It was JFK who once said that a rising tide raised all boats. By that he meant that when an economy is doing well, all will benefit from it. There’s a lot of history to that belief. Henry Ford needed a domestic middle class with buying power, and so he raised the salaries of his workers so that they could all purchase a Ford. His salary raises forced all businesses to raise salaries for their employees, effectively creating the middle class. Until the 1970’s the Henry Ford Syndrome made sense. In that world, the issues of inequality were insignificant.
But today, a rising tide does not raise all boats and the Henry Ford Syndrome has been shattered. Indeed, the inequality gap in the United States is larger than in any developed country. What happened to the “rising tide?”
Over the coming weeks I intend to occasionally explore those dead myths, symbolized by JFK's statement, and explain what has really happened and why inequality is so large in American—and getting still larger. And truthfully, neither the rich nor the super-rich are especially driven to “raise the tide” in America. Why is that? The answer is one of the more simple answers of our growing problem of inequality.
A different world
Henry Ford’s world was local and finite. In a much smaller world, everyone can participate in wealth creation. But today’s world is neither local nor finite. It’s global and infinite. The oligarchs who prosper have emerging markets all over the world to which they can supply their products. As Chrystia Freeland points out, Russian oligarchs can invest directly in Silicon Valley’s hottest start-ups and Chinese princelings can import that technology. All of them can buy second homes in Manhattan and London, villas on the Cote d’Azur and send their children to prep schools and Ivy League universities.
The obvious consequence is that globalization and the technology revolution have reduced the pressure on the American wealthy to support and build a middle class to buy their products. Today, the gap is becoming so wide and so obvious that even the right is starting to take notice. Indeed, one of the biggest issues today is whether Mitt Romney’s millions put him at too far a remove from ordinary voters. All this matters very much. If it’s true, and I believe it is, the political myopia of the wealthy plutocrats will continue its destructive ways. No wonder Aaron Sorkin’s Newsroom can connect with thinking folk—they rightly paint the Koch brothers and the super-rich for what they are: saboteurs of the Middle Class.
You might think that plain, obvious reason would enable America’s plutocrats to see the error in their ways. But a good dose of America’s greatest theologian and public intellectual of the 20th century, Reinhold Niebuhr, will put an end to such naivete. In his massive study of Moral Man and Immoral Society, Niebuhr makes it clear that there is always some class (read, the super-rich) who will use the organs of government for their special advantages. No wonder Mitt Romney is so unwilling to explain his policies.
Chrystia Freeland, Plutocrats: The rise of the super-rich and the fall of everyone else. (New York: Penguin Press), 2012.
Reinhold Niebuhr, Moral Man and Immoral Society: A study in ethics and politics. (Louisville: Westminster Press), 1932.
Flickr photo: dok 1