Tag Archives: wealth

The effects of QE

21 Oct

Of all the new terms that have been invented since the beginning of the crisis in 2008, quantitative easing is perhaps the most bizarre. A purely technical term, it has entered into everyday language as ‘QE’. Monetary policy has taken centre stage as the main tool governments have to do something about growth and QE is it.

Tucked away in the small money supplement of the FT weekend was a long piece on QE. Its discussion of the effects of quantitative easing is worth commenting on. QE is basically a monetary stimulus programme, where central banks create money and use it to buy assets from banks and other financial institutions. The main thing central banks have bought are government bonds. Holders of bonds have therefore exchanged them for cash and that cash is what the governments hope will be spent in ways that stimulate the economy. QE was dreamed up at a time when interests were so low that they couldn’t really go any lower, making a traditional monetary policy response to an economic downturn impossible. The standard approach had been to cut interest rates in a downturn, raise them when the economy seemed to be overheating. Unable to do that with rates so low, QE was the radical alternative.

QE has been striking by its ubiquity: it has been the key policy response of the US Federal Reserve, the Bank of England, the European Central Bank and the Bank of Japan. What is surprising is how prevalently it has been used but how sceptical people are of its effects. The idea is that cash injected into the economy would generate new economic activity. There is little evidence, however, that QE has done that. Banks have tended to use the money to boost their capital ratios rather than to increase lending to businesses. Companies have sat on increasing piles of cash. QE in general is seen as having had little effect on the real economy.

Where has its impact been felt? After all, the US Federal Reserve has been buying $85bn a month of US government bonds since it started its QE. Intervention on such a huge scale cannot be free of effects. According to the FT, the main impact of QE has been on asset prices rather than on the real economy as such. These prices have risen considerably, boosting the wealth of those who own such assets. Predictably enough, that means the already very wealthy. The FT cites a Bank of England study that finds that in the UK, the top 5% of households hold 40% of the assets whose price has risen most because of QE. The central banks’ policy of printing money has inflated some asset prices, to the great benefit of those that hold them.

For everyone else, the effect has been more mixed. By keeping interest rates at very low levels, QE has obviously favoured the lenders over the savers. All those hoping to earn some return on their savings have been disappointed. Home owners, especially those with big mortgages, have been happy.  This view of QE helps us understand some of the curious features of this current economic downturn: as the real economy data continues to give cause for real concern (unemployment remains high, growth is anaemic, business investment remains very low), the price of fine art, the best wines and the high end properties in London, Paris and New York have all soared. With low interest rates and with central banks injecting so much liquidity into the bond markets, investors are looking for some return wherever they can. And that includes in a Monet or a large house in Neuilly or Richmond.

The best defence of QE cited by the FT was that things could have been worse without it. It returned confidence to markets and investors, and so helped us avoid the complete collapse that could have occurred in 2008 or 2009. As the FT admits, this argument is difficult to prove: “we just don’t know what would have happened without QE”. It is surprising that a policy with such obvious distributional effects has not been the subject of greater debate or disagreement. This is perhaps because the term itself is so euphemistically technical. Or because it has been carried out by central banks whose place is somewhat outside the terrain of partisan politics. It may also be that governments have been good at convincing people that there is no alternative to QE, which is tantamount to saying that they have no way of tackling problems in the real economy directly but can only work through asset prices.

This, of course, is not true. Governments could intervene far more directly in the economy. However, QE sits alongside the view that governments are fiscally constrained and need to reduce their outgoings as much as possible. Fiscal austerity combined with QE gives us the policy mix for the current period: a massive boost in the prices of assets owned by the wealthiest section of society and extensive cuts in government spending on public services. However technical it may sound, there is nothing ideologically neutral about QE and its effect.

 

The Future of Work

20 Jun

TCM editor, Alex Gourevitch, will be speaking with Kathi Weeks, author of The Problem With Work, about ‘The Future of Work‘ this Sunday at PS1. It is part of Triple Canopy’s ‘Speculations on the Future‘ program. In advance of this event, we thought it worth laying out a few facts relevant to the discussion. While we have spoken about some of the political questions at stake in the work/anti work debate (here, here, and here), those were relatively fact free speculations. And necessarily so. The issue at stake was hopes and desires for the future, and the organizing aspirations for a possible left. These discussions, however, can always do with a small dose of vulgar empiricism. A brief look at some relevant facts suggests that the most likely, if not most desirable, future of work is roughly that of increasing dependence on the labor market and lower quality work for most people. One word of caution: the data is limited to the US and Europe, entirely because that is our area of expertise and where the data is most readily available.

