SPRIGGS: Solving Inequality

William Spriggs, Special to The Informer | 3/10/2014, 9:02 a.m.
There is a circular flow of money and economic activity between government, business and the household sector.
William Spriggs

The job numbers came out for February last week. The preliminary numbers show that private-sector employment grew by 162,000, meaning it is very likely that in March, private-sector employment will top its previous peak of 115.9 million in January 2008. That is the good news. The bad news is we will still be down 666,000 jobs from the employment peak in January 2008. While private-sector jobs will recover in March, public-sector jobs will not.

This is a large part of the reason that, while most mainstream voices now talk about inequality, it will be difficult to solve. There is a common view that: "Only businesses create jobs." But, that mantra is at the core of the neo-liberal policies that drive inequality and brought about the Great Recession. It is true that businesses create jobs. It is also true the public sector creates jobs.

Jobs are a derived demand. That is, most people do not go around hiring airline pilots or chefs. But when you fly by buying an airplane ticket, you and your fellow passengers are creating a demand for the airline to hire a pilot. When you go to a restaurant to eat a meal, you and your fellow diners are creating a demand for the restaurant to hire a chef. When someone says "only businesses create jobs" they are declaring that only individual demands for private goods are legitimate demands. And that our policies must be tilted so "businesses" can respond to those individual private demands.

That view has many problems. First, it removes the legitimacy of people speaking with a democratic voice to demand something. If we demand high-quality public schools with low classroom size, that creates a demand we expect our government to respond to by hiring highly skilled teachers in enough numbers to give our children small classes. If we demand an efficient way to get to work, we expect our government to respond by building mass public transportation networks and hiring the construction firms and transportation workers to make that function. These are examples of legitimate demands that "create jobs."

Second, if only individual demand for a private good is legitimate, then the high level of inequality means that the sum of our society will be determined by only a few people. Because income is unequal, so is consumption. The marketplace responds to dollar votes, not people votes. Since the 7.4 percent of households earning more than $150,000 a year account for 18.4 percent of all consumption expenditures in the United States, they have 2.5 times more votes than their share of the number of households on what will be produced based on individual demands.

Those households account for 34.6 percent of all private education dollars spent in the United States. That means they get 4.7 votes on shaping education decisions like what colleges should provide. The bottom 60 percent of households, by income, has to make do on 38 percent of the goods and services that private households buy. That means the bottom 60 percent by household count each get two-thirds of one vote on what our society will produce.