I Search Progress: FINAL

The Injustice of American Economic Inequality

What I already Knew/What I Wanted to Know

The number of inmates in America is continually rising. Blacks are six times more likely to be incarcerated than whites, making up 46.7% of the population of prisoners. What does this have to do with economics you ask? California state’s prison is expected to rise to $1.3 trillion over the next decade. The annual cost of housing an inmate is over $35,000. (Patrick Langan) A year is prison and a year at Princeton now cost about the same, only the curriculum and environment are different.  But the real story lies in corporations: the prison-industrial complex now builds new penitentiaries to keep up with the demand for prison space. As a result, the stock price of Corrections Corporation of America, the nation’s largest private for profit prison corporation, has increased twentyfold since its establishment in 1944. (Temps Fact Sheet)Like any industry, the prison economy needs raw materials; in this case, prisoners. The industrial complex can only expand if more people are incarcerated.

What is the reasoning behind “intentionally” wishing for harm to the people of society for one’s greater gain? Why does almost all corporations’ success depend on the failure of others? I guess we can’t possibly all invent the next 4-D television or Windows 8 computer operating system. We can’t all win the lottery. It is important to note the inequalities within the United States pale in comparison to the disparities between the world’s super rich and the billions of people who live without sanitary water or adequate food.

The national obsession with wealth is so unquestionable that we are willing to accept large scale poverty in exchange for the prospect of a few lucky folks enjoying the high life. We as Americans are trained to identify with the upper class spectrum and often fantasize about getting there, depending on many others failing along the way. So my question would be: To what extent does economics and lack thereof apply to American society? And how does this affect our interactions with other countries?

The Story of My Search

There are always going to be many points of views with people who wish to voice their opinions, persuading that their argument is correct. A simple book may seem innocent enough, but there may be prevalent biases within the text, such as a Republican’s conservative viewpoints and a Democrat’s liberal opinions. I would categorize myself as a right winger, but on the topic of economics, the tax cuts for big corporations are unacceptable. The trickledown effect just does not work and is only effective in theory. It would be difficult for myself to encompass the entire economics system of America, its pros and cons, as it can also be defined as a social injustice. So I decided to research the impact of this broken down economy on the core aspects of American society, namely its government, international relations, and big business corporations. I tried to stay as non partial as possible, relying on a couple of important sources of information, relying on lengthy books, and less on internet based web sites. Economics is an unusually confusing study topic, but it doesn’t take Wall Street’s finest to uncover the flaws in the American economy, especially when using “Economic Apartheid in America: A Primer on Economic Inequality and Insecurity” as a study guide with a somewhat biased liberal view on the topic. The author Chuck Collins’s fact based opinions are always backed up with statistics, graphs, simple cartoons, keeping it as simple as possible for the average reader. Despite the fact that Collins inadequately addresses the conservative’s viewpoint, he concisely overviews the broad ranges of topics that impacts the inequality of our economy. Being an economically lower class minority, it’s hard to defend the big business corporation’s exponentially increasing revenue while Americans struggle to care for their families. As an American, and a citizen of the United States, all we can ask for is equal treatment and an opportunity to advance in life for future generations.

The Search Results

As our government elected officials are “fixing” the nation’s economy, with international relations steadily improving, and large corporations’ exponentially increasing revenue and tax breaks, the average American citizen’s lives are not getting better, at this rate, anytime soon. Our core aspects of society are corrupted by a sense of entitlement, power, and greed. We do not realize the importance of moral values in decisions we make on a daily basis. Instead of focusing on the big picture, we evaluate short term, centralized on one’s own views, ignoring the impact it may have on the greater population. The American government, business corporations’, and globalization are too heavily motivated by their own interests, easily influenced by profiting through one’s actions while not acknowledging the workers’ union and what would be beneficial to American society.

            What causes inequality? Why does it grow? “It is the result of the rules that govern the economy--over three decades of public policies and private corporate practices-- that have benefitted asses-owners at the expense of wage earners.”(Economic Apartheid in America, pg 72) Global trade and tax policies, government spending and its regulations have all been skewed in favor of the wealthy and large corporations. Globalization refers to the business driven internationalization of the economy through opening of free trade in goods and services and the removal of obstacles to the flow of capital.