Although every so often there are breathless declarations of the end of workthe collapse of work, and that technology is leading to a world without work, the historical trend is the opposite. Ever since the 1970s, an increasing share of the population has been working. For instance, the graph below shows the employment to population ratio in the United States. Notably, even after the dramatic post-2008 decline, a higher percentage of Americans still work in the formal labor market than anytime before the mid 1970s. Slide1Similar survey data from Eurostat of all people between ages 15 and 64 shows, wherever data is available, that there have been dramatic or gradual declines in ‘inactivity‘ or non-participation in the labor market. In Germany, 35.9% of 15 to 64 year olds were inactive in 1983 while in 2012 that number had sunk to 22.9%. In Spain the drop was from 44.1% in 1986 to 25.9% in 2012. For France, 31.6% (1983) to 29% (2012), and the UK 29.1% (1983) to 23.7% (2012). The Netherlands saw the largest decline from 1983 to 2012, from 41.4% to 20.7%. The most likely future of work in the US and Europe is that more people will be working for wages or salaries than ever before, as absolute numbers and as a percentage of the population.

Three recent changes to the political economy suggest not only increased participation in, but greater dependence on, wage-labor, especially by those on the bottom end of the labor market. These are a) stagnation or reduction of welfare benefits, b) stagnation or decline of wealth and c) stagnant wages and precarious employment. Welfare and wealth are alternatives to wages as sources of consumption; lower wages and precarious employment increases insecurity of and need for employment.

For instance, in the case of welfare, the stagnation or reduction of welfare benefits means that states offer the same or worse benefits to those who cannot find or live off a job. This is consistent with increased numbers taking advantage of these benefits. For instance, recent reports made much of the 70% increase in Americans using food stamps, which represents a doubling of the amount spent on food stamps, since 2008. But food stamps alone are hardly enough to live off, and their increased use reflects the increase in unemployment. More broadly, American welfare benefits are not enough for most people to live off, many states recently cut benefits, and the welfare system is famously designed to spur labor market participation, not provide an alternative to it. Moreover, in Europe, where welfare benefits are more generous and less conditional, the consequence of austerity policies is, at best, to limit the growth of any such programs and in various countries to reduce or even eliminate them. Cuts to public employment and hiring freezes, increases in retirement age, and other measures mean the reserve army of labor will be larger, and most people will have fewer/poorer state provided alternatives to finding a job.

Finally, the increase in part-time, low-wage work, alongside stagnant or declining wealth at the bottom, further entrenches labor market dependence. We were unable to find longitudinal wealth data on Europe, but in the United States we have seen net declines in wealth for the bottom 60% of the population.

Share Total Wealth 1983-2009

Since wealth assets are not only an alternative source of income, but also, in the US especially a source of retirement income, this means greater dependence on the labor market for the working age population, as well as postponement of retirement, further swelling the ranks of the labor market. On top of which, wages remain stagnant and full-time work harder to find. Jobs are low-paying, part-time, and insecure and once one starts looking not at median but bottom quintiles, the situation is only worse. These trends are equally evident in Europe, where part-time, less secure employment has increased in places like the UK and Netherlands, alongside the more often commented increases in unemployment in places like Greece, Spain and Portugal.

In all, then, we can say that alternatives to employment have gotten worse or disappeared for the majority of people in the US and Europe, while the available jobs pay, on average, less than they used to and offer less security. There is every reason to think that the most likely near future of work will give us strong reasons to think about a different way of organizing work – about a better, if less likely, future.

The Real Culture War II: Utopia, Austerity and the F***** C****

18 Dec

Yesterday we argued for carrying the culture war into the heart of the American political economy. We made the very broad claim that a defining feature of our economic culture is the acceptance of limits. This might seem like a strange thing to say. Surely the last decade was marked not by limits but by a failure to acknowledge them. Individuals, businesses and eventually governments borrowed well beyond their means. That, so the story goes, was what created the credit crunch and the stagnant new normal. It is certainly the narrative behind the growing deal, in which Republicans appear to be ‘conceding’ on some tax hikes while Democrats accept 5-10% cuts to Social Security.

