Conclusion and Response Paper #4

"Money" by Andrew Hacker and "The Economics of the Rich" by Edward S. Herman

For 4 November 1997

The main theme in Andrew Hacker's book seems to be that gross inequity exists in America today, both by way of assets and opportunity, and that there are few reasons why this should be otherwise considering the economic system in place and the philosophies that it was founded on. He cites positions taken in the "Federalist Papers" by James Madison and comments by Alexander Hamilton, both founding fathers of the constitution. Madison and Hamilton took the position that in human nature "there is a diversity in the faculties of men", making clear that he and his fellow founders were referring to "the faculties of acquiring property" (p.32), and that "the protection of these faculties is the first objective of government" (p.33). There is the assumption, Hacker points out, that all of those with superior faculties necessarily succeed as though in a vacuum, without taking into account the advantages conferred by privilege or opportunity that contribute to "faculties". He uses the quote by poet Thomas Gray that many fine flowers live and die unseen by human eye and makes the comparison to talented singers that have no marketing skills to illustrate the incompleteness of that faculty is always realized.

Hamilton believed that human beings are basically prone to habit and inhibited by fear and that we need "goading" in order to use their talents. In his view, no one should sit back and all would benefit from competition with others which would result in achieving new heights of accomplishment. This, he stated, is the affect of the market.

One thing left out of the market theory is the question of value and need. Is what is selling well or being done profitably contributing to humanity in a positive way? Does it serve a need? As Hacker points out, there are many instances where the market is doing well providing products that do not benefit humanity - cigarettes that cause disease, violence in the media that confuse youth and demean women, and gross inequalities in income that lead to despair and wasted potential for the disadvantaged. Protection of "the faculties to acquire property" has been institutionalized in our economic system and, as both Hacker and Herman (in "The Economics of the Rich") state, this has led to a booming economy. At the same time, job creation has never been a priority, and this has led to the creation of third world conditions for many citizens in the midst of the economic boom which has benefited some.

Hacker talks at length about who has the money in this country, how much and suggests some theories as to why. He suggests that the astronomical incomes of a few amounts to a manifestation of "the good-old-boys club" mentality of men in power, confirming their worth through mutually supported increases of salaries and benefit packages. He points out that few such high flyers ever test their value on a "free" market nor can they trace their own unique contribution to any enterprise that would justify their incomes.

Hacker compares government policies and public attitudes that affect less advantaged sectors of society. He looks at the affect of affirmative action on the creation of the black middle class and rise of women in the corporate world and he looks at how many of these groups are still in poverty and by how much. He points out that while advances have certainly been made through affirmative action, which largely gave people the opportunity to gain skills and prove abilities by providing opportunities, the proportion of women, children, Blacks and Hispanics who live in poverty has not improved. Women and minorities are relatively better represented at the top of the economic pyramid, which is good, but they were recruited from the middle classes and prosperity has not trickled down to the lower levels of the pyramid.

Education is said to be critical to an individual's success in our economy, but Hacker questions what it is about education that makes it play this pivotal role. He states that while some people benefit from the discipline of formal study, that higher education basically provides warehousing for youth where they can nurture associations with others of the same background until they can be placed in the economy.

He looks at redistribution programs that gain wide acceptance: social security, widows pensions and Medicare - and those that are under heavy attack: Aid to Families with Dependent Children (now Temporary Assistance to Needy Families) and Medicaid. Each program does essentially the same thing: in most cases each pays out more to the receivers that they ever have or ever will contribute. Still, the programs enjoy widely differing levels of public support. Nine times more money is redistributed to the elderly, both those in need and those not in need, than to the children in this nation. The elderly can vote, giving them a voice in the government that children lack except by undependable proxy, and this most likely contributes to the imbalance. Another rationale for the imbalance may be that the sins of the parents (and especially single mothers) are visited on the children. Penance for being uneducated or poor must be paid through either "hard work" (often inaccessible because of childcare shortages and costs and rarely paying enough to lift a single-earner family out of poverty anyway) or a life below the federal poverty level for bare subsistence.

Basic differences in belief about human nature polarizes our economy: are we cooperative or competitive, independent or interdependent, moral or amoral? Currently, Americans seem prepared to pay corporate tycoons million-dollar bonuses for untraceable contributions to the common good while teachers who nurture the minds and spirits of the next generation receive cost of living increases for which they must scratch and claw. Americans accept appropriations to build new prisons and install costly alarm systems in their homes and cars but deny provisions that would enable single parents to be at home with their young children to nurture and bond with them, or provide quality childcare that would build the children's self-esteem and cognitive skills while the parents are at work.

As Herman states in the "Economics of the Rich", the system that promotes the interests of the rich is so taken for granted as "natural" that to have any other priorities is to cater to "special interests". Headlines read "US wage rise mars productivity" (Financial Times, 8 May 1997), "Markets surge as labor costs stay in check" (New York Times, 30 April 1997). Greenspan, head of the Federal Reserve, states optimistically that it is job insecurity that is keeping inflation in check. The system we have now unabashedly promotes the interests of the wealthy over the interests of the majority of the people. Politics is always a major player in economics. The question is whose economics and to what end?

• Since reading about the Federalist and Anti-federalist conflicts during the formation of this nation, it always impresses me how we are still caught up in the same arguments. The premises have not changed. Madison's and Hamilton's attitudes are still pervasive, as we see in current welfare reform efforts. It is also interesting to note that Madison and Hamilton help to engineer the constitutional convention to include the merchant class and exclude the yeoman of the time (Szatmary, 1980). This practice also seems to have survived.

• Unequal distribution appears to be acceptable to many people in America, and I suppose elsewhere, but the concept is far from unchallenged. I think its particular success in America hinges on the fact that the upper classes have succeeded in making poverty a moral indictment, so that even poor people refuse to see themselves as underprivileged and would be embarrassed to champion their own causes. In other cultures this is not so. With Europe's history of feudalism and ruling classes, the context into which one is born is seen as having a determinate role in one's success. The society and ruling classes have an obligation - nobles oblige - to promote the causes of less fortunate individuals. We live in the same world, under much of the same conditions, but we see our responsibilities to each other and our part in the quality of our lives and our environment from such different realities.

• It is stated repeatedly that a change of economic and philosophical directions occurred after 1970. What exactly happened during that time? Even Nixon, no liberal to be sure, spoke for expanded childcare and income credits for the poor. Child poverty was down from 27% in the 1950's to 15% in 1970. Now it is approaching 24%. What was the turnaround point?

• I believe that part of the crisis that America faces now is that we can no longer see ourselves as incontrovertibly economically superior to very other country in the world. Other super powers of the past - The British Empire, the French, and the Roman - must have felt the same. Success validates that our culture is right, which is something cultures have historically needed to ensure their continuation and expansion. This aspect of cultural survival instinct breeds intolerance and, perhaps even more dangerous, makes it impossible to learn from other cultures in areas that they do better.

Szatmary, David. "Shay's Rebellion". University of Massachusetts Press. 1980.