How Income Inequality Injures People and the Economy
27 June 2017 | Pago Pago, American Samoa
The top 1 percent receives 22.5% of all income, while the share of the bottom 90 percent is now below 50% for the first time ever. The top 10 percent receive just over 50% of all national income.
It was not always so. This is a radical change from the post war era. From about 1944 until the early 1970’s, the share of the top 1 percent was about 11.3% and the share of income of the bottom 90 percent was about 67.5%, levels that posed no particularly serious problem and provided a sufficient investor class, The top 10 percent received 32.5% of all income before the early 1970’s
This causes of this increased skew are clear, The rise in income inequality from the early 1970’s coincides with the collapse of unions as a countervailing power to corporate monopsony. At the same time, facing inadequate aggregate demand, corporate America elected to abandon marginal productivity pricing of labor in favor of progressive appropriation all of labor’s future productivity gains for itself in the forms of ever higher profits and increasing management compensation. Within the same time frame, corporate American off shored American manufacturing jobs in great number and without restraint.
Corporate America also very heavily lobbied and bought off congress with campaign contributions to get tax and other laws and regulations changed in order to enhance their bottom lines at the expense of everyone else. Corporate welfare ascended, subsidies flowed and favors poured forth from congress. Finally, the superior intelligence and education of the top 10 percent made all this happen and lined their pockets.
That is how we got to the skew where the top 1 percent receive 22.5% of all income, while the share of the bottom 90 percent is now below 50% for the first time ever, and the top 10 percent receive just over 50% of all national income. It was not by happenstance or mistake.
The problem of excessive income inequality is it hurts people below the top thirty percent or so in income by damaging their standards of living and it injures the operation of the economy. Many now have less income than they need and would spend, and a small minority have too much income and cannot spend it all, hoarding much of it in cash and very inflated secondary financial markets. The result is the circular flow of expenditure and receipts for income is atrophied, especially by the amounts hoarded, which leads all around to further reduced aggregate demand. The economy is nailed to the floor and exists now in a new "lower low."
A more equal distribution of income would increase the expenditures of those who had less before, reduce the hoarding of income by the rich in like amount and the net effect would be to augment aggregate demand, improve the economy and benefit the welfare of the overall population.
These factors and effects are well known and established but not a great deal is written about them, and little research is done, because to proceed so with any effort would result in the loss of personal income and promotions to faculty and general research funds for their universities. The funding oligarchy disapproves and wants a lid kept on these matters, although more is leaking out all the time