Posted by Bob Lord
The Blue Meanie posted yesterday about the control by the top one percent. His post was spot on, especially the closing, where he noted how Professor Krugman's cynicism regarding the prospect of the one percent simply coming up with a new (specious) justification for their austerian policies was entirely justified.
As I've noted in previous posts, we're living through a great experiment: How much wealth and how much income can we jam into the top 1% before the bottom 90% explodes?
The justification for Krugman's cynicism is everywhere you look. I read this article in the NY Times on Monday: Economists Agree: Solutions are Elusive. The reporter's second of two observations regarding a conference hosted by the Intenational Monetary Fund of the world's top economists:
The second was realizing how, after five years of coping with the consequences of the disaster, there is still so much uncertainty about what policies are needed to prevent another financial shock from tipping the world economy into the abyss again a few years down the road.
“We don’t have a sense of the final destination,” said Olivier Blanchard, chief economist of the monetary fund. “Where we end I really don’t have much of a clue.”
In determining what is a sustainable level of government debt, or whether central banks should focus on anything other than inflation, or what should be done to prevent further bubbles from destabilizing economies, he argued “we are still very much navigating by sight.”
The significance of the article is what the reporter didn't say. There was not one mention of the concentration of wealth being at the heart of the instablity of the economy. I suppose it's possible the economists mentioned the concentration of wealth but the reporter chose not to include it in his write-up. But they certainly didn't place much emphasis on it.
In a rational world, how could that be? We have so much wealth and so much income jammed into the top one percent that we encounter bubble after bubble as a result of excess wealth at the top being employed to chase speculative investments, thereby making us constantly vulnerable to financial shocks. Yet the world's top economists meet to discuss the vulnerability of the economy to financial shocks, and apparently don't see a connection there. It could be an occurrence of groupthink — these "top economists" are so impressed with themselves and each other that they don't look to those outside their circle, like Robert Reich or Joseph Stiglitz.
Or there's the more cynical explanation: The top economists are well aware of the connection between the concentration of wealth and the vulnerability of the economy to financial shocks, but would prefer to devote their efforts to controlling the symptom — the vulnerabiity of the economy to financial shocks — than to curing the disease — the extreme concentration of wealth and income at the top.
Want more fuel for cynicism (or anger)? Check out the results of a Pew Research study released on Tuesday:
During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data.
The upper 7% of households saw their aggregate share of the nation’s overall household wealth pie rise to 63% in 2011, up from 56% in 2009. On an individual household basis, the mean wealth of households in this more affluent group was almost 24 times that of those in the less affluent group in 2011. At the start of the recovery in 2009, that ratio had been less than 18-to-1.
Of course, if you prefer a more personalized account of wealth concentration, there's this from Wall Street on Parade on Wednesday:
In one of the worst economic downturns since the Great Depression, the billionaire Koch brothers who habitually rail against government’s unfair burden on the wealthy, have almost doubled their net worth to a combined $64 billion. On March 10, 2010, Forbes listed the net worth of Charles and David Koch at $17.5 billion each. This year, Forbes says the Koch brothers are individually worth $34 billion.
How much wealth and how much income can we jam into the top 1% before the bottom 90% explodes? I coudln't even venture a guess. But I know this: If we don't change our policies — our tax laws, our labor laws, our minimum wage, our regulatory structure, our safety net — whatever that threshold is, we'll get there. Already, as the Pew Research study indicates, we're to the point that the accumulation of wealth by the those at the top is depleting the wealth of the rest of us. It used to be that those at the top simply were taking a disproportionate share of the nation's increase in wealth. The wealth of the rest of us was increasing as well, just at a slower pace. But those at the top have stopped leaving us breadcrumbs, and, to satisfy their appetite for greater and greater wealth, have begun to strip us of the meager wealth we have.
That's a critical threshold to have passed. In the words of the monkey upon realizing he'd caught his tail in the lawn mower, "it won't be long now."