Martin Wolf, chief economics commentator for the London Financial Times, which is the newspaper of choice for the European economic elite, is concerned about the “new gilded age” in the US:
Between 1997 and 2001, the top 10 per cent of US earners received 49 per cent of the growth in aggregate real wages and salaries, while the top 1 per cent received an astonishing 24 per cent. Meanwhile, the bottom 50 per cent received less than 13 per cent. Why is this happening? And should non-egalitarians care?
Most of the growth in the US has gone to a small group of wealthy corporate managers while the rest of the people got the crumbs from the table. Why is this happening?
.. the normal link between productivity and real earnings is broken. Thus, between 1966 and 2001, real median earnings (the earnings of those half way up the distribution) rose by only 11 per cent. Over the same period, the earnings of those at the 90th percentile (10 per cent from the top) rose by 58 per cent, of those at the 99th percentile by 121 per cent, of the top 0.1 per cent by 236 per cent and of the top 0.01 per cent by 617 per cent.
Now, Martin Wolf is no socialist but he is concerned because this is bad for business and economics in the long run. Even if you don’t care about inequality at an ethical or moral level, you should care because it will damage the economy and the political life of the country in the long run:
First, income mobility does not offset the rising inequality. As the two Northwestern university authors note, “not only are half the penthouse dwellers still there a decade later, but the differential opulence of the penthouse keeps increasing relative to the basement”. The chances of leaving the basement are low. Moreover, intergenerational opportunity is also adversely affected.
Second, the failure of an economy to generate rising incomes for a majority over decades causes frustration. US individualism may contain this reaction. Most cultures cannot.
Third, politics inevitably become more populist: the US “right” has become “pluto-populist” – an alliance of free-marketeers, nationalists and social conservatives – and the “left” is increasingly “protecto-populist” – an alliance of protectionists, dirigistes, social liberals and anti-nationalists. This endangers both intellectual coherence and sensible policymaking.
Economic populism makes irrational economic decisions. This isn’t good for anyone in the long run. Even the sensible members of the policy making elite are worried.
There’s a similar story over on ET. It’s even got graphs.
I love graphs. Especially the colored ones with squiggly lines.
I love graphs that explain how poor I am and how unlikely I am to live in a gilded penthouse.
…the failure of an economy to generate rising incomes for a majority over decades causes frustration. US individualism may contain this reaction. Most cultures cannot.
So much for the highly vaunted productivity gains in the long run. Down this path lies the Soviet experience of “We pretend to work, and they pretend to pay us.”
The Republicans should change their party name to the “Banana Republicans,” since that seems to be where they’re taking us, socially, politically, and economically.
For the past few (Bush) years the right-wing media in this country have been bemoaning the fact that in countless opinion polls, “economic concerns” continue to remain as a top area of voters’ issues, and that Bush “isn’t receiving due credit” for his “stewardship” of the US economy. Not only does the FT article suggest WHY Bush gets poor marks, but it comes on top of several other reports showing stagnating wages, rising debt, vanishing savings rates, exploding costs in health care, etc., etc., etc., that continues to bedevil working-/middle-class people in what has become a two-tiered economic system. Gigot and his WSJ Editorial Board, for example, should get their collective arses out of NYC and head for various big-box discount stores or malls and check out people’s attitudes about their own financial well-being. Maybe then the elite will get the picture about life in the trenches as it really is, not just abstracted from Commerce Dept. statistics on “growth” or “employment”.
Let me just pose this as a question. What do you suppose is the likely consequence of taking away economic hope for the bottom 75% or 67% or 50% of our population??…. Anybody?