Posted by: mulrickillion | December 24, 2011

America’s inequality need not determine the future of Britain

By Martin Wolf, Dec 22, 2011 — “The poor you will always have with you,” said Jesus. Despite vast rises in wealth, mainly over the last century, this remains true today because we define poverty relatively. Some object to this judgment: has destitution not disappeared from high-income countries and is it not diminishing in the developing world? The answer is: yes, although much poverty remains. But we are social animals. As stomachs fill, we wish to participate fully in our societies. But rising inequality is in the way.

As the US Congressional Budget Office noted in a fascinating recent study, for the 1 per cent of the population with the highest income, average real after-tax household income grew by 275 per cent between 1979 and 2007, reaching 17 per cent of the total. For the others in the top quintile of the distribution, average real after-tax household income grew by 65 per cent. For the 60 per cent in the middle (the 21st to 80th percentiles), the growth in average real after-tax household income was a little less than 40 per cent. For the bottom quintile, average real after-tax household income rose about 18 per cent. The Organisation for Economic Co-operation and Development states that “the wealthiest Americans have collected the bulk of the past three decades’ income gains”. Moreover, it notes, most of these gains accrued to executives and finance professionals.

An important question is whether similar shifts are happening – or are likely to happen – in the UK and other high-income countries. . . .

Warren Buffett has argued that “there’s been class warfare going on for the last 20 years and my class has won.” The remark has not made him popular with his peers. But he was surely right.

America’s inequality need not determine the future of Britain – FT.com

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