How Inequality Wrecks Everything We Care About

A society that has become an oligarchy destroys our national community, Chuck Collins contends in “99 to 1: How Wealth Inequality is Wrecking the World and What We Can Do About It?” The following is an excerpt from his book explaining how the destruction occurs. You can receive his book with a minimum contribution to Truthout by clicking here.

“The reality is that U.S. society is polarizing and its social arteries are hardening. The sumptuousness and bleakness of the respective lifestyles of rich and poor represents a scale of difference in opportunity and wealth that is almost medieval—and a standing offense to the American expectation that everyone has the opportunity for life, liberty and happiness.” —Will Hutton

Inequality is wrecking the world. Not just poverty, which is destroying the lives of billions of people around the planet, but inequality—the accelerating gap between the 99 percent and the 1 percent.

Reversing the Inequality Death Spiral

According to research in dozens of disciplines, the extreme disparities of wealth and power corrode our democratic system and public trust. They lead to a breakdown in civic cohesion and social solidarity, which in turn leads to worsened health outcomes.

Inequality undercuts social mobility and has disastrous effects on economic stability and growth. The notion of a “death spiral” may sound dramatic, but it captures the dynamic and reinforcing aspects of inequality. And these inequalities were a major contributing factor to the 1929 and 2008 economic downturns. What follows is the case against inequality.

Inequality Wrecks Our Democracy and Civic Life

Inequality is disenfranchising us, diminishing our vote at the ballot box and our voice in the public square. As dollars of the 1 percent displace the votes of the 99 percent as the currency of politics, the 1 percent wins. Not every time, but enough so that the tilt continues toward the agenda of the 1 percent.

The money of the 1 percent dominates our campaign finance system, even after efforts at reform. To run for U.S. Senate—or to remain in the U.S. Senate after being elected—politicians must raise an estimated $15,000 a day in campaign contributions. To do this efficiently, politicians have to spend a lot of time courting people in the 1 percent, attending $1,000-a-plate fund-raising dinners and listening to their concerns and agenda. This means less time shaking hands in front of the Costco or Cracker Barrel. We all respond to the people we are surrounded by, and politicians are no different.

Elections do matter. Politicians care about votes on Election Day, and they campaign for those votes and work to get supporters to the polls. But candidates for the U.S. House of Representatives know that every other day of the year they have to think about money.

The corporate 1 percent dominates the lobbying space around federal and state policies. In the last thirty years, the ranks of official lobbyists have exploded. In 1970, there were five registered lobbyists for every one of the 535 members of Congress. Today there are twenty-two lobbyists for every member.

Who lobbies for the 99 percent? There are impressive organizations out there, such as Public Citizen and the Children’s Defense Fund, that stand up, wave their arms, and say, “Hey, what about the 99 percent?” But they are severely underresourced, outgunned, and outmaneuvered by the organized 1 percent.

Inequality Makes Us Sick

The medical researchers have said it. And now a growing body of public health research is arriving at the same conclusion: inequality is making us sick.

The more inequality grows between the 1 percent and the 99 percent, the less healthy we are. Unequal communities have greater rates of heart disease, asthma, mental illness, cancer, and other morbid illnesses.

Of course, poverty contributes to all kinds of bad health outcomes. But research shows that you are better off in a low income community with greater equality than you are in a community with a higher income but more extreme inequalities.

Counties and countries with lower incomes but less inequality have better health outcomes. They have lower infant mortality rates, longer life expectancy, and lower incidences of all kinds of diseases. Counties with higher average incomes but greater disparities between rich and poor have the opposite indicators. They are less healthy places to live.

Why is this so? According to British health researcher Richard Wilkinson, communities with less inequality have stronger “social cohesion,” more cultural limits on unrestrained individualism, and more effective networks of mutual aid and caring. “The individualism and values of the market are restrained by a social morality,” Wilkinson writes. The existence of more social capital “lubricates the workings of the whole society and economy. There are fewer signs of antisocial aggressiveness, and society appears more caring.”

