Tandem Productions

Jonathan Cape

EXCLUSIVE: Benedict Cumberbatch is reteaming with BBC One and Masterpiece for the adaptation of Ian McEwan’s award-winning 1987 novel The Child In Time. Cumberbatch will star in and executive produce the one-off 90-minute drama which is written by Stephen Butchard.

In their first commission, Pinewood Television and Cumberbatch’s SunnyMarch TV will produce The Child In Time for BBC One with Masterpiece co-producing. Studiocanal has worldwide sales.

Cumberbatch, who is coming off of the fourth season of BBC One/Masterpiece sleuthing series Sherlock, will play Stephen Lewis, a successful children’s book author whose daughter suddenly goes missing in the lyrical and heartbreaking exploration of love, loss and the power of things unseen.

The film will explore the dark territory of a marriage devastated by the loss of a child. Her absence sets Stephen and his wife on diverging paths as both struggle with an all-consuming grief. With the passage of time, a balance of sorts returns, until hope surfaces and triumphs unexpectedly.

This is one of McEwan’s major early works. It won the Whitbread Novel Award in 1987. One of Cumberbatch’s first notable feature roles was in the adaptation of McEwan’s Atonement.

Butchard is known for Five Daughters and The Last Kingdom. Julian Farino (Marvellous, Entourage) will direct.

Cumberbatch says, “I read the novel years ago and it stayed with me — profound, beautiful and very moving. Only Ian McEwan could write about loss with such telling honesty. We’re very excited to have Stephen Butchard’s subtle and brilliant adaptation, and in Julian Farino we have an extraordinary director who delivers emotional truth. I’m so proud The Child In Time will be the first drama produced by SunnyMarch TV.”

Pinewood Television’s Creative Director Helen Gregory, adds, “I am delighted to be bringing Stephen’s beautiful adaptation of The Child In Time to the screen in collaboration with such huge talents as Julian Farino and Benedict.”

McEwan is “thrilled to have my novel in the hands of such a high level creative team. I have fond memories of Benedict playing a brilliant and key part in the movie adaptation of Atonement. Now, it’s a great honor to have this actor of such immense resource, experience and subtlety in the lead role of The Child In Time.”

The drama was commissioned by the BBC’s Piers Wenger and Charlotte Moore. Controller, BBC Drama Commissioning, Wegner says, “The Child In Time is a unique and moving story and one which I think will touch the heart of every BBC One viewer. I’m proud to be involved with both Pinewood Television and SunnyMarch TV’s first television commission, and to welcome Benedict back again to BBC One.”

Masterpiece exec producer Rebecca Eaton notes the broadcaster “has been proud to showcase Benedict’s work for many years, and of course Sherlock has been a fantastic gift to our audience. To co-produce the first television drama out of his shop, SunnyMarch TV, with Pinewood Television is very gratifying.”

Studiocanal, which acquired a stake in SunnyMarch last April, has distribution rights. Rola Bauer, CEO/Partner of Studiocanal’s Tandem Productions, who took on oversight of all Studiocanal production and co-production television activities in the U.S. last year, secured the co-production deal with Masterpiece.

Exec producers are Helen Gregory for Pinewood Television; Cumberbatch, Adam Ackland and David Boulter for SunnyMarch TV; Lucy Richer for the BBC; Eaton for Masterpiece and Butchard.

Cumberbatch is currently shooting The Weinstein Co’s The Current War and reprises his role as Dr Stephen Strange in Disney/Marvel’s Thor: Ragnarok which releases in November. He’s repped by Conway van Gelder Grant and UTA.

From deadline.com
How to Shrink Inequality

Some inequality of income and wealth is inevitable, if not necessary. If an economy is to function well, people need incentives to work hard and innovate.

The pertinent question is not whether income and wealth inequality is good or bad. It is at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy.

We are near or have already reached that tipping point. As French economist Thomas Piketty shows beyond doubt in his “Capital in the Twenty-First Century,” we are heading back to levels of inequality not seen since the Gilded Age of the late 19th century. The dysfunctions of our economy and politics are not self-correcting when it comes to inequality.

But a return to the Gilded Age is not inevitable. It is incumbent on us to dedicate ourselves to reversing this diabolical trend. But in order to reform the system, we need a political movement for shared prosperity.

