Academic journal article Social Work

Economic Inequality and Economic Crisis: A Challenge for Social Workers

Academic journal article Social Work

Economic Inequality and Economic Crisis: A Challenge for Social Workers

Article excerpt

In everyday practice social workers encounter --and try to counter--the effects of severe economic inequality. Daily we witness the devastating effects of economic crisis--loss of jobs and shelter, increasing hunger, and decline in income and living standards. Social workers may be on the shorter end of the stick, our jobs threatened by cutbacks, our earnings too low to sustain middle-class lifestyles. Social workers, however, usually do not consider economic inequality from another angle: its harmful effects on the economy. This article shows how increasing economic inequality has contributed to economic dysfunction and economic crisis in the United States.

From the perspective of economic inequality, the 65 years since World War II can be divided into two periods: (1) the first three decades when inequality, though ever present, was diminishing and (2) the subsequent 30 years when its rise culminated in economic crisis. The article begins by contrasting the two periods with respect to the distribution of income and wealth, wages, unemployment, and poverty. It then describes the political economy of the first period or the relationship between the democratic system of government and the capitalist economy. Although inequality remained a fact of American life in the first period, it was during this time that according to the British economist Andrew Shonfield (1965), a "new capitalism" emerged, one in which the advance in national income benefited people unable to gain a share of prosperity through their earnings. Shonfield also called attention to "the conscious pursuit of full employment" (p. 63), a policy that enabled more people to earn higher incomes. In retrospect, this era may have been an anomaly in the history of capitalism, owing, in the case of the United States, to the federal government's more active role in the economy in response to the highly unusual conditions that preceded it: the Great Depression and World War II. Furthermore, competition with the Soviet Union forced the leader of the "Free World" to demonstrate the superiority of the "new capitalism." With the demise of communism and of competition, capitalism, like all monopolies, has less need to please its constituents.

The trend toward "shared prosperity" came to a halt in the mid-1970s when the nation took a "great U-turn" (Harrison & Bluestone, 1985). Some reasons for this reversal are identified, and the consequent political economy, one more akin to traditional capitalism, is described. Discussion of the second postwar period shows how the interaction between economic and political inequality contributed to economic dysfunction and to near collapse of the economic system. A subsequent section focuses on the proximate causes of the meltdown--the expansion of credit and the housing bubble, both fueled by rising economic and political inequality, specifically, growing control of government by wealth and a burgeoning financial sector. The concluding sections point to implications for social reform and action by social workers.

RISING ECONOMIC INEQUALITY

Escalating economic inequality in the past 30 years comes as no surprise. Yet even those who are cognizant of the economic divide can be shocked by how wide it has become. We encounter egregious inequality wherever we look--at wages, income, wealth, poverty, and unemployment.

In the decades after World War II, real wages rose steadily along with productivity (U.S. Bureau of Labor Statistics [BLS], 2010, n.d.). Thus, the nation's wealth was shared to a greater extent than in previous eras. In contrast, between the U-turn and the meltdown, output per person or productivity grew 85 percent while average hourly wages fell 13 percent (in constant dollars) (BLS, 2009a, 2009b). The real value of the minimum wage declined 30 percent between 1968 and 2006 (Bernstein & Shapiro, 2006).

Not everyone's wages suffered. While the average worker lost ground, chief executive officer (CEO) pay was skyrocketing. …

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