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Growing National Unrest Has Many Worried, Even Capitalists

“You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.”

By Jeffrey Cavanaugh

August 26, 2014 "ICH" - "Mint Press" - - A few days before the dramatic events in Ferguson, Missouri, demonstrated so dramatically what decades of institutionalized inequality can do to a population, the economists at Standard & Poor’s Ratings Services issued a report highlighting the dangers growing inequality holds for America’s long-term economic growth.

More a research note summarizing findings on the topic than the presentation of new scholarship, the economists working for one of the premier institutions of American financial capitalism undoubtedly state that inequality is a clear and present danger to both the health of American society and the U.S. economy. 

Something’s happening here…

According to S&P’s assessment, “extreme” levels of income inequality can harm growth over long periods of time, and in their view, the United States is approaching a level of inequality that is very near the threshold of being dangerous. As such, S&P says its 10-year growth forecast for the country has been lowered from 2.8 percent to 2.5 percent, noting that the country’s economic prospects were much brighter five years ago than they are today.

A primary driver of this inequality, the rating agency continues, is growing disparities in education outcomes between rich and poor that are significantly dragging down overall growth rates. Indeed, S&P estimates that if the American workforce completed just one more year of schooling by 2021, “the resulting productivity gains could add about $525 billion, or 2.4%, to the level of GDP” relative to the agency’s baseline prediction. Schooling — especially in terms of more Americans finishing college — is seen as crucial to lifting wages, incomes and well-being in the years ahead.

What’s more, S&P goes on to challenge one of the most commonly held assumptions about growth held by the capitalist class in America: a rising tide inevitably lifts all boats. This, the agency’s economists say, is not an accurate reflection of what is occurring in America today. Instead, in a country where the ultra-wealthy have captured an ever increasing segment of national income, the tide is merely lifting “a lifeboat carrying a few, surrounded by many treading water.” Moreover, say these deeply conservative business economists, such a lifeboat “risks capsizing” the longer such a situation persists.

While not exactly a warning that revolution à la Marx might be around the corner, it is nonetheless a rather remarkable thing for those so close to the beating heart of Wall Street to say so openly and frankly. It is also a sentiment being echoed by others in our capitalist ruling class who are similarly disturbed by the possibilities opened up by an America that looks more like Mexico or Brazil than Western Europe. Consider, for instance, the open letter to “fellow zillionaires” penned by Nick Hanauer, a self-described “0.1%er” and serial entrepreneur who nonetheless warns that “the pitchforks are coming.”

Hanauer’s open letter, like S&P’s statement on inequality, is also remarkable for what it says so frankly. According to this card-carrying member of the plutocratic class, the rest of the country — the “99.9 percent” — “is lagging far behind,” and their situation is getting worse by the day. So bad, in fact, that in his view America has gone beyond the inequality intrinsic to a capitalist society and entered territory more properly defined as feudal in quality, if not in kind. Moreover, Hanauer asserts that this new type of feudalism is more like the kind they had in  “late 18th-century France. Before the revolution.”

The only outcome that Hanauer sees, he says, if we continue on this course is either dramatic, deep-rooted reform or something far, far worse.

“No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when,” he writes.

The organizing committee of the transnational capitalist class seems to agree. This past January, at the annual meeting of the great and powerful at the World Economic Forum in Davos, Switzerland, the WEF published a report on global risks, citing among them the threat of social unrest if inequality goes unchecked.

“Disgruntlement,” noted Jennifer Blanke, the WEF’s chief economist, “can lead to the dissolution of the fabric of society, especially if young people feel they don’t have a future.”

Who sponsored this rabble-rousing neo-communist manifesto? Why, none other than the raving socialists at the American insurance broker and risk advisory firm Marsh & McLennan and the European insurers Swiss Re and Zurich Insurance Group. 

Everybody look what’s going down…

For anybody who cares to look at the signs of unrest — and if not revolution, then something like it — that these capitalist Cassandra’s are talking about, they’re all there for everyone to see. Everyone is familiar with the Gilded Age levels of economic inequality we are facing in the U.S. today, but what does this mean in practical terms? Consider the following examples:

In a recent piece published by National Geographic titled “The New Face of Hunger,” the venerable magazine takes a look at how hunger and malnutrition have spread across the richest country in the world in the wake of the Great Recession. In America today 1 out of 6 people do not have enough food to eat. Millions of American families, reports National Geographic, do not know where their next meal is going to come from. Moreover, while poverty has been racialized by the media to lead most to think that this a problem of race, not class, the reality is that “more than half of hungry households are white, and two-thirds of those with children have at least one working adult — typically in a full-time job.”

