Andrew Hacker's "Money"
Some of the direst warnings about the capitalist system have come recently from the capitalist class itself. George Soros, billionaire financial speculator and founder of the Open Society Foundation, warns that "there is something wrong with making the survival of the fittest a guiding principle of civilized society."1 Edward Luttwak, former consultant to Reagan's National Security Council, complains that "This country is now much richer than it is stable. It is half West Palm Beach [Florida] and half Burundi [Africa]." And Stephen Roach, chief economist of Morgan-Stanley, tells NY Times interviewer Louis Uchitelle that "it is increasingly clear to me that the improvements in operating performance and profits have been built on a steady stream of downsizings and cost cutting that is just not sustainable. If all you do is cut, then you will eventually be left with nothing, with no market share."
Meanwhile, the collapse of the former Soviet Union misled some socialists into expecting that a discredited marketplace could somehow make socialism "feasible.". A reinvigorated left can do a much better job of revealing the injustices of capitalism than Soros, Luttwak and Roach, since it has no vested interest in private property. In order to do an effective job, it must be able to expose the inequities that news coverage about the "booming" capitalist economy with its nonstop bull market has pushed out of view. A good place to start is Andrew Hacker's "Money: Who Has How Much and Why" (Scribner, 1997).
Hacker's strategy is the same as it was in his groundbreaking "Two Nations: Black and White in America." He mobilizes statistics from official sources such as the Bureau of Labor Statistics, the Census, etc. to refute common misconceptions about income distribution. Since there are so many misleading statements about race and wealth, we should greet Hacker's books with open arms. His latest does not disappoint.
Hacker begins his study by evaluating income distribution in the United States. The evidence supports the suspicion that the rich are getting richer and the poor are getting poorer. In a graph titled "Share of National Income: Rich-Poor Ratio," the United States comes in dead last in a group of the fifteen most prosperous nations. The country with the most equality is Finland where the best-off ten percent of the population has an average income that is 153% of the median national income and the poorest tenth makes do on 59%. The figures for the United States are 206% and 5.9% respectively. New Zealand is right in the middle with figures of 187% and 54%.
Hacker's solution to inequality is straightforward. He observes that if the maximum allowable income in the United States was $200,000, the tidy sum of $155 billion would become available. The benefactors would be the poorest 20% of all households, whose current average income is about $7,760, and who would now have incomes of $15,530. If maximum allowable income was $100,000, then supplemental income to the poor would raise their average income to $22,220. Poverty would therefore disappear. Characteristically, for all of the populist demagogy of Soros and company, they have not made such a concrete recommendation but prefer to complain about excesses in the abstract.
Hacker questions the ability of the new crop of corporations--especially computer firms--to create adequate jobs or incomes. In contrast to the capitalists who produced steel, railroads or automobiles, the Silicon Valley ruling class became wealthy not because of what they produced but what Wall Street thinks that their company is worth as an investment. "It isn't easy to say what the company will be doing or making, say, a decade from now. So what has made Gates...wealthy is that Microsoft remains a Wall Street favorite; its stock was valued at $60.8 billion in March of 1996. In contrast..., while General Motors had revenues more than twenty-eight times those of Microsoft, its stock had only two-thirds the value." (p. 97)
For those at the bottom of the ladder, the boom years have brought nothing but economic suffering as Hacker's statistics indicate. Black male college graduates get only $739 for every $1,000 going to their white counterparts by the time they are between the ages of thirty-five and forty-four. The only explanation for this is racism. Nothing angers Hacker more than the notion that blacks are a privileged group. Addressing the resentment toward affirmative action programs, Hacker notes that it is the public sector that has done much more to remedy past injustices than the private sector, especially the military, postal service, health, education and social services. Continuing efforts to balance federal, state and municipal budgets are not only detrimental to those who benefit from the programs, but to those who administer them as well.
Private corporations, despite public relations effort to correct their racist reputations, remain lily-white at the top levels. Only 5 of 104 corporations--Sears, Xerox, Mobil, Kraft and Merrill Lynch--have African-Americans in senior executive positions. The Forbes 400 list has cited more than a thousand different men and women since it began the survey in 1982. Of this group, only five--less than one-half of one percent--has been black.
Hacker comes up with some fresh insights on the economic status of immigrants. While the left has a tendency to automatically categorize this group as disadvantaged, the reality is more complex. What is probably most surprising is that the median income of immigrants from non-European countries compares quite favorably with those from European countries. For example, Indians have a median household income of $44,696 while Italians only $36,060. Filipinos receive $43,780 while Irish receive $31, 845. This leads him to speculate that the greater the geographical distance the country of origin, the greater will be the income of the new immigrant. This is because it takes greater personal and financial resources to make the trip from India or the Philippines than Mexico or the Dominican Republic. Many of these more affluent immigrants end up in surprising niches. For example, the subway system employs a largely Indian staff of mechanical engineers to inspect and recommend changes in the extensive network of tracks. The work involves long hours spent underground near screeching trains, which turned off recent native-born graduates of engineering schools. So the MTA spread the word at engineering schools in Calcutta and Bombay, where graduating students heeded the call enthusiastically.
The most explosive question is whether immigrants have taken jobs that American-born workers once held. Hacker does not flinch from this question. He claims that there is ample evidence that jobs in building maintenance in Los Angeles, which used to be the province of African-Americans, now are given to Mexican and Central American immigrants for considerably less pay. Hacker says, "Annual median wages of $18, 847 for Mexican-American men and $17,574 for Hondurans mean that employers are supplanting blue-collar pay scales with a domestic equivalent of Third World wages." (p. 162)
However, the most widespread jobs are those that nobody else will do, such as washing dishes and mopping floors in restaurants, picking fruits and vegetables, etc. Even sheep and cattle-herding is done almost exclusively by Latin Americans. This most American of occupations is just not attractive to the native-born who look askance at the idea of sitting in a saddle all day long under a hot sun, staring at grazing animals.
Hacker does not try to provide answers to disappearing jobs and growing income disparity. In the final chapter, he disclaims the idea that his book is about income redistribution, despite looking kindly on the consequences of putting a ceiling on incomes at $100,000 in the earlier chapter. He says the aim of the book is simply to "enhance our understanding of ourselves, of the forces that propel us, and the shape we are giving to the nation of which we are a part." (p. 240) The left should be grateful to Hacker for deepening our understanding of such forces. It is now up to us to include it as part of a general program for transforming American society.
1. ("The Capitalist Threat", Atlantic Monthly, February 1997)
2. "Way of Life in Decline" May, 1996 Harper's magazine,