Saturday, August 15, 2009

Nothing Good Came Of It

funny pictures
Image credit: I Can Has Cheezburger

I won't have much time to write today, but I was intrigued by this quotation from UC Berkeley Prof. Emmanuel Saez on how income disparities have shrunk historically:

The top percentile share declined during WWI, recovered during the 1920s boom, and declined again during the great depression and WWII. This very specific timing, together with the fact that very high incomes account for a disproportionate share of the total decline in inequality, strongly suggests that the shocks incurred by capital owners during 1914 to 1945 (depression and wars) played a key role.1 Indeed, from 1913 and up to the 1970s, very top incomes were mostly composed of capital income (mostly dividend income) and to a smaller extent business income, the wage income share being very modest. Therefore, the large decline of top incomes observed during the 1914-1960 period is predominantly a capital income phenomenon.

Summary: Striking It Richer: The Evolution Of Top Incomes In The United States

"Capital income" is income from investments and the like, as opposed to wages and salaries. They're the sort of income that tend to be earned by the rich.

I haven't seen anyone else make mention of this, and it's a rather ominous point.

The problem is, that didn't happen this time. What happened was that the government poured something like $15 trillion into the banking system in a way that protected rich people, and didn't provide much capital. The adjustment you'd expect to have been made in this downturn, rich people earning less, didn't happen.

So, not only do we get to look forward to slow growth and few new jobs, but the people who caused this meltdown are doing as well as ever. All the crap we've gone and will go through, in other words, hasn't done any good at all.

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