Posts Tagged ‘1 percent’


What happens when you combine conspicuous consumption and consumption productivity?

You get Barracuda Straight Leg Jeans—complete with “crackled, caked-on muddy coating”—on sale for $425 at Nordstrom.

When Thorstein Veblen invented the term “conspicuous consumption,” in his Theory of the Leisure Class (pdf), he was referring to late-nineteenth-century America as having entered the “predatory phase” of culture, when the people at the top obtained their goods by seizure and imputed indignity to the “performance of productive work.”

The clothing of the leisure class reflected this distancing from the world of work—conspicuous consumption combined with conspicuous leisure and conspicuous waste.

In dress construction this norm works out in the shape of divers contrivances going to show that the wearer does not and, as far as it may conveniently be shown, can not engage in productive labor. Beyond these two principles there is a third of scarcely less constraining force, which will occur to any one who reflects at all on the subject. Dress must not only be conspicuously expensive and inconvenient, it must at the same time be up to date.

Nordstrom’s muddy jeans are therefore a perfect example of contemporary predatory culture, when those at the top are afforded the luxury of ironically quoting—but not actually doing—any productive work. Instead, they capture a portion of the surplus and use it to purchase clothing that—in the form of conspicuous consumption, leisure, and waste—shows they are exempted from the exigency of work imposed on everyone else, who are of course required to dress in neat and clean uniforms, just like the servants of the first Gilded Age.


Now, in the latest stage of predatory culture, those at the top can purchase fake mud-stained jeans while McDonald’s employees will now wear uniforms reminiscent of the Hunger Games.

What’s next, corsets?*


*Here again is Veblen:

The dress of women goes even farther than that of men in the way of demonstrating the wearer’s abstinence from productive employment. . .

the woman’s apparel not only goes beyond that of the modern man in the degree in which it argues exemption from labor; it also adds a peculiar and highly characteristic feature which differs in kind from anything habitually practiced by the men. This feature is the class of contrivances of which the corset is the typical example. The corset is, in economic theory, substantially a mutilation, undergone for the purpose of lowering the subject’s vitality and rendering her permanently and obviously unfit for work.



First, it was conspicuous consumption. Then, it was conspicuous philanthropy. Now, apparently, it’s conspicuous productivity.

According to Ben Tarnoff,

the acquisition of insanely expensive commodities isn’t the only way that modern elites project power. More recently, another form of status display has emerged. In the new Gilded Age, identifying oneself as a member of the ruling class doesn’t just require conspicuous consumption. It requires conspicuous production.

If conspicuous consumption involves the worship of luxury, conspicuous production involves the worship of labor. It isn’t about how much you spend. It’s about how hard you work.

And that makes a lot of sense, for at least two reasons. First, CEO salaries in the United States continue to be much higher than average workers’ pay—276 times as much in 2015. CEOs need to publicize the long hours they work in order to attempt to justify the large gap between what they take home and what they pay their workers. As Tarnoff explains, “In an era of extreme inequality, elites need to demonstrate to themselves and others that they deserve to own orders of magnitude more wealth than everyone else.”


The problem, of course, is many American workers are working long hours these days. According to the Bureau of Labor Statistics, in 2015, employed persons ages 25 to 54, who lived in households with children under 18, spent an average of 8.8 hours working or in work-related activities and the rest sleeping (7.8 hours), doing leisure and sports activities (2.6 hours), and caring for others, including children (1.2 hours ).


And, on a weekly basis (taking into account public holidays, annual leaves, and so on), U.S. workers put in almost 25 percent more hours—or about an hour more per workday—than Europeans.


The other reason why conspicuous productivity matters is because, in comparison to the First Gilded Age (when Thorstein Veblen first invented the term conspicuous consumption), a larger share of the surplus captured by the top 1 percent takes the form of labor income during the Second Gilded Age. They get—and deserve—that large and growing share because they work long hours.

The problem, of course, as I showed the other day, that composition of income has changed since 2000. Since then, the capital share of their income has bounced back. Thus, the “working rich” of the late-twentieth century are increasingly living off their capital income, or are in the process of being replaced by their offspring who are living off their inheritances.

