Charting America's Future: Farewell to Fairness
TYLER, GUS
This is the latest article in a year-long exchange on CHARTING AMERICAS FUT 8.FAREWELL TO FAIRNESS Atallevents, whateverthe aim of sedition, it stems in every case from...
...Although such a view is valid, it is an oversimplification that conceals another form of malignant maldistribution...
...The bells were shaped differently and so were the sounds they sent off...
...composing roughly half the employees in the nation??workers suffered through the '70s as their take-home buying power continued to contract...
...A family that earned $2,000 in 1968 paid 26 per cent in taxes...
...The danger to the whole society should be patent...
...To this must be added increased 'perks' in the form of entertainment allowances, club dues, company cars, legal and financial counseling, stock options, insurance, and so on...
...when the ends are wide apart and the middle is shallow, the clang can be calamitous...
...Italics mine...
...abundance would allow affluence for all...
...The progressive tax is supposed to "soak the rich" and the transfer payments??welfare and the like??are supposed to give to the "poor...
...in a populace forms some bell curve...
...It was in 1776, too, that the guru of present-day American conservatism, Adam Smith, explained in his Wealth of Nations: "The difference in natural talents in different men is, in reality, much less than we are aware of...
...Of those who do not, there is a discernible division that has been growing markedly in recent decades...
...His reason waselemen-tary: "Wealth is the parent of luxury and indolence, poverty of meanness and viciousness, and both of discontent...
...A system founded on it is against nature, and, in the long run, breaks down...
...See "The Other Economy," NL Special Issue, May 8, 1978...
...Their bad condition became worse in the early '80's when income was redistributed from the weaker to the strongest...
...It holds that the maldistribution of income in our society is merely an expression of the basic maldistribution of talent in any society...
...The 1981 tax law opened up new loopholes at the top, and withdrawal of Federal funds from local governments has forced states, counties and cities to raise their regressive taxes...
...Over the same decade, wages lagged behind inflation in the small, competitive, labor-intensive companies: In part this was because wages, though lower, were a larger percentage of total costs, and in part because these outfits could not simply pass the added costs on to consumers...
...In feudal times production was for the manor, a pretty much self-contained unit where the lord was not dependent on sales for his style of living...
...At best, transfers keep the bottom layer from losing the meager share with which it has to eke its way through life...
...Because income reflects wealth, it is customary to discuss the maldistribution of income in terms of the contrasts between those who live by "clipping coupons" and those who try to live in "the sweat of their brow...
...namely, the maldistribution of income within the bourgeoisie and within the proletariat...
...The official count is wrong because it states the actual income of those who live by wages, salaries and Social Security payments, but understates grossly the income of those who live by capital gains...
...That's the sad saga, according to the official numbers...
...when that income reaches $99,999...
...and the very different genius which appears to distinguish men of different professions, when grown to maturity, is not upon many occasions so much the cause, as the effect of the division of labor...
...Of the three, theeth-ical rationale is the least provable, yet the most profound and pervasive...
...Transfer payments do bring certain benefits to persons and families who would otherwise have next to nothing...
...By and large, the United States was exceeded in its inequality only by France...
...in fact, most of them don't...
...T ^L^Li he maldistribution of income mirrors the maldistribution of wealth in the United States...
...These people have been double victims of recent policies: hit by the overall pinch in the economy, and hit again by their special deprivations as second-class citizens in our two-tier system...
...The desire for equality," noted Aristotle, "is the mainspring of sedition...
...the most volatile...
...Indeed, in the postwar era, Japan's performance, it is generally believed, has been better than that of the United States...
...Since then matters have gone from bad to worse...
...Of the 14 million firms...
...Smith saw only one limit to the employer's depressing effect on wages: "A man must always live by his work, and his wages must at least be sufficient to maintain him...
...The poor are given the incentive to work by the threat of starvation...
...Some of the benefits are in cash and some in-kind, like food stamps and Medicaid...
...The case for equitable sharing rests on the argument that too much inequality is bad??for ethical, political and economic reasons...
...There have been few advocates of total income equality...
...During much of this time they have served to keep income maldistribution from getting worse...
...There are many capitalists who never "make it...
...In practice, however, not even the most communist nation has a system based on the Marxist maxim...
...He also wrote long before the development of modern unions and social legislation aimed at elevating the income of the "race of workmen...
...Moreover, the distortion grows as the wealthiest draw an ever greater portion of tneir income from capital gains...
...These lesser Americans are not only economically the most vulnerable...
...In the United States, according to these 1976 OECD figures, the top fifth of the population had a share of the national income equal to about 10 times that of the bottom fifth...