But that narrative exactly misreads the role of credit and consumption. The expansion of credit was largely an attempt to overcome the limits of capitalism within capitalism. As is now common knowledge, the expansion of consumer credit presupposed stagnant wages:

Real Household Debt Wealth Income

And, as the graph shows, it began with sagging profit rates of the late 1970s – perhaps most famously marked by Volcker’s revanchist announcement that “the standard of living of the average American must decline.”

Slide1

(graph from Robert Brenner, see also Henwood.) What the expansion of consumer credit permitted, in other words, was the appearance that capitalism could accommodate the expansion of desires, the demand for ‘more,’ even while suppressing labor costs and increasing the expropriation of the expropriated.

The expansion of credit over the past thirty years was in a sense a massive bridge loan to cover the transition to a leaner set of arrangements, in which more jobs would be low-paying, part-time and insecure, labor would be less able to defend attacks on the standard of living, ‘job-creating’ capital would take home a larger share of the pie and then basically sit on it, and politicians could pretend serious economic issues could simply be managed by technocrats.

The major problem with the credit crunch was not the attempt to surpass existing limits to consumption, but with the implicit practical belief that credit could in any way rise above and compensate for the class defeats of the past twenty years. Just as Obama has frequently tried to rise above politics in the name of some abstract non-partisan unity, so too did the borrowing public hope it could rise above the real disparities in society, without having to face them directly.

To put it another way, the ‘fiscal cliff’ is not just a false emergency engineered by Republicans and Democrats, it is the culmination of decades of attempting to paper over the limits, not merely injustices, of the American economy. It is not just that both parties have joined the austerity bandwagon, they in the process are attempting to neutralize the only utopian moment of the past few decades: the satisfaction of desires that the current society cannot satisfy. The expansion of debt would have been unlikely to succeed had that desire not been there to sublimate.

Of course, critics may say that many of these desires took a form not at all challenging to a consumer society. That criticism has some teeth, and we will take it up in tomorrow’s post. However, moving too quickly towards anti-consumerism not only misses the utopian moment, but also blurs quickly into the bland and conservative narrative of arguing we should do more with less. The starting point for an economic culture war must be to reject the austerity party and its culture of low expectations. Any reconstruction of meaningful alternatives must begin by rejecting that piece of our economic culture. After all, the so-called ‘solution’ of a grand bargain is really just a an attempt to throw back on society the political class’s own lack of imagination and inability to deal with the problems it has inherited.

(to be continued)

Capitalism under Hollande

11 Jul

In recent days, French president François Hollande has begun what is perhaps the most important aspect of this presidency, a reform of the French labour market and of capital-labour relations more generally. Typically, very general ideas about these changes were discussed during the presidential campaign but no firm commitments one way or the other were made by Hollande as candidate, not least for fear of angering the unions. Now that he commands a majority in the national parliament and is in a position to push through changes, we can see more clearly the social content of the Hollande presidency. Under conditions of crisis, and in the name of boosting French competitiveness, it is likely Hollande will do something similar to what Gerhard Schroder did in Germany, namely a flexibilisation of labour laws and a shift in the burden of funding social insurance from capital to labour. How hard Hollande will push is unclear but it does seem that history is repeating itself in France: as with Mitterrand, reforms hostile to labour are being undertaken by the left, not by the right.

His method and style are consensual and collaborative. In place of the immediacy and decrees typical of his predecessor, Hollande has organized a conference bringing together all the different representatives of business and labour in France. No firm commitments are to be made immediately. Rather, on key issues commissions have been set up that will discuss proposals and over the course of a year or so will come up concrete reforms. This contrasts also with Lionel Jospin, former socialist prime minister, who had angered business leaders back in 1997 by declaring at the end of a day of discussions the introduction of the controversial 35 hours week. Hollande’s approach is to keep everyone on board and introduce reforms only gradually.

Hollande may have attracted attention from outside of France as a socialist elected after a campaign where he declared “the world of finance” to be his enemy and where he proposed – remarkably off the cuff for such an important policy – to tax at 75% France’s highest earning individuals. But the reality of political change in France is elsewhere. Traditional leftwing parties, like the Front de Gauche, did far less well than many had expected, suggesting that the opportunity for reform à la Schroder has come in France. The form of his consultations is classically corporatist, with labour and business leaders fully represented in ongoing discussions with the state. As in Germany, the critical issue will be whether or not Hollande is able to secure the support of the unions to push through his proposed changes. The German government’s close relationship with the unions was what enabled the country to undertake its internal devaluation in the early 2000s, the source of its present day competitiveness. Keeping the unions on board, as well as the business groups, is essential for Hollande.

