Sunday, August 6, 2017

How the rich get richer

The title is true to the contents of this well-researched, thoroughly-documented book: Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.

Dean Baker examines several policies that have made the wealthy richer while leaving too many in poverty in the United States, Canada and Europe. A

One policy is patents, especially for medicines and medical devices. These patent-protected products are relatively cheap to produce, but excessively expensive to buy. 

The companies claim they use the profits to fund research and development, but that’s misleading because they don’t really spend all that much on research and development, and they are spending less and less as the big companies merge.

Baker makes a convincing case that society would be better off if governments funded research and development directly rather than via patents.

The same case could be made for agricultural research, including improving crop varieties.The companies that hold the patents are stifling progress. There were far more improved varieties developed during the 1950s and 1960s than over the last decade, delivering improvements in disease resistance, yields and quality.

He makes another convincing case that salaries for chief executives are much too high. In fact, some salaries are high enough to fund the entire U.S. food stamp program several times over. And there is no convincing evidence that the highest-paid executives improve their companies, products or services.

Can you justify paying executives more than the president of the United States? Well, okay. Then how about the prime minister of Canada? Many chief executives are not only paid more, but 50 to 100 times more.

He shows how corporations lobby the government to keep unemployment higher than necessary, and how that hurts the poorest people while enriching the wealthiest.

In every point he makes, he offers solutions but adds that politicians will probably lack the necessary courage to implement them because of fierce opposition from the rich and powerful who benefit from leaving policies alone.

He also shows how free trade deals are unfair, increasing competition for relatively low-wage jobs in manufacturing, but retaining trade barriers to protect doctors, dentists, bankers and other highly-paid people.

But he doubts there will be any big policy changes, or soon, to correct the relentless increase of wealth for the richest with no gains for anybody from mid-level incomes down. The system is rigged.