Inequality For All

Documentary Review

The vicious cycle of a widening income gap

In his revolutionary documentary ‘Inequality for All’, the economist Robert Reich explores the reasons behind a weakening middle-class and its implications for the American economy. He argues that while the American market has increased its total production tremendously over the past few decades, the wages for middle-class have remained largely stagnant. This means that with the rising costs of inflation, the middle-class has become poorer today than it was in the later half of the 20^th century.

He deciphers a trend beginning in the 1970’s where this income stagnation for the middle-class began to occur while the salaries of CEOs and business elite took a sudden upshoot. A similar trend was observed in 1928, and we all know what happened afterwards; the market crashed. Similarly, in 1970 when income inequality was at its greatest like in 1928, the market crashed again. Reich postulates that the people who gain the most at times of the greatest inequality are the financiers, because they urge people to invest in speculative instruments that could earn them a fortune overnight, or lose it.

He deciphers a trend beginning in the 1970’s where this income stagnation for the middle-class began to occur while the salaries of CEOs and business elite took a sudden upshoot. A similar trend was observed in 1928, and we all know what happened afterwards; the market crashed.

While all this may signify a very morbid world-view, the Americans only need to look back at their past to know how an economy should function, Reich explains. The good times under Bill Clinton were all destroyed by later presidents of the United States who successively decreased taxes on the rich. This led to a vicious cycle, one in which the American economy is still trapped in. The rich don’t pay taxes, the middle-class can’t pay too much of taxes either because of their decreased purchasing power due to declining wages, the middle-class consume less, the companies produce less, which leads to layoffs and ultimately increases unemployment. Reich argues that the burgeoning salaries of the one per cent have magnanimously decreased those for the 99 per cent which also means that 400 people in the United States together own more wealth that half of its entire population. Perhaps, the baby boomers generation was a better time to live in after all.

But why didn’t the people rebel? They rather found alternate ways of keeping themselves and their families affloat. Women entered the workforce and supported their husbands financially to run and manage the house. People started working overtime and did more than two jobs a day on average. They even took up loans against their houses to finance their living, because the housing prices were shooting up astonishingly at that time. That didn’t end up well at all though, as the financial crisis in 2008 popped the housing bubble.

But why didn’t the people rebel? They rather found alternate ways of keeping themselves and their families affloat. Women entered the workforce and supported their husbands financially to run and manage the house.

In this era of globalisation, what happens to the American economy does not only impact the Americans of course. As the network of multinational corporations is already deeply embedded worldwide, the only question that needs to be asked is; are we still not concerned? This 90-minute documentary is a must-watch for all budding economists and social scientists who are frustrated about the status quo and want to change the system; one step at a time.