Inequality Tears Our Communities Apart

Extreme inequalities of wealth rip our communities apart with social divisions and distrust, leading to an erosion of social cohesion and solidarity. The 1 percent and the 99 percent today don’t just live on opposite sides of the tracks—they occupy parallel universes.

New research shows that we’re becoming more polarized by class and race in terms of where we live. A 2011 report based on U.S. Census data notes, “As overall income inequality grew in the last four decades, high- and low-income families have become increasingly less likely to live near one another. Mixed income neighborhoods have grown rarer, while affluent and poor neighborhoods have grown much more common.” As this distance widens, it is harder for people to feel like they are in the same boat.

High levels of inequality lead to the construction of physical walls. In many parts of the world, the members of the 1 percent reside in gated communities, surrounded by security systems and bodyguards. More than 9 million households in the United States live behind walls in gated communities, similar to the statistics in polarized societies such as Mexico and Brazil. Over a third of new housing starts in the southern United States are in gated communities.

The relationship between the 1 percent and the 99 percent is characterized by fear, distance, misunderstanding, distrust, and class and racial antagonisms. As a result, there is less caring and a greater amount of individualistic behavior. Part of how people express care is support for public investments in health infrastructure and prevention that benefit everyone. As societies grow unequal, support for such investments declines.

Solidarity is characterized by people taking responsibility for one another and caring for neighbors. But for solidarity to happen, people must know one another and have institutions that transcend differences in class, culture, and race. In communities with great inequality, these institutions don’t exist and solidarity is weakened.

Inequality Erodes Social Mobility and Equal Opportunity

Inequality undermines the cherished value of equality of opportunity and social mobility. Intergenerational mobility is the possibility of shifting up or down the income ladder relative to your parent’s status. In a mobile society, your economic circumstances are not defined or limited by the economic origins of your family.

For many decades, economists argued that inequality in the United States was the price we paid for a dynamic economy with social mobility.6 We didn’t want to be like Canada or those northern European economies, economists would argue, with their rigid class systems and lack of mobility.

But here’s the bad news: Canada and those European nations—with their social safety nets and progressive tax policies—are now more mobile than U.S. society. Research across the industrialized OECD countries has found that Canada, Australia, and Nordic countries (Denmark, Norway, Sweden, and Finland) are among the most mobile. There is a strong correlation between social mobility and policies that redistribute income and wealth through taxation. The United States is now among the least mobile of industrialized countries in terms of earnings.

Inequality Erodes Public Services

The 99 percent depends on the existence of a robust commonwealth of public and community institutions. As Bill Gates Sr., the father of the founder of Microsoft, wrote,

The ladder of opportunity for America’s middle class depends on strong and accessible public educational institutions, libraries, state parks and municipal pools. And for America’s poor, the ladder of opportunity also includes access to affordable health care, quality public transportation, and childcare assistance.

Historically, during times of great inequality, there is a disinvestment in the commonwealth. There is less support provided for education, affordable housing, public health care, and other pillars of a level playing field. By contrast, in 1964, a time of relative equality, there was greater concern about poverty. In fact, we launched the War on Poverty to further reduce disadvantage.

Today, as the 1 percent delinks from our communities, it privatizes the services it needs. This leads to two bad outcomes. First, because the 1 percent does not depend on commonwealth services, it would rather not pay for them. They often prefer tax cuts and limited government, which leave them more of their money to spend on privatized services.

Second, the quality of life for the 99 percent suffers when the wealthy don’t have a personal stake in maintaining quality public services. As we’ve seen, the 1 percent has tremendous clout. Its members have the ear of elected officials, command over charitable dollars, dominance of media ownership, and networking connections that are sometimes called “social capital.” In a democratic society, good government and strong public institutions require civic engagement by everyone. But when those with the biggest amount of political power, largest number of connections, and greatest capacity don’t have a stake, a cycle of disinvestment occurs.

