Capitalism fails American middle class
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Shanghai Daily, September 26, 2011
The left likes to blame pro-rich tax policy. And it is certainly true that the gap in the US has widened even as taxes on the rich have decreased. Today's top tax rate, 35 percent, is half what it was 30 years ago. Capital gains taxes are even less than half of what they were 35 years ago - 15 percent today, compared to 39.9 percent in 1977.
Politics have tilted the playing field in favor of those on top in other ways, too. Unions are less powerful than they were 30 years ago, and an ever bigger gap between executive officers and the average worker has become acceptable to shareholders and boards: in 2010, CEO pay at S&P 500 companies was 343 times the median wage.
But taxes, unions and compensation committees tell only part of the story. What's also happening is an economic revolution - actually, a pair of them - that favors those on top and squeezes those in the middle.
The technology revolution and globalization have allowed the very talented, the very lucky and the very brave to build companies and make fortunes nearly overnight. They have also created a highly numerate superclass of workers - technologists, engineers, traders - whose skills are in great international demand and whose salaries have soared accordingly.
Meanwhile, a vast swath of jobs - ranging from manufacturing, to clerical work, and now to routine law and accounting - can be done much more cheaply by machines or by people in lower-income countries, and this is devastating the US middle class, even as those at the top prosper.
Justice is a central issue in American politics and in American society. That's why it seems so important to figure out whether the rich are paying their fair share. It is a crucial question - and the truth is that the rich are getting a better deal than they used to.
But the even more central issue - and it is one that both left and right are reluctant to acknowledge - is that the fundamental forces shaping US capitalism today are hostile to the middle-class majority, which defines US democracy.
The rancor and the paralysis that characterize American politics at the moment are the result of this conflict. Someone needs to admit that modern capitalism isn't working for the middle class, and find a way to make it work better, before it is too late.
