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Real Economy 101

"Economic boom for whom?" That is the question Chuck Collins, author of Economic Apartheid in America, answers in this wide-ranging interview on the wealth gap, consumer debt and the tax cut.
 
 
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The last decade of American economic growth has made history. High employment rates, stock market riches, low inflation and the availability of a mind-boggling array of luxury goods has brought about an unprecedented level of American material comfort and created millionaires overnight.

Life in the United States, we've been told, is the best it has ever been. Our present pre-recession slump notwithstanding, Americans should feel fortunate for having lived through and benefited from such an exciting boom time.

"But economic boom for whom?" ask co-authors Chuck Collins and Felice Yeskel in their new book, Economic Apartheid in America: A Primer on Economic Inequality and Insecurity (The New Press).

Co-directors of the Boston-based organization, United for a Fair Economy, Collins and Yeskel wrote Economic Apartheid to draw attention to the fast-growing gap between the poorest and the richest members of American society.

That gap is neither subtle nor widely reported on: The average CEO at a Fortune 500 company, for instance, now makes 419 times what an average employee makes. But statistics like this are disheartening, and don't make the evening news.

The problem of economic inequality is hardly limited to grossly inflated corporate executive salaries, or even the pressing issues of access to housing and life's basic necessities. At the heart of the matter, write Collins and Yeskel, "economic inequality is the single greatest factor that puts our nation's social cohesion at risk."

Chuck Collins talked about the US's own kind of economic apartheid.

One of the primary assertions made in Economic Apartheid in America is that our much-hyped economic prosperity is precarious. In what ways is the US economy actually less stable than it may appear?

Chuck Collins: Our basic premise is that a lot of people have not shared at all in the economic boom. People in the bottom fifth and maybe the bottom 40 percent are worse off in terms of their real wages and savings and what they have to fall back on. At the same time that housing costs and health care costs have gone up, real wages for the bottom 40 percent have actually fallen. What's masking some of these trends is that for people in the so-called "middle class," they're not feeling the real brunt of this economy because people are working longer hours and borrowing money on credit. The real story of the 1990s was exploding consumer debt, not the stock market boom.

People are buying stuff and getting cool things, and yet a lot of it is based on borrowing. It's not based on real wage increase, it's based on plastic. That contributes to a precarious economic prosperity, and when there is more of an economic slowdown, the mask will be pulled back and people will make up and say, "Oh, I'm in the new economy now. I have $20,000 in consumer debt, 60 percent of my income is going to housing costs."

The values of the new economy -- the message of the new economy -- is "You're on your own." We have to organize to protect our interests and protect ourselves.

In your introduction, you mention that Economic Apartheid is not a treatise against rich people, but that wealthy people have a special responsibility where their money is concerned. What kind of responsibility are you referring to?

CC: Our premise is that this growing economic apartheid economy is bad for everybody, even people who are wealthy. It contributes to a polarization of society. It's our premise that this 25-year breaking apart of society is the result of a power shift and the rules of the economy are being changed. It's not some people working harder than others, and some people being smarter than others. It's that there's just a power imbalance and the winners get more, and everybody else gets less. Some people's contribution is overvalued, and other people's efforts and hard work is undervalued.

So wealthy people should recognize that public policies are skewed to their benefit?

CC: The responsibility for everybody is to make sure that the rules work for everybody. Responsible Wealth [a coalition of rich, concerned citizens] conducts programs at religious and civic groups. We talk about the impact of inequality and people come up to us and say, "You know, I'm actually in the richest one percent, or I'm a retired CEO and I'm with you. I see the dangers of inequality, I see how it's going to backfire. I have children and grandchildren who have to go out into the world in a polarized society, and I see that that's not the kind of country or world I want to live in."

So, it's the rich's responsibility to make sure the rules are fair: tax policy, living wages, making sure that corporations are accountable. It's not a mandate for charity, it's a mandate to work for a just economy. Giving can be part of it. But charity and philanthropy are not the answer. They are just a part of how you change the rules.

You've written about a grassroots social movement that is mobilizing people around growing economic disparities. Where have you seen evidence of this movement?

