Divide, Conquer & Stay Rich

Divide, Conquer & Stay Rich

Part of COVID-19’s legacy will be the extent to which the pandemic laid bare the fragility of the world’s largest economy and exposed the overlapping nature of the myriad inequities endemic to American society.

America’s economic model is fundamentally precarious, relying as it does on “clipping coupons” from the relatively impoverished masses, who overwhelmingly staff the services sector that comprises the largest part of the economy.

“In the absence of a major disruption, the system is capable of moving along by collecting small installments of rent from a large segment of the population,” Deutsche Bank’s Aleksandar Kocic wrote in April. “However, if an exogenous shock disrupts the fragile order of these cashflows, there is a chain reaction of collective insolvency ready to sink the entire system.”

Economic precarity tends to feed on itself. In America, it’s commingled with discrimination based on race and gender. The end result is a self-fulfilling prophecy defined by ongoing socioeconomic deterioration.

That backdrop is ripe for exploitation, especially when the masses fail to identify with one another as exploited members of a downtrodden super-majority, and instead see themselves primarily as belonging to disparate groups defined by race, religion, and creed.

COVID-19 might have catalyzed a national awakening among various demographic cohorts who share equally in the economic injustices of a capitalist system gone rogue had it not been for Donald Trump’s exhaustive efforts to stoke racial tensions and keep society divided.

The protests against inequality over the summer showed that Americans are capable of the kind of collective action that can bring about real change, but as Trump’s share of the vote in November attests, American “values” aren’t what we often claim. As I put it just past midnight when the election was still too close to call, the combination of Trump’s tediously cultivated mythos as the embodiment of the American capitalist dream with Trumpism‘s menu of quick fixes and implicit promise to safeguard what many white males believe is their inherent “right” to occupy a higher social stratum than women and minorities, you end up with a platform that is, unfortunately, wholly consistent with American “values.”

You could argue the other side — that the historic number of votes for Biden was evidence that Trumpism is not “who we are,” so to speak.

But that argument doesn’t account for the fact that Trump’s entire presidency was an abject failure. The first two years were spent under the shadow of an investigation into whether his campaign colluded with a hostile foreign power, the latter part of 2019 was consumed by congressional testimony which overwhelmingly demonstrated that he attempted to leverage US military aid to compel a foreign government to investigate a political rival, and the entire four years were spent fighting a trade war that dead-ended last month with China’s bilateral trade surplus sitting at an all-time record high, according to data out Monday.

And all of that is to say nothing of the 282,000 Americans (and counting) who perished during the pandemic, which ushered in the worst economic collapse seen since the Great Depression.

Not all of the above is Trump’s fault, but most of it is, and even if you think none of it belongs on his shoulders, it’s objectively true that he exacerbated virtually every bad situation with unnecessary tweets and provocations. Indeed, the Mueller probe likely wouldn’t have gone on for as long as it did had Trump not provided ongoing fodder for an obstruction case against himself by constantly commenting publicly on the probe.

In this context, it’s astounding that anyone voted for Trump last month. He presided over the most chaotic administration in modern history which included an impeachment, two arguable stock bear markets (February 2018, December 2018), one epic Wall Street collapse (March 2020), the only depression most living humans have ever witnessed, and a literal plague. The fact that he garnered as many votes as he did despite all of that is evidence that tens of millions of Americans are enamored with Trumpism. And, yes, part of that comes down to a desire to preserve white, male privilege.

As America looks ahead to what one hopes will be better days, I think it’s important that everyone admits the country suffers from a chronic incapacity to engage in self-reflection.

While perusing what amounted to a set of policy prescriptions for lawmakers set out by JPMorgan’s policy group in a recent document shared with the Biden transition team, I came across some statistics I wanted to highlight. These aren’t “new” and this isn’t “news,” but that’s precisely the point — that’s what “endemic” means.

“For every dollar the median white family earns, the median black family earns just 71 cents, and the median Latinx family earns 74 cents,” Heather Higginbottom, President of the Chase PolicyCenter remarked.

