Yves here. I hate to be a stickler, but author Ben Phillips may have unintentionally cherry-picked the data about Martin Luther King’s popularity. King went quickly from being celebrated for his role in achieving civil rights reforms to being demonized in the press for his early opposition to the War in Vietnam. Needless to say, his assassination changed all that. Despite this nit, Phillips makes important points about the persistence needed in in organizing and proselytizing in order to change the attitudes and structures that promote inequality.
By Ben Phillips, the author of ‘How to Fight Inequality’ (Polity Press). He is an advisor to the United Nations, governments and civil society organisations, was Campaigns Director for Oxfam and for ActionAid, and co-founded the Fight Inequality Alliance. Originally published at openDemocracy
2020 isn’t just the year of the Covid-19 pandemic. It’s also the year when protest has gone viral. Covid-19 has both supercharged our inequalities andshone a sharper light on them, exposing the reality that the status quo cannot hold. It has opened up a moment of opportunity, and young people are showing how we can seize that moment by building up a movement.
It doesn’t seem that long ago that young people were being lectured to ‘stop being so disengaged’ and ‘start getting involved.’ Now they get told ‘no, not like that.’ Discussions in newspapers and news studios, whether about Black Lives Matter, essential workers striking over poor safety and low pay, or young climate justice campaigners, involve ‘friendly advice’ to activists to ‘tone it down’ and ‘be less demanding’ – to be less in the way. Such complaints often include references to history: ‘why can’t they be more like the protestors of yesteryear – you know, the uncontroversial ones?’
For my new book, How to Fight InequalityI investigated the history of social justice organizing and found conclusive evidence that – contrary to the false distinctions made between ‘then’ and ‘now’ – today’s protestors stand absolutely in the tradition of those who have gone before them. The reactions they are facing are also uncannily similar, but history also shows that we have real reasons for hope based on action.
In 1966, for example, a Gallup Opinion pollshowed that Martin Luther King was viewed unfavourably by 63 per cent of Americans, but by 2011 that figure had fallen to only four per cent. Often, people read the current consensus view back into history and assume that King was always a mainstream figure, learning the false lesson that change comes from people and movements who don’t offend anyone.
The true lesson of changemakers is that fighting inequality requires us to be disruptive. As King himself said, “frankly I have yet to engage in a direct action movement that was ‘well-timed’ in the view of those who have not suffered unduly; this ‘wait!’ has almost always meant ‘never.’” Icons who today are sanitized as unchallenging terrified the powerful at the time because they refused to be deferential.
The same lesson is true today: we must be ready to be ‘difficult’ to overcome the deference that can keep us quiet. As Zambian musician and activist Pilato shared with me in a recent conversation:
Those who go against the social norms are treated as outlaws. Yes everyone is scared, and I am too, but what gives me courage is that I have something that I am more scared of. When our quiet enables one group of people to become so powerful to do whatever they want to us, then that quiet has become enabling, and I know I must be loud, to remind people of the power we have when we use it.
As well as the courage to be difficult, history also shows that we need the strength that comes from collective organising. Marshall Ganz, for example, worked as an organiser with the Student Nonviolent Coordinating Committeeduring the Civil Rights struggle and then with Cesar Chavez in the National Farm Workers Association. As he shared with me:
Pop-ups weren’t enough – they had to be structured into organised power. We had to be patient. The Montgomery Bus Boycott took more than a year of people walking to work. The Farm Workers movement took five years before our first victory. And when we won changes, our victory was not only that we had achieved the win but that we had created greater collective capability. People said, ‘We are stronger than we were.”
Building power together like this is hard work. It’s about methodology, not just philosophy. Jay Naidoo, who founded the trade union coalition in South Africa which helped bring down apartheid, once told me this:
It was not about how brilliant our argument was – no one cedes power because of a great powerpoint. What matters is the balance of power between your side, the people’s side, in the confrontation and negotiations with the other side, the side of the elite.
