So why is this all happening? Wall Street crashing. Credit Freeze. American, European and Asian banks in trouble. Recession, depression coming fast, if not already here. There are immediate causes: the sub prime loans, securitization of risky loans, another asset bubble. But there is a long term cause also: the Great Class Stratification since 1980 or so.
Bob Herbert in the NY Times today explains:
The after-tax income of the top 1 percent of Americans rose 228 percent from the late 1970s through 2005. The story for working families over that same stretch was one of constant struggle to just stay even.
A Fool’s Paradise
Barack Obama correctly sees that this depression is a final verdict on a failed economic philosophy that placed wealth above work, that created a New Gilded Age.
More from Barack Obama, Franklin Rooselvelt, John Edwards, and Bob Herbert, among others, after the fold.
I'd like to provide an extended quote of Bob Herbert in the NY Times today because he shows the real problem:
Example: The after-tax income of the top 1 percent of Americans rose 228 percent from the late 1970s through 2005. The story for working families over that same stretch was one of constant struggle to just stay even. As the Pew Charitable Trusts reported last year: "The earnings of men in their 30s have remained surprisingly flat over the past four decades."
Disaster was held at bay by the entrance of wives and mothers into the workplace, and by the embrace of colossal amounts of debt for everything from home mortgages, cars, clothing and vacations to food, college tuition and medical expenses.
Now middle-class and working families are up against the wall. With most other options exhausted, the only real way for the vast majority of Americans to continue financing a reasonable quality of life is through the proceeds from employment.
A Fool’s Paradise
But employment no longer pays enough, because unions are weak and workers have little power. Wealth dominates workers. The Government protects the wealthy and uses its power to keep working people down.
Some of you know I supported John Edwards last year. Regardless of his personal issues, John Edwards repeatedly told the truth about class stratification, about the Two Americas. Here he tells it in his speech at Cooper Union in June 2007:
Today, the top 300,000 Americans now make more than the bottom 150 million put together.
Productivity is up but median income is down. People are making more, while they're making less.
Men in their 30s today earn less in real dollars than the men did 30 years ago. More and more women have gone to work, and now married couples with children are working an average of 10 hours a week more than their parents did. Working families with breadwinners in their 40s are almost three times more likely to fall in to poverty than they were a generation ago.
What does all this mean in real terms? It means that our system rewards wealth, not work.
John Edwards, quoted in Edwards Evening News Roundup: the Building One America Edition
In July 2007, the New York Times wrote of a New Gilded Age
Those earlier barons disappeared by the 1920s and, constrained by the Depression and by the greater government oversight and high income tax rates that followed, no one really took their place. Then, starting in the late 1970s, as the constraints receded, new tycoons gradually emerged, and now their concentrated wealth has made the early years of the 21st century truly another Gilded Age.
Only twice before over the last century has 5 percent of the national income gone to families in the upper one-one-hundredth of a percent of the income distribution — currently, the almost 15,000 families with incomes of $9.5 million or more a year, according to an analysis of tax returns by the economists Emmanuel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics.
Such concentration at the very top occurred in 1915 and 1916, as the Gilded Age was ending, and again briefly in the late 1920s, before the stock market crash.
Sounding familiar? The problem IS the Great Class Stratification. And admitting the problem is the first step to solving it.
Franklin Delano Roosevelt did it once before by creating a middle class:
For out of this modern civilization economic royalists carved new dynasties. New kingdoms were built upon concentration of control over material things. Through new uses of corporations, banks and securities, new machinery of industry and agriculture, of labor and capital - all undreamed of by the Fathers - the whole structure of modern life was impressed into this royal service.
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It was natural and perhaps human that the privileged princes of these new economic dynasties, thirsting for power, reached out for control over government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service new mercenaries sought to regiment the people, their labor, and their property. And as a result the average man once more confronts the problem that faced the Minute Man.
The hours men and women worked, the wages they received, the conditions of their labor - these had passed beyond the control of the people, and were imposed by this new industrial dictatorship.
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For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor - other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.
Against economic tyranny such as this, the American citizen could appeal only to the organized power of government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people's mandate to end it. Under that mandate it is being ended.
The royalists of the economic order have conceded that political freedom was the business of the government, but they have maintained that economic slavery was nobody's business. They granted that the government could protect the citizen in his right to vote, but they denied that the government could do anything to protect the citizen in his right to work and his right to live.
Today we stand committed to the proposition that freedom is no half-and-half affair. If the average citizen is guaranteed equal opportunity in the polling place, he must have equal opportunity in the market place.
FDR Speech before the 1936 Democratic National Convention
It's the same story. We've seen it before. The fight will not be easy, but we can prevail. Only a New, New Deal can address the underlying class stratification that led us into this hole. And only a New, New Deal that addresses class stratification can create a more just society.
I believe that Barack Obama understands this:
We measure the strength of our economy not by the number of billionaires we have or the profits of the Fortune 500, but by whether someone with a good idea can take a risk and start a new business, or whether the waitress who lives on tips can take a day off to look after a sick kid without losing her job - an economy that honors the dignity of work.
The fundamentals we use to measure economic strength are whether we are living up to that fundamental promise that has made this country great - a promise that is the only reason I am standing here tonight.
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Our government should work for us, not against us. It should help us, not hurt us. It should ensure opportunity not just for those with the most money and influence, but for every American who's willing to work.
That's the promise of America - the idea that we are responsible for ourselves, but that we also rise or fall as one nation; the fundamental belief that I am my brother's keeper; I am my sister's keeper.
Obama DNC Speech
Last week, Obama spoke of what the crisis means:
It’s an outrage because we did not get here by accident. This was not a normal part of the business cycle. This did not happen because of a few bad apples.
This financial crisis is a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years. It’s the result of speculators who gamed the system, regulators who looked the other way, and lobbyists who bought their way into our government. It’s the result of an economic philosophy that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else; a philosophy that views even the most common-sense regulations as unwise and unnecessary. Well, this crisis is nothing less than a final verdict on this failed philosophy – and it’s a philosophy I’m running for President to end.
That’s what this election is all about.
Barack in Grand Rapids, MI: "The final verdict on a failed philosophy"
Barack Obama appears to understand that we cannot just "fix" the economy so that the 1%ers who control so much wealth can sleep easy at night. The only way to "fix" our economy is fundamental change, an end to the Great Class Stratification, an end to the New Gilded Age, and a beginning of a New, New Deal based on workers, not just wealth:
It’s time we had a President who will stand up for working men and women by building an economy that rewards not just wealth, but work and the workers who create it.
It’s time you had a partner in the White House who knows that the struggles facing working families can’t be solved by spending billions of dollars on more tax breaks for big corporations and wealthy CEOs, and that hardworking families need immediate relief.
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It’s time you had a President who honors organized labor - who’s walked on picket lines; who doesn’t choke on the word "union"; who lets our unions do what they do best and organize our workers; and who will finally make the Employee Free Choice Act the law of the land.
A Labor Day Message from Barack Obama