What Our Modern Era of Greed Looks Like

Emmanuel Saez's graph of income inequality since the Depression

Between the beach and the birthers-turned-death panelists, you probably missed this one last week: Income inequality in America became more pronounced at the end of the Bush era than it had been since, well, ever. The closest comparison to the gap between the super rich and everybody else are the years just before the Great Depression. Hmmm…

University of California at Berkeley economist Emmanuel Saez tracks income data each year; the most recent numbers, for 2007, became available earlier this month and Saez updated his analysis last week. He found the top 0.01 percent—fewer than 15,000 families—raked in more than 6 percent of all income in 2007. That well breaks the previous record, set back in 1928. (See graphic for a stunning visual depiction.) Paul Krugman called it “truly amazing,” but you don’t need a Nobel Prize to figure that much out.


The history of income inequality in America, says Saez, is painted in a deep U-graph. Before World War II, income concentrated in the top decile of earners. The shock of the war and post-Depression economic reforms—from the New Deal to the labor movement and industry regulations—broke up the pre-war concentration. That distribution held strong until the Reagan years ushered in a steady, steep re-concentration of income and wealth. The Robert Rubin-dominated Clinton years stayed Reagan's course, and income concentration reached its pinnacle at the height of the Bush years.

Saez says the current recession is likely to loosen things up again at the top. But unless Washington intervenes to restore the safeguards that kept predatory greed in check throughout much of the 20th century, we’ll be right back to the Gilded Age when the recession finally lifts.


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