America's top 0.1 percent owns now nearly as much as the bottom 90 percent

Apr 10, 2021

Today, I was one of the speakers in a panel on 'Socialism or Capitalism' at the Conference on World Affairs. It was an excellent opportunity to refresh my knowledge of inequality statistics in the U.S. Let's start with some numbers.

Eighty-seven percent of America's wealth increase between 2006 and 2018 went to the top 10 percent wealthiest Americans*.

That means that if you are in that large group of nearly 300 million Americans that form 'the bottom' (90%!) of American society, you had to share amongst yourselves the remaining 13 percent of the wealth gained in America.

And within the 90%, there is not much social sharing of these leftovers; the bottom 50%, yes, half of all Americans, lost wealth in these 12 years.

One billion dollars per household

I don't want to sound too socialist for the Americans' taste, especially since some of you kindly subscribe to this newsletter, but don't you think the top 0.1% should pay more tax? Imagine what you could achieve for education or healthcare by sharing this wealth more fairly. It was like that in America in the 1950s, 60s, and 70s. It won't force them to sleep under the bridge; after all, we talk here about a group whose average wealth is approaching $1 billion per household.

Think about that for a moment; their average household has a thousand times one million dollars. Try to imagine for a moment how little their lives would change if they would have only half of that. And then try to imagine how you could improve the lives of so many Americans with that money. I would give at least half of that away, seriously; I wouldn't even know what to do with such wealth. Luckily, a small group of the super-rich, like Walt Disney heiress Abigail Disney and 80 others, has requested the government to raise taxes on the rich, which is a better, fairer, and more structural idea than just giving it away.

Taxation for the 0,1% decreased 83%

A recent paper from the Institute for Policy Studies analyzed the wealth concentration in the top 0.1%. It noted 'that tax policy plays a unique and dominant role in the concentration of wealth.' That insight shouldn't come as a surprise; the taxation rate of America's top .01 percent, as a percentage of its wealth, decreased dramatically by more than 83% between 1953 and 2018.

Another indication that inequality in the U.S. has increased is to compare how many times richer the top 0.1 percent is than the average American. Between mid-century and now, that has grown from 200 times as rich to 1000 times as rich.

I wonder how such an absurd level of inequality is possible. You would expect that the bottom 50 percent of the Americans, who lost wealth while the rich got so much richer, should have the political and union power to rebalance the wealth. But just today, the unions failed to get Amazon's first organized workplace in the U.S. Through my European eyes, I fall from one surprise into the other. The company has been campaigning for weeks against the union, and even the bathroom stalls were not safe from their anti-union notices. Amazon, which knows a thing or two about marketing campaigns, has been bombarding the staff with text messages criticizing the union. That would be unthinkable in Europe. Therefore, this is perhaps a good moment to look at the other side of the Atlantic.

The Nordic countries

I have lived in Germany, Austria, Sweden, and my home country, the Netherlands. These are social democracies or variations within the Nordic model with well-functioning democracies. In each of these countries, you find excellent education, healthcare for all, more equality, and a well-functioning welfare system. In short, these are generally pleasant, stable, and happy societies. And yes, they also all have their share of challenges.

Recently the Prime Minister of Finland, Sanna Marin, suggested that the Nordic countries are better at achieving the 'American Dream' than the U.S. She said that "every child, no matter their background or the background of their families, can become anything." As a woman of 35 and the youngest prime minister in the world, she is well aware that she could never have achieved this position in most of the other 190 or so countries in the world. You usually find a grey older man in charge of other governments.

The World Economic Forum has made an index of social mobility, the essence of Adams's original American Dream in the 1930s, and in the top-10, you find only (Northern) European countries.

Happiness

Do you remember what I wrote about happiness a few weeks ago? You can read it here and here. I mentioned in those articles the International Day of Happiness and the Happiness Index. The UN-sponsored Happiness Index result is remarkably similar to the top-ten of the Social Mobility Index, suggesting a linkage between the Nordic Model for society, social mobility, and happy people.

A lack of social mobility doesn't only make individuals unhappy; it is also bad for society. In economies that thrive on their human capital, you need the best people in the key positions. A level playing field with education for all and equal chances brings out the best in society.

The American Dream

Let's now go back to the American Dream, and therefore we move back over the Atlantic, where the concept has evolved over the years. In the 1930s, the dream was about social-economic opportunities for all. In the 1960s, Dr. Martin Luther King referred to the American Dream in his "I have a dream speech" in the context of the disappearance of prejudice.

However, when in the past few years, President Trump spoke about the American Dream in several speeches, he described it as getting rid of regulations because that is good for business.

But in the Nordic model, you need specific regulations to create a more fair society, with equal chances, social mobility, and more happiness.

Fifty years ago, there were not only fewer differences between the U.S. and Europe, but there were also significantly fewer differences in American society. A typical worker at General Motors earned, translated into today's dollars, 35 dollars an hour. That is now down to 15. What also went down is the power of the unions. The ones that gained control were the big corporations. And with their wealth, they buy access into the democracy, which I believe was intended by the founding fathers for 'We the People', and not 'We the CEOs'.

Taxation

The wealth at the top is ever increasing. Wealth is trickling up instead of trickling down. America's billionaires got 44% richer, while 80 million people in the U.S. lost their jobs in the year since the pandemic began. The result is that last summer and autumn, 8 million Americans fell into poverty. The increase in inequality is a structural problem that hurts the well-being of so many hard-working Americans. And like many of the main issues in society, there are solutions available. Looking at all these data through my European eyes, I know that fairer taxation would be an essential measure in my toolbox.

If you want to see the debate, which I think was quite interesting since it focussed mainly on China and the West, I will attach the YouTube video below.

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