Redirecting our Rage

       American economist Emmanuel Saez has painstakingly assembled a century-long statistical series on U.S. income distribution.  On two occasions, the share of income captured by the richest 1 percent reached about one-quarter of the national total.  The first time was in 1928.  The second was in 2007.  As we all know, both peaks in wealth concentration were followed by financial catastrophe and depression.  Indeed, maldistribution clearly contributed to both meltdowns.

            But there’s a startling difference in the political reverberations that followed the two conflagrations.  In the 1930s, outrage at the pre-Depression extravagance of the rich, contrasting with the dislocation experienced by masses of Americans, sparked a decade of left-leaning foment.  Government expanded income security, directly hired millions of unemployed (rather than fiddling with bond markets through tricks like “quantitative easing”), and actively supported a new generation of unions to fight for the common folk.  Meanwhile, it reigned in business excess through tough financial rules, anti-trust policies, and high taxes on the rich.

            This time around, there’s been plenty of populist anger – but (so far) it’s been steered in exactly the opposite direction.  Social supports and public employment are being cut dramatically (especially by U.S. state and local governments).  President Obama’s election promise to modernize labour laws and rebuild unions was dead – long before he lost Congress.  And several state governments are now preparing a full assault on union rights: recent proposals in Ohio, Wisconsin, and elsewhere would virtually outlaw collective bargaining across broad swaths of the public sector (all justified by humungous budget deficits that are the legacy of financial meltdown, not union excess).  Never mind that laws like these likely violate international labour and human rights statutes; those little details never stop U.S. politicians from riding populist flames when it suits them.

            The richest 1% almost tripled their share of U.S. national income since 1978, gobbling two-thirds of the income gains generated in the whole economy over the last decade.  With numbers like these, highlighting the incomes of the ultra-rich is no longer an idle, envious pastime.  The concentration of wealth at the top has become macroeconomically significant.  Consider that the bottom 99% of Americans could have tripled their (meagre) income gains since 2002 merely by snatching back the increase in incomes pocketed by the richest percentile.  That gives some rather compelling empirical support to the old Maoist slogan, “Make the rich pay!”

            Recession or no recession, the gravy train at the top hasn’t paused for breath: according to the Wall Street Journal, the top 35 investment banks paid out $139 billion in compensation in 2009, the highest ever (despite the recession), and was set to break that record in 2010.  Executive bonuses keep rising, and the top 25 hedge fund managers made a staggering $1 billion each in 2009.  Nevertheless, the trend in U.S. politics is not to challenge the contrast between the top and the bottom, but to reinforce it.  The Tea Party successfully portrays government itself as the problem.  And rather than empowering average workers to improve their lot (like the Wagner Act did in 1935), America’s rightward lurch in labour relations will reinforce the stagnation at the bottom.

            As we all know, Canada is a kinder, gentler, fairer place.  So the numbers aren’t as extreme.  Or are they?  Check out the numbers in Armine Yalnizyan’s awesome December study for the CCPA:  Here, the richest 1 percent (less than 250,000 tax-filers) capture 17 percent of total income, and that share has merely doubled (not trebled) since the egalitarian 1970s.  A full third of all income gains across Canada since 1987 have gone to that lucky group.  For the ultra-ultra-rich (the top 0.1 percent of families, 25,000 in total, with average income of $1.5 million), their share of national income has trebled to 6.5 percent.

            Despite this largesse, in Canada, too, the political bandwagon lurches to the right.  There’s been infinitely more hot air expended since the financial meltdown over the salaries of unionized garbage collectors, than those of high-flying financiers.  Meanwhile, our home-grown plutocracy keeps raking it in.  For example, bonuses at the Big Six banks alone reached $8.9 billion in 2010, the highest ever.  The Canadian Centre for Policy Alternatives recently documented that the typical Canadian CEO made as much by 2:30 p.m. on January 3, as the average worker makes all year long.

            How do we understand the misdirection of grass-roots rage at unionized garbage collectors, rather than at an elite that is wealthier than ever (despite its complicity in the events that have caused such harm)?  To some extent this may reflect the old adage, “misery loves company.”  If I’ve lost my job, I want to see others take a hit too; that won’t make me any better off (in fact, it could make me worse off, since more layoffs and wage cuts will weaken growth and hence undermine my own employment prospects).  But will I feel better in some perverse way knowing others are being dragged down with me?

            I think it also reflects the clearer pro-business biases visible in our culture and our discourse.  It’s no longer fashionable for academics and journalists to muckrack about the excesses of the rich, even though those excesses are as extreme as they’ve ever been.  Average people have no idea exactly how much money is being taken in at the top – let alone that recession didn’t even slow that gravy train.  And they don’t understand what financial plutocrats actually do.  (The answer is: very little of productive value.)  But they do see their garbage collector at work at the curbside every Tuesday morning.

            When the facts come to light, however, I remain confident that Canadians won’t remain so complacent.

            Imagine a “city” the size of Saskatoon, hogging one-third of all the new income generated by the entire country.  Imagine folks who earn as much in a few hours as the rest of us do in a year – yet still lecture us on the need to tighten our belts.  Imagine 25,000 families earning as much as the bottom 7 million tax-filers put together.  How long will these excesses fly under the public’s radar, while we bicker over wage gaps between unionized garbage collectors and non-union fast food workers?  Not long, I hope.


  • jim,
    thanks for your piece on income distribution. One difference that sheds light on why the attack on unions continues after the recent collapse as opposed to the rise in unions after the collapse in the 1930’s is that, now, Corporate media controls the mainstream news and opinion (this, of course, includes the Globe and Mail). I think you’d agree that you, yourself, are like the token black man on a CBS sitcom, to ease any apprehension of the Globe appearing “unbalanced,” to use Fox News’ term.

  • Emmanuel Saez is French, not American.

  • He is undeniably French, but is also a US Permanent Resident and appears to have lived there for a decade and a half.

    Like Jim, the American Economics Association was willing to consider him an “American economist.”

  • I just came across a very good and quite similar post by Robert Reich.

    He opens with Memphis “sanitation workers” instead of Canadian garbage collectors and concludes as follows:

    [The Republican] version of class warfare is to pit private-sector workers against public servants. They’d rather set average working people against one another – comparing one group’s modest incomes and benefits with another group’s modest incomes and benefits – than have Americans see that the top 1 percent is now raking in a bigger share of national income than at any time since 1928, and paying at a lower tax rate.

    Great minds blog alike!

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