Winner-Take-All Economy - Essay Example

Winner-Take-All Politics Economy Question Gains Have Been Highly Concentrated Statistics such as tax statistics reveals that while gaps have grown across the income spectrum, the real action occurs at the very top. The share of pretax income earned by the richest (1 percent of the total American population) has risen from 8 percent in 1974 to 18 percent in 2007 (Hacker & Pierson 16). This has been fueled by capital gains such as dividend and investment income, the shares have increased significantly from 9 percent to 23.5 percent (Hacker & Pierson 16). The more exclusive the group the group, the more stratospheric the gains have been. Gains Have Been Sustained The income tax statistic reveals that the move of income towards the top has been sustained, and it increases steadily since around 1980. The ever increasing national income shares captured by the richest Americans are a long-term trend which is obviously not related to either the shifting partisan occupation of the White House or business cycle (Hacker & Pierson 17). The rapid increase in the amount of shares captured by the richest Americans occurred during the drives on the stock market that occurred between 1980 and 2000. Gains Have Resulted in Few Trickle-Down Benefits for the Non-rich The average income of the poorest American households increased by 6 percent, while the middle quintiles of households increased by 21 percent. This research study took inflation and government benefits and taxes into account (Hacker & Pierson 17). Most of the richest Americans gain from the struggle and sweat of the middle class and poorest Americans. Question # 2 The Democrats and the Republicans have created Winner-Take-All economy so as to regulate how wealth is created and distributed in America. The policy makers are interested in formulating economic policies that favor their personal interests. It is of no use for globalization beneficiaries to support reforms to tax and regulatory policies, which will prevent them from acquiring wealth with ease (Hacker & Pierson 116). They usually strive to block any policy that alters the economic and fiscal environment than has always titled their interests and favors. This offers them a massive positional advantage. For instance, the Washington’s checks and balances automatically favor the status quo (Hacker & Pierson 118). Most political parties and financial and business lobby group put much of the focus on the net losers in the political economy of reforms, which has deflected the attention from analyzing the incentives and interests of the net winners (Hacker & Pierson 120). The main focus of the politics of economic reforms is to create winners who gain stakes in defending and extending the reforms. Therefore, the goal of reform is to establish a constituency of winners who will support the current efforts to advance the transition to a market economy. The problem associated with the winners is that, the reforms are dispersed throughout the economy, while the losses are concentrated within specific groups (Hacker & Pierson 120). An efficient gain associated with economic reforms should; lower financial deficits, reduce inflation, create a stable currency, and increase the availability of services and goods. It is, therefore, evident that major political parties, who are the key beneficiaries of policies reforms, face barrier to collective action. The richest Americans, who are the losers, face concentrated costs in a short-term, and this makes them have strong incentives to involve themselves in collective action against the reforms (Hacker & Pierson 121). Question # 3 The public understands that the political parties have failed to identify policies, which can help in solving the problem of large increases in inequality. Much of the inequalities occur at higher levels in market income or pre-tax-and –transfer inequality (Hacker & Pierson 137). Most Americans also do not understand how changes in government policies affect shifts in pre-tax income distribution. Economic changes usually produce economic rewards, but the legislatures step in to redistribute income. The government has several tools to affect the distribution of earnings before benefits and taxes take effect. The government policies do not just distribute what financial and labor markets produce, but the reorganize the markets in a manner that structure both economic capacity and outcome for organized action among economic interests (Hacker & Pierson 138). This makes the political parties to take advantage of the public’s ignorance to formulate economic policies which favor their personal interests. Reforms that are aimed at altering any policy that favors their interests are usually not put into effect. The public pays little attention to the indirect ways through which the political parties structure the distribution of income. The rise of winner-take-all inequality is directly linked to the evolution of the framework of industrial relations, the functioning of the financial markets, and government corporate structure and pay (Hacker & Pierson 139). Question # 4 The author of winner-take-all economy suggests that the winner-take-all economy can be reduced by making effective policy changes in industrial relations, financial markets, executive compensation and taxation. Any political analysis addressing rising inequality must pay attention to tax policy. Taxes are one of the invisible ways through which the government influences the distribution of income. The move towards a favorable tax regime for the richest Americans is as a result of policy enactment (Hacker & Pierson 223). Legislators should create economic policies, which favor every American Citizen, and the favors enjoyed by the richest group should be withdrawn. The structure of American corporate governance is a key contributor to American winner-take-all inequality. It is quite unfortunate that the public is not aware this is political outcome. A political environment, in which policy and agenda designs are concentrated and highly organized interests, prevents the formulation of reforms that update policies in the ever changing environment. The author suggests that effective update of policies is likely to limit winner-take-all economy in the American system. The underlying problem is that the legislator branch of government is composed of wealthy and well connected Americans, who are only interested in formulating policies that favor their interests. Therefore, they are not ready to pass any policy that alters other economic polices that favor them. Policy developments that favor winner-take-all economy have existed over several decades, and it is mobilized by organized interests (Hacker & Pierson 131). Works Cited Hacker J. S, Pierson P. Winner-Take-All Politics: How Washington Made the Rich Richer-and Turned its Back on the Middle Class. New York: Simon and Schuster, 2010. Print Read More