Inequality—the Wolf at the Door

Ron Elsdon, San Damiano, November 15, 2014

I am glad to be here with you having a conversation about this important subject of economic inequality at San Damiano, a place dedicated to service and honoring all in our society. It is interesting that both President Obama and the Pope have addressed this subject so I’d better be careful what I say in case there’s a direct pipeline to them both from here! We can immediately see our challenge though as the Pope has continued to speak to this subject, President Obama less so.
For about ten years I have been drawn to writing about various aspects of social justice, including inequality, in newsletters for my organizational consulting practice, and in editing a book last year called Business Behaving Well: Social Responsibility, from Learning to Doing. In speaking about rising inequality in connection with this book, it has been interesting to observe various responses. Many people have been supportive and share a concern about the direction we have been taking.

There is much quantitative information about how inequality has grown dramatically in this country and to a lesser degree in other developed countries. Thomas Piketty’s excellent recent tome Capital in the Twenty-First Century is one example in book form. In fact we could easily spend the entire day just sifting through the available information on this topic. However, rather than doing this, which might challenge our capacity to stay awake, we have today, included a range of activities to engage our hearts and minds. What I will try to do in this brief half hour introduction is to say something about the reality of inequality, some reasons it is getting so much worse, why it matters, and what we can do about it (handout – resource table). The intent is to provide some context for our tremendous panel who will then explore how our various faith traditions speak to us about both inequality and our response to it.

We have a particular challenge since our society is so unequal. Here is David Shipler’s view (from The Working Poor, Invisible in America (Knopf, 2004)): “The forgotten [in America] wage a daily struggle to keep themselves from falling over the cliff. It is time to be ashamed.” Here is the Gospel of Luke, from the beatitudes:

Here’s Martin Luther King from December 1963 at Western Michigan University: “All I’m saying is simply this, that all life is interrelated, that somehow we’re caught in an inescapable network of mutuality tied in a single garment of destiny. Whatever affects one directly affects all indirectly. For some strange reason, I can never be what I ought to be until you are what you ought to be. You can never be what you ought to be until I am what I ought to be.”
Jim Rigby, a Presbyterian pastor in Austin Texas, said it well, quoting the late Brazilian bishop Dom Helder Camara: “When I give food to the poor they call me a saint. When I ask why the poor have no food they call me a communist.” Rigby goes on to say “Too often today in the United States, if you talk about helping the poor, they call you a Christian, but if you actually do something to help the poor [on a policy level, not charity], they call you a socialist.”

Now let’s look at some of the causes of inequality, why it is getting so much worse. Let me start with two vignettes. My wife, Linda, and I were back in the U.K. this October and a year ago. We were in rural Northumberland, which is a bit like some northern parts of northern California. Lots of trees, hills, lots of sheep, calm and peaceful. For the first time a year ago we visited Cragside, a property now owned by the national trust, which we knew nothing about before our visit. It turns out that it was given to the country by the Armstrong family who owned it, in the 1970s to offset large tax bills. It is a beautiful place, over 1,000 acres of woods and lakes, with a mansion in the center that was built and developed in the mid to late 1800s. Think of remote parts of Northern California close to the Oregon border for a comparison. Idyllic.

Now picture a second scene. This of a young girl in the early 1900s walking along an industrial road, around midnight, it’s dark and cold, she is taking sandwiches to her father who is toiling in a factory making armaments. Smelly, noisy, dangerous work. And not a particularly safe road to walk along. Think of depressed parts of Oakland or Chicago. Far from idyllic. The girl walking along that road was my wife’s mother taking food to her father in the factory. That factory, like the mansion and the estate, was owned by the Armstrong family. While they were benefactors to the area, they made most of their money from the manufacture and sale of armaments, for example selling to both sides in the American civil war. And we see on a personal level, gross inequality, affecting people’s lives in a profound way. But isn’t this just something from a distant land and a distant time? No. In the U.S. by 1929 inequality was at a peak contributing in part to the great depression of that year. With progressive policy spearheaded by Franklin Roosevelt, from the mid-1930s we began a time of unprecedented prosperity that accelerated after the second world war. In parallel, by the late 1960s inequality fell to its lowest level in this country. However, in the 1980s this reversed with regressive policies that began then and have over the last 30 years brought us to a point again today where inequality is now equal to that of the late 1920s.

What happened? Here’s Warren Buffett’s perspective: “My friends and I have been coddled long enough by a billionaire- friendly Congress. It’s time for our government to get serious about shared sacrifice.”
Why would he say this? This brings us to the first of three causes of growing inequality that we will mention, namely our taxation policy. Tax rates have plummeted for the wealthiest households since the 1970s. For the highest earning 0.01% of our population, overall federal tax rates have fallen almost in half, from about 70% to about 40% today, whereas for the bulk of our population there has been little change. I am reminded of Justice Louis Brandeis observation “We can have a democracy or we can have great wealth concentrated in the hands of the few. We cannot have both.”

