The New Gilded Age: The 21st Century in Review

Posted on June 28, 2012 by Inequality.org Staff

For roughly 300 million Americans, our new century has brought only income stagnation. But for 30,000 very wealthy Americans, the century has brought consistently rising incomes beyond the dreams of previous generations.

By Salvatore Babones

The June Federal Reserve Bulletin reports the results of the latest Survey of Consumer Finances. The data cover the decade 2001-2010. Unsurprisingly, the report is not happy reading.

In the first ten years of the twenty-first century median household income has fallen from $49,400 to $45,800, a drop of 7.29 percent. The percentage of households with any savings at all has dropped from 59.2 percent to 52.0 percent

.In the first ten years of the twenty-first century median household income has dropped to $45,800.

Young people have fared even worse. The median income of households headed by people under 35 years old has dropped precipitously, from $40,900 to $35,100.

And it’s not just a matter of the poor getting poorer. Even households headed by people with college degrees have experienced falling incomes, from a median income of $83,100 in 2001 to a median income of $73,000 in 2010.

You don’t even want to know what households headed by high school dropouts take home (a median of $23,000 a year, meaning that half make less than that).

All figures are real 2010 dollars, adjusted for inflation.

America suffered a pretty severe recession in 2007-2009, but it’s not as if the economy hasn’t grown in the twenty-first century.

In fact, U.S. real national income per capita grew 6.33 percent between 2001 and 2010, according to figures from the Bureau of Economic Analysis. That’s slow, but it doesn’t account for declining household incomes.
The discrepancy also is not explained by changes in household composition. Expressed in terms of real national income per household, the U.S. economy grew by 5.94 percent between 2001 and 2010.

Where has all the money gone? To the very rich.

In other words, if American national income in 2010 were distributed to people and households in the same proportions as it was in 2001, the median household would now be about 6 percent richer, not 7 percent poorer.

Where has all the money gone? Again the answer is no surprise. It’s gone to the very rich.
Not the merely rich. The very rich.

The Federal Reserve data show that even among the top 10 percent of households in America, median income declined between 2001 and 2010. The merely well-off have seen no increase in income in twenty-first century America. All of America’s economic growth now goes to the super-rich.

The incomes of the super-rich don’t show up in surveys like the Federal Reserve’s Survey of Consumer Finances because there just aren’t enough super-rich people to be found in a survey sample. The super-rich do, however, pay taxes (sometimes). Research based on Internal Revenue Service data shows where the money has gone.

The World Top Incomes Database uses IRS data to compute average real incomes for tax-filing households. Figures are available for all households, the top 10 percent, the top 1 percent, and even the top 0.01% of households.

Even for typical top 1 percent Americans, incomes has been essentially stagnant since 2001.

Like the Federal Reserve data, the World Top Incomes Database shows that the median income of the top 10 percent of American households stagnated between 2001 and 2010. The Fed data show a 1 percent decline while the WTID data show a 1 percent rise. The Fed data include realized capital gains while the WTID data do not.

The Fed data stop at the top 10 percent. Because it’s based on tax returns, not surveys, the WTID data go higher. For the top 1 percent of American households, median income increased only 2.53 percent between 2001 and 2010, according to the World Top Incomes Database.

Any increase is better than a decline, but a 2.53 percent total gain over 10 years is nothing to write home about. That’s just a fraction of a percent each year. Even for typical top 1 percent Americans, incomes has been essentially stagnant since 2001.

To find rising incomes, you have to go to the top. The very top. For the top 0.01 percent of tax filing households — that’s the top 1 in 10,000 — incomes rose an average of 29 percent between 2001 and 2010.
In other words, for roughly 300 million Americans incomes have been basically stagnant in the twenty-first century. Some have done well and some have done poorly, but overall there’s been no change. One person’s gain has been another person’s loss.

The beginning of the twenty-first century truly is America’s new Gilded Age.

But for 30,000 or so very wealthy Americans, the twenty-first century has seen consistently rising incomes beyond the dreams of previous generations.

Twenty-first century America has been called “the new gilded age.” Gilding is the process of applying a thin, shining layer of gold on top of a thick, dull base metal. The metaphor perfectly matches the character of the contemporary American economy.