Most conventional economists point to three primary reasons for growing inequality in the American economy: changing technology, lack of education, and globalization (Democratic Promise). The basic theory is that workers in our economy have not kept up with the dramatic changes in technology, creating a shortage of highly skilled people who have made the leap into the new technological society and whose services, by virtue of supply and demand, command high salaries (Share of Workers in Non-Standard Job Declines).

Galbraith challenges this theory, arguing that rising income disparity is neither “mysterious nor necessary nor the dark side of a good thing” Rather, it is the result of recession, unemployment, slow economic growth, inflation, and a stagnant minimum wage (Galbraith, pg. 14).  The political forces should be attributed to the growth of inequality, the result of changes in the rules and decisions governing the economy. Inequality can be reduced through policies such as those that increase full employment, raise the minimum wage, and control the negative effects of globalization. The owners of wealth have dominated over those who work for a living. As a result, the rules have been changed to help asset owners at the expense of wage earners. (Privatization: Fraud and Cost Over-Runs)

The United States has witnessed over the last quarter century the concentration of money and power in the hands of fewer and fewer individuals and corporations. Former Supreme Court Justice Louis Brandeis once stated that “You can have wealth concentrated in the hands of a few, or democracy. But you cannot have both.”(Kate Bronfenbrenner) He understood the concept of economic power controlling ultimately democratic institutions.

There have been several power shifts that are responsible for the inequality in our economy today, impacting the agenda for economic policies. Big campaign contributors, corporate lobbyists, corporations, big asset-owners, CEO’s, and Wall Street are “on the rise” while popular political movements, voters, labor unions, wage-earners, employees, and Main Street are all “in decline” (David Cay Johnson). By definition, a power shift leads to a rule change, so as political powers are shifting to special interest groups, economics is playing a larger role in determining the rule changes.

In order to secure and maintain political office, candidates must depend on wealthy donors. Once elected, they become accountable to serve the political agendas of their benefactors. Many qualified and strong potential leaders are completely excluded from participation in the democratic process because of their inability to raise the money to compete. This effectively creates a wealth primary where wealthy donors decide which candidates will appear as choice for the general electorate. This would explain why the general public does not get to consider candidates who might challenge policies favoring the affluent and corporate domination. In 1994, the total contributions from just one zip code, 10021, on New York City’s Upper East Side, were larger than the combined contributions made in twenty four states (Corporate Power and the American Dream). Breaking the connection between money power and our democracy is essential to building an economy that works for everyone.

The rise in concentrated corporate power has been a key factor in the imbalance of the United States, with its increasing influence of global corporations and their ability to write the rules in our economy. With $256 billion in sales in 2003, Wal-Mart is the twentieth largest economy in the world. It is larger than the economies of 188 countries including rival IKEA’s beloved native country Sweden’s $230 billion. (Corporate Welfare Hit-list)  Corporations shape our sense of reality through the ownership concentration of the media. Corporations help create our growing fixation with money and success, molding both our morality and material lives.

Global trade and investment policies, as they are now written and practiced, undermine the wage, workplace, safety, environmental, and other standards that people in our country and elsewhere have fought so hard for. The trouble with removing barriers to trade with countries like China, Mexico, and Malaysia is that these countries have weaker health and safety laws, lower wages for workers, and negligent environmental standards. (Jeffrey Wenger) U.S. workers cannot and should not compete against workers in countries like China, where wages are very low, reports of forced prison labor abound, and workers not allowed to form unions. U.S. workers should not have to compete with countries with high rates of child labor.

In order to minimize the costs of production and manufacturing, while in effect increasing the profits, big companies have moved thousands of manufacturing operations to countries with lower environmental standards, no unions, or lax enforcement of existing environmental and labor laws. (Information about Community Supported Agriculture) This “race to the bottom” competition has meant that the United States imports more products from countries with reduced production costs and lower environmental and labor standards.

