Tag: wealth inequality

Affirmative Action For Whites – began in the 1930s

As noted here in “Creating Segregated America in the 20th Century – government in action” segregated America didn’t happen by chance nor by choice of the victims. Consistent white supremacist government action supported by private institutions created the segregation that persists and flourishes in the 21st century. But there is a flip side to this. At the same time government law, regulation and policy created white affirmative programs to provide white people enormous advantages in jobs, education, housing, healthcare and more throughout this period. Columbia University professor Ira Katznelson’s When Affirmative Action Was White: an untold history of racial inequality in twentieth-century America1 lays out the history of Federal legislation, most prominently of the New Deal era, that created the booming white middle-class of the post-WWII decades while excluding African Americans. 

In June, 1965 President Johnson gave a commencement speech at Howard  University, “To Fulfill These Rights” about efforts to end segregation and poverty in the African American community. He outlined the growing disparity between white America and black America as follows:

A WIDENING GULF But for the great majority of Negro Americans-the poor, the unemployed, the uprooted, and the dispossessed–there is a much grimmer story. They still, as we meet here tonight, are another nation. Despite the court orders and the laws, despite the legislative victories and the speeches, for them the walls are rising and the gulf is widening.

Here are some of the facts of this American failure.

Thirty-five years ago the rate of unemployment for Negroes and whites was about the same. Tonight the Negro rate is twice as high.

In 1948 the 8 percent unemployment rate for Negro teenage boys was actually less than that of whites. By last year that rate had grown to 23 percent, as against 13 percent for whites unemployed.

Between 1949 and 1959, the income of Negro men relative to white men declined in every section of this country. From 1952 to 1963 the median income of Negro families compared to white actually dropped from 57 percent to 53 percent.

In the years 1955 through 1957, 22 percent of experienced Negro workers were out of work at some time during the year. In 1961 through 1963 that proportion had soared to 29 percent.

Since 1947 the number of white families living in poverty has decreased 27 percent while the number of poorer non white families decreased only 3 percent.

The infant mortality of nonwhites in 1940 was 70 percent greater than whites. Twenty-two years later it was 90 percent greater.

Moreover, the isolation of Negro from white communities is increasing, rather than decreasing as Negroes crowd into the central cities and become a city within a city.

Of course Negro Americans as well as white Americans have shared in our rising national abundance. But the harsh fact of the matter is that in the battle for true equality too many–far too many–are losing ground every day.2

Without exploring the ironies of Johnson, who was present in the Congress and Senate when much of the legislation that generated these disparities was passed with his support, now calling for a solution, this is the central set of facts that persist to this day with only a worsening in some areas in the ensuing five decades following his Great Society programs.

Katznelson recounts the central political facts of the political coalition that passed the New Deal legislation of the 1930s. Northern Democrats had to rely on the support of Southern Democrats for their majorities in both the House and Senate. The Southern Democrats were white supremacists across the board. They could effectively guarantee that every piece of legislation and the regulations that implemented it would exclude African Americans. Any Federal action that might upset the white supremacist regime in the South was foreclosed.3 Second, Southern Democrats also insisted that the administration of programs be handled at the state and local levels of government. This provided further opportunities to exclude or harass African Americans seeking to take advantage of the Federal programs. And third, Southern Democrats made sure that no anti-discrimination policies could be attached to a Federal program.

With the passage of the Social Security Act in 1935 the first national comprehensive economic security program proved not to be so comprehensive and not so national. Southern Democrats forced the final bill to exclude farm workers and maids. This excluded 65% of African Americans nationally and 70 to 80% in the South from the retirement program. To be sure these exclusions in a country that was still quite rural and agricultural also kept 40% of whites outside of Social Security. In the second portion of the bill, Aid for Dependent Children and help for elderly poor, where cost sharing between the Federal and state governments was involved, the impact of local administration was even more decisive in excluding African Americans. Three states, Texas, Kentucky and Mississippi did not participate at all. The third leg of the Social Security Act, unemployment insurance required that an unemployed person’s employer had paid into the system and that they had a history of “regular and stable employment”. Combined with the exclusions for farm workers and maids the availability of this insurance for African Americans was miserable. The net of these affirmative action programs for whites and others is that by 1950 over $100 billion had been transferred to the white population in preference to black America.4

Katznelson details how the same coalition of complicit white Northern Democrats and Southern white-supremacist Democrats crafted labor legislation and the great post-WWII GI Bill to further favor whites. All of these white affirmative action policies contributed to the increasing disparities between white and black America described by president Johnson.

