Tuesday, July 06, 2010

Lessons We Failed to Learn in 1928

Robert Reich in The Nation:

Wall Street's banditry was the proximate cause of the Great Recession, not its underlying cause. Even if the Street is better controlled in the future (and I have my doubts), the structural reason for the Great Recession still haunts America. That reason is America's surging inequality.

Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation's total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America's total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928—with 23.5 percent of the total

Apparently we didn't learn anything at all from the Depression. Only fifty years later:

But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It increased the cost of public higher education and cut public transportation. It shredded safety nets. It halved the top income tax rate from the range of 70–90 percent that prevailed during the 1950s and '60s to 28–40 percent; it allowed many of the nation's rich to treat their income as capital gains subject to no more than 15 percent tax and escape inheritance taxes altogether. At the same time, America boosted sales and payroll taxes, both of which have taken a bigger chunk out of the pay of the middle class and the poor than of the well-off.

It makes one wonder why we bother to study history at all. Unless we're willing to engage in stern regulation and address the structural problems, this sort of economic devastation will continue to occur.

Containing the immediate financial crisis and then claiming the economy was on the mend left the public with a diffuse set of economic problems that seemed unrelated and inexplicable, as if a town's fire chief dealt with a conflagration by protecting the biggest office buildings but leaving smaller fires simmering all over town: housing foreclosures, job losses, lower earnings, less economic security, soaring pay on Wall Street and in executive suites.

Precisely. The "small people" are left holding the bag, while Wall St. and the banks rake in the big pay and bonuses. Again.

cross-posted at MainSt/workingamerica.org

1 comment:

DissedBelief said...

This is cause for great anger and I have to wonder besides Ronnie Reagan & idiot (I mean W) where else the voting public steered so wrong? I had been using the phrase "robber barrons" tongue in cheek but no more, for it is clear we really are back in the great depression. But because it is so well disguised, it is not recognizable as such. I can still drive my car to and from work and I can still purchase groceries and live a fairly frugal if not comfortable life compared to most people in the this country and on the planet. BUT the fact that non-economists and lay persons such as myself can see a huge gaping cavern widening between the haves and the have nots is proof positive it is indeed happening. And the wars go on. As Bill Marvel so brilliantly titled his piece "our splendid little wars". I would continue this line, "we don't care about the price tag, wether it be lives or money, thank you, Signed; Uncle Sam".