Thursday, 31 May 2018

Is America "The World's First Poor Rich Country"?

Umair Haque's essay Why America is the World's First Rich Poor Country suggests that America has created a new kind of poverty. 

He argues that despite relatively high incomes, growing numbers of Americans can't afford a middle class lifestyle. Key quote:

So Americans aren’t just absolutely or relatively poor, but poor in a new way entirely. First, the basics of life exploded in price, to the point that they are now unaffordable for many, maybe most, households. Second, Americans bear the risks of paying those unaffordable costs to an extreme degree, bearing the risks that institutions should, and so those risks are now ruinously high.

He sums up his analysis by saying the U.S. economy is now a place where "extreme capitalism meets Social Darwinism by way of rugged self-reliance crossed with puritanical cruelty."

About the same time Haque's essay came out, The Atlantic's cover story was The 9.9% is the New American Aristocracy. The 9.9% refers to those who are wealthy enough to be in the top 9.9% of Americans in terms of net worth. 

To be in this group took a net worth of $1.2 million or more in 2016. The 2016 median for this group was $2.4 million and the top members have net worth's in the $10 million range. Above that and you graduate into the top 1%.

As the article chart below shows (click to enlarge), the 9.9% control a bit under 60% of our nation's wealth.

Income inequality

The article is not positive about this group (which the author says he's part of). Key quote:

The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people’s children. We are not innocent bystanders to the growing concentration of wealth in our time. We are the principal accomplices in a process that is slowly strangling the economy, destabilizing American politics, and eroding democracy. 

This is also the theme of the 2017 book The Dream Hoarders

This book defines the new aristocracy as the top 20% of earners (more than $120,000 per year for a family). It too argues this group is advantaging their children at the expense of those who earn less. 

The book got a lot of play in policy circles. The DC think tank Brookings even developed a game you can play to see if you're a dream hoarder

Haque's essay and The Atlantic's story both focus on the effects of growing income inequality and it's impact on society. Both also stress how various forms of economic uncertainty and instability are impacting individuals, families and society overall. 

We still consider a 2014 article called The Lean Years one of the best we've seen at capturing how economic uncertainty impacts both individual decision making and the overall economy. 

Effects include the rise of the gig economy, major shifts in the retail industry, impacts on elections and many more.

Economic Uncertainty is one of the most powerful and important trends we follow. See our Economic Uncertainty section for more detail. 



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