Health care ranks near the top of the United States economy, making up nearly one seventh of it, totaling at nearly $1 trillion a year. Drug companies often get large government subsidies to research drugs, but then get exclusive patent protections lasting decades to ensure that all the publicly funded benefits flow into private pockets. (James Dao) The main priority of these corporations is to make a profitable industry into a super profitable industry. What does this mean for the quality of health care? One effect is that money that could be used to provide health care instead of funding enormous profits and excessive salaries. U.S. Healthcare only used 75 cents of every health care premium dollar for health care in 1999; 14.5 cents went to administration, including millions for then CEO Leonard Abramson; 10.5 cents went to profits. (Time Magazine, 2001)

The corporate takeover of healthcare has caused a complete change of the workplace similar to its other industries, including downsizing, work speedups, subcontracting and outsourcing, and mandatory overtime. As a result, current health providers push for more part time and temporary workers who, ironically enough, receive no benefits. (Susan N. Houseman) The effect on the average citizen is the erosion of quality care for patients and increased stress on providers.

As corporate power has increased, the power of workers, communities, consumers, and others has decreased. The United Parcel Service had made $1 billion, profiting by replacing full-time workers with full benefits with temporary and part-time workers at much lower wages and no benefits. This resulted in Teamsters successful strike against the UPS which had received overwhelming public support because of its focus on part-time workers. (Part-time American Won’t Work) Creating worker’s unions became necessary, making tremendous improvements in the lives of workers and protecting entire communities from irresponsible employers who, in the new global economy, have no loyalty to nation-states, let alone to communities and employees.

While people in unions face insecurities brought on by the restructuring and globalization of the economy, they have much greater protection than nonunionized workers. Unionized workers have much better benefits than nonunionized workers. They are able to receive health benefits, with guaranteed, defined benefit, pensions, and secure jobs. Public policies, however, make organizing unions difficult. Corporations are hiring sophisticated union-busting law firms, intimidating workers who want to organize and using the bureaucratic maze of the National Labor Relations Board to stall organizing drives. (Union Coverage Rates and Trends) In case after case, workers who dare to lead workplace organizing drives are illegally fired, only to be reinstated three years later when the wind has gone out of an organizing effort.

Workers wishing to organize a union must play by a long list of rules that give employers not only control over who is eligible to join a union and the timing of elections, but also the time to wage an antiunion campaign. Protecting the right to organize a union is central in rebuilding the power of workers and creating a countervailing power to organized corporations. (Trends in Union Membership)

In addition to the decline in union power, there has also been a decline in the vitality of other community institutions that defend the interests of workers and communities against the unbridled power of private capital. (Jeffrey Wenger) Two powers, the power of organized people and the power of organized money, can dominate when communities are disorganized and fragmented, lacking the power to protect and advance their interests. The power vacuum is filled with the power of “organized money”, whose interests include privatizing public institutions, commercializing the private and sacred spheres, and promoting consumption as the purpose of human existence. (Privatization: Fraud and Costs Overrun)

The two major political parties now rely more on a donors list of organized money as opposed to utilizing the power of organized people. The only difference between Democrats and Republicans at the national level is that Republicans will always do what corporations want while the Democrats almost always do what corporations want. (Jim Hightower) “We don’t need a third party in the U.S.--we need a second party.”

With the voices of employees, consumers, society members, and environmentalists shit out of significant debates about the economic precedence of our nation, the “mainstream” economic agenda becomes the agenda of big corporations and large owners of capital. This plan includes cutting capital gains taxes, privatization of public services, deregulating company, loosening environmental restrictions, and opening up international markets for trade with no consideration for human rights or environmental standards. (Corey Rosen) Inequality has grown because the rules that govern our economy have been changed to benefit corporations and the large owners of wealth to the harm of people who depend on work for a living or on a social safety net.

