Income disparity is again a front-page political issue. Credit Suisse projects that in two years the global 1 percent “… Will have more wealth than the remaining 99 percent of the people.” In the U.S., the top 1 percent earns a mean household annual income of $1,318,200. This is approximately 70 times the annual income of the average American worker.
‘The 1 percent’ now own approximately 36 percent of America’s wealth. Most telling, over the last decade the wealth of the top 1 percent earners has grown, while the bottom 80 percent’s wealth fell from approximately 20 percent of the U.S. economy to around 10 percent.
Wealth concentration restricts sustained economic growth
To appreciate how wealth concentration can blunt economic growth, think Czarist (or modern-day) Russia: A lot of poor people and a few wealthy families does not sustain economic growth. Recovery from the Great Depression provides similar insights. The path to economic recovery was not through enriching the rich. It was through enriching the middle class so they had the capital to start businesses and grow families.
Now consider our current economy: The inability of our economy to achieve sustained economic growth is tied to our middle class being mired in 15 years of no real income growth. Our economically-stagnant middle class is restricted in their ability to financially bootstrap and sustain businesses that have always been America’s lifeblood for job and economic growth.Click to continue reading »