Читать книгу Engine of Inequality - Karen Petrou - Страница 10

Nobody had our backs in office, not Democrats or Republicans. I'm tired of being sugarcoated and being robbed in the process.… [Politicians] are so out of touch with reality and real people. All of them.

– An autoworker who voted twice for Barack Obama and then for Donald Trump*

This bitter sentiment was voiced by an autoworker in May 2019. One month later, the US achieved a seemingly remarkable milestone: the longest economic recovery ever, at least as tallied by economists.¹ The Federal Reserve's chairman took comfort from this milestone, spelling out the broad benefits of this putative recovery – it was good for all Americans, not just the wealthy – or so he said.² But the Fed was wrong, and the autoworker and hundreds of millions of Americans just like him were right: the economic recovery after the 2008 “great financial crisis” was extraordinarily unequal. When the COVID-19 pandemic hit in March 2020, the shared-prosperity facade disintegrated – unemployment ravaged millions and millions of households and millions of Americans also took to the streets not just to protest George Floyd's murder, but also to mark a decade of extraordinarily unequal growth. No wonder.

If more Americans had had more savings with which to buffer the shock of sudden unemployment and had the American financial system been more equitable, then COVID's economic cost would still have been dear, but not disastrous. But as the US headed into the pandemic, it was the most unequal of all advanced economies, becoming far more unequal far faster after 2010.³

It's no coincidence that 2010 also marks the start of massive changes to US financial policy due to the monetary and regulatory response to the 2008 financial crisis. The powerful link between financial policy and our far more unequal economy is the topic of this book; breaking it is its goal.

You might think that monetary and regulatory policy are far afield from economic inequality given the usual focus on factors such as tax and education policy. Economic inequality results from many causes, but who gets the money how is the most important element in each of them. Money doesn't just fall from trees (would that it were so). The job of central banks such as the Federal Reserve is to control who gets the money, with the Fed the only agency of the US government expressly responsible for allocating money not just for stable growth, but also for shared prosperity. It and other central banks around the world use their own money and the reserves banks hold to encourage markets to rev up or slow down a nation's economy. Starting in 2010, the Fed threw the money into the increasingly ample laps of the wealthiest households. In 2020, it redoubled those efforts with still more trillions for still fewer millions. Thanks to the Fed,⁴ the period immediately after the COVID pandemic struck was “one of the greatest wealth transfers in history.”⁵

Financial regulators also control who gets the money by opening or closing the money spigots to discipline banks or to protect borrowers. After 2010, bank regulators inadvertently turned off funding for affordable loans to average Americans and cut off the bank accounts that households once used to earn living returns on hard-earned savings. Some hard-luck families found financing from high-flying, unregulated financial companies, but this often came at great cost and long-term equality risk. As the last decade closed, new forms of unregulated financial institutions were increasingly powered by new forms of money, much of it formulated by giant tech companies such as Facebook, which over the same years digitalized both economic and everyday life to their own considerable advantage.

What the Fed called a robust recovery was in fact the slowest since the Second World War and the most inequitably shared one ever, as this book will prove. The economy was also very fragile because gains were in large part derived from high-flying financial markets with no staying power beyond the wind the Fed put beneath their wings. Ultra-low interest rates not only failed to stimulate growth, but also made most Americans even worse off because trillions of dollars in savings were sacrificed in favor of ever higher stock markets. Even families with a bit put aside and those with a strong case to start a small business couldn't get loans at reasonable rates on safe-and-sound terms. In short, the economic-equality divide got bigger – a lot bigger – due to all of these financial policies. Capitalism is working fine, but only for capitalists.

Federal Reserve chairs and other financial policy-makers clearly understand what's happening. They see that economic inequality has wrought havoc in American political consensus,⁶ household well-being,⁷ and even mortality rates.⁸ As COVID decimated the nation, the chairman of the Federal Reserve noted that it was an inequality “increaser.”⁹ However, at the same time and often in the same speech, Fed chairs eschew any responsibility for inequality, preferring to ascribe it to unavoidable innovation, an aging population, long-term problems in the US educational system, unaffordable housing, or fiscal policy. All of these are indeed potent inequality drivers, but that there are other causes of US inequality doesn't absolve financial policy-makers from fixing the ones readily within their own reach.

One reason financial policy-makers dismissed suggestions about their anti-equality effects is that they and the economics theorists on whom they rely failed to anticipate how financial markets responded to all of these reforms. More than a decade after 2008, stock markets rode higher and higher at ever greater risk due to a new set of incentives created by Fed policy. Banks are indeed safer, but now also so different that Facebook is ready to replace them – hardly a comforting thought.

Fixing monetary and regulatory policy won't on their own bring back the “glory days”¹⁰ many of us expect in America. But fixing financial policy will have fast impact, meaningfully improving equality and buoying hope for a “kinder and gentler”¹¹ nation and shared prosperity. Unlike many other causes of income and wealth inequality, financial policy is remarkably easy to fix and quick-acting afterwards. All it takes is the will to act.