“Over a long period of time, the main force in favor of greater equality has been the diffusion of knowledge and skills.”
“the decrease in the top marginal income tax rate led to an explosion of very high incomes, which then increased the political influence of the beneficiaries of the change in the tax laws, who had an interest in keeping top tax rates low or even decreasing them further and who could use their windfall to finance political parties, pressure groups, and think tanks.”
― Thomas Piketty, Capital in the Twenty-First Century
“Make America Great Again.” When was the last time that America was great? The period that followed WWII is felt by many to be one of relative harmony. The middle class grew by leaps and bounds, likely due to the rise of powerful unions. The GI bill made it easy for tens of thousands of veterans to obtain a good education. Interstate highways led to an explosion of home ownership in the suburbs. People built equity as they worked. When they retired, they had a small nest egg that helped to carry them through. We should remember that this American dream was only available for the White majority.
Even after accounting for the factors mentioned above, the major reason that the middle class prospered after the world wars is that there was a dramatic drop in income inequality. For thousands of years society had been divided into three categories. At the top of the heap, the religious and warrior/ administrator classes ran the show. The people who did the work (and the fighting) were relegated to bare subsistence. The warriors kept the masses under control with the help of the clerics. People were told that the king’s power came directly from God. In many cases the absolute ruler believed that he or she had divine nature. Anyone who questioned the king’s authority was called a sinner. The lower class was told that a better life waited for them once they died. For the present, they should not even dream of improving their lot.
The French Revolution briefly changed the order of things. The French legislature tried to redistribute some of the wealth, but Napoleon’s coup cut this effort short. In America, the landed class retained most of the power and the money. Blacks were still enslaved, and advancement through education, although possible, was limited to a lucky few.
By the beginning of the 20th century, the top 5% of the population worldwide owned more than 90% of the property. The ruling class had a problem, though. The popularity of clerics had decreased, a lot, to the point where nobody seriously believed that rulers (a few kings were still left) were ordained by God. To justify the rigged society that they had built, they had to come up with another way of associating themselves with divinity. They made property sacred. It followed that those who had more land, or investments, or “things,” were special people. They were smarter, and worked harder, than the rest of society. They deserved to have eight homes and dozens of servants.
Poor people, or those who struggled to get by, were not dedicated enough. The myth was propagated: all one needed to do to own those eight homes was to work hard. No matter that it would be impossible to reach those elite levels on minimum wages.
The world wars changed the equations. A lot of the vast wealth accumulated by a few families was destroyed by military action. Countries on both sides of the conflict had to borrow huge sums of money to pay for weapons and logistics. The wealthy families that ran the show were happy to lend it, at significant interest. Not that they had a choice: had they refused, there would have been intolerable pressure placed on them. They did not want to appear to be unpatriotic.
After the wars more money was needed to rebuild. More loans followed. There was no way that governments could afford to pay these loans back under the existing tax structures. Much to the chagrin of the ultrarich, heavy taxes were placed on their income, their accumulated wealth, and their inheritances. The interest that they were making on their loans was being taxed; their end profit was minimal. The result was that the elite class lost a large portion of their wealth. For the first time in history, the top tier, although still way on top, had to significantly curtail their purchases. The bottom of the pack was the raw material that the middle class came from.
Had things stayed the same, we would probably be much better off today. As it happened, two things happened: Reagan was elected, and the Communist Soviet experiment failed. Reagan was able to convince the people who elected him that government was bad. Unions were slowly emasculated. Taxes on the super-rich were cut from 80% to rates in the thirties. Inheritance taxes were also decreased.
Once the Communists failed, it became easy for politicians, and the wealthy class, to preach that trying to help the poor out was a way to lead us in the same direction as Russia. Anything that remotely smelled of lending a hand was called socialism. The rich became richer; the middle class stagnated; the poor were crushed.
Taxes for the rich were cut once again. All sorts of special deductions were devised. It was possible for a billionaire to own his own plane and pay no taxes. Then came globalization. Basically, this meant that money (and investments) flowed freely from one country to the next. To this day nobody knows where these huge amounts of money really come from. Corporations have found smaller countries that offer them lower tax rates. There is little to no transparency, and the international community is very reluctant to agree to a simple set of rules.
People are suffering. Most households have no money to get them through the end of the month. They eat ultra-processed food because this is the only thing they can afford. They cannot take time off to get sick. Every day is a struggle.
Politicians all over the world have taken advantage of this situation. Because globalization also meant that people were better able to flow freely between nations, they chose to blame immigrants for the bad situation. People took the bait: nativist governments were elected all over the Globe.
Strongmen do not rule by themselves. They need a military that will, at the very least, not interfere with them. They need a press that never criticizes them. They must have the super-rich on their side.
Taxes for the wealthy were cut even more. Funding for the military and police was increased. Something had to give: money for education, training, and childhood programs was slashed. The wealthy can afford to send their children to the best schools. Mediocrity is left for the rest.
Why are we divided? The politicians in America have split the electorate in two. The Republicans can count on the very wealthy, the deeply religious, and those who are afraid of immigrants and anything that changes the way things are. The Democrats get the votes of the well-educated (not always the same as the wealthy), all minorities, and the middle class that is disgusted by the current situation. Both parties cater to people of huge wealth.
If the Democrats wanted to have a permanent majority, they would insist on publicizing how the exorbitantly wealthy get away with paying less taxes that the people at the bottom. They would reinstate large taxes on income over five million a year. They would increase the inheritance tax for fortunes larger than ten million. They would threaten any country that allows tax shelters with severe sanctions.
The money collected from these efforts would go to fund the best education and training available anywhere, for free. I find it amusing that people think that free education through high school should be a given, but that college and tech school should cost money. Why stop at 12 grades of education? In today’s economy, high school will not get you a good salary.
I also smile when people say that “college is not for everyone.” Who are you to decide? We should be spending large amounts testing our kids, to determine what they are good at. This should start early. We should then give them every opportunity to excel. We should put them in touch with employers who need the skills that they have been shown to possess. We should pay for their training.
Lastly: property is not sacred. We should pay taxes on what we own. It unnerves me to see how many people go to a lot of inconvenience to appeal their real estate tax assessments. If they succeed, they may save one or two thousand dollars a year. Then they turn around and pay anywhere from 15 to 50,000 dollars a year to send their kids to private school, because the neighborhood school is not good enough. Maybe if they paid their assessed taxes the local school would be just as good as the private one. Which would increase the value of their home, which would make them wealthier. Go figure.
It is time to roll back the curtain. The wizard needs to be exposed. Immigrants are not the problem. The poor are not lazy, nor do they lack ambition. We are divided because the super-rich have conned us, and our politicians have been too willing to drink their Kool-Aid. Let the whole world know what these jerks are getting away with: this will unite us, since we will know who to be angry at.
It is time.