Inequality is a system of dominance that we can only overcome if we have enough strength. As even research by the IMFnotes, the weaker trade unions become, the worse inequality will get. The record is clear: we have to get organised.
As well as shifting power, history shows that winning the fight against inequality involves shifting norms, which means not just sharing lists of policies but also creating new stories, because the everyday phrases and images we develop are just as important as the think pieces we publish. As the great American workers’ organizer Joe Hillonce noted, “a pamphlet, no matter how good, is never read more than once, but a song is learned by heart and repeated over and over.”
Ironically, we can learn this from perhaps the greatest victory forinequality – neoliberalism. As modern myth-makers, the neoliberals were hugely successful. They developed a high-level intellectual agenda, but that alone didn’t bring them a breakthrough. So they developed a way to sell a cold economic approach as something rooted in a much warmer yearning for freedom and respectability, connecting individualism with nationalism and tradition in the process.
They did so through stories that were told and retold in the mass media from magazines to movies. It’s no coincidence that the most famous voice of neoliberalism was not one of its intellectuals like Milton Friedman, but an actor-cum-politician, Ronald Reagan.
There’s a tendency among some progressives to see themselves as valuing reason over emotion, and facts over myths. This is understandable, but it’s not a winning proposition. Technocracy will not deliver us from inequality.
Even if we have all the science on our side, we will lose if we cede all the great stories, passion and moral conversation to the other side. So we need to get comfortable at creating conversations which make people cry and laugh and not just think; which make people angry, hopeful, excited and determined. For example, the success of social movements in the reform of Mexico’s labour law to provide domestic workers with guaranteed access to social security and paid holiday was facilitated by the popularity of the movie Roma, which has no explicit policy message but which moved millions to understand the challenges domestic workers face.
A good society is about the values we want to live by and the relationships we want to have. The fight against inequality is at root a struggle for dignity: social and economic exclusion break the lives of the poor and dehumanize the rich, so in fighting for a more equal world we are working to heal society. The fight against inequality is beautiful, not just rational.
Of course policy is vital, but we know what needs to be done: investing in public services including health, education and early child care; providing social protection including child benefit, old age pensions, and forms of Universal Basic Income; widening access to land and redistributing large private land holdings; shifting away from indirect taxes and making income taxes more progressive; raising minimum wages and instituting maximum wage differentials; recognizing, redistributing and reducing women’s unpaid care burden; strengthening trade union rights; instituting a wealth tax; increasing corporate democracy by increasing employees’ decision-making role in companies; and limiting private finance for political parties and campaigns.
Policies to tackle climate change are also those that help fight inequality, including massive investment in public transport and public infrastructure to generate millions of quality jobs, create common assets and services, improve public health, and foster the collective experience that comes when people use services together. The tired debate about ‘people versus the environment’ is over; we know what a ‘just transition’ looks like.
The conversation on overcoming inequality is the most exciting we’ve had in a generation. We’re not suffering from a dearth of ideas. The key challenge is make them happen. Policy-making is not working for ordinary people because power has been captured by elites; we need to claim it back.
Amidst the tragedy and trauma of the Covid-19 crisis, history provides many reasons for hope. It also helps to guide us on how to realise that hope. The current worldwide wave of protests shows that people are ready to get into “good trouble” as the late John Lewis put it. We have an opportunity to build power anew, and create a new story. As before, we can win the fight against inequality together.
Prosyletising is important. But one has to remember that everyone can do it. Which is why we see now people voting for things that objectively hurt them.
I really really dislike the people vote against their own interests meme. We forgot that we are dealing with predators. These days there’s really no way to vote that isn’t against one’s interests because at least half the time we can’t know what we’re voting for or how it will be used against us. Even if, for argument’s sake, one got a very straight-forward law passed to directly benefit the bottom 90%, how long would it take the predators to tear it apart and use it to further their own goals?
Yeah, I’m cynical about The Machine. I see voting against one’s interests as a blame game in a very much rigged game where the house always finds a way to win.
