Synthesis/Regeneration (Fall 2005)  [Printer-friendly version]
November 1, 2005


[Rachel's introduction: Strategies that tackle elite income and
wealth, and thereby consumption, serve both an economic and a larger
cultural purpose: They begin to give content to the ecologically and
morally important principle that at some point "Enough is Enough" (or
should be).]

by Gar Alperovitz

It's time for people who are serious about sustainability to open a
direct, clear, and explicit challenge to the extreme inequalities of
income and wealth which are among the most important drivers of
unsustainable growth. This requires far more than the usual laundry
list of (failing) progressive tax and other policies. There are also
signs that the beginning points of a tough-minded program may be
possible in many parts of the country.

Although we often talk in generalities about inequality, the fact is
the numbers are far more dramatic than most people understand. The top
1% now garners for itself more income each year than the bottom 100
million Americans taken together. The top 1% owns just under 50% of
all investment capital. An only slightly larger elite group, the top
5%, owns slightly under 70% of financial wealth and more than 80% of
unincorporated business assets. The most recent data (1999) showed a
mere 0.2% at the very top making more money on the sale of stocks and
bonds than all other taxpayers taken together. [1]

And of course this is only within the United States. Internationally,
things are far worse. The richest 1% of people in the world have as
much income each year as the poorest 57% taken together. The richest
5% have incomes 114 times that of the poorest 5%. [2]

Quite apart from the indecency of these statistics, what needs to be
confronted is their relationship to materialism in general and
unsustainable consumption and production in particular. Ever more
expansive materialism is driven in large measure by the pattern set by
those who can afford upper level purchases. After "the rich and super-
rich began a bout of conspicuous luxury consumption" in the early
1980s, Juliet Schor reports, members of "the upper middle class
followed suit with their own imitative luxury spending..." In turn,
the 80% below who lost ground also "engaged in a round of compensatory
keeping-up consumption." [3]

Even at times when there is no worsening in the relative distribution
of income, there is an expanding absolute gap between those at the top
and those at the bottom. Thus: If you have $50,000 this year and I
have $1,000 -- and next year you have $100,000 and I have $2,000 --
the relative distribution of income has not changed since the ratio
between our incomes remains constant at 50 to 1. However, the real
world distance between us has gone from $49,000 to $98,000.

Dynamic processes of the kind which systematically expand the gap
between those at the top and those at the bottom generates a powerful
"envy machine" -- a social and cultural dynamic in which even those
who climb the ladder, step by step, regularly experience the space
between the rungs getting greater and greater and the distance to the
top farther and farther away as they climb (if, in fact, they do

"Compensatory consumption" to keep up is also driven by factors which
are not directly related to envy or status. Essential to getting into
a top college is high quality primary and secondary education.
However, for those who can only send their children to public schools
this almost always requires purchasing a home in a neighborhood
supportive of good schools -- i.e. a location where prices are
inflated by high incomes at the top.

Again, the "arms race" among car buyers is not simply a matter of
taste or status-striving. To the extent drivers of small, relatively
fuel-efficient cars face the possibility of collision with a 7,500 lb.
Ford Expedition, they may understandably feel compelled to buy a
larger car for the sake of safety of their families alone.

The capacity of top elites to keep raising the bar in connection with
consumption is almost unlimited. Income received by the 10 most highly
paid C.E.O.s in the US rose from an average of $3.5 million in 1981 to
$19.3 million in 1988. By the year 2000, however, it had skyrocketed
to an average of $154 million -- for an overall gain of 4,300%!
Meanwhile workers' wages did little more than slightly out-pace
inflation during the same decades. [4]

At the outset of the 20th century, Thorstein Veblen coined the phrase
"conspicuous consumption" to describe a form of materialism which has
far more to do with demonstrating one's place in society than it does
with meeting a physical or other need. Modern researchers have
documented related concepts -- including hunger for the kinds of
"positional goods" which only elites can afford, pressures to emulate
those ahead of one on career ladders, defensive strategies to keep
from falling behind, and many similar efforts.

