What Recovery? You Probably Became Poorer In the Last 10 Years
You sense it when you look at your retirement account. You feel it when the bills come in. According to new research supported by the Russell Sage Foundation, your instinct is right: you are very likely getting poorer.
For the study, researchers gathered information on families in the middle of the wealth distribution continuum. What they found is that in 2003, the inflation-adjusted net worth for the typical household was $87,992. Fast-forward 10 years: that figure is down to a mere $56,335.
Ordinary Americans got 36 percent poorer in just a decade.
The Great Recession and the bursting of the housing bubble did their damage, but a long list of additional factors have helped funnel money out of the hands of regular Americans and into the pockets of the rich, including deregulation, high unemployment and job insecurity, the shareholder value trend in which corporations focus on manipulating stock prices while throwing workers under the bus, the reduced influence of unions, the shredding of the social safety net, privatization, and tax structures which favor the rich.
And once the inequality train leaves the station, it only gathers speed until something stops it. As Thomas Piketty has recently emphasized, the rich get richer faster than you and me because of the rate of return on their wealth.
Underlying all of this is the spread of faulty economic thinking throughout academia, political circles and the mainstream press. Neoclassical economics, or so-called free-market ideology, essentially serves as the official justification for inequality, promoting mythologies about the rich as the great job creators (when they are actually job destroyers), the presumed benefits of inequality such as innovation (check the Scandinavian countries to debunk that one, where innovation thrives but inequality does not), and a host of similar nonsense.
The upshot is that regular people have endured one of the worst periods in recent memory. It will not surprise you to learn that during the same decade of 2003-2013, the rich were partying down. In the 95th percentile of wealth distribution, people got 14 percent richer.
To put all this in perspective, let’s take a look at another 10-year period, from 1937 to 1947. This decade witnessed something called the “Great Compression,” when income inequality in America plunged. The tax structure was addressed so that the rich paid their share, unions became a powerful force and regulation helped stabilize the financial sector and corporate America. Workers won protections and America’s middle-class blossomed and Americans enjoyed a period of low inequality for the next three decades.
By the 1970s, what’s known as the "Great Divergence” kicked off, with the rich gradually gobbling up more and more of the country’s wealth.
The authors of the Russell Sage study do not have much hope that America’s wealth disparity will get better any time soon: "The American economy has experienced rising income and wealth inequality for several decades, and there is little evidence that these trends are likely to reverse in the near term."
As we can see from the Great Compression, it doesn’t have to be this way. Things won't get better on their own, however: Inequality needs an intervention.