Sunday, August 16, 2009
Income Inequality Worst Since 1917
No Wonder the Poker Game is Ending: The Wealthiest Have Taken All of the Chips
Saturday, August 15, 2009
A new report by University of California, Berkeley economics professor Emmanuel Saez concludes that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.
The report shows that:
Income inequality is worse than it has been since at least 1917
“The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007″
“In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth.”
As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this. On the other hand, billionaires have never had it better.
As I wrote in September:
The economy is like a poker game . . . it is human nature to want to get all of the chips, but – if one person does get all of the chips – the game ends.
In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone’s money, the game ends.
The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed…
This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).
It is a question of focusing any government funding which is made to the majority of poker players – instead of the titans of finance – so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.
As Marc Weisbrot writes in the Guardian:
John Schmitt and Nathan Lane showed that the United States is not the nation of small businesses that it is regularly dressed up to be for electoral campaign speeches and editorials. If we look at what percentage of our overall labour force is self-employed, or what percentage of manufacturing workers or high-tech workers are employed in small businesses – well, the US ranks at or near the bottom among high-income countries.
As economist Paul Krugman noted after reading the study: “One more American myth bites the dust.”
In other words, the idea that America has more small businesses than other countries is false. More small businesses would be good, as it would mean that more of the “little guys” would have poker chips to play the free market game with.
Similarly, breaking up the big banks would lead to more competition and allow smaller banks to fill the lending needs of individuals and small businesses