When Horatio Alger fables turn toxic
June 26th 2011
America’s income disparity is at a record high. Not only is it the worst it has been in American history, it’s the worst it has been in Western history, going back to the French Revolution. The prerevolutionary Russia of the Czars had not seen a constriction of wealth this bad. Nor had the English of Charles Dickens’ time. The aristocracy that the Founding Fathers inveighed against and warned must never be allowed in democratic America did not have as disproportionate share of the wealth as America has today.
It has made a travesty of the American dream, bringing poverty to tens of millions in “the world’s richest country.” At a time when corporate profits are at all-time highs and banks steal billions with seeming impunity, one in six Americans is on food stamps.
But the American Dream exists, even if it is more of an American Delirium now. People still believe they will get a piece of the pie, believing staunchly in class mobility, even though for a decade or more the US has fallen behind Western Europe, significantly so in most cases (http://fwd4.me/04vf). Further, people think Americans as a whole are getting the pie: Americans believe the top 20% of earners control 58% of the wealth, with the rest spread among the other 80%. The reality is that the top 20% control 84% of the wealth (http://fwd4.me/04vg). The same poll, conducted in 2005, asked Americans what the ideal wealth distribution would be, and the results should have the plutocrats worrying about a communist revolution: depending on their own wealth, Americans believed the top 20% should only have between 30% and 35% of the wealth.
The right take full advantage of this cognitive dissonance, saying in effect that any effort to take any wealth from the wealthy and redistribute it to the poor is socialism, and will destroy the country. Incongruously, they warn that such efforts would assure that the poor would never ever become wealthy, although it’s never been make quite clear how that is established, other than the subtext that the rich would punish the poor for daring to suggest that they share a little.
Of course, those of us on the left sometimes overstate the issue, which is really gilding the lily. It’s extremely bad, both from an economic and a moral standpoint, for 1% of the population to control 43% of the wealth. But the other day, I saw a lefty claim that the 1% controlled 90% of the wealth. Right wingers greeted this with loud cries of joyous derision. One pointed out that the top 10% – over thirty million people – only controlled 71% of the wealth. He was really quite proud of how egalitarian that made America. Yes, every Sunday Scrooge McDuck hops in his limo and cruises around Duckville, tossing bright shiny new dimes to the delighted children. It would bring a fond tear to Horatio Alger’s eye, and a disapproving glower from Ayn Rand.
This is the right’s idea of income equality: the top 10% only have 7/10ths of the pie. They’re quite proud of that.
But the exchange got me to thinking. If the income equality was that deformed and skewed to the rich, what effect did it have on the lower 90% of Americans, the 270 million who don’t count?
Back about twenty years ago, there was a book, America: What Went Wrong by Bartlett and Steele, which warned, presciently, that America was on the edge of a complete breakdown of egalitarianism and an absolute stratification of society. The authors warned that the top 1% controlled over 25% of the national wealth (the historic average is about 17%) and the economy collapsed in 1929 after that number reached 28%. They noted with alarm that the bottom two quintiles controlled less than 15% of the national wealth.
That was twenty years ago. Things had clearly gotten much worse. But how much worse?
I went looking, a process that is much easier today than it was twenty years ago, thanks to the innertubes thingy on my computer.
I quickly encountered a statistic that rocked me right back on my heels. I had to reread the chart, and then follow the links, to make sure I was reading it correctly. It was far more horrifying than the statistic that 1% of the population control 43% of the nation’s wealth.
To give you some idea of the impact this stat had, I’ll relate the response I got when I posted it on the web. At first, they tried to lump me in with the luckless lefty who had claimed that the top 1% controlled 90% of the nation’s wealth. I noted that the correct number was 43%, and in any event, I was citing something else entirely. Then one tried to bluster that I hadn’t cited it. I cheerfully reposted the URL, and when he tried again to claim I hadn’t sourced it, offered to keep reposting the URL until he admitted that I had cited. Then he claimed that the cite didn’t say what I said it said. I invited all readers to go to the cite and determine any other possible interpretation of the chart there might be, and I would be happy to entertain different explanations. None were forthcoming.
At which point we went full circle. What I “didn’t understand” according to one right winger, was that 20% of the population only controlled 82% of the nation’s wealth. Apparently this is even more egalitarian than saying that 10% control 71% of the economy. Not only is Scrooge McDuck throwing dimes to the kids, but Richie Rich is out there buying them ice creams once a year. Makes the heart just go pitty-pat, doesn’t it?
Then they said the cite was “debunked” which simply meant they couldn’t respond to it.
Just one more load of narrative lump, and I’ll get to the point. Anyone who did statistical analysis in high school can skip the next paragraphs.
Median isn’t the same as average. With average, you add up the number, divide by the number of units, and you have your average. With median, you arrange the units by highest to lowest, and pick the one exactly half way along the line. As many units have a lower value as have a higher value.
If I make $30,000, my neighbor made $45,000, and Bill Gates made a billion, the average of our incomes would be $333,358,333 and pocket change. The median, however, would be $45,000. As many in my example make less (me) as make more (Gates). Nationally, the average is over $11,000 (nearly 25%) above the median, showing the immense distortion of the super wealthy on our economy.
So the statistic that rocked me and those right wingers so hard is based on the median income, which is around $33,000. What percentage of the wealth do those making above median income have, and more to the point, what percentage do those making less than the median have?
Half of Americans control 97.5% of the national wealth. The other half control just 2.5% of the national wealth.
An 80-20 divide would have been pretty bad. Even 70-30 would be barely tolerable. At that level, it would still be a nation of haves and have-nots, but poverty would be erased, and the wealthy, if not obscenely rich, would be pretty damned comfortable.
97.5 to 2.5. That’s not a democratic and egalitarian society. That’s a banana republic out of the pages of Al Capp. The leader and El Supremo live in 500 room air-conditioned mansions, their army and tax collectors in bungalows, and the rest of the population in grass huts.
Remember how we used to hear that because of pension funds and mutual funds and 401Ks, the average American had a stake in the stockmarket? Turns out that’s not quite true. The bottom 50% of Americans own only one half of one percent of all stocks and bonds.
And race is a major factor, too. The average white person has FIFTEEN TIMES as much wealth as the average black or Hispanic person.
Half the population is very nearly at the point where it has nothing left to lose, and the GOP has decided that now is the time to cut jobs, cut pay, eliminate unions, cut food stamps, and restore the health care system to the corrupt and inefficient mess it was a year ago. They are counting on the support of the 120 million people who are above the median but not immensely wealthy to prop them up for as long as they need them. Then they become the next chuck of the population to be cut out.
You end up with an imploding economy because you have less and less people who can contribute to the economy in any way. You also create a huge subclass that owes your society nothing, and at that point, the security of the wealthy and leisurely class becomes very problematical.
Bartlett and Steele warned twenty years ago that this would happen, and saw no future at all for America if it wasn’t stopped. There’s only one way things can go once the point of no return is reached, and that is economic implosion and revolt. And we are coming up on a point of no return very rapidly.
When you have taken everything away from someone, don’t be surprised if they don’t feel they owe you any favors.
That 97.5 to 2.5 statistic shows just how close to full systemic failure the American economy—and America itself—really is.