Robert Reich: Against Inequality

Fighting for the 99 percent: Former U.S. Secretary of Labor Robert Reich
speaks to Occupy San Francisco demonstrators at Justin Herman Plaza on
Oct. 19, 2011. Now teaching at the University of California, Berkeley,
Reich blames anti-union legislation and market deregulation for the yawning
chasm that has grown between America's wealthy and middle class since the
late 1970s. -- AP

Riech's advice for incoming Presidents, "Expand the Earned Income Tax Credit--
a wage suppliment for lower-income people, and finance it with higher
marginal income tax."

His ideas were the basis for Bill Clinton’s 1992 election campaign slogan,
“Putting People First” (they were both Rhodes scholars and he met Clinton
on board the boat to England; he once dated Hillary too, though he only
realized this when a New York Times journalist rang him up and reminded him).

And they were still there at the heart of President Barack Obama’s inaugural
address last month. America could not succeed, said Obama, “when a shrinking
few do very well and a growing many barely make it.” What Reich, basically,
has been saying for three decades.

And saying how, since 70 percent of the economy is based on the middle classes
buying stuff, if they don’t have any money to buy this stuff, it cannot grow.
Meanwhile, the government has allowed the super-rich, the “one percent,”
to take more of the nation’s wealth. Half of the United States’ total assets are
now owned by just 400 people — 400! — and, Reich contests that this is not
just a threat to the economy, but also democracy. [debilitating to democracy]

At heart “Inequality for All” by filmaker Kornbluff, is a revolutionary film-- in
its dearest desire to precipitate a revolution in the way that we think about
economic matters. "The economy, says Reich, is not like the weather.
An economy does not exist in nature. We don’t have to settle.” And,
crucially, it can be changed.

"I had never done anything political before,” says Kornbluth. “I didn’t consider
myself political. But seeing his example, the way that he has fought this
fight for so many years has been an absolute inspiration to me." Reich's
students "really do walk out of his lectures and want to change the world."
The film is structured around a lecture, or rather series of lectures: Reich’s
incredibly popular wealth and poverty class at Berkeley. But it is only
loosely used as a vehicle

The film threads together evidence that many people know about — the
increasing struggle of the middle classes to just get by, the way that the
top 1 percent of society has unshackled itself from the rest of us and has
seen its income increase exponentially, and the ever-increasing cost of
the traditional avenues of improvement, such as higher education.

Reich charts the three decades of increasing median income after World
War II, a period he calls “the great prosperity” and then examines what
happened in the late 1970s to put an end to it. The economy didn’t falter.
It kept on growing. But wages didn’t.

The figures that Reich supplies are simply gobsmacking. In 1978, the
typical male U.S. worker was making $48,000 a year (adjusted for inflation).
Meanwhile the average person in the top 1 percent was making $390, 000.
By 2010, the median wage had plummeted to $33,000, but at the top it
had nearly trebled, to $1,100,000.

We hear Reich tell his Berkeley class. “Something happened in the la
1970s. Something happened.” And much of the rest of the film is working
out what happened. Some inequality is inevitable, he says. Even desirable.
It’s what makes capitalism tick. But at what point does it become a
problem? When the middle classes (in its American sense of the 25 percent
above and below the median wage) have so little of the economic pie that it
affects not just their lives but the economy as a whole.

Reich’s thesis is that since the 1970s a combination of anti-union legislation
and deregulation of the markets contrived to create a situation in which the
economy boomed but less of the wealth trickled down. Though for a while,
nobody noticed. There were “coping mechanisms.” More women entered the
workforce, creating dual-income families. Working hours rose. And
increasing house prices enabled people to borrow. And then, in 2007, this
all came crashing to a halt. “We have exhausted all the options,” he says.
There’s nowhere else left to go. It’s crunch time.

People may not be familiar with the theory of income inequality but they
haven’t been able to avoid noticing that they’ve got less money in their
pockets. “I’ve always thought that kitchen-table economics is the most
important topic to most people,” says Reich. “Their wages, their jobs,
getting by. I’ve always tried to relate economics to where people live.

That’s why I was so excited about the film.” The human stories of working
American families struggling to cope are at the emotional center of the film.
He was bullied as a child “because that’s just what happens when you’re
small” and repeatedly beaten up. “It’s never been a conscious thing on my
part but that feeling of being bullied, and feeling vulnerable, has stayed with
me. And maybe it’s because of that that I can empathize with poor people.
Because they are the most vulnerable. There is no one to protect them.”

