The American wealthy class is mostly parasitic on the people who actually create value

The current Great Recession is exactly the same kind of economic disaster as was the Great Depression. The ultra-wealthy reached a position of power from which they were able to change the rules regarding who got the benefit of value created by working people. Why is this wrong? Because wealth does not create wealth. It creates power.

From that position of power the wealthy have become able to skim wealth from those who are creative and who actually work to create more wealth. The problem is what anthropologist Eric Wolf called Structural power. Structural power is the kind of power that is used to predetermine what markets can possibly allocate before the buyer and seller ever meet. It is the power that is ignored by the people who claim that free markets properly allocate everything. As an example, no CEO is worth hundreds of times the value of the workers who actually create goods and services. Nor does wealth perform the entrepreneurial function. Instead, the wealthy question entrepreneurs and decide how they can extract the largest amount of vigorish from entrepreneurs in order to lend them money.

Which is not to say that there are not special skills needed to manage large organizations, and especially to do strategic management (something most practicing strategic managers don't do well.) It's just to say that such skills are highly over-rewarded because the people at those levels of the organization have enough power to control how much they get paid and to avoid responsibility for the errors they make.

what we have in America today is a society that rewards the guys at the top based on the power they have and ignores most of the people who actually create the value of the economy. Dean Baker describes what we need to do about that problem.

We have enormous ground to cover to restore an economy that works for the vast majority, but the first step is to know where we are. The upward redistribution of the last three decades has nothing to do with the market and a belief in "market fundamentalism." This is about a process where the rich and powerful have rewritten the rules to make themselves richer and more powerful.

For example, they wrote trade rules that were designed to put downward pressure on the wages of the bulk of the U.S. workforce by placing manufacturing workers in direct competition with low-paid workers in China and other developing countries. This had nothing to do with a belief in "free trade." They did not try to subject lawyers, doctors or other highly paid workers to the same sort of international competition. They only wanted international competition to put downward pressure on the wages of workers in the middle and bottom, not those at the top.

This elite has instituted a system of corporate governance that allows top executives to pilfer companies at the expense of their shareholders and its workers. Top executives are overseen only by a board of directors who owe their hugely overpaid sinecures to the executives they supervise. And of course the Wall Street barons themselves are given a license to gamble with the implicit promise that government picks up their tab when they lose.

No progressive movement will make any progress until we understand the battle we are fighting. Our income is a cost to the rich. They will look to cut it wherever they can, whether this is wages for private sector workers, pensions for public employees, or Social Security for retirees. That is their target.

We have to fight back using the same logic. Their income is our cost -- the multimillion dollar bonuses for the Wall Street wizards is a direct drain on the economy. So are the bloated paychecks of top executives and their lackey boards. Progressives must be prepared to use all the same tactics to bring down the income of the rich and powerful that they have used to reduce the income of everyone else.

This means restructuring the rules of corporate governance to put serious downward pressure on the pay of top executives. The highest paid workers (doctors, lawyers, and economists) must be subjected to international competition in the same way as manufacturing workers have been subjected to international competition. And, we should sharply limit the extent of the patent or copyright protections that are exploited by the drug industry and the entertainment and software industries.

We have to put the focus on the ways the rich have rigged the rules and place this at the center of political debate. The three decade-long battle over tax cuts for the rich is important, but at the end of the day it is a side show. If we let them steal all the money at the onset, it really doesn't make much difference if they end up letting us tax a little of it back.

It's not that people who create new businesses should not get rewarded for it. It's that their descendants do little more than defend their wealth. Inheritance is not a great value to society because it does not reward those who actually created the value they inherit. The thing is that with the power that wealth gives them, they have been able to become dangerous parasites on the American economy. Their efforts to defend their inherited wealthy from the inheritance tax explains why the conservative Republicans are so dead set on removing the inheritance tax.

The economy runs better when the middle class gets a larger portion of the rewards of their work. So look back at Dean Baker's prescriptions for the progressive movement.