Inequality: Capitalism's 'squeaky wheel'

Minimum wage has been in the news, of course, most recently thanks to a hike in the lowest rate for federal workers

But really, it's kind of a proxy for a bigger discussion about rising inequality in this country: the rich getting richer and the poor...not.

So what does that mean for corporate America? Harvard business school historian Nancy Koehn says:

"The average person in that top 1 percent [of the population] makes about $717,000 a year, versus $53,000 for everyone else. So even these very, very rough ballpark numbers: That's a lot of people with a lot less money to buy things, and very little hope, in some sense... of getting more purchasing power... "

That lack of what Koehn calls "hope" can have a multiplier effect on other parts of the country:

 "We know large amounts of social and economic mobility produce more GDP, more social order, more kind of national prosperity and political stability. You can reason inversely that lots and lots of inequality is not a good thing."

And speaking of multiplier effects? The wiggle room afforded by a larger paycheck not only increases the top 1 percent's purchasing power, it also allows them to reinvest:

"You want to put money directly in the hands of the bottom 90 percent so it will get spent, so it will generate jobs, and so it will oil the wheel of capitalism." 

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
Log in to post3 Comments

I never hear Democrats or progressives make an unapologetic case for wealth redistribution—as if they’re afraid of challenging the status quo of America’s New McCarthyism. It’s not a real radical concept. It’s all about ameliorating the most egregious effects of capitalism’s inevitable evolution, and preventing the wealthy elite from using their “extra income” for the purpose of buying up whole governments and ruling with impunity (Any countries come to mind?) There seems to be this ongoing myth that the wealthy deserve to be wealthy and the poor, poor; that all reduces to merit (or not), determination, entrepreneurial initiative, and/or inventive genius—particularly in America. Most people elsewhere in the world have long ago realized that this is pure BS. But even if it were not: Who, in the world, regardless of his or her contribution to commerce, society or humanity, is worth a billion dollars? And who deserves to rule with a will to subordinate others and keep them subservient to them (with monthly payment programs)?

I don't know about you, but I'm working harder for much less since Lehman Bros failed in 2008. Do you think that those in the bottom rung are not working hard and not deserving of a decent minimum wage? It's tough to get a job, so my guess is that they are probably working hard so they don't get RIF'd. Oh, and the rich don't always create jobs. They watch their income statements and trim jobs at the first sign of a downturn. Remember, they didn't get rich by not being profitable.

Ms. Koehn also said that the top earners also reinvest their "extra cash." They are NOT, despite what they and right wing repeat ad nauseam (and except for the few at that level who are truly small-business owners), "job creators."

Of course, this confirms what those of us who lived through the 80s and what Bush Sr. described as "voodoo economics" knew what would happen when Bush II didn't listen to Papa and enacted voodoo redux in 2001.

When you give $50,000+ in tax breaks to those in the top 1%, they are not going to go out and buy anything they could not already buy.

But put a mere $2,000 in the hands of someone earning $53,000, they are going to out and SPEND it.

Thank you Nancy Koehn -- this should be shouted from the rooftops. Time to bury trickle-down once and for all.

With Generous Support From...