Neoliberalism and the maldistribution of wealth

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Welcome to a new monthly column in Boulder Weekly. Writers of this column are members of the Economic Justice Collective of the Rocky Mountain Peace & Justice Center, with the goal of informing readers about economic injustice and some steps that can move us toward economic justice.

Wealth chasm

Getting started, one major economic injustice is the maldistribution of wealth in the U.S. that has grown dramatically worse over the past 40 years. For example, Inequality.org reported that in 1983 the bottom 90% of the U.S. population owned about 32% of the total U.S. wealth while the top 1% owned about 34% of the wealth, already an enormous wealth gap. By 2016, this situation had gotten much worse. The share owned by the bottom 90% had dropped drastically to slightly over 21% while the top 1% increased its share to almost 40%. Moreover, in 2018 just three white men (Warren Buffett, Bill Gates and Jeff Bezos) had more wealth than the bottom 50% of the U.S. population (over 160 million people).

 It’s very likely that this obscene imbalance has gotten even worse during the period since 2016 due to several things, especially the lockdowns of the economy this past year, the bailouts of large corporations and the Trump administration’s tax cuts that primarily benefited those at the top of the wealth pyramid. Note that this maldistribution of wealth is more extreme than that found in most nations.

Political interventions

 Despite the claims by some that this maldistribution results from the hard work and vision of the wealthy, they are ignoring two key factors — the effect of inheritance and the effect of the political/economic approach that the U.S. has been following over the past 40 years. U.S. Supreme Court Justice Louis Brandeis warned us about the dangers of a wealth chasm when he said: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

This wealth chasm is due in great part to the intervention of politicians who were influenced by campaign contributions and lobbying. For example, when I was growing up, there was a wealth gap, but not anything like the wealth chasm today. Many of the programs from Franklin Delano Roosevelt’s New Deal still had an impact. This current horrific situation has come about due to court decisions and the enactment of policies that intentionally weaken protections of the public interest and advance the interests of the wealthy. Some key policies that have rigged the system to the advantage of the super wealthy are the following: allowing corporations to engage in funding political campaigns; weakening labor unions; enacting tax cuts that primarily benefit the wealthy; weakening anti-trust laws and their enforcement; bailing out Wall Street and other large corporations; gutting safety net programs; and allowing usurious interest rates.

Measures of well-being

 One terrible result of this uneven distribution of wealth is the relatively high level of U.S. poverty. For example, according to the measures of poverty used by the Organization for Economic Co-operation and Development (OECD), the U.S. had the third highest poverty rate and poverty gap in 2019 among the 37 nations in the OECD. The rate of childhood poverty in the U.S. is also shamefully high compared to the other OECD countries, with the U.S. having the fifth worst rate. These are shocking outcomes for a nation that is routinely referred to as the richest nation in the world.

 Moreover, the U.S. fares very poorly on measures of mortality, health status and homelessness, and the corporate-controlled media generally downplays these facts. The U.S. public is either unaware or simply accepts these outcomes because that is the way it is. However, the experiences of other nations demonstrate that our extremely bad outcomes are part and parcel of our approach to governance and economics.

Neoliberal economics

 These devastating outcomes are not at all surprising when one examines what comprises our neoliberal approach of the past 40 years. It includes ideas such as so-called free-market capitalism, economic liberalization, deregulation, privatization, austerity and corporate-controlled globalization — ideas that libertarians and many mainstream economists have touted for decades.

A 2016 report called “Neoliberalism: Oversold?” by lead economists at the International Monetary Fund (IMF) admits to shortcomings: “There are aspects of the neoliberal agenda that have not delivered as expected.” When analyzing two fundamental policies of neoliberalism — austerity and removal of restrictions on moving capital — the IMF researchers say they reached “three disquieting conclusions:

• The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.

• The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.

• Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.”

Just economics

 Imagine what the U.S. would be like today had we, for example, allowed only public funding of political campaigns. Other important steps would be to have had an extremely high wealth tax, a high estate tax, a public banking system, health care for all, an expansion of Social Security benefits, free public education through public university or trade schools, and an adequate supply of quality affordable housing. We could have also done away with the racist drug war, created living wage jobs for rebuilding our physical and social infrastructure, implemented a high carbon tax, funded a military budget for defense instead of for offense that benefits corporate interests, supported public day care, imposed a transaction tax on Wall Street, tightly enforced laws by federal and state regulatory agencies, and imposed prison sentences for CEOs whose companies violated the laws. These are policies that could have been enacted instead of following the badly flawed neoliberal approach that has played a major role in creating our sad situation today.  

This opinion column does not necessarily reflect the views of Boulder Weekly.

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