The One Percent Is Hogging so Much of Our Income That It’s Holding the Economy Back

meanlifeAre the rich intentionally trying to make the rest of us poor, thus preserving their own power?  Anthony W. Orlando writes at Informed Comment:

We all know that inequality has been rising and the average American household has been suffering. There is a myth that says all this suffering is necessary, that extreme inequality is the by-product of a rapidly growing economy—or worse, that it’s a good thing because it motivates everyone to work hard and climb the long ladder to the One Percent.

Even a brief glance at the historical record reveals just how perverted this hypothesis is.

For one thing, the economy has not been growing rapidly since inequality started climbing. From 1950 to 1980, “real gross domestic product (GDP)”—the output of the economy, adjusted for inflation—grew by 3.8 percent per year. From 1980 to 2010, it grew by 2.7 percent per year. (Since then, it’s been even worse.)

So income inequality hasn’t been “growth-enhancing” at all. In fact, just the opposite.

The United States isn’t alone in this experience. Economists at the International Monetary Fund recently compiled the most comprehensive data set to date: 140 countries over 6 decades. They consistently found that countries with less inequality experienced stronger, more sustained economic growth and fewer, less severe recessions.

It’s been widely publicized, for example, that Europe has suffered from higher unemployment than the United States in recent years. Many Americans falsely believe that Europe is more equal than the U.S., but a new data set compiled by the economist James Galbraith and the University of Texas Inequality Project shows inequality between countries and regions across Europe for the first time—and they find that Europe has had higher inequality than us since the 1970s. It’s only within specific countries that inequality is lower than the U.S., and guess what: Those countries tend to have lower unemployment than us.

The reason is quite simple: Those workers are also consumers. When the 99 Percent earn more, they spend more, and the One Percent can produce more and earn more themselves.

“In this sense,” says the wealthy entrepreneur Nick Hanauer, “an ordinary middle-class consumer is far more of a job creator than a capitalist like me. […] Anyone who’s ever run a business knows that hiring more people is a capitalist’s course of last resort, something we do only when increasing customer demand requires it.”

Or, as the late economist Michal Kalecki used to say, “The workers spend what they get and the capitalists get what they spend.” What he meant by that was that the rich can afford to save more of their income—and, indeed, we find that the One Percent continue to save 15 to 25 percent, while the saving rate of the 99 Percent has plummeted close to zero. If too much money goes to the One Percent and not enough to the 99 Percent, the economy will save more and more and spend less and less, until there isn’t enough consumer demand to justify increasing production and investment. Thus, the economy will slow down.

Read more here.

22 Comments on "The One Percent Is Hogging so Much of Our Income That It’s Holding the Economy Back"

  1. Anarchy Pony | Dec 15, 2013 at 6:26 pm |

    “Are the rich intentionally trying to make the rest of us poor, thus preserving their own power?”

    Short answer: Yes.
    Long answer: Yeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeees.

  2. Let’s eat the rich. It really is the only solution you know.

  3. Rhoid Rager | Dec 15, 2013 at 8:42 pm |

    If charging interest is intentional, then, yes, wealth disparity is intentional.

  4. kowalityjesus | Dec 15, 2013 at 9:15 pm |

    Don’t you remember? Greed is good!

  5. If the trend is allowed to continue and I don’t see much to stop this, this could threaten the continuance of high-tech civilization itself.

    The hardware elements that make all high-tech devices, CPUs, DRAMs, passive components *must* be made by the tens of millions by nature of the industrial processes used to create them… or not at all. The vendor chains that turn coltan in African jungles into critical passive components also demand substantial volume in order to continue.

    IOW, high-tech devices are either affordable to most people, or they will cease to exist. These devices have limited lifespans.

    The middle classes of Asia which are expanding largely due to First World outsourcing are a stopgap measure. If there’s no substantial 1st World demand because few are able to buy high-tech devices, internal demand probably can’t keep this going. More to the point, how long will Asian elites continue to allow them to accumulate wealth before they decide to extract it paralleling the process which is entering its endgame in the US and the rest of the 1st World?

  6. Calypso_1 | Dec 16, 2013 at 12:28 pm |

    It’s’s only wafer thin.
    Thank you sir, & now, here’s ze cheque.

  7. CynicalAtheist | Dec 16, 2013 at 1:57 pm |

    “He who dies with the most money wins!”…?

    I think that the 1% is so out of touch with reality, they don’t realize yet that you cannot take it with you when you go. I think they are all hoping they will be able to buy immortality. Sorry to tell ALL of them. You really are (organically, if not substantially) HUMAN, and you are going to die. End of story. Stop being so greedy.

    • marvin nubwaxer | Dec 16, 2013 at 2:14 pm |

      the rich can create dynasties to keep their wealth within a family regardless of how intelligent or productive any of their spawn are.

      • Which is why and how the Rockefeller family, worth an estimated $30 billion in 1960, have creatively hidden their wealth and owernship and according to Forbes’ public sources, are ONLY worth $2 billion today (try $300 billion plus).

        Which is why the Mellon family was estimated to be the third richest family in 1970, is today considered also-rans, even though their worth is in the hundreds of billions for the same reason.

    • They control reality, therefore, they are never out of touch — it is you, CA, who fall into that category!

      They have Fox on “one side” and NPR on the same side, but enough jackholes and fools believe there actually exists a difference between the two propaganda stations?

      They both fire any and all reporters who have ever attempted to report the truth!

      Don’t you ever read, or pay attention to the news?
      Psychopaths have no time sense, as the rest of us long ago realized!

      • There’s obviously a difference between the two propaganda stations, otherwise the divide and conquer strategy wouldn’t work so well. “The” truth(s) have been split up. Of course many of them have been placed off the line of legitimacy.

    • Adamas Macalz | Dec 17, 2013 at 2:20 pm |

      depends on how the far the science of longevity goes in the next few years. I can almost assure you some of them will buy an extremely extended lifespan if not immortality. Evolution is there for those who can afford it, though it should be for everyone.

  8. Well, obviously, this has always been the plan of the overclass (or transnational capitalist class, or global banking cartel, or whatever one wishes to call them).

    They have dismantled the economy over the past thirty-five plus years, transforming a “Main Street” economy into a fantasy finance-based economy, whereby they sell endless debt-based financial instruments (credit derivatives, et al.) and then shift the debt over to the public sector (the rest of us).

    All those super-crooks responsible for ultra-leveraging, ultra-leveraged speculation and the greatest insurance swindles in human history (using so-called “unregulated insurance” or naked swaps [CDS uncovered]), are richer and richer, making the rest of us poorer and poorer.
    Which is why faux crat, Paul Krugman, recently came out supporting the Trans-Pacific Partnership (heavily promoted by the neocon Obama Administration) — and yes, I know you believe Group of Thirty dood, Krugman, is a liberal because his column says so!

    (What utter douchetards are Americans today, all Krugman has to do is claim to be a liberal, along with NPR, while Chomsky claims to be a Federal Reserve Bank-loving, Warren Commission Report-loving, 9/11 Commission-loving and Wall Street-loving, radical!)

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