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Yet another curve that inflects in the mid-70s: Top 0.1% share of wealth

(Via the Guardian.)

What I would really like to see is a chart that tracks the bottom 90%, the top 10%, and the top 0.1.%. (It takes a minute to see, but the top 10% is left out -- the comprador class, you might say -- and that's why the curves aren't inverse. There's still momentum for the bottom 90% until the mid-80s.)

Incidentally, we can't blame this on Reagan; this change took place in the Carter administration, and could well have been prepared for before that.

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Barmitt O'Bamney's picture
Submitted by Barmitt O'Bamney on

You may be overinterpreting a small squiggle on a chart. One swallow doesn't make a summer, nor can you foresee in a single tiny squiggle the sweeping arc of history. If one could extrapolate from a recent wiggle on a graph the grand design of the whole, then Elliott Wave stock chartists would all be billionaires instead of penniless cranks.

But since we're reading History into the wiggles on a graph, let's have a look at what was happening before the little swoon you pointed out. The share of the most wealthy had held remarkably steady for decades, then declined in the 70s. The inflationary impact of the Vietnam War and the Arab oil embargo slagged both stocks and bonds. Inflation is very bad for people coasting on passive income from their surplus wealth. The return on preexisting bond holdings gets all et up. This, plus one or two other ingredients which economists wrangle over, produced the decade of "stagflation". So there goes the wealthiest Americans' stable grip on their accumulated winnings. The lower group continue to make gains during the Carter years, according to the chart, as wages continue to rise. When the Richies adjust their capital accumulation strategies to the setback they've experienced, their share only gets back to about the level it trundled along at for the three previous decades. But this return the mean takes longer to achieve than Carter's term by several years. It rises some as Volker drives the country into mass unemployment w double digit interest rates (in order to kill off the Inflation Monster), and it continues to rise some through the Reagan Revolution Recession of the early 80s. But again, it's just getting back to its traditional and accustomed level.

I would say the more interesting inflection point comes about 1987, when the Greenspan put was invented, assuring the rich that they could not lose, no matter how recklessly they gambled. Note that the share of the poorer majority also begins to decline just prior to this point when the share of the Richies begins its relentless upward blast. Reagan's exploding budget deficits combined with a complicit Democratic majority in Congress, resulting in higher Social Security withholding taxes on the working class in 1982 and 1985 (Thanks a lot, Tip O'Neill - Giant Shitbag!) These tax increases on the 99% in concert with the harsh repression of wages pursued by the Volker Fed evidently had begun to chip away at their ability to retain wealth assets by the time the Federal Reserve decided to make a caste system out of economy (unconditionally backstopping the speculation of the Richies) using all the future earnings power of the American people.

That's how I read the squiggly lines anyway. If Carter had been reelected or just somebody besides Reagan had won, there's no telling -really- where the wiggle upward from about the mid 70s would end up. Yes, Paul Volker was his appointee to the Fed, and Carter owns the good and bad arising from that decision. But there's nothing strictly determinative about that small and incomplete reversion to the mean that must necessarily lead to the situation we find ourselves in today.

Submitted by lambert on

I've helpfully highlighted it ;-)

My whole adult life in the workforce is no squiggle ;-)

I just don't think the inflection point was Reagan. I think there were larger social forces at play that Reagan took advantage of and accelerated, for sure. (That also implies that I don't think electoral politics were a driver, if complex systems can be said to have drivers.)

Carter: (a) Initiated "deregulation" with CAB, which was not so insane, but the deregulation movement was a neo-liberal construct we're still living with today.

Carter: (b) Stressed a balanced budget, with ill effects that letsgetitdone continually points out, and another key rationale for the neo-liberal assault on public purpose.

I think if we stop looking at history with who got elected as the key ticks on the timeline, as it were , our vision becomes more clear.

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jjmtacoma's picture
Submitted by jjmtacoma on

Could the change in "fortunes" be related to the official change from the gold standard? It appears to me that transitioning to a full fiat currency created advantages for anyone with the influence to create favorable policies but the focus of the favorable policies was not universally benefiting.

Barmitt O'Bamney's picture
Submitted by Barmitt O'Bamney on

The squiggle I refer to is just the Carter years, as opposed to the "Grand Arc of History", meaning the rest of the graph to the right of your proposed inflection point.

I don't suppose this is worth fighting over, but I think they called it the Reagan Revolution, and not the Carter Revolution, for a good reason. You can place your inflection point wherever you want. I just don't see an inflection point in the Carter years - certainly nothing that carries the post Reagan disaster implicitly within it. I see a wobble of the Richies' traditional 10% share of wealth. I see an equilibrium that once upset tries to adapt and restore itself, like equilibria generally will, and one which hasn't even managed to regain the status quo ante until well after Carter's ouster by Iranian hostage takers. Those years are but a squiggle compared to the Grand Arc that sweeps along later. Nothing happened during them that necessitated what we see reflected in the graph in later years. So my inflection point stay will with Reagan's tax cuts on the incomes of the rich, and tax increases on the payrolls of the workers. The Grand Arc of Despoliation starts there. Deliberate income distribution changes will change wealth distribution eventually like apples eventually fall to earth from trees, especially if you shake the trees with the IRS. It's not a zeitgeist thing, but addition and subtraction acting directly on the bank accts of every household in the country. And that was just one salvo in the Reagan Revolution's class warfare.

Submitted by lambert on

... but I think the trends he consolidated and amplified began before he took office, in the mid-70s. For an earlier discussion of Carter vs. Reagan see here.

Here is a fun zeitgeist example.

Real wages topped out in 1972 and began to decline in 1979. To me the key question is: "When did the serious fucking of the working class begin?" That's when. Another way of saying this is that if labor had not already been tottering, Reagan would not have been able to push them over,