Understanding the racial wealth gap
On the uneven playing field of the U.S. economy, one of the steepest gradients is race:
Wealth — one’s total assets — is the most meaningful measure of financial strength. Yet for every dollar a typical white household has, a Black one has 12 cents, a divide that has grown over the last half-century. Latinos have 21 cents for every dollar in white wealth.
Such disparities drag down the American economy as a whole. A study by McKinsey & Company found that consumption and investment lost because of that gap cost the U.S. economy $1 trillion to $1.5 trillion over 10 years…
The most surprising finding that researchers at the Federal Reserve Bank of St. Louis established after a decade-long study of inequality and financial vulnerability was that no matter what financial decisions you make or schools you attend, roughly 80 percent of those yawning disparities are determined by your skin color, the year you were born and your gender.
Read more about the sources of America’s wealth gap here. Hint: it ain’t just about hard work and personal responsibility.
Inequality versus democracy
Bernie breaks it down:
The United States cannot prosper and remain a vigorous democracy when so few have so much and so many have so little. While many of my congressional colleagues choose to ignore it, the issue of income and wealth inequality is one of the great moral, economic and political crises that we face – and it must be dealt with.
The unfortunate reality is that we are moving rapidly toward an oligarchic form of society, where a handful of billionaires have enormous wealth and power while working families have been struggling in a way we have not seen since the Great Depression….
Growing income and wealth inequality is not just an economic issue. It touches the very foundation of American democracy. If the very rich become much richer while millions of working people see their standard of living continue to decline, faith in government and our democratic institutions will wither and support for authoritarianism will increase. We cannot let that happen.
Read the remedies he proposes here.
Guess what? Government is necessary
Robert Frank on the high cost of market fundamentalism:
Milton Friedman, the Nobel laureate, is said to have joked that if the federal government were put in charge of the Sahara, in five years there would be a shortage of sand.
That antigovernment attitude has been embraced by countless free-market enthusiasts. President Ronald Reagan expressed it clearly in his first Inaugural Address: “Government is not the solution to our problem; government is the problem.” For decades, this perspective has gained influence in American political discourse.
The resulting hostility to government has been costly. It helped spawn not just the recent Texas electric grid meltdown but also a long string of similar failures, including responses to Hurricane Katrina, the 2008 financial crisis, the Covid-19 pandemic and the climate crisis.
The problem, of course, is how to ensure that government serves the people. But it’s a problem that cannot be wished away.
Read more here.
This is what privilege looks like
Caitlin Flanagan writes in the Atlantic that private schools have become “truly obscene”:
However unintentionally, these schools pass on the values of our ruling class—chiefly, that a certain cutthroat approach to life is rewarded. True, they salve their consciences with generous financial aid. Like Lord and Lady Bountiful, the administrators page through the applications of the nonwealthy, deciding whom to favor with an opportunity to slip through the golden doors and have their life change forever….
In a just society, there wouldn’t be a need for these expensive schools, or for private wealth to subsidize something as fundamental as an education. We wouldn’t give rich kids and a tiny number of lottery winners an outstanding education while so many poor kids attend failing schools. In a just society, an education wouldn’t be a luxury item.
We have become a country with vanishingly few paths out of poverty, or even out of the working class. We’ve allowed the majority of our public schools to founder, while expensive private schools play an outsize role in determining who gets to claim a coveted spot in the winners’ circle. Many schools for the richest American kids have gates and security guards; the message is you are precious to us. Many schools for the poorest kids have metal detectors and police officers; the message is you are a threat to us…..
But what makes these schools truly ludicrous is their recent insistence that they are engines of equity and even “inclusivity.” A $50,000-a-year school can’t be anything but a very expensive consumer product for the rich. If these schools really care about equity, all they need to do is get a chain and a padlock and close up shop.
Read more on the intergenerational transmission of inequality here.
Solidarity Dividends
Heather McGee on how the zero-sum narrative results in lose-lose outcomes:
While growing corporate power and money in politics have certainly played a role, it’s now clear that racial resentment is the key uncredited actor in our economic backslide. White people who exhibit low racial resentment against Black people are 60 percentage points more likely to support increased government spending than are those with high racial resentment. At the base of this resentment is a zero-sum story: the default framework for conservative arguments, rife with references to “makers and takers,” “taxpayers and freeloaders.”
In my travels, I also realized that those seeking to repair America’s social divides can invoke this sort of zero-sum framing as well. Progressives often end up talking about race relations through a prism of competition — every advantage for whites, mirrored by a disadvantage for people of color.
In my research and writing on disparities, I learned to focus on how white people benefited from systemic racism: Their schools have more funding, they have less contact with the police, they have greater access to health care. These hallmarks of white privilege are not freedoms that racial justice activists want to take away from white people, however — they’re basic human rights and dignities that everyone should enjoy. And the right wing is eager to fill the gap when we don’t finish the sentence.
For an entire generation of American politics, racist stereotypes and dog whistles have strengthened the hand that beat progressives in the fight against rising inequality. But did white people win? No: Many of them lost good jobs, benefits and social mobility along with the rest of us not born into wealth.
The task ahead, then, is to unwind this idea of a fixed quantity of prosperity and replace it with what I’ve come to call Solidarity Dividends: gains available to everyone when they unite across racial lines, in the form of higher wages, cleaner air and better-funded schools.
Read more here.
A hard line on the climate
This rate exceeds the pace of reductions achieved by any country to date. It also exceeds the rate that would be achieved by pricing emissions at the “social cost of carbon” as conventionally measured: see here and here.
The end draws nearer … for fossil fuels
General Motors’ announcement that it will go all-electric by 2035 heralds the beginning of the middle of the end:
“We are doing this to build a sustainable business,” Mr. Parker, the company’s chief sustainability officer, said in an interview on Friday. “We want to have a business in 15 years that’s a thriving business.”
G.M. has already committed to spending $27 billion to introduce 30 electric vehicle models by 2025, and is building a plant in Ohio to make batteries for those cars and trucks.
The GameStop game stop
In the end, the old adage “the bigger the bubble, the bigger the pop” will be confirmed yet again. In the meantime, Doug Henwood offers some thoughts about the playpen called the stock market:
It’s funny to see some Wall Streeters complain that there’s something unfair about this action, since these are the sorts of games they play with each other and the general public all the time. They talk up stocks or talk them down, depending on their interests, and plot against what they see as weak or vulnerable players all the time. It’s just that the speculators with names like DeepFuckingValue who are savaging them for now are the wrong kind of people. They don’t live in Greenwich in houses with twenty-car garages.
Read his take here.
Paying the price for offshoring production
Americans should draw a lesson from the pandemic:
In the past two decades, the U.S. economy has been lulled into following a path of offshoring, driven by an ideology celebrating short-term financial gains above everything else. The country, once a manufacturing powerhouse, is populated by corporations that have moved manufacturing overseas and lost their ability to produce domestically, leaving little behind except shell companies that employ relatively few people. The United States no longer produces even the essentials, from personal protective equipment to our smartphones and laptops.
It doesn’t have to be this way. Read more here.
Tax cuts for the rich – period
A new study from the LSE looks at the effects of tax cuts for the rich in 18 OECD countries over the 50-year period from 1965 to 2015. The conclusion:
We find that major tax cuts for the rich push up income inequality, as measured by the top 1% share of pre-tax national income. The size of the effect is substantial…. Turning our attention to economic performance, we find no significant effects of major tax cuts for the rich. More specifically, the trajectories of real GDP per capita and the unemployment rate are unaffected by significant reductions in taxes.
One more nail in the coffin of “supply-side economics”. Read more here.