Taken together, the effects of these public laws were devastating. Social Security, from which the majority of blacks were excluded until well into the 1950s, quickly became the country’s most important social legislation. The Labor Laws of the New Deal and Fair Deal created a framework of protection for tens of millions of workers who secured minimum wages, maximum hours, and the right to join industrial as well as craft unions. African Americans, who worked on the land or as domestics, the great majority, lacked these protections. When unions made inroads in the South, where most blacks lived, moreover, Congress changed the rules of the game to make organizing much more difficult. Perhaps most surprising and most important, the treatment of veterans after the war, despite universal eligibility for benefits offered by the GI Bill, perpetuated the blatant racism that had marked military affairs during the war itself.  At no other time in American history have so much money and so many resources been put at the service of the generation completing education, entering the workforce, and forming families. yet comparatively little of this largesse was available to black veterans, With these policies the Gordian knot binding race to class tightened.5

In short African Americans were excluded from the great boom of the 25 years that followed WWII.

This affirmative action for white people and persistent segregation have been the drivers of the continued disparities that mark American society. The ability of African Americans to fully participate and succeed in American life has been and continue to be severely inhibited. Since home ownership is the primary source of wealth accumulation for middle class Americans, we now see a multi-generational gap widening. The persistent segregation with its accompanying poor education, healthcare, lack of job opportunities and mobility, have produced African American incomes and wealth that areis a fraction of what would have been expected to result from the boom decades following WWII. Of course, since the mid 1970s everyone, excepting the top 10 percent, in America has suffered from stagnating incomes and a worsening of wealth accumulation. The fate of African Americans in this environment are predictably somewhat worse.

Katznelson ends his book with an examination of the affirmative action programs following President Johnson’s initiatives. The results have not been very good in terms of changing the fundamentals of income and wealth.

 

 

  1. Ira Katznelson. When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America. New York; London: W.W. Norton, 2006. []
  2. http://www.presidency.ucsb.edu/ws/?pid=27021 accessed 07162017 []
  3. This is a repeat of the failure of Northerners and their politicians to make the emancipation of slaves real when they abandoned Reconstruction in 1877. Not only did newly minted civil rights for African Americans disappear over the following years to the semi-totalitarian system called Jim Crow but the very people who had cleared the land and made it productive were left landless and forced into the new slavery of share cropping. []
  4. Katznelson p. 142 []
  5. Katznelson p. 143 []

Delusions – the US economy – the postings

The Democratic Party and Healthcare – Preserving Obamacare Cannot Be The End Game
June 24, 2017

The Democratic Party must absorb the reality of our situation. We need to develop and express some outrage at the current healthcare providers. None of this will happen as long as Democrats are taking money from the rich and corporations. If there is a single lesson from the Bernie Sanders campaign it is that with messages and programs that reflect the needs of the vast majority of Americans, you can…

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Trickle-Down Returns to Enrich the Rich
June 24, 2017

You need to be clear that the vicious Republican Party is at work on tax changes for their masters among the rich and corporations. There job is making sure that the 40 year stagnation in incomes for the 80% will not change course and the flood of wealth will continue to those at the top. 

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Regulations vs Protections – more than just words
May 7, 2017

The word “regulation” has been used as an epithet and rhetorical sledge hammer by Republicans and the centrist Bill Clinton Democrats as part of a general campaign to discredit anything that the government might do. This is part of the decades long political strategy of the rich and corporations to puff up the delights of “free markets”.

