Inequality For All
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A passionate argument on behalf of the middle class, Inequality for All features Robert Reich–professor, best-selling author, and Clinton cabinet member–as he demonstrates how the widening income gap has a devastating impact on the American economy. The film is an intimate portrait of a man whose lifelong goal remains protecting those who are unable to protect themselves. Through his singular perspective, Reich explains how the massive consolidation of wealth by a precious few threatens the viability of the American workforce and the foundation of democracy itself. In this Inconvenient Truth for the economy, Reich uses humor and a wide array of facts to explain how the issue of economic inequality affects each and every one of us.
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Reich shows that for the past 30 years huge amounts of money have been generated in the global economy and most of it has gone up to a tiny fraction of the population. The key to his presentation is a slide which shows that a typical male worker in 1978 was making around $48,000, adjusted for inflation, while the average person in the top 1% earned $390,000. By 2010, the typical male worker was earning $33,000 and the average worker in the top 1% earned $1.1 million.
As well as wages stagnating, many costs are rising faster than inflation, particularly the cost of buying a home, health care, child care, and the rising costs of higher education. At Berkeley, where Reich teaches, in the 1960s, tuition was free. In the 1970s, it was $700 a year in today's dollars. But now it costs $15,000 for in-state residents. Ordinary people are falling behind. Middle-class families, often with two wage earners, are working harder and getting nowhere. In America, a new aristocracy is emerging. Half of the US's total assets are now owned by just 400 people and, Reich believes that this is not just a threat to the economy, but also to democracy.
Reich's thesis is that since the 1970s a combination of anti-union legislation, market deregulation, globalization, and technological innovation have contrived to create a situation in which the economy boomed but less of the wealth trickled down. Though for a while, nobody noticed. There were "coping mechanisms". More women entered the workforce, creating dual-income families. Working hours rose. And increasing house prices enabled people to borrow. In 2007, this all came crashing to a halt. He claims that "we have exhausted all the options." Reich suggests that if this trend continues there could be trouble in the future.
Reich believes that inequality is linked to education. He argues that more than anything else, that's what lifted people out of poverty and into the middle class in the past. But starting in the late 1970s, college graduation rates began to flatten out. He argues that it is important to invest in people, in the workforce, so Americans can compete in the global economy. Reich uses the example of the iPhone and illustrates where the dollars go when you buy one. Most of the dollars are going to Japan (34%), Germany (17%), South Korea (13%), U.S. (6%), and only 3.6% is going to China. The phone is assembled in China, but the assembly is of pieces from all over the place. Reich wanted his students to see that it's not just cost of wages or labor. It's also which country's workers add what value. Japanese and German workers have the skills needed to participate in the iPhone’s manufacture. The old assembly line jobs are gone, American workers need the skills so that they too can add value.
Reich argues that taxes are the price we pay to finance the kinds of things that we can't do individually, that we need to do together. One of the problems is that the taxation system has tilted toward the rich and away from the middle class. He interviews Warren Buffett who does not believe he pays enough tax. Buffett claims his tax rate is 17.7%, while the average for the staff in his office is 32.9%. If the wealthy are not paying their fair share and if the middle class are basically stagnant and are not paying much in taxes because they're not making much money, then there is less money to support public higher education and fund infrastructure.
The middle class provides 70% of the spending in the U.S. When the middle class doesn't share in the economic gains, you get into this vicious downward cycle. The middle class creates jobs—but only if they are given salaries that allow them to be spend, create demand, jobs, and generate more tax revenue. Reich argues that every place you look on Earth where you find prosperity, you find massive investments in the middle class and the poor.
The problem with trickle-down economics is that the rich spend too little. They're not generating enough economic activity. Somebody earning $10 million a year doesn't spend $10 million. A venture capitalist with an eight-figure income is interviewed. He drives an Audi and claims he only needs three pairs of jeans. He saves most of his money. The money of the rich often goes offshore where they can make the highest returns. Reich argues we need to replace trickle-down economics with middle-out economics. The most pro-business thing you can do is to help middle-class people thrive.
The sharp increase of the income gap is solely due to the highest-income people claiming that they deserve to pay a lower rate of taxes than everyone else -- and gaming the political system to get their way. They claim to deserve huge tax breaks because they are "job creators"... However, as one wealthy business owner admits, his money mainly goes into offshore investments, and his own purchases don't support the economy. The most wealth-generating business model in fact results in exporting jobs from the United States.
The reviewer who panned this film, dismissing it as leftist, evidently has not seen it at all. In fact the stats show productivity is higher than at any time in history. However, ordinary people can barely make ends meet. The middle class has tried to compensate for wage stagnation by first of all mothers of families going out to work, then by more borrowing. This has all been to no avail, and instead there are massive losses of homes as well as jobs.
The real engine that drives prosperity is the purchasing power of a large middle class having income to spare for discretionary purchases. As their wages decline (though costs rise), their purchases decline, thus reducing sales and forcing more shutdowns of jobs, etc. in a "vicious cycle". Reich's analysis of the contrast between that dismal picture, and what he names the "virtuous cycle" that boosts jobs, is enlightening. It would be helpful to have this video and repeat watching these scenes in order better to understand both the problem and proposed solutions.
As far as the film goes it appears well-researched and valid. However, it does not address the issue of the government borrowing money from the privately-owned central banking system known as 'The Fed". The only dot which can be connected here is Reich mentioning that income tax was first implemented in 1913.
That caught my attention because it's the same year The Fed was established. The Fed's owners are private bankers who rule Washington, apparently through buying elections and politicians on both the 'left' and the 'right'. After 100 years of being governed by this financial system, isn't it time for American people to examine that aspect of their economic history? (The banking system and debt-based money was not specifically addressed in this film.) If they then decide they don't like the results, what would American voters do to change their situation?