Stating the obvious

Robert Reich talks to the establishment:

The 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.

When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?

The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.

I agree with Reich. Economic and political conditions in the United States have squeezed the middle class. Yet it is not just the middle class that lacks the economic resources needed to pull the economy out of its stagnant state. The working class also lacks these resources while the size of the underclass — composed of the permanently un- and under-employed — grows in step with the real rate of unemployment. Gross inequality, like high-unemployment and low-wages, marks the steady-state of the current economic regime. This situation ought to be a political problem. But is it? No, it is not. It clearly is not because we have seen the Washington elite respond to this steady-state by reaffirming neoliberal verities. Their response has amounted to affirming the constraints which now limit aggregate demand. The elite have chosen economic stagnation and all that that choice entails.

One might judge the elite response incompetent if, firstly, one believed a competent response would have included a large stimulus and an effort to take wealth from the rich and give that wealth to the poor and if, secondly, one believed the elite in general would affirm an effective program to increase aggregate demand. Why should we accept the second condition as true? After all, if the powerful and influential wanted to reignite the economy, that is, if a consensus among the elite had formed which affirmed a pro-growth and pro-equalization project, they would have, by definition, the means to implement this program. The lack of effort reveals something akin to a collective intent. It shows the class preference of the economic and political elite to be to remain stuck in this stagnant steady-state. They prefer this economic regime because it protects their wealth and power.

Reich, to my mind, wasted his time. The “lesser people” (Alan Simpson) will never reasonably talk the ‘greater people’ into giving up shares of the wealth and their power.