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America’s Wealth Gap Widening

March 1, 2021

Forbes magazine’s annual billionaires report for 2020 revealed that the net income of America’s 660 billionaires (including 43 newcomers) has increased by $1.1 trillion since the onset of the COVID-19 pandemic. Given that the total American economy declined during this period, these profits are a de facto transfer of wealth from one sector of the economy to another. The present wealth of America’s 660 billionaires is two-thirds greater than the combined wealth of the 165 million Americans in the lower half of economy.  

The leading justification for these circumstances is that winners and losers in the capitalist system are constantly in flux, and chance is always a factor in “the invisible hand of the marketplace.” Moreover, winners during the pandemic generally have been businesses that already were leading technological innovators that had organized themselves to serve the new economy efficiently. The pandemic only accelerated trends already in place.

An alternative view is that pandemic profits had little to do with the supply and demand dynamics of capitalism. The pandemic is a once-in-the-century phenomenon profoundly affected by the particulars of the disease. Accurate analysis of the pandemic’s impact requires placing the economy in a national long-term context rather than in the immediate fate of competing firms.

The COVID-19 economic losers were mainly created by a health emergency that required lockdowns and other mandated measures discouraging in-person retail commerce. Most obviously affected have been any activities involving public entertainment. This wide range of employment involving millions of jobs includes sports events, museum attendance, hospitality services, dining out, cinema, and any enterprises linked to travel.

The vast majority of negatively affected enterprises had been viable for decades. 

The films streamed by Netflix are no better than those seen in theaters, the drive-by coffee and sweets offered by Starbucks are often not as good as the offerings of local sit-down coffee shops, and the products now obtained through mail order are the same products formally bought at retail outlets. The transfer of wealth from Main Street to corporate titans involves providing services not suitable, economically feasible, or appropriate for small businesses.

One way of reversing the pandemic’s transfer of wealth would be to impose a temporary two-year 50% tax on the excessive profits of 2020/21 generated by the pandemic. If this tax was limited to taxing billionaires, $550 billion would be immediately available. If a similar tax was applied to excess profits of millionaires, the combined revenue over two years would be sufficient to finance the entire Biden stimulus package without raising the national debt by a penny.

The Biden plan is designed to stimulate economic recovery at the grass roots of society. Each American man, women, and child would receive a $1,400 tax free check. Unemployment benefits would increase by $400 monthly. Funds for health care involving children, veterans, seniors, the underinsured, and others would increase by $374 billion. Another $680 billion would directly aid state and local governments in administering vaccinations, maintaining testing, and creating safe conditions for reopening the public schools. Aid to small businesses, renters, and other distressed sectors would total $1,332 billion. 

Among the biggest winners in 2020 were Jeff Bezos, Mark Zuckerberg, and Elon Musk. Bezos, the head of Amazon, had a growth in income of $69 billion. During that same year Amazon was repeatedly in court for its mistreatment of its employees, a charge also brought against UPS, another winner. Mark Zuckerberg’s wealth grew by $37 billion even as his Facebook enterprise faced congressional investigation for malpractice. Tesla’s CEO Elon Musk was the biggest winner, his wealth rising by over $154 billion. He frankly acknowledges that Tesla would have gone bankrupt some years ago if it had not been aided by NASA (National Aeronautics and Space Administration). Now would be a good time to repay the public for this aid.

The widening global wealth gap troubles many mainstream economists. Josef Stadler, head of UBS, the Swiss banking giant, has written that he believes that the gargantuan concentration of wealth by the super-rich is politically unsustainable when hundreds of millions of people around the world struggle to maintain even a minimal standard of living. Stadler, fearful of a global uprising by an enraged public, believes that, “we are at an inflection point.”

Contemporary America is rent by highly emotional political positions regarding immigration, racism, regional underdevelopment, the health care system, the environment, public education, and a host of other issues. All are rooted to a large degree in the wealth gap increasing apparent to all. Addressing that gap requires shifting political discourse from abstract, ideological orientations to measures that would actually improve the existential quality of every-day American life. Ignoring or rationalizing the transformation of wealth that has been going on for decades is not a credible option. Inaction will only further thrust the United States in the direction of being an increasingly volatile and malfunctioning society.

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