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Dumping Concrete: a law of capitalism In action – a local example
May 6, 2017

Thanks to GossipsOfRivertown for the image. The May 3rd post “Unbelievable” on our favorite local blog GossipsOfRivertown.blogspot.com caught our attention. This F.H.Stickles concrete truck dumping waste concrete next to a stream running into the Hudson River is a local demonstration of one of the central laws of capitalism. For more pictures of this incident go here. Every company seeks to get someone else to pay for as many of its…

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United Airlines, Monopoly/Oligopoly, The Natural Laws of Capitalism
April 17, 2017

From: http://newyork.cbslocal.com/2017/04/15/united-airlines-new-policy/ The recent incident in which United Airlines used the Chicago Police Department to enforce its corporate policies has already roused plenty of comments. Many have focused on the clumsiness, even callousness of the policy and its later justifications by senior managers. This is missing a more telling point about airline travel today. In the US four airlines control over 80%1 of the seats…

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Building the New American Economy – Not
April 5, 2017

The title of this short book, only 130 pages, Building the New American Economy: smart, fair, & sustainable by Jeffrey D. Sachs with a foreword by Bernie Sanders (Columbia University Press, 2017) is unfortunately misleading. There is much here about the new economy. The misleading part is that there is very little about its construction, the building of the new economy. Sachs covers many important issues in a thorough, efficient…

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Thoughts on Standard Economics
April 1, 2017

I’ve been looking through Paul Krugman’s textbook Macroeconomics (Krugman and Wells, 4th edition, 2015) and came on Principle #2 – “The opportunity cost of an item—what you must give up in order to get it—is its true cost….The concept of opportunity cost is crucial to understanding individual choice because, in the end, all costs are opportunity costs. That’s because every choice you make means forgoing some other alternative.” In this…

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BEHEMOTH (BEI XI MO SHOU) at TSL Hudson
March 4, 2017

This 2015 movie by Chinese director Liang Zhao is filled with great cinematography and sounds. It trades back and forth between scenes of enormous horizon gulping coal mines, under ground mines, iron making, and ends with scenes of a ghost city filled with enormous apartment blocks in a newly developed but vacant city West of Beijing. But, the most arresting part of the movie is its focus on the workers,…

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Job (Business) Killing Regulations
March 2, 2017

Ever since Ronald Reagan told us in his 1981 Inaugural Address, “Government is not the solution to our problem; government is the problem.” government bashing by right-wingers, Republicans and many Democrats has been a constant drumbeat of political rhetoric. Now we have Trump with his “Kill 2 regulations for every new one” and a government dominated by Republicans for whom destroying government has been an objective for decades. We are…

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Diversity and Identity Politics Is A Deadend
March 1, 2017

Progressives have to declare class war as a central strategy. Otherwise we will all be sitting at the dinner table basking in our glorious diversity with nothing to eat. For many good reasons identity and diversity have dominated our politics for decades.  Progressives celebrate its expansion and Republicans and their brethren on the right pretty universally engage in either dog whistle or outright racist politics.  Simultaneously the rich and corporations…

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How Much Money Would It Take To Eliminate Poverty in the US?
February 26, 2017

This 2013 article “How Much Money Would It Take to Eliminate Poverty” (http://prospect.org/article/how-much-money-would-it-take-eliminate-poverty-america) addresses this question. The answer then was $175 billion. This is a ridiculously small number in the context of a $16 trillion GDP. As someone who is on the homeowners gravy train I was stuck by this part of the article: “The utterly ridiculous tax expenditures directed toward the disproportionately affluent class of people called homeowners—mortgage interest deduction,…

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Park Avenue and How We Got There
January 22, 2017

Park Avenue puts faces to many of the wealthy and the corporations. Do not for a moment think that if we could just rid ourselves of these avaricious individuals that our problems would be solved.

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The Gig Economy in the Academy – a note
December 29, 2016

The values of capitalism, especially as expressed through free market (neoliberal) ideology, have come to dominate how we organize our lives. Silicon Valley and the tech sector is busy celebrating the “gig” economy. Companies have simply stopped hiring employees and now conduct much of their work using “temps”, “1099ers”, part-time contract workers. The companies, and the champions of free markets, tout this as a wonder of flexibility and opportunity. For…

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A Note on Jobs & Unemployment
December 27, 2016

As the presidential campaign of 2016 fades away and the Trump Era begins, we find a national scene without any real discussion of the facts of jobs and unemployment and what the future might bring. Trump and others talk about bringing manufacturing back to the US. No plan, plausible or otherwise, has ever been mentioned for how to accomplish this. The Democrat are hardly better. Much has been made and…

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Book Review – The Rise and Fall of American Growth
June 25, 2016

The Rise and Fall of American Growth: the US standard of living since the Civil War by Robert J. Gordon2 is a weighty book in every regard. At 762 pages it is a heavy lift – not beach reading or even bed-time either. But I found it almost a page turner. It is very well structured and written. None of the fussiness or obscurantist language one often…

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Inside Goldman Sachs with the Federal Reserve
September 27, 2014

Since the beginning of the 2008 Great Recession we have hoped that the government would return to applying some real rational restraints on the financial system. To be honest, with both political parties deep in the pocket of the industry, this is probably merely wishful thinking.

