That the wealthy have been steadily increasing their share of the wealth has been obvious for some time. Reader Tadas sent me a link to an article that has quantified the amount siphoned off by them during the past four decades and it is a staggering $50 trillion since the year 1975.
This is not some back-of-the-napkin approximation. According to a groundbreaking new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. That is an amount equal to nearly 12 percent of GDP—enough to more than double median income—enough to pay every single working American in the bottom nine deciles an additional $1,144 a month. Every month. Every single year. [My emphasis-MS]
Price and Edwards calculate that the cumulative tab for our four-decade-long experiment in radical inequality had grown to over $47 trillion from 1975 through 2018. At a recent pace of about $2.5 trillion a year, that number we estimate crossed the $50 trillion mark by early 2020. That’s $50 trillion that would have gone into the paychecks of working Americans had inequality held constant—$50 trillion that would have built a far larger and more prosperous economy—$50 trillion that would have enabled the vast majority of Americans to enter this pandemic far more healthy, resilient, and financially secure.
The benefits of growth for the last 45 years have gone almost entirely to the top 1%.
What the pandemic has exposed is how the US system, built on structural inequality and racism, is highly brittle and thus unable to meet the challenges posed by the pandemic. The.most glaring example has been the health care system that is based on a private fee-for-service model whose structural problems have been exposed. Because of the pandemic, people have been avoiding contact with hospitals and doctors offices as much as possible and cancelling all elective procedures. As a result, hospitals are no longer performing expensive and lucrative services like MRIs and income for hospitals and doctors have plummeted, with many hospitals struggling to stave off bankruptcy. In any sane society that has a publicly-funded health system based not on fee-for-service but where the rewards lie in maintaining people’s health, the pandemic would not have had such a major negative impact.
Many people had long been living on the edge. As long as there were no major shocks and their situation got worse slowly, they struggled to somehow get by. But now they are exposed and helpless. Take as just one example the child pre-school and day care business. It was operating on very thin margins even though the workers were poorly paid. Now they are faced with what to do if and when they re-open. Their income is cut because cannot have as many children because of the spacing restrictions while their expenses have gone up with the new health requirements with masks and sanitizing and so forth. We can expect to see many close up shop. And then what happens to parents who need this care when they have to go back to work?
Sometimes a massive shock to the system can make a nation collectively look in the mirror and realize that things are horribly wrong and make radical changes for the better. With the Trump administration that will never happen. They will just make things worse. Will a Biden-Harris administration be able to rise to the challenge? I am not too hopeful. They may not actively make things worse like Trump but it will require massive pressure from the bottom up for them to turn things around.
But hey, the stock market is surging, so everything must be fine, right?