions are, an employer isn't going to intentionally hire someone who won't generate revenue for the business. So, every employed worker is generating profits, at least in theory. Times of low unemployment are actually times when workers are most likely to be generating profits, because times of low unemployment are also times of high consumption. Times of higher unemployment are times of lower consumption, during which employers may retain less profitable workers over the short-run in hopes that they will need to retain that talent for times when the economy "picks up". This means that employers actually get a lower rate of return on workers during times of higher unemployment, and a higher rate of return during times of low unemployment.
In addition, even if extremely low unemployment were to reduce the rate of return per-worker, the fact that a larger number of workers are working, creating more value, means that a greater volume of profits are being generated. Basically, the more people work, the more profits are generated, which raises the incomes of capital owners. The idea that the labor market, all by itself, will "naturally" and "inherently" reduce profits for capital owners is absurd, because even in the hardest of labor markets capital owners have distinct advantages in the labor exchange transactions, as explained in my articles on capitalism: Wages and Labor Markets, Evolution of the American Economy
The way that capitalism works is that the owners of capital "get a cut" of all the value created by workers. Jobs are not charity, they are not gifts. Employers hire workers because they need workers to generate profits. The more consolidated that capital ownership is, the greater the amplifying effect of inequality, because it means that the excess value being created by each worker that goes to profits is being funneled to smaller portion of the population. And today, economic inequality in America and around the world is being driven not only by domestic working conditions, but by global working conditions. American inequality is being partly driven by the profits generated from foreign workers, in places like China, India, South America, etc. A piece of all the value those workers cerate is being funneled to a relative handful of major America capital owners.
The idea that "all we need to do" to reduce economic inequality is "create jobs" and reduce unemployment is rooted in a false belief that income inequality can be reduced through "market mechanisms", and that we don't really need to do anything significant to address it, other than "invest" and "work hard". This is completely false. Capitalism is a system that fundamentally and inherently drives economic inequality, because the entire system is predicated on transferring wealth from workers to property owners, i.e. capitalists. The more workers work, the more profits are generated, and the richer the few capital owners become. Thus, creating more jobs does nothing to reduce inequality, in fact it only increases inequality. The only things that are historically proven to reduce income inequality within capitalist economies are non-market policies, like collective bargaining through unions, minimum wage increases, regulation of executive pay, regulation of profits, regulation of markets.
Those are certainly not the only ways to reduce economic inequality, but those are the mechanisms that have been used in America and other Western capitalist economies to effectively reduce inequality in the short term. However, in my opinion, these types of policies are doomed to long term failure, because they fail to address the root cause of economic inequality in capitalist economies, which is consolidation of capital ownership. The problem with the New Deal reforms was that they did nothing to reduce consolidation of capital ownership, in fact they likely exacerbated it. The source of wealth and power is ownership of capital, and as long as a relatively small number individuals are able to retain ownership of the majority of capital there is no way to check their political or economic power over the long term.
This is why real economic reform and real reduction of economic inequality requires re-distribution of capital ownership and mechanisms to ensure that capital ownership remains permanently highly distributed among all people. In my opinion the three fundamental building blocks of economic fairness and equality are distributed ownership of capital, universal public education, and universal public insurance for all major forms of risk, such as disability, unemployment, health, and life insurance.
"Markets" are never going to reduce economic inequality. "Creating jobs" will do nothing to reduce economic inequality, it's a proven fact.
This is an open response to an article in Jacobin called There's a Gene for That. I'm replying to this because it touches on a subject that I've been grappling with a lot lately, which is how many “leftists” fail to acknowledge biological reality.
Mr. Mehta, while you raise some reasonable points, I think that you have fallen into the same trap that many, if not most, leftists have fallen into with regard to biology, which is basically buying into the same fundamental framework as conservatives, but simply taking the opposite side of the coin.
Let me first say that as someone with degree in biology and who is a (let's say) “pseudo-neo-Marxist” (whatever that may mean), I am very frustrated with how many leftists view biology. In fact I think this frustration is a common circumstance among left leaning biologists.
I want you to hear me out and I want to change your mind on this issue.
