Why everyone overestimates American equality of opportunity.
Read an excerpt from Senior Editor Timothy Noah’s upcoming book, The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It, published in the March 1, 2012 issue of the magazine.
“Most of Western Europe today is both more equal in income and more econmically mobile than the United States. And it isn’t just Western Europe. Countries as varied as Japan, New Zealand, Singapore, and Pakistan all have higher degrees of income mobility than we do. A nation that prides itself on its lack of class rigidity has, in short, become significantly more economically rigid than many other developed countries. How did our perception of ourselves end up so far out of sync with reality?”
—Timothy Noah, “The Mobility Myth: Why everyone overestimates American equality of opportunity.”
The shape of American inequality. From Andrew Hacker.
According to a report published by Reuters on July 13, 2009, 77 million of the 80 million Egyptians live on less than $1 a day. Around 30% of the workforce is unemployed, 7% of children miss schools because of poverty. There are over 100,000 homeless youth. Egypt’s official foreign debt is around 12 billion dollars, yet several of Mubarak’s corrupt ruling elites have stolen almost half this amount from Egyptian banks. These facts, along with the record of abuse by police forces defy Washington’s statement that it is “not too late” for the Mubarak regime to reform itself and become a democratic government. This statement is comparable to the Carter administration’s support of the Shah of Iran in 1978 and 1979 while street protests that eventually included close to 10% of the Iranian population rocked the nation.
Great article. The following excerpt from the same article seems appropriate for this blog…
“Ignoring governments for the moment, what do these protests mean for people around the world? As virtually any earthling knows, the past decade has seen an increase in economic disparity and political repression in almost every nation. From New York to Cairo; from Beijing to Buenos Aires, the neoliberal world order (or monopoly capitalism’s latest phase) is feeling the effects of its greedy attempts to privatize the very basics of human survival. The legal and illegal corruption these attempts, and the poverty they have spawned, have been felt the deepest in nations like Tunisia and Egypt.”
So who remembers that movie Rat Race? No, the picture is not quite so simple but sometimes it seems like those who gamble billions for profit on a daily basis consider it more of a game than anything else.
Between 2001 and 2006 the top one percent took over 53 percent of US income gains. There was an economic expansion (particularly from 1979 to 2006) but the goodies went to the top one percent. The middle benefited a bit (slightly less than one percent a year) but only if one discounts the fact that they were working more (2 income families) and more hours. Without that additional work, the incomes of the middle would have barely budged. The income of those in the bottom would have fallen.
If the economy had grown at the same rate that it actually did and if inequality had stayed at its 1979 levels, the average income of households in the middle would be more than 12,000 dollars a month higher than it is now. Differently put, the rich took our money.
US economic growth wasn’t exceptional. Most of the European economies grew at the same rate. The primary difference: our inequality soared. Another difference: we were working more hours. Put that way, their economies were actually stronger (GDP per hour worked rose faster). And, we should keep in mind that they have more secure retirement and health benefits.
The top .1% collectively rake in more than a trillion dollars a year. Also, most of the executives in this tier get amazing retirement packages—even when most workers have no defined benefits (so we hear all sorts of crap about the cost of pension funds for workers in the auto industry, for example, and nothing about the massive resource suck of executive perks, particularly executive perks for retirees).
A substantial majority of the top .1% are executives and managers (corporate and finance bad guys, the same one’s rolling in the dough right now). In the US gains at the top are driven by outrageous executive compensation and low taxes: “markets have been politically reconstructed to aid the privileged” (45). In 2007, average CEO pay for the top 350 companies was 12 million dollars a year.
The shift toward the super rich is a trend that begins in 1980 and continues to steadily increase (hmm…1980. What—or who—could have started this??). Tax rates on the rich have fallen dramatically. The rich are richer because they are taxed less heavily than they used to be (and our infrastructures are crumbling, schools are failing, people are dying because the rich are taxed less heavily than they used to be). Hacker and Pierson write: “if the effects of taxation on income at the top had been frozen in place in 1970, a very big chunk of the growing distance between the superrich and everyone else would disappear” (49).
And get this: this diminution of taxes for the rich happened even as support was growing for taxing them more. In 1939, 35% of Americans supported making the rich pay more taxes; in 1998 45% did; in 2007 56% did.
Taxes aren’t the only factor. Another is the decline in unions, again a decline that ocurred even as more and more private sectors workers said they wanted a union. This decline also has political causes, most significantly the failure of a major labor law to pass in 1978 not to mention Reagan’s stacking of the National Labor Relations Board with pro management appointees.
This blog is turning into a conversation with the Naum brain trust but that’s OK. What do you all think about the proposition of starting each child born with a trust fund? Others have suggested this idea before but this would seem to be a good place to start investing for the future. Where does the money come from if we are in a deficit already? Again, original thought source is unknown but someone brought up the point that one can not opt out of SSN payments after 65. It becomes taxible income which for some is probably just a nuisance. How about an option to revert those funds into a “life” fund instead of the “death” fund. The “life” fund could then be opted out of as well by families who just don’t need it.
- In the last 30 years, on average, men are working an extra 100 hours per year and women are working an extra 200 hours.
- The typical American now works two weeks more each year than 30 years ago. Compared with any other advanced nation we are veritable workaholics, putting in 350 more hours a…
Thank you for summarizing so thoroughly the race to the bottom. Where the hell is all the wealth going to?