“Racial gaps in liquid assets are twice as large,” she added, noting that “for every dollar of liquid assets held by white families, the median black family has just 32 cents, and the median Latinx family just 47 cents.”

It is virtually impossible to argue those figures are somehow not the result of systemic racism and chronic inequality of opportunity.

The visual (below) illustrates the first point. What you see in the figure doesn’t just happen by chance. It’s structural.

When it comes to the concentration of assets in the hands of white Americans, the situation is simply egregious. I’ve illustrated the point in a variety of ways over the years, typically using Fed data.

The Chase data referenced by Higginbottom produces a truly disconcerting visual. The figure (below) shows that while income gaps are large, liquid asset concentration disparity is twice as acute for African Americans versus whites.

That’s the breakdown by age group, but as Higginbottom noted, the overall figures show that for every dollar a white family has in a checking account, savings account, money market fund, or CD, an African American family has just 32 cents.

As you can imagine, the situation is even more discouraging when you combine gender and race. For example, for every dollar of liquid assets owned by a white man in America, an African American woman has just 26 cents.

Let that sink in. The median African American woman in the US has just a quarter for every dollar that a white man has.

There is no question in my mind (and there probably shouldn’t be in yours either) that the desire to preserve the state of affairs represented in those visuals is at least in part responsible for what I have subjectively assessed to be a too-large share of the popular vote for Trump if most voters were casting their ballots based solely on job performance or on the merits.

Of course, that assessment begs the question, doesn’t it? What counts as “performance” from an American president? And what are the “merits”? For many voters, those concepts are themselves defined in terms of actions taken and rhetoric employed to perpetuate the attitudes and structural biases that lead to the situation depicted in the visuals.

Frankly, America’s unwillingness to collectively acknowledge the reality of endemic racism and misogyny borders on the pathological. And that steadfast refusal to acknowledge reality is part of what’s driving disadvantaged groups to protest in the streets.

Critically, Americans would do well to wake up to the fact that the vast majority of society shares an economic interest in seeing the system overhauled. The charts above may “help” lower- and middle-class white males cling to a relative advantage over minorities and women, but that should be small comfort when the race- and gender-neutral statistics on wealth, income, and asset concentration show that at the end of the day, America is divided not based on race, gender, or creed, but based on wealth.

And those who possess wealth will do anything they can to preserve it. Including and especially stoking tensions based on race, gender, and creed. Divide, conquer, and stay rich.


 

23 thoughts on “Divide, Conquer & Stay Rich

  1. So unfortunate that absolute wealth, like power, tends to corrupt absolutely.

    Read recently about Robert F. Smith, the billionaire tech investor and philanthropist who founded Vista Equity Partners. Also the richest black man in the U.S. Remember he made headlines last year when he announced during his commencement address at Morehouse College that he would pay off the student debt of the entire graduating class. Turns out that was only after he learned he was being targeted in a personal tax probe that just concluded with him agreeing to repay $ 140 million from his hidden offshore wealth. He is worth over 7 billion. His late-stage philanthropy likely has successfully mitigated the overall impact of his greed.

    Talk about taking a feel-good story for the masses and absolutely gutting them a year later with the truth.

  2. Recall Ray Dalio warned that they (billionaires) either had to reform capitalism or face global revolution?

    “America is divided not based on race, gender, or creed, but based on wealth.

    And those who possess wealth will do anything they can to preserve it. Including and especially stoking tensions based on race, gender, and creed. Divide, conquer, and stay rich.”

    If you think this is ancient history and not relevant, you will be surprised to see the many parallels to current events. These films are particularly relevant insofar as they explain HOW wealth is preserved and the general lack of effective working-class resistance.

    it’s an accurate telling of our American history, and the American experience.

    The Plutocracy series, by filmmaker Scott Noble, is the first documentary series to comprehensively examine early American history through the lens of class (WEALTH).

    There are interesting times ahead.

  3. This was depressing to read on so many levels.

    But ultimately, we (the country) can do so much better.

    Look at what has been done with the East Lake Foundation in Georgia. Education, safety. Giving a base (or foundation excuse the pun) that can support upward mobility. It can be done. Why this is not used as an example of what can be done is amazing.