The actual substance of the changes is not yet certain but the ideas being floated make clear that the shift in the balance of forces within society is going against organized labour. One key possibility is that the cost of paying for social insurance, which in France lies heavily on business and is a clear legacy of postwar social democracy, may be increasingly levied on workers. This changes the balance between private wealth and public claims on that wealth. At present, there seems little by way of social mobilisation in France – or in the positions taken by unions – to suggest that such a shift will be resisted. The previous Sarkozy government had planned a similar shift but through an increase in VAT, the so-called social VAT, which unions had opposed unanimously. Hollande’s government is thinking instead in terms of raising what is called the CSG (contribution sociale generalise – a tax paid by all, used to finance health insurance, pensions, welfare payments to family etc.), a proposal that currently divides unions, some are in favour and some not. The CSG was already introduced back in 1990 as a way of generalizing the cost of social insurance which up until then had been levied uniquely on salaries and its extension today is in line with these earlier changes. The position of business is clear: unless such a move is made, competitiveness will continue to decline and jobs will be lost. With thousands of jobs in line to disappear as companies – from automobiles to big pharma – shed labour, the pressure on the government to lessen these costs on businesses is very high.

The situation in France is thus a confusing one. A superficial attack on business through capping of salaries in public sectors enterprises and levying a high tax rate for high-earning footballers and other stars, exists alongside a much more substantial reduction in claims the state makes on privately generated wealth. Social insurance, in France, is being transformed. From being something that belongs to society as a whole, and is based on a coercive transfer of wealth from the private to the public purse, it is now a good enjoyed by individuals and one that they need to pay for themselves. What is being given up here is the idea that markets generate systematic inequalities that should be righted through public intervention. From social insurance as a critique of capitalism to social insurance as a private good purchased by individuals through their own contributions. We aren’t there just yet but this is the direction in which France is heading.

What Middle Class?

11 May

Is the middle class doing worse or better since the 1970s? Depends, but if so, just barely. Is this the right question to ask? No. Let us explain.

Recently, a number of commentators have begun pushing back against the claim that the past thirty years have seen stagnating fortunes for the middle class. The claim comes from a variety of sources, perhaps most prominently from Piketty and Saez’s work on inequality. They have argued that median incomes have stagnated and that, from 1979-2007, the median income is up just 3% in real terms. But other mainstream economists think the data answers a poorly framed question. Meyer and Sullivan, two mainstream economsits, argue that “material well-being” for poor and middle income households has increased. Burkhauser et al. claim that if we look at post-tax and transfer household income, rather than pre-tax and transfer individual tax unit income, then the median household had seen a gain of 36.7% in their overall income.

Can everyone be right? Oddly, yes. The reason is that the difference here is not about the data – which we for the moment assume is more or less accurate – but the interpretation of the data. It is true that, as P-S say, the median, pre-tax and transfer individual median income is up just 3%. It is also true that, as Burkhauser et al. say, the median household post-tax and transfer income is up 37%, and that it is also true, as Meyer and Sullivan argue, that the material well-being of the poor is better than it was thirty years ago. That everyone can be right is only the beginning of the story.

Let’s take Meyer and Sullivan first. Note that material well-being or ‘standard of living’ can improve even as the poor take home a decreasing share of the overall social product. It is perfectly reasonable for Meyer and Sullivan to point out that economic growth over the past thirty years has made more high quality goods and certain amenities (like air conditioning) cheaper, and thus available to those who couldn’t afford them. It would be hard to imagine capitalism surviving if it did not improve material conditions. But this improvement in the standard of living is perfectly compatible with increasing exploitation of workers. At least since Marx we have known that immiseration is not an absolute but relative process. We can have increasing living standards for many, while those same many control less of their time than before. If $100 used to buy a black and white TV and now it buys an HDTV, then that qualitative improvement in material human well-being is perfectly consistent with stagnating compensation, declining bargaining power and more injustice. It might take only three hours for society to produce all the things I can buy with $100 rather than the four hours it used to. And so, if all I have is $100, my overall claims on society have been reduced, even if the quality of my goods have improved. Put another way, if originally I had $100 and GDP was $10000, and now I have $100 but GDP is $20000, then just because I have higher quality goods doesn’t mean that my fortunes are increasing.

It would of course be wonderful if we organized production for the sake of human needs, not profits. But it is pretty clear that is not Meyer and Sullivan’s interest in offering material human well-being rather than income and wealth as the measure of growth. Terry Eagleton once said that ideology works by being true in what it affirms but false in what it denies. It is true that standards of living have improved since 1970s, but it is false to think that refutes the concerns people have regarding inequality and growth.

