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The Wealth Gap

Since I downloaded it last week, I have been trying to think of any graphic from the past ten years that is more important than this:

(Click here to view readable image.)

I haven’t found one yet. (See End Note One)


There are four graphics in the article “Plutocracy Reborn” that appeared in the 30 June issue of The Nation. The first is the most important; the others fill in the details.  The title of the graphic says it all:


“Recreating the Gap that Gave Us the Great Depression – the Average Income of the Top 0.01 Percent of the US Households as a Multiple of Average Income of Bottom 90 percent of US Households.”


This data puts the growing Wealth Gap in stark perspective and provides a clear, up-to-date picture of what Robert Reich is talking about in “Supercapitalism.” (See Bacons Rebellion blog posts, “Why Supercapitalism Will Not be a Popular Book,” 6 March 2008, and “The Decline of the World’s Greatest Nation State.”)


The graphic shows there has been a steady widening of the Wealth Gap since 1980 when it became policy to encourage the well-to-do to invest by creating attractive tax advantages. The only dips were during the Oil / Auto / Real Estate Recessions. Tell us again, who exactly is “hurt” by recessions and who “benefits” the most from “growth and prosperity” under Supercapitalism?


This graphic documents what has happened for the top 0.01 percent of the economic food chain. It is clear that a similar curve applies for the top 0.1 percent, the top 1 percent and perhaps the top 5 percent. The top 5 percent are the “happy-as-clams” crowd at the top of the Ziggurat in PROPERTY DYNAMICS. We also know what has happened (and is now happening faster) to the Running As Hard As They Cans and almost all of those in the bottom 50 percent of the food chain – they have been losing ground since the mid ’70s.


While I was considering the importance of this information along came the 29 June WaPo with two related items:

“A New Political Geography: Role Reversals in Virginias (sic – the story compares two counties, one in Virginia and one in West Virginia) Reflect larger Shifts”
“All-Consuming Problem: Even in a Weak Economy, Some Shoppers’ Compulsive Habits Can Take Over Their Lives.”

The first story has implications for the upcoming elections in Virginia, the latter exposes a critical dysfunction with the economic structure that underlies contemporary civilization as we know it planet-wide.


In “All-Consuming Problem,” Nancy Trejos focuses on the estimated 5.8 percent of the population that buy stuff that “they do not need and that they cannot afford.”
Two observations are in order:


The “problem” is not just the 6 percent +/- of the population which does not need and cannot afford the consumption individually. The real problem is the majority of the population that has been buying stuff it does not need but can (at least until recently) afford on an individual and Household basis.


A large number of individuals may be able to afford the cost of all that stuff but society cannot afford the cumulative impact of Mass OverConsumption. This level of consumption is unsustainable. This reality is documented by current economic data – balance of trade, personal debt, public debt, value of the dollar, cost of energy and other indicators.
The second observation related to the “problem” of Mass OverConsumption is the information now available to citizens. The story about the 5.8 Percenters appeared in WaPo, a major outlet of MainStream Media that is supported by advertising. The story on over-consumption was in a Sunday paper and the majority of the pages printed that day tout things to buy. The ads shout:  “You need this …,” and “If you buy this you will be happy.”  We all want happiness but you cannot buy happiness at Wal*Mart, at Bloomingdale’s or on e-Bay. A McMansion or a BMW will not do it either. (See THE ESTATES MATRIX.)


Now back to that graphic on the Wealth Gap:
There is a serious systemic problem with the current unsustainable trajectory: Those in the top 0.01 percent of the population are now smarter than those in the Roaring ’20s who led us to the Great Depression. The current crop of masters of the universe can keep the gravy train rolling for themselves longer than could their predecessors, and the fall may be much harder. This is due to the rise of supportive Institutions leveraged by the Agency bailouts of unfounded “investments.”


One of my grandfathers was a high roller in the ’20s. He sold his valve and tappet business to General Motors and invested in chromium mines and other speculative ventures. Now there is a better option for some of that cash, and its sustains the ride.


The 0.01 Percenters of the ’80s, ’90s and ’00s have been giving some of their money to tax-exempt think tanks and other Institutions. These growth and prosperity cheerleaders churn out “research,” sound bites, talk show baloney and blog fodder that support causes that increase – directly or indirectly – the cash flow of 0.01 Percenters. These Institution actions support the agenda of Mass OverConsumption, Business As Usual and “Happiness-is-more-and-more-consumption.” (For the details on the growth of tax-exempt Institutions see THE ESTATES MATRIX.)


