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- Aug 9, 2004
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https://www.washingtonpost.com/us-policy/2019/02/08/wealth-concentration-returning-levels-last-seen-during-roaring-twenties-according-new-research/?utm_term=.8a4512147c3cThe 400 richest Americans — the top 0.00025 percent of the population — have tripled their share of the nation’s wealth since the early 1980s, according to a new working paper on wealth inequality by University of California at Berkeley economist Gabriel Zucman.
Those 400 Americans own more of the country’s riches than the 150 million adults in the bottom 60 percent of the wealth distribution, who saw their share of the nation’s wealth fall from 5.7 percent in 1987 to 2.1 percent in 2014, according to the World Inequality Database maintained by Zucman and others.
Overall, Zucman finds that “U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties.” That shift is eroding security from families in the lower and middle classes, who rely on their small stores of wealth to finance their retirement and to smooth over economic shocks like the loss of a job. And it’s consolidating power in the hands of the nation’s billionaires, who are increasingly using their riches to purchase political influence.
If this isn't a giant warning sign for all of us, I don't know what is. Four hundred people is a very small number. A Boeing 777 seats an average of 400 passengers. In America today, those 400 passengers on a single commercial airplane have more wealth than the bottom 150,000,000 people. With the US population somewhere around 325 million, this means that 400 people (.00025%) have more wealth than 46% of all Americans . . . nearly half.
Even the most dogged "boot straps capitalist" has to recognize that this kind of dramatic concentration of wealth is not the product of toil and hard work, of "individual exceptionalism" - it is structural . . . it is a product of a system that rewards the few (for mixed reasons, some with merit, some without), but it continues to pile reward upon reward. To illustrate, one way that massively wealthy people make income (i.e. "yield" or "return") is by "investing" large sums of money in financial instruments ("fixed income") that serve as lending pools for lenders. For example, a car manufacturer's financing arm will offer several points of return for investors to place large deposits that the financier than uses fund loans to consumers. The consumer then pays a factor of two or three times the yield to the investor to account for overhead and profit to the finance company. In other words, often when regular consumers (sometimes part of the 150,000,000) take a loan to buy something, that money is effectively being borrowed from a massively wealthy individual who gets a couple of percentage points or more in interest for it. Using this example, you can see how a CEO of a car company could make tens of millions in annual income while the technician or middle-manager at the same company lives paycheck to paycheck . . . and then pays the CEO to borrow money to buy the things they need. This is a product of economic structure and it allows wealth to passively compound on itself until it reaches an escape velocity - it will never be fully used by the individual or anyone in his or her family for many generations. We have begun to hear political talk about "structural change" - and this is what they're talking about. This kind of wealth concentration is not sustainable . . . the concentration of resources among the few to the detriment of the many ends civilizations.
It should be obvious to anyone, but there are only two things that keep the 150,000,000 people from taking wealth away from the 400 people: one cynical and one idealistic. The cynical is that the wealthy have enough resources to pay to keep the 150,000,000 people down. Wealth is able to purchase security (everything from the obvious gated homes, hired security, to the more subtle, laws and institutions that protect that wealth). Wealth is able to purchase influence to keep the structure in place by laws and other 'legal' means. The other thing keeping the 150,000,000 people from taking wealth away from the 400 people is the idealistic: the 150,000,000 believe in the system. As long as the masses still buy into the system, they're willing to work within that system and not seek redress outside of it through chaotic means.
You don't have to be particularly smart to see that wealth can only purchase so much security. If 150,000,000 people agree to do something, there's nothing the 400 people can do to prevent it - that number of people, or even a fraction of them, could overwhelm any security measure (short of mass death by military means) bought by that wealth. So really, it's the belief in the system that keeps it all together. Some of that belief is well-founded, well-intended, justified, and valuable. Some of that belief is the product of an ideology where the wealthy have convinced many of the 150,000,000 that the structure is not broken and suggesting it is is somehow un-American or "mentally ill". Regardless of why the belief exists, it is the the single thing that perpetuates this thing we call America.
But belief in a system, "faith", is impermanent - it can come crumbling down, even quickly - and human history shows those moments to be chaotic, violent times of upheaval that bring about the restructuring that was necessary to return that belief, that faith into co-existence in a peaceful society. The alternative to chaotic, violent dismantling of structures that perpetuate the concentration of resources is by peaceful, incremental means. We clearly have a structural problem in America and we have two choices: we acknowledge it and begin the process of peaceful, incremental adjustment, or we allow it continue until the masses lose faith and take matters into their own hands. There might not be a critical time where the fork in the road is obvious - we have to choose to do this based on the evidence we have before us and thoughtful consideration of what it means. Just because a factor that yields the structural problem is a long-held tenet of what we believe makes us who we are as Americans doesn't mean we cling to it while the walls come crashing down.
Something has to change.