No way to vote *for* your interests, but you can vote for a fat middle finger. A reasonable alternative to Biden, though not mine.
What if everyone who worried that they couldn’t vote for something different in their own interest tried it anyway?
There needs to be a concerted effort to explain to people why it is against their best interests. For example, Trump is lauding his plans to eliminate the payroll tax while “saving” Social Security. He is turning eliminating the payroll tax into a story. Nobody is out there countering his narrative even though the elimination of the payroll tax would likely mean the dissolution of Social Security as we know it within a generation. They are just assuming that it will be blocked by Democrats in the House and have moved on to other things. This is how Trump got elected in the first place.
They are going to vote Trump because his lying seems to have a frankness to it, amazingly enough. If there was someone else appealing to vote for, Trump would be toast. It’s almost as though some people got together and scoured the nation in search of a ticket worse than Trump-Pence. A kinder gentler corporate hegemony neoliberal puppet, with a dash of woke.
Neither wing of the money party will ever represent people. It’s not reasonable to expect them to, though it’s curious that Democrats are more shameless about this than Republicans. They have the advantage of despising rather than fearing their base.
I remember the days of corporate pushing the shortening of “time to market” in the Northern California tech industry, in the 1990’s as I recall.
One of the terms introduced was “MVP”, but it did not stand for “Most Valuable Product”.
It was an abbreviation for “Minimum Viable Product” to emphasize getting first to the market with an acceptable product was the goal.
The Democrats spent 4 years producing a “Minimum Viable Product” with the Biden/Harris Ticket.
For environmental regulations they call it minimum compliance.
While the core ideas are sound, rest assured, that stuff has turned into a full blow cult designed to soothe the insecurities of senior leadership.
It’s hard to read Trump’s proposal for eliminating the payroll tax. He didn’t come up with it himself. Nor did Larry Kudlow. It’s too big an idea. It doesn’t bother to pretend to achieve the “productivity” needed to keep everyone employed with a decent income … it doesn’t really achieve anything except the dissolution of Social Security. Raising the question, What exactly are they aiming for? The complete separation of “productivity” from social progress? That would be my bet, but then social progress needs to be implemented another way. So “productivity” – often thought of as profits – is in some real trouble down the road (what goes around comes around) unless our hapless Congress can start to function like a modern government. It would be reasonable to consider an amendment to the Constitution which creates a way to force Congress to function in behalf of the people – dissolve Congress and vote a new one in, rinse and repeat, until those clowns can actually achieve something.
We already have an election process set down in the Constitution, for all the good it does us. We also have a (non-constitutional) two-edged uniparty, a wholy-owned subsidiary of The Big Money 1%, which determines who you are allowed to vote for. Be careful what you wish for — any attempt at a Constitutional amendment will be committeed and highjacked into the opposite of what you are hoping for, and it will be permanent. Remember that Bernie guy?
The two-party system is the inexorable consequence of the first-past-the-post electoral system with single-member electoral districts. That is the reason for the longevity of the Republican and Democratic parties in the US and of the Conservative and Labour parties in the UK. In Italy, which has a proportional electoral system, the currently dominant parties didn’t even exist 30 years ago. If he were an Italian politician, Bernie Sanders would have founded his own party instead of having to squabble with Biden et al.
I think it is personal on the part of Trump. He runs hotels, restaurants, and golf courses. Very labor intensive using people who make less than $100k.
He probably grits his teeth every quarter when his companies send the payroll tax checks for the employer’s share to the IRS as a tax for which he perceives zero benefit to him or his companies.
They have reduced personal income taxes and corporate income taxes. he has one last federal tax in his gunsights. The fact that elimination of it would be supported by the Kochs just provides the technical support to actually write the orders and legislation.
By the time his supporters figure out that he has strip-mined their retirement, he would be long out of office.
I hate to talk about things like ‘tipping points’ and so on, but when you look at historically successful movements – both progressive and malign ones – they often sputter on for decades or more until some point when the stars align and with remarkable speed a small fringe minority movement suddenly either becomes a majority, or is projected into power.
