High Income Inequality and Low Social Mobility are both important parts of the high military spending empire theory. Between the great Roman Empire and the modern American Empire lies the doldrums of Europe in the Middle Ages. Medievalism is a special case of empire, characterized by the relative economic stagnation of the high military spending empire, with little scientific advancement and excessive church domination. Medievalism has widespread social inequality as there were many serfs dependent on their lords for protection with expensive castles with moats and knights in shining armor. The militarism is obvious in this situation. Traveling is dangerous, too, with the need to be armed and preferably with sufficient companions and not alone. Legends like the Three Musketeers with many roving bands that survive by their arms and wits. This fear based economy is very inefficient and unproductive.
In the modern era, income inequality robustly correlates inversely to the top income tax rate. With a high income tax rate over 90% in the fifties and over 70% in the seventies, all income quintiles doubled their income from 1945 to 1980. Since Reagan brought down the top tax bracket to 28% the top 1% have more than quadrupled their incomes, while the other 99% have had no material net increase in income for nearly forty years. Yes, the famous study by the non-partisan congressional research office from 1979 to 2007 shows the top 1% quadrupling their income while even the rest of the top 5% show no progress.
A recent study of American attitudes shows that 12% of us think that we are in the top 1% and 23% of us expect to be in the top 1% sometime in our lifetime. That 35% total matches the 35% support for President Trump, otherwise known as the Republican base. Of course the there are Democrats who think this way and Republicans that never expect to get rich, yet this delusion of the general public says a lot about our politics today. If 12% believe they are in the top 1%, then clearly 11% are deluded. And the thought that 23% expect to be in the top 1% shows how much we are a nation of aspirational fools. Thanks to the Occupy movement of 2011 we have increasingly come to our senses, with polls last year showing 70% opposed the Republican health care repeal plan and 70% opposed the tax cut that mainly went 70% to the real top 1% not the deluded many aspirants. This is what seems to be fueling the coming Blue Wave in American politics. Plus the insults to women and immigrants and shootings of our school children, and we are all getting tired of the tweets and 2000 lies in the first year alone. Yet the purveyors of fake news have done a good job persuading many that real news is fake, so we remain a deeply divided nation. To the extent the Russians have aided this division, they must be delighted. Seventy years of empire since the last World War and the drying up of social mobility in America have all aided this process.
One of the leading convenient excuses to get us to accept our situation is that the new divide is between those with a college education and those without. Yes, in many ways the college degree is the new equivalent of the high school degree in generations past. But the US, once a leader in college degrees, has fallen behind many European countries. The 1% have put today’s students deeply in debt and threatened to take away Medicare, Social Security, and Medicaid rather than restore high taxes on the rich to easily make these many problems disappear. Too many experts get into the class divide argument of college versus no college degree rather than recognize the real main cause of many problems that the top 1% (really the top 0.1%) are hogging all the benefits for themselves. These experts excuse their union busting in the eighties and the spiral up of top executive salaries in the last forty years. It used to be that top CEOs earned fair wages. Then the practice became commonplace to try to outbid others by 20%, leading to an endless spiral upwards. CEOs in America earned 120 times their workers in 1980, compared to 35 or 50 to one in Japan or Europe. Then a PBS show by Bill Moyers reported fortune 1000 CEOs averaging $37 million while their workers made $38,000 in the year 2000. Almost 1000 to one. Most figures reported since then are lower, probably by including all stock exchange companies, not just the top 1000. That this is unearned is shown by the Chrysler buyout by Mercedes Benz, where the CEO of the failing US company was paid $33 million while the successful German CEO was only paid $7 million, one fifth as much. Clearly top wages in America were way out of line and not based on performance or real results.
The idea that cutting taxes of corporations and the rich will help the economy is problematic. Businesses need customers even more than they need capital. About a third of the corporate tax cut is being used to buyback stock, which supports the price of stock, but does little to boost the economy. Tax cuts for the middle class will lead to increased sales for the businesses and will boost the economy. Unfortunately, the Trump tax cut will go 70% to the top 1% and only 30% for the middle class or the bottom 99%. Actually widening income inequality will only aggravate national health and social problems like low social mobility, high homicide rates, high mental illness rates, high obesity, high teenage birthrates, and high imprisonment rates as shown by the “Spirit Level” authors in 2010.
Community versus Private Sector
There has long been an imbalance between utilities run by government compared to those investor owned utilities. Public utilities charge 60% of the investor owned utilities overall in these United States. Europeans with health care for all pay about 60% as much as people in the United States pay for less health care coverage. Occupied countries like France in the early forties and East Germany during the Cold War also seemed to operate at only 60% economic levels of comparable unoccupied countries. Why keep paying this 40% for overpaid executives and dividends and profits to investor owned utilities? Why keep paying unnecessary middlemen like health insurance companies and plan administrators and specialized medicine rather than general practice medicine? Why keep paying this 40% to occupying forces? None of these imbalances make sense.
The award winning Eugene Register Guard newspaper of Eugene, Oregon, USA, had an editorial in the early eighties about how rural economies collapsed at an 8% rate absent new business development moving into an area. Coincidentally or maybe not, 8% was the average percent of the economy on military spending from 1945 to 1980. Military spending depletes capital and research from all good producing industries like manufacturing, construction, mining, and agriculture, hence is a major cause of the agricultural decline of that period. Eight percent was the average drop per year during the 1929-1933 start of the Great Depression. Eight percent a year was the long term decline of the cigarette tax in Oregon I learned in the 1981 legislative session. Eight percent per year was the annual decline in the Wisconsin Dry Cleaner Tax started in 1998. Eight percent per year seems to be the rate economic sectors decline in general, unless new industry replaces the old as is common in capitalism in normal times. The 2009 US economy dropped 6%, but for just one year (about nine months).
For the chapter on various social conditions under empire theory:
Please cite this work as follows:
Reuschlein, Robert. (2018, April 29), “Income Inequality Theories”, Madison, WI: Real Economy Institute. Retrieved from: https://www.expertclick.com/NewsRelease/Income-Inequality-Theories,2018156909.aspx
Dr. Peace, Professor Robert Reuschlein, Real Economy Institute
Nominated Vetted 2016, Given Odds 2017 Nobel Peace Prize