What Habbened is Greed
In the US, capitalism has sometimes worked to make all boats rise. A remarkable study last year of the history of national income, written by the foremost French researchers about income inequality, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, shows that from 1946 to 1980, real income doubled across the economic spectrum. That was also a period of extraordinary economic growth: gains of over 5% in gross domestic product for most years, and occasionally more than 10%. The top income tax rate for the richest Americans was higher than 85% until 1964, and then 70% until 1980. Nevertheless, the top 0.01% tripled their income after taxes in this period.
But since 1980, the story has been very different. The income of the poorer half of Americans has remained completely stagnant. The upper half has seen its income grow, but most of that growth has been at the very top: incomes of the top 1% have tripled, and that tiny rich slice earns almost twice as much before taxes as the whole bottom half. The few thousand families in the top .001% have multiplied their income 7 times. Our graduated income tax, along with other income-based payments like Medicaid, does redistribute money toward the bottom, but that hardly dents the huge inequality.
That’s due to political choices. The top tax rate has fallen steadily, to 50% in 1982, to 40% in 1993, to 35% in 2003. The tax rate on capital gains from stocks, which nearly all go to the wealthiest Americans, has also fallen from 40% to 20%. After nearly tripling from 1940 to 1970, the real value of the minimum wage has fallen since then. One of the least discussed but most important political policies that contributes to growing inequality is the ability of the very rich to hide their income in international tax shelters. The leak of the so-called Panama Papers brought the illegal use of tax havens into the international spotlight: the anonymous leaker said he was motivated by “income inequality”. It is estimated than 10% of the world’s GDP is held in offshore banks, including about 8% of American GDP.
Corporations have contributed to rising inequality by boosting the incomes of top management. CEO’s earned about 30 times the income of a typical worker in 1980. That ratio has skyrocketed to 300 times average wages.
Political choices continue to widen the economic gulf between the few and the many. The Republican tax reform of 2017 mainly benefitted the rich, notably by doubling the amount of money that can be left in an estate without being taxed, helping only a few thousand families.
Growing inequality is not only an American problem, but a global problem that keeps getting worse. Between 2010 and 2016, the total wealth owned by the poorest half of the world’s population fell by over one-third. At this moment, the world’s top 1% owns more than all the rest of us. The world’s economy keeps growing, but the yachts of the wealthiest are disappearing from view. Since 2000, the bottom half of the world’s population has gotten about 1% of the increase in global wealth. The top 1% took in half of that growth. The 8 richest men in the world now own as much as the poorer half of the global population, 3.6 billion people.