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 capab
A global observation.
https://www.oecd.org/sdd/household-wealth-inequality-across-OECD-countries-OECDSB21.pdf
I find it interesting that some of the best markets commentary comes from somebody with a large progressive streak. It makes my daily visits to the website doubly exciting.
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.
Let’s not forget that power and wealth tends to corrupt fairly equally no matter what side of the spectrum the person originally came from. It only took 30 years for Daniel Ortega to go from “revolutionary” to “authoritarian”. 30 years and Ortega is the new Samoza. It pays to be leery of anyone who purports to speak for the “people”
https://www.hrw.org/news/2020/10/08/nicaragua-ortega-tightening-authoritarian-grip
Dare I say, the most important piece I may have ever seen on this platform. Thank you H.
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.
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.
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.
Excellent content.
“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”.
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.
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”.
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.
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.
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.
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.
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.
Bravo! How do you get the middle and lower classes regardless of pigmentation, gods, and tongues to unite to demand a wealth tax or overt debt monetization?
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.
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.
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.
Thank you very much for your work. I only hope that your musings are re-published often with an appropriate compensation of course.
It is a well written article. Thank you. Should be outside the pay-wall.