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#409 - Economic Trends, 28-Sep-1994

The NEW YORK TIMES recently described a dark trend. In the U.S., and
overseas, the rich are getting richer, the poor are getting poorer, and
the people in the middle are becoming less and less secure about their
future. And this is all happening during a period of economic growth.

Labor secretary Robert B. Reich said in a speech recently that the U.S.
economy has entered a period of healthy expansion but an expansion that
is occurring "at the expense of the workers propelling it."

Reich said that "ominous forces" in America have physically divided the
country, leaving an "overclass" in the safety of the elite suburbs, an
"underclass quarantined in surroundings that are unspeakably bleak, and
often violent" and a new "anxious class" trapped "in the frenzy of
effort it takes to preserve their standing" as more and more families
try to patch together two and sometimes more paychecks to meet their
basic needs. Reich went on to describe widening gaps in income, health
care, and retirement benefits (pensions), that he said are spurring the
"disintegration" of the middle class.[1]

Mr. Reich called for voluntary action to solve this growing problem: he
asked business leaders to transform their vision of workers "from
expendable costs to ever more sophisticated assets" and to invest money
in training workers for new tasks.

Stanford University economist Paul Krugman sounded a similar theme in
the TIMES recently: He pointed out that the average per-capita
productivity of American workers increased 25% between 1973 and 1993,
yet real wages for young men without a college degree dropped 20%
during the same period.[2] "On both sides of the Atlantic, economic
forces are more and more tending to split society into two: those with
good jobs and a rising standard of living and those with either falling
incomes or the prospect of a more or less permanent life on the dole,"
Krugman said. "Even an economist can see that such a split demoralizes
those at the bottom and coarsens those at the top," he said "The
ultimate effect of growing economic disparities on our social and
political health may be hard to predict, but they are unlikely to be
pleasant," Krugman said.

Labor Secretary Reich identified the source of the problem as "a
tendency among many business leaders to focus their attention on
competition overseas while ignoring the lives and welfare of workers at

What are the effects OVERSEAS of business people focusing their
attention on competition OVERSEAS? The TIMES recently described
conditions in Latin America:[3]

"The resumption of economic growth [after a decade of economic
stagnation] has been bought at a very high social price, which includes
poverty, increased unemployment and income inequality, and this is
leading to social problems," said Louis Emerij, an economist and
specialist on social reform at the Inter-American Development Bank in

The TIMES went on: "United Nations economists say that despite
projected economic growth through the end of the century, no progress
will be made in reducing poverty [in Latin America], creating the
potential for more social unrest. Poverty is even likely to increase
slightly. As of 1986, 37% of the region's families were living in
poverty; by 2000, the economists say, the figure will be 38%, or 192
million people."

"The coming years will be quite difficult for these countries," said
Peter Jensen, regional coordinator for human settlements at the United
Nations' Economic Commission on Latin America and the Caribbean.
"Growth has been really on only one end of the spectrum, the wealthy.
The rich are getting richer and the poor are getting poorer. And this
will generate social conflict," Jensen said.

The question is, have these trends simply developed by random chance,
or do they result from policies created by politicians and corporate

We offer the following facts as a guide to real power in America.

** In 1984 there were 272,037 active corporations in the manufacturing
sector; of these, 710 (one-quarter of 1%) held 80.2% of total
manufacturing assets.[4]

** In 1985 there were 14,600 commercial banks. The 100 largest held
57.7 percent of all assets in the system.

** In 1986 in agriculture, 29,000 large farms (only 1.3% of all farms)
accounted for 46% of farm profits.

** In the industrial sector of the economy in 1987, 500 large firms
accounted for 54.4% of all industrial sales.

** In 1983 the richest 0.5% (1 out of every 200 families) owned more
than 45% of the nation's privately held net wealth. This included 47%
of all corporate stock, 62% of nontaxable bonds, and 77% of all trusts.

** In 1986, the top 1% of families owned about 53% of all income-
producing wealth.

** In 1986, the top 10% of families owned 83% of all income-producing
wealth. The remaining 17% of all wealth was shared among the other 90%
of American families.[6]

** In 1983, 60% of all U.S. families owned less than $5000 in assets.
Half owned $2300 in assets, or less.

** The U.S. has the highest incidence of poverty in the industrialized
world, with exceptionally high infant and preschool child poverty. The
rate exceeded 17% for everyone below age 18 in 1986 (not a recession
year) and reached 40% for African-American children. Also in 1986, 2
million adults were poor even though they worked a full-time job.

** In the late 1950s, during the Eisenhower administration, the
wealthiest Americans paid a tax of 91% on income. Today, after 3 major
"tax reform" laws passed during the Reagan/Bush/Clinton administration,
the top tax on the wealthy is 39%.[7]

Those with wealth have an easier time gaining more wealth (compared to
the rest of us), so as time passes the wealthy tend to become wealthier
while the rest of us grow relatively poorer. Therefore, although the
facts given above are somewhat dated, it is very likely that they
reflect the situation today. It is even likely that they understate the
growing disparities between the rich and the rest of us.