In the film, he tells how he made strategic alliances with older boys who
could protect him. And years later, he discovered that one of them had
traveled down to Mississippi to register voters and had been tortured and
then murdered. “That changed my life,” he says.
“He’s an incredibly smart guy" says Kornbluff, "and he could have found a
way to correlate that into money as so many people do. But he never has.

He has absolute integrity. He draws a modest salary. He has this absolute
moral compass. Riech is a philosopher trying to rectify economic injustice.

The world has changed in ways unexpected since 50s 60s hopes. We fell
victim to what Reich calls “the huge lie.” That the free market is good.
And government is bad. Government makes the rules, Reich keeps on
reminding us, over and over. And it decides who benefits from those rules,
and who is harmed. And unprecedentedly, the rich are oppressing the poor.

Perhaps the most surprising voice in the film is Nick Hanauer’s. He’s just
your ordinary, everyday billionaire. One of the 1 percent. Except that he
believes — like Warren Buffett — that he doesn’t pay enough tax. And
that hammering the middle class, the ones who buy actual stuff, who create
demand, which in turn creates jobs and more taxes, is simply bad for the
economy. The system simply isn’t working, he says. It’s put the millionaires
and the billionaires, the Nick Hanauers and the Mitt Romneys — the people
that Republican rhetoric describes as job creators — at the center of the
economic universe, rather than what Hanauer calls the true job creators —
the middle classes.

The problem is, he says, is that they’ve been attacked from every side.
He was one of the initial investors in Amazon, a business of which he’s
“incredibly proud,” but he points out that on revenues in the last three
months of 2012 of $21 billion, Amazon employs just 65,600 people. “If it
was a mom and pop retailer, it would be 600,000 people, or 800,000 or
a million.”

Globalization and technology have played their role. But so has the
government. For decades, under both Republicans and Democrats the
highest rate of tax didn’t dip below 70 percent. Now, Hanauer says he pays
11 percent on a six-figure income. Hanauer believes that if he was taxed
more, he would be better off, because his company — he’s a venture
capitalist and his family own a pillow factory — would sell more products,
and he would, therefore, make more money.

This is inequality that is being led from the top. Reich’s charts show that
for years, chief executives’ earnings kept in step with other employees.
And then in 2000-’03 “It went kerbluey,” by which he means off the charts.
Which is where it still is. This isn’t just an American problem. “If there was
upward mobility it would be OK,” says Reich in the film. “But 42 percent of
children born in poverty in the USA will stay there. In Denmark it’s 24 percent.
Even in Great Britain, where they still have an aristocracy, it’s 30 percent.”
It’s probably a shocking statistic for Americans to hear. The problem is that
by every index you can measure, inequality is worsening in Britain. Its now
taking the same path we took.

One of the key moments for Reich was the underinvestment in education,
particularly higher education in the ’70s. This was when America introduced
tuition fees for public universities and its workforce started to fall behind the
rest of the world’s. When opportunities for those from low- and middle-income
backgrounds began shrinking: precisely where the U.K. is today. It's not
just that wages have remained flat in America — as they have in the U.K. —
it’s that the expenses of everyday life have soared, in particular education
and health care.Last October, an independent commission in the U.K. led by
independent research and policy organization, Resolution Foundation,
predicted that in 2020 wages for low-to middle-income families would be the
same as they were in 2000. And yet everything else will have gone up. Britains
too are facing the crunch.

Reich was bullied as a child “because that’s just what happens when you’re
small” and repeatedly beaten up. “It’s never been a conscious thing on my part
but that feeling of being bullied, and feeling vulnerable, has stayed with me.
And maybe it’s because of that that I can empathize with poor people.
Because they are the most vulnerable. There is no one to protect them.”
In the film, he tells how he made strategic alliances with older boys who could
protect him. And years later, he discovered that one of them had traveled down
to Mississippi to register voters and had been tortured and then murdered.
“That changed my life,” he says.

“He has never cashed in,” says Kornbluth. “He’s an incredibly smart guy and
he could have found a way to correlate that into money as so many people do.
But he never has. He has absolute integrity. It’s almost shocking now for
someone not to do that. He draws a modest salary. He has this absolute moral
compass. And he’s still trying to change the world.”

