Soviet-Style Disproportion

Henry Srebrnik, [Charlottetown, PEI] Guardian

In his State of the Union speech last month, Barack Obama warned that America is becoming “a country where a shrinking number of people do really well, while a growing number of Americans barely get by.”

The United States has gone from being a comparatively egalitarian society to one of the most unequal democracies in the world. The richest fifth of the population controls about 85 per cent of the country’s wealth.

Income inequality stands at its highest rate since the Great Depression. Chief executives now make roughly 200 to 300 times as much as their average employees’ salary.

The incomes of most Americans began to flatten or decline after 1980 -- they now enjoy less economic mobility than their counterparts in Canada and much of Western Europe.

The economic meltdown since 2007 has created further damage, asserts the well-regarded Columbia University economist Joseph Stiglitz. “Unemployed young people are alienated. It will be harder and harder to get some large proportion of them onto a productive track. They will be scarred for life by what is happening today,” he wrote last December in a Vanity Fair article.

But the problem is not simply that a small number of people are very rich or pay less than their fair share of taxes. It also lies in the way many of them got rich.

They are all too often bankers, hedge fund managers, and Wall Street traders who manipulate immense sums of money for their own benefit, and give themselves multi-million dollar bonuses – regardless of whether their activities actually benefit the economy as a whole.

Very often it’s actually the reverse, as companies are downsized, manufacturing jobs outsourced to other countries, workers laid off, and homes foreclosed.

Yet financiers and corporate leaders have managed to grab more and more of the country’s income for themselves -- even when their corporation’s performance has been disappointing.

These are not the “captains of industry” of yesteryear.

The political class has also done well for itself. Roughly 11 per cent of members of Congress have a net worth of more than $9 million, according to an analysis of 2010 financial disclosures compiled by the Center for Responsive Politics. That puts these politicians in the top one per cent of Americans in terms of wealth.

Has America developed a Soviet-style “nomenklatura,” an elite that appropriates a disproportionate share of the nation’s wealth, by virtue of its position in society? After all, many of these people don’t “make” (as in produce) anything, they just make money.

In the Soviet Union, while the economy stagnated, the Communist party elite enjoyed a standard of living far greater than that of ordinary Russians. The system provided them with ample high quality goods, while those less privileged might wait months or years for basic necessities.

And when the Soviet command economy finally collapsed, and people could buy state-owned industries and property, it was these privileged Communist apparatchiks, with strong connections to Soviet power structures and access to the monetary funds, who snapped them up at bargain-basement prices, becoming a class of ultra-rich oligarchs.

Is America, with its growing gap between the privileged few and a declining middle and working class, beginning to resemble the Soviet Union after the 1970s?