The difference between the super rich and the rest of us
in this country has grown exponentially in the past decades. The disparity has reached the point where America can no longer be called "the land of opportunity."
The Share Withholders
How capitalism was upended
By Hedrick Smith
Over the last three decades, we Americans have lost something precious and essential in our concept of capitalism – the idea that shared prosperity is smart business and smart economics because it generates long-term economic growth and competitiveness for the nation as a whole.
In our recent untrammeled pursuit of cutting costs, cutting corners and maximizing short-term corporate profits, we have plunged our economy into the financial collapse of 2008, spawned disasters like the fatal BP oil rig explosion in the Gulf of Mexico, and created what Citibank has called the greatest economic inequality of any major power since 16th-century Spain.
The so-called New Economics of the last three decades, an outgrowth of theories originally advanced by John Maynard Keynes in the 1930s, have left the great mass of middle-class American families worse off financially today than in 1999, trapped in stagnant growth, while Wall Street soars to record levels and an economic elite captures a near-record share of the nation’s income.
That is not the way American capitalism used to operate.
Hedrick Smith explores the cause of economic disparity in the United States, its effects, and what we can do to correct our course as a country in a TED talk. YouTube videoThree decades ago, we were the unrivaled “land of opportunity.” Americans could rise up the economic ladder more easily than people anywhere else. We mocked class-ridden Old Europe as an outdated bastion of inequality and aristocratic privilege.
Today, the roles are reversed. The U.S. is no longer the land of opportunity. Studies show that moving up is easier in Germany, France, Scandinavia, Canada, Australia and New Zealand than in the U.S. And the hyper-concentration of wealth and power in America today is far more extreme than in other advanced countries.
In our earlier, more democratic version of capitalism from the mid-1940s to the mid-1970s, we as a nation generated widely shared prosperity that made the U.S. middle class the envy of the world. In his famous “kitchen debate” of 1959, then-Vice President Richard Nixon outdid Soviet Communist Party leader Nikita Khrushchev by declaring that it was America’s democratic market economy, not communism, which had achieved a “classless society.”
That was an exaggeration, of course, but Nixon had hit on something essential. In ’50s, ’60s, ’70s America, the distance between the top, middle and bottom of the economic pyramid was not so great. Describing that period, economists coined the phrase “Great Convergence” – meaning convergence of income levels.
One basic reason for this convergence was that the gains in American economic growth and efficiency got passed through to average Americans. From 1945 to 1975, the productivity of the American workforce roughly doubled. Productivity rose 97% and the median hourly wage went up 95%. In short, the rising tide was truly lifting all boats.
Read the rest of this story in the Summer 2016 issue of Artenol. Order yours today