Sunday, June 19, 2011

The Rich aren't Like Us: Class War Coup d'état

In many ways, the rich aren't like us.  But then that's because they're rich.  Oh, and they're getting richer by the second.  While 99% of Americans see their wages stagnate, the rich continue to eat more of the pie.  In a 2010 paper by economist Emmanuel Saez he shows just how true this is.

From 1993 to 2008, the top 1% saw their incomes grow by nearly 4% while the bottom 99% (everyone reading this, no doubt) saw their incomes grow less than 1%.  And the prospect for change in this unequal distribution are poor.

Looking further ahead, based on the US historical record, falls in income concentration due to economic downturns are temporary unless  drastic regulation and tax policy changes are implemented and prevent  income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced  income concentration until the 1970s (Figures 2, 3). In contrast, recent  downturns, such as the 2001 recession, lead to only very temporary drops in income concentration.
Deconstructing the top 10% of income earners is revealing.

Saez is very clear about why this is happening.  Very clear.

The labor market has been creating much more inequality over the last thirty years, with the very top earners capturing a large fraction of macroeconomic productivity gains. A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II - such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality. We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional reforms should be developed to counter it. 
Attacks on institutions which even the distribution of growing economic prosperity are nothing more than an attack on 99% of Americans.  And the fact that they have convinced a small but vocal minority of that 99% to defend this out of some twisted sense of "fairness" is nothing short of a class-warfare Coup d'état.

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