A recent example would be the SNP in Scotland, which was for a long time a small fringe movement of eccentrics which, thanks to the errors of English based Labour and the Tories pretty much handed over power to them in the post-Blair years – fortunately for Scotland, the SNP have had good leaders to take advantage (notwithstanding their current difficulties). In many ways, this mirrored Ireland in the 19th and early 20th Century, when successive revolts of one form or another failed in the face of repression and a generally ambiguous population, before a gross over-reaction by London in 1916 transformed a small minority of revolutionaries into representatives of the broad population, leading to British rule in Ireland collapsing.
Another example would be South Korea, where there were several decades of suppression and activism by the authoritarian State against a variety of progressive movements – all of which were either ignored or actively crushed, until the overstepping by the government (essentially, they started shooting students, forgetting that some students have powerful and influential parents), resulted in a wave that completely overwhelmed the government, despite the fact that (as subsequent elections proved) a majority of South Koreans actually supported it. It took another 2 decades of false starts before the country made decisive moves in a progressive direction. The gradual move of Taiwan into a more progressive direction mirrors South Korea remarkably closely.
Those here who know more about the histories of those countries could maybe comment on how nations like Spain and Portugal gradually emerged from extremely authoritarian and regressive governments to become (with flaws of course) modern and relatively fair (at least in comparison to what they were) countries.
I honestly thought that a mere 7 months ago the US was on the cusp of such a moment, when Bernie looked like his wave could overwhelm the Democrat establishment and Trump. He could not have been instantly transformable of course due to the make-up of Congress and the Senate, but it could have been a moment like 1987 in South Korea when progressives showed that they could break through. But sadly, as we all know, that movement has passed. But there is little doubt we are heading into a few years of extreme change and disruption, there is no guessing what will happen. What is important is that the broad swathe of progressive forces don’t lose heart and be ready to take advantage if and when the stars do align again.
Even if we have all the science on our side, we will lose if we cede all the great stories, passion and moral conversation to the other side.
“Remember the war against Franco,
that’s the kind where each of us belongs.
Though he may have won all the battles,
we had all the great songs!”
“Ready . . . aim . . . SING!“
I just keep getting the feeling that “history shows” is becoming increasingly irrelevant, and that mass media and advancing notions of practical psychology solved that problem almost entirely. History may show propaganda and selling and culture warping down through the ages, but most of history has nothing like TV or the internet to accomplish this stuff.
We laugh at the hairstyles of past decades, no? Someone made those popular, and then unpopular. Was it organic, or driven? Grassroots, or marketed? Whatever it was, people went along for the whole ride. Do we assume social evolution is so different these days?
Look at the absurd little sci-fi designs on your shoes now. Pretty sure we’re going to be lambasting those in the future, but that the change won’t come until shoe companies stop making those designs on their own. We will have almost zero to do with the change or the perception of it as acceptable and unacceptable.
Or maybe I’m wrong, but I sure as hell feel like the people in my neighborhood have been restricted from listening to anything but rap music, for example. Old enough to know it wasn’t always like that. Old enough to remember when my father was a tepid conservative in the 70s, and to see the full-on MAGA faithful he is now, while he watches FOX all day in his retirement, wasting those days away in front of the TV and having its messages become his whole world.
Inequality is not like other things: it’s about who has the wealth and thus the power, and the power and thus the wealth, in any society. It can’t really be compared to civil rights, democracy etc. because it involves the power elites giving up their money and power to others. “History shows” that this doesn’t happen voluntarily, and, in general (see the work of people like Scheidel, Nitzan/Bichler and Picketty) there is a tendency towards increased inequality over time, as the already powerful use their power to gain more wealth. Only wars, revolutions , disasters, etc can put an end to this process. The ruling class will happily toss anyone and anything overboard to hang onto their wealth, and has bought off protesters with symbolic or cost-free concessions many times in the past. It will continue to do so unless some overwhelming power is brought to bear.
