Plutocracy in the USA: four views

1) From State of Working America an interactive graph of changes in average income and the top percentiles of US income.

From  1939 to 1973, during the 24 years from the start of WW2 to the first oil crisis the US’s average income grew by $30,500.  72% of this economic growth in incomes went to the poorest 90%, and 28 % went to the richest 10%.

Over the following 24 years, between 1974 and 2008, the US’s average income grew by $11,000 – average income of the poorest 90% declined, and all the growth went to the richest 10%, mostly to the richest 1%.

The data on the website comes from economist Emmanuel Saez’s work.

2) Economist Daron Acemoglu of MIT is interviewed by EconTalk about the role income inequality may have played in creating the financial crisis.

… Acemoglu suggests a simpler story where the financial sector through its political influence distorted the rules of the game, benefiting executives in the industry, which in turn led to outsized rewards and ultimate instability in the financial industry.

3) From the Washington Post Federal investigators expose vast web of insider trading.

“Given the scope of the allegations to date, we are not talking simply about the occasional corrupt individual; we’re talking about something verging on a corrupt business model,” Preet Bharara, the U.S. attorney for the Southern District of New York, said in a statement.

The heightened focus on insider trading by the Justice Department and the Securities and Exchange Commission comes as the financial crisis has shaken confidence in the honesty of the financial markets.

Far from being a victimless crime, insider trading takes advantage of honest investors. In a series of cases, financiers are accused of gaining – or avoiding the loss of – more than $100 million trading such familiar stocks as Google, IBM, Hilton and Intel.

“What’s at stake is the credibility of our markets,” said former Sen. Ted Kaufman (D-Del.), chairman of a panel Congress created to review the Treasury Department’s $700 billion bailout of financial companies. Insider trading, he said, “sends a clear message to people who want to invest in the United States that . . . I’m not going to get a fair shake in the market. And that’s very dangerous.”

4) Economist Robert Schiller is an expert on speculative bubbles. He was recently interviewed by the Browser and recommends five books about human behaviour, inequality and the financial crisis. Among other books he recommends Winner-Take-All Politics (mentioned earlier on Resilience Science). He says:

This is a new book – it just came out. It’s about rising inequality and it traces back to fundamental causes.

… In the US, we’ve seen a rapid concentration of wealth at the extreme high end. The top tenth of a per cent of the top hundredth of a per cent of the population is getting wealthy very fast. They point out that this is not true in Europe, and yet the economies are very similar and growing at similar rates. If the technology is the same, why would there be a difference at the extreme high end? And they argue that the answer is really political. There have been political changes in the US that allow the extreme high end to garner more wealth. Ultimately, it represents a failure of our society to take account of the fact that the extreme high end can lobby and can organise for its own interests, and we’ve let it happen.

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