“We are in a very serious decline, punctuated by rising inequality which reacts back upon and worsens the decline.”
To mark Economic Update's 10th anniversary year, Professor Wolff is revisiting relevant moments from 10 years ago to explore how capitalism, its defenders, and its critics have all changed. For the month of July, Prof Wolff takes a look at income and wealth inequality.
How has US inequality changed? The Gini coefficient (a measure of income inequality that ranks a country from 0%, perfectly equal, to 100%, perfectly unequal) of the US was 38% in 1991. After 20 years, it grew two percentage points, to 40%. According to Prof Wolff, at this point “Some people felt that the fundamental notion of American capitalism, or as some called it ‘American exceptionalism,’ was that it produced and sustained a huge middle class... But 10 years ago people began to notice that [the middle class life was] available to a shrinking part of the population.”
This realization may have begun 10 years ago, but in the last decade it has become nearly impossible to ignore, as the US gini coefficient has jumped to 41.4% in the last 10 years. Not only is this worrying trend continuing, but it is happening at a faster and faster rate.
As Prof Wolff points out, this growing inequality has impacts which compound the problem. “Could [this inequality] in fact explain the rising level of debt that plagued Americans? And the answer was an obvious, ‘Yes.’ Could it have been behind the failure of people to cover their mortgages which led to that crack up of the American capitalist system late in 2008? And again the answer was a pretty obvious, ‘Yes.’"
The last year is a particularly strong example of this growing inequality. US billionaires saw their wealth increase 55% in the last year, the year that the Covid-19 pandemic and economic crash brough financial struggle and ruin to millions of Americans. While the majority of this country struggled, they collectively raked in an additional $1.62 trillion to their already astounding wealth.
Will this destructive pattern continue? How can we learn from this history?
10 years ago, Economic Update with Richard Wolff was the first program produced by Democracy at Work, and it has brought you analysis of questions like these every week for a decade. “We are a society that needs what we [at Democracy at Work] try here to produce: an honest, critical evaluation of a system that isn't working for most Americans anymore, and threatens to take us down with it.”
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