A new year is upon us, and there are numerous stories of economic recovery across the world. However beyond basic growth rates, there is another measure which often reflects more about people’s day to day lives. I’m referring to wealth inequality and in the USA, it often feels more like the great depression rather than a booming new decade.
The depression of course took place in the 1920s and in those times, as usual the wealthy were pretty much shielded from the worse effects. In fact during that decade, the wealthiest 10% of the population owned about 84% of the total wealth. The situation evened out over the next few decades with that figure declining before starting to rise again in the 1980s. However we’re now reaching levels that are very similar to those of the 1920s with the majority of US wealth held by a small proportion of it’s citizens.
The statistics are now more accurate so in some senses a direct comparison is not always completely relevant. However the overall result is the same, the level of wealth inequality in the US is extremely high and only heading in one direction. You can see some aspects if you watch news and documentaries on the local media. It’s certainly interesting to view the different perspectives – for US readers try watching the local news from the UK – you can use this, or vice versa for European readers.
Fortunately when these inequalities are combined with a growing economy, the effects seem less severe. The US is doing pretty well, with unemployment heading to a new 6 year low and the job market consistently expanding. However when you realise that the richest 0.1 % control as much wealth as the poorest 90% you realise this is not a fair and equal society.
The rich are in fact getting even richer, while the poorer sections of society are increasingly stepping into levels of significant debt in order to simply survive. Real incomes are growing, but at a much higher rate for the wealthy than the poorer levels. In fact with under 1% income growth, it’s not getting much easier for those at the wrong end of the income ladder.
Of course capitalism has always produced such inequalities, but the argument goes that the growth in income actually is down to new businesses and opportunities for all. However the studies suggest that the growth in wealth is not coming largely from entrepreneurial spirit but merely reflects the fact that the wealth is held in shares and bonds which naturally are worth more as the economy recovers. Unfortunately this is unlikely to help bring many benefits to society at large, it will just make the rich, well richer!