A 2017 study by Oxfam International found that only eight people owned as much of the world’s wealth as the bottom fifty percent of the global population. It does not take an economist to realize that this finding highlights a very unequal economic situation. The question that remains for those who are concerned with this issue is: how can we change it? Can we rely on our elected officials to combat wealth inequality and to fight for a more equitable society?
According to researchers Martin Gillens and Benjamin I. Page, elected officials may only be reliable in aiding those that are economically advantaged. After reviewing over 1,700 policy issues, the researchers found that there was only a 5 percent chance that the average citizen’s preference would have an impact on the policies decided by elected representatives, while there was a 78 percent chance that an economic elite’s preference would have an impact. This suggests a frightening reality in which U.S. democracy is being turned in to a plutocracy, where policy decisions are decided on behalf of the interests of a wealthy few, not the voters that put our elected representatives in power.
It is an open secret that both of the United States’ main political parties cater to wealthy interests at the expense of their voters, and that the country’s democratic institutions are turning out to be undemocratic theaters of corruption. In an alarming report, the Economist Intelligence Unit’s 2017 Democracy Index Report ranked the United States as a flawed democracy for the first time. They state that the main reason for this regression was “a serious decline in public trust in U.S. institutions in 2016.” As the Gillens & Page report suggest, the U.S. is a nation in which wealthy interests have a tremendous amount of influence on policy decisions. This open secret in the concentration of political power by a wealthy few has spurred new calls for change seen in the economic populism of Senator Bernie Sanders, and the populist nationalism of now President Trump. What links supporters in both camps is dissatisfaction with the rise of economic inequality and the power dynamics created because of it. To avoid the dangers of nationalism, the following policy ideas should be considered to rejuvenate the need for democracy and economic security.
A New Economic Bill of Rights
It is fitting as students in the Public Policy Program at Roosevelt House to recall Franklin D. Roosevelt’s 1944 State of the Union Address. In this address, FDR remarked, “We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made”. This State of the Union was a call to the action of realizing freedom in the context of having material security free of financial burdens, such as paying for healthcare, housing, and education. This Economic Bill of Rights would have guaranteed Americans the right to all these essentials of life, as well as the right to work for a living wage.
Unfortunately, there have been massive cutbacks to the social safety net under decades of neoliberal economic policy. One of the sparks of this neoliberal reaction was the increased use of cash-transfer programs (i.e. Medicaid, social security, section 8, etc.), which lead to a 7 percent decrease in the total number of hours worked by 1979[1]. In a misguided attempt to address the fundamental problem of simple cash-transfer dependency programs, the Reagan administration began to enact cuts to these programs which were meant to help the most economically disadvantaged.
Since the cutting back/privatization of social safety programs, neoliberal policies have created tremendous concentrations of wealth for very few people. This has gotten to the point that, starting in the 1980’s, the worker productivity of the United States has continued to increase year after year, but hourly compensation for workers has only increased 11 percent since 1973[2]. Without the proper societal regulations in place to guarantee economic security, workers may never receive the wages that they should have earned through their productive labor.
Since that cost is fundamentally at odds with their employer’s profit, the responsibility of securing a more equitable distribution of wealth has largely fallen on labor unions and policy makers within the state. It is troubling that between 1983 and 2017, membership in labor unions has fallen from 20.1% to only 10.7%, according to the Bureau of Labor Statistics. Given that several states have passed right to work laws that limit the collective bargaining power of unions, wages will likely continue to stagnate.
Thus, the evaporation of the social safety net, coupled with stagnating wages, prove that there is a need for a new economic bill of rights that will guarantee a level of economic security for all Americans.
One can see the implementation of an economic bill of rights in the social democracies that have flourished in parts of Europe for over fifty years, where citizens have the right to tax-funded universal healthcare, education, childcare, etc. Despite some of the social democracies such as Norway and Finland having Norway and Finland having higher GDP growth than the United States[3], the rising tide of neoliberalism across the globe has put their universal safety nets under threat.
Economist Pranab Bardhan and John Roemer point out that the vulnerability of social democracy is that, “It is idealistic to believe that tax concessions of this magnitude can be effected simply through electoral democracy without an organized labor movement, when capitalists organize or finance influential political parties”[4]. In other words, the problem of wealthy capitalist interest having influence in political parties, in the policy making process, leads to those interests organizing against policies that will redistribute their profits. Thus, a strong Labor movement is crucial to maintain social democracy and social welfare programs, and steps must be taken to change the fundamental structure of who receives the profits of businesses so that economic security can actually be secured.
Ultimately, an effective economic bill of rights for the 21st century needs to expand worker cooperatives as a means of helping workers secure more of the wealth they produce. A recent study by Professor of Economics Virginie Pérotin suggests that worker cooperatives are not only more productive than traditional, capitalist, enterprises, but that they also retain a larger share of their profits than the traditional business models. If worker cooperatives are better at maintaining their profits than traditional capitalist models, then the need to redistribute tax concessions from the wealthy will be circumvented by the workers acquiring all the wealth that they produce in the firms that they would collectively own. The before mentioned Oxfam International report also points at the Mondragon corporation in Spain as a successful example of a worker cooperative that can build a more “human” economy. Not only did Mondragon have a profit turnover of over 13 billion Euros, but its 74,000 employees manage the company through general assemblies, giving workers a direct say in the governance of the business. With the business model of a worker cooperative, not only does it add a criterion that it’s a more productive/profitable business model, but it creates a platform where there can be a stronger democracy in the workplace.
In conclusion, the United States needs an economic bill of rights, backed up by a strong labor movement and an increase of worker cooperatives. This will help create the infrastructure for economic security, which will in turn help reverse the troubling trends of nationalism and distrust for the U.S. political system.
[1] Fred Block, Richard A. Cloward, Barbara Ehrenreich, and Frances Fox Piven, The Mean Season: The Attack on The Welfare State, (New York: Pantheon Books, 1987), 22.
[2] Malcolm Harris, Kids These Days: Human Capital and the Making of Millennials, (New York: Little, Brown and Company, 2017), 74.
[3] Irwin Garfinkel & Timothy Smeeding, “Welfare State Myths and Measurement” Capitalism and Society 10, no.1 (2015): 17.
[4] Bardhan, Pranab, Roemer, John. “Market Socialism: A Case for Rejuvenation,” Journal for Economic Perspectives 6, no.3. (1992): 104-105.