Why Rising Wealth Disparity Actually Creates Poverty
Rising wealth causes overproduction and hence unemployment and destitution. How? It's all a matter of supply and demand. Inequality goes up when official economic policy does not allow wages to catch up with ever-growing labor productivity. Profits then soar because employers are taking much of the share that should have gone to workers. By this means, rising productivity increasingly raises the incomes and bonuses of business executives. Then those excess profits sit idly in the vaults of bankers and big-business CEOs, and this consequent shortage of cash in the pockets of workers restrains consumer demand, leading to overproduction, backed-up inventories, and then, inevitably, to layoffs and poverty. This toxic combination of mounting layoffs and woefully insufficient job creation naturally causes poverty to grow, which, according to official figures, is now the highest in 50 years.
How has the government helped restrain wages relative to productivity and thereby made the rich richer and the poor poorer?
When reading the following list of answers to this question, keep in mind that almost all of these official economic measures or policies, adopted since 1981, have combined to devastate the middle class.
1. The Reagan income tax cut of 1981 that so nicely benefited the rich, made it necessary to sharply raise all other federal taxes, which were of course paid mostly by the middle class and the poor, so as to finance that tax cut.
2. Unenforced antitrust laws, leading to mergers among large and profitable firms, killed high-paying jobs in numerous industries (and thus provided additional profits for the rich).
3. Permitting the oil industry mergers in the 1990s now prevent oil prices from falling -- and this in the middle of the worst slump since the 1930s, when people can least afford these unnecessarily high prices (prices that only benefit the rich). Did workers get a share of those increased profits? Of course not.
4. Permitting relentless mergers among pharmaceuticals and health insurance companies, so that America, far more than any other nation, now spends almost 15 percent of its gross domestic product (GDP) on health care that is (for everyone except the top few percent) mediocre by European and Japanese standards.