Credit: Creative Commons
At dinner with friends recently, the subject of rents came up.It’s a big topic around San Francisco, because an influx of new money (from hi-tech, mostly) and other factors have made that city a landlord’s delight. When they moved out of their two-bedroom apartment, our friends told us, the landlord raised the rent a thousand dollars, to $3800 a month. “It was nothing fancy,” they said, “hadn’t been updated in years, an ordinary middle-class neighborhood.” The new figure was almost exactly the San Francisco median rent for a two-bedroom this year and a little below the corresponding average as of last month: $3898.
My friends had heard of renters offering well over the asking price – more than double the average in one case – to be sure of getting a place that was otherwise undistinguished but came with parking or a good location for errands and walks.
So that’s my main quibble with Nick Hanauer’s rather remarkable screed on Politico, “The Pitchforks Are Coming…For Us Plutocrats.” In this “Memo To: My Fellow Zillionaires,” Hanauer makes an eloquent (and perhaps disturbing to its intended recipients) plea for what San Francisco and Seattle have deemed a livable minimum wage, $15 an hour.
The underlying economics are simple: people who can pay the rent and buy groceries need less public assistance, put more money into circulation, generating prosperity for those who have goods and services to sell, which in the long-run reduces the tax burden as well. In contrast, Hanauer cites the case of Wal-Mart:
Wal-Mart is our nation’s largest employer with some 1.4 million employees in the United States and more than $25 billion in pre-tax profit. So why are Wal-Mart employees the largest group of Medicaid recipients in many states? Wal-Mart could, say, pay each of its 1 million lowest-paid workers an extra $10,000 per year, raise them all out of poverty and enable them to, of all things, afford to shop at Wal-Mart. Not only would this also save us all the expense of the food stamps, Medicaid and rent assistance that they currently require, but Wal-Mart would still earn more than $15 billion pre-tax per year. Wal-Mart won’t (and shouldn’t) volunteer to pay its workers more than their competitors. In order for us to have an economy that works for everyone, we should compel all retailers to pay living wages – not just ask politely.
Hanauer’s essay is very clever and shrewd. He has studied history well enough to understand that this kind of class polarization is radically unstable:
If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.
Hanauer also understands money well enough to both make tons of it and to see that the rich are not the primary job creators, contrary to the right’s rhetoric:
We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good.
Most deliciously, Hanauer understands the definitive role that blind luck and other forms of randomness play in good fortune. (He “got as lucky as a person could possibly get in the Internet age by having a buddy in Seattle named Bezos” – Jeff, that is, the founder of Amazon.com.)
So forget all that rhetoric about how America is great because of people like you and me and Steve Jobs. You know the truth even if you won’t admit it: If any of us had been born in Somalia or the Congo, all we’d be is some guy standing barefoot next to a dirt road selling fruit. It’s not that Somalia and Congo don’t have good entrepreneurs. It’s just that the best ones are selling their wares off crates by the side of the road because that’s all their customers can afford.
I enjoyed Hanauer’s article tremendously and I highly recommend it to you, despite the fact that his main point is a little removed from on-the-ground reality.The super-rich often have difficulty getting a grip on real-life calculations in the lower ranges.
A 40-hour work-week at $15 an hour equals a gross income of $600 per week, or about $2400 a month. With the normal deductions, a two-income household would net no more than $4000 per month, or $48,000 a year. This is a living wage for a couple in many parts of the country – in some states, it even leaves room for little luxuries and treats. But in San Francisco and Seattle, the enlightened cities Hanauer lauds for understanding that a decent wage for the lowest-paid benefits everyone, after covering the rent, it would leave just enough to buy rice and beans to get you through the month.
Credit: Creative Commons
I don’t know how much success Hanauer will have in awakening his fellow plutocrats to the dangers of their present path and the benefits of behaving decently, though I hope he succeeds. In a way though, it doesn’t matter, because there are so many more of us than them. What we do matters more. Joseph Stiglitz, former chief economist for the World Bank, has been moderating a six months-long series at the New York Times called “The Great Divide.” The subject is inequality.
In the final post, Stiglitz reviews the shameful state of this country: the “political system is overrun by money;” “corporate welfare increases as we curtail welfare for the poor;” “economic and geographic segregation have immunized those at the top from the problems of those down below;” “with almost a quarter of American children younger than 5 living in poverty, and with America doing so little for its poor, the deprivations of one generation are being visited upon the next.” “In the eyes of the rest of the world,” Stiglitz writes, “and a significant part of its own population, mass incarceration has come to define America – a country, it bears repeating, with about 5 percent of the world’s population but around a fourth of the world’s prisoners. Justice has become a commodity, affordable to only a few.”
Stiglitz ends with an exhortation to the other 99.99 percent (as Hanauer characterizes us):
We have located the underlying source of the problem: political inequities and policies that have commodified and corrupted our democracy. It is only engaged citizens who can fight to restore a fairer America, and they can do so only if they understand the depths and dimensions of the challenge. It is not too late to restore our position in the world and recapture our sense of who we are as a nation. Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves.
In an otherwise discouraging moment in U.S. political life (it’s hard to overstate the stupidity and cruelty of the Supreme Court’s recent Hobby Lobby decision, a gesture of welcome to bigotry in action that institutionalizes the right to discriminate so long as it’s grounded in “religious belief”), it lifts my spirits to see growing recognition that the cost of upholding the right to rule of our new oligarchs is not bearable. I hope with all my heart that our national neocortex takes action before our amygdalae pick up the pitchforks. I guess that’s our call, hm?
Moments of beauty sustain us. “Silent Song” by Mighty Sam McClain and Mahsa Vahdat.
What has American prosperity done to the environment? That question looms large in the presents of human influenced climate change & global warming. Our economy is predicated on infinite expansion, while our planets resources are finite. Because of dwindling quality of natural resources( the high quality stuff that built the middle class is gone), the economic expansion that the rebuilding of the middle class depends on becomes far more expensive than what it took to create the golden years of the middle class from 1946 to 1980. And, the degradation to the environment becomes more severe.
Hanauer didn’t address this aspect of recreating prosperous consumers that would insure the wealthy get wealthier.