Detroit’s bondholder-friendly, worker/retiree-unfriendly bankruptcy tells the story of an economy where the priorities are completely screwed up.
July 23, 2013

Those big headlines about the bankruptcy of Detroit were like a punch in the gut to those of us who grew up in working class in the Midwest, and they should sober anyone who cares about working families all across America. But the headlines alone don’t tell the whole story. When you look at the details about who will benefit, you notice that the bondholders will probably come out just fine, while the folks who will lose by far the most are the city’s pensioners and workers.

Shocking, right? That is the kind of country we are living in right now, and you see it every time you look around. Here are 2 headlines from the Washington Post business pages the other day, lined up side by side on the page:

Strong Earnings Send Stocks To New High


US Middle Class Still Suffering Amid Economic Recovery

Detroit’s bondholder-friendly, worker/retiree-unfriendly bankruptcy, and the 2 headlines above tell the story of an economy - and a society - where the priorities are completely screwed up. This is not how you build a healthy sustainable economy. And remember, this is an economy that is officially 4 years into recovery, with a Democratic President who ran on a platform of fighting for the middle class. The fact that this economy is so lopsidedly in favor of the top 1% is not the result of a short term glitch in the economy; it is not something we will grow our way out of. Tinkering will not make the changes we need. Having success in electing a few more Democrats alone will not fundamentally alter these realities. We are going to have to build a movement that can be sustained for the long haul, and we are going to have to recognize that the short term legislative and electoral fights we need to fight are not going to be able to make the big changes that have to be made. Short term tactical wins are great, but it is not nearly enough, not even close. We are going to have to recognize the big things going on in the economy that must be addressed, the things that are foundational to the economic situation we find ourselves in.

The first foundational thing we have to understand is that we are living in an era where not only is wealth concentrated, but entire industries are becoming so concentrated as to be near-monopolies. The pioneering work of Barry Lynn in his book Cornered: The New Monopoly Capitalism and the Economics of Destruction, and in numerous other articles written as a fellow at the New America Foundation, documents this trend- and its terrible impact on our entire economy and society- in industry after industry. Everyone knows that Wal-Mart has become the dominant retailer in the country, that Amazon dominates the book industry and other forms of online commerce, that a few banks have become Too Big To Fail, that there are fewer and fewer airlines. But what Lynn’s work has documented is how this trend toward consolidation, concentration, and near-monopoly power has taken over industry after industry, and how this fact has been crushing entrepreneurialism and has warped our economy in a hundred different ways. The DOJ stopped enforcing most of the anti-trust laws during the Reagan administration, and no administration since has picked up the task since. We are all paying the price, and it is an incredibly steep one.

The second foundational thing we need to understand is how the financialization of the economy is weakening the entire middle class. The Too Big To Fail banks are 30% bigger than they were in 2008, and the industry takes a higher and higher share of both total corporate profits and the entire economy all the time. Financial services as a share of the economy has tripled since 1950. Compensation in the financial industry used to be about the same as that of other industries, but since 1980, it has skyrocketed and is now 70% more on average. Financial services now make up more than 40% of all corporate profits in this country. What all this means is that a very small number of bankers is now hoarding more and more of the money circulating in the economy. And it’s not like they are investing in mom-and-pop start-ups, either: more and more of the money is going into speculative trades and overseas investment, and less and less into entrepreneurs trying to start a new business.

The third foundational thing is that we are stuck in a low wage economy, and the “recovery” isn’t doing anything to make that better. After steady and consistent growth in the 40 years after the New Deal, average wages compared with inflation have been pretty flat in the 40 years since. This recovery is the worst we have ever seen in terms of wage growth, because the new jobs that are being created are mostly low wage jobs. Median earnings have actually fallen 4% since the recession ended (since it ended!) Labor unions no longer have the bargaining clout to make wage gains; the minimum wage hasn’t gone up in 6 years; decent paying manufacturing and construction jobs are very rare. And in the meantime, inflation in college tuition, health costs, groceries, and utility rates doesn’t seem to be slowing much at all. You want to know the worst insult of all? It is government contractors that are creating more low wage jobs than any other company in America- just what we need, our own government tax dollars driving down wages.

These 3 factors are killing the 99%. They explain why even in the midst of a 4 year economic recovery, we still have way too many people unemployed and even more on the edge hanging on for their dear lives. The fact is that neither political party seems to want to do much about any of this. There are more Democrats who are willing to speak out, and the number is growing, but it is nowhere near enough- most politicians are stuck in short term tactical battles on issues that rarely get to the main point. President Obama is planning on doing a series of speeches, and the rumor is that they will take a populist tack. I hope so, but whatever he says isn’t coming soon enough, and is unlikely to do anything on these big topics that matter.

There are a few political leaders who are saying what needs to be said, thank goodness. Elizabeth Warren is so good that TV networks are taking down their own video feeds because she so embarrassed their reporters, and she keeps fighting for the middle class and against the wealthy special interests trying to rip them off. And there are some other fighters as well. But more Democrats need to be willing to take on the powers that be.

Mostly, it is going be those of us outside of government. We are going to have to build a movement that keeps fighting for a better economy for working families. It has happened before in American history, and will have to happen again. A friend of mine notes that when we look back on the 1960s, where people stood on civil rights is what people in politics were judged by. That was their seminal struggle, and they risked their lives to win the battle. 50 years from now, he notes, it will be where people stood on issues about breaking up the power of concentrated wealth. That is our generation’s ultimate struggle, and we’d better get to the barricades.

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