How to Reverse Inequality in 4 Not-So-Easy Steps

Don’t get distracted by income, author Chuck Collins says. It’s power and hidden wealth driving inequality.

Globalization and technological change contribute to inequality, but they are not the driving forces.

Illustration by Mark Airs/Getty Images. 

Inequality in the United States has become a household concept, if for no other reason than Sen. Bernie Sanders centering his presidential run around fixing it. There’s plenty of visible evidence of it, but author Chuck Collins wants Americans to take a closer look at other aspects of inequality too, particularly wealth disparity, the power imbalance it creates, and how the rules of the economy have been changed to benefit those asset owners at the expense of everybody else.

Collins is a senior scholar at the Institute for Policy Studies, where he directs the Program on Inequality and the Common Good. His report “Reversing Inequality: Unleashing the Transformative Potential of an Equitable Economy,” co-published with the Next System Project, takes an exhaustive look at the causes of continued wealth disparity in the United States and lays out several ways to reverse it, ranging from narrow policy fixes—raising the minimum wage, strengthening labor standards and protections, and expanding health coverage to everyone—to systemic reforms in how corporations are chartered, breaking up monopolies, encouraging the growth of socially responsible “B Corporations,” and establishing a National Infrastructure and Reconstruction Bank.

Collins spoke with YES! Magazine senior editor Chris Winters about the need for a system of economic rules that make it easier for people to act in non-exploitative, non-extractive ways and four collections of steps needed to address inequality: lifting the floor, leveling the playing field, deconcentrating wealth, and rewiring the next system.

This interview has been edited and condensed for publication.

Winters: You talk about universal basic income, and you’re combining it in the same report where you’re talking about restoring progressive income taxation and other things. I take this to be more of a handbook, in other words, for everything that needs to be done to reverse inequality, not just tackle one or two issues.

Globalization and technological change contribute to inequality, but they are not the driving forces.

Collins: I think the good news is, for a certain part of the audience, people are, “OK, we get it, we get the inequality picture.”

But we’re kind of at the stage where a bit of snake oil solutions are being put forward that are not systemic. So, for example, people will misdiagnose. They’ll say, “Inequality is terrible, and if only we invested in education access, then low-income people could be better educated and participate in the economy, and that would reduce inequality.”

There’s actually a whole economic body of thought that just points to that: The reason we have inequality is because of globalization, technological change, and, you know, some people have been left behind. If that’s your analysis, then the solution is invest in fixing those people—that’s a quotation, really—fixing those people so they can participate in the economy. And the fancy economic term is “skills-biased technological change.” If you’d ask a traditional economist, “Why is there inequality?” they’ll say it’s because of this skills-biased technological gap; these people don’t have the skills they need to participate in the economy.

Globalization and technological change contribute to inequality, but they are not the driving forces. The drivers have more to do with power, the power imbalance, and how the rules of the economy have been changed to benefit asset owners at the expense of wage earners.

Winters: The main takeaway, essentially, is that it’s less about income and more about wealth and assets and ownership, and the systems that reinforce that structure.

Some advocates don’t want to talk about addressing the concentration of wealth and power.

Collins: Yeah, and this is where, again, even thoughtful people will say, OK, we want to reduce inequality, let’s focus on solutions that raise the floor, level the playing field. And, of course, income matters and those interventions are necessary. But some advocates don’t want to talk about addressing the concentration of wealth and power and how that’s really distorting and driving these inequalities. And so this idea is somewhat of a challenge to that. In fact, it’s basically saying, we’re not going to reverse inequality unless we address the concentration of wealth and power at the top. And that’s controversial.

Winters: The cynic in me, who grew up during the late stages of the Cold War, says this is like waving the red flag, so to speak, just opening the door for someone to say, well, that’s communism! How do you create an argument around this that avoids that reaction?

Collins: When I talk to business groups, I point out that if you care about free market capitalism, these inequalities are distorting and undermining healthy capitalism. Peter Georgescu, the former CEO of an advertising agency, wrote this book Capitalists, Arise!, saying these inequalities are bad for business—unless you’re a monopoly capitalist, unless you’re a beneficiary of a rigged economy.

Chuck Collins. Photo courtesy of Wikimedia Commons. 

We need to think about a system beyond this kind of hyper-extractive capitalism. That doesn’t necessarily have to be the traditional bugaboo of communism, state ownership, centralized planning, you know, everybody’s images of the “red menace,” as you described it there. There’s a patchwork of solutions that would protect the commons and even strengthen independent private enterprises at the local level.

It’s also an invitation to not think of it just in terms of communism versus capitalism, socialism versus capitalism. Think about, what are the elements of the next system that move us away from the extreme inequality system?

