Home > upward income and wealth redistribution > Roaring 1980s, 1990s, 2000s, and 2010s (2 graphs)

Roaring 1980s, 1990s, 2000s, and 2010s (2 graphs)

from David Ruccio

saezfig1

In the United States, we’ve witnessed a return of the Roaring Twenties—for the past three and a half decades.

As Emmanuel Saez and Gabriel Zucman show, the share of wealth (defined as total assets, including real estate and funded pension wealth, net of all debts) held by the top 0.1 percent of families is now almost as high as it was in the late 1920s.

saezfig2

The opposite side of the wealth coin has been an erosion of wealth, beginning in the mid-1980s, among the middle class and the poor. By 2012, the bottom 90 percent of Americans collectively owned only 23 percent of total U.S. wealth, about as much as they owned in 1940.

According to Saez and Zucman,

The growing indebtedness of most Americans is the main reason behind the erosion of the wealth share of the bottom 90% of families. Many middle-class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before. . .For a time, rising indebtedness was compensated by the increase in the market value of the assets of middle-class families. The average wealth of bottom 90% of families jumped during the stock-market bubble of the late 1990s and the housing bubble of the early 2000s. But it then collapsed during and after the Great Recession of 2007–2009. . .

Since the housing and financial crises of the late 2000s there has been no recovery in the wealth of the middle class and the poor. The average wealth of the bottom 90% of families is equal to $80,000 in 2012 – the same level as in 1986. In contrast, the average wealth for the top 1% more than tripled between 1980 and 2012. In 2012, the wealth of the top 1% increased almost back to its peak level of 2007. The Great Recession looks only like a small bump along an upward trajectory.

How can we explain the growing disparity in American wealth? The answer is that the combination of higher income inequality alongside a growing disparity in the ability to save for most Americans is fuelling the explosion in wealth inequality. For the bottom 90% of families, real wage gains (after factoring in inflation) were very limited over the past three decades, but for their counterparts in the top 1% real wages grew fast. In addition, the saving rate of middle-class and lower-class families collapsed over the same period while it remained substantial at the top. Today, the top 1% families save about 35% of their income, while the bottom 90% families save about zero.

And looking forward?

If income inequality stays high and if the saving rate of the bottom 90% of families remains low then wealth disparity will keep increasing. Ten or 20 years from now, all the gains in wealth democratisation achieved during the New Deal and the post-war decades could be lost. While the rich would be extremely rich, ordinary families would own next to nothing, with debts almost as high as their assets.

To put it differently—and in honor of the season—what we can expect in the future is a tiny group of extremely wealthy vampires continuing to share in a larger and larger share of the blood of living labor, accumulating more and more wealth, while the vast majority wander the economic and social landscape like zombies, being paid the same amount for the work they do and owning next to nothing.

  1. October 29, 2014 at 5:50 pm

    Three questions: What will it take for economists to stop supporting an insane banking and monetary system based on debt, that is producing such horrible results? A nuclear holocaust? Wouldn’t that be a bit too late fellows?
    Sincerely,
    Stephen Zarlenga
    Director, American Monetary Institute
    http://www.monetary.org

  2. Ack Nice
    October 30, 2014 at 1:49 pm

    I chanced upon this comment from an anonymous poster shortly after Obama was selected president of the usa and the world learned that goldman sacks-us was front-running customers’ bets, beating them by miliseconds courtesy of their secret software:

    “The situation is so desperate that the powers that be have manufactured a deliverer figure for the masses, to keep them toiling with faith devoid of violence. We are now part of the anthropological Cargo Cult that waits for irrational money to drop from the sky to resolve long term internal contradictions and limits of unfettered unregulated capital. Can somebody explain to me who in their right mind did not understand the pathological acquisitor mentality that, empowered by software and computer would take acquisition for the sake of acquisition to its apocalyptic chaos state? Think of it as a mass hallucination of pathological economic gluttony by narcissistic acquisitors who are convinced that if they crash the whole system, they can pick it up for nothing. This is acquisitor nirvana and also the end of capital as we know it. The elite of the elite have accomplished their mission, and all they now need is security and gated compounds while the chaos brings prices down. We are all collateral damage. These guys act as if humanity is a video game.”

    Comments had closed before I spotted that or I would have responded that I mostly agreed with the sharp summation – but there is no real security for the uberrich in their gated compounds because – with extremely few exceptions – overfortunes are relentlessly eroded by the enormous costs of defending an overfortune from all comers – until the loot is all gone.

