Fair go going, going, gone: the haves and have-nots gap is disrupting democracy

Why does it matter that the earnings gap between the richest and the poorest is surmountable? And that the poorest earn a living wage? Because democracy depends upon the fairness of the economy. 

The best example is in America. Over the past 50 years, American CEOs have gone from making 21 times what the typical worker earns to 351 times what the typical worker earns. Put another way, since 1978 CEO compensation, which has expanded by 1,322%, has outpaced the growth of the S&P stock market. 

When wages become this lopsided, middle-class hope of material goods and social status withers on the vine.

In the wake of the Wall Street bailout after the 2007-08 global financial crisis, hope died altogether for some Americans — people who watched, while they lost their homes, as their government stepped in to rescue financial institutions deemed “too big to fail”. 

Analysts didn’t take the problem all that seriously. Measured by real GDP per person, Americans are the richest people in the world, and while the real wages of the lowest quarter of earners didn’t increase at anywhere near the rate of the top 10% of wage earners (4% v 16%), everyone’s boat was lifting, so why should anyone complain? 

However, this perspective doesn’t account for inflation and the resultant stagnation of real wages for those at the bottom end — indeed, real average wages in the US today have about the same purchasing power as they did 40 years ago. It also doesn’t consider what happens when your material circumstances are stagnant, but those of the wealthy keep improving: feelings of relative deprivation, of a loss of morale and hope, of humiliation experienced from failing to “make it big” in a culture where earnings are the definition of success, of the shame from having bought into the American dream, when the reality is that it isn’t for you.

For many in the MAGA movement, this is where the rage — and the thirst for compensation that would restore dignity in their own eyes and that of others — began. It took the form of rolling the party elites so the party would adopt their prohibitionist policies on abortion, despite everyone knowing they are electoral poison.

But winning fairly was never the goal of the MAGA movement. The point was that, having abandoned hope of ever being granted their dignity economically through the provision of secure and well-paid jobs, they’d found another way to have their concerns and interests recognised by the political party that claimed to represent them. 

Is there a lesson here for Australians? Certainly. Our income inequality problem is less extreme than that of the United States, although considering that the US is now one of the most unequal societies in the developed world, that’s not saying much. 

We’re not that far behind, though, when it comes to the disparity between CEO and typical worker pay, which sees the chiefs of Australia’s biggest companies on compensation packages 78 times that of a typical worker. From the mid-1980s, this was a result of real executive salaries growing substantially faster than average real wages. 

All this, too, before the current cost-of-living crisis, in which average Australians are battling significantly elevated housing, heating and food costs. Meanwhile Australian companies like Qantas and the big supermarket chains deceive, price gouge and otherwise treat their customers with contempt, while their CEOs and shareholders enjoy healthy payouts and profits. 

This is why my blood ran cold when I read the pitch that Thomas Sewell, a leader in Australia’s neo-Nazi movement, uses to attract followers: 

They are going to see that they are never going to afford a home. If they do, it’s going to be in the middle of nowhere. They are going to be spending two hours in traffic to get to work in some dead-end job [that they] had to go to university for four years [to get]. They are in all this debt. The whole thing is geared against them. 

Folks like Sewell are finding a deep vein of economic disenchantment in Australia, according to writer and researcher Lydia Khalil, with white right-wing extremist activity on the increase, including in groups with connections to white nationalists in the United States. 

This makes it critical that Australians recognise that democracy is under siege, not just in the United States but across the Western world. Far from the “end of history” predicted by Francis Fukuyama, for the past 14 years, the number of democracies in the world has been declining every year. 

No matter how well you’re doing personally, now is the time to actively push Australian federal and state governments — and to support union efforts — to reduce the gap between haves and have-nots. This includes staunchly opposing the stage three tax cuts, which will worsen income inequality. And if strikes become necessary to ensure wages rise for those in the middle and below, we support them and bear the inevitable inconvenience with grace.  

The loss of economic hope is something happening on both sides of the political spectrum. And while the solutions being promoted on the left are more collective and empowering, and eschew violence, they too could have an impact on democracy as we’ve known it. But we’ll talk about that next time.