Everybody senses that the wealthy are too strong and too greedy and that millions of Americans are being left behind so that those at the top can get even further ahead.
But as national problems go, it’s being discussed symptomatically. Like a bad hip that might be ready for hip replacement surgery. Bernie Sanders and Elizabeth Warren, the two critics with the most to say about the damaging behaviors of modern day capitalism, haven’t done much to lift the national discussion.
I can sympathize. I discovered the Emmanuel Saez database perhaps ten years ago. It seemed to tell a story of fluctuating fortunes for the Top 1%. In its various updates, the theme of significant wealth for the Top One Percent had its periods of moderation and its periods of excess.
Eventually the Saez database became a bit more comprehensive. It sliced the Top Ten Percent into six parts – the first five percent, the next four percent, the next half a percent, the next four-tenths of a percent, the next nine-hundredths of a percent, and the top one hundredth of the top one percent. And, trailing along behind, with no breakout detail, the Bottom 90%.
But it was enough data for me to run a test I hadn’t tried before. From one presidency to the next, how much of the income growth of that presidency went to (a) the Bottom Ninety Percent, and (b) to the Next Nine Percent, and (c) to the Top One Percent. I lagged each presidency by a year, giving Eisenhower’s first year to Truman, JFK’s first year to Eisenhower, and so on, up through the beginning of the Obama presidency.
For the first seven presidencies of the postwar era, everything was stable. Roughly two-thirds of all the economy's income gains were received by the Bottom Ninety Percent. Between eight and ten percent went to the Top One Percent. And somewhere between a fifth and a quarter went to the Next Nine Percent.
Then with the Reagan presidency, the whole pattern went haywire. The share of new earnings going to the Bottom Ninety Percent plummeted from two-thirds to only forty percent. The share of new earnings going to the Top One Percent skyrocketed. The Next Nine Percent did better too.
With George H.W. Bush, the story for the Bottom 90% became truly grim. Those in the Bottom Ninety Percent were worse off at the end of the Bush 1 presidency than they had been at the beginning.
And so on. What this way of slicing the data had revealed, in gross terms, was that the entire economy had undergone a sudden shift. Stable income growth for the Bottom 90% from the Truman years through the Carter years. Then an abrupt loss of footing!
But did I know how to understand that shift? How to interpret it? I did not. I knew that the conventional explanations – globalization, decline of manufacturing, the hollowing out of the economy’s middle class jobs – weren't powerful enough to explain the suddenness of what happened to Americans in the Bottom Ninety Percent in the Reagan years. There had to be more to the story than the conventional voices were letting on.
Finally it came to me. I had to stop thinking of the American economy in monotonic terms, as nothing more than an Output machine, with its activities wholly summed up by a measurement called GDP.
It was time to visualize the American economy as having Two Identities, not only an Output Identity, but also a Wealth Identity.
And it was time to acknowledge an obvious corollary. An economy with two identities is an economy that can be optimized in two different ways. Toward two different ends.
Now the shift that occurred during the Reagan years finally made perfect sense. From 1945 through 1980, the American economy had been optimized for Prosperity, for rising output and rising middle class incomes. With incomes for the Top One Percent held in check, via personal tax rates of seventy percent or more. With strong unions, and contracts that guaranteed rising wages that were more or less in step with the economy’s rising productivity.
And then with Reagan as President, the Federal Government changed sides. It stopped promoting Prosperity Capitalism. It bent its energies toward optimizing the American economy for Enrichment, for pumping up the wealth of the Top One Percent. The hell with protecting the incomes of the American workforce. The point of the American economy had been wholly redefined - from boosting the prosperity of the entire workforce, to pumping up the enrichment of the Top One Percent.
Government stopped defending unions. Companies were given almost a blank check to engage in as much union busting as they wanted. Marginal tax rates for the Top One Percent were cut from seventy percent to fifty percent, and then cut again to twenty-eight percent. And all sorts of less visible favors to corporations and investors were written into the tax code.
Enrichment Capitalism – under a very different name – became the economy’s new normal. (it was branded under the meaningless label of “Free Enterprise Capitalism” – a marketing ploy.)
In other words, no one in power said in plain English that the American economy would henceforth be optimized for Enrichment. No one said in plain English that optimizing the American economy for prosperity was to be ended. It was a ooup, a seizure of power, artfully disguised with endless doubletalk.
We are still living within the story that has never been named – a story of how the American economy has two distinct identities, that two distinct approaches for optimization are available, and that those two approaches advance two dramatically different kinds of goals.
The American Economy can be optimized to promote Prosperity for All.
Or the American Economy can be optimized to promote Enrichment for the Few.
But it cannot be optimized for both at the same time!!!
Were these insights already part of the public discussion - which they're NOT - this question would clearly be at the center of the 2020 election debate. Is it better to optimize the American economy for Enrichment? Or is it better to optimize the American economy for Prosperity?
But these insights are surprisingly - stunningly - absent from the way the issues are being framed, today, in 2019.
Not even the economists whose data make possible the discovery of this option have noticed the "Two Identities, Two Ways to Optimize" feaure of the economy we live in.
And if this distinction is regularly overlooked even by the data wizards whose work leads us toward the "Two Identities,Two Ways to Oprimize" storyline that explains what's happening, who then will tell the story?
One would think Elizabeth Warren would have figured all this out. Long before now. But she hasn't.
One would think Bernie Sanders would have figured it out. But he hasn't.
Sanders I understand. I'm not sure Bernie wants to acknowledge that any capitalist economy can be operated within decent rules to produce decent outcomes. But even though I have my doubts, I think he'd come around. If given the Two Identities, Two Ways to Optimize framework he needs.
Warren is harder to understand. I'm convinced she's actually looking for a "Healthy Capitalism" story. But with none of the economists upon whom she leans for advce offering her the "Two Identities, Two Ways to Optimize" story line, how is she to make the jump on her own? She wants to be a systemic reformer - that's clear - but for now she epitomizes the symptomatic reformer.
The broader failure lies with the Democratic National Committee. The entire Democratic Party ought to be emphatically in favor of an economy optimized for Prosperity, not an economy optimized for Enrichment. Amd this ought to have been its view for a good long time.
But the contrast between an American economy optimized for Prosperity versus an American economy optimized for Enrichment has never even been noticed by the DNC.
It's past time for the DNC to awaken from its intellectual slumbers. Americans are in the throes of a massive Systemic crime. The Top One Percent is aggressively looting the Bottom Fifty Percent. The DNC ought to have been blowing the whistle. The DNC ought to have a point of view about the distinction between patriotic ways to run a capitalist economy and unpatriotic ways to run a capitalist economy. But it just doesn't seem to have enough curiosity, or wisdom, to rise to the core challenges of our time.
There are, what, 24 candidates in the race for the Democratic nomination? Wtih all of them, at the moment, ensnared within a false view of the economy. And none able to explain to America the distinction between symptomatic reform and systemic reform.
The voters they're appealing to, the American people, deserve better from the Democratic Party than they have been getting. In their gut, the American people have long known that some sort of bait and switch has taken place. Why hasn't the DNC noticed? Or cared?
The American people - especially America's working people - have a right to hear the story, straight up.
They deserve a candidate who will spell out the real options.
Stick with Enrichment Capitalism?
Or shut it down, and revive the Prosperity Capitalism we used to have?
Two dozen candidates are contending for the Democratic nomination.
Sooner or later, one of them will get it right. Which one will it be?