The Great Regression: Robert Reich’s New Film Mainstreams the Dangers of Income Inequality

By Pam Martens: October 3, 2013

If there is one must see film this year, it is Robert Reich’s newly released “Inequality for All.” If you’ve ever yearned to sit in a Reich public policy class at UC Berkeley, or get your mind around how Wall Street crashed the economy in 2008, or rid yourself of guilt that you’ve failed your family by losing your job or living from paycheck to paycheck – this is your opportunity to take a seat and let the warm and witty former Labor Secretary take you on a journey from 1928 to today.

The first stunner comes with the chart we have posted below showing that in 1928 and 2007 – the year before the two greatest financial crashes in U.S. history, income inequality peaked. In the film, Reich says about the graph: “The parallels are breathtaking if you look at them carefully.” Indeed they are.

Reich brilliantly animates this graph into a suspension bridge, demonstrating that there is a finite equilibrium of income distribution at which the U.S. economy can function. Since 70 percent of U.S. Gross Domestic Product is consumption, when workers are stripped of an adequate share of the nation’s income, they are not able to function as consumers. Less consumption means lower corporate earnings resulting in layoffs and then even lower corporate earnings and more layoffs. The vicious cycle feeds on itself.

Going forward at Wall Street On Parade, I will be calling this the Suspension Bridge Theory of Income Inequality: when the delicate balance of the structure shifts to extremes, it collapses under its own lopsided weight.

The data for the graph comes from the brilliant French duo whispered about in those secret Koch brother confabs as Piketty-Saez. They are indeed the nemesis of the Ayn Randians, proving with data going back to 1917 that dramatic income concentration at the top is a killer to the economy. Thomas Piketty teaches at the Paris School of Economics; Emmanuel Saez is the Director of the Center for Equitable Growth at UC Berkeley. Both wear the badge of honor of being denounced on the editorial page of the Wall Street Journal.

The next stunner for the public will come with the graph showing how after World War II and for decades thereafter, the income of the middle class was on a steady upward trajectory. Then, in the late 70s, the upward climb abruptly stopped. For the next three decades, adjusted for inflation, middle class incomes stagnated.

To compensate for that stagnation, women left the home and joined the workforce to make ends meet. Then the middle class began to work longer hours. Still struggling to keep pace with rising costs for food, shelter, medical expenses and college tuition, the middle class took on ever greater levels of debt – especially home equity loans, as their one major asset grew in value.

Occurring simultaneously over the intervening years, the number of people represented by unions fell from one-third of all workers to a stunning 7 percent. The ability of workers to negotiate for higher wages, and set a higher benchmark for all wage earners, died with the decimation of unions. And this was not a spontaneously occurring phenomenon. There was a heavy-handed and at times brutal corporate pushback against allowing workers to join unions.

But don’t get the wrong idea that this is a tedious economics lecture limited to graphs and charts. Reich buzzes around in his little Mini Cooper showing us the tragic human underbelly of this march toward inequality. One struggling mom admits she has just $25 in her checking account; another man has $30.

Interspersed with the Mini Cooper adventures are the faces of the hundreds of adoring young people in Reich’s classes at Berkeley. As Reich charts on big screens the undeniable evidence of a new Robber Baron class, we see close-ups of the students’ sad and disappointed expressions. He’s thinking, and I’m thinking, these young people looked to our generation to leave them a better and fairer America, and we have failed them. But how did we fail so abysmally?

At one point in the film, Reich looks a little teary eyed when he reflects on the 30 years he has preached about rising income inequality and yet failed to drive his message home. He tells us that during his time in the Clinton administration he harped on it so incessantly that people began to roll their eyes.

What happened in the roaring 20s also happened in the two decades leading up to the 2008 crash. More and more wealth became concentrated in the financial sector. Wall Street used that money to steal power from the electorate through lobbyists, and revolving doors, and financing political campaigns. The U.S. Supreme Court’s decision in Federal Election Commission v. Citizens United has effectively given billionaires the permanent power to control Congress and the Executive branch. How can the little people fight back when even the U.S. Supreme Court appears to be part of the conspiracy against them?

Reich presents a hopeful message at the end, telling students they must mobilize, energize and organize. He also reminds us of how our ancestors overcame all odds to enact unemployment insurance and Social Security, civil rights laws, voter rights laws. He draws a chuckle reminding students that even the Environmental Protection Act was passed under President Nixon.

But then there are those disturbing scenes of the police brutalizing those who did attempt to mobilize, energize and organize in Occupy Wall Street groups all over the country.

If the Supreme Court has enshrined the right of corporations to control elections; if the Department of Homeland Security has melded with local police to silence the voice of dissent and peaceful assembly; if the NSA is able to monitor our every conversation about realigning our democracy – how exactly does one organize for change?

The first step is clearly to educate the populace and deprogram the Fox News watchers. In addition to Reich’s film appearing in theatres, he is also making it available for the public to show to community groups beginning in 2014. You can get on the list now at this site.

There are many touching and remarkable anecdotes that Reich shares with us about his own life – like his sea voyage with Bill Clinton to take their place as Rhodes Scholars and the one tragic event that set Reich on a lifelong quest for a level playing field for the little guy. But I’ll leave that to Reich to share with you himself.

See this movie if you are serious about changing the world.

Income Inequality Graph from Robert Reich's New Film, "Inequality for All."


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