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    Did you know...that the Register of the Kentucky Historical Society, first printed in 1903, is the oldest peer-reviewed publication dedicated to Kentucky history?Subscribe to the Register (only $40 per year).
  • Privatization as a Source of Income and Wealth Inequality
    Posted On: Dec 12, 2016

    Privatization as a Source of Income and Wealth inequality

                                                                               Joe Brennan

    "Inequality in America has grown to the point where we have to do everything we can. Some of these causes of inequality may be largely beyond our control, others we can affect only gradually, in the long run but there are still others that we can address immediately. We need a comprehensive attack". Nobel prize recipient Joseph Stiglitz.

    Contrary to the privatization advocates, those favoring trickle-down economics, Stiglitz and several other progressive economists both sound an alarm that the current levels of economic inequality far beyond issues of social justice also point to the potential of long term economic disaster unless current economic patterns are immediately changed. Former Secretary of work Robert Reich has stated that " we did not learn the larger lesson of the 1930's: that when the distribution on income gets too fast out of whack, the economy needs t be reorganized so the  broad middle class has enough buying power to rejuvenate the economy over the long term". The same author quotes Saez and Piketty whose research discovered that "the total income going to the richest 1 percent of Americans peaked in both 1928 and in 2007 at 23 percent. The same pattern held for the richest one=tenth of one percent".

    Privatization would justify this gap in income and wealth between the investors and those who have invested their lives in the struggle to increase corporate productivity. This gap attempts to justify itself by suggesting that it is the investors who have taken "all the risks" with their finances, not considering the day to day risks that their employee workforce was taking in the shops in what at times constitutes unsafe work conditions. Economic inequality was furthermore justified by what Stiglitz terms "marginal productivity theory", "a notion that those who got more did so because they had made a greater contribution to society". This ideological framework still is used to justify the privatization process whereby private investment justifies whatever methods or techniques may be used to justify the investor's return on investment.

    Unfortunately, economic studies have demonstrated that public perception as to the differences of economic inequality between the two social classes. Those perceptions have been that these perceptions in no way reflect the actual distribution of wealth between the top and the lowest ten percent of the population. These perceptions are further demonstrated in the struggle for an increase in the nation's minimum wage. Whereas the Congressional Budget Office projects that such an increase will increase unemployment by 500,000 to a million jobs, 600 Ph.D. economist, including nine Nobel Prize recipients, have written a joint letter to the president and congressional leaders that increases in the minimum wage had little or no effect on the employment of minimum-wage workers.

    Privatization tends to support the retention of a low or minimum wage workforce under the pretext that such increases would only prompt business leaders to move their operations to other locations that were more business favorable. Some local municipalities have conceded to this position, but billionaire Nick Hanuer states that the real job makers are the consumers capable of purchasing goods and services and not the millionaire investors. Privatization encourages the transference of public services to private enterprises that can establish the framework of employment as one that is non-union, low wage, minimal workplace regulations, reduced benefits including health and retirement benefits, all under the pretext of reduced taxation obligations.

    While the privatization movement receives the support of conservative politicians, backed by conservative economist, it is obvious that its goals are to improve personal profit margins, returns on investment, greater satisfaction for investors, especially if all these gains can be obscured through tax loopholes. All this accomplished through a lack of adequate redistribution of profits with those directly responsible for actual production. Privatization benefits those few at the very top of the economic chain with far less benefits for the majority of the working class.     

       


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