My Turn/Abrahams: Wealthy exercise most political power

  • ABRAHAMS

Published: 1/18/2017 5:05:26 PM

Like many others, I was horrified by the election of Donald Trump. What’s particularly striking about his election is how few people, even his supporters, have anything good to say about him. The strongest arguments made on his behalf are that he will shake things up, or protect the country from the immigrants, or seize control from the billionaires who are running things (a particularly ironic claim considering the people whom he’s named to his Cabinet). But the election results have obscured some long-term trends in the world that ultimately will prove more important.

Thanks to rapidly advancing technology, the world is becoming enormously more productive. That productivity has eliminated much of the demand for factory workers, which in turn has caused a lot of unemployment. Some jobs, to be sure, have moved to lower-wage countries, but the main source of unemployment is automation.

Once the public accepts the fact that there will never be jobs for everyone, the appropriate response looks very different. Increased productivity creates increased aggregate wealth. The biggest questions then are how it ought to be distributed and how to achieve that distribution.

The marvelous book “Capital in the Twenty-First Century” by Thomas Piketty describes how and why the portion of national income derived from labor is decreasing and the portion derived from capital, that is, investments, is increasing. Since the wealthy get most of their income from investments, inequality has been growing and will continue to grow unless measures are taken to restrain it. The discouraging fact is that the wealthiest exercise the most political power and have managed to persuade most of the population to accept the maldistribution by scapegoating the poorest.

But two things point in the opposite direction. As the proportion of economic losers grows, the pressure for change eventually becomes overwhelming, as it did in the French Revolution, in the election of FDR and his New Deal, and even in the Russian Revolution (though Soviet-style communism reversed much of that gain). Moreover, many realize that at some point, added wealth no longer increases satisfaction with life. They change their priorities from mere accumulation to improving the world. I think of George Soros, Bill Gates, Warren Buffett, and Andrew Carnegie in their later years. Carnegie once stated that his goal in life was to give away all his money before he died, and John Rockefeller IV was a quite progressive governor of West Virginia and later its senator.

Because inequality is becoming so extreme and applies even more to wealth than to income, quite modest taxation of great wealth can produce enormous government revenue. I think, for instance, of recovering the wealth and income lost to tax shelters, an income tax of, say, 20 percent with a large exemption, and a net assets tax of, say, 1 percent annually. It is vital, of course, that such taxes be inescapable.

That revenue could support a guaranteed basic income, provided without any work requirements and no reduction in payment for those who choose to work. In places as varied as Finland, Alaska, and Saudi Arabia, governments have experimented with providing at least some people with such a basic income. Interestingly, the guaranteed basic income has support both from liberals and conservatives. Liberals see it as helping the poor; conservatives see it as reducing and perhaps eliminating the need for targeted social benefits.

Even with a basic income, many people will still choose to work. Work provides extra income beyond bare necessities. It can provide structure to one’s life. And in order to find workers for what are now regarded as crummy or dead-end jobs, employers will have to pay more and improve working conditions. A guaranteed basic income will help both those who don’t work and those who do.

Two other long-term trends are climate change and degradation of the environment. Much of that can and should be slowed, though the effort to slow it will be set back over the next four years.

Yet in geological terms, four years is not a long time. The good news is a growing awareness of the problem, along with advances in the technology of energy production, particularly wind and solar. I expect the production of nuclear energy to increase greatly; new reactor designs promise to be safer and produce less radioactive waste. Many environmentalists are moving in this direction. Security, of course, is vital to prevent the diversion of nuclear materials, but the world has managed to avoid nuclear war for over 70 years.

Inevitably, the world of the future will look very different. People have willingly adapted to difficult climates such as equatorial Africa or northern Alaska, and even the idea of human habitation on the moon or Mars does not seem inconceivable. A dramatic long-term rise in sea level seems quite likely, but that still leaves plenty of land area even if it means the loss of species and of our coastal cities.

Uncontrolled population growth is a threat, particularly since it is most pronounced in the poorest groups and among religious conservatives. The reassuring news here is that richer societies have lower birth rates.

Time heals most wounds, and it will heal the wounds from this election. Whatever happens in the next four years will become less significant as it recedes into the past.

Paul Abrahams lives in Deerfield.


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