To overcome the global economic meltdown all around us, this British economist reminds us, we need to go back to the future — back to becoming a society that values greater equality.
By Sam Pizzigati
A review of Super Rich: The Rise of Inequality in Britain and the United States, George Irvin (Polity Press, 2008), 260 pp.
n 1999, the British economist George Irvin was waiting for a connecting flight in Detroit when a CNN newscast announced that the Dow-Jones average was about to smash past the 10,000 mark. His fellow travelers, Irvin remembers, let out “whoops of joy.” Irvin didn’t. Those travelers saw, in the record-breaking Dow, a spectacularly successful economy. He saw a frighteningly unequal one.
Last week the Dow tumbled below 10,000 and kept right on falling. No one is whooping for joy any more. Fright has set in. Americans, by the millions, have seen 401(k)s melt away in mere moments. They want to know what happened.
George Irvin explains what happened in his most timely new book, Super Rich. With clarity and empathy — for those who would normally recoil from any book on economics — he traces a transatlantic tale of times good and then greedy.
The good times, in both Britain and the United States, came in the quarter-century right after World War II. In both countries, average working families experienced an unprecedented swelling of income and economic security. Both nations entered the 1970s far more equal than they had ever been.
Both nations would go on to exit the decade headed in the exact opposite direction. Average families, ever since, have been sinking in debt and insecurity while those at the top have been accumulating piles of wealth that would have been considered grotesque — and unimaginable — in the 1950s and 1960s.
So what happened in the 1970s? Why did the United States and the UK lurch into an anti-egalitarian reverse? The short answer: Their elites panicked.
In the 1970s, Corporate America and Corporate Britain both found themselves in a new — and far more difficult — competitive environment. The nations of continental Europe and Japan, all devastated by World War II, had rebuilt and modernized their infrastructures. The United States and Britain, both spared the war’s devastation, had not. The easy-profit salad days, for British and American business, had clearly ended.
Corporate movers and shakers, in both Britain and the United States, came up with the same response. They demanded “freedom” — from the government regulations and taxes they claimed were stifling the entrepreneurial spirit.
This power-suit pushback against government “intervention” in the “free market” would gain unstoppable political momentum with Margaret Thatcher’s 1979 election in the UK and Ronald Reagan’s 1980 election in the United States.
The Great Greed Grab had now begun. Wealth concentrated. Safety nets shriveled. Speculators frolicked. Huge swatches of the economy went off-limits to unions — and decent wages.
None of this, George Irvin shows, had to happen. Nothing like this did happen in other developed nations. The nations of continental Europe and Japan have, by and large, maintained distributions of income and wealth significantly more equal than the United States and Britain.
Indeed, the Nordic nations have demonstrated that societies only thrive economically, in our contemporary post-industrial Information Age, when they “tax and spend” — tax the rich and spend on programs that give all their people a real chance to contribute and succeed.
Author Irvin, in Super Rich, laces his exposition with fascinating digressions into everything from happiness research to the history of economic ideas. He wrote this book, obviously, before the crushing financial market collapse of the past month. But a sense of impending collapse pervades his pages.
“We are drifting,” he writes at one point, “into a financial crisis of global proportions.”
A sense of solution pervades these pages, too. Let’s go one step at a time, Irvin urges. His suggested initial goal: getting the transatlantic world back to the levels of equality that we last saw back in the 1970s.
Reaching this goal will demand a considerably more ambitious course of action than either the Labor Party in the UK or the Democratic Party in the United States is now promoting. Top Democrats, for instance, only want to lift the 35 percent current tax rate on income in the top tax bracket to 39.6 percent, the rate in place in 2000, just before George W. Bush became President.
Sam Pizzigati, an associate fellow at the Washington, D.C.-based Institute for Policy Studies, edits Too Much [1], the online weekly on excess and inequality.