Income gap in America is widest since 1917
19 August 2009
The social chasm separating America’s financial oligarchy from working people, the vast majority of the population, is wider than at any time since 1917, according to the latest statistics from the Internal Revenue Service.
The income gap between the top 10 percent and the bottom 90 percent has reached “a level higher than any other year since 1917 and even surpasses 1928, the peak of the stock market bubble in the ‘roaring’ 1920s,” according to an analysis of the data published earlier this month by University of California economist Emmanuel Saez.
Saez’s report, entitled “Striking it Richer: The Evolution of Top Incomes in the United States,” shows that the real increase in the concentration of wealth has taken place at the pinnacle of the social pyramid—the top 1 percent, with annual incomes of $400,000 and above.
The figures released by the IRS are from 2007. They indicate that for most of the top 10 percent (families with incomes of $110,000 or more), there was little change in terms of income growth and share, but the top 1 percent increased their share of the national income to 23.5 percent, compared with 22.8 percent in 2006.
Between 2002 and 2006, this social layer, consisting of one out of 100 American households, accounted for 65 percent of income growth nationwide. This trend has held for the better part of the past decade.
During the period 2002-2007, the top one percent saw an annual growth in income of just over 10 percent annually. During the same period, the bottom 99 percent saw an increase of only 1.3 percent per year, falling well below the rate of inflation. As a result, the top one percent accounted for two thirds of income growth over the six-year period.
Bringing this income stratification into still sharper focus provides a staggering indication of the concentration of wealth in the US. The top .01 percent of the population, (less than 15,000 families) saw its share of total income rise from 5.46 percent in 2006 to 6.04 percent in 2007 (compared to just 0.9 percent in 1979). This 2007 figure amounts to roughly double the total combined income for the bottom 20 percent, some 30 million families.
As Saez comments, “2007 was an incredibly good year for the super rich.”
It was also, of course, the year preceding the greatest financial collapse since the Great Depression of the 1930s. This was no mere coincidence. The accumulation of obscene amounts of wealth by this tiny minority is a major factor in the bankrupting of the country and the plunging of the entire world into economic crisis and misery.
Professor Saez points to the dramatic changes in the economic landscape since 2007, noting that real income is falling across the board. He points out that in previous recessions, the income share of the top 1 percent has tended to decline because business profits, capital gains and stock option returns tend to fall faster than average income.
“Based on the US historical record, falls in income concentration due to recessions are temporary unless drastic policy changes such as financial regulation or significantly more progressive taxation are implemented and prevent income concentration from coming back,” Saez writes.
The present crisis, however, is not just another recession. Rather, it signals the final collapse of the post-World War II global capitalist order, which depended on the economic supremacy of the United States. The ruling elite, not just in the US but in all the major capitalist countries, aims to resolve this crisis through a drastic reduction in the income and social conditions of the working class, accompanied by attacks on basic democratic rights and an increasing turn to military aggression.
As part of this global process, the working class in the US has already suffered severe blows. Some 30 million are jobless or relegated to involuntary part-time work, while wage-cutting is rampant.
At the other end of the social spectrum, wealth accumulation continues unabated. Seven of America’s top ten CEOs took home total compensation of $100 million or more last year, according to a report by the independent research group The Corporate Library. This compares to just three who pocketed that much the year before.
Topping the list (which includes the heads of seven major oil companies) is Stephen Schwarzman of Blackstone Group LP, the private equity firm, who took in $702.4 million—nearly $2 million a day.
Meanwhile, Wall Street has set aside tens of billions of dollars for annual bonuses, with 2009 set to be the most lucrative year yet for the bankers and financial traders.
The Obama administration has no intention of imposing the kind of financial regulation or tax increases on the rich that Saez suggests could lessen social polarization and the concentration of wealth. On the contrary, all of its policies have been directed at bailing out the banks and the financial elite, while demanding that workers accept drastic pay and benefit cuts, the destruction of their jobs, and a series of counter-reforms in health care and other essential social programs.
Commenting on the controversy over Wall Street pay and benefits last week, White House spokesman Robert Gibbs defended the bankers’ plundering of the economy, telling the press “I don’t think the American people begrudge that people make big salaries, as long as they’re not jeopardizing the good will of the public in doing so.”
The only alternative to the destruction of working class living standards to maintain the wealth of the financial aristocracy is a socialist one. It requires a break with the Democratic Party and the building of an independent mass political movement of the working class fighting for an end to the domination of society by the financial parasites of Wall Street.
