The Rich Rule
April 21, 2015
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The dominance of the 1% is now widely accepted. What is often missed is the fact that their dominance was built on a major transformation of the U.S. economy beginning in the early 1980s and that U.S. policy, which helped to usher in that transformation, has largely been committed to reinforcing it. An NPR Planet Money post includes two charts that vividly highlight this transformation.
The chart below shows trends in the average inflation-adjusted pre-tax income for both the bottom 90% and the top 1% of the U.S. population. From the early 1940s to the early 1970s, the bottom 90%—the great majority of the population—enjoyed a steady growth in their average real income while the top 1% saw little growth (to their already substantial total).
However, beginning in the early 1980s, thanks to the intensification of globalization, privatization, deregulation, and attacks on unions and social programs, things dramatically changed. Now it was the top 1% that saw all the income gains. In fact, as the chart makes clear, the real average income of the bottom 90% has actually been in decline.
The following chart offers an even more dramatic way to see this change in relative “fortunes.” Each data point represents the average real pre-tax income of the bottom 90% and the top 1% for the given year. The vertical greenish line illustrates the fact that between the early 1930s and 1970s only the bottom 90% saw income gains. The horizontal red line illustrates how beginning in the early 1980s all the income growth went to the top 1%.
One take away: no change in policy, no change in income distribution.