When I read your article and listen to your argument, and the arguments of many other leftist who hold similar positions, what I hear is a mirror image of what conservatives believe in regard to biology. Both your view and the conservative view seems to be that biology dictates what is right and wrong, what is acceptable or not acceptable. The only difference is that conservatives claim that inequality is an inherent natural phenomenon, therefore it is justified, while leftists take the position that inequality and all manner of obvious injustices are bad, therefore “they cannot be natural”.
This is essentially what your argument boils down to in my mind. What I am going to tell you is that inequality and all manner of injustices are natural, but the fact that these things are natural does not in any way justify them.
In my opinion, it is of vital importance that “the left” understands this and takes this position, because what many leftists like yourself (presumably) have done, is placed the core foundation of leftist theory and ideology on quicksand. What you've done is you've basically said, “all leftist ideology is built on the premise that there are not inherent differences between people,” i.e. that all people “are in fact equal”.
What this argument does is it says, if it can be proven that all people are not in fact “biologically equal”, then our entire case for social equality falls apart.
What I'm telling you is that the case for social equality does not, and cannot, rest on an assumption of “biological equality”.
Biological inequality is an inescapable fact, however, what's also true is that minor biological differences are greatly exaggerated by social constructs. Essentially, “right and left” are “both right” when it comes to claims for the root causes of inequality, but the problem is that “the right” tries to justify all inequality via biological inequality while “the left” tries to claim that all inequality is social in origin, fearing that acknowledging any biological inequality proves the positions of “the right” correct. And the really big problem with all of this is that biological inequality is scientifically provable and quantifiable, while social causes of inequality are not, or at least are not as easily and directly provable and quantifiable. This puts “the left” in a very bad position, because even though it may be true that there are many social causes of inequality, it is much harder to prove those than it is to prove the biological causes.
Essentially both “the left” and “the right” take the same position, that the role of society should be to “enforce the natural order of things.” The difference is that “the right” claims that inequality and hierarchy are the natural order of things so those things must be good, and society should therefor be built on those principles; whereas “the left” takes the position that hierarchy and inequality are bad, therefore they must be “unnatural”, and therefore must be “caused by” society. The thinking then goes that if we can eliminate the effects of society, we would then “return to” a just natural state. (This is a major theme in feminsit "rape cutlure" theory)
What I'm telling you is that the natural order of things is unjust and all manner of behavioral ills are rooted in our biology. Historically society has tended to reinforce and exacerbate those natural injustices, however the role of society should be to counteract natural injustices and try to create a just world, despite the fact that the world is inherently unjust.
And this takes me to one of your core augments, which is that “evolutionary theory” has historically been used to justify “power and inequality”. Here I will point you to my article The Mis-portrayal of Darwin as a Racist. In that article I basically show the opposite of your claim, which ironically is a claim commonly made by anti-evolution right-wing fundamentalists against evolution. The conservative idea that human inequality is rooted in the “natural order of things” is an idea that greatly precedes evolutionary theory, and in fact Darwin and evolutionary theory did much to disprove many of these ideas. It was evolutionary theory, and later genetics, which showed that we are all much more similar to each other than was previously believed and tore down many of the fundamental assumptions about human inequality.
Nevertheless, the reason that there has been a long-held idea that inequality and hierarchy are a part of the natural order of things is because it is an obvious observation of the natural world, which people have been making for thousands of years. The issue comes with the belief that the world has “been designed the way it is supposed to be.” The world has not been designed, there is no “way it is supposed to be.” The natural world is not a guide to justice or a model for society, indeed the role of society should be to overcome the inherent injustices of the natural world.
You go to great lengths to demonstrate environmental effects on physiology, and these points are obviously true, but none of this is new information to biologists (nor ultaimtely do these arguments contradict a determinsit view, they merely add additional factors). Biologists well understand the complexities of gene expression, through mechanisms like epigenetics and other forms of environmental feedback loops that influence biological development, but really all of this misses the point.
The real point is that exploitation and market failures are demonstrable phenomena that drive economic and social inequality, regardless of any biological differences between individuals or groups. And here is the point I want to really drive home.
It doesn't matter if X group is “biologically more intelligent” than Y group. That fact, even if it is true, does not, and cannot ever, justify exploitation any more than X group being physically stronger than another would justify exploitation.