This was my conclusion:

It looks then as if those at the top have either turned into or been replaced by rentiers, thus joining the existing owners of capital at the very top—thereby mirroring, after a short interruption, the structure of inequality last seen during the first Gilded Age.

That’s perhaps why conspicuous productivity was invented. Increasingly, those at the top are able to capture a large share of the surplus not because they do, but because they own. But if they can hide that by boasting about the long hours they work, they can attempt to defend their class power.

Or so they hope. . .


Skellington is right: in my post on Tuesday, I did not separate out people at the very top from the rest of those at the top. That’s because, in the data I presented, those in the top 0.1 percent were included in the top 1 percent.

Unfortunately, I don’t have the same kind of breakdown in the composition of incomes as I used in those charts. What I do have are data on the shares of income and wealth for the top 0.1 percent versus the remainder of the top 1 percent (so, top 1 percent to but not including the top 0. 1 percent).


Clearly, income within the top 1 percent is unequally distributed—and has gotten more unequal over time. While the top 0.1 percent (approximately 326.5 thousand individuals) captured about 9.3 of pre-tax income in 2014 (up from 3.9 percent in 1979), the remainder of the top 1 percent (and thus about 2.9 million individuals) took home about 10.9 percent of pre-tax income in 2014 (up from 7.3 percent in 1979). Over time (from 1979 to 2014), the top 0.1 percent has increased its share of the income going to the top 1 percent from a bit more than a third (35 percent) to almost half (46 percent).


The distribution of wealth within the top 1 percent is even more unequally distributed than the distribution of income—and it, too, has become more unequal over time. While the top 0.1 percent owned about 19.1 percent of total household wealth in 2014 (up from 7.2 percent in 1979), the remainder of the top 1 percent owned about 18. 2 percent of household wealth in 2014 (up from 15.2 percent in 1979). Thus, over time, the top 0.1 percent has increased its share of household wealth owned by the top 1 percent from about one third (32 percent) to over half (51.3 percent).

The conclusions, then, are straightforward: For decades now, those at the top have managed to pull away—in terms of both income and wealth—from everyone else in the United States. And, by the same token, those at the very top have been distancing themselves from everyone else at the top.

No matter how much they do battle over their respective shares, the one thing that ties together those at the top and those at the very top is that their income and accumulated wealth derive from the surplus created by the bottom 90 percent.


Who’s running away with the surplus, those at the top or those at the very top?

In a new study on “income inequality in the 21st century,” Fatih Guvenen and Greg Kaplan note that recent increases in inequality in the United States need to be understood in terms of trends of and, especially, within the top 1 percent. That’s particularly true when, instead of using Social Security data (which capture labor income), they turn to Internal Revenue data (which capture all forms of income).

While I agree with Guvenen and Kaplan that historically there have been significant differences between the incomes of the top 1 percent and the top 0.1 percent—those at the top and those at the very top—in my view, they tend to exaggerate the differences and lose sight of the fact that the two groups have become one.

Clearly, as can be seen in the chart above (based on data from Thomas Piketty, Emmanuel Saez, and Gabriel Zucman), the average income of those in the top tenth of one percent has risen much more than that of the top one percent. From 1979 to 2014, the average income of those at the very top has risen 277 percent compared to an increase of 183 percent for those at the top. But, of course, the average incomes of both groups have soared compared to that of the bottom 90 percent, which has increased only 27 percent over the same period.

And while they’re right, the rise in capital income much more than labor income helps explain the rising share of income of those at the very top, especially in recent decades, the fact is both groups—whether in the form of labor or capital income—have managed to capture a rising share of the surplus.

Where do those incomes come from?

The following two charts illustrate the composition of incomes of the top 1 percent and top 0.1 percent, respectively.



One way of making sense of the way those at the top and those at the very top manage to capture a portion of the surplus is by distinguishing between a labor component (in various shades of blue in both charts) and a capital component (in shades of green). When added together, the two components represent the total share of national income that goes to the top 1 percent (which rose from 11.1 to 20.2 percent) and the top 0.1 percent (which rose from 3.9 to 9.3 percent) between 1979 and 2014.