Research Reflection

I would not say that Neo liberalism, a system of beliefs that virtually all government intervention in the economy is bad and that unfettered or free markets are good, should be adopted, but the economy of our own country should be placed ahead of any other conflicts. The United States is different from “virtually all European countries in its legal disenfranchisement of workers and other stakeholders.” (In Corporation Nation) We must remove the influence of big money from our democracy, reforming our campaigning finance system should be on the nation’s agenda. We must provide voters with information on each candidate, to better inform themselves as “consumers” regarding the special interest of each individual candidate. Ultimately, the rules of the global economy need to be changed to stop the negative impact of unregulated economic globalization. Citizens and civil society organizations need to be involved in broad discussions about what the rules of the new global economy should look like. Addressing the needs of the average citizen, the minimum wage at the state and federal level must be increased to combat the wage inequality in society. Guaranteed full employment, with health benefits and formations of worker’s unions must be established with the elimination of public subsidies favoring wage inequality. “Corporate welfare” only benefits large corporations and affluent individuals. Government assistance should be directed to nonaffluent households, small businesses, family farms, and democratic enterprises such as cooperatives. (Lawrence Goodwyn) Immediate reforms are needed to enable low and moderate income families to earn, save, and invest more money in order to build asset security.

Works Cited

Bronfenbrenner, Kate, “Uneasy Terrain: The Impact of Capital Mobility on Workers, Wages and Union Organizing,” a report for the U.S. Trade Deficit Review Commission, September 6, 2009. <http://www.americanrightsatwork.org/resources/studies.cfm>

“Corporate Welfare Hit List,” Public Citizen. See their web site at : <http://www.citizen.org/congress/corwell/cuts.html.>

Dao, James, “In Washington, A Delay on the Road to Baseball’s Return,” New York Times, November 17, 2010. See <http://www.nodctaxesforbaseball.org>

Galbraith, Robert D., Bowling Alone: The Collapse and Revival of American Community (New York: Simon and Schuster, 2000). Robert D. Putnam, “The Strange Disappearance of Civic America,” The American Prospect, Winter 2010. See also Putnam, “Bowling Alone: America’s Declining Social Capital,” Journal of Democracy, January 2011.

Goodwyn, Lawrence, Democratic Promise: The Populist Moment in America (New York: Oxford University Press, 1976), 34; a poetic description of a populist emcampment.

Greenhouse, Steven, “Activism Surges at Campuses Nationwide, and Labor is at Issue,” New York Times, March 2, 2011. See <http: //www.jubileedebtcampaign.org/uk.>

Houseman, Susan N., “Temporary, Part-Time, and Contract Employment in the United States: A Report on the W.E. Upjohn Institute’s Employer Survey on Flexible Staffing Policies (Kalamazoo, MI: The W.E. Upjohn Institute on Employment Research, April, 2011).

Information about Community Supported Agriculture (CSA’s) from the Extension Program of the University of Massachusetts, October 29, 2010. See <http://www.umassvegetable.org.>

Johnson, David Cay, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich and Cheat Everyone Else (New York: Portfolio, 2008).

Langan, Patrick A.; Levin, David J. (June 2, 2007). "Recidivism of Prisoners Released in 2007". Bureau of Justice Statistics. “Privatization: Fraud and Cost Over-Runs,” in the Labor Institute, Corporate Power and the American Dream (New York: Apex Press, 2011)

“Temps Fact Sheet,” Temp Worker Justice Week, October 2010. See information on the Fair Jobs web site: <http://www.fairjobs.org/week/facts.htm>

“Trends in Union Membership,” AFL-CIO as cited from the U.S. Department of Labor. Bureau of Labor Statistics, 2011. See <http://www.aflcio.org.>

Rosen, Corey, “ESOPs, Stock Options, and 401(k) Plans Now Control 8.3% of Corporate Equity” (Oakland, CA: The National Center for Employee Ownership, 2007). See <http://www.nceo.org.>

“Union Coverage Rates and Trends,” Labour Relations Labrador. Data from Labour Force Survey, Statistics Cancada. Information online at <http://www.gov.nl.ca/lra/statistitcs/unionrates.htm>

Wenger, Jeffrey, “Share of Workers in Non-Standard Job Declines,” (Washington, DC: Economic Policy Institute, 2010.)