The Capitalist Economy: The Rise of Inequality 

 

The rise of economic inequality is now so severe that even the captains of finance capital and their ideological minions had to make it the center of the agenda at Davos, Switzerland. Rather than the failure of markets, as the Davos crowd would have it, inequality reflects the capitalist markets working precisely as they should. Inequality has nothing to do with market imperfection: the more perfect the capitalist market, the higher the rate of return on capital is in comparison to the rate of growth of the economy and of wages, the wider is inequality. The higher this ratio is, the greater inequality is. And what we see are historically high returns on capital, reflecting higher rates of exploitation of labor worldwide.

The six-decade period of growing equality in western nations – starting roughly with the onset of World War I (which began after and in fact offset the depression of 1913) and extending into the early 1970s – was unique and highly unlikely to be repeated. That period represented an exception to the more deeply rooted pattern of growing inequality.

Those unusual six decades were the result of two world wars and the Great Depression. The owners of capital – those at the top of the pyramid of wealth and income – absorbed a series of devastating blows. These included the loss of credibility and authority as markets crashed; physical destruction of capital throughout Europe in both World War I and World War II; the raising of tax rates, especially on high incomes, to finance the wars; high rates of inflation that eroded the assets of creditors; the nationalization of major industries in both England, Germany and France; and the appropriation of industries and property in post-colonial countries.

At the same time, the Great Depression produced the New Deal coalition in the United States, which empowered an insurgent labor movement. The postwar period saw huge gains in growth and productivity, the benefits of which were shared with workers who had strong backing from the trade union movement and from the dominant Democratic Party. Widespread support for liberal social and economic policy was so strong that even a Republican president, who won easily twice, Dwight D. Eisenhower, recognized that an assault on the New Deal would be futile. In his own words Eisenhower argued, “Should any political party attempt to abolish Social Security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear from that party again in our political history.”

The six decades between 1914 and 1973 stand out from the past and future because the rate of economic growth exceeded the after-tax rate of return on capital. Since then, the rate of growth of the economy has declined, while the return on capital is rising to its pre-World War I levels, that is the levels they were at at the time of the 1913 depression. This means, simply, that the rate of exploitation has increased. For Black workers this is doubled edged, the increasing rate of exploitation goes alongside catastrophic levels of poverty, unemployment and underemployment. The crisis for the Black working class is all-sided, comprehensive and, under the current regime of capital, irreversible.

If the rate of return on capital remains permanently above the rate of growth of the economy, it generates a changing functional distribution of income in favor of capital and, if capital incomes are more concentrated than incomes from labor (a rather uncontroversial fact), personal income distribution will also get more unequal — which indeed is what we have witnessed in the past 30 years. On a global scale producing the grotesque fact that 85 families have more wealth than 3.5 billion people. Or the astounding fact that 147 global corporations control most of the resources ,production and finance of the planet.

The ideological relationships and the ideological struggle under these circumstances take on new significance to humanity. Ideological processes occurs occur through propaganda and and the penetration of human psychology. Propaganda says things are getting better, in spite of the fact that most people say we’re still in a recession. On the other hand it produces a culture of distraction, to prevent a culture of resistance arising. At the psychological level a collective psychology of nihilism, egotism, and celebrity worship all of which attempts to have the working people internalize attitudes that predispose them to defeatism and “let me do my thingism.”
At the levels of elites, especially for African American elite academics and intellectuals, the ruling class strategy is to produce a discourse that privileges petit bourgeois concerns, with personal identity, “high” culture and matters that do not impact the masses. In fact, the racial bribe is such that these elites are paid well not to talk about or identify with Black suffering.

About Anthony Monteiro

I am a activist and scholar who is a professor in the Department of African American Studies at Temple University.
This entry was posted in Political and Ideological Issues, Race , class and sociological studies and theories, US capitalism, empire and race. Bookmark the permalink.

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