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Wealth Inequality: Core Challenge for National Security

By Edward Corcoran / Ret. Strategic Analyst, U.S. Army War College /  04/30/2013


America prides itself on being the Land of Opportunity, and has made real efforts to be a land of equal opportunity. But it has never claimed to be a land of equal results. The driving force of the capitalist economic system is to get ahead with hard work and clever thinking, get ahead of the crowd in terms of assets and prestige. This is in stark contract to a socialist system focused more on levelling, “to each according to his needs.” This socialist concept largely collapsed with the Soviet Union, though some echoes remain in Europe. This contrast is intensified by an American focus on individualism, persons being responsible for their own well being. The Land of Opportunity tends to view those who do poorly as slackers, failing to take advantage of the opportunities they have.

Admittedly it is not a perfect system, and some are unable to take advantage of opportunities due to no fault of their own: individual handicaps, personal catastrophes, natural disasters and medical emergencies affect millions. Americans have also been generous to underdogs, those in need. But there has always been an underclass, people working for inadequate, or no, wages. Initially it was slaves and indentured servants, then freed slaves and new immigrants who worked their way up the Ladder of Success and were then replaced by still newer immigrants. This dynamic economy had occasional rough periods, but generally supported broad government programs providing defense, justice, and education as well as direct support to the economy with infrastructure, research, and regulation.

More recently this overall economic framework has been degenerating. Jobs, in particular, have been shrinking due to the impact of two forces: globalization and technology. Globalization has opened the American economy to direct competition from abroad, as well as drawn many manufacturing operations out of the country. Technology has intensified this problem by decreasing the need for individual workers. In particular, well paying jobs for people with low skill qualifications have practically disappeared; many people now out of work have given up on ever finding jobs. Although an aging population has raised concerns about a future lack of an adequate work force, the opposite is now true: the economy has more workers than it needs to produce essential goods and services. The challenge is not to find workers, but to find jobs for them, to spread work to a wider population, including more service jobs that enrich the lives of the population.

The underclass situation has also changed. There are still millions working for substandard wages, many of them immigrants, often in arduous jobs that people out of work simply decline to take. But a major difference is that the ladder of success which formerly allowed them to move up in economic status is now broken. More people are falling out of the middle class than moving into it. The technological advancements that have decimated many low qualification jobs require high qualification maintenance and oversight, but many of the jobless have the wrong or inadequate skills. One result is that immigrants are sought for higher skill jobs that people out of work are unqualified to fill. This provides a chilling comment on the state of our education system.

The weakened economy severely constrains government operations. This trend has culminated with federal sequester and widespread restriction of essential government functions, particularly maintenance and training activities where reductions provide easy immediate savings and create long term expenses. Education — already inadequate judging by the number of low qualified people unable to find jobs — is also significantly impacted. Job pressures reverberate through the economy. Reduced spending power by everyday citizens means small businesses, especially service businesses, close, hiring shrinks, joblessness becomes a vicious circle. The lower end of the work force is particularly hard hit. Poorly qualified workers find it practically impossible to find work that provides a living wage, much less a comfortable Middle Class life.

This naturally worsens underlying social problems. A big increase in economically desperate and frustrated people naturally translates into more crime and violence. Youth gangs attract the unemployed, property crimes rise, and the prison population rises. The United States already has by far the highest incarceration rate in the world and prison costs further strains government budgets, while the dismal job situation means many released inmates have little opportunity to become productive citizens — another vicious circle. The overall situation is creating optimal conditions for another Watts riot — in that case a small incident sparked off a riot involving thousands of local residents, with unemployment a key factor. With unemployment now stubbornly high, especially for some population groups, higher gun ownership and recent examples of raw violence, the idea of an angry armed mob torching an upscale neighborhood is hardly unthinkable. This situation is not helped by a precipitous drop in recent years of support for the mentally ill — another result of tight local government budgets. The explosions at the Boston Marathon vividly illustrate how disruptive even a couple determined individuals can be; copycat events are almost inevitable.

The prospect of national decline looms not from external forces, but from internal fragmentation exacerbated by global instability. The two, in fact, are intertwined. Global prosperity is the only key to global stability and the United States is the only nation in a position to lead such a transformation. But the current economic situation along with aspects of US military operations and diplomacy undermine such global leadership.

The sad aspect of all this fiscal tension is that the nation has more than enough resources to address all these challenges, but nearly 80 percent of the national wealth generated since 1973 has gone to the upper two percent. This top layer has an outsized influence on government, particularly with campaign financing and lobbying, and an outsize influence in the economy, controlling the financial sector and running major corporations in ways that maximize profits and squeeze workers. WalMart is a fine example. It has created a system that very efficiently provides a wide range of consumer goods at very reasonable prices. But it also is notorious for low wages, in contrast to companies like Costco which pay well above average wages and work hard to keep the loyalty of their worker. Unfortunately, the WalMart model is much more prevalent, especially among large corporations. This growing concentration of wealth in the hands of the upper class is of more than academic interest. The diverted money is what is needed to raise wages, build economic demand to foster real job creation, and improve government services and education. It is the difference between a nation with a broadly prosperous middle class and a nation riven by class differences.

Ironically, the immigration situation is fueled by wealth inequality in countries to the south where the concentration of wealth by the upper classes undermines the potential for jobs for the lower classes. The United States is their safety valve; some of their most dynamic and ambitious individuals head north — exactly the sort of people that are needed for a dynamic local economy. But wealth inequality in the United States is now on a par with those countries, so it is clearly difficult for the United States to urge these nations to spread wealth and jobs more equitably when America is doing so poorly itself. And there is no other country that serves as a safety valve for the United States, so pressures just continue to build. Wealth inequality in the United States not only underlies domestic economic degradation, but also undermines U.S. ability to lead on a global scale, to promote the types of actions needed to build the global prosperity on which domestic prosperity is ultimately based.

And the answer to this challenge of wealth inequality is that there is no answer, no specific action that can reverse two hundred years of economic development. The entrenched political power of the top layer is supported by a much wider democratic sclerosis — millions of everyday citizens defending their own small concessions by opposing efforts at restructuring. The only reasonable approach is to develop individual programs which improve the overall situation and constantly re-evaluate and adjust them. The first step is recognizing the problem, realizing that wealth inequality is not just at odds with long-standing American values but is badly eroding U.S. social cohesion and ultimately internal stability, the true bases of national security.

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