America’s New Robber Barons

JP Morgan.png
Drawing by David Levine
John Pierpont Morgan













One other major point requires some attention. This runaway at the top is different from other periods of great inequality, like the late 1800s. Back then, the Robber Barons may have kept money due to monopoly advantages and their power over workers. All the while they were adding to GDP by building oil and steel giants, railroads, and mass production companies from chewing gum to cars.

Today’s people at the top exploit workers in somewhat different ways. There is constant pressure to keep wages down by CEOs in order to push up stock prices. This is the modern-day Robber Baron equivalent. Corporate takeover and leveraged buyouts have had the same effect: they build up cash flow by cutting expenses in order to pay off the debt they took on for their huge acquisitions. This is how Wall Street helps creates a culture in which it is considered okay for a company to fire workers while giving its CEO a giant raise.

But much else of what happens on Wall Street has nothing to do with the real economy, except to waste hundreds of billions of misdirected savings that are plowed back into useless speculation and casino-like gambling by the very rich on trades among themselves. As we have seen, it was this kind of reckless trading that fueled the credit crisis and the collapse of investment houses like Lehman in 2008. The way to deal with this is more serious regulation, including restrictions on the amount of leverage buyout artists and privatizers are allowed to take on. And since we are talking about outrageously high incomes at the very top, higher taxes on the highest earners also make very good sense because much of that income was not reflecting real contributions to the economy—in fact, it was arguably doing just the opposite.

So Occupy Wall Street is right: the financial firms are much to blame for runaway incomes at the top. Yet understanding the nature of inequality in America should place the focus where it truly belongs, on the other 99 percent. Wages have by and large stagnated in America. The real problem is that America’s job machine is broken. Wall Street is partly but not entirely responsible for this. And policies to adjust this—persistent fiscal stimulus, substantial public investment in infrastructure and industry, a lower dollar to the yen, a higher minimum wage, and direct job creating programs like the New Deal’s Works Progress Administration—are what’s needed. If we do not begin to develop such policies, we will not have only the problem of runaway incomes for the few at the very top, but a large and growing part of the population—some of which is highly skilled and educated—that is cut off from the economy altogether.