The Economist came out with a Special Report: Inequality in America in the last issue.  It is interesting because the timing coincides with the end of the series The Rise and Fall of the American Middle Class here at Voice of Arizona.

 

 

Even more importantly, it reinforces the theme of that series in no uncertain terms.  And this is a view from the outside looking in at us, rather than us simply introspecting.

 

 

“During the 1950s and 1960s, the halcyon days for America's middle class, productivity boomed and its benefits were broadly shared. The gap between the lowest and highest earners narrowed. …. A few years later, at the start of the 1980s, the gap between rich and poor began to widen.”  (The rich, the poor and the growing gap between them, June 15th 2006)

 

Yeah?!?  I wonder why??  Perhaps a review of the series The Rise and Fall of the American Middle Class would throw some light on this statement by The Economist, and furnish a perspective that the magazine just kinda nibbles at around the edges. 

 

 

“Economists have long debated why America's income disparities suddenly widened after 1980. The consensus is that the main cause was technology, which increased the demand for skilled workers relative to their supply, with freer trade reinforcing the effect. Some evidence suggests that institutional changes, particularly the weakening of unions, made the going harder for people at the bottom.”

 

 

The Economist does an excellent job of analysis, some of which I want to share with you in a follow-on article.  But it p**** foots around the changes to the original blueprint for the New Global View (NGV) by the current crop of power brokers and examines the construction material (principle of which is Globalization) instead.  Whether this is out of ignorance, or caution, is a question that might be asked.

 

 

In any event, the prognosis is not good in the view of The Economist.  “Whichever explanation you choose for the signs of growing inequality, none of the changes seems transitory. The middle rungs of America's labour market are likely to become ever more squeezed.” 

 

Perhaps there is a more satisfying meta-explanation?  We here at VofA have the advantage now of being familiar, courtesy of The Rise and Fall of the American Middle Class series, with the background for that which is materializing in our lives today. 

 

 

“But during the 1990s, particularly towards the end of the decade, that gap stabilised and, by some measures, even narrowed.”

 

 

Apparently Bill Clinton and his band of merry liberal Democrats were not in on the change of plans for the NGV.  They were playing from the original hymnal, and the middle class benefited mightily from that under his benevolent and enlightened administration.

 

 

But George W. Bush and his Dark Side Minions were determined to sing from the new revised NGV hymnal, and that with a vengeance.

 

 

“After 2000 most people lost ground, but, by many measures, those in the middle of the skills and education ladder have been hit relatively harder than those at the bottom.”

 

Not to panic, however.  Our elite leadership is safe.  Their boat is floating ever higher.

 “The one truly continuous trend over the past 25 years has been towards greater concentration of income at the very top. The scale of this shift is not visible from most popular measures of income or wages, as they do not break the distribution down finely enough. But several recent studies have dissected tax records to investigate what goes on at the very top.

“The figures are startling. According to Emmanuel Saez of the University of California, Berkeley, and Thomas Piketty of the Ecole Normale Supérieure in Paris, the share of aggregate income going to the highest-earning 1% of Americans has doubled from 8% in 1980 to over 16% in 2004. That going to the top tenth of 1% has tripled from 2% in 1980 to 7% today. And that going to the top one-hundredth of 1%—the 14,000 taxpayers at the very top of the income ladder—has quadrupled from 0.65% in 1980 to 2.87% in 2004.”

It seems that “The fruits of productivity gains have been skewed towards the highest earners, and towards companies, whose profits have reached record levels as a share of GDP.”

The average middle class salaryman and wage-earner are running harder in place while the Big Boys turn up the speed on the productivity treadmill.

The Average American has a vague sense that something is not right with this picture.

 “According to the latest Gallup survey, fewer than four out of ten think it is in “excellent” or “good” shape, compared with almost seven out of ten when George Bush took office.”

But George is serene   … “The White House professes to be untroubled.”

According to The Economist he may have some in-house disagreement.  “Eventually, the country's social fabric could stretch. 'If things carry on like this for long enough,' muses one insider, 'we are going to end up like Brazil'—a country notorious for the concentration of its income and wealth.”

How’s your Portuguese my friend?