A major
division in America today is the growing gap in IWE: income, wealth, and
education. In some respects the gap is Marxist,
except the working and middle classes have been gaining while the rich have gained
greatly. It’s the gap between the Haves
and Have Lots, the top 1% and maybe 10%.
Several
studies have shown that long-standing income and wealth gaps in the U.S.
started to narrow during the Great Depression and continued into the
1970s. Among several factors that changed this, the Reagan
Administration encouraged private wealth-building, and a few did. The 1990s saw great economic growth in
general, but the rich pulled way ahead of others. This was due to the explosion
in digital technologies and the success of new products, services, and startup
companies. It was also caused by the
growing disparity between the wages of employees and the income, bonuses, and
investment returns of business executives.
Then came the
economic bust of 2008 and the Great Recession.
Nearly 8 million Americans lost their jobs; that number of new jobs was
not again reached until 2014. The Great
Recession was not just one of those periodic business downturns, but rather a
structural shift in the American economy.
Many workers and lower-level managers never got their old jobs back or
found new jobs that paid as well. They
got left behind in the recovery enjoyed by the upper middle class and the
rich. By 2011, the top 10% of the
population held 72% of all private wealth while the bottom 50% owned just 2%. Said another way, the top
1% may own as much as 38% of private wealth, or more than all the assets of the
bottom 90%.
More than ever
in the past, the growing income and wealth gap in the U.S. is caused by and in turn
affects the education achievement gap.
Those parents and communities that have benefited from superior schools
strongly back education, because an education is the surest way for the
better-off to pass class and financial advantages on to their children. But less advantaged parents and communities,
especially in inner city and remote rural districts, can undervalue and undermine
the schools in many ways.
It has been
estimated that only 30% of Americans now achieve a level of education higher
than their parents. In the past,
Americans expected to do better than their parents in all sorts of ways. Now more and more young people doubt that
they will earn as much as their parents did.
They question the future validity of the “American Dream.”
Education
translates directly to better incomes for students in the future. For example, in 1995 an American who did not
finish high school typically earned a bit less than $25,000 a year; by 2014,
that median annual income in constant dollars barely rose. With a high school diploma, one could earn
over $32,000 in 1995, and actually earned less by 2014. Meanwhile, a person with a bachelor’s or
higher degree made over $51,000 in 1995 and made slightly more by 2014.
Many Americans
of all ages who lacked competitive skills and suffered serious financial
reverses in spite of the Great Recovery have become bitter and resentful. They particularly resent the government and
its subsidies to those people who feel “entitled” to benefits that they have
not otherwise earned. Occasionally they
may resort to violence, but they will not likely engage in civil war as class
warfare – not unless they believe that they have to rise in revolt to protect
their self-respect and interests.
Addressing the
gaps in income, wealth, and education to avert social tensions and violence,
let alone another civil war, is the biggest domestic challenge in the U.S. Yes, we want general economic growth, but who
will benefit the most? With their great
wealth, will the top 1% act like 18
th century French aristocrats and
expect extraordinary privileges? Will
they dominate the political process? Could
they be the “Deep State”? And how will
income and wealth inequality impact all American consumers, who account for
some 70% of our annual GDP?
© 2017 Stephen M. Millett. All rights reserved.