Wage stagnation, the explosion of health and education costs as the American welfare state shrinks, and above all the financial manipulation of debt has generated extraordinary profits on Wall Street and massive debt and housing foreclosures on Main Street. The taxpayer, who is told there is no alternative, replaces losses from outrageous risk-taking by “too-big-to-fail” financial institutions.
This new gilded age political-economic system can be thought of as a trifecta of a highly degraded educational system, a financial system that is unregulated by both law and social norms, and a political system increasingly corrupted by money.
The educational system has promoted a meritocracy of cumulative advantage. The vast majority of American students experience primary and secondary schools in which they fall far behind their peers in much of the rest of the developed (and even less-developed) world; they then face costs of higher education that produce a level of debt that cannot possibly be repaid out of their earnings. But the elite reproduces itself with the ability to pay for college and graduate school educations, while simultaneously feeling accomplished by their success given the extraordinary competition within the educational system.
The financial sector has been systematically deregulated as free market orthodoxy took off in the 1980s. This deregulation served to extract resources from the “real” economy and concentrate it in the bank accounts of a tiny elite, who are the same victors of the Darwinian educational competition. As the concentration of income at the very top of the population took off in the 1990s-2000s, spectacular displays of conspicuous consumption became commonplace. At the same time, a political system corrupted by the absence of meaningful limits for special interest campaign spending could not rein in the financial sector by setting limits to risk-taking, even after both the magnitude of the recent crisis, as well as its causes were plain to see.
In the face of all this, what in the end has been the rallying cry of protest at Occupy Wall Street and beyond? A simple statistic, originally generated in a technical article in a leading economics journal by Thomas Piketty and Emmanuel Saez. Their work told the story of a staggering increase in the share of after-tax income received by those with top incomes since the 1970s.