CC:The four places where things are really cooking are within religious denominations, the labor movement, communities of color and new immigrant communities and student/youth groups. I'm hopeful because I hear a kind of rumbling in the land. I see the formation of institutions, organizations, people coming together and educating themselves.

Most of it's below the radar screen, but I think events in Seattle around the World Trade Organization made the movement more visible, particularly the efforts that are forming around challenging corporate power, challenging the values of individualism and the notion of the market as a new kind of god.

I travel and meet people and see and hear the different threads coming together. A few years from now, we're going to see more organized people-power. I think the impulse behind Ralph Nader's candidacy -- there are many, many more people who supported Nader than voted for him -- if someone like him got more of a public forum, it would contribute to a real realignment in politics.

I wonder if you would talk about the living wage movement. How has it worked in various cities?

CC:I'm working right now in Pittsburgh with a coalition that is pushing for a $10/hour minimum wage, which, in a Seattle or San Francisco housing market, is way below what's needed. There are around 120 communities in the country that now have living wage movements, and 46 have passed living wage ordinances.

In rich cities like Seattle, San Francisco, Boston, it's not one neighborhood that's gentrifying, it's the whole metropolitan area that has exploded with housing costs. It's not like people are being pushed from one neighborhood to another; they're actually being pushed to outlying communities. So, a living wage is part of the solution, but certainly not the whole solution.

We could become like Toronto, which is a booming metropolis, but 15-20 percent of the housing is social housing -- public housing or in a social ownership structure: a limited equity cooperative or a mutual housing association or a land trust. Then, you can have investment in a community without displacement.

In "The Wealth Holders" section of your book, you point out that between 1996 and 1999 Bill Gates' personal wealth went from $18 billion to over $85 billion dollars, and that his personal wealth now exceeds the combined wealth of the bottom 45 percent of the U.S. population. Is someone like Gates, by virtue of his hard work and acumen, entitled to that kind of wealth, especially if he's giving some of it away?

CC: I think his contribution is significant, and his own labor and time and effort is significant. His charitable acts are righteous and good. All that being said, his contribution is overvalued. There are lots and lots of people working at all levels of society who are also making significant contributions. People who teach at a local high school, the nurse at the local hospital, the researcher working on a cure for cancer or AIDS, the parent who raises a child so that they have self-respect. There's other work in the world that is so undervalued and his share is overvalued. It's not that it's insignificant. It's that it's a distorted market that overvalues his contribution more than other people's.

There's so much focus on "let's fix the poor." Problems are phrased in terms of "let's fix people in the bottom fifth of our society." Whereas I would say that a lot of our social problems are rooted in an over-concentration of wealth and power. Why do we have such a bad energy policy in this country? Why is it that the rules of society are not aimed at long-term sustainable energy policies? It's because the oil interests have so much power and they can block certain progressive policies from happening.

The 1997 Taxpayer Relief Act is something you single out as having compounded the unfairness of the American tax code. Responsible Wealth responded at the time by launching a "Tax Us More" campaign. Tell me more about this campaign.

CC: We had roughly 150 people who would have benefited from that tax cut protesting it, saying that the last thing that we should be doing right now is giving the wealthy more tax cuts. In a time of great inequality, you don't give rich people more tax breaks!

More recently, last summer, Congress passed a complete repeal of the estate tax, which is the most progressive tax there is. It really only falls on the richest one percent of households, and the Responsible Wealth people were out there demanding that the estate taxes not be eliminated. We purchased ads to make sure there were enough votes so that when Clinton vetoed the tax repeal, there were enough votes to sustain the veto.

But Bush has made elimination of the estate tax priority. It's going to be a tax cut for the richest 3,000 households in American, at the expense of everyone else. If you cut $28 billion dollars in revenue, you have to make up for it with cuts in services. Not only that, but the estate taxes are a way to prevent concentrated fortunes from accumulating. It's one of the "brakes" against concentrated wealth and power. If you eliminate that, we become even more of a plutocracy: a nation governed by wealth.

Versions of this interview first appeared in Real Change, Seattle's newspaper of the poor and homeless, and online at LiP Magazine.