David Korten: "Growth or Equality: Two Competing Visions for America’s Future"

Photo by Yasin Hassan.

 David Korten on how closing the wealth gap can open the way to a fairer, more prosperous economy.

 by David Korten

The current political debate in America hints at an unspoken, but profoundly important choice between two radically different visions of the path to prosperity for all.

• One vision holds that inequality is an essential and beneficial precondition to unleash the economic growth needed to end poverty and heal the environment. Freeing the rich from taxes and cumbersome regulation will unleash a wave of productive investment, job creation, and prosperity that eventually will trickle down to enrich us all.

• The other vision holds that inequality bears a primary responsibility for the political, economic, social, and environmental failures that threaten the future of America and the world. America already has the world’s largest economy and one of the world’s highest per capita income levels. Further growth for growth’s sake is not the answer. Our priority need is to reallocate and redistribute our economic resources to get the outcomes we really want.

Equality: The Evidence

British epidemiologist Richard Wilkinson has done an exhaustive review of the evidence on the relationship between the distribution of wealth and indicators of physical, mental, and social health across and within countries. His research demonstrates that on virtually every indicator, more equal societies enjoy more positive outcomes than less equal societies.

When wealth and power are concentrated at the top, however, the result is not trickle down. It is a sucking up.

Figure 1, below, graphs the results for the world’s high-income countries. By a substantial margin, the United States ranks first in inequality and has the worst outcomes on a range of indicators of physical, mental, and social health (see alsoWilkinson’s TED talk).

Wealth in equality in America has become so extreme that it should be setting off alarm bells as a  threat to national well being.

In relatively equal societies, modest differences in wealth and privilege based on differences in real competence and contribution are easy to accept as fair and justified. When, however, the differences become extreme and the winners distinguish themselves primarily by their willingness to engage in morally corrupt behavior for personal advantage, there is an inevitable deterioration of the trust, institutional legitimacy, and moral fabric essential to the healthy function of individuals, communities, and society. That creates a social deficit, from which it takes generations to recover.

Health and Social Problems are Worse in More Unequal Countries

Index: Life expectancy; math and literacy; infant mortality; homicide; imprisonment; teenage births; trust; obesity; mental illness, incl. drug and alcohol addiction; social mobility.

Source: Wilkinson & Pickett, The Spirit Level (2009), www.equalitytrust.org.uk

Figure 1: Equality and National Health

More Sucking Up Than Trickle Down

If distributed equally, U.S. per capita GDP would translate into $192,400 for a family of four.

Wall Street interests would have us believe that the best way to deal with the plight of the poor is to bring up the bottom by growing the economy from the top down—the classic claim of trickle-down economics. When wealth and power are concentrated at the top, however, the result is not trickle down. It is a sucking up. Those on the top suck up the wealth and gorge on a spending spree. Those on the bottom suck in their guts, tighten their belts, and fight for survival.

From 1983 to 2008, total U.S. GDP grew from $6.1 trillion to $13.2 trillion in constant 2005 dollars. Figure 2, below, shows the distribution of the total wealth gain during this period. The wealthiest 5 percent of American households captured 81.7 percent of the gain. The bottom 60 percent of households not only failed to share in the overall increase, they suffered a 7.5 percent loss.

Figure 2: Who Captures the Wealth Gain from Growth?

Current U.S. per capita GDP is $48,100 for every man, woman, and child in the United States. This places us somewhere around seventh in the world, depending on who is counting. We are bested only by countries with comparatively tiny populations (Qatar, Luxembourg, Singapore, Norway, Kuwait, Brunei)—four of them with a lot of oil.

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If distributed equally, U.S. per capita GDP would translate into $192,400 for a family of four. Our economy is already far larger than necessary to provide for needs of all and provide a fair reward for those who make distinctive contributions.

Contrary to the incessant mantra of economists, politicians, and media pundits, economic growth is not the solution to what ails us. In fact, sheer economic growth drives the need to chew up ever more of our living Earth, creating an environmental deficit that compromises Earth’s living systems to feed an economic system that fails to meet our most basic needs because of an egregious misallocation of resources. Our prime need is for a more intelligent distribution of the wealth we have—giving social and environmental returns priority over financial returns.

When Wall Street Interests Make the Rules

Money itself is not wealth. It is a system of accounts by which modern societies record and balance our obligations to one another...

The sucking-up economy is no accident. More than 30 years ago, Wall Street interests mobilized in the name of deregulation and market “freedom” to rewrite the rules of finance in order to break the link between contribution and reward; and to favor the bankers, big corporations, private equity firms, and others in the business of playing financial games to make money from money. They suppressed wages and benefits for working people, reduced taxes paid by the rich, and stripped away constraints on speculation and other financial games by which those at the top increase their financial wealth without contributing to the real wealth of society.

Wall Streeters now pride themselves on generating eye-popping profits and bonuses through financial manipulation, deception, and extortion while producing nothing of real value. As the wealth gap grows, so too does the relative political power of the elites and thereby their ability to rig the rules in the favor of yet greater wealth concentration.

Economic structures institutionalized by policies that favor growth for the rich now virtually guarantee that the benefits of growth flow to the top. There will be no economic recovery for the rest of us so long as these institutions control our economy and our politics.

Please go here to continue this article:  http://www.yesmagazine.org/blogs/david-korten/growth-or-equality-two-competing-visions-for-americas-future

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“Imagine an economy in which life is valued more than money and power resides with ordinary people who care about one another, their community, and their natural environment. It is possible. It is happening. Millions of people are living it into being. Our common future hangs in the balance.” - David Korten