Just how strong such pressures can be is suggested by studies of what
Americans feel they need in order to achieve their hoped-for goals. In
1986, when median family income was $29,458, survey researchers found
that on average Americans felt they really needed far, far more --
$50,000 -- if they hoped to fulfill their dreams. This benchmark, of
course, offers a snapshot at one moment in time. The ongoing moving
picture reveals a deeper dynamic: Less than a decade later, in 1994,
what people felt they needed had more than doubled to $102,000 while
actual median family income had risen to only $38,782 in current
dollars. [5]

Not surprisingly, even as incomes have grown over time Americans (and
others) have not experienced greater happiness. Quite the contrary;
given the expanding dimensions of their unsatisfied aspirations,
millions feel they are on a treadmill running faster and faster simply
to stay in place. Over the roughly four-decade period between 1957 and
1995 both the US economy and consumption expenditures just about
doubled. The proportion of Americans who described themselves as "very
happy," however, did not change in any significant way. [6]

Several recent proposals suggest an initial line of attack on the
expansive consumption and resource challenges created by such
pressures. Schor, for instance, urges ending the tax-deductibility of
advertising by corporations as a way to reduce some forms of
unnecessary consumption. (A limited version of this approach has also
been suggested by Senator John McCain.) Schor and others also suggest
new taxes on luxury items. One specific proposal would provide that
"the high-end, status versions of certain commodities would pay a high
tax, the mid-range models would pay mid-range taxes, and low-end
versions would be exempt." [7]

It helps to be specific about the meaning of the term "luxury items"
-- and the kinds of consumption norms top elites help establish. The
super-elite -- the people Paul Krugman, Kevin Phillips and others have
termed the new "plutocracy" -- increasingly live in a very, very
different world from most Americans, and in a radically different
culture. It is a world where homes cost $5-10 million and where $5,000
grills, $14,000 Hermes Kelly handbags, $17,500 Patek Philippe
wristwatches, and $100,000 luxury automobiles are commonplace. When
Mercedes-Benz introduced its new Maybach sedan in 2002, its beginning
base-line prices were $310,000-$360,000; Ferrari had a three and a
half year waiting list for its $170,000 360 Modena Spider.

An approach which moves beyond taxing specific luxury goods is
economist Robert Frank's proposal for a progressive consumption tax to
replace the federal income tax. This would exempt all savings from
taxation -- plus an additional $7,500 deductible amount per person
($30,000 for a family of four). It would then steadily increase the
progressivity of taxes on the remaining income -- i.e. all money
devoted to consumption -- with a top marginal tax rate of 70% on
income and consumption expenditures above $500,000. [8]

Important as such measures are, addressing the huge and growing income
disparities which drive wasteful materialism in general and
unsustainable consumption patterns in particular will ultimately
require more far-reaching strategies to deal with the underlying
social and economic pressures. One obvious element of a long-range
approach is greater elite taxation, including wealth taxes and a
return to income taxes ranging up to and including pre-Reagan-era
rates of 70-91% for the very top groups.

A proposal by former Chairman of the House Budget Committee Martin
Sabo points to a further issue which a serious long term approach must
also address -- namely, the ratio of income at the top to income at
the bottom (i.e., not simply the extraordinarily high levels of elite
income). Sabo has proposed legislation which would eliminate the
deductibility to corporations of compensation at the top which is more
than 25 times that at the bottom. [9]

Ecological economist Herman Daly goes further, and the logic he offers
is compelling: First, "there is a limit to the total material
production that the ecosystem can support." Second, "I conclude,
therefore, that there must implicitly be some maximum personal
income..." Daly adds that "bonds of community break" if there is not
some limit to inequality. [10]

Strategies which take on elite income and wealth, and thereby
consumption, serve both an economic and a larger cultural purpose:
They begin to give content to the ecologically and morally important
principle that at some point "Enough is Enough" (or should be!).

Taxation of elites could also help generate resources which might in
turn be channeled back to support expanded programs to raise floor-
level incomes, thereby reducing the social distances which contribute
to compensatory consumption. Additional precedents for dealing with
inequality "from the bottom up" include increasing minimum wage levels
and enacting "living wage" requirements.

Over the course of the century a comprehensive strategy to undercut
excessive materialism might slowly reduce ceiling levels of elite
income at the same time low income floor levels were raised -- so that
ultimately not only would a ceiling be set, but the income
distribution would begin to compress towards ever greater degrees of

Often proposals which urge taxation at the top are viewed as utopian.
Given the pain which the Bush Administration's policies are creating
at all levels, however, there are signs -- particularly at the state
level -- of a new willingness of the American public to begin to get
serious about what is going on. In the November 2004 elections,
California voters overwhelmingly approved tax increases on those
making more than $1 million -- and earmarked the proceeds for mental
health programs. New Jersey enacted legislation in 2004 taxing those
making more than $500,000 -- and used the funds to offset regressive
property taxes.