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Flash Boys cover by Michael Lewis
Flash Boys Doesn’t Ask the Important Question
April 7, 2014

We should demand that our financial markets serve their findamental purposes – connect investors with those who can deploy those resources to create new products and services and enable the flow of these goods and services. To call holding financial insturments whether stocks, bonds, or other assets for mere seconds investments is to beggar the mind.

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playing cards
Wall St – not about investing but fixing the game
July 9, 2013

photo courtesy of Chance Agrella, photographer An article in the NY TImes today reports3 that NY Attorney General Schneiderman is pursuing various information providers, Thomson Reuters in the immediate case, for their practices of selling market sensitive information preferntially. Those paying a premium get information several minutes before its release to the general public. This is more evidence that Wall St…

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The Job Creators – Who Are They? The Rich, Really?
May 19, 2012

In recent years a standard bit of political rhetoric in the US has included references to “the job creators”. This most usually  flows along the lines of higher taxes on the wealthy will injure the job creators. Or, government regulation is crushing the job creators. The presumption of course is that the wealthy, the 1% in the current rhetoric, create jobs (and those not created by the wealthy are created by small…

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Economic Inequality – Does It Matter?
May 9, 2012

It is fairly widely known that income and wealth inequality in the US is as high or higher than at any time except perhaps the Robber Baron period at the end of the 19th century. Lots of articles and books explain how this has come about over the last 30 years. In a recent NYTimes Magazine article, “The Purpose of Spectacular Wealth, According to a Spectacularly Wealthy Guy” by Adam Davidson, we…

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High Frequency Trading and Deeper Questions about Capitalism
March 27, 2012

A recent PBS Newshour report by Paul Solman on Thursday 3/15/12 in his series “Making Sense of Financial News” gave pause concerning the role of high frequency traders (HFT) on Wall St. (and doubtless on other markets around the world). First, you might ask what are HFTs? These are traders who use computer-based algorithms to select, buy, and sell shares on the markets. The speed of these transactions and the…

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Charts from Mother Jones Illustrate That the Rich Have Won the Class War
November 19, 2011

I came on a set of graphics in Mother Jones, “It’s the Inequality, Stupid: Eleven charts that explain what’s wrong with America” that illustrate what you probably already know. But, a simple refresher course in some of the reasons why the rich are rich. The 99% already have this base covered. Here are some of the charts I liked. Read the whole article at the Mother Jones website. Income (constant dollars) Note that if median family…

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Where, Oh, Where Did Our National Debt Come From?
July 8, 2011

The political rhetoric of the current moment, chiefly flowing from Republicans, but barely challenged by the Democrats, describes tales of profligate over-spending by the Federal government matched with burdensome taxation. While it is true that Federal spending is higher proportionately than post-WWII norms, social programs are not the source of this over spending. One only has to look back to George Bush’s two terms to see the true sources of the…

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Naomi Wolf’s The End of America – the movie
May 27, 2011

The End of America – a film by Annie Sundberg and Ricki Stern Here is a summary4 of the ten steps discussed and illustrated by Ms. Wolf in the movie. 10 STEPS THAT CLOSE AN OPEN SOCIETY 1. invoke an internal and external threatPeople who are afraid are willing to do things that they wouldn’t otherwise do. 2. establish secret (unaccountable) prisons where torture takes…

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Corporations as Persons – Freedom of Speech, now Right to Privacy – Bring on Three Strikes!
January 20, 2011

The case of the Federal Communications Commission v. AT&T5 now being heard before the US Supreme Court raises anew the craziness of the thinking that has position corporations to be “persons” in the first place. Noun vs Adjective! First we have several of the justices focusing argument around the difference between “persons”…

