1% of Americans Hold Down the GDP of 99%
|August 7, 2014||Posted by Staff under Economic Principles|
An analysis by the rating agency Standard & Poor’s claims the widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and slowed the 5-year-old recovery from the recession.
The rising concentration of income among the top 1 percent of earners has contributed to S&P’s cutting its growth estimates for the economy to 2.8 percent rate to a 2.5 percent annual pace in the next decade.
S&P estimates that the U.S. economy would grow annually by an additional half a percentage point — or $105 billion — over the next five years, if the average the American worker had completed just one more year of school.
Income disparities hurt growth because consumers tend to become more dependent on debt to continue spending, thereby worsening the boom-bust cycle. Or they curb their spending, and growth improves only modestly, as it has during the current recovery.
Adjusted for inflation, the top 0.01 percent’s average earnings have jumped by a factor of seven since 1913. For the bottom 90 percent of Americans, average incomes after inflation have grown by a factor of just three since 1917 and have declined for the past 13 years.
Ed. Notes: There are better reasons than growth to justify closing the income gap and wealth gap. The main reason is the very rich are not earning all that money. They don’t have jobs packaging food or sewing clothes or driving buses. No, it’s not work they do but owning. Their companies get corporate welfare and society’s spending for land and resources, aspects of nature that nobody made. That belongs to everyone, not only to the 1% now getting it.
Not only is such skewed distribution bad, growth is not always good. Do we really want to spend more money on sprawl, divorce, prisons, weapons, ethanol, etc? GDP counts all spending: the good, the bad, the ugly.
And while a better educated or skilled workforce can grow growth, that workforce does not necessarily get higher wages, or at least not for long. You just create more competition among more competent workers. And under the current system, both taxes and inflation will rise, too.
The only growth really worth measuring is growth in leisure, in enjoying the same standard of living or better while working the same or less.
It would be possible to live comfortably, to work less, to study whatever captured one’s fancy, and to live in a less hierarchical, less class-ridden society if we were to adopt geonomics and share the worth of Mother Earth.