Herewith a short summary of what has happened, how it threatens the foundations of our society, why it has happened, and what we must do to reverse it.

What has Happened

The data on widening inequality are remarkably and disturbingly clear. The Congressional Budget Office has found that between 1979 and 2007, the onset of the Great Recession, the gap in income—after federal taxes and transfer payments—more than tripled between the top 1 percent of the population and everyone else. The after-tax, after-transfer income of the top 1 percent increased by 275 percent, while it increased less than 40 percent for the middle three quintiles of the population and only 18 percent for the bottom quintile.

The gap has continued to widen in the recovery. According to the Census Bureau, median family and median household incomes have been falling, adjusted for inflation; while according to the data gathered by my colleague Emmanuel Saez, the income of the wealthiest 1 percent has soared by 31 percent. In fact, Saez has calculated that 95 percent of all economic gains since the recovery began have gone to the top 1 percent.

Wealth has become even more concentrated than income. An April 2013 Pew Research Center report found that from 2009 to 2011, “the mean net worth of households in the upper 7 percent of wealth distribution rose by an estimated 28 percent, while the mean net worth of households in the lower 93 percent dropped by 4 percent.”

Why It Threatens Our Society

This trend is now threatening the three foundation stones of our society: our economy, our ideal of equal opportunity and our democracy.

The economy. In the United States, consumer spending accounts for approximately 70 percent of economic activity. If consumers don’t have adequate purchasing power, businesses have no incentive to expand or hire additional workers. Because the rich spend a smaller proportion of their incomes than the middle class and the poor, it stands to reason that as a larger and larger share of the nation’s total income goes to the top, consumer demand is dampened. If the middle class is forced to borrow in order to maintain its standard of living, that dampening may come suddenly—when debt bubbles burst.

Consider that the two peak years of inequality over the past century—when the top 1 percent garnered more than 23 percent of total income—were 1928 and 2007. Each of these periods was preceded by substantial increases in borrowing, which ended notoriously in the Great Crash of 1929 and the near-meltdown of 2008.

The anemic recovery we are now experiencing is directly related to the decline in median household incomes after 2009, coupled with the inability or unwillingness of consumers to take on additional debt and of banks to finance that debt—wisely, given the damage wrought by the bursting debt bubble. We cannot have a growing economy without a growing and buoyant middle class. We cannot have a growing middle class if almost all of the economic gains go to the top 1 percent.

Equal opportunity. Widening inequality also challenges the nation’s core ideal of equal opportunity, because it hampers upward mobility. High inequality correlates with low upward mobility. Studies are not conclusive because the speed of upward mobility is difficult to measure.

But even under the unrealistic assumption that its velocity is no different today than it was thirty years ago—that someone born into a poor or lower-middle-class family today can move upward at the same rate as three decades ago—widening inequality still hampers upward mobility. That’s simply because the ladder is far longer now. The distance between its bottom and top rungs, and between every rung along the way, is far greater. Anyone ascending it at the same speed as before will necessarily make less progress upward.

In addition, when the middle class is in decline and median household incomes are dropping, there are fewer possibilities for upward mobility. A stressed middle class is also less willing to share the ladder of opportunity with those below it. For this reason, the issue of widening inequality cannot be separated from the problems of poverty and diminishing opportunities for those near the bottom. They are one and the same.

Democracy. The connection between widening inequality and the undermining of democracy has long been understood. As former Supreme Court Justice Louis Brandeis is famously alleged to have said in the early years of the last century, an era when robber barons dumped sacks of money on legislators’ desks, “We may have a democracy, or we may have great wealth concentrated in the hands of a few, but we cannot have both.”

As income and wealth flow upward, political power follows. Money flowing to political campaigns, lobbyists, think tanks, “expert” witnesses and media campaigns buys disproportionate influence. With all that money, no legislative bulwark can be high enough or strong enough to protect the democratic process.

The threat to our democracy also comes from the polarization that accompanies high levels of inequality. Partisanship—measured by some political scientists as the distance between median Republican and Democratic roll-call votes on key economic issues—almost directly tracks with the level of inequality. It reached high levels in the first decades of the twentieth century when inequality soared, and has reached similar levels in recent years.