Burkhauser et al. are taking a different tack. They argue that, if we want to know how the poor and middle class (whatever exactly the ‘middle class’ is) are doing, then we need to look at “real compensation.” We have to factor in not just pre-tax and transfer ‘market income’ but all the sources of compensation. After all, why should we care about what people take home before they pay taxes and claim benefits? Surely we care what households take home all things considered. And the real compensation by household has grown over the past 30 years, by about 37%. In fact, even in the worse period, from 2000-2007, while individual market income (pre-tax and transfer) declined by 5.5%, real compensation still grew by 4.8% because of elements of the tax code and public benefits, like welfare, earned income tax credit, unemployment benefits, and so on. Burkhauser supplies the following graph to illustrate his point:

Again, his own terms, Burkhauser is right. Real compensation has grown. Though note, two things. First, real compensation has grown very slowly: 1% per year, and has slowed to a near stop in the past decade. Further, “real compensation” has grown mainly because redistributive state measures have been large enough to cancel out declining individual wages and stagnating household wages. In other words, the market has been unable to produce jobs at the median level that compensate any better than they did thirty years ago (and below the median, real wages are decidedly worse.) Without progressive taxation and redistribution, real compensation would be down. In fact, the implication of Burkhauser’s data is that, for most people, the market has not created better jobs than thirty years ago. The bottom end is hanging on through transfers, not bargaining power and quality work. So when Burkhauser says “the notion that we as a society are not doing as well as we were 30 years ago, I think by virtually any reasonable measure, is just false,” this is not even true by his own measures. It’s certainly not true by the conventional conservative standard that people not be dependent on the state.

So far, we have just been considering the arguments on their own terms. In both cases, the authors do not prove that the economic situation over the past thirty years has been desirable or improving, which was their central intent. But that does not mean that the mainstream, default focus on median market income is still the right way to evaluate economic development. The median unit, whether it is an individual or household, is a narrow concern. It says nothing about class structure, how the worst off are doing, nor about economic possibilities and alternatives. For one, changes in wealth, not just compensation, are better indicators of class structure and advantage. In our society, it is wealth, especially financial wealth, more than income that confers security, greater bargaining power, and overall social power. And by that measure, our society is more unjust and exploitative. Recall this graph, showing decline in wealth for the lowest 60% of the population:

When we combine this graph, with some data on the actual distribution of financial (non-real estate) wealth, we are reminded why ‘median’ and ‘middle class’ are more ideological than they are analytical concepts.

Those who have no reasonable alternative but to sell their labor, as diverse a group as they are, still constitute roughly 80% of the population. These statistics suggest that behind ‘median’ income and compensation there is a much different distribution of wealth, and thus a different class structure than concepts like ‘middle class’ can make sense of.

We can ask even further questions – what kinds of jobs are being created, or could be created? Who controls job creation? Who has the freedom to ‘innovate’ and ‘create,’ and who serves the creators? An economy, after all, is never just about making new things, it is always about making new things under specific social conditions. Those social relationships always have to be reproduced, along with the goods and services that get produced. These are concerns about class structure and social power that mainstream economists are rarely interested in, but which cannot be dismissed by gesturing at living standards and compensation.

François Hollande and the conservative critique of capitalism

29 Feb

In an earlier post, we criticized the French Socialist Party candidate, François Hollande, for his moralizing approach to economic policy. The ills of contemporary capitalism are, for him, a matter of evil intentions pursued by unscrupulous individuals. In his first major campaign speech, he declared that his real enemy was finance. Most recently, in a television interview for TF1, Hollande announced that if he was elected president he would introduce a new tax on high earners (Le Monde, 29 February). For those earning over 1 million Euros a year, the tax rate would be 75%. This would affect about 3000 people in France and would bring into the French treasury around 200 to 300 million Euros.

Upping the attack on the country’s rich and on its financial institutions seems in part a calculated response, in part a spontaneous reaction by Hollande and his entourage to the dynamics of the campaign. Whilst Hollande’s speech at the end of January was a carefully crafted affair, this latest announcement of a tax hike on high incomes seems entirely off the cuff. Announced by Hollande on TV and radio, even his taxation and budgets specialist within his own campaign team was unaware of the new policy. Hollande’s decision to crank up the anti-rich rhetoric is clearly both a strategy and an integral part of his world-view.