The labor component comprises two categories: employee compensation (e.g., payments to CEOs and executives in finance) and the labor part of noncorporate business profits (e.g, partnerships and sole proprietorships). Capital income can be similarly decomposed into various categories: interest paid to pension and insurance funds, net interest, corporate profits, noncorporate profits, and housing rents (net of mortgages).

As can be seen in the top chart above, by 2014 the top 1 percent derived over half of their incomes from capital-related sources. In earlier decades, from the late-1970s to the late-1990s, a much larger share of their income came from labor sources. They were the so-called “working rich.” This process culminated in 2000 when the capital share in top 1 percent incomes reached a low point of 49.4 percent. Since then, however, it has bounced back—to 58.6 percent in 2014. Thus, the “working rich” of the late-twentieth century are increasingly living off their capital income, or are in the process of being replaced by their offspring who are living off their inheritances.

Much the same trend, in an even exaggerated fashion, is true of those at the very top, the top 0.1% (in the lower chart). More than half of their income has always come from capital-related sources. They were never the “working rich”; they were always for the most part “coupon clippers.” The share of their income from capital-related sources was already 60 percent in 1979 and continued to grow (to 63 percent) by 2014.

What this means, in general terms, is the growth of inequality over decades is due to the ability of those at the top and those at the very top to capture a large portion of the growing surplus. But there has also been a change in the nature of that inequality in recent years, at least for those at the top—which is not due to escalating wage inequality, but to a boom in income from the ownership of stocks and bonds. They’ve now joined the ranks of the “coupon clippers,” who are able to use their accumulated wealth to get their share of the surplus.

It looks then as if those at the top have either turned into or been replaced by rentiers, thus joining the existing owners of capital at the very top—thereby mirroring, after a short interruption, the structure of inequality last seen during the first Gilded Age.



Liberal stories about who’s been left behind during the Second Great Depression are just about as convincing as the “breathtakingly clunky” 2014 movie starring Nicolas Cage.

For Thomas B. Edsall, the story is all about the people in the “rural, less populated regions of the country” who have been left behind in the “accelerated shift toward urban prosperity and exurban-to-rural stagnation” and who supported Republicans in the most recent election.

Louis Hyman, for his part, argues that the people who have been left behind—rural Americans and the people “who live and work in small towns”—hold a misplaced nostalgia for Main Street, which has been exploited by Donald Trump. What they really need, according to Hyman, is to find new jobs online so that they can “find their way from Main Street to the mainstream.”

In both cases, and many more like them, the great divide is supposedly one of geography: everyone is prospering in the big cities—with high-tech jobs, soaring incomes, and a proliferation of non-chain boutiques and restaurants—and everyone else, outside those cities, is being left behind.

Except, of course, nothing could be further from the truth. Yes, lots of people outside of the country’s metropolitan areas have been excluded from the recovery from the crash of 2007-08 (just as they were during the bubble that preceded it). But that’s true also of cities themselves, from Boston to San Francisco.

The problem is not geography, but class.

According to a 2016 report from the Economic Policy Institute, in almost half of U.S. states, the top 1 percent captured at least half of all income growth between 2009 and 2013, and in 15 of those states, the top 1 percent captured all income growth. In another 10 states, top 1 percent incomes grew in the double digits, while bottom 99 percent incomes fell.


Much the same is true in the nation’s metropolitan areas. In the 12 most unequal metropolitan areas, the average income of the top 1 percent was at least 40 times greater than the average income of the bottom 99 percent. In the New York City area, the average income of the top 1 percent was 39.3 times the average income of the bottom 99 percent, in Boston 30.6, and in San Francisco, 30.5 times.

