As Under Secretary of Commerce for International Trade, David Rothkopf oversaw the International Trade Administration under Clinton. Now he’s arguing that the deregulation which occurred during the 1990’s unleashed an epic rivalry not between nation-states, but between business and government.
David Rothkopf: When you look at the United States at the moment and you think about our future one of the things that you might ask is, what are we good at? We used to be good at creating jobs, but we’re not so good at creating jobs. We used to be good at building bridges or highways or infrastructure. We’re clearly not doing that. We haven’t done that for 50 years. We used to lead the world in innovation, but the innovation is coming from other places. In that past 10 years, what have we led the world in? And the one thing we’ve really led the world in is creating inequality. We have become accidentally and unfortunately a world leader in this and we’re coming out of a decade in which the results have been kind of horrifying. For the first time in US history we’ve had a decade in which we’ve had a net loss of jobs, but we’ve also seen social mobility decrease and inequality continue to increase so much so that last year, which was a year of recovery for the United States, 93% of the benefits of the recovery went to the top 1% of the population and the 450 richest Americans have a net worth equivalent to the 150 million poorest Americans. That’s not just an interesting cocktail party statistic. That’s a complete breakdown of our society as it was envisioned as an opportunity society.
Technology, industrialism and capitalism have made America richer on an average basis. They have made our GDP go up on an average basis. And for most of American history, when GDP goes up everybody benefits. Jobs are created. When productivity goes up, everybody benefits. Money is passed on down through the system. But somehow over the course of the past decade or two what has happened is more and more of the benefits from economic growth have gone to fewer and fewer of the people because executive compensation has gotten to the point where CEOs, instead of making 50 or 60 times what an employee made 30 years ago, they may now make 300 times or 400 times what an employee made, where taxes for the people at the very top are at the lowest level they’ve ever been in American history by a dramatic, dramatic amount. In the middle of World War II the highest tax rate for the richest Americans was 92% or 93%, almost three times what it is today.
So that has had an effect, and of course if you’re in a really privileged position in a privileged industry in Wall Street or you’re at the top of a big company, we have got the system set up that you can influence political outcomes. You can influence who gets to pick the regulators. You can influence who gets to pick the judges in a way that almost guarantees that as the rules get written, even if there is little regulatory squeeze or pinch here or there, net net you’re going to benefit, and the rest of society is going to fall behind. And so we’ve essentially institutionalized inequality and we’ve accelerated in so doing the sort of descent into evermore unequal society.
So through democratic means we need to create institutions that have the power to counterbalance, to reign in, to regulate, to ensure that companies and the rich pay their share and advance our interest as a society as a whole, that we get away from the notion that the purpose of our society is simply wealth creation, simply having the highest GDP. You know you can have a society with a very high GDP that’s all one company and most of the people are living in poverty, and that’s what we’ve seen in the past decade. GDP goes up, but the life of the majority of people goes down.
The problem gets worse when you deal at a global level because national power stops at borders, but global corporations are able to operate out in a space where there is no regulation at all, whether that’s in global derivates or it’s in internet commerce, or it’s simply their ability to go from one tax regime or one IP regime in one country and go to another place that has a more lax regime and sort of venue shop around the world. And so we need those governance mechanisms on a global stage as well as on a national stage, and that challenge is even greater because here an individual could cast a vote, file a referendum, run for office, have an impact through existing institutions. We don’t have the institutions on the global level to provide that counterbalance.