Main Street Americans are experiencing the impact of a finance driven economy in ways that compromise their quality of life. Those most oblivious to the impact of a finance drive economy are usually those who have benefitted most. America was not intended to be an exclusive enclave for the wealthy.
Unlimited wealth among a small minority of Americans should not become the template for American society. The reason is obvious. The kind of unlimited wealth enjoyed by one percent of the U.S. population is not attainable by the 99%.
Try to imagine what American society would look like if 100% of Americans were equally wealthy. That would seriously limit the power of wealth as it is utilized today. The impact of a finance driven economy implies the need of the few to prey upon the many.
Haves and Have Nots
According to Forbes, back in the late 1980s, the loss of jobs and related loss of income struck a crushing blow on low and middle income individuals. It created today’s legacy of Top Down economics. The harsh reality is that the mathematical equation, according to many U.S. economists, was skewed to make it appear those at the top would share their wealth with those at the bottom. Now, the numbers after several decades prove otherwise.
Finance In America
To present an accurate picture of what finance is doing to America, it is necessary to study several aspects. The most important is income inequality. When wealth didn’t trickle down from the top and instead was hidden in offshore tax free havens to avoid paying U.S. taxes, the immediate effect of this was a greater burden on middle and lower income classes forced to fill in gaps in tax revenues.
Once the loss of this revenue reached $21 trillion as reported by Forbes in 2012, this was a significant loss of tax revenue that others in the U.S. would be responsible to replace.
A study conducted by “James Henry, former chief economist at the consultancy McKinsey, an expert on tax havens and offshoring, calculated that some 92,000 people, a thousandth of a percent of the world’s population, control $9.8 trillion, and that if all the $21 trillion that has been offshored earned 3% a year and were taxed at 30%, it would raise $188 billion in revenues, more than rich countries spend on aid to the developing world every year”.
On a smaller scale, the impact of loss of income equality has the effect of generating higher levels of unemployment due to offshoring labor in countries where wages are one-quarter of wages Americans are paid. When unemployment rises, debt rises as a result of the inability to meet obligations to pay for necessities. Some Americans attempted to supplement their incomes with sports betting websites.
In terms of what finance is doing to America, finance schemes resulted in a housing and mortgage loan crisis in 2008 of such major proportion that only bailouts, paid for by U.S. taxpayers, averted a massive “meltdown.” These are the same middle and lower income taxpayers who already bear the brunt of replacing tax revenues lost to offshoring profits and wealth in tax free accounts.
The irony of the meltdown had its roots in financial schemes of mortgaging banks, housing developers, real estate agents and moving and relocation businesses across the board.
Mortgaging banks knowingly engaged in approving housing loans they knew would fail. These banks had the assurance that if loans resulted in foreclosure, these insured loans would pay out in insurance claims.
Foreclosed properties were sold by banks that took ownership of these properties and sold them at a profit to housing developers, who enlisted the aid of real estate agents who profited from real estate commissions and moving and relocation businesses profited from the glut of people forced from their homes. What finance is doing in America is further deepening the disparity between the haves and the have not.
By Jennifer Livingston