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Money floating around
Religious Doubt Spreads – Free Flows of Capital Seen as Dangerous to Some
November 12, 2010

There is more evidence that the current run of religious mania about “free markets” is finally giving way to a more fact-based approach to this important human invention, many countries are now applying capital controls on the flow of monies into  their economies. The world flood of money seeking higher rent districts is terrorizing smaller economies like a tsunami. Fears of speculative bubbles burgeoning and then bursting with disastrous consequences for local economies are…

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The Mortgage Debacle – Redux
October 10, 2010

The current tsunami of revelations of misbehavior, if not outright criminality, by the banking industry in their pursuit of mortgages gone bad, is further evidence of how fundamentally corrupt and cynical this industry continues to be. On the front end of this global economic disaster the financial system engaged in misleading sales tactics using financial products that were baroque in their complexities. Aided by governments seduced by the siren songs of free market…

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Do We Need Wall St. and all the other gamblers in the financial services world?
April 20, 2010

What Is the Function of Wall St.? The global financial meltdown of 2008 – 2009 with its ongoing sequelae seems not to have definitively demonstrated the dangers of our continuing belief in the religion of “free markets” nor shaken, especially it seems in the Obama administration, our thrall with Wall St. and all things financial. We are seeing the combined effects of Wall St.’s funding of the Democrats and Republicans,…

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The Two Faces of Mortgage Debt – “Return to Creditor”
January 25, 2010

Return to Creditor There is an interesting headline in today’s (1/25/10) New York Times, “Huge Housing Complex in N.Y. Returned to Creditors”.6 This article reports that Tishman Speyer Properties and BlackRock Realty defaulted (welched?) on their debt obligations of $3 billion for their 2006 purchase of the Stuyvesant Town/Peter…

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How Did We Come To Consider Corporations to Be Natural Persons? – What To Do Next?
January 25, 2010

This week’s decision by the US Supreme Court to allow corporations, including unions, to hold full rights to free speech and political action under the First Amendment to the Constitution once again reminds me of the strange practical and ethical relationship we have with corporations. In the 1886 ruling, Santa Clara County v. Southern Pacific Railroad Company1, the court reporter wrote in a summary: “The court does not wish to…

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Controlling Gambling by Wall St. and the Big Banks – Bad for Business?
January 22, 2010

Anti-Wall St Does Not Mean Anti-Business President Obama’s proposals to break up the “too large to fail” mega banks and otherwise reapply the Glass Steagall Act to the financial sector has predictably brought loud complaints that this is populist and anti-business. Even the rhetoric of the reporters and expert talking heads reflects a general bias that anything that we might do to prevent a re-occurrence of last year’s global financial…

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Manias,Panics,and Crashes by Kindleberger
Book Review: Manias, Panics, and Crashes: a history of financial crises by Kindleberger
November 13, 2009

Manias, Panics, and Crashes: a history of financial crises, fourth edition by Charles P. Kindleberger (New York: Wiley 2000) A recent Wall St Journal article described this book as a “must read” classic for anyone involved in financial markets. I have been involved directly in financial markets in two ways recently. First, I spent a year chasing around chasing angel investors and venture capitalists during the DotCom boom to fund Valuedge…

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Enron, Trust and Malfeasance
January 29, 2002

January 23, 2002 (revised 1/29/02) The collapse of energy giant Enron over the last six months has produced a surprising level of outrage especially for a cynic like me. As this drama continues to unfold, I have been trying to understand how Enron structured their business and made money. Until just last night I was operating on the belief that the cleverness and sophistication of Enron’s managers simply outstripped my…

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Enron, Trust and Malfeasance
January 29, 2002

January 23, 2002 (revised 1/29/02) The collapse of energy giant Enron over the last six months has produced a surprising level of outrage especially for a cynic like me. As this drama continues to unfold, I have been trying to understand how Enron structured their business and made money. Until just last night I was operating on the belief that the cleverness and sophistication of Enron’s managers simply outstripped my…

