I presented this chart of rising wealth inequality a number of times over the past year. Do you notice something peculiar about the inflection points in the 1980s?
Correspondent W.S. noted that the inflection point for the top .1% (late 1970s) preceded the inflection point of the bottom 90% (around 1986): both increased their share of household wealth from 1978 to 1986, and then the share of the top .1% took off, essentially tripling from 8% to over 22%, while the share of the bottom fell precipitously from 36% to 23%.
(Note that the data stops at 2012; if we extend the trends to the present, the lines have certainly crossed and the share of the .1% now exceeds that of the bottom 90%.)
So what happened between 1978 and 1986? The first phase of the financialization of the U.S. economy.
We all know wealth/income inequality is soaring. I’ve published many entries on this topic (please see the three charts below as a refresher), and it’s clear there are multiple sources of rising inequality: globalization and technology, which concentrate gains in relatively few hands, and inflation, which reduces the purchasing power of stagnating real wages.
But the dominant source of inequality is privilege–specifically, privilege that is institutionalized by the status quo.
This engine of inequality–institutionalized privilege–is the topic of my new book, Inequality and the Collapse of Privilege($3.95 Kindle ebook, $8.95 print edition).
The word “privilege” is tossed around rather loosely. What does it mean in economic and social terms? I differentiate between privilege, which is unearned, and advantaged, which is earned.
To reverse rising inequality, we must dismantle the institutionalized power of privilege and create universally accessible pathways to the advantages of building capital. A key part of my analysis is causally linking rising inequality, poverty and privilege.
Centrally issued money optimizes inequality, monopoly, cronyism, stagnation, low social mobility and systemic instability.
If we don’t change the way money is created and distributed, wealth inequality will widen to the point of social disorder.
Everyone who wants to reduce wealth inequality with more regulations and taxes is missing the key dynamic: the monopoly on creating and issuing money necessarily widens wealth inequality, as those with access to newly issued money can always outbid the rest of us to buy the engines of wealth creation.
Control of money issuance and access to low-cost credit create financial and political power. Those with access to low-cost credit have a monopoly as valuable as the one to create money.
Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit.