When the idea for writing his 2008 book Runaway Inequality came to him, Les Leopold was pondering a basic question his adult son living in New York City posed to him. How is it that in one of the richest cities in the world, one so easily confronts poverty? Back then, it would be hard for him to imagine a galvanizing run for the Presidency based on a populist critique of economic inequality, but that’s exactly what’s transpired. Leopold freely admits his work runs on a parallel track to the senator from Vermont, and he’s exciting by what the Sanders candidacy represents.
Leopold was in town last week to train CWA labor leaders in his program, which has grown in scope because of its ability to unite disparate progressive causes under the umbrella of economic inequality. “The way we’re set up now is that you’ve got labor and you’ve black lives matter and you’ve got the environmental movement, you’ve got housing, and education and everyone works on their own thing,” Leopold explained to The Public in a local union hall. “They’re very determined on their issues. And sometimes they form transactional coalitions, but their focus is, ‘This is my identity, I’m this kind of activist, I’m that kind of activist.’ And that’s no longer good enough to handle what’s going on in the world. We need something bigger, broader.”
And that’s nothing shorter than political revolution. Leopold sat down to tell us why and how.
What brings you to town?
The communication workers. I had a chance about a year ago, I was asked in the New York area with Verizon workers—they basically said we have good activists but they’re all in their silos. Can you give them a broader picture? And I said, “I can try, and by the way I’m working on this book, can I use it?
So they gave me five half-days over a three month period, half-day training sessions with these 30 workers. They were rank and file political activists, the kind of people that do the door-knocking and form the committees, you know they’re not staff. They’re regular people but a little more active. So we went through this thing we call “silo busting” and the basic economic analyses in the book and they really ate it up, and at the end we asked how many books they’d like to circulate with your own members. And we totaled it up and it was 3100, so we knew we had something. The word of this got to the national leadership. So we’re now training trainers, worker-trainers, the same like those 30 people, to go out and do day-long workshops on runaway inequality and why we have to be united in a much broader movement. It’s not explicitly a Bernie Sanders thing at all, and it’s going to go beyond the election.
The analysis in the book is really eye popping. For example, we know the incomes of the super rich have gone up and up while wages have stayed stagnant for an entire generation. The common understanding is well you know it’s Wall Street and they have a casino, but we don’t know how money gets there. How does money get from us to them. What this program shows is how basically, our corporations have been financially strip-mined, how they’ve been turned into financial assets, how it is that the money gets siphoned out to the CEOs and to the Wall Street investors. It’s a process that’s just not obvious to people and it grabs people.
From there, once you have that inequality, you have a tremendous impact on everybody, not just workers in a particular company. The process of financializing a corporation is corporate raiders—hedge funds, private equity companies—go in, buy up a company but use a lot of borrowed money, and when they do that they stick the borrowed money on the company. If you went out and bought a car with a loan, who pays back the loan, you or the car? In a corporate-raiding situation, the car pays back the loan. So what we’re seeing is a huge rise, an enormous rise in corporate debt, and interest payments on debt isn’t taxable, so corporate contributions to the public sector have gone down dramatically, ever since the late 1970s when this whole process began. And this process came out of a new philosophy which we called a “better business climate model”: cuts in taxes, cuts in regulations, cuts in social spending were supposed to become a profit investment boom and then all boats were supposed to rise. What they didn’t tell us at the time is when you deregulate finance, weird things start to happen. Most of the controls put in during the New Deal were removed, and that allowed what we call financial strip-mining to take place. A big part of it is stock buy-backs. I didn’t realize that companies are spending three-quarters of all their profits buying back their own shares, which raises the price of the remaining shares, CEOs cash in on their stock options, the investors cash in on after the stock goes up.
Before 1982 that was called stock manipulation, after 1982 it was legal. Before 1982, 95 percent of corporate pay was salary and bonuses, and 5 percent were stock incentives. It’s switched around entirely. It’s hard to believe: 5 percent of CEO salaries now are salary and bonuses and 95 percent of their compensation are stock incentives, so you can imagine how that changed the game.
In our area, the largest labor constituency is likely public employees. We’re seeing ongoing tumult in Chicago Public Schools, the sick-outs in Detroit. We’ve escaped such catastrophes so far here, but it wouldn’t take much for us to be in a similar boat.
Here’s the puzzle: How can the richest country in the history of the entire world be unable to afford its public sector? That’s the flip-side of the puzzle of how does all our money end up on Wall Street, where 40 percent of all corporate profits goes to a sector that only has five percent of all employees. Once we understand that, that’s one side of it.