    I would also have added this to the conversation about extreme inequality of wealthpower:

    How great a part of human progress is rightfully attributable to human division of human labor? We advanced precisely because we began to specialize in our work and no longer do all the different jobs it takes to keep a body alive, each being his own carpenter and baker and shoemaker and dentist and farmer and artist, musician, buggymaker. The efficiency of division of labor allowed more wealth to be created, so the cooperation of everyone in this venture – for all to specialize in their work and then exchange the workproducts – you see it is supposed to be an equal exchange of labor, one man’s labor making shoes for another’s labor growing lettuces and potatoes – and everyone in this picture is working at roughly the same hardness of working and no one in this picture is working more than about twice as long as the average.

    But we’ve forgotten, or overlooked, that the benefits of having division of labor include the greater and greater wealth creation and the benefit is only made possible by the whole community so the benefits obviously belong to the working families. Some things are so pervasive, so omnipresent, so utterly ubiquitous, so there – that they’re not there at all…they don’t show up in the forefront of anyone’s consciousness. The fact we are paying almost all the benefits of what it takes everybody to create to just a fraction few families on the planet is invisible to us in just this way: it’s too big to see – and not always easy to internalize if people do see it.

    The benefits derived from division of labor belong to the entire community – not to just a few. Our rich are reaping, and have long been reaping un-fair money, other-earned money. With everybody’s cooperation.

    Every day, every hour, every human is turning out misery, turning the handles of an economic dystem (dysfunctional system) that turns out minced humans’ minced happiness. Not because they are evil, just because they are wrong – just because they do not dump their mindless faith in human custom and use common sense.

    People have brains, but they keep them far away from certain areas of their realities. (To wit: even people who refer to themselves as heterodox economists are still preposterously calling bill gates a philanthropist). The result is that 6 billion people are not acting in accord with – are acting in opposition to – what everyone really believes. Let us for once set aside our lemming faith in the crowd and in custom and bring our behaviour in front of a tribunal of our own wits. Governments cannot save us as they are now – they have been devoured by superwealth. Only a grassroots growth in awareness, realism, sobriety, simple good sense, maturity, practicality in the people can drive events to safety and peace.

    People are saying: Let’s not let these superrich have so much, let them have less. But why then is no one working out how much they should have? Why is there no work on assessing what amount is right? We hear much wishing, hoping, longing for liberty and justice for all – but where is the thinking on where pay justice lies?

    In 1880 the highest pay per hour was a million times the lowest. In America, sew-ers were getting 1 cent per hour while Jay Gould was getting $10,000/hr.

    And now highest pay globally is a billion times lowest – and violence is proportional.

    People?

    Just how crazy do you want to act before you sober up?

    Pay justice is the most important justice of them all, because money buys just about everything. Money is food and shelter and medicine and education. And it is social and political power too – power to exert influence and control, power to make advantage and take advantage everywhere all the time.

    Pay injustice is the root of all problems. Don’t solve that root problem and you don’t solve anything: your tree of problems is growing faster than you are hacking branches. Pay injustice [and the violence it so reliably engenders] has been growing faster than you can hack branches for 3000 years, since trade started and wealth become storable, nonperishable.

    There are many wideopen legal thefts in the system – pays for no work by self. Why does the economics profession consistently and reliably refuse to list and explain the myriad legal thefts? If you pay students for studying there are NO valid reasons for higher than average hourly pay – they are all specious arguments made by greed [love of overpay, love of having other-earned wealth]. Greed impoverishes all: 99% are underpaid, the overpaid are very unsafe unhappy.

    Remove these elements and you can calculate the maximum self-earned fortune – it is under $10 million [100 hrs x 50 wks x 50 yrs x US$40/hr – doubling every 18 yrs at 4% global inflation].

    The lower the highest fortune is, the higher the lowest fortune is. Lower overpay means less underpay means less violence. Violence (war, crime, weaponry, brutality, tyranny, warmongering) is now at 60 times planet death capability. In this century, population is going towards 12+ billion, topsoil is going to zero, ‘third-world’ percentage of world wealth is going to surpass that of the former colonizers. This means vast wars in which the first world will use nuclear weapons to defend themselves from the righteous invasion by the people they plundered, murdered, enslaved, burned for 500 years – and they will fail, as they failed in Vietnam and are failing in Iraq and Afghanistan. Quantity of poverty-hardened soldiers beats quality of weapons – ants beat elephant every time. We are in a **maximal global emergency**, the bombs are global, global means every house. There is a nuclear bomb under every bed and movieseat on this planet.

