I saw a shocking number today. According to an Oxfam report titled An economy for the 99%, 8 individual people own as much wealth as 50% of the world’s total population. That’s 3.6 billion to 8, or roughly 450 million to 1. Just think about those numbers. Somehow, even looking at that number, some of the smartest people I know refuse to believe that the deck is stacked, the game is rigged. They honestly believe – or just want to believe – that these 8 people each worked 450,000,000 times harder than everyone else. They hear news about CEO’s getting paid (I almost said ‘earned’ but realized that would be counterintuitive) 380 times as much as their average worker, and believe that those CEO’s must add 380 times the value to the company. And even though the top 1% has seen their income skyrocket at the same time the average earnings for workers remained stagnant, these smart people still insist that our current system is fair. Even as we have seen class mobility drop to its lowest rate since before 1970, the delusion persists that people who aren’t rich just don’t work as hard as those 8 people, or others similarly situated.
Just focusing on the American economy, there is now an alarming disparity between the richest Americans, and everybody else, and that disparity is affecting the economic prosperity of our nation, and threatens a bleak outlook for the future. In fact, the wealth inequality in the U.S. is among the worst, ranking 23 out of 30 developed nations, according to a study by the World Economic Forum.
Way back in 1992, William Jefferson Clinton, then governor of Arkansas, was running his first campaign for President, with the herculean feat of challenging an incumbent, George H.W. Bush. Bush, who was Ronald Reagan’s vice president for eight years, was elected in 1988, riding on the good will of the Reagan legacy, not least of which was the fall of the Soviet Union and the end of the Cold War. And while in office, Bush launched a successful campaign in the middle east, driving Iraq out of Kuwait in the Gulf War.
In 1991, because of his remarkable success in that war, Bush had a greater than 90% national approval rating. However, in the aftermath of the Gulf War, domestic issues began to chip away at that stellar approval rating. Most notably, America entered a recession, and the Bush administration was slow to respond, driving his record-high approval rating down below 40% in less than a year. The American electorate is fickle, to say the least, and we have short memories.
Bill Clinton’s campaign, lead by the Ragin’ Cajun himself, James Carville, hoped to capitalize on this particular shortcoming of the Bush administration. “It’s the economy stupid,” therefore became a central slogan that continues to be recognizable today. It was a “meme” before memes were even a thing. And it fueled a thrilling rally from the trailing Clinton campaign, and helped him succeed in becoming the 42nd president of the United States.
Perhaps uncharacteristic of presidential politics, President Clinton seemed to deliver on his campaign promise to focus on the economy. The Clinton administration oversaw strong economic growth, which averaged 4.0 percent per year, compared to average growth of 2.8 percent during the Reagan-Bush years. The economy grew for 116 consecutive months, the most in history. More than 22.5 million jobs were created in less than eight years – the most jobs ever created under a single administration, and more than were created in the previous 12 years combined. Of the total new jobs, 20.7 million, or 92 percent, were in the private sector.
Economic gains were made across the spectrum as family incomes increased for all Americans. Overall unemployment dropped to the lowest level in more than 30 years, down from 6.9 to just 4.0 percent by November 2000. The unemployment rate was below 5 percent for 40 consecutive months. Unemployment for African Americans fell from a staggering 14.2 percent in 1992 to 7.3 percent in October 2000, the lowest rate on record. There were many other gains and accolades, but they all lead to the same conclusion: Bill Clinton focused on the economy. And he used that booming 1990s economy to not only balance the budget, but to go from budget deficits, made famous during the Reagan and Bush years, to record budget surpluses. And it is important to note that while Bill Clinton arguably did a yeoman’s job of boosting the economy, he failed to protect it from rising levels of wealth inequality. He helped deregulate the banking system and Wall Street, which in the long run would be instrumental in the near-collapse of 2008.
Moreover, all the progress Clinton did make was retarded and reversed in less than 8 short years by the regressive policies of the George W. Bush administration. There was an almost immediate reversion to the “trickle down” economic ideas of Reagan that has since set the U.S. on a downward spiral of economic depression. Well, at least for most of us. You see, the richest Americans have gotten obscenely richer, while most Americans have seen a sharp decline in virtually every metric of success and financial well-being, a trend that has unfortunately continued under Barrack Obama, and will likely become even more stark under Trump and his cabinet of billionaires.
Ratings agency Standard & Poor’s issued a report in 2014 stating that the actual income gap in the U.S. has been worsening and now is approaching an “extreme” threshold that threatens to hamper long-term economic growth. According to experts (and logic), the wealth gap undermines economic growth by dampening social mobility and creating a less-educated workforce unable to compete in the global economy. “Higher levels of income inequality increase political pressures, discouraging trade, investment, and hiring,” the report noted.