When large numbers of Americans are working harder than ever but getting nowhere, and see most of the economic gains going to a small group at the top, they suspect the game is rigged. Some of these people can be persuaded that the culprit is big government; others, that the blame falls on the wealthy and big corporations. The result is fierce partisanship, fueled by anti-establishment populism on both the right and the left of the political spectrum.

Why It Has Happened

Between the end of World War II and the early 1970s, the median wage grew in tandem with productivity. Both roughly doubled in those years, adjusted for inflation. But after the 1970s, productivity continued to rise at roughly the same pace as before, while wages began to flatten. In part, this was due to the twin forces of globalization and labor-replacing technologies that began to hit the American workforce like strong winds—accelerating into massive storms in the 1980s and ’90s, and hurricanes since then.

Containers, satellite communication technologies, and cargo ships and planes radically reduced the cost of producing goods anywhere around the globe, thereby eliminating many manufacturing jobs or putting downward pressure on other wages. Automation, followed by computers, software, robotics, computer-controlled machine tools and widespread digitization, further eroded jobs and wages. These forces simultaneously undermined organized labor. Unionized companies faced increasing competitive pressures to outsource, automate or move to nonunion states.

These forces didn’t erode all incomes, however. In fact, they added to the value of complex work done by those who were well educated, well connected and fortunate enough to have chosen the right professions. Those lucky few who were perceived to be the most valuable saw their pay skyrocket.

But that’s only part of the story. Instead of responding to these gale-force winds with policies designed to upgrade the skills of Americans, modernize our infrastructure, strengthen our safety net and adapt the workforce—and pay for much of this with higher taxes on the wealthy—we did the reverse. We began disinvesting in education, job training and infrastructure. We began shredding our safety net. We made it harder for many Americans to join unions. (The decline in unionization directly correlates with the decline of the portion of income going to the middle class.) And we reduced taxes on the wealthy.

We also deregulated. Financial deregulation in particular made finance the most lucrative industry in America, as it had been in the 1920s. Here again, the parallels between the 1920s and recent years are striking, reflecting the same pattern of inequality.

Other advanced economies have faced the same gale-force winds but have not suffered the same inequalities as we have because they have helped their workforces adapt to the new economic realities—leaving the United States the most unequal of all advanced nations by far.

What We Must Do

There is no single solution for reversing widening inequality. Thomas Piketty’s monumental book “Capital in the Twenty-First Century” paints a troubling picture of societies dominated by a comparative few, whose cumulative wealth and unearned income overshadow the majority who rely on jobs and earned income. But our future is not set in stone, and Piketty’s description of past and current trends need not determine our path in the future. Here are ten initiatives that could reverse the trends described above:

1) Make work pay. The fastest-growing categories of work are retail, restaurant (including fast food), hospital (especially orderlies and staff), hotel, childcare and eldercare. But these jobs tend to pay very little. A first step toward making work pay is to raise the federal minimum wage to $15 an hour, pegging it to inflation; abolish the tipped minimum wage; and expand the Earned Income Tax Credit. No American who works full time should be in poverty.

2) Unionize low-wage workers. The rise and fall of the American middle class correlates almost exactly with the rise and fall of private-sector unions, because unions gave the middle class the bargaining power it needed to secure a fair share of the gains from economic growth. We need to reinvigorate unions, beginning with low-wage service occupations that are sheltered from global competition and from labor-replacing technologies. Lower-wage Americans deserve more bargaining power.

3) Invest in education. This investment should extend from early childhood through world-class primary and secondary schools, affordable public higher education, good technical education and lifelong learning. Education should not be thought of as a private investment; it is a public good that helps both individuals and the economy. Yet for too many Americans, high-quality education is unaffordable and unattainable. Every American should have an equal opportunity to make the most of herself or himself. High-quality education should be freely available to all, starting at the age of 3 and extending through four years of university or technical education.

4) Invest in infrastructure. Many working Americans—especially those on the lower rungs of the income ladder—are hobbled by an obsolete infrastructure that generates long commutes to work, excessively high home and rental prices, inadequate Internet access, insufficient power and water sources, and unnecessary environmental degradation. Every American should have access to an infrastructure suitable to the richest nation in the world.

