Ideas Have Consequences: the Explosion of Inequality

Capitalist classes once believed in the idea that Keynesian economic policies, including redistribution of wealth within the system, guaranteed strong and sustained growth. Then they took advantage of economic crisis to change the system. By the 1970s, when high inflation and economic stagnation engulfed the system, the ruling classes opted to abandon the compromise and to shift to an open class war on labour – in order to restructure the system to restore capital accumulation. The consequence of neoliberal ideas was the transfer of enormous wealth to the capitalist class from workers, but it did not bring about a new age of economic growth. Neoliberals continue to maintain that the market delivers benefits that could never be achieved by planning. However, at any one time one-third of families do not earn a living wage – a wage that is high enough to maintain a family’s basic needs of living: food, clothes, rental housing, childcare, transportation and small savings to cover illness and emergencies.

Neoliberalism is a consequence of restructuring of class power in favour of the economic elite. It has no vision of the good society or the public good and no mechanism for addressing society’s major economic, political and social problems. Under the cultural trope of ‘individual responsibility’ welfare for the poor is cut and restructured to make welfare recipients more responsible for their economic status. This takes the focus from the inherit inequality in the system and focuses on the distribution, specifically its disproportionate effect on the excluded – such as the unemployed, minorities and immigrants. The issue is no longer unemployment as such, but its over representation among certain groups and hence the discrimination to which they have clearly been subjected. Today neoliberal ideology defines the social relationships of poor people and the attitude towards them that supports an economic system that creates inequality.

Rather than think about why such poverty is occurring in Canada or the US, many blame the poor themselves for the poverty crisis. The Great Recession should have put the victim-blaming theory of poverty to rest. In the space of only a few months, millions of people entered the ranks of the officially poor – not only laid-off blue-collar workers, but also downsized tech workers, managers, lawyers, and other once-comfortable professionals. No one could accuse these “nouveau poor” Americans of having made bad choices or bad lifestyle decisions. They were educated, hardworking, and ambitious, and now they were also poor – applying for food stamps, showing up in shelters, and lining up for entry-level jobs in retail.  Poor decision-making of individuals in the financial services industry, with self-tolerance and a sense of entitlement, leveraging the market brought chaos on the world financial system in 2008. Poverty has increased as a result of the recession; while banks went on to net the biggest profits in years.

A consequence of neoliberalism is the reconfiguration of class relations in a society where the explosion of inequality and economic instability has profoundly dismantled the working class. This system replaces exploitation with the problem of surplus population that consists of the unemployed, the impoverished, immigrants, the under-employed, and the insecurely employed. As soon as unemployment began ticking upward and became ‘structural’, the concentration of unemployment helped to produce within the working class, both in theory and practice, a group without work who were truly isolated from those with work. The post-industrial society is divided between those who have access to the labour market and those, in varying degrees, who do not. Neoliberal capitalism has enlisted these two fractions of the proletariat into destructive competition against each other. The clash is no longer between labour and the privileged elite rather between a proletariat that pays taxes with an underclass that relies on a system of handouts and entitlements.

Poverty exists because of the existing social system. An astonishing number of people are working at low paying jobs. Many more households are now headed by a single parent, making it difficult for them to earn a living income from jobs that are typically available. There has been a crisis in low paying jobs for the past forty years. In the US one-quarter of the jobs pay below the poverty line for a family of four, while one-third of the population struggle to make ends meet every month. Wages for those on the bottom half have been struck since 1973 – increasing less than ten percent. The Great Recession of 2008 was a wake-up call – there are significant holes in the safety net and increase in extreme poverty. Poverty is a structural phenomenon – people are in poverty because they find themselves in holes in the economic system.

Poverty is not a personal choice, rather a reflection of society. The US cut spending on health insurance and safety nets that protect the poor and marginalized people because of a culture that emphasises individual responsibility. The proponents of this policy claim poor and minorities need only make better choice – work harder, stay in school, do not have children until they can afford them. This is a simplistic view that implies poverty is a state of mind. This thinking ignores the root causes of poverty shaped by society and beyond the control of individuals. Societal barriers are structural causes of poverty and inequality. The necessary changes to overcome these barriers include make the rich pay their fair share of running the country, raise the minimum wage, and provide health care and a decent safety net. Without structural changes, it may be very difficult if not impossible to eliminate inequities and poverty.

Neoliberal capitalism is associated with increasing income gradient between the rich and the rest of society. This increasing economic inequality between the rich and the rest of society over the past four decades led to the hollowing out of the middle class, leaving many people angry. There are significant barriers to change – the obscene amount of money flowing into the electoral process makes change harder yet. What sustains neoliberalism is the ability to which it has been able – explicitly but more often without anyone realizing it – to penetrate and restructure the vision of its opponents. This dynamic will impede people power action that was seen in the Great Depression. It is necessary to challenge the monolithic power of corporations supported by an ideology serving the interest of financial capital and globalized elites in the redistribution of wealth upward.

The first thing needed to get people out of poverty is more jobs that pay decent wages. There needs to be a bigger investment in education and skill development strategies. For change we need to do something about both the system people participate in and how they participate in it. Neoliberals claim poverty is an individual phenomenon and say it is primarily their own fault – the poor just need to focus and work harder. However, based on this theory of individual responsibility, one would need to only run faster / worker harder and get someone else to take their place in the bottom fifth; may get you out of poverty, but won’t get rid of poverty itself. Individuals rise and fall in the class system. Social problems are more than an accumulation of individual woes; they can’t be solved through an accumulation of individual solutions.

In 1984, Charles Murray published Losing Ground. Its central thesis was that all government welfare programs should be abolished, supposedly because welfare hurt the very people it was intended to help by “rewarding bad behavior” such as “illegitimate babies.” Murray also called for ending food stamp programs. Murray’s manipulation of data claimed to show welfare programs were the cause of minority poverty, rather than the cure. In order to get the numbers to work to “prove” that liberal social welfare spending created poverty, Murray excluded government spending on the elderly from his “evidence.” As Lester Thurow, former dean of MIT’s Sloan School of Management noted, 86% of federal social welfare spending went to programs to help the elderly; and the poverty rate for the elderly dropped from 25.3% in 1969 to 14.1% in 1983, refuting Murray’s thesis. There is no science to support Murray’s social Darwinism ideas that the economic elite exploit to persuade themselves they acquired their wealth through merit.1

It is necessary to win the war of ideas – to overcome what Gramsci described as cultural hegemony. The now dominant economic doctrine has been carefully nurtured over the decades through thought, action, and misinformation. It was bought and paid for by economic elite who stand to gain from its implementation. If some ideas are to become more fashionable than another, they must be financed: it takes money to build intellectual infrastructure (foundations) to develop and promote the neoliberal worldview. Gramsci observes defining, sustaining and controlling culture is crucial: get into people’s head and you will acquire their hearts, their hands and destinies. Presently, the ideas around neoliberal laws of the market excludes one-third of US society from fully participating in community activities. It is necessary to return to laws based on equality of persons rather than laws of the market. Those who refuse to act on the knowledge that ideas have consequences end up suffering them.2

1 The Social Contract of the Neoliberals. (23 July 2016) http://questioningandskepticism.com/social-contract-neoliberals/

2 George, Susan. “How to Win the War of Ideas: Lessons from the Gramscian Right” http://ceimsa.org/ateliers2/a11/art11-1.html

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