The problem with this moralizing approach to capitalism was put succinctly in a comment to The Current Moment: an ethical critique of capitalism leaves the system itself untouched and in fact only goes to legitimize the status quo further. It does this by attacking the present for being dominated by a materialistic, vulgar and anti-egalitarian culture, encapsulated in the figure of the bankster and the celebrity lifestyle of its political class. In its place, it proposes a deeply conservative alternative: austere, responsible, more egalitarian and less showy in its attitude to wealth and consumption. This is exactly François Hollande’s argument: he justified his new tax measure not on the grounds of how much money it can raise but in terms of morality and national patriotism. France’s rich elite, by paying more into the national coffers, will be doing its patriotic duty.

Instead of being asked to choose between different economic programmes, what Hollande is proposing is a different style of rule. In place of the crass materialism of Sarkozy, with his rich friends and rich wife, we are presented with François Hollande, a more ordinary and serious individual, with tastes that are less extravagant than those of Sarkozy. Here we can see very strong echoes between the campaign in France and developments in Italy. What Monti brings to Italian politics is more than anything a change of style: far removed from the glamour and glitz of Berlusconi, Monti represents the austere alternative, suited to times of generalized national austerity. When asked about the cost of his end-of-year celebrations, Monti replied by publishing a detailed list of his end of 2011 dinner party at the Chigi palace: 10 guests, all family members, a traditional New Year’s Eve menu, and a list of where Elsa Monti went shopping and how much it all cost.

This is in fact the key: this cultural shift proposed by Hollande and others such as Monti is what is required to legitimize the present age of austerity. Hollande’s moralizing critique of capitalism thus preserves the system in two ways: by proposing a set of conservative values, such as patriotism, duty and national responsibility: and by providing a closer fit between the downturn in France’s economy and the values and conduct of its political class. So far this is working for Italy, as Italians welcome an end to the Berlusconian orgy. Hollande’s bet is that it will work for him in the forthcoming elections. It may do, especially if the wealthy in France catch-on that Hollande isn’t out to get them, he is their saviour.

Expropriating the expropriated (1983-2009), or, Why It’s the Top 20 not Top 1% That Matter

19 Jan

Recently, the Economic Policy Institute published “11 Telling Charts from 2011,” including the following one showing the share that different segments of the US Population took of the wealth gain from 1983-2009.

When we first looked at this chart, we started reading from the left and adding the numbers but did a double take by the time we added the Top 1%, Next 4%, Next 5%, and Next 10% – or the top 20%. Add their shares together and you get 101.7%. At first that just didn’t seem right, since our assumption was that when you add up all the shares one would get 100%. Naively, we had assumed that, while radically unequal, the gain in wealth for all quintiles would positive. A piece of folk philosophy in the United States is that the rich can gain huge gobs of money and power, so long as the poorest can also have some piece; and that those who rise do so on their own merits, but not by making the worst off even worse off. That, as it turns out, is also a premise of the most influential theory of justice in contemporary political philosophy, which states that the only permissible inequalities are those that make the worst off better off than they otherwise would be under pure equality.

The past twenty-five years have followed a different path from mainstream, common sense theories of justice. The worst have been made worse off. Meanwhile, the massive gains of the top 20% were only as large as they were because wealth was redistributed from the poor to the rich (with very moderate gains for the top 20-40%). The expropriated were expropriated some more.

These figures are even more important than the income inequality statistics with which everyone is now familiar, because those income statistics alone give the impression that, at the very least, nobody is being made worse off. In addition, wealth is a much better indicator of social and economic power than income, as it shapes individual bargaining power, determines who controls investment, and establishes the distinction between those who are economically secure enough not to have to work, and those who aren’t. Looking at the graph again, a key political point emerges, which we have made before: the problem is not with the 1% alone. The expropriators area larger class than that. After all, the next 4% took just as large a share of the total wealth increase, and overall, the top 20% are doing quite well. To reuse a chart we have used before, the top 20% control 85% of the total wealth in the United States, and if residential wealth were removed (at least, value of primary homes), that would undoubtedly rise much higher.

So the current political obsession with the 1% introduces a very problematic distortion into the actual dynamics of class, and the real distribution of wealth and power, in the current political economy. We are the 99% has a wonderful, quasi-universalist ring, but actually real distinctions under the rug, and implicitly dodges hard conversations about the real class composition of the United States. A real critique would have to reach beyond mere populism.

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