Monday, December 28, 2015

Waking up from the American Dream

The average family income in the United States overall rose 4 percent from 2010 to 2013 after falling 7 percent during the recession.

When adjusted for inflation, the average real income for the top 20 percent of Americans rose 10 percent from 2010 to 2013. Real income for the 40 percent below that, the ‘middle class’ and ‘upper middle class’, barely budged, meaning they didn’t recover the losses they’d experienced during the recession. The poorest people, the bottom 20 percent, not only didn’t make up their losses from the recession, they continued to lose ground.

The Pew Research Center issued a report titled “The American Middle Class is Losing Ground: No Longer the Majority and Falling Behind Financially.” It found that 49 percent of total income in the U.S. in 2014 went to households in the upper-income tier, up significantly from 29 percent in 1970. Forty-three percent of income in the U.S. went to middle-income households, down significantly from 62 percent in 1970.

One significant factor underlying the widening gap between the rich and others is a simple economic fact: The more resources you have, the more wealth you’re able to generate for yourself. In common parliance, money makes money and the rich get richer.

Income may have taken a dip during hard economic times, as it did for even wealthy Americans during the Great Recession, but when things start to improve, companies begin to gear up again, stocks and other investments start to rise, and real estate prices recover. The Americans who own such assets benefit from this, recovering faster than those who don’t. People in the lowest income levels who are living paycheck to paycheck — if they have a full-time job — find it difficult to save, let alone invest. For the ‘middle class’, a home has often been their biggest asset, which is why the middle class was hit particularly hard by the housing crash.

The richest 400 Americans have more wealth than the bottom 50 percent of Americans, and the wealthiest 1 percent own 42 percent of private assets. Since 2000, the median weekly earnings of full-time wage and salary earners dropped until they are lower than they were 40 years ago. The ranks of the working poor have exploded. Ninety percent of all Americans are getting poorer day by day, while rich families are becoming an in-grained aristocracy.

The American Dream was an opiate to soothe the masses while the rich rigged the system. In the case of the United States, Canada, France, and Germany, for example, much of the recent growth in personal wealth (more than 20%) is attributable to capital equity growth alone. There was no real value created here, just paper money for the most part. But paper money is power all the same.

A century ago, at the time of the First World War, the richest 20% of the world’s population earned eleven times more than the poorest 20%. By the end of the twentieth century they earned seventy-four times as much. When it comes to wealth, rather than income, the picture is more extreme. Globally, the richest 1% now own nearly half of all the world’s wealth. The poorest 50% of the world, by contrast—fully 3 billion people—own less than 1% of its wealth.

Total global wealth was estimated at $263 trillion in mid-2014, up from $117 trillion in 2000. That was the same year that the world agreed to bind itself to achieving the Millennium Development Goals by 2015 (with the headline ambition of halving the proportion of people living on less than $1.25 a day). Those goals end this year, in 2015, in many cases not having been met. Meanwhile, global wealth keeps on growing: by 8.3% from mid-2013 to mid-2014 alone.