We've Got a Billionaire Bailout Society—And the 99% May Never Recover From It In Our Lifetimes
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The odds are that we in the bottom 99 percent may never see a recovery in our lifetimes. That's because our nation has evolved into something entirely new: a billionaire bailout society.
We are entering a disastrous new era in which all the economic gains go to the top 1 percent, according to data from economists Emmanuel Saez and Thomas Piketty. They report that, "Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery.... In sum, top 1% incomes are close to full recovery while bottom 99% incomes have hardly started to recover." (In 2012, $394,000 is the cutoff to make it into the top 1 percent.)
We see in vivid detail what the new American order looks like. The top 1 percent live in another economic universe of high finance that sucks the wealth from the rest of us. In their world, banks (owned by and for the top 1%) are able to grow larger and larger so there is no chance they will be allowed to fail, even after these same banks took down the economy. (In 1965 they had assets equal to 17% percent of the U.S. economy. Today it's more than 65% percent.)
Free from any meaningful controls, financial gambling (called proprietary trading in polite circles) is now the dominant activity within our largest banks. In fact, in these too-big-to-fail banks, more money goes to financial gambling than to loans for businesses and consumers. These are not banks—they are rigged casinos for the rich. The upside from these corrupt pursuits are kept by the top fraction of the 1 percent, while the 99 percent hold the bag when those phony bets crash the economy.
And who among us doesn't think that will happen again?
Regulation is hapless as billions of dollars slosh through the political troughs. Serious enforcement is virtually non-existent because the enforcers fear that the entire financial system will fail should these criminal banks be prosecuted. Every national policy from the bailouts to "quantitative easing" has further funneled money to the super-rich. Meanwhile, the rest of us are told to plod along until jobs miraculously appear and our incomes finally rise. Dream on.
In sum, our new economic era is characterized by the supremacy of financial capital which vacuums up the productive wealth of the nation, and then uses the nation's wealth as an insurance policy to pay for its inevitable losses.
Entering Uncharted Territory
The billionaire bailout society is quite different than previous gilded ages. This can be seen clearly in comparing the aftermath of the recent Great Recession to what took place during the Great Depression. We need to remember that after the crash of 1929, America went on a crusade to rescue the economy by controlling Wall Street, supporting unions, and fundamentally rebuilding our physical and educational infrastructure. As Harvard economist Claudia Golden put it, a Great Compression took place during which the gap between the rich and the rest of us came down—not by destroying wealth but by making sure working people got their fair share. In 1929, the top 1% grabbed 23 percent of the nation's income. By the late 1960s it was below 9 percent.
During the Great Compression we had our feet planted firmly on the neck of Wall Street. Financial gambling was held to a minimum. Incomes were no higher on Wall Street than in the productive economy. Finance and production more or less were in balance. But after deregulation set in the late 1970s, the income gap began to accelerate yet again, returning to the unconscionable levels of the late 1920s.