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How do you explain this?

United States

A Guide to Statistics on Historical Trends in Income Inequality | Center on  Budget and Policy Priorities

  1. May 23, 2021 at 11:28 am

    This graph clearly refutes free market jargon as diversionary propaganda. It is an interesting illustration of austerity applied to a centrally planned and policed corporatist economy.

  2. Ken Zimmerman
    May 23, 2021 at 11:37 am

    First, following the ‘Great Depression’ excessive wealth required justification. Otherwise those who possessed it were looked on as freeloaders and featherbedders who played no or little useful part in society. FDR came from one of America’s wealthiest family’s but proved himself by his work ethic, care for ordinary Americans, and work to save the USA. Even the wealthy who wanted to be ostentatious feared public rebuke and legal punishments if they focused solely on protecting their wealth. At best excessive wealth was tolerated but seldom glorified, at least publicly. Mostly Americans found their heroes elsewhere.

    Second, WWII reinforced the notion that in winning wars, protecting democracy, ensuring an economy that is both successful and good for all Americans the wealthy are not required and often an impairment for these goals. Particularly economic equity.

    Third, the tax code, while not outlawing great wealth accumulation did ensure that accumulation was clearly limited and the wealthy’s tax rate was the highest with few escape routes.

    All this began to change in the late 1970s. This effort was and is deliberate, cynical, funded by the politically right wing wealthy, and decidedly anti-democratic. Today, the totalitarian propaganda of this effort is almost impossible to escape.

  3. Econoclast
    May 23, 2021 at 3:50 pm

    Note the kink at1980. A B-movie actor named Ronald Reagan who suckered voters into believing he was a “fiscal conservative” even though he ran the California economy into the red. Subsequently boosting the Pentagon budget into the stratosphere. Bill Clinton, believing that the salvation of the Democratic Party was to become Republican Lite. All now given a euphemism, “neoliberalism”.

  4. May 23, 2021 at 11:10 pm

    William Mitchell is Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), University of Newcastle, NSW, Australia
    http://bilbo.economicoutlook.net/blog/?p=27457

    “Until the early 2000s, real wages and labour productivity typically moved together in Germany as they did in most advanced nations. While to complex a topic to go into here, if real wages and labour productivity grow proportionately over time, the share of total national income that workers (wage earners) receive remains constant. Indeed, this relationship was so constant that famous Cambridge economist Nicholas Kaldor listed it as one of this six ‘stylised facts’ about economic growth (Kaldor, 1957). However, once the neo-liberal attacks on the capacity of workers to secure wage increases intensified in the 1980s in many nations and, later in Germany, a gap between the growth in real wages and productivity growth opened and widened. This led to a major shift in national income shares away from workers towards profits.

    The capitalist dilemma was that real wages typically had to grow in line with productivity, to ensure that the goods produced were sold. If workers were producing more per hour over time, they had to be paid more hour in real terms to ensure their purchasing power growth was sufficient to consume the extra production being pushed out into the markets. How does economic growth sustain itself when labour productivity growth outstrips the growth in the real wage, especially as governments were trying to reduce their deficits and thus their contribution to total spending in their economies? How does the economy recycle the rising profit share to overcome the declining capacity of workers to consume?

    The neo-liberal period found a new way to solve the dilemma. The ‘solution’ was so-called ‘financial engineering’, which pushed ever-increasing debt onto households and firms in many nations. The credit expansion sustained the workers’ purchasing power, but also delivered an interest bonus to capital, while real wages growth continued to be suppressed. Households, in particular, were enticed by lower interest rates and the vehement marketing strategies of the financial engineers. It seemed too good to be true and it was.”

    • Ken Zimmerman
      May 24, 2021 at 12:21 am

      Thanks, Larry. A recent story in the Washington Post reported financial investors were concerned that additional help for Americans pressured by the pandemic and related economic failures would reduce their profits. Nothing like guaranteed profits. What happened to the risk reward trade off?

  5. John Jensen
    May 24, 2021 at 3:04 am

    Nobody has the guts to raise taxes on the rich, especially with too small a majority in Congress. And, the public has been brainwashed into thinking that low taxes leads to more jobs and Trickle-Down – the idea that rich people will contribute more when they have higher profits. No idea where this all leads to? Possibly a self centered Monarchy, a plutocracy or just another failed nation. There obviously has to be more than just Biden working on reversing all of this.

  6. May 24, 2021 at 4:20 am

    The graph depicts the Reagan-Thatcher era, the rise of Chicago, and the fall of Keynes, see https://weapedagogy.wordpress.com/2015/01/03/the-power-of-economic-theory-graphically-illustrated/

    • Robert Locke
      May 24, 2021 at 8:37 am

      This is no surprise, people weree desceibing it dueing the time

      • Robert Lockel
        May 24, 2021 at 8:41 am

        I wrote three books about it, one in 1984, 1989, and 1996.

  7. Gerald Holtham
    May 27, 2021 at 6:14 pm

    Go a bit deeper. Why did Reagan arrive when he did (and Thatcher in the UK). It was because of the rapid inflation in the 1970 that really alarmed the floating voter. Rubbish accumulated in the streets as garbage workers went on strike to try and get their wages to keep up with double-digit inflation. Kalecki warned in the 1940s that Keynesian managed capitalism would result in persistent inflation that could be controlled only by periodic recessions to discipline the workers. After the oil shock made the wage-price spiral worse the road forked; there were two ways out. Either a workers’ state where they took responsibility for the consequences of wage demands or a crackdown that disciplined the working class by abolishing exchange control, reducing welfare benefits, adopting anti-union legislation and using super-high interest rates to create a lot of unemployment. The only examples of a purported workers state were in Russia and China, which were not attractive. So we got the reaction, since reinforced by developments in technology. We have left the world of Kalecki and entered the world of Minsky where recessions are caused by a deregulated financial system not by attempts to stifle wage inflation.
    This system too will lead to a political reaction as inequality becomes too egregious and there will be some change. It may even be starting to happen. I doubt that we’ll return to Kalecki-world. Ecological crisis will also force change in due course. I am not percipient enough to know what shape society will adopt.

    • Robert Locke
      May 28, 2021 at 8:15 am

      The 1970s ended American hegemony i staleholder industries and started us on th long road to industrial decline that continues today. Why seek economic explations when industrial ones suffice; there is a mountain of evidence.

      • Ikonoclast
        May 31, 2021 at 1:56 am

        Does the typo “i staleholder industries” mean “in stakeholder industries”? In turn, what is the technical definition of a “stakeholder industry” in this context? I ask because of my ignorance of terminological nuance in this context. For example does it refer to the ordoliberal concept of multiple stakeholders? I want to understand the comment because I believe it probably contains a very important point.

    • Ken Zimmerman
      May 28, 2021 at 11:05 am

      Gerald, this can sometimes be the situation, when economic relations are closed and zero sum. Which they never are. Although at times some people take them as such. Figuring out when and how this occurs is part of our job.

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