Other features of our modern world are worth noting. Although average
wages in the U.S. are the highest in the world, by several measures the
U.S. does not stack up well in "quality of life," compared to other
industrialized countries.

** U.S. has lowest level of job security for workers, with the greatest
chance of being dismissed without notice or reason. Other industrial
nations generally prohibit sudden or arbitrary firings or plant

** U.S. workers have the greatest chance of becoming unemployed without
adequate unemployment insurance or medical insurance. The U.S. has the
lowest unemployment-income-to-employment-compensation ratio of all
major industrial countries.[8]

** U.S. workers have less leisure time than workers in other industrial
countries, with an average of 2.5 weeks annual vacation. Newly hired
workers in most European nations receive a minimum of 4 weeks vacation.

** The U.S. has lowest percentage of workers unionized, and lowest
percentage voting in elections. By these measures, the U.S. ranks at
the bottom of 18 non-communist industrialized countries.[9]

** U.S. has a combined worst ranking for life expectancy and infant
mortality, mainly due to extreme inadequacy of health care for
minorities. The U.S. spends more than other countries on health care
(11% of GNP [gross national product] in 1988), but in 1986 it ranked
16th in infant mortality among the 21 wealthiest nations. If only
whites were counted, the U.S. would rank 12th.

** U.S. has highest teenage pregnancy rate, twice that of runner-up
Great Britain.

** U.S. citizens have the greatest likelihood of being killed by
another person, nearly three times as likely as a resident of Finland,
which has the second-highest murder rate.

As Bryn Mawr college economist Richard B. DuBoff says, "The central
contradiction of American life --record-high per capita incomes
coexisting with appalling social problems --does not result from random
shocks to the system or bad luck." It results from policy choices --
from "private" policies made by managers of large corporations, and
from "public" policies made by elected and appointed officials whose
elections and appointments are directly and heavily influenced by
managers of private corporations.

It is unusual to find information on income and wealth in print. These
are not common topics of public debate, though they affect us all
directly. Perhaps this is because, "Today, despite more than 25,000
outlets in the United States, 23 corporations control most of the
business in daily newspapers, magazines, television, books, and motion

In 1990, Ben Bagdikian, dean of the School of Journalism at the
University of California at Berkeley, pointed out: There are 14
dominant companies that have half or more of the daily newspaper
business (7 years ago there were 20), 3 in magazines (7 years ago there
were 20), 3 in TV (7 years ago there were 3), 6 in book publishing (7
years ago there were 11), 4 in motion pictures (7 years ago there were
4). The total number of corporations dominating all media is 23 (7
years ago it was 50).[11]

"It is quite possible --and corporate leaders predict --that by the
1990s a half-dozen large corporations will own all the most powerful
media outlets in the United States," Bagdikian said in 1990.

Of course this will all change whenever the American people decide it
must change. We citizens have in our hands the Constitutional right to
change anything we choose to. We hold the power to give, withhold, or
take away corporate charters. We have the authority to tax. And--most
importantly--we have the right to advocate change openly, the right of
free speech, and a free press. These things are all we need, if we
combine them with vision, will, courage, organization, and persistence.

--Peter Montague


[1] Catherine S. Manegold, "Reich Urges Executives to Aid Labor," NEW
YORK TIMES September 25, 1994, p. A25.

[2] Paul Krugman, "Long-Term Riches, Short-Term Pain," NEW YORK TIMES
September 25, 1994, pg. F9.

[3] Nathaniel C. Nash, "Latin Economic Speedup Leaves Poor in the
Dust," NEW YORK TIMES September 7, 1994, pgs. A1, A14.

[4] Richard B. DuBoff, ACCUMULATION & POWER (Armonk, N.Y.: M.E. Sharpe,
1989), pg. 171.

[5] DuBoff, cited above, pg. 180.

[6] Duboff, cited above, pg. 181.

[7] Donald A. Barlett and James B. Steele, AMERICA: WHO REALLY PAYS THE
TAXES? (N.Y.: Simon & Schuster, 1994), pgs. 70, 166.

[8] Duboff, cited above, pg. 183.

[9] DuBoff, cited above, pg. 184.

[10] Ben H. Bagdikian, MEDIA MONOPOLY 3rd Edition. (Boston: Houghton
Mifflin, 1990), pgs. 3-4.

[11] Bagdikian, cited above, pgs. xx, 18.

Descriptor terms: wealth; income; economy; robert reich; workers;
health care; retirement benefits; pensions; stanford university; paul
krugman; productivity; wages; latin america; poverty; corporations;
banking; farms; agriculture; tax rates; taxation; unemployment; working
conditions; labor unions; leisure; voter participation rates; life
expectancy; infant mortality; teenage pregnancy; murder; bryn mawr
college; richard duboff; economists; media; concentration; magazines;
newspapers; tv; books; motion pictures; ben bagdikian; university of
california at berkeley; constitution;