Income Inequality

This chart shows pretty well the history of income inequality in the United States for the last 100 years. Note that in 1928, the richest 1% of Americans reached a record level. In that year, that richest 1% was getting 23.9% of all the income in the entire nation -- leaving only 76.1% of the nation's entire income to be divided up by the other 99% of the population. While the rich (and their Republican cohorts loved this, it was not sustainable -- and it resulted in the Great Depression. 

There are those who would claim that the Great Depression was caused by the stock market crash of 1929, and not by the rich hogging too much of the nation's income. But that's not true. The cause of the Great Depression was the lack of enough income for the 99%. The stock market crash was only the trigger that kicked off the depression that was waiting to happen, and if the stock market had not crashed then something else would have triggered it. The vast inequality in wealth and income had created a situation that could not be maintained.

Then we get to the period in our history that is probably the healthiest economically of any in that 100 year period -- 1950 through 1980. Note that the share of the nation's income that went to the richest 1% during this period stayed between 9% and about 12%. And in 1980, when Ronald Reagan was elected, the share of the 1% stood at 10%. This was a reasonable figure, and showed that everyone in our society was getting a share of increased productivity.

But this was not good enough for the rich and the corporations, and they convinced Reagan that they were somehow being treated unfairly. Reagan introduced his infamous "trickle-down" policies (which said if we give the rich more money they will share it with everyone). It was a silly idea, and doomed to failure, because the rich have never shared their income with anyone -- especially workers and people less fortunate than themselves.

Reagan began to bust unions, reduce taxes for the rich, loosened regulations on corporations and and Wall Street, and generally tilted the economic playing field back toward the rich (and away from the bottom 99%). As you can see on the graph, the rich began to gobble up more than their share of the national income again (claiming all of the gains in productivity for themselves, and sharing nothing with workers). So, for the last 30 years, the income of workers was stagnant (and actually lost a great deal in buying power due to inflation) while the rich gained an ever larger share of the national income -- culminating in 2007 at a rate very similar to that of 1928 (23.5%). 

And the same thing happened in 2008 that happened in 2009 -- a serious and sustained recession. It had to happen, because the rich were hogging far too much of the nation's total income (and wealth). And the rich continue to get even richer (and increase their share of the income), while wages for workers go down and the middle class is disappearing. And this will continue to happen, and the economy will continue to suffer, as long as this vast inequality of income and wealth remains.

People must wake up to the fact that a healthy economy depends on everyone getting a share of the economic pie -- because that creates demand, and demand creates jobs and higher profits. We will continue to have problems until the share of income going to the richest 1% is reduced (preferably under 15%). Some will call this redistribution of income. OK, but income is always being redistributed in every economy. We must make a choice. Do we want a fair distribution of income, or do we want most of the income being redistributed to the richest people in America? I opt for the former, and believe it would result in a healthy and thriving economy -- an economy that is good for everyone, including the rich.