Americans’ net worth plummeted by $3.73 trillion in the fourth quarter of 2018, according to the Federal Reserve, the most dramatic decline since the Great Recession began in 2008. Workers’ pay and benefits have been falling as a percentage of gross domestic income for years, down to 52 percent. It was 59% in 1970 and 57% in 2001; the difference has largely gone to corporate profits.
The incomes of the very rich have grown faster than the economy since 1980, skyrocketing by more than 400 percent for the top .01 percent. The top 1 percent aren’t hurting either, raking in about 180 percent more over the same period. The top 10 percent have held their own, with income gains that closely mirror GDP growth. (New York Times columnist David Leonhardt calls this – those making $120,000 to $425,000 a year after taxes – the “upper middle class.” Presumably, under this conception, the middle class includes everyone except the richest and poorest 1 percent.) And the bottom 90 percent are steadily losing ground.
A few weeks later another Times columnist, Neil Irwin, noted a string of economic problems: “economic growth has been slower than it used to be… Productivity growth has been weak. Inequality has risen. And the corporate world is more and more dominated by a handful of ‘superstar’ firms.” Others call this monopolization.
“What,” he asks, “if those megatrends are all the same problem?” Not capitalism, of course, but the effects of surging economic inequality, holding down economic growth because most people can’t afford to buy stuff, and holding down wages because the remaining companies face little competition for workers. Perhaps “we’ve been thinking about the world’s economic woes all wrong. It’s not a series of single strands, but a spider web of them.”
Leonhardt was back a few days later, conceding that economic pundits have been “exaggerating the strength of the economic expansion, because it makes for a good story. Here’s the truth: There is no boom. The economy has been mired in an extended funk since the financial crisis ended in 2010.” Indeed, he offered a chart showing that year after year, the economy has consistently underperformed the experts’ predictions. “And for most families, real-life experience has been more disappointing than the G.D.P. numbers, because much of the bounty of the economy’s growth has flowed to the affluent.”
Leonhardt blames this long stagnation on too much money sloshing around in the pockets of the rich (they long ago reached the point where there’s nothing more for them to buy, and so stash the wealth we create in bank accounts and stocks and such), and an investment slump resulting from the fact that most companies “have grown so large and monopoly-like that they don’t need to invest in new projects to make profits. Think about your internet provider: It may have terrible customer service, but you don’t have a lot of alternatives. The company doesn’t need to invest in new technology or employees to keep you as a customer.”
He suggests we stop funneling money to the rich, and instead put it into repairing infrastructure, improving the social safety net, and speeding the transition to an environmentally sustainable economy.