    When you know the legal thefts, you know the limits of self-earned fortune, you know where underpay starts, you can aim at pay justice – and get peace – and chop the tree of problems down permanently.

    There will either be an uprising of will to survive, to be real, to be bigpicture, to be happy…or there will be history-on-steroids-kaboom.

    Such a great majority can be convinced of the enormous benefits of pay justice (starting with no extinction, and far greater happiness for both currently overpaid and underpaid) that the incorrigibly greedblind will be left with no muscle. Education alone can do it. Every adult in the world can learn the truth in just 31 times the time to teach two, just by word of mouth alone – and you only need to teach the bellwethers, then the herd instinct will work for us as people follow the bellwethers to safer pastures. Everyone need only learn it and teach two – there are 3 billion adults to reach but 3 billion adults to reach them.

    New ideas do come along. Not all change has been by force. ‘Car’ was once just an idea in someone’s head – today the idea of car is ubiquitous. This fairpay justice idea is very plain and simple – if you look at the big picture. Strike at the root and the tree of problems comes down permanently. Keep hacking at the branches and: kaboom.

    10% unequal pay is unjust. 100% unequal pay is very unjust. And we have 100,000,000,000% unequal pay. If pay justice means democracy = 1, our pay injustice factor of one billion means democracy = 0.000000001

    Wake up and smell the uranium, Humanity.

    We have global transport, global finance, global bombs, terrorism, warmongering. Let’s get global thinking, global people-rule. There is no democracy without the people ruling, thinking, digesting global data. If you can get it in a month, the whole world will get it in 31 months – this is aquarius. Read with care, don’t fast-judge, decide if you agree, and if so pass it on.
    The fiercest tyrant has always folded to firm and clear opinion of the people. Even tyrants cannot walk around in public unclothed, because the people “know it is wrong”.

    If one person has the property of 1000, he has merely 1000 times what he can use, has lost 1000 friends and gained 1000 enemies.

    Take away the mal-distribution we practice today and world-average family income for a family with two working people is around $200,000 per year. Studies show the effect of money on happiness declines to zero below $100,000/yr.

    Pay injustice is the joker injury, and injury ricochets tirelessly as atoms. The golden rule is merciless, adamantine realpolitik, self-interest: don’t hurt people, they hurt back! The golden rule is not just a piece of feel-good-advice to be nice – – it is hard science, our scientific guide to life.

    Money is the blood of an economy – it must circulate or all die. Would you rather all die, or would you rather live in a world where every family on the globe is working and getting $200,000 per year for their sacrifice?

    Is that a difficult choice to make?

    Every empire has, towards the end, had 1% getting 90%, and every empire has fallen. It’s the lesson of history. We will learn it sometime. Reality has been drilling it into our heads for thousands of years – it has to break through to brain sometime. Maybe now, maybe in the next decade, maybe next year. The thing is, there is nothing else to do of any use, except to keep saying and saying the simple goodsense truth that everyone agrees with already.

    Everyone already knows violence and misery will decrease enormously if a government stops committing the injustice of taking 90% of income off 90% of people and giving it all to 1%. No one will argue that taking 90% off 90% and giving it all to 1% will be an increase in happiness, a decrease in violence. There is no one in the world mad enough to propose such a thing. So it is already in people’s brains. We just have to get it into every part of people’s brains, spread the rationality around like peanut butter into all the atavistic cerebellum reptilian mammalian kneejerk instinctive custom-and-convention head-in-the-sand denial, if it isn’t pleasant it doesn’t exist, I have no connection to that, money isn’t important, can’t see the forest for the trees, striking at branches not root, corners of the brain.

    We ought to care for self-interest. Robbery [underpay] makes the violence. The underpay, the violence is super extreme and egalitarian – it gets to everyone – especially with global bombs.