The other side of it, we’re ranked low on the international list on what we pay our teachers. We’re near the bottom. Countries that have a lot less per capita income than us would never tolerate whats going on in Flint or Detroit. Crumbling schools, rats running around. How do we allow that to happen? The answer is, the most robust parts of the economy are not contributing to public sector anymore.
There’s a chart in the book that shows a decline of corporate revenues as percent of all state and local government because of this huge debt burden on corporations, and because we now have a war between the states, and everybody’s giving more tax breaks. Matter of fact, the tax breaks and incentives given to corporations on the state and local level, the amount of taxes lost as you compete to get a plant here that maybe wants to go to Missouri but you’re going to compete to get them here—the tax revenues lost from that is greater than the [public employee] pension burden.
Like development grants and incentives?
Yes. The tax abatements, the 10-year tax abatements. I keep seeing ads on TV that say come to New York, you’ll get 10 years no taxes. Those things add up to more than the entire pension burdens of the hard-pressed states. You look at the top 10 states with pension burdens and look at their tax forgiveness to corporations; that’s because this financial strip-mining process leads directly to it.
The author and activist talks about the roots of economic inequality and the coming tax revolt.
The second loss of revenue is from wealthy people who have moved their money offshore. So you have corporations doing that obviously with these inversions that are part of the deregulation philosophy, but the combination of Wall Street wealth managers and tax lawyers design programs for the wealthy to not pay taxes. And they pay less than you do, less than I do, in terms of percentage. Way less. Tax revenues from the wealthy have been going down and down.
So what’s left? You have people who haven’t seen a real wage increase in a generation, and we have a very high level of poverty compared to the rest of the world; we have the most children living in poverty of any developing nation. So you add that up and it’s a incredible tax burden on the average taxpayer.
You’re going to get a tax revolt. You’re going to get a constant series of tax revolts. People are going to say, “Hey, I don’t have pensions like what these public sector employees have, I don’t have the job security they have, why should I be paying taxes so they can live better than me?” So it’s an easy ploy for politicians to make and so we have people chewing on each other’s legs. So the private sector workers don’t want to pay taxes to the public sector workers and meanwhile, what the CEOs and Wall Street investors are doing to the private corporations so they don’t pay taxes, and what they’re doing with their money so that they don’t pay taxes goes on. We’re not talking about a small amount of money here, the estimate is that there’s $21 trillion off shore, and the loss is approximately $150 billion per year.
If inequality has been running away for decades, that has to indict the American voter and our paltry voter turnout rates. Is democracy not working?
Oh, it’s definitely not working. Let’s go back to the better business climate model. Both parties adopted it—the Democrats adopted it just as strongly as the Republicans did—so it wasn’t just Reagan. Carter already began the deregulation. I don’t know if you’ll recall, but Ted Kennedy was all high on deregulating airlines, communications, trucking—they thought it would help deal with inflation and create new openings in the economy. Carter took off the cap for interest rates for credit cards, that was first big deregulation of finance. Everyone was into it. Look at the Clinton administration, they deregulated the big things: Glass Steagall, derivatives (they didn’t deregulate, they said you weren’t allowed to regulate derivatives which a decade later lead directly to the crash). So the Kool-Aid was already imbibed by both parties.
If you look at voter participation during the Kennedy era, it was really high, like 70 percent, and it’s gone steadily down. The more the economy got financialized as this better business climate set in and as more people’s wages began stagnating, they started to feel like, “No one is really representing me.” There’s an incredible study, which I quote in the book, but I also have been writing about in the Huffington Post and everywhere else. Two political scientists, one from Princeton one from Northwestern, Gilens and Page, they looked, about a decade ago, at the years 1990 to 2003. They looked at 1,771 Congressional bills, and they tried to figure out, looking at poll data, that which was passed, how did it represent the average voter, compared to wealthy voters and large business lobbyists. And they found the average voter had NO, near zero, impact on legislation. Zero. Now think about that. That’s the very definition of a plutocracy. You have no influence. So the frustration that America feels is that it doesn’t matter who gets in. I mean, why else would people be so upset about Obama? Because he lifted people’s hopes up that he was going to make big changes. And when you think about it, other than the health care act, which was a weird compromise to being with, he made very few changes that impact everyday people’s lives. He still follows the better business climate model. Let me ask you this: When was the last time a politician said, I think we should create more public sector jobs? For people who need work, for the people who are being laid off at this plant and that plant. We need more public sector employees. We need more teachers in the schools. We need more day care, more health care?