Forget about groups and statistics for a minute and think about individuals. If one individual is physically stronger than another, does that make it okay for the stronger person to enslave the weaker one, or to intimidate them into under-compensated labor? No, clearly it doesn't. The same goes for intelligence. The fact that one individual is smarter than another doesn't justify the smarter person taking advantage of the less intelligent one. And like I said, forget about “groups” and just think about individuals. It is obvious that on an individual basis some individuals are smarter than others. This is an inescapable fact. What difference does it make if X group is statistically more intelligent than another? This can no more justify exploitation than one individual being more intelligent than another or one individual being physically stronger than another.
To claim that various groups would all have demonstrably equal intelligence if not for environmental factors is as absurd as claiming that all individuals would have the same intelligence if not for environmental factors.
I worry when I see leftists (this is very common among so-called feminists) arguing about biology and denying even the possibly of biological differences between various groups, be they sexes, “races” or whatever. I worry because it both totally misses the point and it leads to arguments based on a premise that can easily be disproven, thus seemingly undermining the case for many “leftist causes”.
The case for social and economic equality does not rest on an assumption of biological equality, period. Do not ever base any argument for social or economic equality on an assumption of biological equality. By doing so you merely undermine the case for social and economic equality, because we aren't biologically equal.
This is something that Karl Marx understood very well, which is exactly why he famously stated (always quoted out of context), “From each according to his ability, to each according to his needs!” This statement inherently acknowledges that we are not all equal in ability.
But even more important, the mechanisms of economic redistribution from wage laborers to capital owners is a provable fact that stands on it's own, regardless of any other considerations. Both market failures and manipulation of markets by capitalists to misappropriate value to themselves are provable facts which stand on their own.
It doesn't matter if “the working class” are biologically less intelligent than the capital owning class in America. Even if this is true, which I strongly beleive that it is, it doesn't change the fact that the mechanisms of capitalism rob value from wage laborers and undermine democracy.
Theft is wrong. That the strong steal from the weak doesn't make it justifiable. The fact that more intelligent people are able to rise to the top of a corrupt system doesn't make the system defensible. The fact that smart people are more capable of rigging the game and cheating doesn't make it okay.
There are three major factors that drive economic inequality, but only two of them drive extreme levels of inequality. One is biological inequality, but while this is true, it is really only a minor factor. Two is the “winner take all” effect, which I'll go into, and three is private capital ownership. In America there is no question that two and three are the major drivers of inequality, but to deny the existence of factor number one simply makes it appear that factor number one is of crucial importance, when in fact it is not.
First let's address the “winner take all effect”. You have a one mile race with 100 competitors, where each competitor pays a $100 entry fee which is used for prize money. First prize for this race is $8,000, second prize is $1,500, and 3rd prize is $500. No prizes for anyone who places after 3rd.
The winner of the race runs the mile in 3 minutes 45 seconds, the second place finisher runs it in 3 minutes 46 seconds and the 3rd place finisher runs the mile in 3 minutes 48 seconds. The last place finisher runs the mile in 6 minutes.
The compensation for winning first place is 5.3 times larger than the compensation for 2nd place, but the first place winner isn't 5.3 times faster than the 2nd place winner, in fact they are only marginally faster. I think you see where this is going. The difference in reward is greatly disproportionate to the difference in performance. This phenomenon is ubiquitous within our economic system, and what people on “the right” do is they claim that our economic system “is a measure of” performance, such that they claim that an individual's compensation measures their contribution, i.e. that differences in compensation measure the differences in contribution. This is kind of true if you are talking about the bottom 99% of workers, but it is totally untrue when you talk about high-end incomes, in just the same way that it is untrue in the race example above.
What those on “the right” effectively try and do then is to claim that the winner is in fact 5.3 times faster than the 2nd place finisher because their reward is 5.3 times greater, when in fact they are only 1.003 times faster than the 2nd place finisher and only 1.74 times faster than even the last place finisher.
And this is where the biology issue becomes important, because what happens is that our social system amplifies modest biological differences, but the biological differences are there, they are real. We don't need to deny the biological differences, we need merely to show that while there is real biological inequality, it doesn't actually account for the vast inequality produced by our society. Maybe the first place winner won because he had a larger heart and longer legs than any of the other competitors, clear biological advantages. That does nothing to change the fact that he is still actually only 1.74 times faster than the last place finisher and that his prize money came from the entry fees of all the other racers who got nothing at the end of the race.