5) Pay for these investments with higher taxes on the wealthy. Between the end of World War II and 1981 (when the wealthiest were getting paid a far lower share of total national income), the highest marginal federal income tax rate never fell below 70 percent, and the effective rate (including tax deductions and credits) hovered around 50 percent. But with Ronald Reagan’s tax cut of 1981, followed by George W. Bush’s tax cuts of 2001 and 2003, the taxes on top incomes were slashed, and tax loopholes favoring the wealthy were widened. The implicit promise—sometimes made explicit—was that the benefits from such cuts would trickle down to the broad middle class and even to the poor. As I’ve shown, however, nothing trickled down. At a time in American history when the after-tax incomes of the wealthy continue to soar, while median household incomes are falling, and when we must invest far more in education and infrastructure, it seems appropriate to raise the top marginal tax rate and close tax loopholes that disproportionately favor the wealthy.

6) Make the payroll tax progressive. Payroll taxes account for 40 percent of government revenues, yet they are not nearly as progressive as income taxes. One way to make the payroll tax more progressive would be to exempt the first $15,000 of wages and make up the difference by removing the cap on the portion of income subject to Social Security payroll taxes.

7) Raise the estate tax and eliminate the “stepped-up basis” for determining capital gains at death. As Piketty warns, the United States, like other rich nations, could be moving toward an oligarchy of inherited wealth and away from a meritocracy based on labor income. The most direct way to reduce the dominance of inherited wealth is to raise the estate tax by triggering it at $1 million of wealth per person rather than its current $5.34 million (and thereafter peg those levels to inflation). We should also eliminate the “stepped-up basis” rule that lets heirs avoid capital gains taxes on the appreciation of assets that occurred before the death of their benefactors.

8) Constrain Wall Street. The financial sector has added to the burdens of the middle class and the poor through excesses that were the proximate cause of an economic crisis in 2008, similar to the crisis of 1929. Even though capital requirements have been tightened and oversight strengthened, the biggest banks are still too big to fail, jail or curtail—and therefore capable of generating another crisis. The Glass-Steagall Act, which separated commercial- and investment-banking functions, should be resurrected in full, and the size of the nation’s biggest banks should be capped.

9) Give all Americans a share in future economic gains. The richest 10 percent of Americans own roughly 80 percent of the value of the nation’s capital stock; the richest 1 percent own about 35 percent. As the returns to capital continue to outpace the returns to labor, this allocation of ownership further aggravates inequality. Ownership should be broadened through a plan that would give every newborn American an “opportunity share” worth, say, $5,000 in a diversified index of stocks and bonds—which, compounded over time, would be worth considerably more. The share could be cashed in gradually starting at the age of 18.

10) Get big money out of politics. Last, but certainly not least, we must limit the political influence of the great accumulations of wealth that are threatening our democracy and drowning out the voices of average Americans. The Supreme Court’s 2010 Citizens United decision must be reversed—either by the Court itself, or by constitutional amendment. In the meantime, we must move toward the public financing of elections—for example, with the federal government giving presidential candidates, as well as House and Senate candidates in general elections, $2 for every $1 raised from small donors.

Building a Movement

It’s doubtful that these and other measures designed to reverse widening inequality will be enacted anytime soon. Having served in Washington, I know how difficult it is to get anything done unless the broad public understands what’s at stake and actively pushes for reform.

That’s why we need a movement for shared prosperity—a movement on a scale similar to the Progressive movement at the turn of the last century, which fueled the first progressive income tax and antitrust laws; the suffrage movement, which won women the vote; the labor movement, which helped animate the New Deal and fueled the great prosperity of the first three decades after World War II; the civil rights movement, which achieved the landmark Civil Rights and Voting Rights acts; and the environmental movement, which spawned the National Environmental Policy Act and other critical legislation.

Time and again, when the situation demands it, America has saved capitalism from its own excesses. We put ideology aside and do what’s necessary. No other nation is as fundamentally pragmatic. We will reverse the trend toward widening inequality eventually. We have no choice. But we must organize and mobilize in order that it be done.

[This essay appears in the current edition of “The Nation.”]

 

The Political Roots of Widening Inequality

For the past quarter-century I’ve offered in articles, books, and lectures an explanation for why average working people in advanced nations like the United States have failed to gain ground and are under increasing economic stress: Put simply, globalization and technological change have made most of us less competitive. The tasks we used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.

