In sharp contrast, here's what the economy looked like in the 28-year period from 1945 to 1973:
Notice howe eveyone in the bottom 99% goes up almost in lockstep? The only ones left out are the folks in top 1%--the three lines on the bottom of the chart, and the ones doing worst of all were those in the top 0.1%. Now sure, the folks in the top decile below the top 1% did better than eveyone else. But not outrageously so. In fact, folks in the 90th-95th percentile did better than those in the 95th to the 99th percentile. So this really is a picture of broadly-shared economic growth, nothing at all like the period that followed it from 1973 to date.
In fact, here's what it looks like if you combine the two eras together:
If you want to get a clearer picture of what the two eras were like just for the bottom 99%, here's the graph for them from 1945 to 1973, showing everyone doing almost equally well, with very little in the ways of fluctuations:
And here's the graph for them from 1973 to 2007:
It's clear that the folks in the top decile below the top 1% have done considerably better than everyone else, starting in the early Regan Administration. But, as noted at the beginning, they aren't doing that well compared to the 1945-73 era, nor are they doing well compared to the top 1%. And just look at the up-and-down ride they've had. Nothing at all like the steady growth of the 1945-73 era.
I've written before about how successful the New Deal Party system era was economically--far more successful than the Sixth Party System of divided government that followed it--but I've never had anything like this sort of data to underscore the point. The data Saez has compiled is truly invaluable, because it reveals how misleading it is to only look at data divided into quintiles, even with a special category for the bottom of the top 5%--which is what we get from the Census bureau. The census bureau data vastly under-represents the degree to which the economy has stopped working for eveyone except the top 1%. The data Saez compiles makes the 1% economy clearly visible for all to see.
But seeing how stark the difference is between the New Deal Era economy and the post-Nixon economy that followed it immediately raises the question of why the economy has changed so drastically.
To answer that question, I want to refer to a 1996 paper co-authored by the late Hyman Minsky, the economist who saw the current crash coming earlier than anyone else--arguably all the way back in 1986. But even a brief discussion of the paper I want to refer to will involve quite a bit to get through. So I'll continue that in a separate diary--The One Percent Economy --Part Two: The Why.
I'll be talking more about Minsky later in the weekend, so this separate diary will be a good introduction. If you want to get a head start, the paper I'll be talking about is "Economic Insecurity and the Institutional Prerecquisites for Successful Capitalism" by Hyman P. Minsky and Charles J. Whalen, Working Paper No. 165 from the Levy Economics Institute of Bard College. Among other things, this discussion will help set up some other topics I'll be discussing this weekend--topics that I think are very important for understanding the economic crisis we're in, and why the measures being taken are so inadequate. Above all, it establishes the viewpoint that (a) finance matters enormously as a explicit sector of the economy, (b) a related point--money is an endogenous (internal) factor in the economy, not just an external counting device, (c) capitalism changes form over time, particularly forms of finance, and economic theory must change to reflect such changes, and (d) an ahistorical reduction of economics to eternal micro-level basics misses maters of fundamental importance. |
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