Winters: You said it’s a patchwork of solutions. There is a list of different solutions in the report, and they’re not all necessarily related to each other except where they come together as a foundational building block for this kind of a next system. But does it necessarily have to be patchwork or is there a possibility for some kind of a movement to revolve around a lot of these things all at once, rather than each interest group taking on the issue they want—one group wants to make sure Glass-Steagall comes back, another group wants to pursue tax reform, another group wants to expand welfare?

Collins: In practice, I actually think it will evolve over time as somewhat of a patchwork just because of the political nature of our system. But I think it could be part of a larger shared program, that people understand how all these pieces fit together. Whether they all happen at the same time or not is another story.

We need a system of economic rules that make it easier for people to act in non-exploitative, non-extractive ways.

Winters: It seems there’s a certain kind of reliance on people’s better nature. When we’re talking about transforming the corporation, for example, it’s a mix of consumer action, socially responsible investing, shareholder power for the common good—this is kind of a result of bottom-up action. And then there are things like rule changes inside corporations, shareholder reforms—this is relying on corporate insiders being altruistic. And then there’s regulatory elements.

I guess I would put the ball into your court and say, convince the cynics that there are enough altruistic people at all these different levels from the bottom to the top that they can work together.

Collins: We need a system of economic rules that make it easier for people to act in non-exploitative, non-extractive ways. I mapped what I think is actually happening, which is, there are these internal reform movements, and there are the B Corporations, and there are the corporate responsibility actors.

There is a spectrum from least to most challenging in terms of fixing the actual systemic drivers. You know shareholder resolutions aren’t going to fix systemic drivers.

I think it would be like, how do you move toward a German-style system of co-management, with corporate charters requiring an entirely different stakeholder control? That would take a powerful social movement that would change power relations.

So, that’s not going to happen any time in the short term, but that could be the endgame, that could be where we’re heading.

Like the whole idea of a federal charter on corporations that operate internationally and across state borders. That’s a revolutionary reform, if you will. That it keeps corporations from pitting states against each other and nation-states against each other. It just raises the bar entirely. So I thought of that as what’s actually happening now, to pointing the way toward more far-reaching system changes.

Winters: In terms of reaching that final level, where’s the leadership on this? Getting it out of the realm of what we’re doing with this here, think-tanking this idea, and putting it out there and moving forward and driving this at the policy level?

Collins: If you look around you see things like the Hedge Clippers Coalition, the Take On Wall Street campaign, some of the business reform groups like American Sustainable Business Council and Business Alliance for Local Living Economies. I think some pieces of that program and some constituencies of that program are almost there. It’ll take people power, the Our Revolution coalitions and others, to make bigger demands than we have been making around corporate governance. It’ll be retired CEOs like Peter Georgescu who say, yeah, we need to rewire things, and the worker ownership movement making that case. So those are some of the people who basically are pushing back on Wall Street and saying something’s deeply broken. I think that’s a growing constituency.

The reality is the United States is one of the stable safe haven markets.

Winters: One thing I’d like to ask about specifically, because you did set off a special section in the report on it, is the offshore tax and finance system, the invisible money that the Panama Papers investigative journalism project shined a brief spotlight on. I can easily imagine some Wall Street tycoon looking at this growing movement and saying, “It’s pitchfork time. I’m just going to relocate to the Cayman Islands.” What would it take to address that particular problem and also forestall the flight of capital if people with means smell revolution in the air and decide to get out?

Collins: It’s both the offshore tax system, but it’s also the uses of trusts that hide who the beneficiary owners are. And you put those things together.

Here’s the thing: That money isn’t in the Cayman Islands. It’s right there in Seattle. It’s in those downtown office buildings that are being built that are empty, that are being built by global corporations that we don’t know who they really are. That’s where the hidden money is. It’s there because the reality is the United States is one of the stable safe-haven markets. People aren’t literally taking their money out of the country; they’re just pretending on paper that it’s out of the country.

I’m hoping for more Panama Papers-type leaks. We know that there are a lot of wealth managers out there that know that they may be helping a few families at the expense of all the other families in the world. And that this troubles them, and that they know this is a huge tax dodge. And I think we’re going to see more leaks.

The U.S. has huge leverage. If there was the political will and the political movements to push, the U.S. could say to almost any other country, if you want to do business with us, you have to have transparency provisions, and we’re going to have transparency requirements.

Because I think that as soon as people hear, if people really understood that the very rich—I mean people with $40 million and up—are hiding about a third of their money at this point, while we’re being told there’s not enough money, we have to tighten our belts, and there’s austerity and there’s debt, we can’t afford this and we can’t afford that—when the super-rich are hiding their money, I think that would lead to your populist pitchfork movement.

You can pretend your money’s not in the country, but this is the marketplace people want to be in. This is why the Russian and Asian money is flowing into the United States, because we’re perceived as being stable. I think we’re going to have a hard time reversing inequality if so much of the wealth is hidden.