Look at the figure above. It represents the amount of total wealth in the United States owned by the richest 10% of the population. The rather significant spikes at either end are of enormous importance. The facts of the American economy in 2017 are simple. The wealthiest 10% of the population owns 75% of the nation’s wealth.
The last time wealth disparity was so pronounced was right before the Great Depression in the 1930s. While the oligarchs and the privileged are accumulating untold amounts of wealth, everyone else is losing in this economy. For the vast majority of Americans, wages have either been frozen or have declined for four decades. Income earners at the bottom of the economy make less in terms of real disposable income than they did in 1980. Disposable income is income remaining after deduction of taxes and other mandatory charges, available to be spent or saved as one wishes. Those slightly above the bottom have seen their wages increase only 6% in 35 years. That’s a salary increase of 0.00172% a year.
So, the average American who didn’t inherit great wealth has been going to work 40 hours a week for 40 years and earning less in real wages. In order to survive, many people now have to work two jobs. Despite the massive expansion in financial assets realized by Wall Street and the inherited rich, most of the U.S. population is considerably poorer than they were in 1980. According to the U.S. Bureau of Labor Statistics’ Consumer Price Index what $1 bought a consumer in 1980 requires $2.91 to make the same purchase in 2016. In other words, the cost of living one’s daily life has increased by almost 300%.
And how can we explain this? It’s actually simple. It is a basic contradiction of capitalism. In the U.S. there is no longer any connection between wages and economic productivity. Real wages have declined for 90% of the population during a period of rapacious gains in productivity as the following figure from the ultra-conservative Heritage Foundation demonstrates.
According to the Economic Policy Institute:
From 1973 to 2016, net productivity rose 73.7 percent, while the hourly pay essentially stagnated—increasing only 12.5 percent over 43 years… This means although Americans are working more productively than ever, the fruits of their labors have primarily accrued to those at the top and to corporate profits, especially in recent years.
The net result is that everything we need to survive from milk, to housing, to medical care has become much more expensive. The cost of basic necessities goes up year after year and real wages are stagnant or declining.
It’s not that the economy has failed to produce wealth. It is that the economy concentrates that wealth in a few hands and none of it “trickles down” to those who do the actual work. The quality of life for 90% of the population not only has failed to improve, it’s gotten much worse. Workers have gotten poorer while venture capitalists, bankers, and real estate moguls have reached obscene levels of wealth. The economy has produced huge reservoirs of wealth reflected in Trumpian condos, mansions, and private jets for corporate executives, and offshore bank accounts safe from taxation and filled with the profits produced by the work of others. The rich live opulently, but those who produce that wealth have not seen their lives improve one iota.
There is no question that a technology-driven economy has given us cell phones, computers and iPads, alternative fuels, and gene-sequencing. But, the truth is that this economy has produced products that 90% of the population has to incur crippling debt to partake of. For example, gene therapy is available for those who wish to improve their sight by replacing a mutated gene in the retinal cells. Analysts have estimated the therapy could cost $800,000 to $1 million to treat both eyes. Gilead’s new gene therapy for lymphoma is priced at $373,000 a patient. Novartis has developed a new drug called Kymriah to treat leukemia. The one-time treatment costs $475,000 and the costs of managing side effects from the drug raises the final tab to $1.5 million. The very rich among us, about 1% of the population, can benefit from research we all have paid for. The rest of us can die.
But while most of us can never dream of paying the price of good health, many of us covet cell phones, computer tablets, big screen televisions and the other amusements produced by this economy, almost all of which are secured through debt. But consider one item which, at least here in Kentucky, is a basic staple of life: a Ford F-150 pick-up truck, the best-selling truck in the United States for decades. In 1969, a new Ford F-150 was $2,500. Today the stripped-down base model is $30,000 and the cost of a truck which actually does what you need it to do is $45,000. That’s a full-year’s after-tax income for the average American.
It’s hard to get a good truck. But some people are doing very, very well. According to Forbes magazine, there are 540 billionaires in the United States, with a combined net worth of $2.399 trillion. That will buy one great truck and some gene therapy on the side. But in a country where there is no correlation between productivity and wages, it is impossible for 90% of the population to stay ahead of rising costs. So, we borrow. Today, we have about $13 trillion in total debt, almost all of it attributable to the purchase of food, housing, vehicles, education and health care. It is an economic system which has produced the greatest disparity in income and wealth in a century. It is a system that seems destined to land 90% of the population in poverty.
It is a system that is doomed by the many contradictions of capitalism. It is a system that is doomed to die. We all must hope that it dies before it kills us.
Professor, School of Justice Studies
Eastern Kentucky University