For the past five years, as a new facet of my vocation, I’ve directed a master of arts in public leadership program in partnership with the Fox School of Business at Temple University, Philadelphia. We began this two-year curriculum to prepare leaders for social ministries such as Lutheran Services in America’s 300-plus agencies. In conversation with leaders of these agencies, one topic has consistently emerged: inequality.
Economic inequality has always existed. But over the past 50 years a new kind of inequality has appeared to stall progress, harm people and threaten the planet.
That inequality has grown is undeniable. In 2012 a greater gap existed than at any point since 1929 between the wealth of the top 1 percent of U.S. citizens and the remaining 99 percent. Kevin Philips signaled this troubling trend in Wealth and Democracy(Broadway Books, 2002). And economist Thomas Piketty clinched the case in Capital in the Twenty-First Century (Belknap Press, 2014).
Piketty documents how in the last 50 years wages have stagnated for most workers, while those for the top 1 percent have risen 165 percent (that’s 362 percent for the top 0.1 percent). In 2014 dollars, that means the average annual household income has remained flat at about $51,000, while incomes for the top 1 percent have risen to an average of $717,000, according to Forbes magazine. Many CEOs now routinely rake in annual salaries in the double- or triple-figure millions, when not long ago their salaries were much closer to those of the average worker.
And inequality in wealth — in accumulated capital — has expanded even more. Tax breaks favoring inherited wealth have produced what Piketty calls “patrimonial capitalism,” where family dynasties dominate political life. Forbes estimates that the top 1 percent control 43 percent of the wealth in America and the next 4 percent control an additional 29 percent. More than 70 percent of U.S. wealth is held by 5 percent of citizens.
Practically, this means decisions about investing in innovation are made by a startlingly small group.
Meanwhile, in this new “Gilded Age,” some social programs have been eliminated or cut and others (like Medicare and Social Security) struggle to sustain themselves. In Philips’ words, these trends “corrode American democracy” because they discourage innovation, reinforce privilege and encourage corruption.
Marks of inequality
A first mark of inequality is underinvestment. “Inequality,” economist Joseph E. Stiglitz argues, “means that [a society’s] most valuable asset — its people — is not being fully used.”
Underinvestment in education, infrastructure and technology obstructs people from realizing fulfilling vocations. “America,” Stiglitz concludes, “has become a country not ‘with justice for all,’ but rather with favoritism for the rich and justice for those who can afford it.”
A second mark of inequality is concentration. Political scientists Michael Hardt and Antonio Negri have shown how global inequality has produced a new kind of “empire.” It’s not linked to territorial conquest by a nation-state, but to corporate control of the global flow of information (think Google) and commodities (think cellphones), which are concentrated in fewer and fewer hands.
Stiglitz considers a CEO who earns a not-unusual salary of $21.7 million per year. Even if that CEO is indulgent, it will be a challenge to spend all of that $21.7 million in a year (I know, “let me try,” you say). But take that same amount divided among 500 people in jobs paying $43,400 apiece and almost all of the money gets spent.
“The relationship is straightforward and ironclad,” Stiglitz concludes, “as more money becomes concentrated at the top, aggregate demand goes into a decline.” That means businesses close, jobs end, people suffer.
A third mark of the new inequality is “financialization.” This refers to making money from money — by banks and traders, more than by traditional means of agriculture, manufacturing or other industries. This lack of diversification produces volatility. As in biological systems, diverse economic systems can adjust to changing circumstances. Monocultures are prone to disruption.
What can Lutherans do?
So we live amid a new kind of empire, with new inequality that impedes peoples’ potential. How — without being alarmed because we are saved by grace through faith and without creating scapegoats of the wealthy, some of whom do much good with their resources — can Lutherans respond?
Historically, many Lutherans have been frugal. Consequently some might favor calls for “austerity” and “shared sacrifice” as ways to end inequality. But these are reactions that have largely failed where tried. Because austerity programs require all to “sacrifice” (note well the religious language), they tend to blame and disproportionately harm those with the least. Who benefits? You guessed it.
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