That’s about it, but even local politicians are very careful, because they’re so afraid of going against this better business climate idea which says that any job in the private sector, no matter what it is, is more virtuous than a job in the public sector. The voter senses all of this and I think the reason we’re seeing a response for Trump, not so much Cruz but maybe, but with Trump especially because he’s saying, “I can’t be bought” and he’s giving the nativistic argument. And then he sees Bernie, who’s saying, the billionaires run this country. He’s saying that! And people are responding in droves. We’ll see how far he can go, but it’s quite astounding to me. I think participation would go up with a candidate like that. And he’s calling for political revolution. That’s what I’m more concerned with. We have to build something with legs, that will last between elections. It won’t be about any one political candidate. He’s no spring chicken, he can lead it for a while, but we need to build something. We don’t need another Occupy Wall Street that lasts six months and disappears.
How far can Bernie Sanders go? Within the labor community locally…
…especially given Hillary Clinton’s historical ties, I’ve sensed a reluctance to endorse the candidate whose views are more closely aligned with average working people…
Yeah, right. They’re worried about access.
Does Clinton have any credibility when she speaks about “reining in Wall Street?”
No, no, she has no chance of doing that. Here’s the situation, Gilens and Page were very very mainstream political scientists. They conclude by saying, “Given this data, I’m not sure we have a democracy anymore.” I wrote about this just last week for the Huffington Post. Basically what it comes down is her line—and Paul Krugman’s line—against Sanders is that he’s not realistic. What they really mean is that he’s not really ready to play ball within the plutocracy. They’re saying that she’s the skilled realist that knows how to nibble around the edges to make whatever changes can be made. What she’s not going to do is what’s needed. She’s not going to bring a million people down for a demonstration on Wall Street and demand the financial transaction tax, or demand the closing of the carried interest loophole, which is a loss of billions of dollars that hedge funds get and private equity companies get, and nobody else does. It’s a ridiculous loophole. Ridiculous. She can’t do that, that’s not her psychology. Sanders comes from a tradition, where that is his psychology. It’s like what Roosevelt said, a bunch of labor folks came in and wanted this big change, and he said, “Sure. I’m in favor of that. Go out and make me do it.” And what he meant to say was, “Create turmoil, I can then move in your direction.” He had that kind of vision.
Look at the story of LBJ. Krugman was saying, well LBJ was one of these realists. You’ve seen the movie, Selma. LBJ wasn’t going to do the civil rights stuff, he was pressured into doing it because there was a real movement from below. That movement needs to be built. It took the civil rights movement a full 15 years after World War II to make an impact. I think people are ready to actually join something, if they thought there was a mainstream version of the Tea Party but it was progressive, I think they’d come running. I think that apathy you’re sensing would dissipate. If we could all do something to shake up the plutocracy, we’d do it.
That was the problem with Occupy Wall Street. I was writing about this like crazy. I’m going, “Hey, I’m 60-something years old, I’m not going to sleep on the god damn street, what am I supposed to do, I want to help.” But they didn’t want to set up an organization. It became a spectator sport. All the progressive silos watched. So the moment was missed, nothing was set up. There were probably a million people in the New York area who were sympathetic to Occupy Wall Street. They had so much money thrown at them they didn’t know what to do. They were sitting in a room at one point with $600,000 cash, and they didn’t know what to do with it because they weren’t an organization. But they did tap into something, people are still pissed off at Wall Street. If Hillary has a vulnerability it’s “I can sit down and talk to them. But I’ll take $2 million in speaker fees from them.” That’s not going to fly.
Back to labor. Labor’s divided. It’s always divided in terms of acces. When you’re weak, the weaker you are the more you need an invitation from Cuomo or Hillary or whoever to come to this meeting or to get their advisors a seat, so you have a split in the unions. You’re going to have the ones who want to play the insider game and the ones who are willing to bang away from the outside. It shows how weak the labor movement is when it doesn’t have the courage to shake it up, they’re so fearful to lose whatever influence they have with the Democratic party. They basically understand on some gut level that it is a plutocracy so they want someone who can play game inside of it.
The reason we’re doing this education campaign is we find most people are completely lost, they think the wage gap is what it was in 1970, they have no idea of how bad it’s gotten and they have no analysis of why it’s gotten so bad. And this includes labor leaders.
Les Leopold will be appearing at the Western New York Labor Federation annual meeting on Saturday, March 12, from 9am-12pm at the UAW Region 6 hall at 35 George Karl Boulevard.