Lost in the Forest

The excitement caused by Thomas Piketty’s “Capital in the Twenty-First Century” has died down. The futility of implementing his proposed global wealth tax is obvious to all but the most blindly ideological. The argument over how one determines “wealth” will continue.

But I will not deal with wealth here, but focus on income, something easier to quantify and a measure of how much a group benefits at any given point in time, and I will concern myself only with the US. The statistics on US income are not the target of particular controversy. Since the same basic trend can be found among the top 1%, the top 5%, and the top 10% of income-earners, I will use the middle group, the 5%, as my example today.

Using the statistics provided at The World Top Incomes Database created by Mr. Piketty’s team, here is a graph of the percentage of total income in the US earned by the 5% over a sixty-year period beginning in 1953 and the inauguration of President Eisenhower through 2012, the end of President Obama’s first term. This removes the impact of World War Two and any residual impact during President Truman’s tenure. Call this, if you like, the Modern Age.

Income share of the top 5%

This graph and others like it have been so common in recent years that I suspect all of you have seen it or one like it. Clearly, something significant happened in the 1980’s. This graph concerns US income distribution, so it must reflect government policies, at least in good part, right?

Most people’s first reaction to this graph, at least those from my generation (I am 69), is to identify President Reagan’s tax cuts as the turning point. To me, that is too much focus on a tree while the forest stares me in the face. To provide a clearer idea of the forest I saw, here are the same statistics with a little extra information in a graph created by a friend of mine at my request (she is much better at this sort of thing).

Income share of the top 5% by political party

The first 28 years, when the top 5% received just over 20% of the income, represent six Presidencies (Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter), three Democrats and three Republicans.

The remaining 32 years represent five Presidencies (Reagan, GHW Bush, Clinton, GW Bush, and Obama), three Republicans and two Democrats.

Some were generally judged to be conservative (e.g., Reagan), some moderate (e.g., Carter), and some liberal (e.g., Obama).

Ignoring trees and looking at the forest in this light, what does this graph tell me? It tells me that the party identification or the ideological identification of the governing President made absolutely no difference at all to the proportion of income received by the top 5%.

There is no correlation, none, nada, zilch. If there was, you would be looking at a roller coaster, not a flat plain leading up to a mountainside. Either that, or Presidents Clinton and Obama are secret admirers of President Reagan.

Now, let me be clear. I see no sense in demonizing people who earn more money than I do. Nor am I a fan of demonizing people who are paid a lot more money than I think they are worth, as long as it’s not my money. If it’s my money, than I am the demon. But this is not the issue that concerns me today.

What concerns me is that we are now entering the intense period of yet another election year. Once again, I have no doubt Republicans will be criticized, even demonized, as the ones responsible for the results shown above. Once again, I have no doubt Democrats will insist they are the only people standing between the greedy corporate hoard and the innocent public. To me, the graph above puts the lie to all that.

I am an independent and am thoroughly unimpressed with both political parties. Their leadership is uninspired and uninspiring, and I am not alone. The results are clear in the polls. But neither am I a fan of political manipulation.

I am an American and intend to remain one until my death, but I live and work outside the US. I look back with sorrow on my home nation. The level of semi-hysterical emotionalism from our political “leadership” is unnerving. The world has changed and I believe they know it, but they seem unable or unwilling to deal with it on its own terms. After all, it’s not about reality, it’s about votes. To make matters worse, it seems most economic and investment analysts are every bit as blind, frightened, and lost. After all, it’s not about reality, it’s about money.

However, what really aggravates me is that this is so simple and so obvious. Two graphs, exactly the same with the exception of one additional piece of information in the second graph. Do you find it so hard to see? Why is it so hard for the analysts to see that it goes ignored?

Our current leaders, both political and economic, of what I call the Old World of the North Atlantic are so trapped in the failure of their own analyses in past decades that they are unable to look clearly at the present for fear of the future, especially their future. I am left to believe that either they have no clue as to what is happening and what should be done about it, if anything, or if they do, they are too frightened to speak honestly to their public.

I will be discussing what I believe is underway in weeks to come as I say at the end of each commentary, “when time and spirit allow”. I will be spending less time on American politics which I find boring, predictable, thoughtless, and incoherent, but I cannot completely ignore it.

Like it or not, the more than seven billion of us who keep things running on this planet must depend on leadership that has a clear idea of where we are, where we should be, how we should get there, and then be able to communicate that to the rest of us successfully. That leadership does not exist today, most clearly not in North America or in Europe, but the problem is global.

Until it does, we are all lost in a global forest. And pardon me for saying so, but I smell fire.

——-

This is a personal blog, more of a notebook, unadvertised and without promotion. It is where I jot down thoughts that are important to me and may potentially be used in other commentaries for general publication. I write when time and spirit allow. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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