Which brings us to the second public policy cause of growing inequality. That is the decline in the real minimum wage. Today it is 23% below its peak in 1968, which not coincidentally was also the time when we had the lowest level of inequality in our country. We have been employing a reverse Robin Hood principle, taking from the poor to give to the rich. It is good to see some initiatives at local levels to redress this, though it’s not surprising that William Sloane Coffin observed that we have “a government of the wealthy, by the wealthy, and for the wealthy.”
Which brings us to a third cause of growing inequality, growing inequity in compensation in corporations. Today CEOs of major U.S. corporations earn several hundred times the average compensation of American workers With this degree of inequity a CEO typically earns more in one day than an average worker earns in a year. By contrast in the 1970s few senior executives made more than 30 times what their workers made. Furthermore, the performance of the companies with the highest-paid CEOs was much worse than industry average in one study.

There’s hope though. Here’s Tommy Douglas, founder of the Canadian public healthcare system (and a national hero for that) “Courage, my friends; ‘tis not too late to build a better world.” And here’s Muhammad Yunus, founder of the Grameen Bank and Nobel Peace Prize recipient, “I strongly believe that we can create a poverty-free world, if we want to. We can create a world where there won’t be a single human being who may be described as a poor person. In that kind of a world, [the] only place you can see poverty will be in the museums.” That is our challenge and opportunity. Now let’s talk about why it matters.
It may seem self-evident that inequality matters, but the fact that it has been growing for more than thirty years suggests otherwise. These words by Philip Yancey from Soul Survivor say it well “I belong . . . to a privileged minority … How do we, the ‘privileged ones,’ act as stewards of the grace we have received? We can begin . . . by ripping off the labels we so thoughtlessly slap on others unlike ourselves. We can begin by finding a community that nourishes compassion for the weak, an instinct that privilege tends to suppress. We can begin with humility and gratitude and reverence, and then move on to pray without ceasing for the greater gift of love.” Philip Yancey reminds us about what is important and, as I expect we will hear from our panelists, what is at the heart of the world’s major faith traditions. Philip Yancey’s words are a reminder about the importance of supporting all in our society, which means understanding why inequality matters. Inequality is important for social, practical and emotional reasons. Let us look at each in turn.

There is growing evidence that inequality in a society brings many social ills, reduced life expectancy, higher infant mortality, more obesity, increased crime, lower levels of trust, and less social mobility. Measures of social distress increase directly as inequality increases, whether comparing among countries or among states in the United States. Inequality damages community cohesion; people are less concerned with the well-being of others. And yet everyone benefits from reduced inequality. It is not just the poorest who benefit. While the greatest improvements are experienced by those lower down the economic ladder, there are still significant benefits for those at the top. And it doesn’t seem to matter how this reduced inequality is created, whether by more equitable compensation levels as occur in Japan, or redistribution of societal resources as is the case in Scandinavian countries.

Inequality also creates practical economic problems. When income and wealth are concentrated in the hands of a few, the economic fuel to power our economy is depleted, and the engine of our economy stalls. Using tools of mathematical modeling we can see this by examining how discretionary spending, the fuel of our economy, changes with growing inequality. The estimated cumulative loss of discretionary spending since 1970, simply due to growing inequality and the growing concentration of income, totals more than $4 trillion. Greater concentration of wealth and income significantly hurts our economy; we need trickle up, not trickle down approaches.

On an emotional level once basic survival needs are met, the pattern of happiness or life satisfaction rapidly leveling off as income increases can point us to a path that strengthens our society for the benefit of all. It turns out that when happiness levels off with increasing income, as it does, then happiness for our society is greatest when income for everyone is roughly equal. This is one reason why the world’s major faith traditions speak to the importance of supporting all in our society. It is one reason why societies that are more equal are better places to live. We are not like bees in a hive. There are, of course, factors that support some degree of inequality and the associated incentives this provides, which in turn benefits individual happiness. Indeed a primary challenge for us is to integrate individual and communal responsibility so this works well for all of us. In general, reduced inequality is associated with greater economic prosperity. So it is not surprising that people in the United States say they would prefer much reduced wealth inequality.

The current level of inequality in the United States creates reduced life circumstances for many and threatens economic and social stability. This is why David Shipler in The Working Poor observes, “Being poor means being unprotected. . . . A poor man or woman gets sacked again and again—buffeted and bruised and defeated. When an exception breaks this cycle of failure, it is called the fulfillment of the American Dream.” I believe someone once said if you want the American Dream then go to Norway. It is not surprising that Harold Pinter offered the following observation, “If to be a socialist is to be a person convinced that the words ‘the common good’ and ‘social justice’ actually mean something; if to be a socialist is to be outraged at the contempt in which millions and millions of people are held by those in power, by ‘market forces’, by international financial institutions; if to be a socialist is to be a person determined to do everything in his or her power to alleviate these unforgivably degrading lives, then socialism can never be dead because these aspirations never die.”