My solution—and I’m hardly alone in suggesting this—has been an activist government that raises taxes on the wealthy, invests the proceeds in excellent schools and other means people need to become more productive, and redistributes to the needy. These recommendations have been vigorously opposed by those who believe the economy will function better for everyone if government is smaller and if taxes and redistributions are curtailed.

While the explanation I offered a quarter-century ago for what has happened is still relevant—indeed, it has become the standard, widely accepted explanation—I’ve come to believe it overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs. And the governmental solutions I have propounded, while I believe them still useful, are in some ways beside the point because they take insufficient account of the government’s more basic role in setting the rules of the economic game.

Worse yet, the ensuing debate over the merits of the “free market” versus an activist government has diverted attention from how the market has come to be organized differently from the way it was a half-century ago, why its current organization is failing to deliver the widely shared prosperity it delivered then, and what the basic rules of the market should be. It has allowed America to cling to the meritocratic tautology that individuals are paid what they’re “worth” in the market, without examining the legal and political institutions that define the market. The tautology is easily confused for a moral claim that people deserve what they are paid. Yet this claim has meaning only if the legal and political institutions defining the market are morally justifiable.

                                                         II

Most fundamentally, the standard explanation for what has happened ignores power. As such, it lures the unsuspecting into thinking nothing can or should be done to alter what people are paid because the market has decreed it.

The standard explanation has allowed some to argue, for example, that the median wage of the bottom 90 percent—which for the first 30 years after World War II rose in tandem with productivity—has stagnated for the last 30 years, even as productivity has continued to rise, because middle-income workers are worth less than they were before new software technologies and globalization made many of their old jobs redundant. They therefore have to settle for lower wages and less security. If they want better jobs, they need more education and better skills. So hath the market decreed.

Yet this market view cannot be the whole story because it fails to account for much of what we have experienced. For one thing, it doesn’t clarify why the transformation occurred so suddenly. The divergence between productivity gains and the median wage began in the late 1970s and early 1980s, and then took off. Yet globalization and technological change did not suddenly arrive at America’s doorstep in those years. What else began happening then?

Nor can the standard explanation account for why other advanced economies facing similar forces of globalization and technological change did not succumb to them as readily as the United States. By 2011, the median income in Germany, for example, was rising faster than it was in the United States, and Germany’s richest 1 percent took home about 11 percent of total income, before taxes, while America’s richest 1 percent took home more than 17 percent. Why have globalization and technological change widened inequality in the United States to a much greater degree?

Nor can the standard explanation account for why the compensation packages of the top executives of big companies soared from an average of 20 times that of the typical worker 40 years ago to almost 300 times. Or why the denizens of Wall Street, who in the 1950s and 1960s earned comparatively modest sums, are now paid tens or hundreds of millions annually. Are they really “worth” that much more now than they were worth then?

Finally and perhaps most significantly, the market explanation cannot account for the decline in wages of recent college graduates. If the market explanation were accurate, college graduates would command higher wages in line with their greater productivity. After all, a college education was supposed to boost personal incomes and maintain American prosperity.

To be sure, young people with college degrees have continued to do better than people without them. In 2013, Americans with four-year college degrees earned 98 percent more per hour on average than people without a college degree. That was a bigger advantage than the 89 percent premium that college graduates earned relative to non-graduates five years before, and the 64 percent advantage they held in the early 1980s.

But since 2000, the real average hourly wages of young college graduates have dropped. The entry-level wages of female college graduates have dropped by more than 8 percent, and male graduates by more than 6.5 percent. To state it another way, while a college education has become a prerequisite for joining the middle class, it is no longer a sure means for gaining ground once admitted to it. That’s largely because the middle class’s share of the total economic pie continues to shrink, while the share going to the top continues to grow. 

                                                         III

A deeper understanding of what has happened to American incomes over the last 25 years requires an examination of changes in the organization of the market. These changes stem from a dramatic increase in the political power of large corporations and Wall Street to change the rules of the market in ways that have enhanced their profitability, while reducing the share of economic gains going to the majority of Americans. 

This transformation has amounted to a redistribution upward, but not as “redistribution” is normally defined. The government did not tax the middle class and poor and transfer a portion of their incomes to the rich. The government undertook the upward redistribution by altering the rules of the game.

