The late Thomas Naylor, former Professor Emeritus of Economics at Duke University, remarked in 2008, “Of all the western democracies, the United States stands near dead last in voter turnout, last in health care, last in education, highest in homicide rates, mortality, STDs among juveniles, youth pregnancy, abortion, and divorce…The nation has trillions in deficits it can never repay, is beset by staggering income disparities, has destroyed its manufacturing base and is the planet’s most egregious polluter and greediest consumer of fossil fuels. With some 40 million Americans living in poverty, tens of millions more in near poverty, and a permanent underclass trapped by a real unemployment rate of 17%.”
This may be one of the most sobering assessments made in the last decade. It runs counterintuitive to the virtuous ideas of American progress, leadership, and upward mobility we’ve been raised to believe – that each generation will be better off than the last, that if you work hard you’ll succeed, and that the American Dream isn’t just a lofty ideal, but achievable.
And then we grew up.
In the 21st century, we’ve discovered these tenets of our society no longer hold true. The problem with our shattered dreams isn’t just the painful loss, but that so many of us fail to recognize it.
Former Republican Congressman Mike Lofgren echoes this bitter analysis in The Party is Over: How Republicans went Crazy, Democrats became Useless, and the Middle Class got Shafted (As if the title didn’t say it all):
“America today looks more like a third world country than an advanced industrial state in international comparisons of social health such as longevity, infant mortality, income distribution, social mobility, labor protection, average number of vacation days, and many other metrics. Our tax policies have ensured that the rich got richer and the rest of us got stuck with the bill. Congressional obedience to corporatized medicine ensured that Americans pay an average of 50% more for their health care than citizens in Western Europe. Union busting, leveraged buyouts, and the offshoring of jobs guaranteed lower wages and fewer labor protections. According to the International Monetary Fund, Communist China is on track to have a gross domestic product greater than that of the United States by 2016…The downgrading of U.S. sovereign debt by Standard & Poor’s during the summer of 2011 was…the first credit downgrade of our nation since the ratings began in 1917…According to a CBS/New York Times poll, Congress’s favorability rating stands at 9%, the lowest since polling began. Even the prospect of ‘America going communist’ has higher public favorability, at 11%.”
So how did a once-great nation who led the world after the last great world war become a punching bag of dismal statistics?
Only by understanding this can we begin to climb out of this rut. But first we need a mutual understanding of America's class structure.
The Lower Class, Middle Class, and Upper Class vary by state, city, and standard of living, but for the most part, it looks like this:
The 99% consists of:
Lower Class: < $30,000 a year.
Middle Class: $30,000-$150,000.
Upper Class: > $150,000, unless you are in a large city.
The 1% consists of:
1%: > $500,000.
0.1%: > $1,000,000.
0.01%: > $8,000,000.
When we refer to the 1%, we are generally referring to the “1% of the 1%”, or the 0.01%. These exclusive individuals earn incomes above $8 million per year and comprise our economic elite.
Now let’s look at how slices of the wealth pie have changed over the last 40 years.
“In the 1960s and 1970s, the wealthiest 1% of Americans got 9–10% of our total income. By 2007 that share more than doubled to 23.5%, while the wealthiest 0.1% tripled its share. America hasn’t experienced this degree of concentrated wealth since the Gilded Age of the late nineteenth century, “ reports Economist and former Secretary of Labor Robert Reich in Beyond Outrage.
The 1% now lay claim to nearly 1/4 of the total economic pie. The last time their share was this high was on the eve of the 1929 stock market crash. “In 2007, according to the IRS, the richest 400 taxpayers had an average income of more than 10,000 times the average income of the bottom 90% of taxpayers,” writes The Nation editor Christopher Hayes in Twilight of the Elites: America after Meritocracy.
“Wealth has flowed so massively to the top that during the nation’s growth spurt from 2002-2007, America’s super-rich, the top 1% (3 million people), reaped 2/3 of the nation’s entire economic gains. The other 99% were left with only 1/3 of the gains to divide among 310 million people. In 2010, the first full year of the economic recovery, the top 1% captured 93% of the nation’s gains,” informs bestselling author and Pulitzer Prize-winning reporter Hedrick Smith in Who Stole the American Dream?
