President Bill Clinton’s former Secretary of Labor Robert Reich believes that income inequality is the big problem that stalls the economy and is a threat to a proper working democracy. He makes his case here in Inequality for All.
Depending on what your aptitude
on the subject of economics is, you can either appreciate Reich for simplifying
(or disgusted with the oversimplification and innuendo) what is needed –
spending.
Cycles
Reich frames everything in
cycles. The film has data, historical and current to back up his claim, but in
general the math and the alphabet soup of economic discussions – GNP, GDP,
index this and that, inflation rate – which has made me dose off more than once
in class, has been avoided.
To put it simply the economy can go on a Virtuous
Cycle or on a Vicious Cycle. The names are self-explanatory.
Blood has to flow throughout the
body and back to the heart; water has to evaporate only to become rain again. Likewise,
money just has to keep flowing around and consumer spending makes this possible.
Virtuous Cycle
When skeptics, no doubt fishing
for any answer that can be construed as communist and thus unfit in American
life, asked what models can be copied or countries that can be emulated, Reich
would answer it with the 50s-60s United States.
Might as well call it a virtuous
age the way Reich describes it: gap between rich and poor was small; wages were
high; education was high in priority; and the middle class of predominantly
single income families was booming.
Virtuous to Vicious
Just to be clear, Robert Reich is
not against inequality per se. It is inevitable and necessary as incentives for
people to be more productive or inventive. However, it should be asked, he
says, how much inequality is tolerable? When does it become a problem?
As far as cycles go, the problem
is from below and from on high. Below, the middle and lower classes have
depleting means to spend, and from above, the wealthy have more money than they
can spend.
Cycles mean money needs circulating, so what’s happening is that from
on high and from below, money has been deprived in the system.
Wages started to flatten out in
the late 70s. The middle class – highly populated step in the economic ladder –
have lesser and lesser means to keep the wheels turning. They work more and
earn less.
Single income families now had two people working; one job needed a
second job and maybe more. In many cases the effort only makes both ends meet.
If it doesn’t meet, they get buried in debt.
Reich would only highlight one
point in the entire film, that 400 people have the wealth of half the
population of the United States. Actually, he used the words ‘more wealth’ so
the point feels worse.
Among other things, what he is
saying is the upper class can’t pick up the spending slack even if they wanted
– it’s just physics and good sense. 400 people can never consume the equivalent
of half the country.
The wealthy never tinker around with their full wealth
unlike the lower classes who may have to go all in. They only play and use a
percentage; the wealthy can actually save money and leave some in the bank. And
if that isn’t enough its tax breaks to the "rescue".
If that point is debatable then
the implications of 400 people equaling the wealth of half the country on
matters of influence and politics should be more worrisome.
What it means to Me
Of course what I never got from
the documentary are Philippine numbers and situations, but knowing how much my
country is a copy cat of the United States, there will always be similarities.
What astounds me the most is the
way Reich would describe the single income family of yesteryears as the ideal
period. In the late 70s to early 80s in the Philippines, I was raised in a
single income family. Toys didn’t come easy to me so I don’t recall it as
heaven; I wore hand-me-downs and played with hand-me-downs.
Having seen Inequality for All, I
can’t imagine having the same quality of life if was raised now in 2018, even
with the hand me downs. I should be thankful to have seen such times, never
realized I had it good.
Or, should I be angry and asking why it is gone? What
happened? The innuendo in the film, if it can be called as such, is greed.
Once, I can have a movie and a
meal with P100 or was it P200 – in a mall. Not day to day living but forgive me, it's the only spending I was interested on saving as a kid and what I can remember to compare to now.
Obviously that price wasn’t charity.
SM North, the nearest and biggest to me at the time, made a profit and since
then many more malls would spring up as well as hypermarts and condominiums. Now a
movie and a meal can be P500 easy.
via GIPHY
What’s the profit margin like then
and now – when people can buy more and when they can buy less with their money?
How many of the mall employees can even patronize the products that they worked
hard to sell every day? What employee benefits like, if at all?
Denmark says they have an handle on rich and poor gap unlike most countries. So what the US has (and mine does too); it isn't the only way how the world works. If the 60s were ideal shouldn't there be a means to make it happen again?
Denmark says they have an handle on rich and poor gap unlike most countries. So what the US has (and mine does too); it isn't the only way how the world works. If the 60s were ideal shouldn't there be a means to make it happen again?
I still feel a bit naked without
the alphabet soup that always made me sleep in class but I hear enough of ‘spending’
in the news to know it is important. It worries policy makers that fewer people
may be spending, but how far will they go to guarantee it?
The perennial veiled threat: raise
salaries or endure retrenchment? Then again, maybe not so veiled. Probably false since Reich
would only call out for an environment conducive to spending for everybody.
Is it that
simple?
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