The beginning of the twenty-first century truly is America’s new Gilded Age.

http://profile.yahoo.com/WQ2BSTMDEES4RIKGT4ECSVRE5I Whirlpooloff

$45,800 is plenty for me. What would I make if I lived in Africa? Who cares what the top 1% make? Maybe they put in a lot of overtime.
- Adrianoz
  
  You should care because it is to the long-term benefit of none and detriment of all with concentration of wealth at the upper echelons and top stratas of society.
  
  The creation of a welfare state, rising real wages in line with productivity growth, strong labour and civil rights, increased unionization, massive public investment in research and development of new innovations, and thereby new markets, such as the computer, Internet, GPS and digital photography, financed through progressive taxation, made possible through strong and strict, mutual financial and capital regulations and controls to prevent capital flight, tax evasion and offshoring of production; all of this combined leads to increased purchasing power and consumer confidence among the general working population, which leads to rising general demand and thereby increased profits and income to private and public sectors, resulting in investments in hiring and expanding production, leading to rising economic activity and falling unemployment, with increased revenue from taxation and trade in its wake, which can be utilized to promote further socioeconomic development and pay down on acute debts and deficits. This model of domestic demand-led socioeconomic development was the one applied during the Postwar-Golden Age(1948-1973), characterized by all of the above features, which had an average global growth rate of 4.8%, average global inflation of 3.9% and average unemployment in the France, Germany and Britain was at 1.2%, 3.1% and 1.6%, whilst the world experienced no more than 38 financial crises and no global recessions as average growth never fell under 3%.
  
  Compare this to the Washington Consensus(1979-present), characterized by stagnant real wages, de-unionization, deindustrialization, economic deregulation, declining productivity growth, massive social and income inequalities aswell as a dismantling of the welfare state, with average global growth being at 3.2%, average global inflation marginally lower at 3.2% and average unemployment in France, Germany and Britain at 9.5%, 7.5% and 7.4%, with the world experiencing 139 financial crises between 1973-1997 alone, and five global recessions to date.
  
  Had growth rates remained at the levels of the Golden Age, the world economy would have been 50% larger at the present.
  - http://profile.yahoo.com/WQ2BSTMDEES4RIKGT4ECSVRE5I Whirlpooloff
    
    Gee, your first sentence sure has a high degree of certainty to it. I started my working career in a factory in 1973. I recall no worse period than the late 1970s and early 1980s, including the current one. My father participated in the 1948 – 1973 economy as well as the depression prior to that (born 1909). He attained a high-level managerial position (same company where I started at $3/hr., by the way) which he held for many years until retirement at age 65 in 1974.
    
    I never attained the relative level of success that my father did. Went from factory to greenhouse to post-office jobs, working my way through college self-funded with those earnings. After graduation, I got a job in banking – in the mailroom. Simply worked myself up by demonstrating my abilities, but never reached any managerial position. Frankly, never wanted one.
    
    But I did learn the mathematics of savings early from dad which was reinforced in my final career path. That final career path started in 1981 at a salary of $8,400, but one was just as lucky to find full-time employment at that time as now.
    
    The final part of this saga is that I retired six years ago at age 50. My hard work and savings over the years accumulated sufficient funds that I can now live on those evil capital gains and dividends. If my father were still alive, I’m very positive he’d tell you my economic standard of living exceeds his in that wonderful “Golden Age” you fondly describe.
    
    So there you have one story to refute the absolute conclusion you started out with. I doubt mine is the only one out there, but likely the only one you will see on a site such as this.
    - Adrianoz
      
      Personal anecdotes are interesting, but have no value in a factual debate, and too often resort to knee-jerk reactions of rugged individualism.
      
      It is to state the obvious that your living standard exceeds that of those who lived in the 1950s and 1960s; the discussion at hand is how much higher our standards of living, how much better our working conditions and how much greater our affluence would have been had the conditions of those decades remained intact, and, as was explained, it is obvious that the average, male, blue-collar worker would have been much better off compared to his contemporary situation, as the era characterized by a relative equal distribution of wealth was superior across virtually all metrics, from growth, employment and volatility to stability, productivity and social mobility, as is explained in the example of your father, who managed to climb up the corporate ladder to become a manager, compared to you, who had to float around between precarious, short-term contracts whilst the skill and competence of those on the floor is wasted rather than being brought into corporate governance as was the case during the Golden Age, more so in Europe and Japan compared to the U.S., though, where management was conservative and antagonistic towards labour unions and workers, resulting in the marginalization of e.g. the U.S. auto industries as a result of retarded methods of production.
      
