"I Dream of Gini ..."

In this series of posts about rising economic inequality in America, I'm talking about how the American middle class has been hammered since the mid-1970s, while the well-off have seen their wealth and incomes skyrocket.

The map at left shows that distributing U.S. land according to how U.S. wealth is distributed would have the richest 10 percent of Americans hogging the whole continental United States north of a line stretching between Los Angeles and Raleigh, North Carolina. The remaining 90 percent of us would need to divvy up the land below that line. The poorest 40 percent among us would get squeezed into a tiny dot about the size of Corpus Christi, Texas.

That's one way to show the extent of the inequality, but economists prefer the Gini coefficient. According to "For richer, for poorer," a recent special report in The Economist:

The best-known way of measuring inequality is the Gini coefficient, named after an Italian statistician called Corrado Gini. It aggregates the gaps between people’s incomes into a single measure. If everyone in a [society] has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.

"America’s Gini for disposable income is up by almost 30% since 1980, [from 0.30] to 0.39," says The Economist. Is that bad, or not so bad?

Scandinavian countries have the smallest income disparities, with a Gini coefficient for disposable income of around 0.25. At the other end of the spectrum the world’s most unequal, such as South Africa, register Ginis of around 0.6. (Because of the way the scale is constructed, a modest-sounding difference in the Gini ratio implies a big difference in inequality.)

So 0.39 is pretty bad, but more worrying than that is the 30% rise since 1980. In this erstwhile land of opportunity, a sizable jump in Gini suggests that opportunity has been knocking on middle-class doors a lot less often that it once did.

By another formal measure of inequality, says The Economist, things look even worse:

Including capital gains, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, roughly where it was a century ago. Even more striking, the share going to the top 0.01% — some 16,000 families with an average income of $24 [million] — has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.

Mark Twain

100 years ago, America was in the Progressive Era, a time in which the excesses of the Gilded Age — "an era of serious social problems hidden by a thin layer of gold," according to satirists Mark Twain and Charles Dudley Warner in The Gilded Age: A Tale of Today — were being forcibly pared back by activist government. It was during the Progressive Era that the U.S. Constitution was amended to allow the levying of an income tax, and that the corporate monopolies of the "robber barons" — at that time the monopolies were called "trusts" — were getting "busted."

If the top one percent grab fully 20% of the income our economy generates nowadays, isn't it fair to say that we live in a New Gilded Age today?