Indeed, hunger today in America is “white, married, clothed, and housed, even a bit overweight,” largely due to poor nutrition. At last count in 2012, 48 million people were deemed food insecure by the government, a five-fold increase since the 1960s and a 57 percent increase since the 1990s. In 1980, the magazine reports, there were merely “a few hundred emergency food pantries and soup kitchens” in America. Today there are 50,000 — in the richest country in the world.

If that seems shocking, it shouldn’t be. According to estimates of Americans’ take home pay, in 2012 U.S. citizens reported taking home $1.1 trillion more in income in 2012 than 2009, a 15 percent increase in real terms. However, this was overwhelmingly captured by the wealthy and in that year the richest 16,000 households in America took a third of that additional trillion that America produced. Going a bit further down the income ladder, the top 1 percent captured 95 percent of that $1.1 trillion, while the top 10 percent — the best-off 31 million people in America — enjoyed all the national income growth, effectively leaving nothing for the rest of us. Adjusted for inflation, the bottom 90 percent of Americans were worse off in 2012 than they were during the Great Recession. Despite economic growth, they saw their income drop by 15.7 percent. By this accounting, the majority of Americans’ 2012 income fell back to levels last seen in in 1966. Little wonder, then, that poverty and hunger have grown wildly.

Then there are the little things, like vacations. Remember those week-long summer vacations the family used to take way back when? Back then, Americans would hop into the family car and travel to some distant location like Disney World, the Grand Canyon or a campground somewhere. Nearly every American has a memory of them and iconic comedies like “National Lampoon’s Vacation” pay homage to something nearly every American who grew up in the 1970s and the 1980s could relate to.

However, as recently reported by Vox, week-long vacations — like landlines and affordable health insurance — have increasingly gone the way of the dodo. Starting in the 1980s the number of Americans who have reported taking a week-long vacation from work begins to go into a decline that has not yet recovered. Over 80 percent of Americans once reported taking off from work for a week in the past year. Today, that number is approaching 56 percent and it’s shrinking fast. Perhaps no better indicator of the bifurcation of America into the haves and have-nots is understanding that what was once a right by dint of being American — vacation — is now as much a class divide as anything else. 

What a field day for the heat…

One could go on, of course, to talk about how America’s wealthy and organized interests so totally dominate the political process that it is more technically accurate to talk about America as an oligarchy than a democracy, but that would merely belabor the point. What’s clear, though, is that a breaking point is fast approaching. Even many among the capitalist class who so dominate our lives recognize that our current system simply cannot — indeed, will not — go on. As the despots who formerly ruled the Middle East found out to their regret so recently, there are consequences for simultaneously immiserating a people, making them hungry, leaving them ever more physically insecure, and then also taking away their time off from their increasingly sad and desperate lives.

This is because sad, angry, desperate people just don’t go away like actors in some penny play, exit stage right or left. They get angry and they get even, often violently. The riots in Ferguson — a tiny suburb of St. Louis that registers just 22,000 people — is a clear demonstration of this and but a small taste of how one incident piled atop others can create a spark that, once lit, is hard to put out. Time and again movements and revolutions that many once derided as impossible spring into being seemingly overnight in reaction to a single incident or a couple of them because the kindling, long absent, was suddenly put into place by a system that, by design, could not recognize how it was going off the rails.

Indeed, if there is anything that history teaches it is that a people pushed too far will eventually strike back with a violent ferocity that most onlookers would not have believed possible beforehand. Is America at that point yet? Probably not, but if a small and quiet Midwestern suburb can erupt into division and violence seemingly overnight, then even the most optimistic among us must admit that we are much further along the way toward the bad place predicted by the worried capitalists at Standard and Poor’s than we were just a few short years ago. Where we will go as a country from here few can say, but what we do know is that we live in interesting times.

© 2014 Copyright Mint Press, LLC

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