...It began to rise again once the restrictive growth policies of the '70s took hold, reaching 10.3 percent in 1980??a 17 per cent increase...
...In ancient Sparta, according to Plutarch, Lycurgus imposed equality in property (excluding slaves...
...On prices, Smith wrote: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices...
...About half the capital gains simply go unreported, while those that are reported are taxed at 20 per cent maximum...
...In a time of contrived scarcity, the bulk of the nation is being forced to make sacrifices to enrich the richest, with those at the bottom having to make the greatest sacrifices...
...but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profit above what it naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow citizens...
...As Representative Henry Reuss of Wisconsin, chairman of the Joint Economic Committee of Congress, noted in June 1981: "Since 1978, consumer prices have increased by over 26 per cent, average weekly earnings by only 15 percent...
...A handful reach the top??the millionaire singers, actors, basketball players, and rock stars...
...Smith wrote all this long before the development of those enlarged and sophisticated contrivances called trusts, cartels and conglomerates...
...There is another distortion that borders on the comic...
...Broadly speaking, this would make the rich less rich and the poor less poor without making the rich poor or the poor rich...
...The Declaration of Independence proclaimed flatly that "all men are created equal...
...Morgan Reynolds and Eugene Smolensky, in studying the two decades from 1950-70, when "there were sizable efforts toward a more egalitarian distribution and a sizable increase in benefits accruing to the lower end of the distribution," found that "aggregate income inequality in the final distribution [was] virtually unaltered...
...The real facts are more sinister, for the true income of the most affluent in the nation??say the top 2 per cent??is hidden from public view...
...otherwise it wouldbeimpossibleforhimtobringup a family, and the race of such workmen could not last beyond the first generation...
...But then he hastened to warn against "the consequences of this enormous inequality [in France] producing so much misery to the bulk of mankind...
...on the other, by vulgarizing and depressing...
...T he contrast between the '60s and afterwards is dramatically demonstrated by the ebb and flow of poverty in America...
...On wages, he wrote: "The workmen desire to get as much, the masters to give as little as possible...
...He believed that to alleviate the distress " legislators cannot invent too many devices for subdividing property...
...Then came stagflation and a sliding back to greater inequality...
...Thanks to the momentum of the War on Poverty, by 1974thepercentagehita low of 8.8...
...in bad times, they go bust...
...In thetruecount, thetop 1.4 per cent of the families had an income equal to the bottom 34 per cent...
...Hence, to rail against existing inequality is to rail against nature itself...
...They must even upon most occasions be somewhat more...
...He also declared that "another means of lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher proportions of property in geometrical progression as they rise...
...T ^??hrc hrough the ages, to plain people the principle has been self-evident, like the inalienable rights in the Declaration of Independence, and has been a force of earth-shaking proportions...
...The income of the wealthiest is significantly understated because the Bureau of the Census does not take into account "money received from the sale of property, such as stocks, bonds, a house or a car...
...Because the latest Bureau of the Census statistics end with 1978, what has been happening sinceis necessarily conjecture...
...The hidden income of the most affluent has been on the rise for decades...
...The masters, being fewer in number, can combine more easily____In all such disputes, the masters can hold out much longer____We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen...
...When the ends of the bell come closer together, the social sound seems sweeter...
...West Germany, Canada, Sweden, the United Kingdom, and Japan were all more nearly equal than we...
...The social disruption arising from this discontent is not limited to sedition in the formal meaningof that term...
...The fear of poverty exploding the established order has prompted those in power to redress the economic balance somewhat, whether through charily or unemployment insurance, collective bargaining or the progressive income tax...
...No less an egalitarian than Thomas Jefferson, in commenting on the situation in pre-revolutionary France wrote: "I am conscious that an equal division of property is impracticable...
...Tax shelters allow million-dollar incomes to go tax free...
...But his straightforward recital of what is likely to happen in the absence of any external restraints on the "masters" and "dealers" is as valid today as it was in 1776...
...s_ nalistically tagged "big labor" and "big government," have been more or less operative in the half century from 1933 (the inauguration of Franklin D. Roosevelt) to 1982 (the second year of Reagan...
...Whatever progressivity is left at the Federal level is offset by regressive local taxes that fall heavily on middle and lower America??who spend practically all of their income buying goods and services??and lightly on the largest earners??who use the bulk of their income to invest, not to consume...
...With the rise of capitalism, production was conducted for the market, for sale to some impersonal consumer...
...Although Jefferson probably never heard about bell curves, he knew that there were bells and bells, and that through laws to redistribute property and to impose progressive taxation it was possible to determine their shape...