In the US, it was a series of rolling depressions and market “panics” that ended the inequality of the Gilded Age. It was the Great Depression that ended the inequality of the 1920s. In many other countries it was bankruptcy due to economic destruction by a war or revolution.
The US elites learned from these experiences and when inequality built up again, they were able to get the full power of the Fed and Congress to ensure their wealth and power was locked in place. In the absence of those, 2008 would have been a repeat of the Great Depression and we would have had much lower inequality at the price of a major recession. Same thing now in 2020 with the Covid pandemic. We are already seeing the pushback in the Senate by the Tea Party Republicans resisting additional moneys for the bottom 90% while ensuring the protections remain in place for the top 10% and especially the top 0.1%.
The British Brexit will be an interesting experiment because it is really a pushback on globalization and inequality. The flight form London in the pandemic will also impact the values of real estate in the city which will also impact the wealthy. Can this really all happen peacefully without a long recession or depression?
Indeed, good point, I just realised all the examples I mentioned above were ultimately about democracy, etc., not money.
Historically though, it can be said that the rich have been willing to give a little, if they think it will save them in the longer run. The long term social contracts you see in Scandinavia and other northern European countries were often implicit or explicit ‘we’ll give you this, so long as you don’t touch our land and capital’ type deals. Famously, Bismarck set up old age pensions as a means of deflating pressure from the left.
This is one reason why I find the utter refusal of centrists in the US to support Medicate for All to be a sign of rot within the ruling classes there. Its a straightforward deal that would help enormous numbers of people and would almost certainly (through lower costs) benefit many rich capitalists as well. Its the very definition of a win-win policy and would be recognised as such by, say, a de Gaulle or Bismarck or Eisenhower (as similar social policies have been embraced by wealthy elites for utterly pragmatic reasons in countries such as Taiwan and Singapore and Japan). But the economic establishment has closed its wagons to protect just one small chunk of its own people. This either indicates extreme confidence, extreme stupidity, or just incoherence and lack of leadership among elites.
That’s an interesting point, and it reflects, I think, a different political context. The Scandinavian models and the Western European Post-War dispensation came from a calmer, more united, era, where compromise and consensus were the order of the day. In De Gaulle’s case, he was already broadly a Christian Democrat, and his programme was the famous one of the National Resistance Council which Jean Moulin had created on his behalf. There was an opportunity to make a lot of progress quickly, while Republican forces had power.
It’s not like that now, and I think that Medicare for All, were it announced, would be seen as a sign of weakness, and proof that the 1% could be forced into making concessions. When a previously impenetrable barrier starts to give way like that, “history shows” that it can sometimes fall apart very quickly. The fear that it might do so is perhaps what’s keeping US elites from acting in what, I agree, would be their own long-term interest.
There aren’t any centrists. Biden’s ‘Nothing fundamental will change’ is the essence of conservatism, and most of the Democratic Party leadership is signed on to it; they put their mouths where the money is, they know which side of their bread is buttered, etc. It is true that the cleverer conservatives will understand that the state of things can usually be preserved with minor concessions and a little fancy footwork, but the current crop of conservatives don’t seem very clever, although they have succeeded in dispersing and neutralizing the Left for the moment. Meanwhile rightist radicalism grows in the space left for it.
Which right winger do you mean? Biden or Trump?
This is one reason why I find the utter refusal of centrists in the US to support Medicate for All to be a sign of rot within the ruling classes there. Its a straightforward deal that would help enormous numbers of people and would almost certainly (through lower costs) benefit many rich capitalists as well. PlutoniumKun
Health trumps increased wealth and it might easily be that the current system is optimized to promote the health of the rich.
King may not have been popular among most white people at the time but he did provide the movement with a leader. Who are the protest leaders now and would a much changed media acknowledge them? BLM itself is rather amorphous with various other organizations attached. Occupy deliberately styled itself as leaderless so as to deprive the authorities of targets. When the authorities attacked anyway it seemed to just disappear.