A closer look at the 1% reveals:
The richest 85 people on the planet have as much wealth
as the poorest 3.5 billion – or half the world's entire population – put together. (Alex Andreou, “Trickle Down Economics is the Greatest Broken Promise of our Lifetime”)
The richest 1% of Americans earn about $1.35 trillion a year – greater than the total national incomes of France, Italy, or Canada. (Robert Frank, Richistan)
“Today, the gravest challenge and the most corrosive fault line in our society is the gross inequality of income and wealth in America…Since the era of middle-class prosperity from the mid-1940s to the mid-1970s, the past three decades have produced the third wave of great private wealth in American history, a new Gilded Age comparable to the era of the robber barons in the 1890s, which led to the financial Panic of 1893 and the trust-busting presidency of Theodore Roosevelt; and to the era of great fortunes in the Roaring Twenties, which ended in the stock market crash of 1929 and the Great Depression,” writes Hedrick Smith.
Even President George W. Bush acknowledged this disparity when he said, “The fact is that income inequality is real – it’s been rising for more than 25 years.” And this from a man who rarely had his numbers, words, or facts straight.
"Inequality...clearly corresponds to pathological social problems that we cannot hope to address unless we attend to their underlying cause. There is a reason why infant mortality, life expectancy, criminality, the prison population, mental illness, unemployment, obesity, malnutrition, teenage pregnancy, illegal drug use, economic insecurity, personal indebtedness and anxiety are so much more marked in the U.S. and the U.K. than they are in continental Europe," writes historian Tony Judt in Ill Fares the Land. "The wider the spread between the wealthy few and the impoverished many, the worse the social problems: a statement which appears to be true for rich and poor countries alike. What matters is not how affluent a country is but how unequal it is. Thus Sweden, or Finland, two of the world's wealthiest countries by per capita income or GDP, have a very narrow gap separating their richest from their poorest citizens - and they consistently lead the world in indices of measurable wellbeing. Conversely, the United States, despite its huge aggregate wealth, always comes low on such measures... Inequality is corrosive. It rots societies from within. The impact of material differences takes a while to show up: but in due course competitions for status and goods increases; people feel a growing sense of superiority (or inferiority) based on their possessions; prejudice towards those on the lower ranks of the social ladder hardens; crime spikes and the pathologies of social disadvantage become ever more marked. The legacy of unregulated wealth creation is bitter indeed."
But perhaps the dimmest indicator of the Middle and Lower Classes’ encroaching demise can be found in a 2011 issue of Ad Age, which declared that we no longer count to advertisers if we do not earn at least $200,000 a year.
We are no longer a mass economy, the top trade journal informed. “The age of mass affluence in the U.S. is over.”
“The wake of the global economic recession has shown a spotlight on the yawning divide between the richest Americans and everyone else -- inflation-adjusted incomes of most American workers have remained more or less static since the 1970s, the income of the rich (and the very rich) has grown exponentially. The top 1% alone control nearly 40% of the wealth.
“And while the social and political effects of this inequality may be cause for concern, the accrual of wealth among the very few is of great consequence for marketers, since 10% of U.S. households ‘account for almost half of the consumer spending’ and represent about one-third of total GDP, according to the American Affluence Research Council.
Simply put, a small plutocracy of wealthy elites drives a larger and larger share of total consumer spending and has outsized purchasing influence -- particularly in categories such as technology, financial services, travel, automotive, apparel and personal care.”
Before this downturn, luxury marketers embraced the concept of "mass affluence," referring to a vibrant Middle Class with disposable income, essential for driving the U.S. economy.
Now, however, as writer Sam Pizzigati explains, Madison Avenue concludes that in a deeply unequal America, if you don’t make at least $200,000, you no longer matter.
In other words, the American Middle Class is on the way out.
We'll see how we got here in:
Part 2: Declining Wages. Or, Why the Poor get Poorer.