Special to the Observer
Connect the dots between two articles in the July 13 Observer and you get a classic picture of today's U.S. economy.
"Dow rockets to record" described how the previous day's stock gains "come after a year of impressive gains for stocks." Focusing on the other end of the wealth scale, "Housing squeeze getting tighter" noted that "The lack of affordable homes for poor families is the nation's No. 1 housing problem and undermines the stability and security of families and communities nationwide."
These news items not only highlight the growing disparity between rich and poor, they bring into question some of our most cherished economic axioms.
A finite world
Apologists for the wealthy and powerful claim that wealth is not a zero-sum game, and they've convinced the public that the huge incomes of the wealthiest Americans are irrelevant . They even claim that the more money the wealthiest Americans make, the more wealth will trickle down .Sure, money is unlimited and it can multiply like crazy, and devalued money does trickle down. But our earth has finite resources -- like land, water and air -- and our nation is limited in its ability to produce products, especially the most desirable ones.
The popular fiction that it doesn't matter to you how much money other people have ignores the obvious. We live in a world of auction markets. As those with more money increase the demand for housing, gasoline, scarce foods, medical care, education, etc., those with less money get priced out of the market.
All across this country working-class Americans are finding that they can no longer afford to buy or rent decent housing near where they work, especially if they live in a desirable area (clean air, low crime, good schools).
Wealthy investors are buying a few houses with a view, tearing them down, and building a single mansion . And they're doing it in multiple states and countries.
But that's just the beginning of the story. They also make sure that real estate represents a significant part of their investment portfolio. It's not unusual to see an ad in the classified section of a newspaper like this one:
FOR SALE: 27 rental houses, singly or as a total package. Excellent rental histories, great tax advantages. Retiring. 555-3578.
Real estate is one of the greatest creators of wealth for those who have it or can get it. It's also one of the greatest creators of poverty for those who find themselves priced out of the market, either as buyers or renters.
The exploding wealth and income gap is no accident, and is not a result of the movement of the stars or some unexpected economic fluke. It is the direct result of economic policies that are designed to redistribute wealth from those who actually handle and produce products and services to investors whose major business is simply moving money around. Those who serve investors and money managers, like top-level corporate executives, are also on the gravy train.
Our federal policies of manipulating the prime interest rate (to make sure the unemployment rate keeps "wage inflation" from occurring), our expansion of legal and illegal immigration, globalization and a host of other actions are deliberately designed to keep wages from going up, thus maximizing profits.
It's always zero
If wages don't go up along with rising corporate profits, then the Dow rockets and investors become wealthier faster. If workers make more money, the businesses and corporations make less profit and the investors don't become so rich so fast. Corporate profits always equal income minus expenses (including labor). Subtract the left side of the equation from the right side and you always get zero.