And one suspects that the current protests have as much to do with Trump as with inequality. Social change may be a long slog but you have to at least know where you are going. Here’s suggesting that while everything in the above article may be true that journey hasn’t even started yet.
In my wayward youth, the ’50s and the ’60s, Martin Luther King was the most hated man in America, certainly among White people — no doubt whatever about that — but also among Black activists of the Left, who thought he wasn’t radical enough, and of what we might call the Right, such as the Black Muslims, who thought nonviolence was foolish and counterproductive. Now he seems to be observed from afar through a gentle, golden bourgeois haze that completely obscures the confusion and turbulence of his era. If people want to talk about History, especially with a capital H, I think they need to see through the smoke and mirrors of contemporary apologists for the Established Order. The kids are all right, sort of, but illusions don’t help them.
Well he did supposedly convince LBJ to push through the Civil Rights Act–a major thing. By the end of the 60s civil rights was front and center due to controversies like bussing (the Supreme Court of course also had a role throughout).
It took decades for “colorblind” to take hold but finally it did mostly take hold at least where I live. That’s why to some of us the current protests seem to be living in the past. They should be rampaging through Wall Street, not downtown America. And the goals such as “eliminate the police” are so far fetched as to seem not really serious.
He’s been Hamiltoned…
Numbers of the like minded are needed, definitely.
But, I think it begins with the personal choice of “the time for change is now” and personal action that begin reinforcing that choice you made.
Decision made, you will encounter the likeminded much more and find affinity groups forming everywhere.
The feeling of knowing you are not alone is fresh air in a stale world, in my experience.
The article has this statement: “As even research by the IMFnotes, the weaker trade unions become, the worse inequality will get.”
This may be another example of confusing correlation with causation.
How does a globalizing seeking country have strong trade unions when globalized labor is plentiful?
Weaker trade unions are evidence of plentiful available labor.
In the USA, the politicians could not even agree to pass a bill limiting corporate deductions for moving facilities overseas.
Unions are in a similar situation to the large American retailers, they don’t want to shrink to irrelevance, but circumstances are pushing them this way.
One big thing that is going on is that capitalism itself has become irrelevant. It was a super-driver of economics during the industrial revolution. So was communism. But all good things must pass. We tried to keep the system alive for 50+ years and it diminished relentlessly in spite of our delusions. That’s gotta have something to do with the rise of financialism. If we can’t manufacture prosperity we’ll just agree to buy and sell faster and faster. What a crazy party we’ve had. We gobbled up the planet; trashed the environment; killed off whole populations of people; aggressively repopulated ourselves; caused a century of extinctions – we did everything we could to maintain economic “productivity.” And now we are up against the very forces of nature. I’d say it’s a no brainer that we will either get real or go extinct ourselves. Congress is already a dodo.
Why can’t we honor Martin Luther King Jr as a labor leader? To me it seems everyone wants to safely put him on a pillar and only talk about his earlier civil rights leadership.
absolutely!!!! It could open *so* many minds; it would re-frame how race is thought of and discussed; it is an essential strategy for non violent action and goals.
History does help.
The USP of neoclassical economics – It concentrates wealth.
Let’s use it for globalisation.
Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
“a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped”
Wealth concentrates until the system collapses.
I remember now, that’s why Keynes put some redistribution in.
“…Joe Hill once noted, “a pamphlet, no matter how good, is never read more than once, but a song is learned by heart and repeated over and over.”
This is an important observation that doesn’t get elaborated on in the article. For the civil rights movement, folk musicians early on gave impetus to the marches — I don’t see that happening now. It took over college campuses in my day – my freshman year only my later to be husband and a couple of others had guitars. Sophomore year the entire back campus was filled with kids strumming away. And this hearkened back to the folk song collectors in Depression days, so there is no reason it cannot be reborn now. And yes, you can sing with a mask on!
Isn’t this a time?!
