Exploding gap in wealth, wages not an accident
Federal economic policies favor money movers, not producers
Special to the Observer
Connect the dots between two articles in the July 13 Observer and you get a
classic picture of today's U.S. economy.
"Dow rockets to record" described how the previous day's stock gains "come
after a year of impressive gains for stocks." Focusing on the other end of the
wealth scale, "Housing squeeze getting tighter" noted that "The lack of
affordable homes for poor families is the nation's No. 1 housing problem and
undermines the stability and security of families and communities
These news items not only highlight the growing disparity between rich and
poor, they bring into question some of our most cherished economic axioms.
A finite world
Apologists for the wealthy and powerful claim that wealth is not a zero-sum
game, and they've convinced the public that the huge incomes of the wealthiest
Americans are irrelevant . They even claim that the more money the wealthiest
Americans make, the more wealth will trickle down .Sure, money is unlimited and
it can multiply like crazy, and devalued money does trickle down. But our earth
has finite resources -- like land, water and air -- and our nation is limited in
its ability to produce products, especially the most desirable ones.
The popular fiction that it doesn't matter to you how much money other people
have ignores the obvious. We live in a world of auction markets. As those with
more money increase the demand for housing, gasoline, scarce foods, medical
care, education, etc., those with less money get priced out of the market.
All across this country working-class Americans are finding that they can no
longer afford to buy or rent decent housing near where they work, especially if
they live in a desirable area (clean air, low crime, good schools).
Wealthy investors are buying a few houses with a view, tearing them down, and
building a single mansion . And they're doing it in multiple states and
But that's just the beginning of the story. They also make sure that real
estate represents a significant part of their investment portfolio. It's not
unusual to see an ad in the classified section of a newspaper like this one:
FOR SALE: 27 rental houses, singly or as a total package. Excellent
rental histories, great tax advantages. Retiring. 555-3578.
Real estate is one of the greatest creators of wealth for those who have it
or can get it. It's also one of the greatest creators of poverty for those who
find themselves priced out of the market, either as buyers or renters.
The exploding wealth and income gap is no accident, and is not a result of
the movement of the stars or some unexpected economic fluke. It is the direct
result of economic policies that are designed to redistribute wealth from those
who actually handle and produce products and services to investors whose major
business is simply moving money around. Those who serve investors and money
managers, like top-level corporate executives, are also on the gravy train.
Our federal policies of manipulating the prime interest rate (to make sure
the unemployment rate keeps "wage inflation" from occurring), our expansion of
legal and illegal immigration, globalization and a host of other actions are
deliberately designed to keep wages from going up, thus maximizing profits.
It's always zero
If wages don't go up along with rising corporate profits, then the Dow
rockets and investors become wealthier faster. If workers make more money, the
businesses and corporations make less profit and the investors don't become so
rich so fast. Corporate profits always equal income minus expenses (including
labor). Subtract the left side of the equation from the right side and you
always get zero.
There is no getting around it; wealth is a zero-sum activity at both the
front end (when income is distributed) and at the back end (when products and
services are sold in an auction market.)
Right now our government's economic policies favor the super-rich, and
they're using unfair advantages to demand too great a share of our nation's
resources and productivity.
Chuck Kelly is a retired management consultant in
Charlotte and is author of The Destructive Achiever; Power and Ethics in the
American Corporation, and Class War in America. He can be reached at kellycm2@bellsouth.