Income Disparity and Its Problematic Promotion in the 21st Century
By Staff News & Analysis - August 11, 2014

Karl Marx was right — at least about one thing … While the steady or slightly accelerating global growth rates predicted by the IMF is the most likely outcome, it may not be achievable because of three imbalances: social, geographical and demographic. These seem deeply embedded in the structure of global capitalism today. They are weakening demand, creating excess savings and driving the buildup of borrowing and lending that has been both a cause and consequence of the global financial crisis. The most dangerous imbalance is in the distribution of wealth and income. Income disparities have become a source of political and moral controversy, but their macroeconomic effects have attracted less attention. The mechanism whereby income inequality causes economic stagnation was recognized by Karl Marx and other 19th-century writers. – Reuters

Dominant Social Theme: Income disparities are dragging down Western economies.

Free-Market Analysis: In numerous recent articles, we've tracked the "income disparity meme," and this Reuters editorial continues the trend.

A Wounded Meme Dies Hard

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French Revolution Meme Persists

An Unfortunate Politico Promotion?

Fanning Social Unrest: A Diabolical Strategy With Bad Ramifications

This important elite meme blurs the reality of what destroys economies – monopoly central banking and corporate personhood. Top globalists are seemingly doing their best to obscure the reality of these destructive economic developments by inciting a kind of class-warfare.

Grappling with the disappointment of the Occupy Wall Street promotion, they've apparently decided that they need to approach the promotion from another angle. Now the idea seems to be to establish the destructive economic reality of income disparity via editorials and analyses in prestigious mainstream media outlets.

And, thus, among others, we find yet another contribution to the cause: This Reuters editorial (initially published in July) places income disparity alongside geographical and demographic distortions as reasons why there will be no significant recovery either in the US or Europe even after six years of significant – horrible – industrial dysfunction.

Regarding "geographical distortions," the idea is that some countries are doing much better than others, which creates geographical rigidities that make it impossible for economic policy makers to do their jobs. The article uses Germany as an example, and claims that Germany's political and industrial clout virtually prohibit the devaluation of the euro, which would relieve stress on foundering Southern European countries.

Demographic distortions are said to involve aging "baby boomers" in both Europe and the US who are saving rather than spending and thus adding to "deflationary demand pressures," as they are not aggressive consumers. Additionally, according to the article, retirement subsidies are accounting for most state spending, thus making it impossible for states to practice Keynesian "pump priming."

The third distortion is the aforesaid "income disparity." This is the reason for the article, in our opinion, which is not really an analysis but an elaborate promotional presentation.

The larger analysis, the various macro-economic factors cited alongside "income disparity," are offered only as a seemingly logical framework to introduce the income disparity meme. The main point of the article is thus to be found in this paragraph:

… If too much of the income created by capitalism's capacity to increase production flows to people who are already rich and likely to save rather than spend, then crises of under-consumption become almost inevitable, as described by Marx in Das Kapital and analyzed more rigorously by John Maynard Keynes in the 1930s.

You see, income disparity is not merely unfair or morally degenerate, it is actively destructive to the economy – just as Karl Marx predicted! We mentioned this devious argument in our most recent article on the topic, "As Predicted, Income Inequality Meme Is Now Portrayed as an Economic Threat." Here's the relevant language:

We seem to be treading on dangerous ground now: When it comes to this "economic inequality meme," frustrated internationalists may have decided to dispense with populist approbation in order to simply make a case for leveraging government force without the appropriate "buy-in." This is surely a recipe for tremendous social discord, aimed not at the victims that elites want targeted but at elites themselves, or at least the mechanisms of elite control. … Perhaps this is indeed the current plan … to generate as much anger and chaos as possible in order to justify authoritarian regimes that can mandate increased globalist policies.

Let's break this down … Having failed to create the environment for a kind of neo-French Revolution via Occupy Wall Street, those behind this meme are now apparently seeding the ground for legislation that will likely forcibly "level" income disparities. In doing so, these disparities will be highlighted and become the source of much debate, further contributing to the desired fraying of social comity. In the process, it is obviously hoped that central banks' role in the current disastrous economic climate will be forgotten, or at least mitigated.

First, it is necessary to come up with weighty macro-analyses that studiously avoid the mention of monetary judicial impacts on socio-economic trends. Mention demographics and regional distortions, focus on income disparity, but for God's sake don't discuss the ruinous effects of money printing, the boom-bust cycles it generates and inevitable centralization of money and power that trail in its wake.

And just as importantly, never discuss corporate personhood and how, by ensuring that corporate executives are not held liable for destructive company policies, large companies can continue to grow in power and prestige without significant constraints. The combination of these two elements produces what can only be referred to as "corporatism" – unless one wants to call it by its less polite name … fascism.

You'll read nothing about these two key defining factors of modern capitalism in this Reuters article, though. Here we are instructed on Keynesian macroeconomics. The problems with today's economic systems in the West are purely mechanical and have to do with "imbalances." Here's more:

Confidence in the global economy is steadily improving, as shown in the financial markets' bullish behavior and confident comments from companies and policymakers over the past few weeks. Though these columns have argued in favor of a robust recovery, when investors get uniformly bullish, the pessimistic case deserves attention. Many distinguished economists believe that the current improvement in global conditions is just a blip. They insist that the world faces years, if not decades, of "secular stagnation."

How seriously should we take them? The good news is that there is little evidence of secular stagnation in global statistics. The "new normal" for the world economy since 2008 has not been very different from the pre-crisis period. The average growth of the global economy from 1988 to 2007, the 20 years before the crisis, was 3.6 percent, according to the International Monetary Fund World Economic Outlook database. The IMF latest forecast for 2014 is exactly the same — 3.6 percent.

… Since both emerging and developed economies have weakened, how can it be that the world economy as a whole has not slowed? The answer is the shifting balance of economic activity from slower advanced economies to faster-growing developing economies.

This question, asked in this last paragraph, above, precedes what we have analyzed. If Africa and Asia are growing quickly and the West is not, then this must be as a result of demographic, regional and income-inequality "distortions."

Of course, from our point of view, Western dysfunction is simply the outcome of monetary recklessness. African and Asian countries have not yet arrived at the same sort of dysfunction, but this is merely a matter of timing. They'll get there, too.

The article conveniently forgets that Asia has been there already, during the late 1990s' Asian Contagion. At the time there was no pontificating about "regional distortions." The truth was simply acknowledged: Asian governments had overprinted and over-borrowed and excesses would have to be wrung out before "growth" – Keynesian style – could resume.

As we recall, European banks insisted on repayment in gold and in countries like South Korea, officials went door-to-door demanding gold jewelry and other items containing the "barbarous relic," as Keynes called it.

But this sort of anecdote was not widely reported in the Western media for obvious reasons. This Reuters article, on the other hand, may get wide distribution because it is a prime example of an artful promotion. It seems authoritative and advances a reasonable argument concerning Western economic stagnation.

All one has to do is close one's eyes and forget that the current crisis was initially a monetary one and has remained a monetary one. Not for nothing did a panicked Fed disburse US$16 trillion in short-term loans around the world in a time-period that may have been as short as a single weekend.

After Thoughts

Yet there are many who remember as well … perhaps too many to allow this promotion to have the impact and success that its sponsors wish for. This sort of propaganda is harder to disseminate in the 21st century than the 20th.