In his book, “Blessed Unrest”, Paul Hawken dubs the causes that many of these Institutions generate and support “pseudo populism.” Special interest Institutions dress up slavery to consumption in a costume called “freedom” and “independence.”


“Pseudo populism” dupes millions who are in fact Running As Hard as They Cans and some who are Falling Further Behind to support policies, programs and candidates that exacerbate the Wealth Gap – bailouts for speculators,  tax deductions for McMansions, the “death tax” campaign but mainly the “tax cuts to spur job growth” and economic prosperity without a strategy to create Balance. Balance is the sine qua non of sustainable economic activity. (See End Note Two.)


As we point out in our 2 June 2008 column, “Riding the Tiger,” almost all citizens of the US of A are riding on the Consumption Tiger. (Also see the two “Tiger Rider” posts on the Bacons Rebellion blog of 10 June 2008 and 11 June 2008.)


Until there is a new metric for citizen well being (see Backgrounder on that topic), perhaps along the lines of the parameters we outline in “The Inelastic Perspective of the Tiger Riders” posted 11 June, there will be no hope of obtaining a sustainable trajectory until after The Even Greater Depression. (See End Note Three.)


It had to be clear that an economy built on unsustainable consumer consumption – 70 percent of the current Gross Domestic Product – will collapse at some point. Abe told us “you could not fool all the people all the time,” but fooling all the citizens is just what the Tiger Trainers (aka, masters or the universe and creators of Supercapitalism / manipulated market fundamentalism) hope everyone is fooled so they can ride a little longer.


As always, the question is: Will there be enough resources left after the crash to rebuild anything approaching the civilization we enjoy in 2008 to rebuild a sustainable trajectory?
— July 7, 2008


End Notes
(1). Someone added a link to “27 June 2008 Breaking News” to Jim Bacon’s 27 June Bacons Rebellion blog post “Human Settlement Patterns: The Fringe Unravels.”  That link takes one to “Scott’s Current News,” and from there to The Nation web site. Thanks to those who contributed to this very useful path.
(2). The second graphic in The Nation story documents the erosion of the top tax rate.  As we have suggested in The Shape of the Future the entire tax structure is now warped in favor of top income earners – thanks again to the lobbying of those Institutions and Enterprises.  The income tax should be scrapped and replaced with a consumption tax and with user fees that reflect true, total costs.  Of course the loop holes creating and supporting self-serving but tax-exempt Institutions need to be fixed immediately.
(3). The following material is quoted from the 11 June Blog post:
“Here are some tentative targets for crafting a realistic economic survival plan. There is no guarantee that this level of conservative action will change the trajectory enough but they will help and they are within limits that most citizens would embrace if they understood the enormity of the consequences of Business As Usual:

  • One percent annual decline in Gross Domestic Product
  • Three percent annual decline in Consumer Consumption
  • Five percent annual decline in Total Energy Consumption
  • Ten percent annual decline in Energy Imports

“After a decade on this new consumption trajectory it should be possible to anticipate a one percent annual drop in total population. Both per capita consumption and total population declines are necessary to achieve a sustainable trajectory.
“The role of functional human settlement patterns will be critical in achieving these goals. Achieving functional human settlement patterns is the only strategy that can achieve this level of conservation without destroying the Quality of Life for the majority of citizens. In fact, Claude Lewenz argues that changes in human settlement patterns to achieve these goals at the Village scale would improve Quality of Life. We agree.”
In this discussion, we are talking about Quality of Life from the perspective of 75 percent of the economic and social Ziggurat.  (See THE ESTATES MATRIX.)
Another way of putting our thesis is that “Fundamental Transformation of human settlement patterns” is the only comprehensive strategy to achieve a sustainable trajectory for civilization without sacrifice of Quality of Life.
A draconian change in life style is the only way individuals and Households can survive without a comprehensive strategy.
What do we mean by “Draconian change?”  Something like this:
Abandon the McMansion, the three Autonomobiles, the two jobs, the beach place and almost all the stuff.  Move the Household to a camper on land along a stream in West Virginia. Perhaps this is land that was purchased for a retreat / retirement home. Starting preparing the land for a subsistence, off-the-grid farm.
This is not impossible.  Helen and Scott Nearing did it in Vermont (and again in Maine) but it will be a draconian change for most citizens who, if given a knife, a match and a live chicken, would go hungry.
That is alright because this option will be open to only a small percentage of the current population.

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