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Review: Robert Reich Inequality For All

Inequality
Inequality
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Robert Reich is a celebrity economist known to most political junkies who follow television talk shows and read op-ed pages. He's a Harvard graduate, Rhodes scholar and has worked in the Ford, Carter and Clinton administrations.

His documentary Inequality For All (2013 Netflix) sets out to demonstrate that wages for the middle-class have remained stagnant from the late seventies onward while the top earners (the 1%) have grown wealthier. The documentary is loaded with graphs and statistics to prove income disparity and other graphs that imply causes through correlating.

Reich is short and affable and makes much of his size, jocularly, throughout the film. Although the economic terrain he exposes is dire, the film is actually optimistic in tone. Reich is a nice guy that has bad news but don't worry about it, things can get better if we try hard and assert ourselves in the community as the country has done in the past. The past being how the country has overcome civil rights disparity and anti-war movements. Inequality, the Reich, is an issue of social justice.

The problem with Reich thesis through film, as with any when the subject is the dry empirical world of economics, is graphs and statistics don't always amount to clear cut causes or conclusions. Inequality is a bad thing, we gather, and the worst years for this, according to the graph, were 1928 and 2007 and it seems to make sense since these were the peak years before financial collapses. The problem with the graph is the best years were the 1970's and this is where the thesis undermines itself. Few can claim the 70's were the good old days of economic health in America but it was the best ten years in terms of "equality", at least according to the graph.

Reich is a liberal economist or more accurately a Keynesian economist but his Keynesian prescriptions here are very light and are said in passing such as the need for government to "invest in education and job training", oh, is that all we need to do? Certainly he prescribes more than this in is columns but one would think there would be more here.

The film is also short in accounting for the disparity. One central cause he spells out is the decline in labor unions and so we're shown a graph of labor union participation overlapping with that of the income inequality graph and we have correlation, therefore a cause. But it isn't convincing or ought not to be if we are savvy enough to know that correlation does not prove cause.

In one unintentionally humorous scene we find out that president Clinton, with the help of Reich, devised a plan where executives of companies would lose certain tax deductions in the area of executive pay if income did not somehow correlate with the growth of the company. As a result of this policy companies started to pay their CEO's and top executives with stock options. This led to an exponential (and thus greater disparity) between the workers of a company and the people who run it. Here we have an economists lamenting about inequality and a need for more government involvement in economic affairs when the involvement itself had a lot to do with the inequality in the first place.

Reich asserts that the presidency of Bill Clinton had produced the best economic years in recent history. But earlier he asserted that the best period of economic well being were the 50's, 60's and the awful 70's after that things start to get less equal. So now we don't know what to think. This is the problem with graphs and statistics tied with an attempt to draw causes and conclusions. Reich the economist has statistics to assert to a proof of a proposition. But then he gives his political view and it doesn't gibe with the economic, nor sometimes does the economic jibe with reality as is the case of the 1970's.

If the data is right, and we have little to assume it isn't, then how do we account for stagnant wages for the last 40 years? Reich demonstrates that Americans tapped into their homes for equity to make up the difference in expenses. There is a lot to be said here and analyzed, certainly there has to be more to this than just the decline in labor unions. But the problem becomes more complex considering home ownership along with second mortgages are tied to income qualification. Wages have declined, lets just say they did, but home ownership rose along with that decline, but paradoxically so did the rise in home prices which are tied to wages.

That's not to say "therefore wages didn't decline" but to suggest there is more to the story that we aren't getting from Reich's data. The real estate crash doesn't solve the paradox since we would not have the rise in values in the first place if it weren't for income qualification to begin with.

Reich also delves into tax policy. To Reich the rich are not paying enough taxes since they ultimately pay in the mid-teens and most of the very wealthy pay capital gains, also in the mid-teens. Most average workers pay a tax rate a little over 30%. There is enough about the tax system that is distorted and illogical but what Reich proposes is that the rich ought to pay more. But if they are prospering by paying in the mid-teens, wouldn't it be better to have everyone else pay in the mid-teens as well? If the rich should pay more this isn't explained through economic or political reasoning but on pseudo moral grounds in that they would be paying their "fair share". But is it less fair to suggest that the middle class ought to have their taxes slashed by 50% to meet parity with the rich? Why not? If fairness is the only standard, who's to say one sense of it is better than another?

Inequality For All doesn't make its case but it hardly makes any case at all. From the onset Reich states inequality is in itself not a bad thing, even inevitable. Certainly we know this. But it's the "concentration" of wealth that's the problem. So it's not inequality after all but a lot of wealth at the top. But so what? The immediate response, and the one he certainly gets is "that's not fair" but only if we're so inclined to think this isn't fair, there is nothing to the film that compels us to think this ought not be fair. Reich does say that with wealth comes power and the ability to influence politicians. But wealthy Americans come in all political stripes. If it were necessary to follow that wealth buys politicians for laws that favor them (at the expense of the middle class) then how do we explain the jobs of liberal politicians or even Barack Obama? That shouldn't happen if Reich were correct. Reich shows wealthy people and how much they give to Republicans and only a few that give to Democrats,this is a partisan slight of hand.

In any event Reich documentary is well made and informative even if you're not inclined to agree with his conclusions.