March 8, 2012
The Great Inequality by Michael D. Yates

There are many kinds of inequality, but the two most obviously important ones are those of income and wealth. Incomes—normally in a money form but also “in kind,” as when part of a worker’s pay takes the form of room and board—are flows of cash (or “kind”) that go to persons over some period of time, such as a wage per hour or a yearly dividend. Incomes are always unevenly divided in a capitalist economy, and in the United States they are more unequal than in every other rich capitalist country. Since 1980, the year Ronald Reagan became president and helped engineer a savage attack on the working class, income inequality has risen considerably.

Households are physical spaces identified by the Census where people live, excluding institutional spaces like prison cells. Those in a household need not be related. In 2010, according to U.S. Census data, the richest 20 percent of all households received 50.2 percent of total household income. The poorest 20 percent got 3.3 percent. A mere three decades ago, in 1980, at the outset of the so-called Reagan Revolution, these shares were 44.1 and 4.2 percent, respectively. Those in the least- affluent households thus lost 21.4 percent of their income share, while the most affluent saw theirs rise by 13.8 percent. The next two poorest quintiles also lost in their shares of the economic pie, while the next richest quintile gained, but not by nearly as much as the top quintile. The Census breaks out the richest 5 percent of households from the top quintile. The income share of the richest 5 percent rose from 16.5 percent in 1980 to 21.3 percent in 2010, a gain of 29.1 percent. In 2010, the share of the top 5 percent was greater than that of the bottom 50 percent of households.

Economists often use a single statistic, the Gini Coefficient, to summarize increases or decreases in inequality or to compare inequality among countries.2 The Gini is a measure of how far away the actual distribution of income is from one of perfect equality, which would be a distribution in which each income quintile received exactly 20 percent of the total household income pie. In this case, the Gini turns out to equal zero. If, on the other hand, one household got all the income, the distribution would be perfectly unequal, and the Gini equals one. The greater the inequality, the closer is the Gini to one; the more equal, the closer it is to zero. The Gini Coefficient in the United States has been rising for nearly four decades. In 2010, the U.S. Gini was, according to Census calculations, equal to .469. In 1980, it was .403.3 Most wealthy capitalist nations have coefficients considerably lower than that of the United States. An article on The Atlantic website puts U.S. inequality starkly: “Income inequality is more severe in the United States than it is in nearly all of West Africa, North Africa, Europe, and Asia. We’re on par with some of the world’s most troubled countries, and not far from the perpetual conflict zones of Latin America and Sub-Saharan Africa.”4 Recently, economic historians Walter Schiedel and Steven Friesen estimated that the Gini coefficient in the Roman Empire at its peak population around 150 C.E. was slightly lower than that of the contemporary United States.5

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  1. inside-illusion posted this