George Orwell missed by 4 years.
Massive social changes have happened over the last 30 years. Our hugely powerful American society strongly differs from what it was then. This is the first of a series that will look at some of the trends that emerge from recorded data. We can see some things happened, and when, but will never discover why and who this way. Trendlines on the page are like a mass of footprints in sand, we cannot know what was going on, but they are there. Basic trends lead to the beginning of understanding; let us review records before all indentation in the sands of time are smoothed away by the waves of new events.
In this Footprints series, we will not attempt will be made to link to a possible whys or hows. Quick answers would probably be conspiracy-theory simplistic, anyway.
Significant Changes Happened in the last 30 years.
The five graphs in Fig. 1 all have the same time line. For example, 1980 is at the same location along each chart. Scan vertically to see how things change in relation to each other. To see the correlated behavior better, double click the image and display the entire file on the screen. Click on the underlined figure name in the paragraph for the graph image. That is, click 1C to bring up the single graph shown as (C) in Figure 1.
Fig1: 5 Indicators of class inequality during the previous 100 years.
Fig 1A Peak oil
1A is the US oil production history. The heavy green “Total” line shows the Total annual oil production extracted in the U.S. The black line is from the lower 48 states. The difference between the two is from the Alaskan Prudhoe Bay (dotted curve). Production of crude peaked in November of 1970.
This is displayed because of the peak’s impact on how we developed afterwards; it imposes profound constraints on our options in the future.
Fig 1 B,C Shares of Total Income
The upper earners suddenly started taking an ever-larger fraction of the money flow starting about 1980. This graph follows Dr. Emmanuel Saez’ lead in showing fractions of the total earned each year, rather than the dollar amount, because the total dollar amount changes and because inflation rates are highly variable.
1B shows the post ’80 rising earning share transferred to the 10% of all households that earn the most.
1C shows the post ’80 falling share that goes to the lowest earning 1/5th of workers. The earning shares of the other 70% of households lie between the trendlines for the top 10% and the bottom 20%.
Fig 1D Tax Rates of the Classes
1D shows how our class groups fared in their official tax rate. The powerful Ultras got the largest drop in taxes (after ’80, of course). They also multiplied their share of the total US earnings by 5.
Fig 1E Evaluating the Workforce
1E uses data from Dr Robert Reich . Industrial productivity maintained an ever growing increase while the base wage stagnated, finally showing a 7% growth in 2009 over the value in 1979. Total compensation was only a bit higher. Base wages, the kind that most people earn by their own efforts, flattened out during the Saudi Arabian oil embargo, but total compensation did not really start its dive until 1980 (1980 again). Part of this wage stagnation came from holding actual dollar increases to minimum possible amounts. Part due to the fact we “off-shored” much of our basic industry and workers left behind had to take (much) lower paying jobs.
In Zero Sum Games, we saw that during the years from the end of WW-II to 1980 the fraction each group received varied about a constant value over the years. The box summarizes some basic facts from that post.
Most of the classes discussed have millions of member households. Ultras form a group of less than 12 thousand.
These comparisons refer to income (including capital gains) not net worth, (meaning all assets). A person can be in the ultra class without being a billionaire. A billionaire is not necessarily an ultra.
Summary
Starting about 1980, our society gradually lost many of its capabilities. At the same time the various income classes lost or gained from their original fraction of the total income, we exported our industrial might across the world and shut down our factories. I am not sure we could now manufacture a fluorescent light if we had to.
These are linked ideas, even though we promised at the beginning not to show connections. The super gain by the Ultras and losses by the bottom 4/5ths of our households are tied with the loss of industrial manufacturing. And we did, indeed, lose industries during these last 30 years.
We lost our steel industry, our textile industry and much of our paper industry, to mention a few. Our elites had their hands on the tillers of industry, under the control of our ultras. Our auto industry almost collapsed. It may have clawed back a kind of success from the unprecedented strength of the yen and weakness of the euro. But the car companies stopped making the things to go into cars; now manufacturing means assembly, pushing part A into slot B. Our aviation industry is surviving with off-shore manufactured metal and electronic parts. Even our brilliant military opts for foreign manufacture.
By the 1980’s our submarine fleet moved in silence and could not be tracked. Soviet subs had normal screw propellers that generated noisy cavitation when running, and were easy to track. This was the backstory to Tom Clancy’s enjoyable 1984 novel, Hunt For The Red October. In the mid 1980s, the U.S. Navy contracted with Toshiba Heavy Industry to make the then top secret precision-designed screws for a new generation of subs. THI sold the designs to the Soviets via the Norwegian company Konigsberg, and we lost this huge advantage. Ultras around the world made family fortunes on this. And they kept them. Ref: Natural Museum of American History.
We made the best commercial optics in the world at one time. Lenses you might buy now are all made abroad. The list of lost industries is huge. This all happened during the same 30 year period that income share shifted to the upper categories.
The inequality trendlines seem to start near 1980, but some of these loss-trends suffered by the bottom of the earning households may have started during the post-Vietnam downturn and 1970s oil embargoes by Saudi Arabia and Iran. The net result is that our elite classes have gotten much larger share in income, and our Ultras are now nearly overpoweringly wealthy. These are the most powerful and wealthy creatures ever to walk on Earth.
This post attempts to capture snapshots of the what and when of income inequality. The other 3 w’s: where, why and who cannot be answered by footprint artifacts. But, sometimes, seeing there are trends in the patterns is enough.
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Charles J. Armentrout, Ann Arbor
2012 Feb 04
Listed under Economics …thread Economics > Inequality
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