Now let’s look at what we can do about inequality. We know that growing inequality comes from public policy choices made over the last thirty years so we can reverse them if we choose to. It is in building a foundation of effective public policy now and sustaining it in the future that we can create a better place for all of us.
The message of economic justice is central to Christian theology and ethics. Nehemiah, in the fifth century B.C., explained how wealth and income redistribution were needed in his society to stop families having to sell their children into slavery. But that couldn’t happen here could it? Just ask those who monitor human trafficking how the Walnut Creek BART station is a gateway for some young people into modern day slavery. Our son speaks of an example of some members of the basketball team in one of the top high schools in Madison, Wisconsin, rooting through waste baskets to recover food scraps from treats the team had been given. The basketball players had no food at home. Meanwhile we allow political interests to remove funding from food stamp programs. Jesus’ teachings in the New Testament, and the example of members of the early church sharing their possessions, remind us that economic justice is a central tenet of the Christian faith, as it is in other faiths, and it should be a central tenet of a noble society.

While it is easy to be drawn into thinking that acts of charity are sufficient to solve problems of economic inequality, and while charity is personally meaningful, honorable, and important, its ability to affect fundamental social change is as limited today as it was in Nehemiah’s time. Here’s Peter Buffett, Warren Buffett’s son, from a 2013 New York Times piece: “Because of who my father is, I’ve been able to occupy some seats I never expected to sit in. Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left…As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity. But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life…Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market. Is progress really Wi-Fi on every street corner? No. It’s when no 13-year-old girl on the planet gets sold for sex. But as long as most folks are patting themselves on the back for charitable acts, we’ve got a perpetual poverty machine. It’s an old story; we really need a new one.” These were Peter Buffett’s words. Another path is recourse to our political system, and this is an avenue we must pursue. However, a recent paper, (“Democracy and the Policy Preferences of Wealthy Americans,” by Benjamin Page, Larry Bartels, and Jason Seawright) in the March 2013 issue of Perspectives on Politics is sobering. This describes a study of the political views of the wealthiest 1% and 0.1% of the population based on a sample in the Chicago area. The authors confirm that the wealthiest participate disproportionately in politics and that their views diverge significantly from the general population – the wealthy are much less supportive of social programs such as social security and effective universal health care or providing broad educational opportunities, and they are less supportive of economic regulation that might have averted the recent economic collapse. The authors conclude that “if policy makers do weigh citizens’ policy preferences differently based on their income or wealth, the result will not only significantly violate democratic ideals of political equality, but will also affect the substantive contours of American public policy.”

Another direction we can look is to the business community. This too is a path we must pursue as highlighted in the book Business Behaving Well. However, some voices in the business world seem to take positions that benefit corporations at the expense of the community. Indeed large organizations are not democracies; rather they are oligarchies of entrenched power that now serve primarily the interests of senior management. This route too presents major challenges. So let’s consider some other steps that we can take: Stay informed about emerging social, community, business, and workplace issues so we can decide where to best commit our time and energy. In order to support and drive change we need to know why change is important and why it is urgent. So staying informed about the facts and consequences of inequality is an important first step, this when there is much misleading information that can obscure the truth. This means staying informed about inequality in all of its dimensions, for example in income, wealth, education, health care, even life expectancy.

• Become well informed about organizations and their approach to social responsibility so that, based on their performance, we can decide to engage or not, whether as member, employee, contractor, supplier, investor, or customer.
• Influence public policy by supporting candidates who speak to the needs of all in our society, not just the wealthy and powerful, and engage in legislative campaigns and direct action in this regard. Encourage participation in our political processes, addressing the challenge of lower voting rates at lower income levels, and support comprehensive political campaign finance reform.
• Support social and community causes that benefit all, such as full access to healthcare in the United States through a Medicare-for-all system, and needed progressive taxation levels for individuals and organizations.
• Support strengthened education at all levels, recognizing that education offers a significant opportunity to break the bonds of poverty.
• Each create our own work/life direction, not beholden to others in organizations, rather a direction that matches our values, interests, skills and preferences so as to be fulfilling and rewarding, unencumbered by corporate bureaucracies.
• Speak to issues of inequality so that we are all better informed about, and can communicate, what is really happening. In the words of Joan Chittister “Courage is coming to realize that what does and does not happen in the world does so because of what you and I fail to say – not when silence is right, but when we fear the cost to ourselves of speaking out.”