...The result has been largely a chronicle of collective bargaining, not in the narrow sense of unions negotiating with management, but in the cosmic sense of classes clashing with one another over the distribution of the goods and services of a nation or of the earth...
...The second is a tax law that redistributes the national income from all levels to the top...
...It is precisely for this reason, for example, that the hourly income of women is only about 59 per cent that of men, despite all kinds of laws on equal pay for equal work, on equal access to jobs, etc...
...T ??ihr hree policies, proposed by American conservatives and pursued by President Reagan, threaten the nation with the social disorder inherent in intolerable inequality...
...In practice, things do not work out that way...
...These two items, nearly 14 per cent of personal income, are significantly more concentrated in the upper income brackets than is wage income...
...His generous formula assumed a society with such a superfluity of goods that to give more to those who needed it would work no hardship on anyone...
...as it did repeatedly before it became the practice for government to intervene to balance consumption with production...
...Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labor above their actual rate...
...So now Robin Hood has reversed his role: taking from almost everyone to give to the richest...
...During the 1970s, the income of employees in the capital-intensive corporations more or less kept up with the inflation rate: In part this was because wages represented a relatively small proportion of total production costs in heavily capitalized firms, and in part because these "monopolies" could transmit costs to consumers...
...The rich are given the incentive to invest by the promise of new riches...
...Income now had to be so distributed that there would be a mass of people out there with the wherewithal to buy...
...In the earlier decade??as t he economy expanded and income was reapportioned, albeit slightly, from the few to the many??the percentage of families living in poverty fell from 18.5 in 1959 to 9.7 in 1969, or almost by half...
...the one in Japan doesn't look like the one in America...
...For a long stretch they did spur total growth so that there was more for everybody, on the average, thereby reducing the number and the percentage of persons living in official poverty...
...The gap between the wages and salaries of the two has been expanding steadily...
...What set of scientific facts or unflawed line of logic can be presented to "prove" that it is unethical for a few to live in luxury while others barely live...
...Whenever there is in any country uncultivated land [unused facilities??G.T.] and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural rights...
...The difference between the most dissimilar characters, between a philosopher and a common street porter, for instance, seems to arise not so much from nature, as from habit, custom, and education...
...However worded, the inequity is depicted as arising from the division of society into classes whose sources of income are different, with the wealthy deriving their earnings from what they own and the others from the sale of their labor...
...In one calculation for the year 1968, the official tabulation had the top 2 per cent of the families in the nation receiving 9 per cent of the national income, but they actually received 18 per cent of the total when income from capital gains was added...
...Left alone, the capitalist would destroy capitalism by killing the goose that lays the golden eggs...
...In a market economy, the Midas touch murders...
...These are, of course, precisely the kinds of sources that contribute heavily to the resources of the rich...
...The matter is handled with malign neglect...
...Nonetheless, in recent decades public policy-making has paid little or no mind to income equity...
...Thus the classic formulation of the condilion in terms of bourgeoisie versus proletariat, management versus labor, investors versus consumers, leisure class versus working class...
...I In theory, the maldistribution of income in the United States is corrected somewhat by taxes and transfer payments...
...Among those making over $100,000 a year, the percentage drawn from capital gains rose from 22 in 1954 to 23 in 1956 to 29 in 1967...
...It is we...
...1938)" (nl, December28,1981), "Undoing the New Deal (1939-1981) " (nl, January 25), "Responses...
...The starting point of any account of income distribution in the United States is the report contained in Historical Statistics of the U.S., issued by the Bureau of the Census (although, as we shall see later, its figures are misleading...
...the nonaffluent are beaten with sticks...
...The 1981 tax law change, reducing the levy on capital gains to an insignificant 20 per cent maximum, provided further incentive??as was intended??for theinvesting class to derive an ever larger piece of its income from capital gains...
...In sum, Smith warned against the masters of the market with their desire and ability to accumulate more than a fair share to themselves: "The interest of the dealers in any particular branch of trade or manufactures is always in some respect different from, and even opposite to, that of the public...
...But the several studies that have been done??by the Federal Reserve in 1962, by an examination of estates in 1969??support Lester Thurow's concept of an "iron law of wealth distribution," which has the top one-half of 1 per cent of the nation owning an inordinately huge share of the country's income producing property...
...Sooner or later, their frustrations must turn to fury??as racial, generational and ethnic antagonisms are ignited by economic discontent...
...More, the United States had the dubious distinction of having its poorest 20 per cent with a lower share of total before-tax income than any other country, including France...
...In his Inequality in An Age of Decline, Paul Blumberg tells us: "In a curious practice, the CPS [Current Population Survey] simply stops counting individual incomes from any single source...