Intellectual property rights—patents, trademarks, and copyrights—have been enlarged and extended, for example. This has created windfalls for pharmaceuticals, high tech, biotechnology, and many entertainment companies, which now preserve their monopolies longer than ever. It has also meant high prices for average consumers, including the highest pharmaceutical costs of any advanced nation.

At the same time, antitrust laws have been relaxed for corporations with significant market power. This has meant large profits for Monsanto, which sets the prices for most of the nation’s seed corn; for a handful of companies with significant market power over network portals and platforms (Amazon, Facebook, and Google); for cable companies facing little or no broadband competition (Comcast, Time Warner, AT&T, Verizon); and for the largest Wall Street banks, among others. And as with intellectual property rights, this market power has simultaneously raised prices and reduced services available to average Americans. (Americans have the most expensive and slowest broadband of any industrialized nation, for example.) 

Financial laws and regulations instituted in the wake of the Great Crash of 1929 and the consequential Great Depression have been abandoned—restrictions on interstate banking, on the intermingling of investment and commercial banking, and on banks becoming publicly held corporations, for example—thereby allowing the largest Wall Street banks to acquire unprecedented influence over the economy. The growth of the financial sector, in turn, spawned junk-bond financing, unfriendly takeovers, private equity and “activist” investing, and the notion that corporations exist solely to maximize shareholder value.

Bankruptcy laws have been loosened for large corporations—notably airlines and automobile manufacturers—allowing them to abrogate labor contracts, threaten closures unless they receive wage concessions, and leave workers and communities stranded. Notably, bankruptcy has not been extended to homeowners who are burdened by mortgage debt and owe more on their homes than the homes are worth, or to graduates laden with student debt. Meanwhile, the largest banks and auto manufacturers were bailed out in the downturn of 2008–2009. The result has been to shift the risks of economic failure onto the backs of average working people and taxpayers.

Contract laws have been altered to require mandatory arbitration before private judges selected by big corporations. Securities laws have been relaxed to allow insider trading of confidential information. CEOs have used stock buybacks to boost share prices when they cash in their own stock options. Tax laws have created loopholes for the partners of hedge funds and private-equity funds, special favors for the oil and gas industry, lower marginal income-tax rates on the highest incomes, and reduced estate taxes on great wealth.

All these instances represent distributions upward—toward big corporations and financial firms, and their executives and shareholders—and away from average working people.

                                                          IV

Meanwhile, corporate executives and Wall Street managers and traders have done everything possible to prevent the wages of most workers from rising in tandem with productivity gains, in order that more of the gains go instead toward corporate profits. Higher corporate profits have meant higher returns for shareholders and, directly and indirectly, for the executives and bankers themselves.

Workers worried about keeping their jobs have been compelled to accept this transformation without fully understanding its political roots. For example, some of their economic insecurity has been the direct consequence of trade agreements that have encouraged American companies to outsource jobs abroad. Since all nations’ markets reflect political decisions about how they are organized, so-called “free trade” agreements entail complex negotiations about how different market systems are to be integrated. The most important aspects of such negotiations concern intellectual property, financial assets, and labor. The first two of these interests have gained stronger protection in such agreements, at the insistence of big U.S. corporations and Wall Street. The latter—the interests of average working Americans in protecting the value of their labor—have gained less protection, because the voices of working people have been muted. 

Rising job insecurity can also be traced to high levels of unemployment. Here, too, government policies have played a significant role. The Great Recession, whose proximate causes were the bursting of housing and debt bubbles brought on by the deregulation of Wall Street, hurled millions of Americans out of work. Then, starting in 2010, Congress opted for austerity because it was more interested in reducing budget deficits than in stimulating the economy and reducing unemployment. The resulting joblessness undermined the bargaining power of average workers and translated into stagnant or declining wages.

Some insecurity has been the result of shredded safety nets and disappearing labor protections. Public policies that emerged during the New Deal and World War II had placed most economic risks squarely on large corporations through strong employment contracts, along with Social Security, workers’ compensation, 40-hour workweeks with time-and-a-half for overtime, and employer-provided health benefits (wartime price controls encouraged such tax-free benefits as substitutes for wage increases). But in the wake of the junk-bond and takeover mania of the 1980s, economic risks were shifted to workers. Corporate executives did whatever they could to reduce payrolls—outsource abroad, install labor-replacing technologies, and utilize part-time and contract workers. A new set of laws and regulations facilitated this transformation.