    I HOPE that President Biden addresses the needs and looks to ways to improve situations for all Americans.

    If we can encourage all Americans to be better through education, safety, opportunity, etc we all benefit. It could actually be that the sum really is greater than the parts. I truly believe that. I may be naïve but with leadership on a national level amazing things could be achieved and any govt investment (with accountability so no cronyism) would pay back in multiples in a higher quality of life.

    1. I did believe and thought that we could get back better through incremental reforms. COVID gave me another chance to believe we could do it.

      As we now see, If COVID didn’t help manifest reflection and reform, then lesser challenges will surely not be helpful to spur reform, much less needed, systemic change.

      Any longer, it’s perhaps only something so horrific as the U.S. losing a major war that could do it. A second candidate would be a crash in the financial economy and subsequent deflationary depression.

  4. “That backdrop is ripe for exploitation, especially when the masses fail to identify with one another as exploited members of a downtrodden super-majority, and instead see themselves primarily as belonging to disparate groups defined by race, religion, and creed.”
    That sentence reminds of South Africa during the Afrikaner rein. They were only about 10% of the total population but were able to keep the majority separated and subdued by creating “homelands” where the various tribes were told to keep their native language and stay in their “home” within South Africa. Worked for a long time, until Nelson Mandela and his party united the various factions.
    Trevor Noah (yes the South African TV host of Comedy Central) describes how this worked much better than I, in his book “Born a Crime”.

    1. We have a system here, as H accurately and eloquently describes, that effectively creates the same type of ‘homelands’ here as in South Africa. What we have to perpetuate it that South Africa didn’t have is the toxic belief that America is the greatest country in the world, or the shining star that all other countries should look up to (and bow down to). Why even think about changing when you are the greatest and, as some believe, chosen specifically by a higher invisible power.

      I don’t know how you get rid of that national concept except through violent destruction of the system. My guess is that’s not going to happen. The wealthy control most all the reins of power; money, guns, information and government institutions and to an extent that would make any dictator wet his or her pants. In most ways the divide between surfs and lords has never been greater. Last I heard Denmark is the place you should go if you want to pursue the ‘American Dream’.

      Add to this that humans are naturally inclined to believe in scarcity (for you to have more, I have to have less), and you have a prescription for a slow gradual decline of the current reigning global superpower. Notice too that any wealthy person worth his/her salt has a home(or homes) outside the US. Like a network of shell companies, they have gated lodging options around the world. A strategy they could have learned from Louis XIV when he decided to get out of Paris for Versailles.

  5. This is the first time I’ve felt compelled to comment on the great volume and content you so faithfully produce. This one touched a nerve and I thank you for laying out the case so plainly and eloquently. Although I considered myself a right-leaning moderate (of course I’m a white male) just a few years back, I’m now firmly in the progressive camp…thanks to a combination of your musings, the influences of my wife and daughter and the last four years of Trump and Trumpism. I will continue to do my part to try to help soften the other privileged few in my circle by encouraging them to “engage in self-reflection”.

  6. Inequality will only get worse in the future. Advances in interplanetary travel and fields leading to transhumanism will give the wealthy elites very expensive toys that will make class divisions not only endemic, not just structural – but deterministic.

  7. My science fiction Artificial Intelligence is a take over of the financial system by computers who view the current system as being counter productive. A.I. as a Robin Hood looking beyond Zero-Sum.
    I am glad the violence has not manifested. Trump is putting together one hell of a severance package for himself.
    By tarnishing Democracy he has collected enough in his PAC to pay himself $10,000,000 a year quite legally. That is what I have read, but nowadays I have learned to doubt everything I read…. Almost. Not here of coarse.
    The USA used to seem to be a place where the attitude was about lifting those at the bottom up, meritocracy also.
    Wealthy people never bothered me. People being poor and hungry bothers the hell out of me. Especially when modern efficiencies make it so counter productive.
    I wish Joe Biden the best.