However a trap that many on “the left” fall into is trying to claim that the first place finisher is completely undeserving, and that they aren't actually even the legitimate winner of the race. This is also not true. I think that in America at least, it is probably the case that most of the richest people in the country actually are the top “contributors” to economic development and productivity. It isn't so much a matter of ranking that's the problem, the issue is that the people at the top, while legitimately at the top, are still massively over compensated, and that over compensation (just like the prize money in the race) comes from redistribution from all of the people who are under compensated. Yeah, maybe the people who are getting under compensated are in fact “inferior” to use a horrible right-wing term, but it doesn't change the fact that the compensation for “the winners” comes from redistribution from “the losers”.
I'm not going to address the issue of capital ownership in this post, it would take way too long, I'll just refer you to my article here: Understanding Capitalism V: Evolution of the American Economy
I do want to address one more issue as well though, which is the issue of “removing boundaries”. This is a really major topic of feminism, and one that I think many on “the left” have a lot of misunderstandings and wrong expectations about.
Yes, it is a fact that historically there have been many legal and social barriers that prevented various groups from “maximizing their potential”, this is indisputable. It is also indisputable that these barriers had a real impact on limiting the abilities and deminishing the lives of whole groups of people. However, it doesn't hold true that these barriers were necessarily the sole cause of performance differences between groups. In fact, what I think is a very likely case is that over time people intuitively picked up on stereotypical aptitudes of various groups (something our brains are “designed” to do) and then institutionalized rigid rules and social structures that reinforced and amplified those minor differences.
Again let's use a racing example. Today the best long distance runners in the world are indisputably Kenyan and Ethiopian runners, or let's just say East Africans. To deny the inherent biological advantages that individuals from these populations have for long distance running would be foolish at best.
But let's say that now that we've established that the best long distance runners tend to be from East Africa, that we decided as a culture to say that only people from East Africa are even allowed to compete in long distance races, and in fact only East Africans are allowed to run for more than one mile at a time.
If we did that, what would happen is that over time all non-East Africans would get worse and worse at long distance running. Not biologically worse, just worse due to lack of practice and training in that skill. So let's say that 100 years after that rule is put into place we look around and we see that East Africans are running marathons in under 2 hours, and we do a few sample tests and find that non-East African can't even finish a marathon. So some people say, “See, look how bad non-East Africans are are long distance running! Just proves that we should only let East Africans run!” But some decide, “Hey, that's not fair.” They do some studies and they find that, in fact if you train someone from Japan or Germany or whatever, they can greatly improve their long distance running ability.
So we decide, “Let's remove this rule, and allow everyone to run long distances.” Okay, so we do that and we then work on “closing the running gap,” and we make great progress, and non-East Africans are able to get their marathon times down to 2 hours and 30 minutes, but then, even after decades of trying and training and focus on helping non-East Africans run longer and faster, the gap is never fully closed and it still remains that all of the world's best long distance runners are East Africans.
Puzzled, the advocates of running equality demand that something must be wrong, and somehow various environmental factors must be giving East Africans an advantage that everyone else isn't getting. They start blaming the coaches and investing in all manner of programs to give non-East Africans advantages, but despite all this, the East Africans still dominate long-distance running. Not by a lot. Nothing like it was during the height of the ban, but they still edge out everyone else consistently.
Why? Because, they have inherent biological advantages. Yes, the social restrictions put in place by the ban exacerbated the performance differences, and were the cause of a large part of the differences, but they weren't the sole cause.
Don't read too much into what I'm saying here, I'm just saying that we must at least be open to this possibility as an explanation for many types of performance differences that we observe among various groups of individuals. What we are dealing with are confounding effects. There can be multiple causes of differences, and I think a very likely scenario, given how evolution and social systems work, is that our social system have evolved to greatly amplify minor biological differences.
What this means is that, unlike what many people on the left think, while we should expect social justice equality policies to greatly reduce performance differences among various groups, it may well be the case that underlying biological differences mean that performance differences, in aggregate, can't be fully eliminated via any amount of social engineering.
