Robert Reich on America’s Growing Inequality
Is America Becoming an Oligarchy?

Five Takeaways:

The old dynamic of right versus left, Democrat versus Republican, doesn’t work anymore: Instead, America is in the midst of what Reich called a battle between oligarchy and democracy. It has happened before: The nation’s first oligarchy was during slaveholding days, and the second during the Gilded Age of the late 1800s. Reich said the third oligarchy began in the 1980s, and since then the share of the nation’s total household income going to the richest 1% has more than doubled. With such concentration, the rich look for ways to hold onto their wealth, and social unrest follows.

The U.S. is out of step with the rest of the world: The top 1% in America receive a higher share of total income than in other advanced nations. In the 1990s and 2000s, the share of income going to the top strata increased faster in the U.S. than elsewhere and was far larger – 18.3% in the U.S., 14.3% for second place U.K., and less than 10% for nearly all other nations. “Other countries do follow the United States,” he said. “But the United States is the outlier. … There’s something else going on here in the United States because we are so extreme.”

Power takes many forms: It comes in the form of income and wealth, which is increasingly concentrated, and political strength, which also flows disproportionately to the wealthy. The working class and the poor may try to speak up, but they aren’t heard: Reich pointed to research that shows that politicians act on the policy preferences of the wealthy but overlook those from average citizens and mass-based interest groups.

U.S. wages have stagnated for decades: Productivity in the private sector – at factories and offices alike – has marched steadily upward for the past half century. But hourly wages peeled away from those productivity gains and, since the 1970s, have essentially flatlined. In his research, Reich talks with people who are working harder but making less – and so are never able to move ahead. Reich said that about 25% of the stagnation in wages is due to technological change – robotics and the like. Another 25-30% is due to globalization – the ease with which companies can outsource. “But that still leaves 45% of the question,” he said, arguing that the decline of labor unions is one big factor.

The nation has run out of “coping mechanisms”: Reich said America’s middle-class households papered over their declining economic power by engaging in serial survival strategies. First, women went into the workforce in large numbers. Then, everybody worked longer hours. Then households borrowed and then borrowed some more – credit cards, student loans, home equity loans. The debt party hit a wall with the 2007-2009 Great Recession, and families are still struggling to get back to where they were in the 2000s. “The most powerful force in American politics today … is anti-establishment anger,” Reich said. “And that anger is related to a sense of unfulfilled expectations.”

This program was funded by the David and Lucile Packard Foundation, W.K. Kellogg Foundation, and Heising-Simons Foundation. NPF is solely responsible for the content.

Robert Reich
Former Secretary of Labor, Professor of Public Policy, University of California, Berkeley
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