The cycle of disinvestment begins when public services start to deteriorate after the withdrawal of tax dollars and the participation of the powerful. For example, if someone doesn’t use the neighborhood public swimming pool because he or she belongs to a private club or spends summers at a private beach house, that person doesn’t have a stake in ensuring that the public swimming pool is open all summer, clean and well maintained, and staffed with qualified lifeguards. When services deteriorate and the powerful no longer participate, it leads to a decline in political support and resources, which in turn leads to a cycle of further disinvestment.

This lack of stake is even more visible in terms of public education, where the withdrawal of the 1 percent and even the top 30 percent of families has contributed to severe disinvestment in some school districts. This triggers a vicious circle of budget cuts, stakeholders pulling out, and declining public support for education.

The cycle of disinvestment accelerates when it becomes rational to abandon public and community services if one can afford to do so. Those who can get out do so, in a rush-to-the-exits moment. Families in the 99 percent work extra hard to privatize the services they need until there is a wholesale withdrawal from the public sphere.

If you can’t depend on the bus to get to work, you buy a car. If you can’t rely on the local public schools to educate your child, then you stretch to pay for private schools. If you can’t depend on the lifeguards to show up at the public pool, then you join the private pool. If you can’t depend on the police to protect your neighborhood, you hire a private security service or move to a gated community. The cycle of disinvestment continues and the costs of privatized services rise, trapping the remaining families in poor schools and neighborhoods lacking services.

Inequality Undermines Economic Growth

Remember the last time in history that the 1 percent had such a large share of the wealth pie? It was 1929, the eve of the Great Depression. Economic historians argue that this was not a coincidence. Too much inequality contributes to economic instability.

The corollary is that periods of shared prosperity have greater economic growth and stability. The period after World War II, 1947 to 1977, is often cited as a case study of a high-growth and high-equality period.

Making such comparisons is fraught with danger—we’re not just comparing apples and oranges, we’re comparing bicycles and dump trucks. The period after World War II was unprecedented in terms of the dominant and unrivaled role the United States played in the global economy. But international comparative data that look at inequality and economic performance reinforce this story. More-equal societies do better on most indicators.

The conventional wisdom, espoused in the 1960s by economists such as Arthur Okun of the Brookings Institution, was that there was a trade-off between growth and equity: policies that increased equality would slow economic growth, and aggressive pro-growth policies would worsen inequality. But this thinking is now being turned on its head.

Research by the International Monetary Fund (IMF) and the National Bureau of Economic Research point to the fact that more-equal societies have stronger rates of growth, experience longer economic expansions, and are quicker to recover from economic downturns. According to Jonathan Ostry, an economist at the IMF, trends toward unequal income in the United States mean that future economic expansions will be just one-third as long as they were in the 1960s, prior to the widening of the income divide. Less-equal societies are more vulnerable to both financial crises and political instability.

In volatile markets, investors become gun-shy, even those in the 1 percent. When they perceive that financial markets are rigged in favor of insiders and the politically connected, they take their money somewhere else. “You’re going to lose a generation of investors,” observed Barry Ritholtz, an investor researcher with Fusion IQ. “And that’s how you end up with a 25-year bear market. That’s the risk if people start to think there is no economic justice.”

Many economists have drawn parallels between 1929 on the eve of the Great Depression and the 2008 economic meltdown. Raghuram Rajan, a former chief economist for the IMF, argues that both depressions were preceded by periods of extreme inequality. In his book Fault Lines: How Hidden Fractures Still Threaten the World Economy, Rajan observes that during the decade prior to both economic downturns, the 1 percent captured a gigantic percentage of income gains and wages were stagnant for the majority of Americans. Meanwhile, government policies and private corporate practices encouraged easy access to credit and borrowing among the poor and middle classes. Household debt nearly doubled during both periods.

Did inequality play a role in the 2008 economic meltdown? The next chapter takes a closer look at this important question.

Copyright of Chuck Collins. Not reprintable without permission.