You have to at least be open to that possibility. And once you accept that possibility, you can then accept the fact that social and economic equality does not have to rest upon an assumed biological equality, in fact it shouldn't.
Having said all of this, I think a very important point of agreement is that we need to be very skeptical and wary of the so-called science of biological determinism and genetic profiling because of the potential for misuse and abuse, given the fact that science, like all things, is a tool in the hands of the ruling class, whether that ruling class be American capitalists or the Chiense government. So while I beleive that the fundamental principles of "biological deteminism" are sound, I agree that there is much reason to be concerned about their implemetantion.
At long last, I'm finially publishing my latest aricle on capitalism. It's been almost 3 years in the making, but I've finally wrapped it up.
This article seeks to provide an understanding of capitalism by providing an overview of the the American economy from colonial times to present day, and then using economic theory to understand why America's economic history unfolded the way that it has, and to then understand what both America's economic history and economic theory tell us about America's economic future.
"It is a just observation, that minds of the strongest and most active powers for their proper objects fall below mediocrity and labor without effect, if confined to uncongenial pursuits. And it is thence to be inferred, that the results of human exertion may be immensely increased by diversifying its objects. When all the different kinds of industry obtain in a community, each individual can find his proper element, and can call into activity the whole vigor of his nature. And the community is benefitted by the services of its respective members, in the manner, in which each can serve it with most effect."
- Alexander Hamilton; Report on Manufacturers
"The spirit of enterprise, useful and prolific as it is, must necessarily be contracted or expanded in proportion to the simplicity or variety of the occupations and productions, which are to be found in a Society. It must be less in a nation of mere cultivators, than in a nation of cultivators and merchants; less in a nation of cultivators and merchants, than in a nation of cultivators, artificers and merchants."In the end both were right. But here is where Hamilton's point comes into focus: the economy that has been engineered by America's economic elite is not diverse enough for the American population. Everyone can't be a scientist or a doctor or a engineer, everyone can't even be a college graduate, not everyone has that aptitude, and yet, just because one doesn't have the aptitude to be an engineer doesn't mean that one should be relegated to flipping burgers at a fast food joint, where, as Hamilton put it, their labor is "confined to uncongenial pursuits," but this is exactly what has happened in the American economy.
- Alexander Hamilton; Report on Manufacturers
The Occupy Wall Street movement is more popular among Americans than either President Obama or any of the Republican candidates. It's been said that if Occupy Wall Street were running for president it would win... Well, in that case, let's write it in! (Actually I think that "The 99%" is better, but Occupy Wall Street is more recognized)
Here is the deal, voting in the 2012 presidential elections is meaningless, as long as you vote for either the Democratic or Republican candidate. Yes, its true that Obama isn't as bad as whomever the Republicans are going to put forward, but its also true that no matter who is elected president in 2012 the following 4 years are going to be total gridlock anyway.
So one question here is, "Would you really not vote for Obama if you genuinely thought he could lose and we'd end up with a Republican president?" Yes, I would still not vote for Obama even under those circumstances, because sending a message about the failures of our political system is more important than whoever wins the presidency for the next 4 years.
In addition, I'm not convinced that we wouldn't be better off today if John McCain had won the presidency in 2008, because if McCain had won it's very doubtful that many of the regressive policies that Obama has been able to usher through Congress with the support of the Democrats would have been possible with the Democrats in opposition to McCain instead of being pulled along by Obama, such as the pro-insurance industry health care "reform" laws pushed through by Obama. We'd be better off in the long run with no reforms than what we got with the misleadingly titled "Affordable Health Care Act". Yes there are a few good provisions in it, but ultimately it entrenches for-profit interests and does nothing to bring down costs, all it really does is prevent denying coverage to people, which is good, but in the grand scheme of things its put us on a path that makes reforms that would bring down the costs of health care and improve quality more difficult and has even paved the way for the dismantling of Medicare.(Republicans have already come out with plans to basically eliminate Medicare and transition it to the "ObamaCare" model). Basically, I think McCain would have faced a similar situation of gridlock to what Obama faces, and he may in fact have been less inclined and able to lead Congress down path of doing Wall Street's bidding, which is exactly what Obama has done. How can anyone who supports Occupy Wall Street vote for Obama? He is Wall Street's candidate!