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  1. corrected from 60% on 4/20/17 []
  2. Princeton U. Press. 2016 []
  3. Regulators Examining Early Sales of Financial Data http://nyti.ms/12hDF3t []
  4. from the endofamericamovie.com website – 05/27/2011 []
  5. See the NYTimes,  “Court Weighs Whether Corporations Have Personal Privacy Rights” By ADAM LIPTAK Published: January 19, 201 []
  6. photo by Nicole Bengiveno/The New York Times – The Peter Cooper Village and Stuyvesant Town complex in 2006- borrowed without permission []

Trump’s Innovations in Governing

The Plutocrats Have Occupied the White House and Executive Branch

It has been a fact of American life for decades that the rich and corporations control our political system. But this control has been exercised always one arms length removed from the actual levers of power. They have had to be satisfied with setting up their think tanks, hiring lobbyists, and buying politicians. Always they have had to put up with the unsavory influence that the public might have to disturb their plans and obstruct their enrichment. Even as described so eloquently and with such cleverness by Lawrence Lessig in his TED talk, “We the People and the republic we must reclaim“, the rich and corporations were always one step away from hands on control of the government.

Obama, Wall St. and Big Money

Edited 5/9/2017 

(Originally published as “Obama and the Future of the Democratic Party”)

President Obama achieved some remarkable things during his eight years. Action on income and wealth inequality were not among them. He surrounded himself, especially on the economic front, with people who had direct connections to Wall St. or academic economics. He famously made a speech in 2013 announcing that income inequality was “the defining challenge of our time”.1 Then, faced with attacks from within the Democratic Party and all Republicans that he was engaging in “class warfare”, he beat a hasty retreat. The rhetoric was trotted out but he proposed nothing and did nothing.

Citibank and Obama’s Cabinet

  1. https://obamawhitehouse.archives.gov/the-press-office/2013/12/04/remarks-president-economic-mobility []

Diversity and Identity Politics Is A Deadend

Progressives have to declare class war as a central strategy. Otherwise we will all be sitting at the dinner table basking in our glorious diversity with nothing to eat.

For many good reasons identity and diversity have dominated our politics for decades.  Progressives celebrate its expansion and Republicans and their brethren on the right pretty universally engage in either dog whistle or outright racist politics. 

Simultaneously the rich and corporations have been fighting a class war. They have succeeded beyond belief. As is well known, for 90% of the population real incomes have been flat for the past 40 yrs. Meanwhile, the rich and corporations have gotten fabulously rich. Richer than at any time in history. And, to make things worse they have done this while hiding behind free-market (neoliberal) ideology that has impoverished the government and the public sphere of our lives. Our infrastructure is crumbling, education is outrageously expensive, sending many students to decades of indebtedness. Our health system costs more than twice any of our developed country cohort and delivers third world results. 

Progressives, time to fight back. Diversity and identity without a fair share of the pie is not going to make you happy.

Park Avenue and How We Got There

“There” is our current situation in which our government has been bought by the rich and corporations, over 80% of the population has not had a pay raise in 40 years and the public sphere, schools, parks, our infrastructure, really anything not behind the gated walls of private wealth, is being starved in the name of free market ideology. The American promise that hard work, pluck and a bit of luck can bring success to anyone, regardless of their rank at birth, is an empty myth. If you are born poor you will die poor. Even if you are middle-class, there is a significant chance that you will sink and at any rate you will always struggle just to keep that middle-class status.

The rich and corporations have waged a 40 year class war. At this point they have won all of the battles and continue to take home the spoils.

Economic Inequality – Does It Matter?

It is fairly widely known that income and wealth inequality in the US is as high or higher than at any time except perhaps the Robber Baron period at the end of the 19th century. Lots of articles and books explain how this has come about over the last 30 years. In a recent NYTimes Magazine article, “The Purpose of Spectacular Wealth, According to a Spectacularly Wealthy Guy” by Adam Davidson, we are even offered an affirmative defense of this by a buddy of Mitt Romney from Bain Capital Edward Conrad.

Conrad… “aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conrad writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off.”

But, leaving aside the obvious disconnect between any rational measure of value add by the wealthy and their incomes and holdings, does economic inequality really matter? Is it just that those of us in the not wealthy class, now branded The 99%, are jealous of all the toys of the wealthy? Their four or five houses, countless cars, airplanes, and all the rest?

Are their some measurable consequences to economic inequality?