The first day I arrived to Berkeley for my undergraduate studies, I remember seeing a bumper sticker that said “Eat the Rich.” I was at once amused and puzzled: It seemed a little histrionic for the era. It was late 1970s, and a very different time. It was a time when the undergraduate tuition at UC Berkeley was less than $1,000 per year and the citizens of the California spent about 5.6% of their personal income on education. California schools were the envy of the nation, even the world. During this time, the top 1% of US income earners amassed 12.8% of the national income whereas the bottom 80% earned 48.1%.
But times have changed — now it costs over $12,000 dollars per year to attend the University of California, and Californians have reduced their personal income contribution to the school system by 20%. The K-12 educational system went from one of the best in funding and test scores to one of the worst in the nation. Presently, the top 1% of income earners garner about 21.3% of the national income, an increase of 66%, whereas the bottom 80% earned 38.6%.
Much of the malaise of the California educational system can be traced back to Reagan’s tax revolution. This caused an inevitable concentration of wealth, which destabilizes the economy: As more wealth gets locked at the top of the pyramid, there’s less to go around for social services for the poor and middle class. In addition, education, the best path toward upward mobility, is squeezed. Moreover, when so much of additional income goes to those who already have so much, less is spent. How many cars, homes, shoes, TVs, etc. can one household buy, after all? This leads to less overall consumption, and less economic activity.
It is easy to see why concentration of the wealth is bad for the poor and middle class, but it’s bad for the wealthy as well. Things can turn bad very quickly. One little comment about eating cake and you find your head in a basket at the feet of Madame Defarge. For example, take a look at what’s happening in the Middle East: The plutocracies there continue to take too much during lean times. In the 1990s when Tunisia was relatively flush, even with the totalitarian regime in place, the people were relatively calm. It wasn’t until the global financial crisis unfolded, and people found themselves without jobs that the bloated Trabelski-Ben Ali clan was run out of the country. We’re seeing variations of the same story in Egypt, Morocco, Iraq, and Libya. People tend to take to the streets when they have nothing to lose.
This drama has been repeated throughout history in France, Russia, China, Cuba, Chile, to name a few. But it certainly could never happen in this country. Right? Although the United States has not seen widespread insurrection of the proletariat masses, we have indeed had social revolutions following periods of extreme wealth accumulation. In the late 1800s, the concentration of the wealth and the excesses of the industrial sector known as the “Gilded Age” ushered in the Progressive Era. This resulted in a series of laws designed to level the field such as regulation of business activity, suffrage for women, and the establishment of the progressive income tax.
Another example where the tide turned toward the workers and the poor was when the Bonus Army took to Washington D.C. The Bonus Army was made up of veterans of WWI who were suffering during the Great Depression. They asked Congress for an early payment of their promised bonus. When that was denied, they stayed in Washington D.C. camping out and protesting their treatment. One day in July of 1932 General McArthur burned the Bonus Army’s encampment on the Anacostia River to the ground killing a baby and destroying their meager possessions. This shocked the nation and laid the groundwork for The New Deal.
Today, the concentration of the wealth is even more severe than during the Great Depression. There’s greater income inequality here than there was in Egypt of Tunisia. There are millions of people out of work, struggling to get by. There is a concerted effort by some to bust labor unions, thereby further eroding the middle class. George Santayana said “Those who cannot remember the past are condemned to repeat it.” We can hope the top one half of one percent will take the lessons from history or we can await the changes that are sure to come.
Teresa Laughlin is a professor of economics at Palomar College.
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