Inequality serves as a “wedge” between growth and living standards, funneling income to the most wealthy, and making it more difficult for living standards to improve, or for poverty to fall, during business expansions. Economic growth, therefore, “has become a spectator sport for too many poor and middle-class households.” In fact, following the most recent recession, the stock market has rebounded to its highest level in history, GDP is up significantly, corporate profits and worker productivity are at historical highs, yet median household income is actually down 5%. So the rich have seen massive income growth, while everyone else is seeing their incomes fall.
Ultimately, a lopsided economy that benefits a smaller and smaller portion of the populace, can, and does, lead to economic collapse. Many economists now agree that both the Great Depression and the most-recent recession in 2008, were caused – at least in part – by extreme levels of wealth and income inequality. The greed and unfairness that such a system encourages leads to eroding levels of opportunity and mobility for all income levels, and will eventually lead to disaster if we don’t take action to preserve the fundamental American principal of equal opportunity. And despite the 2008 collapse, and a resulting “economic recovery,” inequality has continued to grow.
There is a video on YouTube called “Wealth Inequality in America.” This video was created a few years ago, and has since gone viral with almost 20 million views. It shows three different wealth distribution charts, one showing what most Americans believe is the “Ideal” wealth distribution, one showing what most Americans believe is the actual distribution, and then, a chart showing what the actual distribution really is. Of course, the difference is shocking, at least to average Americans.
Basically, taking data from a Harvard poll conducted a few years ago, the first chart shows the “ideal” wealth distribution as reported by a majority of those polled. It shows a very healthy income curve, starting with the bottom 20% almost completely above the poverty line, with a smooth transition between all levels, and a top 20% that is only about 10-20 times wealthier than the poorest folks.
Of course, most Americans know that our wealth distribution is anything but “ideal,” thus, when they described what they believed the distribution actually is, the response showed a graph that was much more skewed toward the wealthy. This graph shows the bottom 20% quite a bit worse off, with a small portion actually below the poverty line, and it shows the wealthiest Americans with roughly 100 times the wealth of the poorest, and even a middle class that is struggling a bit.
The shocking thing is that this graph is nowhere near the actual distribution of wealth. In the actual distribution graph, the poorest don’t even register, and almost the entire lowest 20% is below the poverty line, while the middle class is barely distinguishable from the poor.
And of course, the top 1% is so far off the chart that there had to be a special column just for his portion of the wealth – roughly 40% of the overall wealth of the nation, concentrated in the hands of 1% of the people.
In the U.S, the wealth gap has reached “spectacular” heights. And the rich are actually wealthier than previously thought. It is estimated that America’s top 1 percent, the nation’s wealthiest group by a long shot, control almost 40 percent of wealth, rather than the 30 percent that had previously been estimated. Let that sink in. The top 1% has nearly half of the nation’s wealth. While the bottom 50% only has 7% of the wealth. The 1% has more than five times as much wealth as the entire lower half of this nation’s population.
The richest 1% earn almost 25% of the nation’s annual income, while in 1976 they only took home about 9%. The top one percent own 50% of the all stocks, bonds and mutual funds, while the bottom 50% of Americans own only 0.5%, or half of one percent. Obviously, the bottom 50% of the country is not investing, just barely earning enough to get by. CEOs of our richest corporations take home somewhere around 380 times as much income as the same rich corporation’s average worker – not its lowest paid employees, but the average earner. 380 times? That means the average worker would need to work an entire month to earn what the CEO makes in a single hour of a single day. And again, this is a trend that we have seen grow steadily more pronounced since the 1970’s, and the end of the economic policies of the 40’s, 50’s and 60’s that helped create the most robust middle class in world history.
This picture of the American economy strongly suggests an uneven playing field. As the rich get richer, the poor get poorer, until virtually all of the nation’s wealth is controlled – either directly or indirectly – by a handful of mega-wealthy individuals. When enough wealth is concentrated in the hands of a few billionaires, it becomes easier for those few billionaires to buy politicians, to repeal regulations, skew the tax code in their favor, thus allowing them to keep even more of their wealth, and to pay their workers less and less, while eliminating any competition.
“Oh, you’re just jealous. Don’t attack rich people because they worked for what they got.” I know, i know, anytime anyone starts talking about income and wealth inequality, some libertarian zealot hollers “Class Warfare.” There is a vocal group of opponents that view every mention of inequality as a challenge to the rich and powerful. A battle cry by the poor masses against the wealthy elite that are literally in charge of everything. They are the “job creators” and we should all be thankful for their contributions to our society. But these wealthy titans are busy buying elections, and influencing public policy, and consolidating economic power by engaging in mega-mergers, all to make it even harder for hard-working people to achieve that mythical American Dream. And don’t forget that the majority of the nation’s wealthiest – well over 60% of those on the Forbes 400 list – were born rich, and will do anything to preserve that legacy for their progeny. As Warren Buffet – a mega-wealthy, proponent of capitalism himself – once stated, “There’s class warfare alright, but it’s my class, the rich class, that’s making war.” And we, the intrepid 99%, are the casualties of that war. Think about that.
Until next time, I remain Your Lawscholar.