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What shared prosperity?!

from David Ruccio

income-shares

In a recent New York Times article, Quoctring Bui reveals some fascinating details about the geography of inequality in the United States—including the fact that 

between 1990 and 2014, the states that we tend to think of as economic engines for the country — like New York, California and New Jersey — are the ones where inequality has grown the most.

nj ny ca

But the author makes the mistake of repeating the common presumption that, prior to the new millennium (specifically, between 1990 and 2000), income growth was widely shared between rich and poor.

When you change the yardsticks to include changes only from the 1990s, the “rising tide lifts all boats” maxim that economists like to talk about seems to hold true. Incomes grew almost across the board, poor to rich; they sag only for the upper middle class.

average

Nothing could be further from the truth. Whether in terms of income shares (in the chart at the top of the post) or average incomes (as in the chart immediately above), the rising tide left the rich richer and everyone else—the bottom 90 percent—falling further and further behind.

There simply has been no shared prosperity in the United States—not in the last decade of the last millennium nor in the first decade and a half of this one.

  1. September 10, 2016 at 6:52 pm

    Not even during the Bill Clinton late 1990’s golden years? I thought it was generally accepted that there were some gains at the bottom of society in the late 1990’s. Why, exactly, that might be so isn’t clear. There’s bound to be a dispute over that but I’ll defer to those who slice and dice the data for the Roaring 1990’s. My own take on the “why” is the there was a spillover wealth effect for those in the service economy – waitresses and waiters, parking lot attendants getting bigger tips, not better baseline pay – which evaporated after the 2000-2001 bust…and what has followed. At the end, I’ll plead that I’m “just a student” in this controversy.

  2. Tom Welsh
    September 11, 2016 at 12:31 pm

    I don’t ant to appear unduly cynical, but… Bill Clinton’s campaign headquarters was prominently festooned with signs saying, “It’s the economy, stupid”. From what I know of American politics, if “it’s the economy” that really matters, whatever steps are necessary will be taken to make it look as if the economy has improved. Consider, if you will, the official US government statistics for unemployment and inflation today, both of which are absurdly “massaged”. (See, for example, http://www.shadowstats.com/)

  3. September 11, 2016 at 5:34 pm

    I think the cynicism is warrented, to a degree, Tom. If the official stats were telling a complete story, it would be hard to explain the type of year we’re having politically. Mrs. Clinton’s positioning would then be resonating with better poll results, since she is attacking Trump for painting too dire a picture economically, and refuting the more broader picture of decline he is painting. And Trump is perhaps at his most absurd in talking about American military decline…it’s hard not to see a new infusion of military Keynesianism solving the Right’s ideological problem of government spending…

    I’m finding a revisiting of the complexities of Weimar Germany to be interesting, and illuminating. Re-reading Franz Neumann’s Introduction to Behemoth, his 1942 classic, was eye opening. The cartelization of German economic life, the mobilization of formerly apolitical middle class citizens, into the streets and against the existing parties, which started much earlier than the rise of National Socialism according to some revisionist accounts…the cultural tensions between that middle class and especially its rural citizens…against the modernity represented by Berlin culture – it’s decadence in their eyes – and the way the German right, traditional and insurgents used the internationalism of the hated treaties and even the better Dawes and Young plans…against the liberal-left-center “Weimar Coalition” …and taking note of Martin Wolf’s important op-ed recently in the Financial Times…and then the work of the Frankfurt Institute in trying to explain the popularity of Fascism with their psychological studies of workers…the resulting arguments over economic base and political superstructure…the importance of mass culture…it’s hard not to see the chance to cast more light on our contemporary struggles in the West…than CNN sheds…

  4. September 11, 2016 at 8:18 pm

    As he was being deported from the US “Lucky” Luciano is reported to have commented that had he known how easy it was to make money legitimately in US he never would have become a criminal. Most historians have interpreted this as his complement to the openness of the US economy. I don’t agree. I think Luciano was noting the similarity between what he did to make money as a criminal and what “legitimate” businessmen did to make money. The rich are getting richer in the US because they’re taking from everyone else. Just like Luciano did. And like Luciano the taking by the legitimate rich provides little benefit in return. In fact, Luciano may have actually given more back than the legitimates he seems to have admired. No elaborate economic theories needed here.

    • robert locke
      September 11, 2016 at 8:36 pm

      I just read that the gap between the rich and the poor in Germany has not increased in the past 10 years or so. I think this can be traced, in contradiction to America, to the existence of a stakeholder instead of a stockholder-director primacy conception of society.

  5. September 12, 2016 at 6:37 am

    By all accounts and based on the few times they competed against one another Luciano was smarter and more nimble than Capone. Luciano wasn’t praising the American economic system. He was simply stating the results of his own observations. But at the time he lived choosing to be a legitimate business owner was not open to people like Luciano and Capone. It wasn’t even open to the Irish, like Joseph Kennedy, Sr. If they were to become rich is had to be through such enterprises as bootlegging, gambling, prostitution, and drug smuggling and distribution. And the competition was brutal. There are still bootlegger’s cemeteries all along the Canadian border, if any history PhD student’s looking for a dissertation topic. Just about everything involved in culture can be a racket, including the economies Economies of every shape create winners and losers. The winners want to keep on winning and the losers want to push the winners out of the way so they can win. Capitalism merely exalts and amplifies these tendencies.

  6. dmf
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