Robert Reich: The Three Myths Used By Ultra-Wealthy To Justify Ultra-Wealthy – OpEd

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The stock market is down but don’t cry for America’s mega-billionaires. A record share of the nation’s wealth remains in their hands. They’re also paying a lower tax rate than the average American. 

So how do they justify their wealth and their low tax rates? By using three myths. All are utter rubbish. 

1. The first is trickle-down economics. They (and their apologists) claim that their wealth trickles down to everyone else as they invest it and create jobs.

Really? For over forty years, as wealth at the top has soared, almost nothing has trickled down. Adjusted for inflation, the median wage today is barely higher than it was four decades ago. Trump provided a giant tax cut to the wealthiest Americans, promising it would generate $4,000 increased income for everyone else. Did you receive it? 

In reality, the super-wealthy don’t create jobs or raise wages. Jobs are created when average working people earn enough money to buy all the goods and services they produce, forcing companies to hire more people and pay them higher wages. 

2.  The second myth is the “free market.” The ultra-rich claim they’re being rewarded by the impersonal market for creating and doing what people are willing to pay them for. The wages of other Americans have stagnated, they say, because most Americans are worth less in the market now that new technologies and globalization have made their jobs redundant.

Baloney. Even if they’re being rewarded, there’s no reason why the “free market’ would reward vast multiples of what the rich were rewarded decades ago. The market can induce great feats of invention and entrepreneurialism with lures of hundreds of thousands or even millions of dollars — not billions. And as to the rest of us succumbing to labor-replacing globalization and labor-saving technologies, no other advanced nation has nearly the degree of inequality found in the United States, yet all these nations have been exposed to the same forces of globalization and technological change. 

In reality, the ultra-wealthy have rigged the so-called “free market” in America for their own benefit. 

Billionaires’ campaign contributions have soared from a relatively modest $31 million in the 2010 elections to $1.2 billion in the most recent presidential cycle — a nearly 40-fold increase. What have they got for their money? Tax cuts, freedom to bash unions and monopolize markets, and government bailouts. Their pockets have been further lined by privatization and deregulation.

3.  The third myth is that they’re superior human beings — rugged individuals who “did it on their own” and therefore deserve their billions. 

Bupkis. Six of the 10 wealthiest Americans alive today are heirs to fortunes passed on to them by wealthy ancestors. 

Others had the advantages that come with wealthy parents. Jeff Bezos’ garage-based start was funded by a quarter-million dollar investment from his parents. Bill Gates’s mother used her business connections to help land a software deal with IBM that made Microsoft.

Elon Musk came from a family that reportedly owned shares of an emerald mine in Southern Africa. (By the way, when I mentioned this in a recent video, Elon went nuts — tweeting that “You [sic] both an idiot and a liar.” Hmmm. Did I touch a nerve, Elon?)

Don’t fall for these three myths. Trickle-down economics is a cruel joke. The so-called “free market” has been distorted by huge campaign contributions from the ultra-rich. Don’t lionize the ultra-rich as superior “self-made” human beings who deserve their billions. They were lucky and had connections. 

In reality, there’s no justification for today’s extraordinary concentration of wealth at the very top. It’s distorting our politics, rigging our markets, and granting unprecedented power to a handful of people. 

The last time America faced anything comparable was at the start of the 20th century. In 1910, former President Theodore Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power” could destroy American democracy. 

Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916, and the capital gains tax in 1922. Since that time, both have eroded. As the rich have accumulated greater wealth, they have also amassed more political power — and have used that political power to reduce their taxes.

Years later, Franklin D. Roosevelt saw the 1929 crash not only as a financial crisis but as an occasion to renegotiate the relationship between capitalism and democracy. Accepting renomination in 1936, he spoke of the need to redeem American democracy from the despotism of concentrated economic power. 

“Through new uses of corporations, banks and securities,” he said, an “industrial dictatorship” now “reached out for control over Government itself. … [T]he political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people’s property, other people’s money, other people’s labor—other people’s lives… Against economic tyranny such as this, the American citizen could appeal only to the organized power of Government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people’s mandate to end it.”

FDR gave workers the power to organize into labor unions, the 40-hour workweek (with time-and-a-half for overtime), Social Security, unemployment insurance, and workers’ compensation for injuries. He raised taxes on the top. 

But since then, these reforms have also eroded.

The two Roosevelts understood something about the American economy and the ultra-rich that has now reemerged, even more extreme and more dangerous. We must understand it, too — and act. 

**

By the way, here’s the new video that put Musk into a lather:

Robert Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, and writes at robertreich.substack.com. Reich served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fifteen books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good," which is available in bookstores now. He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

3 thoughts on “Robert Reich: The Three Myths Used By Ultra-Wealthy To Justify Ultra-Wealthy – OpEd

  • October 1, 2022 at 7:01 am
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    I bitterly agree with everything you’ve written. It’s very easy for me to become cynical when they own the politicians and control of our government and have laws written to benefit them . What can we do and how can I help to change any of this?

    Reply
  • October 1, 2022 at 3:50 pm
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    While I agree that alot needs to be done to uplift the masses economically to ensure everyone is enjoying a fair share of wealth, at no point are people expected to have equal wealth. We should therefore not demonize successful entrepreneurs who have against great odds built global business empires that impact the whole world and the American tax coffers. It’s easy to dismiss Elon Musk’s success to shares that the family owned in an Emerald mine? Really, what role did that mine have in Elon’s succesive entrepreneurial pursuits? So what if Jeff Bezos received Usd. 250,000.00 from his parents savings to start Amazon.com, he parlayed that into a Usd. 1 trillion global empire that makes a huge contribution to the American economy. You have alot of solid arguments to bring down wealth inequality including introduction or reintroduction of taxes that can improve the balance. You can still make your case without bashing and minimizing the achievements of others.

    Reply
    • October 2, 2022 at 12:51 am
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      That’s all fine. I’m happy for their success but then they should be paying their personal share of taxes. And then they should distribute the wealth at the top to the workers at the middle and bottom who are doing the work to make the business run. Who is going to pay for the Teslas, the iPhones, or the useless crap coming out of Amazon if there is no working person left who is able to afford them?

      Reply

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