On Sat, 11 Jan 2014 21:29:44 -0800, Rudy Canoza
<LaLaLa...@philhendrie.con> wrote:
The richest 1 percent made as much every year as the bottom 60 percent
combined. They called the group with all the power the "plutonomy"
http://www.alternet.org/economy/rich-people-spending-sprees-may-find-one-day-income-inequality-bites-them-wallet?paging=off¤t_page=1#bookmark
Rich People on Spending Sprees May Find One Day That Income Inequality
Bites Them in the Wallet
The richer they get, the more blind the 1 percent is to the
consequences of their greed.
For the past five years, the market for luxury goods has been on a
roll, even as the rest of the economy sputtered. Fancy cars are flying
off the production lines. Tiffany and Prada are in the pink. Even Big
Tobacco is in on the action, doing brisk business in high-end cigars.
Consumer spending is up! the latest headlines shout. Rejoice! But wait
� if a big chunk of this is driven by sales of luxury goods, is that
ultimately a good thing for the economy?
Despite the Great Recession, the U.S. has remained the world�s
number-one nation for luxury goods consumption. The 1 percent has
never had such fawning attention and splendiferous choices. The stock
market returns of 2013 only served to further escalate the spending
sprees of the wealthy. That's great for them. But what about the rest
of us?
Well, we don't really count, according to the banksters. If you'll
recall, back in 2005, the number-crunchers over at Citigroup released
a report on the economy that made it all clear. The report announced
that there is "no such thing as the U.S. consumer." Notions like
"average" consumer and "average" debt were totally irrelevant.
America, they explained, actually consisted of two groups: the rich
and everybody else. There was no reason to worry about the second
group, because what it did just didn't matter much. The richest 1
percent made as much every year as the bottom 60 percent combined.
They called the group with all the power the "plutonomy".
"Economic growth is powered by and largedly consumed by the wealthy
few," the analysts said. Just like it was in the Gilded Age and the
Roaring Twenties. The idea was simple: the rich alone can keep the
economy humming. Who cared, in that case, about income inequality?
Thinking along those lines, many conservative neoclassical economists
over the years have argued that income inequality is actually
necessary for growth because it puts money into the hands of
capitalists who will do things like create jobs and spend their money,
which supposedly helps everyone out eventually. Trickle-down
economics, some call it.
Our government officials are tooting the consumer spending horn as the
rich are burning up their credit cards. But the rest of us are still
cutting back on many things. Socked with high, out-of-pocket
healthcare expenses, job insecurity, and disappearing pensions, the
middle class has less disposable income. Instead of taking trips,
we're taking staycations. We're not spending as much on electronics or
new cars. At the lower rungs of the economic ladder, workers are stuck
in low-wage hell and struggle merely to survive.
Meanwhile, just as in the Gilded Age and the Roaring Twenties, the
richer the rich become, the less they believe is expected of them, and
the louder they cry out against paying their share of taxes and call
for budget cuts even as the federal deficit continues to shrink
(according to the Congressional Budget Office, the government actually
ran a $44 billion surplus in December). The rich push policies that
only increase income inequality.
If the Citigroup folks were right, then the rich need not worry. The
economy will be okay.
But maybe the Citigroup folks were wrong.
Economists who do not subscribe to conservative neoclassical theories
are beginning to do research on how income distribution impacts
economic growth over the long run. The subject is controversial at
this point, and tricky because it's hard to get empirical evidence.
But it looks like there could be some problems with the Citigroup
theory, particularly as it relates to consumer spending. The rich have
contraints on their spending, for one thing. There are only so many
Prada bags, cars and fancy cigars one can buy. So if you can't spend
it all, what do you do with it? You might just end up saving most of
it, which doesn't help the rest of the economy, and might be bad for
it in the long run. There are other problems, too. Some of the rich
will use the excess money they can't figure out how to spend on
speculation, which can destabilize the economy.
Long-term economic growth isn't the only reason we should be worried
about income inequality. There are many problems, like social unrest,
health crises and the breakdown of democratic institutions that result
from the rich and the rest being separated by a wide gulf. But the
damage to the economy is something even the rich might stop and think
about. They may find that income inequality will eventually come back
to bite them in the long run � right in the wallet.