The Betrayers of Capitalism and its Promise

America is well into its second Guilded Age, as the top one percent received their largest share of national income since 1928 and CEO compensation continues to soars, breaking all laws of gravity.  Capitalism can be a marvelous machine for advancing individual prosperity and social progress. But  when it falls into the clutches of the greedy and self-obsessed and works to the primary benefit of a select few, it sets itself on a perilous course of almost certain mishap and painful misadventure.

The Widening Wealth (and Responsibility) Gap

It was announced on Thursday that the top 1 percent of Americans received their largest share of national income since 1928, according to 2005 tax data.

As the Times noted:

The top 1 percent received 21.8 percent of all reported income in 2005, up significantly from 19.8 percent the year before and more than double their share of income in 1980. The peak was in 1928, when the top 1 percent reported 23.9 percent of all income.

So now, despite all the efforts to improve education and the advancements that have taken place in business, government, and the tax system over the past three-quarters of a century, in one important respect America is back to where it was before the Great Depression. We will leave it to others to explain how this happened. But if you look at the tax reduction policies of the Bush administration for upper incomes and the tremendous wealth explosion in CEO pay alone over the past decade, you will quickly see that the ground has been carefully laid for this reversal in social progress. There can be no doubt that many at the top will care not at all about this development. They would be content to ride the current wealth wave as far as they can and give absolutely no thought to the human —or broader social— consequences.

Capitalism has experienced these kinds of episodes in the past —the Gilded Age from 1865 to 1901 and the “malefactors of great wealth” that sparked the fury of Theodore Roosevelt and his promise of a “square deal” in a fledgling 20th century come to mind. The results produced considerable upheaval. One of the more turbulent periods was the aftermath of the Great Depression, when the hope of a “new deal” began to resonate with displaced workers who rode the rails in search of work. It is not encouraging that we are seeing a return to the milestone of 1929 in 2007.

Yet it seems that even with the benefit of history, there are few at the top who understand that capitalism needs its stewards as much as its zealots. It is a system that depends on its champions of integrity and public consent as much as it does on its contrivers of non-compete payments and backdated stock options. How long will this gap be tolerated? How much wider can it grow before serious divisions erupt in society?Read more

 

from Finlay ON Governance, 2007

Next post: