Unleashing the Transformative Potential of an Equitable Economy
The Institute for Policy Studies’ Chuck Collins says that to reverse inequality in the US, we need a “next system” for the economy
DHARNA NOOR: Welcome to The Real News Network. I’m Dharna Noor joining you from Baltimore. Several recent studies have identified growing inequality as a serious problem both for the U.S. and around the world. The latest study conducted by the Institute for Policy Studies and the Next System Project not only documents the reality of inequality, but tries to pinpoint its causes and presents a number of policy recommendations to reverse the trend.
Joining us to discuss the study is its author, Chuck Collins. Chuck is a senior scholar at the Institute for Policy Studies, where he directs the program on inequality and co-edits Inequality.org. His newest book is Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good.
Thanks for joining us today, Chuck.
CHUCK COLLINS: Thanks for having me, Dharna.
DHARNA NOOR: Before we get into the causes and the solutions of inequality, let’s start with just the sheer reality of it. How bad is it now and what are its main indicators?
CHUCK COLLINS: Well, we’re living in a time of extraordinary inequality that in the United States is nothing … No one has seen something like this unless you were born in 1916. Really, that was the last time we had these levels of extreme inequality. It’s both income and wealth and opportunity. One indicator I point to, just in the last 10 years almost all the growth in income and wealth has gone not to the top 1% but to the top 1/10th of 1%, people with wealth starting at 20 million and up. That’s what we’re living through. We’re living through an economy that’s funneling wealth to the top.
DHARNA NOOR: Your study identifies several different causes or contributing factors to that kind of rise in inequality. Could you summarize sort of the main ones for us, the main factors that contribute to inequality?
CHUCK COLLINS: Well, I think that one of the most important drivers to understand is that this isn’t sort of a weather event. It isn’t a function of technology and globalization, which compounds inequality, but the real driver is a power imbalance. It’s the way in which the rules of the economy have now been tilted to benefit asset-owners at the expense of people who work for wages. As wealth concentrates in fewer and fewer hands, the wealthy actually use their power to change the rules and distort the economy further. One driver is what I would call sort of the oligarchy dynamic, which is the corrosive impact of concentrated power in the hands of a few.
DHARNA NOOR: As you say in the study, some attribute that kind of inequality to cultural differences or individualism, individual choice not to succeed as sort of a meritocratic argument. Why don’t those arguments hold weight with you and in your study?
CHUCK COLLINS: Well, I think what we’re seeing is these inequalities are sort of almost delinked from individual merit, effort, work. In fact, one of the things that keeps us from addressing inequality are those stories, mythologies, I would call them, of deservedness, the idea that we’re unequal because some people work harder and some people don’t work as hard. That simplistic story just is completely inadequate to explain these systemic drivers that are pushing us apart at a rapid, rapid pace.
DHARNA NOOR: Each of those systemic drivers, each type of cause of inequality has a different sort of solution. You in your study group those solutions into four categories. There’s lifting the floor, leveling the playing field, de-concentration of wealth, and rewiring the rules of the system. Could you talk more about what those mean and what solutions fall into each category?
CHUCK COLLINS: Yeah. It’s important to realize that there are different drivers and different ways to fix it, so lifting the floor are things like raising the minimum wage. Many societies, many European Nordic societies don’t have the same level of inequality as the United States because they have a higher floor. They have a social safety net and a higher floor, higher wages, guaranteed universal insurance, access to lifelong learning and education. Those are the things that keep people from falling through the floor into destitution. That’s a piece of the solution.
There are the things I would call leveling the playing field or things that just sort of reduce the fact that we sort of have one set of rules for the wealthy and one for everyone else and distortions caused by the influence of money in politics. There are rule changes that level the playing field.
Both of those things are important, raising the floor, leveling the playing field, but they’re completely insufficient because the concentrations of wealth and power are overwhelming us now. We have to do something to address this concentration of wealth and power, and those solutions often involve taxation, taxing the wealth of the top, high income taxes, high inheritance taxes, but because this is a report on sort of looking at what’s the next system, I also think part of the solution is just rewiring capitalism, rewiring what we call capitalism.
For instance, expanding worker ownership. If we had much broader ownership of wealth and ownership of businesses, then we would almost be pre-distributing wealth before it became unequal. You have a situation like the owner of Chobani yogurt, who gave 20% of the ownership of the company to his employees. That broadens wealth. Those are the kinds of things that actually get into the wiring of the economic system that right now is creating the inequalities we’re trying to address.
DHARNA NOOR: Now stepping back a little bit, you argue that we should look to European countries, developed European countries with less inequality than the U.S. as models. How do you respond to those who say that equity in those countries is easier to achieve because they’re less diverse than the U.S. ethnically, racially, culturally?