Even the conservative Virginia State Senate approved legislation in
2003 that would have raised income taxes on those making more than
$150,000. In Connecticut -- which is currently considering a tax on
incomes over a million -- a recent poll found 77% of voters in favor
of the tax (including 63% of Republican voters!). [11]

The invidious comparison and envy machine mechanisms associated with
great inequality are clearly not the only sources of unsustainable
growth. "Faced with the loneliness and vulnerability that come with
deprivation of a securely encompassing community," NYU professor Paul
Wachtel writes, "we have sought to quell the vulnerability through our
possessions." What is often interpreted as materialism, Thomas Power
adds, is in reality a "demonstration of the pathologies of social
deprivation." What is really being sought "is participation in
authentic social and natural worlds." [12]

Among the underlying drivers behind such problems are the foundational
conditions of everyday work and community life -- including a dearth
of meaningful personal relationships and a sense of community, and
insufficient time and encouragement to pursue creative and fulfilling
activities which do not require materialist consumption.

Community-oriented strategies now being developed by many activists
can help open the door to dealing with foundational problems of this
kind -- especially efforts aimed at achieving greater local economic
stability and thereby individual job security, and strategies designed
to nurture community economic and social well-being. A comprehensive
program would bring together an all-out attack on extreme inequality
at the same time it worked to rebuild ecologically and humanly sound


** Gar Alperovitz is Lionel R. Bauman Professor of Political Economy
at the University of Maryland. This article is adapted from his
recently published America Beyond Capitalism (John Wiley & Sons,


1. Congressional Budget Office, Effective Federal Tax Rates, 1997 to
2000, August 2003. Changes in Household Wealth in the 1980s and 1990s
in the U.S. in Edward N. Wolff, ed., International Perspectives on
Household Wealth (Elgar Publishing Ltd., forthcoming); 5% figure
provided by Ed Wolff. Data analysis of 1999 data provided by Jeff

2. United Nations, Human Development Report 2002, Deepening Democracy
in a Fragmented World, pp. 2, 13.

3. Juliet B. Schor, What's Wrong with Consumer Society? Competitive
Spending and the New Consumerism, in Consuming Desires, ed. Roger
Rosenblatt (Washington DC: Island Press, 1999) p. 46.

4. Paul Krugman, Plutocracy and Politics, New York Times, June 14,
2002, p. A37; Data drawn from Kevin Phillips, Wealth and Democracy
(New York: Broadway Books, 2002), pp. 151-153.

5. Juliet B. Schor, The Overspent American: Upscaling, Downshifting,
and the New Consumer (New York: Basic Books, 1998), p. 15; U.S. Census
Bureau, Families by Median and Mean Income: 1947 to 2001, Table F-5.

6. Richard Easterlin, Will Raising the Incomes of All Increase the
Happiness of All? Journal of Economic Behavior and Organization, Vol.
27, No. 1 (1995), pp. 35-47; Alan Thein Durning, Are We Happy Yet?, in
Ecopsychology, ed. Theodore Roszak, Mary E. Gomes & Allen D. Kanner
(San Francisco: Sierra Club Books, 1995), pp. 70-76, 71, citing
National Opinion Research Center surveys.

7. Juliet B. Schor, What's Wrong with Consumer Society? Competitive
Spending and the New Consumerism, pp. 37-50, 46.

8. Robert Frank, Luxury Fever (Princeton: Princeton University Press,
1999), pp. 214-215.

9. See Rep. Martin Sabo, The Income Equity Act of 2001 (H.R. 2691).

10. Herman Daly, Beyond Growth (Boston: Beacon Press, 1996), pp.

11. Mark Pazniokas, Poll Finds Division on Deficit; but Millionaire's
Tax Favored by Majority, Hartford Courant, November 25, 2004, p. B1.

12. Paul L. Wachtel, The Poverty of Affluence: A Psychological
Portrait of the American Way of Life (New York: Free Press, 1983), p.
65. Thomas Michael Power, The Pursuit of Quality, Orion (Summer 1993),
pp. 30-35, p. 34.