Capitalism is a system driven by the pursuit of profit. Corporations, for example, take action not to ensure the satisfaction of their workers or community needs, but to maximize the return to those who own the company’s assets–the stockholders.
Of course, in theory, the actions taken to maximize returns to wealth (which includes business and land property, stocks, bonds, and the like) will indirectly lead to outcomes that benefit all (or the great majority) of us–but that is a theory and the conclusion depends on a great many assumptions.
The fact is that wealth is highly concentrated in this country, which means that when our corporations and government take actions to maximize returns to wealth holders, they are actually responding to the direct interests of a very small minority.
How concentrated is wealth in this country? Professor William Domhoff draws on a number of studies to report the following:
As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%.
Here is a look at the 2007 distribution of wealth.
A look at the distribution of wealth by asset is especially revealing. In 2007, as the chart below shows, the top 1% hold 62% of all business equity, 61% of all financial securities, and 38% of all stocks and mutual funds. This concentration of ownership means that the top 1% have enormous power not just to enjoy the rewards of our economic activity, but to directly shape it according to their own interests.
The trend in the distribution of “capital income,” which is income from capital gains, dividends, interest, and rents, probably offers the clearest picture of the class trajectory of our system. As the chart below reveals, the top 1% has been steadily commanding a greater and greater share of capital income.
Next time you hear some commentator talk about how we are all in it together and that we should cheer when the stock market or profits go up–remember these charts and think about how few directly benefit. And then think about what policies helped to boost those returns to capital–like wage reductions, capital flight, corporate bailouts. It is a great system for some of us.