Economic Justice

When Is Growth a Good Thing?

Distributive Justice in the Age of Globalization

by Gene TeSelle, Witherspoon Issues Analyst
[2-25-08]

Here’s an additional look at the growing rich-poor gap in a global perspective. (The current issue of Network News focuses on that, but we ran out of time and space to include this important ...)

There are some who think that government should never interfere with the operations of the market but simply let the "invisible hand" work its magic. But it is obvious that wealth carries with it the power to affect the market in important ways. And governments often reinforce the influence of private wealth. So there are many others who think that government has an obligation not only to stop favoring the most powerful but to create a regulatory framework that will encourage the market to act in constructive ways. But what considerations should shape government policy?

In recent decades there has been much discussion of John Rawls' A Theory of Justice (1971), and specifically of his "difference principle": inequities of distribution are justified only if they benefit those who are least favored. This is a restatement of the older notion of "Pareto efficiency" or "Pareto optimality," a distribution which should not be changed to make some better off if it will make others worse off.

This has recently been put to practical use by Thomas Pogge, a German who received his Ph.D. at Harvard under Rawls, taught in Australia, taught more recently at Columbia, and is now at Yale. He has written several books about Rawls and his theory of justice. Recent publications include World Poverty and Human Rights (2002) and Global Institutions and Responsibilities: Achieving Global Justice (2005).

Most recently he published an article on "Growth and Inequality" in the global economy. (It can be accessed online in Dissent Magazine). Picking up on a point made in The Economist, he noted that economic growth is benefiting China and India more than other countries. At first glance this seems to mean that large numbers of poor people are benefiting from that growth. But he points out that the statistics ignore the profits that leave these countries and go into the pockets of foreign investors. Even more important, they fail to ask how the profits are distributed within those countries.

If the lower "deciles" in these countries had simply maintained their proportion of total income, their economic situation would have improved, and they would have been spared the marginalization and loss of power that they have experienced. Globally, he finds that doubling the wealth of the bottom 40 percent would take only 1.55 percent of the wealth of the top 1 percent. Doubling the wealth of the bottom 80 percent would take only 15.3 percent of the wealth of the top 1 percent.

So he concludes that the problem of world poverty "is both amazingly small and amazingly large." Raising the world's population above the World Bank's poverty level of $2 a day would cost $300 billion annually, less than 1 percent of the global product, less than what the U.S. spends just on on its military. But it would do much to alleviate death, disease, and suffering worldwide.

from the Witness in Washington Weekly, published by the Washington Office of the Presbyterian Church (U.S.A.), January 14, 2008

NOTE: The forthcoming issue of Witherspoon’s Network News will focus on just this issue, within a the wider concern for the growing gap between the wealthy and the poor in the US and around the world, under the title of “The Other Inconvenient Truth.” We will post it here (in PDF format) as soon as it comes off the press.

In 1963, the Reverend Dr. King led the March on Washington for Jobs and Freedom and stood in front of the Lincoln Memorial to deliver his “I Have a Dream” address. A key demand of the march was “a national minimum wage act that will give all Americans a decent standard of living.” Certainly, Dr. King did not dream that the value of the minimum wage would be lower today than it was in 1963.

In March and April of 1968, nearly forty years ago, the Reverend Dr. King was marching with the striking sanitation workers in Memphis, Tenn. The paramount issue of that march was wage justice – a fair wage for a day’s work. On March 18, 1968, at the historic Memphis rally, Dr. King said, “It is criminal to have people working on a full-time basis . . . getting part-time income. We are tired of working our hands off and laboring every day and not even making a wage adequate with daily basic necessities of life.”

The year 2008 is an important anniversary for wage justice issues. This is the seventieth anniversary of the enactment of the very first minimum wage, with the Fair Labor Standards Act of 1938. This is the fortieth anniversary of the highest value of the minimum wage, when the 1968 wage floor reached a value of $9.60 per hour in 2007 dollars.

On March 31, 1968, on Palm Sunday in the National Cathedral in Washington, DC, Dr. King said, "this is America's opportunity to help bridge the gap between the haves and the have-nots. The question is whether America will do it. There is nothing new about poverty. What is new is that we now have the techniques and the resources to get rid of poverty. The real question is whether we have the will." Today, the unconscionable gap between the haves and have-nots is significantly wider than it was then. The minimum wage, which was worth $9.60 in 1968 (in 2007 dollars), is an impoverishing $5.85 today.

The year 2008 is a sad year for wage justice issues, for even though the federal minimum wage was increased last year for the first time in ten years, it remains shockingly inadequate as a wage to provide low-wage workers with a livelihood. Families continue to choose between health insurance and grocery bills, paying for gas to drive to work or paying for rent to stay in their homes. On July 24, 2007, the minimum wage increased from $5.15 to $5.85 per hour. On July 24, 2008, it will increase to $6.55 and on to $7.25 a year later in 2009, falling shamefully short of Dr. King’s dream, and the value of the 1968 wage which, even then, was not adequate to keep people out of poverty.

The year 2008 is, lastly, a hopeful year for wage justice issues. We observe a federal holiday in honor of Dr. King and pray that his message of justice for workers will be remembered as we read and listen to his sermons this weekend. People all across the country will advocate at all levels of government for living wages, not just minimum wages, and will seek to build the “will” of which Dr. King spoke. This year is a great building year for wage justice issues.

So, as we observe the Reverend Dr. King’s birthday this weekend, let us consider a commitment in 2008 to wage justice issues. Visit http://www.letjusticeroll.org/ for more information on minimum and living wage campaigns and to find one near your home, and visit http://capwiz.com/pcusa/dbq/officials/ to send a message to your legislators that we must do better for low-wage workers in 2008.