    We are full of damage to our pursuit of happiness, our proper selflove, our duty to ourselves. Compare animals: they are each individually 100% committed to their own happiness. Not we humans – we are lost even from our goal, our destination. We are no longer asking ourselves: Is this path I’m on the best path for my happiness? Is this pace the best pace? We don’t feel ourselves inside to see what we are, what we individually want, what unique things will fulfill our particular selves. We are not working for ourselves, we are working for god-knows-what, we are not present – we are absentminded from ourselves – we are not in love with ourselves – we are not ourselves – we have become unmoored from ourselves, just drifting on the tide of history and general custom. We have low self-esteem. We are not *for* ourselves very much at all. We are not thinking, not caring, not working towards personal goals with any intensity or alertness. Billions of people have just thrown themselves into their society and let it carry them where it will go.

    We have to start defying the social pressures and individually start caring for ourselves as individuals with all the sanity of the other animals. The other animals assume they are loved and they assume they are worthy of happiness, that nature has given them the gift of the right and freedom to pursue their own happiness, that nature has given them by virtue of their birth full right to a place to put their feet, to live their lives. They do not just throw themselves willynilly into their social group come-what-may; they retain a sense of individual right being prior to society. Society is a tool they use for themselves – society is not something they commit themselves to in spite of their own happiness.

    We have let ourselves be perverted away from this fundamental of living life. Pursuit of individual happiness is the excitement, the meaning, the loveliness of life. Pursuit of happiness is the conduit through which we experience the desire of life for us to be happy, through which and only through which we feel joy at all the things that life has given us for our happiness: eyes and air and sun and soil – the very pursuit of happiness is already a happiness, perhaps the greatest part of happiness, since it is love, and love is fulfillment. It is something that can be done at all times, in all situations.

    Without selflove there is no love of others. How are you going to care what happens to others if you don’t even care what happens to you? The first life you must bring back to life is your life – then you will see that others smiling is a great part of your smile – others happy with you
    is a big part of your happiness. Obey the golden rule for selfish reasons. Save others for your own sake. We are not in separate boxes – we are in the same box. Everything ripples everywhere. The human situation is not: let’s pretend we are brothers – it is: we are brothers. A rude word to your brother is a punch in the arm, maybe a cruel trick played on you, or a humiliation.

    What is wrong with selfishness is not the self-interest of the selfishness but the myopia of the selfishness: not seeing how things go out from you and turn around and come back at you.

    We must work out which thing is doing the most damage to our happiness. .Justice is a virtue and that means that justice produces happiness. Virtue is not its own reward – Happiness is the reward of virtue. We have hyper-extreme injustice. After thousands of years of uncontrolled, unlimited ‘rich get richer’, ie, rich get paid more and more and more per unit of work, pay now ranges from $1 to $1,000,000,000 for a fortnight’s work. Instead of equal pay for equal work, we have from $1 to $1,000,000,000 for equal work.

    Obviously, if you have a community all working, all equally well-off, and some imp takes all the property off everyone and gives it to one person, that will very greatly destroy happiness – of everyone – including the person who gets others’ property – because that person now has, if he doesn’t immediately yield up the property, committed himself to a great injury on everyone else, thus polluting his environment with enemies who could be friends, giving himself a giant security headache, which he cannot win, because the security danger will go on forever, eating up the property, until the property or life is gone. Even if he keeps the rest at bay till he dies, he has had to spend the whole of his life isolated, in terror, in excruciating hard labour of survival, when he could be sitting outside the community pub drinking and laughing and dancing and loving every evening, fellow amid fellows.

    The virtues produce happiness – and this justice will contain them all, for justice in fortune is moderation in fortune, and justice in fortune is wisdom in fortune, and justice in fortune is selflove in fortune – and then courage will be for things like ‘winning the fair maid’, not for keeping the community from breaking down the door 24/7.

    It is the obvious which is hardest to see, the easiest to forget. Only the person 100% committed to selfloving selfcaring will see it and see its essential vital importance. And there is no goodness without it – without it, we are all members of a conspiracy of selfdestruction, of evil.

    It is not true that, because others are definitely wrong, we are definitely right – that is a trick many fall for. Rather it is true that the more that others can be wrong, the more we can be wrong too (in the same way or a different way) because we are very like ‘them’.

    We need to be game for a fight with our own brains.

    This is our human insane reality: two people do a fortnight’s work, and we give one of them $1 and the other $50,000,000 [average, all his life] $1,000,000,000 [peak rates of pay]. We give 99% of people less than the world average, we give 90% of people less than a 10th of average, so we can give 1% of people more than average, so we can give 1% of people up to a million times average. We calmly sit by while a few rake most of the money out of the social pool of work/ wealth/ products of work. We look in the pool and we say: Isn’t it sad that there is so little in the pool for most people, and we make no connection between this and the people pumping out most of the water in the pool with a fleet of siphon trucks…while each and every family earns makes creates US$200,000 a year of wealth/ products of work.

