Political Turmoil Reflects Vast Inequality

Political economists’ warning that the large rise in inequality over the past decades would lead to political turmoil and social unrest has finally come to pass. If the Trump administration wants to reduce divisiveness and bring the country together, then national policies must reduce inequality. However the Republican’s policies based on free market economics will increase inequality. In contrast, government policies based on a holistic sustainable market approach, called Buddhist economics, can improve the quality of life for all Americans and help heal our political divisiveness and turmoil.

A country’s inequality is not an inherent outcome of capitalism, but a choice that the country makes through its national laws and institutions. So far Trump’s proposed policies will increase income mostly for the rich, and will reduce social programs that improve the lives of the working class. Trump’s focus on reducing taxes will mainly reduce taxes for the rich. The proposed shifts of funds from social programs to defense spending will shred the safety net and reduce health care, food programs, and job training for working class families. Plus the EPA’s support for coal, oil and gas projects will pollute U.S. air, water, and land, which harms American’s health, as it promotes global warming and harms people around the world. Republican lawmakers fight against specific policies known to reduce inequality, including higher minimum wages, more progressive taxes, increased child benefits, and stronger worker bargaining power.

The Republican respond that these free market policies will promote economic growth that provides jobs and raise incomes. But the surge in income and wealth since the mid-1970s has been captured by the top 1 percent and has done little to benefit the majority of families, who have experienced stagnant incomes. Then many families suffered large wealth losses in the 2008 mortgage crisis. The banks were bailed out, but homeowners were not. In the United States, the bailout cost taxpayers $21 billion, plus billions in lost wages.

The recovery from the deep recession demonstrated once again that economic growth can no longer be our primary national policy to increase family incomes and provide good jobs. When we look to see who has benefited from the Trump election, we find that Wall Street has profited handsomely. The stock price of Goldman Sachs skyrocketed, as Trump nominated several Goldman Sachs executives to his cabinet.

Proponents of free market economics argue that inequality is required in order to provide incentives for people to work hard and be rewarded for their contributions to the economy. But does inequality actually provide incentives by rewarding good performance? A recent study of CEO pay (value of total annual compensation) and the performance of the CEO’s company (revenue and profit) shows that as CEO pay goes up, company performance goes down. CEOs with lower pay run companies with better performance. Furthermore, the negative relationship between CEO pay and company performance was most pronounced in the 150 firms with the highest-paid CEOs. Yet free market advocates continue to argue that outrageous CEO pay provides required incentives.

The other argument that free market enthusiasts make is that more income for the rich will “trickle down” and make everyone better off. Yet research demonstrates that trickle-down economics does not work— reducing the taxes paid by the rich is not related to higher saving, investment, or productivity growth. Instead reducing taxes paid by the rich increases their share of total income and inequality.

The alternative holistic Buddhist economics model argues for tax reform with more progressive income and capital gains taxes to redistribute income from the rich to those in need, to help families eat better, be healthier, and live more fulfilling lives. Buddhist economics shows how
Trump’s policies will increase inequality and reduce American’s quality of life and speed up global warming. As inequality increases, people look for a scapegoat, and Trump gives us globalization and immigration. But economists already know the policies that will create an innovative, productive, and healthy economy—clean energy infrastructure, progressive taxes, child benefits, worker bargaining power, strong safety net for hard times, standards to protect labor and our environment, and affordable health care and college education.

Now is the time for egalitarian policies that bring back progressive taxation, reduce inequality, and unite our nation in shared prosperity, rather than regressive policies that increase both inequality and political turmoil.