    1. Ill-gotten money is not even the primary issue with Trump’s stolen election narrative. More significant is its corrosive effect on American politics where a significant portion of the electorate is potentially alienated from the lawful governance of the country by the incoming president and his administration. Additionally, there is the very real possibility that Trump will continue to dominate the Republican party by putting himself forward as its presidential candidate in 2024.

      National divisions and Republican obstructionism may reach new highs over the next four years.

  8. What’s interesting is that this post relies on data from the Chase PolicyCenter and the structure of the article is essentially just several previous articles explained as part of one socioeconomic structure.

    Further, if you actually read the JPMorgan Chase PolicyCenter recommendations mentioned in another Monday post here, the language around the statistics is actually more… well… “abrasive” isn’t quite the right word, so let’s just say “blunt,” than the language I use in the post above.

    Of course, they don’t mention Trump specifically, and they don’t use some of the terms I use, but they basically say (and I’m paraphrasing here): “Our data points to severe inequality along racial and gender lines and it really should stop. Here’s what we recommend…”

    My post here is just the truth. And because I’m a vivid writer, I’m able to communicate it in a way that resonates and to readers inclined to be offended by socioeconomic realities, comes across as unduly straightforward.

    All I’ve done here is state facts. Clearly, some of it is opinionated, but then again, long-time readers know I include so many caveats and disclaimers (e.g., “on the other hands” and “to be fairs”) in my commentary that some folks actually suggest I’m not as forthright as I could be.

    The point is simply this: Every, single article on Heisenberg Report is published with the sole intent to inform or to be thought-provoking. And every, single post is based on facts. This post is no exception. It’s not meant to be abrasive. It’s a fact-based critique of America’s socioeconomic reality.

    Think about all the ramifications from this article. For example, what does it mean for the velocity of money if, due to biases, conscious or otherwise, bankers are reluctant to lend to African Americans? Or to women (regardless of race) who want to start a business? How does that reluctance impair the monetary policy transmission channel?

    Or: How many minorities are unbanked unjustifiably? That is: unbanked not because they don’t have $500 to start a checking account or $1,000 to start a savings account, but because at some point they’ve had a bad experience? What would it mean if those potential customers became actual customers and accessed better, more efficient banking services and built relationships with their banks that allowed them to get loans for homes or businesses or refinance student debt.

    And on and on and on.

    This is why we have to recognize and get over these prejudices — it’s holding everything back. Not just morally, but economically.

  9. Amen. Socialism for the rich is the necessary domino that needs to fall here. In addition to its deleterious effects on equality and wealth It logjams politics by removing the opportunity of emergency.

    Unfortunately the fed and its policies has the support of both parties and will continue its unintended destruction for the foreseeable future.

  10. The US Constitution makes it very hard for any real change to take place. The structure of the Senate, the Electoral College, the difficulty of making amendments, and the nature of the Supreme Court are all barriers.

    1. Which means our democracy, like every other form of national organization ultimately dies if it can’t change. I worry, like you, that the system is beyond fixing at this point.

  11. Enjoyed the post and the comments. Like our author, my educational background is social sciences. The data on the structural problems are inarguable.

    The math is, too. I hate to go all Pogo on readers who, being an intelligent-sounding lot, probably are among the more fortunate residents of our nation, but the problem isn’t just one of billionaires exerting their weight through Congress or millionaires playacting roles on CNBC.

    The problem is really the top 10% of the income distribution, a stratum I’ve wandered into and out of more than once, maybe even the top 20%. Outsized benefits accrue to this group as though they really require them to survive and as though they are not benefits but rights.

    Just consider the CARES Act and the Economic Impact Payments. Did a household with an annual income of, say, $150K that experienced no loss of income really need $2K plus in cash? Did that windfall translate into spending at SMEs, many of which were shuttered around here back in Wave i? Or is it related to those increased car sales a few months later?

    The policy failures have all fallen on the lower half of the income distribution and the smaller end of the establishment universe. We may be in a K-shaped recovery. If we are, the lower leg is getting the worst of it.

  12. Thank you very much for your work. I only hope that your musings are re-published often with an appropriate compensation of course.

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