The banks and finance houses must be taken out of private hands and placed under public ownership and the democratic control of working people. The vast fortunes accumulated by the CEOs and financial speculators should be reclaimed to pay for jobs, education, health care, housing and other vital social needs.
The return of income polarization to the level of 1917 has profound significance. That was the year of the October Revolution in Russia, marking the first time that working people took political power and initiated the task of placing society on socialist foundations on a worldwide basis. The social gap that now dominates US society, and indeed the entire planet, cannot continue without producing an explosive resurgence of class struggle and a new period of social revolution.
Bill Van Auken
The role Of Neo-Liberalism, in widening the income gap between the rich and the poor.
June 5, 2010 by politicalsnapshots.wordpress.com
The role of Neo-Liberalism, in widening the income gap between the rich and the poor.
“One of the most pronounced effects of Neo liberalism is to create wealth inequality within national borders and between states. Within a decade of adopting free market policies, the class divide in the US and UK became significant.” Professor G. William Domhoff. UC @ Santa Cruz.
It is just another indictment of Neo liberalism and its multi-faceted destructive policies encumbered upon people of the world. It is very fascinating to note, that the income gap between the poor and the rich has more pronouncedly been evident in the US and UK, the joint creators of Neo liberalism.
This enormous income gap between the rich and the poor in the US has concentrated more power in the hands of the rich and has created a feeling of helplessness on the majority of American citizens who have been marginalized by Neo liberal policies.
Consequently, sooner or later, the question will arise, whose country is it anyway? It is obvious that the widening of the income gap in the US is close to the breaking point. It is not if, but when it breaks, no one can forecast how it might end. It is just that the Corporations are blinded by greed, and our representatives are muzzled by big business.
Writing on the subject of Neo liberalism’s impact on social cohesion, David Coburn, from the University of Toronto writes: “While it has been asserted that neo-liberalism produces a lowered sense of community it might also be argued that the rise of neo-liberalism is itself a signifier of the decline of more widespread feelings of social solidarity. The political rise of neo-liberalism is freighted with a more individualistic view of society and, perhaps, itself reflects a decline in the notion of we are all in the same boat. Not only do neo-liberal policies undermine the social infrastructure underlying social cohesion but neo-liberal movements themselves are partial causes of the decline of a sense of social cohesion.”
It is absolutely frightening, what Neo liberalism is doing to societies. It is corroding the very fiber that societies are built upon. Neo liberalism is cancerous. It is undermining our Democratic system. When a government becomes a by stander when millions are practically becoming paupers, while the few are amassing billions, then, the people have no protector. Laws, Rules and Regulations are in the books only to protect the interest of the rich.
In a wonderful article entitled, “Skewed Wealth Distribution and the Roots of the Economic Crisis”, David Barber, a Professor at the University of Tennessee, wrote:
“And what is true in the United States of the unequal distribution of wealth, and of the consequences of that unequal distribution, is true again on a world scale. This super-poor mass of humanity, from whose soil is ripped vast amounts of mineral and agricultural wealth, and out of whose labor the world’s manufactured goods increasingly come, are almost wholly excluded from participating in the world’s market economy”. So, what is to be done?
While a number of social scientists have forwarded divergent solutions for anarcho-capitalism to save itself, Professor Michael Rustin at the University of East London suggests the following points are “made necessary by the implosion of the neo-liberal system in the current financial crisis, and are needed to construct a new post-neo-liberal phase of democratic capitalism”.
The five points he has put forward are the following:
(1) A more active role for governments in regulating markets, and especially global financial markets
(2) Constitutional reforms which enhance democratic processes and civil liberties, and create more representative and pluralist systems
(3) Policies, which reduce inequalities, and give greater weight to social justice and social inclusion.
(4) The enhancement of the capacities of international institutions, and especially the EU, to maintain economic stability and growth
(5) Programmes to address the problems of climate change.
Very sensible, are they not? But Wait!!! We have to see which governments have any backbones left in them to try and regulate the market, and do away with thirty years of destruction of the people that started with Reagan and Thatcher.
As I am ready to post this article, I hear a news story that stated that “Hungary might default on its debt”. What is the world coming to. Wasn’t Hungary the darling of the West? Didn’t it do everything that it was asked to? It privatized everything. It reduced government employment. It cut welfare as it was told to do by “free Market Reform” advisors. Hungary did everything a good and obedient follower of Neo liberalism is supposed to do. Yet, it is threatening to “default” on its debt in spite of a $24 billion IMF and EU loan few months back. This is the fruit of Neo Liberalism.
Do you wonder, which devoted and submissive follower of Neo liberalism will bite the dust, next?
Professor Mekonen Haddis.