...In good times, they exploit themselves without letup, working endless hours at an hourly income well below that of the average employee...
...It can break forth as riot, terrorism or plain street crime...
...The pecuniary powers almost instinctively join forces to keep wages down, lift prices high, and enlist the government in support of their efforts to give more income to themselves...
...Hence, ironically, if the fabled capitalist self-interest (greed...
...Wall Street Journal hatever the virtues asserted for the economic policies in the conservative era begun by Richard Nixon and continuing with Ronald Reagan, it has never been suggested that any of them aimed at achieving a more equitable distribution of income in the United States...
...Yet paradoxically, these transfers do not give those at the bottom??let's say, the bottom tenth??a greater share of the national income from one year to the next...
...Interestingly, Sparta's egalitar-ianism was enacted essentially for military reasons, to give each man a real stake in the society...
...were allowed to work its will without restraint, if excessive wealth were piled up in the hands of a few at the expense of the many, the system would become top-heavy and prone to topple...
...For the most affluent there are loopholes...
...Malign" because when neglected, the natural tendency is for income distribution to go from bad to worse...
...The progressive income tax isn't...
...Apparently, equality does not inhibit efficiency...
...In sophisticated conservative circles this dangerous distribution has an elegant rationale, known as "management of incentives...
...Virtually none of them ends up even among the top fifth...
...By this official record, in the 50 years from 1929-78, the bottom 40 per cent of American families and "unrelated individuals" improved their share of the national income hardly at all, from 12.5 to 13.5 per cent...
...Basically, the division is between those employed by small businesses and those employed by the larger corporations, usually operating in oli-gopolized sectors with heavily capitalized resources...
...This is the latest article in a year-long exchange on CHARTING AMERICAS FUT 8.FAREWELL TO FAIRNESS Atallevents, whateverthe aim of sedition, it stems in every case from inequality...
...who are now headingfor the cellar position in the league...
...gifts...
...The bell in the United States in 1982 does not look like the bell in 1962...
...If the ethical position remains technically unprovable??since it requires acceptance of the premise that equality is handed down by God or inherent in nature, and of the second premise that to go contrary to God or nature is wrong??thesensethat it is shameful for some to roll in money when others are rolling in the gutter still seems to be as embedded in the human spirit as the very will to live...
...The affluent are bribed with carrots...
...ince the capital-intensive, oli-gopolized sectors do not live by the same economic imperatives as the labor-intensive, competitive sectors, both the American economy and the American working class are sorted out into two separate tiers...
...The third is the push to balance the budget by further depriving the neediest . Together, these policies add up to a system to transfer income from the less affluent majority to the most affluent minority...
...The preceding pieces in this series were: "TheGreatDebate"(NL, November 30, 1981), "Those New Deal Years (1933...
...But, whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject...
...A closer look reveals that what progress there was toward a lessening of extremes peaked in 1967, when the income figures for the bottom, middle and top were, respectively, 14.2, 42.3 and 43.4 per cent...
...Thus Matthew Arnold: "On the one side, inequality harms by pampering...
...Underlying the perilous ploy is a rationale that posits the eternal and inevitable arrangement of humans along a bell curve...
...Aristotle From a political standpoint, perhaps the most dramatic aspect of the Reagan program is that it sharply favors the rich over the poor...
...in many cases, they are also socially (politically...
...If they were included in the official count, the income share going to the top would be far greater than stated in the formalized figures??and, correspondingly, the shares going to all others would be reduced...
...The first is the cooling of the economy that leaves less, on the average, for everyone...
...It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms...
...they have done little??if anything??to redistribute national income more fairly...
...In a 1975 study, Brookings Institution economist Arthur M. Okun concluded that "the top 1 per cent of families have as much after-tax income as nearly all the families in the bottom 20 per cent...
...Incidentally, it will be noted that France is endeavoring to get out of its cellar position in the international league, as evidenced by the recent election of the more egalitarian Mitterrand government...
...Two economic detectives, Roger A. Herriot and Herman P. Miller, who have been on the trail of true income distribution for many years, recalculated the results if the capital gains excluded by the Census were included...
...Dividend income increased by 26.2 per cent between 1978 and 1980, interest income by 48 per cent...
...Congressman Reuss, focusing on the disparity between income distribution in the United States and other industrial countries, observed: "A study made by the Organization for Economic Cooperation and Development (OECD) in 1976 found that, both before and after taxes, the United States had the second greatest degree of inequality of the seven leading industrialized democracies...
