A low volume, high quality source from the demand side perspective.The podcast is produced weekly. A transcript is posted on the day of.

Sunday, December 18, 2005

The economic tide is going out, not up

What struck me most about the workshop I went to last Saturday ("The Growing Divide -- Inequality and the Roots of Economic Insecurity") was not the facts, but the general ignorance of those facts. The past three decades have been a period of stagnation for most of America, while an an obscene concentration of wealth has grown for the few at the top. At the same time these past three decades have been a period of low growth overall. (Had it not been for the 1990s, it would have been worse.) Contrast this to the three decades prior to 1980 when there was a general sharing of prosperity and a simultaneous enormous increase in overall total growth.

Between 1947 and 1979 real family income doubled for every quintile (one-fifth). In fact, it was better at the bottom ( 116%) than at the top (99%). In the years since 1979 virtually all the growth has been at the top. The bottom quintile even lost 2%. The top gained only 51%, but that was more than the other four-fifths combined.

What struck me most at the workshop, as I said, was not the facts themselves. What struck me was that most of the people attending were largely unaware of them. Why? Part of the reason, I think, is that as we get older, our incomes tend to go up as a result of promotions and increasing skills. The general stagnation is masked by our individual advancement. The fact that the lower end seems to keep dropping has been concealed by the migration of people upward and we don't realize people are starting out further and further behind. Previous to 1980, young people had a significant head start on their parents. But even mobility over one's lifetime is now decreasing, and people are more and more stuck.

This is part of the reason for the lack of awareness, but I'm convinced that most it is our quaint American way of blaming ourselves. The better education, more strategically positioned manufacturing, and generally weak international competition of previous times are ignored in favor of the idea that "I screwed up." (Many of our families assist us in this evaluation.) But I can tell you the comfort level has dropped significantly since I came up. As a kid in the 1960s and 1970s I traveled around a lot "getting experience." It was pretty easy to find work that paid. If I tried to do the same thing today, I'd be sleeping on a grate and living out of the mission.

Be that as it may, and before I list some of the interesting factoids from the workshop, one connection needs to be repeated and reemphasized. The "winner take all" economic mentality that is today's accepted wisdom has not led to overall prosperity, while the "share the wealth" tendency that followed World War II created strong, consistent and widespread growth. Everybody did better, even the top (in terms of income). It's just that they didn't do exponentially better than the rest of us.

Material for the workshop I attended is available at United for a Fair Economy. Another set is at the Economic Policy institute. Their The State of Working America is the definitive publication. There is a list of fact sheets excerpted from the book there on income, wealth, poverty, CEO pay, and so on.

Did you know?

At the same time that income has risen to the top, taxes have fallen to the lot of the middle class. Today federal taxes paid by a middle quintile family are 50% more than they were in 1948. For the top 1%, federal taxes are one-third of their 1948 level.

The share of income held by the top 1% in 2000 was "the largest since the run-up to the Great Depression," according to EPI.

CEO pay in large US corporations was 42 times that of the average worker in 1980. In 2004, CEOs carried off 431 times as big a paycheck as the average worker.

38% of all household wealth is held by the top 1%. The top 10% own 85% of all stocks and mutual funds. (Fit that into dividend and capital gains tax cuts and see who benefits.)

These are only a few. Check out the links for more. Be aware, we are in transit. This is not a static situation, it is a historical trend, a tide. Things are getting worse. They could get much worse before they turn around.

No comments:

Post a Comment