      The stagnation of real wages over the past decades is a result of the destructive competition brought about with the neoliberal globalization of the 1970s, which was a reaction to the falling rate of profit as a result of Stagflation, which led to rising general prices as costs of production rose when oil increased in price and general output and productivity declined, forcing corporations abroad to compensate for this and maintain their profit-margins through exploiting cheap, foreign labour, all of which further encouraged deindustrialization in a self-maintaining cycle, as domestic manufacturers are forced to allocate production abroad in order to remain competitive with regards to multi-nationals who can undercut prices and in order to compensate for the fact that general demand has stagnated as real wages have stagnated, though a relatively high standard of living has been maintained in U.S. households despite stagnation, through us working harder and longer hours, through both partners working, through a reliance on cheap imports and through a dependance upon debt, credit and property-based consumption, all of which further promote offshoring.
      
      In fact, the export-led mercantilism of Third World-economies, such as those of East Asia, or even Germany in the eurozone, is unsustainable in the long run and has been essential in the stagnation of our society and world economy, for the logic is that through suppressing real wages and subsidizing exports, labour will become cheap and precarious and unions weakened, and capital flows and multi-national corporations will be attracted to that nation or region, allowing it to flood foreign markets with cheap, massproduced goods which will ruin local competition and deindustrialize the importing nations, though this same process cannibalizes the general demand which it relies upon, which is Western demand, as domestic demand in East Asia is lacking, being the reason for the high savings rates, as people pile what incomes they receive in order to survive, and is non-existant in Third World nations such as in Africa or Central America, who depend upon remittances sent home from cheap immigrant labour in order to boost household consumption, for real wages stagnate as a result of the pressure from foreign, cheap labour and the threat of offshoring and capital flight, and in order to compensate for this, debt-based economies are created through deregulation commenced in the political establishment, giving rise to constant bubbles and financial crises, the sub-mortgage crisis and housing bubble being perfect examples of this method of property-based consumption through having tax incentives favour capital gains, dividends and investments in private properties rather than re-investment in the productive capacities of the corporations, and all of this is proof to the short-sightedness of this model, for if it is applied in Western nations aswell, as is the case during this economic crisis, it will result in a collapse of general demand in the world economy, as neither private consumption nor public investment is available for use in order to ensure stagnation, resulting in a new Great Depression, which is the dystopian future we have in front of us unless a new course is taken.
      
      What we need is a whole new, international system, similar to Bretton Woods of the Postwar-Golden Age, which aims to create domestic demand-led socioeconomic development and fair trade, rather than export-led mercantilism and retarded development, through regulation of currencies, exchange rates and capital flows, imposition of economic regulations and taxes on a global basis and the creation of an international minimum level with regards to wages, compensation, conditions, safety and influence, in order to guarantee that sovereign nations are allowed to pursue policies of long-term investments in promotion of domestic demand without being punished through speculative attacks, tax evasion, capital flight and offshoring of production, whilst ensuring progressive global competition based upon encouraging knowledge, competence, skill and innovation, rather than lower wages, lower taxes, worse conditions and insecurity.
      
      This needs to be combined on a national level across the world with a Green New Deal, of massive jobs programs, public investment and societal initiaitves in all economic areas, ranging from green climate change, construction of infrastructure and affordable public housing aswell as creating robust, generous social insurance and welfare systems to strong labour rights and trade unions, rising real wages in line with productivity growth and strict regulation, financed through progressive taxation, as all of this combined, as explained in the previous post, leads to increased purchasing power and consumer confidence among the general populace, leading to rising general demand and increased profits and income to private and public sectors, resulting in investments in hiring and expanding production and thereby to rising economic activity and falling unemployment, with increased revenue from taxation and international trade in its wake, which can be utilized in order to promote further, domestic socioeconomic development to the benefit of domestic and foreign workers, who see their incomes and living standards rise at levels not seen since the Golden Age, and of domestic and foreign, high-productive corporations, who see their profits soar as general demand rises when real wages rise, in turn re-investing it into increasing and expanding the productive capacities of their industries in order to increase profitability, meet the rising demand and remain high-productive to ensure that their fate is not that of the low-productive corporations, who are driven out of the market incase they are unable to improve their productivity growth through measures such as improved working conditions, automation, robotisation and structural adjustment.
      - http://profile.yahoo.com/WQ2BSTMDEES4RIKGT4ECSVRE5I Whirlpooloff
        
