“Nation’s Poorest 1% Now Controls …..
Posted by Nandinee Kutty on May 26, 2008
Two-Thirds Of U.S. Soda Can Wealth,” so reads a headline from the latest issue of The Onion, my favorite source of political commentary. The article goes on to talk about the “growing and possibly unbridgeable gap between the rich and the mega-poor.” Indeed, the distribution of wealth in the U.S. (including, interestingly enough, soda can wealth) is extremely skewed. The wealthiest 1 percent of Americans now own 34 percent of the nation’s private wealth, more than the combined wealth of the bottom 90 percent.
Economic inequality in the U.S. is at its highest since the Gilded Age of the 1880s. According to Robert Reich, Not since the days of the robber barons of the 19th century have we seen this much wealth concentrated in so few hands.
From 1979 to 2005, a period during which national output had nearly doubled, the after-tax real income of the bottom one-fifth increased by only 6 percent, that of the middle fifth increased by 21 percent, while that of the top fifth increased by 80 percent. For the top 1 percent, this income more than tripled, increasing by 228 percent.
According to economists Emmanuel Saez (University of California, Berkeley) and Thomas Pikkety (Paris School of Economics), much of the phenomenal gains for the top class are the result of huge increases in salaries at the top, especially executive compensation packages for top management, which started to rise in the 1970s, and grew rapidly in the 1990s.
According to the Congressional Budget Office, the top fifth of households got more after-tax income in 2005 than the bottom 80 percent; and the top 1percent got more than the bottom 40 percent.
Over the past few decades, there has been a class warfare going on in America — not of the kind that Marx predicted, with workers rising against capitalists, but a different kind of war, waged through tax policies, huge executive compensation packages, tax shelters for the wealthy, relatively flat wages for about half of all workers, and a squeezing down of benefits for workers from the bottom to the middle class.
Warren Buffet describes it thus: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
The inequality is growing and becoming more visible in our prosperous cities. In his book, Superclass)., David Rothkopf wrote that the ratio of wealth held by the richest one-fifth to that of the poorest fifth in Manhattan was about 20 to one in the late 1970s; today it is 52 to one.
Extreme economic inequality creates a distortion in political priorities such that policies get put in place which protect the assets of the wealthy and neglect the needs of the masses. This has already happened, and in this climate, political lobbying becomes a growth industry. The number of lobbyists on Capitol Hill more than doubled between 2000 and 2007, to around 35,000.
Some capital market analysts call the economic system under such extreme inequality (both within the U.S. and globally), a plutonomy. Under a plutonomy, the stock market and other markets can continue to soar based on the consumer demand of the super-rich classes, even as lower classes face hardships.
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics,” wrote Plutarch, the Greek philosopher.
The U.S. seems to be already in the throes of this ailment that Plutarch referred to. Does this signal the decline of the republic or will the forces of genuine democracy push back the plutocracy that has enmeshed itself into the U.S. system?
Political campaign financing by affluent private donors (individual and corporations) is one important source of the rise of a plutocracy. This year, leading presidential candidates have taken positions against the “business-as-usual” style of campaign financing. This represents a small step in the right direction.