Sunday, February 23, 2014

"Downton Abbey" Economy in the USA

  • Comments from the Economic Analysis and Research Network’s report “The Increasingly Unequal States of America” (February 19, 2014) included “between 1979 and 2007, the top 1% took home well over half (53.9%) of the total increase in U.S. income.”  Also, as “the average income of the bottom 99% of U.S. taxpayers grew by 18.9%...the average income of the top 1% grew … by 200.5%.” During the recovery from the great recession, “between 2009 and 2012, the top 1% captured 95% of total income growth… CEOs and financial-sector executives at the commanding heights of the private economy have raked in a rising share of the nation’s expanding economic pie.” 
  • By comparison, “between 1928 and 1979, the share of income held by the top 1% declined in every state except Alaska. This earlier era was characterized by a rising minimum wagelow levels of unemployment after the 1930s, widespread collective bargaining in private industries (manufacturing, transportation [trucking, airlines, and railroads], telecommunications, and construction), and a cultural and political environment in which it was unthinkable for executives to receive outsized bonuses while laying off workers.” 
  • Separately, comments by former U.S. Treasury Secretary Larry Summers in a Washington Post (February 16, 2014) included “The United States may be on course to becoming a “Downton Abbey” economy. There are valid causes for concern about inequality: sharp increases in the share of income going to the top 1% of earners, a rising share of income going to profits, stagnant real wages and a rising gap between productivity growth and growth in median family incomes. A generation ago, it could have been asserted that the economy’s overall growth rate was the dominant determinant of growth in middle-class incomes and progress in reducing poverty. This is no longer a plausible claim…issues associated with an increasingly unequal distribution of economic rewards are likely to be with us long after cyclical conditions have normalized and budget deficits have been addressed.”

MY TAKE
These comments reinforce widely held views about today’s economic reality. Questions to consider include: 
  • what actions should be taken to address these challenges, 
  • is the current stage of capitalism harming democracy, and 
  • are the dynamics of global commerce limiting income growth for most citizens? 

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