CHUCK COLLINS: Well, I would agree. I think that in some respects, race has been used as a divider to build popular support for some of these solutions, but actually, the Nordic countries, and Sweden is a good example of this, it’s much more diverse than we think. Many of the lessons that we can draw from them are lessons that could be applied in a United States context. In fact, they’re similar to the kinds of things that we did after World War II.
After World War II, we taxed wealth at high levels. The inheritance tax, state taxes were much higher, and we invested in public goods like infrastructure, debt-free college education, and things like first-time home-buyer loan programs. Now in the context of after World War II in the United States, there was overt racial discrimination in those wealth-building programs, but there’s nothing inherent in the design of them that we couldn’t repeat with a special attention to how we should reduce the racial wealth disparities at the core of it.
I think we could learn from both the lessons and mistakes of the U.S. efforts to create a kind of a shared prosperity society, but we could also emulate the European model, which went further. We kind of made a wrong turn in the ’70s in terms of moving toward a society that was going to lift the floor and create opportunity for more people. We went toward this hyper individualistic market economy, whereas other societies kept moving toward greater equality. I think we have a lot to learn from our own experience as well as other countries with much less inequality.
DHARNA NOOR: Lifting the floor and leveling the playing field seem pretty straightforward comparatively. The policy proposals that you just laid out seem relatively straightforward, but how do you de-concentrate wealth without expropriation of wealth from those who have the most, or if you do expropriate, how could such a proposal actually fly in this hyper capitalist system that is the United States?
CHUCK COLLINS: Well, that’s a good question. We a century ago had these same extreme inequalities, but we put in place progressive income taxes, progressive inheritance taxes, antitrust policies that prevented the concentration of business power. Over a generation really between 1920 and 1945, we moved in a very different direction. Some people might have felt like the New Deal was appropriating income and wealth. In fact, the inheritance tax in 1936 almost was at a 90% level on fortunes above a certain threshold. We did have steeply progressive income and wealth taxes.
It’s hard to imagine that in today’s political environment, except that an overwhelming percentage of people now really support ensuring that the wealth pay their fair share. I would argue if we linked wealth taxation to something that people understood broadly as helping expand opportunity … Let’s say the elimination of student debt. Let’s create an education trust fund, debt-free college education for all, funded by a progressive tax on wealth over 50 million and up. All of a sudden, I think you have a political constituency that would support those policies.
I think that even in the Trump era, when you ask people, “What do you think about the level of inequality and what do we do about it?” people broadly support that. It may seem very far-fetched, but actually, I think in the next couple of years, we might see a realignment around progressive populist economic policies that reduce concentrated wealth and link that revenue to things that lift up everybody.
DHARNA NOOR: There’s another proposal in your study that I wanted to ask you about specifically. You propose federalizing the corporate charter. What does this mean and how would it help establish greater equality in the U.S.?
CHUCK COLLINS: One of the things that corporations do is they pit states against each other within the United States. You have states like Delaware, South Dakota, Wyoming, where incorporating a corporation is easier than getting a library card, because if you’re trying to get a library card in Wyoming, you at least have to prove who you are and where you live. There’s been this almost race to the bottom of who will require the least of that corporation. These are global corporations incorporated in states that don’t require hardly any documentation.
One way is to say, look, if you’re a global corporation or if you operate across state lines, you should get a federal charter, and the federal charter should require more disclosure and transparency and reporting and should require, make it impossible for companies to kind of game the system and eliminate their taxes. That’s one way in which a federal charter would kind of keep that dynamic from happening.
DHARNA NOOR: Your proposals all amount to essentially what some would call a social democratic program of redistribution. You call it, quote, “rewiring capitalism,” as you said. How do you respond to those who would say that as long as you don’t dismantle capitalism as such, you leave the door open for the wealthy to just rig the system back into their favor?
CHUCK COLLINS: Well, I’m sympathetic to that. What I find is the kind of rewiring of capitalism that I’m proposing in this report would fundamentally change capitalism. It would be a different kind of economic system. It would be kind of like the Next System. I think we have to create ways to protect the common wealth or the commons, nail it down in a system of ownership that’s local ownership, state ownership, non-profit ownership. Think of the housing market in any community where we live. More and more of the housing market should be part of a non-speculative system. We might have a private market system alongside a social housing market system as long as we’re nailing down and protecting most of that system for most people.
I think that would move us toward a kind of rewiring of capitalism to the point where we may not be calling it capitalism anymore. We just don’t have a good name for it. It’s not socialism in the sense of state ownership of everything. It’s kind of a patchwork of common ownership and private ownership. That’s what I’m proposing as sort of our … as a way of transition and to look at sort of a Nordic model as one step to move us in that way.
DHARNA NOOR: All right. Chuck Collins from the Institute for Policy Studies, thanks so much for joining us today.
CHUCK COLLINS: Thank you for having me.
DHARNA NOOR: Thank you for joining us on The Real News Network.