Please leave off posting well-meaning hopium crap like this. The title to this article makes a completely wrong claim. History does not give any such hope. The author appears to write in a vacuum as if no one has investigated this sort of thing before. William Scheidel has written a very detailed scholarly investigation (“The Great Leveler”) of the events that have leveled inequality from the dawn of civilization to the 21st century. Read it and weep.
Reform has NEVER worked.
There are four and only things that have worked.
1) Total war requiring mass mobilization, such as the World Wars.
2) Total revolutions completely transforming society such as the communist revolutions of Russia and China.
Those two things are very much unique products of industrial civilization, unlikely to be repeated, unless we nuke ourselves into relative oblivion. Wars and revolutions before the 20th Century had very little such effects, not even the vaunted French Revolution.
3) Massive pandemics like the Bubonic Plague, which generally worked until the worker class “recovered,,” i.e., bred itself back into creating too many workers.
4) Complete State failures, such as the Fall of the Roman and Mayan Empires because wealth completely depends on property rights and the legal regime protecting its accumulation and retention, and disappears quickly when state authority collapses.
The last is the most common and reliable of means of “leveling.” It is accompanied by massive suffering and death, as are the others.
Apart from the effects of these events, whose leveling is never permanent (state collapse generally producing the longest run of relative equality), the creditor and government classes quickly resume and continue their relentless wealth accumulation. They may be different bosses, but they are the same as the old bosses.
In the age of paper money and securities, I would add a fifth which is the collapse of financial markets which eliminates paper wealth. To retain wealth during that period you had to have little debt and something that would generate cash flow – speculators or heavily indebted wealthy people did not survive. Examples are the late 1800s in the US, 1920s in Great Britain, 1930s in the US, and a few others. It was brutal on everybody, but Gini coefficients got reset and many noble and wealthy families were just left with paper titles.
This was the leveler that the wealthy figured out in 2008 and got the Fed and Congress to back them with unlimited money so that debt ceased to be an issue if you were wealthy. If you were not wealthy, you probably lost everything through foreclosure and bankruptcy if you had excessive debt. The same is repeating now that the federal money is running out for the bottom 90%.
History has some very important lessons.
The classical economists could observe a world of small state, unregulated capitalism around them.
Today’s economists worked up from micro foundations and concluded small state, unregulated capitalism was something very different.
How different is classical economics?
Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
“The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
What does our man on free trade, Ricardo, mean?
Disposable income = wages – (taxes + the cost of living)
Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
Employees get less disposable income after the landlords rent has gone.
Employers have to cover the landlord’s rents in wages reducing profit.
Ricardo is just talking about housing costs, employees all rented in those days.
Low housing costs work best for employers and employees.
In Ricardo’s world there were three classes.
He was in the capitalist class.
The more he paid in labour costs (wages) the lower his profits would be.
He was paying the cost of living for his workers through wages, and the higher that was, the higher labour costs would be.
There was no benefits system in those days and those at the bottom needed to earn money to cover the cost of living otherwise they would die. They had to earn their money through wages.
The more he paid in rents to the old landowning class, the less there would be for him to keep for himself.
The labourers had before 25
The landlords 25
And the capitalists 50
He looked at how the pie got divided between the three groups.
The capitalist system actually contains a welfare state to maintain an old money, idle rich in luxury and leisure. In the UK we still have an aristocracy, so it is hard to forget.
There were three groups in the capitalist system in Ricardo’s world (and there still are).
Workers / Employees
Capitalists / Employers
Rentiers / Landowners / Landlords / other skimmers, who are just skimming out of the system, not contributing to its success
The unproductive group exists at the top of society, not the bottom.
Later on we did bolt on a benefit system to help others that were struggling lower down the scale.
Adam Smith on Profit:
“But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
Exactly the opposite of today’s thinking, what does he mean?
When rates of profit are high, capitalism is cannibalising itself by:
1) Not engaging in long term investment for the future
2) Paying insufficient wages to maintain demand for its products and services
Today’s problems with growth and demand.
Amazon didn’t suck its profits out as dividends and look how big it’s grown (not so good on the wages).
The benefits of the system can be passed upwards in dividends or downwards in wages.