My point is this, right now, no matter who wins the presidency in 2012, we the people lose. Voting for the lesser of two evils is no solution, it just prolongs the suffering.
What we should do is all write in Occupy Wall Street for president, and if you want some insurance, vote Democrat in all of the Congressional elections. Why? I believe that all we have to do is get Occupy Wall Street to come in 3rd place in the elections and that alone would be a powerful statement. It would force news coverage of the issue. It would send a powerful signal to our own government and elites, as well as the rest of the world, that we are deeply unsatisfied with our political system, and that we have lost faith in our political system to represent the will of the people
The reality is that either a Democrat or a Republican is going to win the presidency in 2012. Voting for a 3rd party (unless something radical happens in the next few months) isn't going to do anything. Voting for a 3rd party candidate isn't going to be a protest vote that matters. Right now all we have is a protest vote, that's all we can do. Voting for either the Democrat or the Republican is just giving legitimacy to the failed and corrupt system. The challenge is how to register a protest vote that matters, and if any protest vote can matter then this is one that can. If you vote for a 3rd party candidate, be it a Green Party candidate or a Libertarian one, etc., all that's going to happen is they are going to get like 1% or 2% of the vote at max and they will be a foot note.
At most we'd have a Ralph Nader situation all over again, and you see the lessons people drew from that, they blamed it on Ralph Nader said 3rd parties were stupid. But if Occupy Wall Street comes in 3rd place, even if it is with only 1% of the vote, it would still be a major story and a major signal saying, "NO ONE IN THE POLITICAL CLASS REPRESENTS US, THE SYSTEM HAS FAILED!"
And what if Occupy Wall Street got 5% of the vote or more? That would be massive. Even if a 3rd party candidate got 5% it would just be a side note news story for a few days and then it would be forgotten, but if Occupy Wall Street got 5% it would be clear, this is the vote of the disenfranchised people.We don't like either one of you at all!
Voting for Occupy Wall Street is better than voting for a 3rd party person, because that's part of how the system is supposed to work, that just looks like you like that person, but that's not the point here, the point is that we are disenfranchised altogether.
Voting for either the Democrat or the Republican isn't going to do anything to fix our system, the election of 2008 just proved that. Millions of progressives voted for Obama hoping for change that would reform the corruption and inequalities of our system and Obama not only failed to deliver, he has in fact sided with the status quo, for whatever reason. It doesn't matter if he's siding with the status quo because he wants to or because he has no choice, its irrelevant, the fact is that he can't do anything other than entrench the status quo, his years in office have proven that.
Let's all vote for Occupy Wall Street on November 6, 2012, and make an effort between now and then to get as many people as possible to do the same.
There is a new article out in the Washington Post about executive pay. The article does a good job of laying out the basic facts, but I'm going to put the basic facts into a larger context.
What this article basically states is that based on recent data that has come from government regulations that went into effect in 2006 forcing public corporations to disclose more information about executive pay practices, we now have hard facts that tell us how executive pay is determined at major US corporations and to a lesser degree how those practices have changed over time. Much of this is stuff that we already knew in the general sense, but we now have much more concrete information.
As we know, executive pay is set by boards of directors and boards of directors are essentially picked by share holders, but not exactly. The reality is that the pool of folks at the top is rather small and incestuous, meaning that a lot of corporate executives either currently sit on the boards of other companies or they are former board members of other companies, and the number of individuals or institutions that hold enough shares to be able to determine board members is relatively small and spans many companies. In practice in many cases executives themselves play a large role in who gets onto the board of the companies that they are leading, which is to say that executives are in many cases picking the very people who will set their pay. These board positions are themselves largely ceremonial positions that pay nice sums of money, and individuals can easily serve on multiple boards. In the example given by the Washington Post, board members for Amgen are paid $350,000 a year.
For smaller companies, like start-ups, board members are often direct investors themselves, but for large companies board members are not typically direct investors, they are people appointed by institutional investors. They do also hold shares, but these shares are often given to them as a result of becoming a board member, instead of becoming a board member because they hold lots of shares.