As a result, economic insecurity became baked into employment. Full-time workers who had put in decades with a company often found themselves without a job overnight—with no severance pay, no help finding another job, and no health insurance. Even before the crash of 2008, the Panel Study of Income Dynamics at the University of Michigan found that over any given two-year stretch in the two preceding decades, about half of all families experienced some decline in income.

Today, nearly one out of every five working Americans is in a part-time job. Many are consultants, freelancers, and independent contractors. Two-thirds are living paycheck to paycheck. And employment benefits have shriveled. The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent today. In MetLife’s 2014 survey of employees, 40 percent anticipated that their employers would reduce benefits even further.

The prevailing insecurity is also a consequence of the demise of labor unions. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker earned $35 an hour in today’s dollars. By 2014, America’s largest employer was Walmart, and the typical entry-level Walmart worker earned about $9 an hour. 

This does not mean the typical GM employee a half-century ago was “worth” four times what the typical Walmart employee in 2014 was worth. The GM worker was not better educated or motivated than the Walmart worker. The real difference was that GM workers a half-century ago had a strong union behind them that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they would be unionized if they did not come close to matching the union contracts.

Today’s Walmart workers do not have a union to negotiate a better deal. They are on their own. And because less than 7 percent of today’s private-sector workers are unionized, most employers across America do not have to match union contracts. This puts unionized firms at a competitive disadvantage. Public policies have enabled and encouraged this fundamental change. More states have adopted so-called “right-to-work” laws. The National Labor Relations Board, understaffed and overburdened, has barely enforced collective bargaining. When workers have been harassed or fired for seeking to start a union, the board rewards them back pay—a mere slap on the wrist of corporations that have violated the law. The result has been a race to the bottom. 

Given these changes in the organization of the market, it is not surprising that corporate profits have increased as a portion of the total economy, while wages have declined. Those whose income derives directly or indirectly from profits—corporate executives, Wall Street traders, and shareholders—have done exceedingly well. Those dependent primarily on wages have not.


                                                         V

The underlying problem, then, is not that most Americans are “worth” less in the market than they had been, or that they have been living beyond their means. Nor is it that they lack enough education to be sufficiently productive. The more basic problem is that the market itself has become tilted ever more in the direction of moneyed interests that have exerted disproportionate influence over it, while average workers have steadily lost bargaining power—both economic and political—to receive as large a portion of the economy’s gains as they commanded in the first three decades after World War II. As a result, their means have not kept up with what the economy could otherwise provide them. 

To attribute this to the impersonal workings of the “free market” is to disregard the power of large corporations and the financial sector, which have received a steadily larger share of economic gains as a result of that power. As their gains have continued to accumulate, so has their power to accumulate even more.

 Under these circumstances, education is no panacea. Reversing the scourge of widening inequality requires reversing the upward distributions within the rules of the market, and giving workers the bargaining leverage they need to get a larger share of the gains from growth. Yet neither will be possible as long as large corporations and Wall Street have the power to prevent such a restructuring. And as they, and the executives and managers who run them, continue to collect the lion’s share of the income and wealth generated by the economy, their influence over the politicians, administrators, and judges who determine the rules of the game may be expected to grow.

The answer to this conundrum is not found in economics. It is found in politics. The changes in the organization of the economy have been reinforcing and cumulative: As more of the nation’s income flows to large corporations and Wall Street and to those whose earnings and wealth derive directly from them, the greater is their political influence over the rules of the market, which in turn enlarges their share of total income. 

The more dependent politicians become on their financial favors, the greater is the willingness of such politicians and their appointees to reorganize the market to the benefit of these moneyed interests. The weaker unions and other traditional sources of countervailing power become economically, the less able they are to exert political influence over the rules of the market, which causes the playing field to tilt even further against average workers and the poor.

Ultimately, the trend toward widening inequality in America, as elsewhere, can be reversed only if the vast majority, whose incomes have stagnated and whose wealth has failed to increase, join together to demand fundamental change. The most important political competition over the next decades will not be between the right and left, or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground, and an economic elite that refuses to recognize or respond to its growing distress.

[This article is from the spring issue of “The American Prospect.”]