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The Economy Unites Us: What’s wrong with the economy and how we can fix it

By Margaret Flowers and Kevin Zeese

April 09, 2013 "Information Clearing House" - This article is based on a talk that we gave at the Maine Peoples Budget conference at the University of Maine in Orono. It was a sponsored by the Maine Alliance for the Common Good, a coalition of organizations that work on different issues and recognize that all of their issues are connected. They are focused on the current budget cuts and what they can do to create an economy that serves and protects people and the planet.

In the presentation, we described the current economic situation and the direction that the economy is headed. We outlined a strategy to shift economic and political power to people and create a democratized economy so that people have more control over the economy and so that the economy benefits more people. This will reduce the wealth divide and start to meet more people’s basic needs.

Democratized economic institutions are being put in place throughout the world and support for a democratized economy is growing within the US. Given the current risks for another recession or perhaps another crash in the US, these systems may serve as protection from increased poverty that would otherwise be the result.

This is a broad overview and we did not include some important topics such as debt and lack of savings and retirement security for many. But, we hope this will help to frame the current situation and what we can do about it.

Slide 1: Overall, the US grows wealthier every year. This trend has been fairly consistent over the past 200 years except for the period around the depression and WWII. Manufacturing output in the US continues to grow too despite low levels of manufacturing employment. Manufacturing is changing in the US due to increased use of technology which replaces workers.

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Slide 2: And corporate profits continue to grow. Corporate profits are rising dramatically again following the economic crash in 2008. Of all of the presidents, Obama has been the best for Wall Street. Average annual profit growth during Obama’s presidency is nearly 80%. Under the next closest president, Harding, there was an average annual growth of less than 20%.

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Slide 3:  But employment has fallen. Employment took a precipitous drop and remains at a fairly steady level following the 2008 crash. This chart does not reflect the number of people who have given up on looking for a job, nor does it reflect the number of people who are underemployed. When these factors are included, the actual unemployment is closer to 49%. See http://itsoureconomy.us/2012/08/the-real-unemployment-rate-in-the-u-s/

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Slide 4: Over the past four decades, income has only risen significantly for the top 1%. The charts show that income has only risen for the top 1% and top 20% since 1979, and there are wide disparities in the degree of growth. For the bottom 80%, income has fallen.

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Slide 5: Most of us are still in a recession. Since the economic crash of 2008, profits in the financial sector have returned to previous high levels. From 2009 to 2011, average real income per family grew modestly by 1.7%, but the gains were very uneven. Incomes of the top 1% grew by 11.2% while incomes of the bottom 99% shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery. See http://itsoureconomy.us/2013/02/obama-recovery-the-rich-get-richer-but-everyone-else-gets-poorer/.

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Slide 6: Big business and the wealthy were taxed at rates as high as 92% in the mid-20th century. In reality, taxes this high were not paid because CEOs took lower salaries and re-invested profits in their businesses which built the economy. Currently, because of tax havens and corporate tax loopholes, some of the largest corporations pay no taxes, indeed some receive large tax refunds, and the wealthy pay a much lower tax rate on income that is derived from investments. The first chart shows the actual tax rates paid by the 1% and 0.1%. The trends can be compared to the second chart which shows the change in share of total income.

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Slide 7:  As a result of all of the above, wealth inequality is growing in the US. The Gini coefficient is a measure of wealth inequality; the higher it is, the greater the inequality. The chart on the left shows that it has been rising steadily since the late 1960s with spikes in the early 1990’s and following the 2008 economic crash. In addition, the chart on the right shows that labor’s share of the GDP has fallen sharply.

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Slide 8: This Harvard study showed that wealth distribution in the US is very far from the ideal and what most people think it is.

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Slide 9: A small number of financial and transnational corporations control a large part of the global wealth. Through their influence over the political process and their control over resources, jobs and capital, these corporations are currently in power. And they are seeking greater power through the TransPacific Partnership which will give transnational corporations power over sovereign nations. We think of it as a global corporate coup. See http://www.flushthetpp.org/ for more information.

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Slide 10: The US is heading in the same direction as many countries in the EU and the UK. Austerity measures in a fragile and struggling economy will create a recession. A more effective response to the economy would be to increase taxes on the wealthy, create full employment, strengthen social insurances and regulate capital. Instead, we are seeing false crises and debates that provide cover for increased cuts to social programs and other austerity measures. Emphasis is misplaced on the deficit instead of on the wealth divide. The chart shows GDP rose after the New Deal and fell during a recession that ensued when FDR cut social spending.

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Slide 11: There are evidence-based solutions to every crisis that we face. And supermajorities of people support these solutions, but Congress and the White House are going in the opposite direction. These solutions are not even allowed into the national conversation. This is why we believe that people as a group would make better decisions than those in power.

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Slide 12: When discussing solutions, we should not limit ourselves to what is “on the table.” And here are three principles that are essential for success. The first is to be independent of political party in our agenda. If we tie our agenda to a particular party, then we are set up for compromise. We must be clear about what we are demanding so that we cannot be confused by partial or false solutions. And we must be uncompromising on the fundamentals so that we don’t accept non-solutions.

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Slide 13: We can shift power to the people. It has happened before and there is empirical evidence of what works. We propose a two-pronged approach of protesting what we oppose to expose it and try to stop it while creating alternative systems to replace what currently exists. More time and energy should be spent on building new systems.

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Slide 14: When the Super Committee was meeting in Washington in 2011, we protested the hearings and held our own Super Committee hearing. We brought in experts on taxation, military spending, jobs, healthcare and more and we asked them to propose solutions based on the evidence of what works. From that, we wrote our own deficit proposal.

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Slide 15: We are in a “Great Turning.” The global society is shifting from one that is competitive and that exploits and destroys the Earth to one that is based on cooperation and sustainability. This is already happening. We have an opportunity to nourish this turning and create alternative systems that are life-sustaining. We can organize based on solidarity, cooperation, sustainability and democracy.

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Slides 16 to 25: A new economy is rising around the world and within the US. We can build this new economy within the Capitalist economy so that it arises and replaces Capitalism. Some call it a Solidarity Economy We call it a Democratized Economy because it is based on greater control of the economy by people and greater equality and benefit for people. Here is a brief outline of the new economy. It is not exhaustive. There is more information on our website, ItsOurEconomy.us. Use the search box on the website to find more information on specific topics. You may also want to read the “Occupy G8 Peoples’ Summit Report” which provides more information and links to resources.

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We published the power point on It’s Our Economy, see here, so that it can be downloaded and others can use it in their communities. If you have any questions about the charts please contact us at ItsOurEconomy.US@gmail.com.  We encourage you to share this widely so people can understand the economic situation and how to create an economy that serves all of us.

Kevin Zeese JD and Margaret Flowers MD co-host ClearingtheFOGRadio.org on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It’s Our Economy and are organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.

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