At any rate, what has been discovered by these disclosures since 2006 is that 90% of corporate boards explicitly decide to set executive compensation at or above average. In other words, when determining executive pay they look at the the average compensation for comperable executives then they set a compensation package above that average value, 90% of the time! Obviously, if everyone is setting a value above average then pay is just going to shoot up over time, which is exactly what we have seen.
But let's put this in a bigger context now. What we are really saying is that executive pay is not determined by labor markets. This is a huge deal, because the whole underpinning of the capitalist wage system is labor markets, and let's look at the difference between how labor markets work vs. how this "peer benchmarking" system works for executives.
Labor markets inherently drive compensation down, while the executive pay system inherently drives compensation up. In a labor market "labor prices" are determined by the lowest amount of pay that individuals will accept for a given set of labor. The labor market system for determining compensation is at the heart of the criticisms of capitalism noting that the labor market system compels a race to the bottom and deprives workers of the value of their labor by pitting them against one another in a bargaining war over who will agree to taking the lowest compensation to get a job. At the same time, defenders of capitalism and market theory have defended labor markets as efficient means of determining the value of a worker's contributions.
So what we have here is that there are two completely different systems and sets of principles in place for determining compensation for corporate employees, and that the compensation for executives is not determined by markets. While the hypocrisy is overwhelming, this isn't just a matter of hypocrisy, its a matter of real money and real wealth. While these corporate and financial elite and their defenders have been extolling the virtues of markets, and have been portraying the compensation of those at the top as a product of "fair and balanced" market forces, the reality is that they have engineered a system where executive compensation is not determined by market forces at all, indeed the system of executive compensation violates every market principle.
And the important thing to understand is that this is made possible due to the massive concentration of private capital ownership. It is the consolidation of capital ownership that makes this all possible, because decision making is in the hands of relatively few powerful people.
The justification for the growing economic inequality in America has always been that the high incomes of those at the top are justified because they are determined by the same market principles that determine everyone's income. We now have not just theoretical arguments or anecdotal claims, but solid proof that this is not true. This shows that the real mantra of the corporate elite is, "markets for thee, but not for me."
When we combine this with the recent reporting on the raiding of corporate pension accounts to help fund growing executive compensation the case becomes clear that the corporate elite (the executives, board members, and major investors) have in fact been involved in decades of direct theft from the working class (domestic and foreign). This isn't theoretical, we are talking about concrete systems that have been in place for 30 years that have directly transferred wealth created by the working class to an undeserving elite minority who we can factually prove never earned it.
While economics as a whole may not be a zero sum game, accounting is. A corporation's revenue is a finite value. The only way that one individual in a corporation can be paid more is if someone else is paid less. This means that inflation of executive compensation has to be at the expense of the other employees, there is no way around it.
And here is the kicker, the thieves have accumulated so much wealth and power that they now control the political system. So at this point the theft hasn't just taken place due to the actions of the executives and capital owners, the politicians are accomplices to the crime, which is why what has been done isn't against the law, because the thieves control the people who write the laws. This is why we have politicians and corporate media pundits repeating the claim that raising taxes on high incomes "punishes achievement". It's total nonsense. The reality is that these high incomes are virtually all entirely unearned and undeserved, even though those receiving them may themselves think they deserve it. And its not just that they are unearned and undeserved, these high incomes come at the expense of the rest of us, at the expense of the other 99% of the population, the "working class". And on top of it all, it also turns out that the worst perpetrators of these crimes are those in the health care industry! Surprise, surprise.
If people understand the full implications of what that Washington Post article is saying, it should cause a revolution. While the article doesn't state it, the real conclusion that we can draw from the evidence it presents is that we now have solid proof that trillions of dollars have been stolen from the working class by the corporate elite over the past 30 years, that the high incomes that have been justified on the basis of "market theory" are in fact products of complete violations of market principles in ways that funnel value created by corporate employees to corporate executives, their cronies, and capital owners.
The ultimate lesson here is that "we the people" have lost control of the nation's capital. Indeed there is no such thing as "the nation's capital", the capital is owned and controlled by an elite minority of people, few of which have any national allegiance or sense of responsibility. Virtually all of our nation's economic problems stem from this fact. The capital that our society depends upon is owned and controlled by a small minority of people whose interests in direct conflict with the interests of the working class, and it is that minority of people who have the majority of political power.
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