...In 1962 that top fraction owned 22 per cent of the country's wealth, while in 1969 the favored few owned 26 per cent (see NL, "The Other Economy...
...Masters too sometimes enter into particular combinations to sink the wages of labor even below this rate...
...Traditionally, the sturdiest contention has been that inequality is contrary to nature...
...Instead, historically each class has had a definition of fairness tending toward a formula that favors itself...
...There can be no doubt, though, about the continuing reversal...
...Thus, a top corporate executive whose salary is $500,000 is tabulated as receiving only $99,999...
...presumably owned by capitalists??in the United States, 97 per cent may be listed as small businesses...
...The exact figures are hard to turn up, since no government agency gathers data on who owns how much in America...
...A like division exists within the population that works for wages and sala-ies...
...But by the 1970s poverty rose, the economy lagged, and national income began to be redistributed from bottom to top through developments in the private sector and government approach that "sharply favors the rich over the poor...
...And just as striving for perfection motivates better performance, the ideal of equality, of everybody getting the same, underlies the idea of equity, of everyone receiving a fair share...
...But even the little bit that transfer payments have been able to do to preserve the share of the poorest began to be undone in the '80s, as the President and Congress proceeded to slash school lunches, Medicaid, food stamps, aid to families with dependent children, housing subsidies, unemployment compensation, survivor benefits, etc...
...To widen the market may frequently be agreeable enough to the interest of the public...
...On the role of the state, Smith wrote: "Whenever the legislature attempts to regulate the difference between masters and their workmen, its counselors are always the masters...
...Any person whose income from any one source exceeds this figure is recorded as earning $99,999...
...Executive compensation in profit-making corporations increased by 17.5 per cent in 1978, 16.8 per cent in 1979, and 17.3 per cent in 1980...
...indeed, the two may be identical...
...Among the workers in this second tier, whose decline in living standards has been far more steep than in the country as a whole, there is a disproportionately large percentage of women, youth, elderly, minorities, and immigrant workers...
...The relative equality in Japan apparently did not weaken the incentives for economic growth in that country...
...In the lower tier...
...Plato declared that no person should have an income greater than four times that of another...
...The reason for this is that the weakest tend to fall ever more behind...
...The economic argument for income equity is fairly modern, arising out of the ironies of a market economy...
...Eighty-five per cent of women in the labor market are entrapped in the second tier of the economy...
...in Japan, the top fi fth had a share equal to only about five times that of the bottom fifth...
...The thesis is difficult to refute because all history appears to confirm the conclusion that the apportionment of skill, intelligence, wealth, power, charm, physique, etc...
...They do this not because they are morally evil, but because that is the way of all flesh in the marketplace...
...In other words, Uncle Sam is supposed to be a legalized Robin Hood...
...The former are disposed to combine in order to raise, the latter in order to lower the wages of labor...
...It was none other than Adam Smith who told how such behavior was inherent in the system...
...one making $25,000 paid only 33 per cent...
...nl, February 8), "The Roots of Stagflation" (nl, February 22), "Responses-2" (nl, March 8), "The Polities of Productivity" (nl, March 22), "Re-sponses-3"(NL, April 5), "Supply-Side Trickle-Up" (nl, April 19), and "The Budget Balancing Act" (nl, May 31...
...The reality was neatly described by Isaiah Berlin: "Belief in equality??fairness??the view that unless there is a reason for it, recognized as sufficient by some identifiable criterion, one man should not be preferred to another, is a deep rooted human principle in human thought____Like all human ends it cannot itself be defended or justified, for it is itself that which justifies other acts??means taken toward its realization...
...It is then that suppressed expectations are likely to turn to irrepressible explosions??that society will be seized, as Aristotle warned, with the "sedition" that "stems from inequality...
...In fact, the political motivation has undoubtedly been more effective in redistributing income than the ethical injunction to treat others as brothers in the family of God or nature...
...Their share of the market has been shrinking: Their 11 per cent of total assets in manufacturing, for instance, is falling and is projected to drop to 3 per cent by 1996...
...For the affluent, 'unearned income' provided a much better buffer...
...The next highest 40 per cent (so-called middle-and upper-middle America) did advance from 33.1 to41.2 per cent, and at the expense of the top fifth, whose share of the national income went down from 54.4 to 45.2 per cent...
...and lump sum inheritances or insurance payments...
...Of the 111 tables attached to the 1982 Economic Report of the President, not one addressed income distribution...
...To widen the market and narrow the competition is always the interest of the dealer...
...Karl Marx proposed a sort of superequality in income: "From each according to his ability, to each according to his needs...
Vol. 65 • June 1982 • No. 13
