Published CommPro.biz 2014.05.13

 

A New Gilded Age?

By: W.T. “Bill” McKibben

In 1873 Mark Twain and Charles Dudley Warner published The Gilded Age: A Tale of Today. The name stuck, roughly covering the period from the end of the Civil War to the Trust Busting Teddy Roosevelt era. At its height around 1900 the top 10% percent of Americans soaked up about half the income with the top 1% getting about 40% of that amount. That left the 90% to divvy up the other half, slim pickings at best.

After Teddy Roosevelt leveled the playing field and the labor movement spread the bucks around even more, income inequality was not as big an issue. The two World Wars that devastated the infrastructure of nearly all developed economies, except the United States gave America a running start during most of the last 100 years. However, toward the end of the 20^th Century and into the early part of the 21^st the rich and powerful began to tilt the table in their direction again. The laws put in place following the Great Depression that protected little folks fell to a “Deregulation Era.” Enter a new Gilded Age.

Tax loopholes and corporate subsidies added in to tilt the American landscape toward the super rich. So we find ourselves just where we were in the last Gilded Age, half the bucks going to the top 10% and 40% of that going to the top 1%. The middle class has been devastated and the poor are scrambling to keep their heads above water. Basically a set of social problems covered by a “thin gold gilding” the same outlook seen by Twain and Warner in 1873.

That leaves some questions. Is it morally and ethically acceptable? Is it financially sustainable? Teddy Roosevelt didn’t think it fit inside any of those parameters. He saw it as just wrong. It isn’t as if this new Gilded Age came about through the efforts of those who are benefiting. When the laws of the land are twisted to give any group an advantage it’s just plain wrong. What’s really bad about the current situation is that the recession so many are struggling to crawl out from under was triggered by reckless bankers who we had to bailout to avoid a major depression. They are now doing better than ever and the stock market is booming.

A recent Pew Research Center study shows that almost all Americans understand how the makeup of this Gilded Age came to be. Given an open-end question the answers came in all over, however, two out of five pinpointed loopholes and our tax system, followed by all the usual suspects, government policies, corporate influence, greed, etc., etc., etc. Although remarkably 10% believe that a poor work ethic and reliance on government handouts created inequality; really! A gilded age is unsustainable; it’s bad for the poor and for the rich.

The Price

The nearly unprecedented power a handful of monster banks wield over our lives raises a suite of ethical questions. “Nearly unprecedented” only because it mimics the power of the banking sector in America following World War I and through  the decade we refer to as the “Roaring Twenties.” We all know what happened at the end of that period, the Great Depression.

Interestingly, the monster banks of that day played a small role in triggering that horrific event. However, the people and their representatives in the Congress reacted more aggressively than those in that esteemed body have in response to an event almost exclusively the result of reckless behavior by today’s monster banks. Their power is two-fold: their control over members of Congress through massive injections of campaign cash, plus their ability to convince foolish voters that making rich folks richer will somehow benefit those down the food chain.

Add to this snake-oil logic the idea that instead of addressing the Great Recession as we have every other economic downturn since the industrial revolution, we are told that we need to cut investments in education, our crumbling infrastructure, firemen, police, and anything else that might maintain and improve our nation’s well-being. We are told austerity is the answer, a solution embraced by some in the Euro Zone and Great Britain.

Germany has taken the lead in imposing this path to prosperity on its neighbors. However, it’s not been so keen on austerity for Germany itself. The Scandinavian nations have not embraced austerity with enthusiasm either. Our neighbors to the north, Canada, have seen no need, since their banking laws saved them from the carnage our banks inflicted on Americans. By the way, our banks are fine; we bailed them out and guess what they are doing? The same stuff that crashed the world economy in 2007-2008. Why not? They know we will bail them out again.

How’s austerity working for the American people? They took the hit, no bailout for them. It’s been hard. Losing homes, jobs and dreams has been tough. Some folks can’t deal with it. Marriages come apart, and for some folks who just can’t go on, suicide seems the answer. The suicide rate in Europe has soared and it’s climbed in America as well.

As the recession ballooned from 2007 through 2010 experts* estimate suicides exceeded the norm by more than 4,750 across our land. The rate was a lot higher in states with the highest job losses. Unemployed folks are roughly twice as likely to die by their own hand as those who have work. Every one of these nearly 5,000 Americans who committed suicide was killed by the reckless bankers who tanked our economy. The bankers killed them as surely as if they had mowed them down against a wall; they were “Collateral Damage” in the bankers’ scramble for riches. The bankers gambled and everyone lost,,,,, except them. Some lost their lives.

*David Stuckler & Sanjay Basu, The Body Economic: Why Austerity Kills

A Return To Stability

Close to 3000 movers and shakers took to the world stage in Switzerland last week (01.25-29) for the annual World Economic Forum, commonly referred to as Davos. This year’s theme was The Great Transformation, Shaping New Models. And while there was much discussion on new models, most looked a lot like the model that emerged from the Great Depression and served America well for two generations. That would be the model we dismantled in the 1980s and 1990s.

As the doings began at Davos, Bloomberg released their Global Poll of more than 1.200 investors, analysts and traders who shared their thinking on the state of the economy. Surprising numbers; more than half agree with the Occupy Wall Street movement that income inequality harms the economy, harms growth. Seven in ten believe the banks have too much control over government. Two-thirds of the respondents think governments should pursue policies to tackle that issue.

A participant on the opening panel at Davos, Sharan Burrow, general secretary of the International Trade Union Confederation said, “If you’ve got a group that is too big to fail, what it means is that you are the biggest bullies on the planet. The financial sector has lost its moral compass.” More than 80% of the respondents to the Bloomberg study think banks need to be regulated so they’re not too big to fail.

 

About two-thirds see at least some truth in the argument that bankers’ actions are driven by greed and harm the economy. This is in line with studies showing that when executive pay scales escalate too far above the average employee in their company, it takes focus off what’s best for the company and moves it to what’s best for those at the top. When bankers start focusing on their pay, they forget their role in the community. They forget they are there to protect the funds the members of the community entrust to them. They forget that they are there to find local businesses that need loans to grow. They forget that they are there to help people in their community finance their homes. 

When it comes to the investment bankers on Wall Street, they get so focused on their paychecks that they forget they are there to help create capital. Instead they are busy devising ways to play high-stakes gambling games, all the while setting up their customers to take the fall if the bank’s bet goes south. Moral compass? There’s none to be found. While most business people and small businesses are striving to do the right thing every day, the Wall Street types have the morals of an alley cat.