Michael Lind thinks so. As more wealth becomes concentrated in the upper 5-20% of the population, aggregate demand shifts to those items they like to buy, and away from those things the lower 80% purchases.
According to Moody’s Analytics, the top 5 percent of American earners are responsible for 35 percent of consumer spending, while the bottom 80 percent engage in only 39.5 percent of consumer outlays. Meanwhile, the top 20 percent received nearly half of all income generated in the U.S. -- 49.4 percent -- and the ratio of the income of the top 10 percent of Americans to the poor has risen from 7.69-to-1 in 1968 to 14.5-to-1 in 2010.
At the same time, however, the top 10 percent of earners received 50 percent of all income, while they accounted for only 22 percent of spending. Where did the rest of their money go? Much of it went into speculation in the two waves of the bubble economy between the late 1990s and 2008. Had more of that money been in the hands of the bottom 50 percent, more of it would have been spent on consumer goods, including manufactured products, and far less would have gone to gambling on condos in Manhattan and Miami and trendy stocks.
This suggests a tangible economic problem is created when wealth is allowed to be concentrated in the hands of the few. This is not the first time in history this has happened.
Related:
- Definition.
- A Modern Day Plutonomy?
- From the Wall Street Journal.