        I have no interest in global theories, unless they can make me a buck. I simply follow my right to life, liberty, and the pursuit of happiness as was written 236 years ago this week. You may have read or heard about that. I have been successful in that regard as far as I’m concerned.
        
        There are many other anecdotes far better than mine. Sam Walton, Warren Buffet, Bill Gates, Steve Jobs, etc. All of those and many others did not sit around writing pages about why they or everybody else couldn’t succeed. A few might do it now after they have made their billions.
        
        Pay your taxes, give the rest of whatever you have to charity or third world inhabitants and continue to conjure up theories of what should have been and the sorry plight of everybody that doesn’t have what somebody else does if that’s what your pursuit of happiness is.
      - Adrianoz
        
        Verbal diarrhea. Why bother replying when all you propose is to gain wealth, forgetting all but self?
        
        In fact, if what motivates you is greed and selfishness, then a return to the Golden Age is what should interest you the most, where, as you said yourself, workers such as your father could climb the social ladder and live long and prosperous lives, rather than being kept docile through the threat of offshoring and outsorcing and being forced to take whatever work there is on precarious, short-term contracts where one is forced to work twice as hard for less pay under threat of unemployment, to the long-term benefit of neither the rich nor the poor.
        
        Interesting that you bring up people like Steve Jobs or Bill Gates; how did these people become successful? It wasn’t through pulling themselves up by the bootstraps, it was through massive public investment, subsidies, tax incentives and guaranteed markets in research and development of new innovations and new markets, giving rise to modern technological advancement. Case in point being the iPhone; the Accelerometer-technology behind it was developed at the Pentagon to guide missiles, the Touchscreen was developed at the University of Delaware through funding from CIA and the National Science Foundation, the microchip was developed through subsidies and guaranteed markets, with mass purchases from the Pentagon driving down costs by a factor of 50, the Internet was developed through research and development at the Pentagon, through DARPA, with it being in public hands for 30 years, the computer was developed at the Pentagon, with IBM learning how to create them under several decades, after which they were commercialized during the late 90s, the GPS was developed in the Pentagon to guide satellite systems and cellular communications has its roots in military radiotelephonic capabilities.
        
        In other words, all of this is not the result of free market fantasies or rugged individualism, but, rather, massive public investment, financed through progressive taxation, made possible through mutual capital regulations and controls to prevent capital flight, tax evasion and offshoring of production.
      - http://profile.yahoo.com/WQ2BSTMDEES4RIKGT4ECSVRE5I Whirlpooloff
        
        Oh my goodness (to quote Shirley Temple), you sure like to start your posts with outrageous statements. I don’t care about that. Very unimportant.
        
        Let’s get to the points you raise.
        
        You assume my father “could climb the social ladder”. He did nothing of the kind. I only shared that his working career was very successful. The biggest social thing each of us ever achieved were $10 annual memberships in a so called private restaurant and bar club. Yeah we really climbed that social ladder alright. Almost to the first rung. Oh, I forgot to mention a couple of years ago I bought a season pass at a municipal golf course. Full disclosure after all.
        
        There is nothing wrong with spending on the common Defence. In fact it is the first thing mentioned in Article 1, Section 8 of The Constitution of the United States. Perhaps you should try reading it sometime.
        
        If some have used that essential government spending to make great wealth in the private sector, more power to them! I wish I would have had the brains to do that.
        
        Guess what? Bill Gates and Warren Buffet have a foundation set up to redistribute their wealth as they see fit. Real confidence that the government can get it right isn’t it? They are certainly doing the right thing wether I like their charities or not.
        
        I want to make money just like them to enjoy my life. And like them I intend to leave you and the government without a clue as to where I believe it belongs when I’m no longer around to play with it or direct it to the causes I want it to go to like I currently do.

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