We can’t seriously address income and wealth inequality if the only democratic tool we use are tax policies. We simply can’t ignore monetary policies — the creation and circulation of our own money.
Currently, the vast majority (estimated as high as 97%) of our money is created not by our government — as authorized in the Constitution (Art 1, Sec 8 giving Congress the power to coin, or create money) — but by private financial corporations. It is the penultimate privatization/corporatization of any public assets.
Worse, the financial corporations create this money via loans — meaning money is created as debt, which of course must be paid back at interest.
There are numerous economic…not to mention political…problems with this scam. One of the problems is its contribution to inequality. As the above image from Positive Money in the UK describes, each time a person pays the interest to the financial institution is each time wealth is transferred from the bottom to the top. Ten percent of the population benefit from this set up, 90% gets stiffed. Inequality is built into our monetary system.
There are numerous worthy proposals to address inequality through tax measures. A new report issued just this week, “Billionaire Bonanza: The Forbes 400 and the Rest of Us” by the Institute for Policy Studies, is the latest example. The report, which documents that the richest 20 people in the US own more than the bottom half of all Americans (i.e. 152 million people), presents several recommended tax changes. These include closing various tax loopholes and increased direct taxes on wealth, not just income.
Instituting these tax changes would certainly provide an economic relief to the majority of people and to society as a whole. Failing to change the design of our monetary system, however, guarantees that inequality via interest payment on bank loans will continue.
Our money should be conceived of as a public utility. It should be publicly created and determined publicly how it is spent — as an asset, not a loan/debt.
There are proposals to end the ability of banks to create money as debt. Just as we educate ourselves on the nuances of tax policies, it’s time to get serious about monetary literacy. That’s the only way we can get serious about solving wealth inequality.