By the same token, some of the nation’s non-urban counties have very high levels of income inequality. Lasalle County, Texas, for example, has an average income of the bottom 90 percent of only $47,941 but a top-to-bottom ratio of 125.6. Similarly, Walton County Florida, with a bottom-90-percent income of $40,090, has a top-to-bottom ratio of 45.6.

left behind

The fact is, across the entire United States—in large cities as well in small towns and rural areas—the incomes of the top 1 percent have outpaced the gains of everyone else. That’s been the case during the recovery from the Great Recession, just as it was in the three decades leading up to the most recent crash.

While it’s true, the voters in most metropolitan areas went for Hillary Clinton and those elsewhere supported Trump. The irony is that the majority of those voters, inside and outside the nation’s cities, have been left behind by an economic system that benefits only those at the very top.


One of the arguments I made in my piece on “Class and Trumponomics” (serialized on this blog—here, here, here, and here—and recently published as a single article in the Real-World Economics Review [pdf]) is that, in the United States, the class dynamic underlying the growing gap between the top 1 percent and everyone else was the much-less-remarked-upon divergence in the capital and wage shares of national income. Thus, I concluded, “the so-called recovery, just like the thirty or so years before it, has meant a revival of the share of income going to capital, while the wage share has continued to decline.”

Well, as it turns out, that conclusion is more general, characterizing not just the United States but much of global capitalism.


We know that—not just in the United States, but in a wide variety of national economics—the share of income going to the top 1 percent has been rising for decades now.


Thanks to the work of Peter Chen, Loukas Karabarbounis, and Brent Neiman (and the full paper [pdf]), we also know that corporate profits (across some 60 countries) have also been rising.

We document a pervasive shift in the composition of saving away from the household sector and toward the corporate sector. Global corporate saving has risen from below 10 percent of global GDP around 1980 to nearly 15 percent in the 2010s. This increase took place in most industries and in the large majority of countries, including all of the 10 largest economies.

According to their analysis, the rise of corporate saving mirrors an increase in undistributed corporate profits, corresponding to a decline in the labor share for the global economy.

Moreover, the increase in corporate saving exceeded that in corporate investment, which implies that the corporate sector improved its net lending position. Just as I concluded in the case of the United States, the improved net lending position of corporations is associated with an accumulation of cash, repayment of debt, and increasing equity buybacks net of issuance.

If you put the two trends together—increased individual income inequality and increased corporate savings—what we’re witnessing then is increasing private control over the social surplus. Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want—or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

And proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.

Why is it anyone would want to save such an economic system?


This semester, we’re teaching A Tale of Two Depressions, a course designed as a comparison of the first and second Great Depressions in the United States. And one of the themes of the course is that, in considering the conditions and consequences of the two depressions, we’re talking about a tale of two countries.

As it turns out, the tale of two countries may be even more true in the case of the most recent crises of capitalism. That’s because the two countries were growing apart in the decades leading up to the crash—and the gap has continued growing afterward.

It seems we learned even less than we thought about the first Great Depression. Or maybe those at the top learned even more.

As Thomas Piketty, Emmanuel Saez, and Gabriel Zucman remind us,

Because the pre-tax incomes of the bottom 50% stagnated while average national income per adult grew, the share of national income earned by the bottom 50% collapsed from 20% in 1980 to 12.5% in 2014. Over the same period, the share of incomes going to the top 1% surged from 10.7% in 1980 to 20.2% in 2014.

What is clear from the data illustrated in the chart at the top of the post, these two income groups basically switched their income shares, with about 8 points of national income transferred from the bottom 50 percent to the top 1 percent.


The consequence is that the bottom half of the income distribution in the United States has been completely shut off from economic growth since the 1970s. From 1980 to 2014, average national income per adult grew by 61 percent in the United States, yet the average pre-tax income of the bottom 50 percent of individual income earners stagnated at about $16,000 per adult after adjusting for inflation, which barely registers on the chart above. In contrast, income skyrocketed at the top of the income distribution, rising 205 percent for the top 1%, 321 percent for the top 0.01%, and 636 percent for the top 0.001%.

Clearly, “an economy that fails to deliver growth for half of its people for an entire generation”—and, I would add, distributes the growth that has occurred to a tiny group at the top—”is bound to generate discontent with the status quo and a rejection of establishment politics.”