It's Still a Problem

I WATCHED THE OCCUPY PROTESTS A COUPLE YEARS AGO WITH INTEREST, and for a while I was extremely gratified at their success. They succeeded in changing the subject from “we must cut the deficit immediately and at all costs” (which is economic idiocy — the short-term problem is a lack of demand; the long-term problem is debt) to “what are we going to do about unemployment and Robber Baron Era levels of wealth inequality?”

Finally, the national conversation was beginning to be about inequality and its beneficiaries — an unaccountable, reckless and arrogant oligarchy — which is the root cause of the financial and economic crisis consuming the West.


Dr. Robert Reich, secretary of Labor during the Clinton administration, has noted correctly that the root cause of our economic malaise is a “larger and larger share of total income going to the very top while the vast middle class continues to lose ground.

“And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.

“America’s median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn’t pay their bills, and banks couldn’t collect.

“Each of America’s two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation’s total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society, expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America’s total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928 — with 23.5 percent of the total.”

That’s the most concise summary of our economic predicament as I’ve seen.

You can't have the wealth inequality numbers we have, and also have sustainable economic growth.