Both actually detract from the money available for re-investment as Jeff Bezos knows only too well. He didn’t pay dividends and paid really low wages, to maximise the amount that he could re-invest in Amazon and look how big it’s grown.
William White (BIS, OECD) talks about how economics really changed over one hundred years ago as classical economics was replaced by neoclassical economics.
He thinks we have been on the wrong path for one hundred years.
Small state, unregulated capitalism was where it all started and it’s rather different to today’s expectations.
The classical economists could observe the world of small state, unregulated capitalism in the world around them.
Today’s economists worked up from micro foundations and got very confused.
In order to beat inequality, it helps if you know what the causes of inequality are. Currently many fashionable ideas about inequality are not based on the methods of the social sciences, but are instead conspiracy theories. By this I mean the idea that all inequality and injustice result from discrimination and/or racism. For instance I doubt very much that many people who complain about black poverty in the US have read the paper “Immigration and African-American Employment Opportunities: The Response of Wages, Employment, and Incarceration to Labor Supply Shocks”, by George J. Borjas, Jeffrey Grogger and Gordon H. Hanson, NBER Working Paper No. 12518, September 2006.
The paper says, “The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, the incarceration rate of black men rose markedly … As immigrants disproportionately increased the supply of workers in a particular skill group, the wage of black workers in that group fell, the employment rate declined, and the incarceration rate rose.”
This was the outcome of the Immigration Act of 1965, which was billed as a measure reversing decades of discrimination against prospective immigrants from certain countries. So less discrimination against one group results in more hardship for a different group. This contradicts the notion that racism is the only causal factor in poverty and incarceration among American blacks. As a matter of fact the opposite is the case. American blacks are the victims of too little discrimination, or of non-discrimination, enjoyed by other social/racial groups.
In the same vein, the victimization discourse blames anti-black racism for the exceedingly harsh penalties for possession of crack cocaine (associated with urban blacks) as opposed to regular cocaine (associated with suburban whites). However the legislative history of these harsh punishments reveals that it was black legislators who insisted on their enactment. Apparently they believed that long sentences were an effective deterrent.
When proposing social reforms, there is no substitute for objective social and historical research into the origins of the ills that one seeks to mitigate.
The authoritarian Portuguese régime was overthrown by a military coup in April 1974 because many army and navy officers realized that Portugal could not go on fighting its colonial wars in Africa and had to grant its colonies independence, and also because there was widespread discontent with the régime. In Spain régime change began with the assassination of Admiral Carrero Blanco in 1973. He was the prime minister, Franco’s hand-picked successor and the guarantee of régime continuity when Franco eventually died, which he did in 1975. Carrero Blanco was assassinated by the Basque ETA nationalist terrorist movement, which however had a lot of help from the elite. The cops had detected the militants months before they blew up Carrero’s convoy with two anti-tank mines that they had placed under the street after tunneling from a rented basement. But the police just watched them. Once the ETA people forgot their guns in a restaurant, and the police made sure they got them back when they returned to retrieve them. After they killed Carrero, the French police reported to the Spanish embassy in Paris that they had identified the terrorists on French soil and asked for instructions. The Spanish ambassador didn’t reply. His deputy protested but was ignored. The Spanish minister in charge of the police (Ministro de la Gobernación) in the Carrero cabinet, Carlos Arias Navarro, succeeded Carrero as prime minister, which seems to have been a reward for bumping his boss off, although that conjecture is not confirmed by Arias Navarro’s subsequent policy. Eventually Arias Navarro was succeeded by Adolfo Suárez, who had been the minister in charge of the fascist political party Movimiento Nacional, formerly called Falange. Suárez began the tortuous process of eliminating the fascist system through purely constitutional means, persuading the ultra-reactionary members of the hand-picked legislature to vote for their own political demise, so that nobody could question the legality of the democratic system that eventually arose. In order to obtain the complicity of the Francoist apparatchiks, amnesties had to be proclaimed and many other concessions made.