General Assembly Guidance:

The 217th General Assembly (2006) of the Presbyterian Church (U.S.A) wished to “communicate to all members of Congress its desire that legislation to increase the minimum wage be swiftly passed and at least reflect the increase in the cost of living since the last minimum wage increase in 1997, with the goal of a wage level sufficient to lift full-time workers out of poverty. Additionally, middle governing bodies, local congregations, and individuals are encouraged to support efforts to increase the minimum wage at federal, state, and local levels as well. Presbyterians are also encouraged to take advantage of the resources and advocacy opportunities of the National Council of Churches’ Let Justice Roll campaign.

US income gap widens, income share of the richest hits record     [10-16-07]

The gap between America’s richest and poorest is at its widest in at least 25 years, with the wealthiest taking home a record share of the nation’s income that exceeds even the previous high in 2000.

According to recent data from the Internal Revenue Service, the richest 1 percent of Americans earned 21.2 percent of all U.S. income earned in 2005. That is a significant increase from 2004 when the top 1 percent earned 19 percent of the nation’s income.

2005 incomes, on average, still below 2000 peak
[8-23-07]

The Presbyterian Washington Office puts this adjustment in perspective, and suggests urging Congress to work toward a more just minimum wage.

"You shall not withhold the wages of poor and needy labourers, whether other Israelites or aliens who reside in your land in one of your towns." – Deuteronomy 24:14

On July 24, 2007, the federal minimum wage will increase for the first time in ten years, from $5.15 an hour to $5.85. This increase is the result of a federal minimum wage increase that was passed by Congress in May and signed into law by the President 60 days ago. This desperately needed raise will take effect over 2 years, increasing to $6.55 on July 24, 2008, and again to $7.25 on July 24, 2009.

The federal minimum wage has been stagnant at $5.15 an hour for ten years, over which its real value has dropped over $1.30, so this increase represents a desperately needed increase for low-wage workers. This raise will make a huge difference in the lives of millions of workers whose annual before-tax income will increase by more than $1,400. This new minimum wage, however badly needed, still falls far short of the mark and does little to help the working poor climb out of poverty.

In 1988, the 200th General Assembly of the Presbyterian Church (U.S.A.) "urge[ed] the President and Congress of the United States to raise the minimum wage to its historical level of 50 percent of the average non-supervisory, nonagricultural wage and provide for regular increases that will keep the minimum wage at an adequate level to lift people out of poverty"(Minutes, 1988, p.364). The "average non-supervisory, nonagricultural wage" has been falling over the last two decades, as the value of the minimum wage has decreased, and dragged down the overall average. However, even given this decline in real value, according to the Bureau of Labor Statistics’ "Employment Situation: June 2007" report, the average non-supervisory, nonagricultural wage last month was $17.38. If the 1988 General Assembly policy were applied, the minimum wage LAST MONTH would have been $8.69 an hour, not $7.25 in 2009.

This wage increase is an important first step toward making sure that workers have enough to support their families, but it is obviously an inadequate wage with which to support a family, or even a single household. As the costs of housing, health care, transportation, fuel and food all continue to rise, most workers’ wages have not, and families must increasingly rely on services like housing assistance and food banks to supplement their inadequate income, and on emergency rooms to provide health care because insurance is not affordable.

A vision of the common good and a just society demands that all people have the right to work for living wages, not poverty wages. The federal minimum wage has too long kept U.S. workers living in poverty, not climbing out of it. Click http://capwiz.com/pcusa/dbq/officials/ to send a message to your members of Congress calling for a just minimum wage.

The Witness in Washington Weekly is published weekly by the Washington Office, Presbyterian Church (U.S.A.), 100 Maryland Avenue, NE Washington D.C. 20002, (202) 543-1126 www.pcusa.org/washington. For more information about the content of this article, please email us at ga_washington_office@pcusa.org. If you would like to receive this information directly, please go to http://capwiz.com/pcusa/mlm/signup/

Cornell president and Network of Spiritual Progressives both urge this big step forward     [6-7-07]

Witherspooner Betty Hale recently told us of the commencement address by Cornell's president, David Skorton, calling for the creation of a "New Marshall Plan" to alleviate the gaps between rich and poor nations, and much more.  He urges universities to spearhead this move, using their capacities for research and innovation to benefit a world in crisis.

At the same time, the Network of Spiritual Progressives is putting forth a similar call, rooted not in academia but in the growing conviction among people of faith that the world must begin learning to operate on the basis of generosity rather than selfishness and fear of the other.

While leaders of the World Bank debate what to do with Paul Wolfowitz, their embattled president, the IMF and World Bank are facing a deeper challenge , which the think-tank Foreign Policy in Focus calls a "confidence crisis."  The essay begins:

As International Monetary Fund (IMF) and World Bank officials engage in their joint semi-annual meetings in Washington, the Fund has a nettlesome new task: convincing its shareholders (most of the world’s governments, represented at the meeting by Finance Ministers and Central Bank Governors) that the institution should continue to exist.

After some 30 years of making "bail-out" and "structural adjustment" loans to indebted and impoverished countries in return for their adherence to a long list of neo-liberal economic reforms–trade and investment deregulation, privatization, tightening access to credit, and rapid budget cuts and public-sector layoffs, to name a few–the IMF has been confronting a crisis of confidence for the past two years. Demand for its services has been shrinking. Its reputation has never recovered from its disastrous interventions in the East Asian and Argentinean financial crises (1997-1998 and 2001-2002 respectively).

A major
Ghost Ranch event this summer!

July 28 - August 3, 2008

Paths toward Peace and Justice:
Spirituality, Earth-Care, and the Prophetic Word in a time of Violence

More info >>

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