The rich get richer; the poor get poorer.
You don’t hear us complaining about it…but others surely will. One of the big struggles in the world of politics has always been between those who have and those who have not…between equality of opportunity and equality of results…between the upper classes and the lower ones…between the patricians and the plebes…the elites and the yahoos. The elites always come up with a theory – divine right, social contract, communism, democratic capitalism – which keeps the masses quiet for a while. But then, times get tough and the mob goes sour. The lumps start asking for a New Deal or a Revolution. At that point, they usually don’t want just money…they want blood.
Of course, we’re still a long way from there.
Still, you have to wonder how long the proles will continue to believe in a system that gives them less and less, relatively. If modern American capitalism is the gold mine most people think it is, a lot of people are getting nothing but the shaft.
First, we note that the U.S. trade deficit rose 10% in March to its highest level since September. At nearly $64 billion, Americans are still spending $2 billion PER DAY more than they make – on a global basis. They make up the shortfall, as we all know, with debt. Corporate debt. Government debt. And private debt.
But one group that is relatively debt free is the wealthy. They don’t need to borrow – they’re getting rich and lovin’ it.
Floyd Norris, in the International Herald Tribune, reports that NY bars and restaurants can barely keep up with demand for champagne at $350 a bottle…and one brand sells at $1,600. It’s not unusual, apparently, for a single table to spend $12,000 on liquor in an evening.
He notes that one of the achievements of American capitalism of which we were once most proud, was the fact that it gave the ordinary working stiff a bigger share of business earnings by, as Peter Drucker put it 30 years ago, “the steady narrowing of the income gap between the ‘boss man’ and the ‘working man.'”
As productivity improved, working-class wages went up, while there was no particular need to increase executive salaries.
But that was a long time ago. Now, productivity rises – and the boss men get the extra dough.
This from the BBC:
“After growing at more than 3% a year in 2004 and 2005, the pace picked up to a blistering 5.6% annual rate in the first quarter of this year – although the pace has since then slipped back to 2.9%.
“So far, though, little of that growth has translated into the hands of the average worker, according to new research from the Economic Policy Institute (EPI).
“For real household incomes, the median point – the level at which half of households earn more and half less – has actually fallen over the past five years.
“During the five years from 2000 to 2005, the U.S. economy grew in size from $9.8 trillion to $11.2 trillion, an increase in real terms of 14%.
“Productivity – the measure of the output of the economy per worker employed – grew even more strongly, by 16.6%.
“But over the same period, the median family’s income slid by 2.9%, in contrast to the 11.3% gain registered in the second half of the 1990s.
“The wages of households of African or Hispanic origin fell even faster.
“And new entrants to the labour market fared particularly badly.
“Average hourly real wages for both college and high school graduates actually fell between 2000 and 2005, and fewer of the jobs they found carried benefits such as health care or company pensions.”
The BBC then helpfully asks the obvious question: If the economy grew…and most people didn’t get any more money…where did the money go? The answer:
“The share allotted to corporate profits increased sharply, from 17.7% in 2000 to 20.9% in 2005, while the share going to wages has reached a record low.
“The incomes of the top 20% have grown much faster than earnings of those at the middle or bottom of the income distribution. The income[s] of the top 1% and top 0.1% have grown particularly rapidly.
“From 1992 to 2005, the pay of chief executive officers of major companies rose by 186%.
“The equivalent figure for median hourly wages was 7.2%, leaving the ratio of CEOs’ pay to that of the average worker at 262.
In the 1960s, the comparable figure was 24.”
In other words, the ratio of the top earners to the bottom earners has risen 1000% since the Johnson administration.
Of course, it’s not polite to ask what others make. People with manners will ignore the disparity entirely. But that still leaves nearly 300 million American ready to make an issue of it.
Markets and Money