The world has changed since the 60s and 70s. We fell victim to what Reich calls
“the huge lie.” That the free market is good. And government is bad. Government
makes the rules, Reich keeps on reminding us, over and over. And it decides
who benefits from those rules, and who is harmed. And increasingly, that boils
down to the rich and the poor.

Perhaps the most surprising voice in the film is Nick Hanauer’s. He’s just your
ordinary, everyday billionaire. One of the 1 percent. Except that he believes —
like Warren Buffett — that he doesn’t pay enough tax. And that hammering the
middle class, the ones who buy actual stuff, who create demand, which in turn
creates jobs and more taxes, is simply bad for the economy. The system simply
isn’t working, he says. It’s put the millionaires and the billionaires, the Nick
Hanauers and the Mitt Romneys — the people that Republican rhetoric
describes as job creators — at the center of the economic universe, rather than
what Hanauer calls the true job creators — the middle classes.

The problem is, he says, is that they’ve been attacked from every side. He was
of the initial investors in Amazon, a business of which he’s “incredibly proud,”
but he points out that on revenues in the last three months of 2012 of $21 billion,
Amazon employs just 65,600 people. “If it was a mom and pop retailer, it would
be 600,000 people, or 800,000 or a million.” Globalization and technology have
played their role. But so has the government. For decades, under both
Republicans and Democrats the highest rate of tax didn’t dip below 70 percent.
Now, Hanauer says he pays 11 percent on a six-figure income. Hanauer
believes that if he was taxed more, he would be better off, because his company—
he’s a venture capitalist and his family own a pillow factory — would sell more
products, and he would, therefore, make more money.

This is inequality that is being led from the top. Reich’s charts show that for
years, chief executives’ earnings kept in step with other employees. And then
in 2000-’03 “It went kerbluey,” by which he means off the charts. Which is
where it still is. And this isn’t just an American problem. "If there was upward
mobility it would be OK,” says Reich in the film. “But 42 percent of children
born in poverty in the USA will stay there. In Denmark it’s 24 percent. Even
in Great Britain, where they still have an aristocracy, it’s 30 percent.”

It’s probably a shocking statistic for Americans to hear. The problem is that
by every index you can measure, inequality is worsening in Britain.

One of the key moments for Reich was the underinvestment in education,
particularly higher education in the ’70s. This was when America introduced
tuition fees for public universities and its workforce started to fall behind the
rest of the world’s. When opportunities for those from low- and middle-income
backgrounds began shrinking: precisely where the U.K. is today.
It’s not just that wages have remained flat in America — as they have in the
U.K. — it’s that the expenses of everyday life have soared, in particular
education and health care.

Perhaps the unlikeliest thing about Robert Reich is how very chipper he is.
Even though, by every measure, inequality has got worse in the United
States since he started preaching his doctrine. He doesn’t seem to let it
get to him.

Riech tries to politely prod its people into looking at the world differently
rather than beating them around the head with a heavy wooden bat marked
“polemic.” But American politics has become so polarized, so ideologically
vicious, that it’s only a matter of time before it’s attacked by the right as
Stalinist propaganda. “But I’m used to that,” he says. “I’ve been attacked
at a personal level for the last 30 years. I’m just excited that this might
trigger a debate. Though I’m trying not to get my hopes up.”

Crunch time in the U.S. is looking ugly. Reich believes that both the Tea
party and Occupy movements spring from the same sense of anger and
frustration that people fear. That politics will become more polarized,
more extreme, more hate-filled. One of the key pieces of research that
Reich cites is a study of tax data by Emmanuel Saez and Thomas Piketty
which shows that the years of peak income inequality in America were in
1928 and 2007. Right before both crashes. “The parallels are striking,” he
says. It’s also striking what happened in the years after 1928. How in
Germany, to take a random example, worldwide depression also led to
a vicious polarization of right and left. And certain other outcomes.

And yet, despite, it all, he remains hopeful. “Change has always been
difficult,” he says. It’s why he teaches. If he can’t change the world,
maybe his students will. Or people who watch the film? I ask and get a
classic, understated, deadpan but not entirely unoptimistic Reichian
reply. “I’m trying to keep my expectations in check.”

-- condensed and edited from an article in
The Obverver by Carole Cadwalladr