    We know and believe that the rich get richer and the poor get poorer – we know that this has been going on for millennia – the few getting richer and richer and richer [and more and more powerful] for millennia, and most getting poorer and poorer and poorer [more enslaved] for those same millennia, and we know the amount of wealth a person has is no indication of the amount of work the person has done – we know the rich are not rich because they are working harder and harder while the poor work less and less – the opposite is true – and yet we don’t know we are robbing *every one* of ourselves of everything. The American dream of freedom from tyranny was founded on the prevention of unjust wealth concentration – and we don’t know we have utterly neglected that path. The price of democracy is vigilance, and we do not even know we have been utterly unvigilant regarding the root and fount of democracy, freedom, and justice, peace, happiness, and survival.

    I’m guessing economists – whether orthodox or so-called heterodox, alas – will be the last people to see the ultimately fatal self-harm of continuing to use division of labor as a lame (irrational) excuse to force underpay on most of humanity in order to keep heaping great piles of other-earned wealth upon a miniscule segment of humans. I don’t why economists who teach keep refusing to teach that the pool of wealth is finite, but I suspect it’s because even they haven’t learned that most fundamental of all crucial truths yet.

    The first sentence in every economics textbook should be: Overpay has nowhere to come from but from underpay, because the amount of wealth in the pool of wealth is ALWAYS a FINITE number.

    (Finnegans, Begin again!)

    • davetaylor1
      October 30, 2014 at 3:34 pm

      I hope that makes you feel better, Ack, as it is relevant to the blog post.

      What I’m taking away from it is that if you can convince a couple of people that money isn’t wealth but merely an IOU which cannot be repaid with another IOU, then it is possible after a few generations of such persuasion for everyone to believe it. But isn’t the proof of the pudding in the eating? A few generations of lying persuaders have managed to convince nearly everyone that money IS wealth. The problem now is unlearning what one takes for granted.

    • robert r locke
      November 1, 2014 at 4:15 am

      “People are saying: Let’s not let these superrich have so much, let them have less. But why then is no one working out how much they should have? Why is there no work on assessing what amount is right?”

      Ok Ack, who would do this assessment. It is now being done by the superrich who decide themselves, in the corporate governance they control, who gets how much. Do you want the government to do it? No many Americans do. I suggested when the finance crisis came that something had to be done to redistribute wealth and it did not have to be done by the superrich or the government. It could be done within civil society itself, by letting the employees in firm have an important voice on the compensations committees that could be legally required in firms to set salaries and emoluments. There is a suggestion for you that is not pie in the sky but actually used in some countries. So someone was working out how much people could get — me. Why didn’t you take up this suggestion when I blogged it, why when I made it the Keynote speech in 1997 at a symposium about the founding of the School of Management in Groningen (nl) didn’t the audience jump out of their seats and say “yes, yes, yes.”

      • davetaylor1
        November 1, 2014 at 9:08 am

        Which was the point of my comment. Those who HAVE worked out what is reasonable (given money represents wealth rather than – in practice – debt to the rest of society) are pretty much agreed on something like a seven-times differential between a living wage and a maximum income; Keynes to a large extent realised that by means of rent control and progressive taxation, though Thatcherites have done their best to limit the effect on their own un-earned incomes.

        Personally, given the way money is created (in effect banks authorising one to spend what at some time they have created “out of thin air”), it amounts to no more than an IOU: this not to the banks in proportion to services rended but to God/Nature and Society who have provided what we buy. So why to we have to earn an IOU? Surely we should be given it and pay it back by doing what is needed of us to replenish what we use? (What we use will be on record via shop-keeper’s accounts and what we do via employers or other observers).

        So who should decide how much credit people have available? Surely, as much as they need, given what they have to do with it, e.g. to look after themselves and play their part in society and – in approved cooperative or corporate enterprise – to pay for the resources needed. I want to be generous, and in any case who knows how much is needed but the people themselves? Let everyone (not just the super-rich) decide for themselves how much they need, reducing banks to the equivalent of credit card managers maintaining accounts which constantly remind us how much we are in debt to others, thereby motivating us to pay back what we can when we can. In default we may get a chin-wagging from our account manager, but also an opportunity to write off debts resulting from misfortune.

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