Great economic cataclysms have in the past knocked the super rich off their stride. Our Great Recession’s deep pockets, stunning new income data show, are bucking the historical tide.
We can wait all we want, but sometimes history never gets around to repeating.
History — more specifically, the history of the Great Depression in the 1930s — has been a constant presence in America’s political discourse ever since the Great Recession started slamming us in 2008.
Analysts have drawn all sorts of useful and entirely appropriate parallels between the run-up to the Great Depression and the years before the Great Recession. And inequality — the gap between America’s rich and everyone else — has figured prominently in those parallels.
In 1928, the year before the stock market crash, America’s richest 1 percent were taking in just shy of 24 percent of the nation’s income, a modern-day high.
In 2007, the year before our Great Recession’s Wall Street meltdown, America’s top 1 percenters were pulling in 23.5 percent of the nation’s income, the top’s highest share since 1928.
But the parallels go even deeper.
The early years of both the Great Depression and the Great Recession hammered incomes at America’s economic summit. In 1928, the nation’s top 1 percent were averaging just over $400,000, in today’s dollars. Two years later, that top 1 percent average income had dropped by half, to just over $256,000.
The early years of the Great Recession had much the same impact. America’s top 1 percent averaged $1.44 million in 2007, the year before Wall Street’s epic meltdown. In 2009 top 1 percenters averaged over $520,000 less, more than a 36 percent dropoff.
Back in the Great Depression, after the initial income shock for the super rich, the shocking would continue. Top incomes kept dipping as the Great Depression wore on. Average top 1 percent income didn’t reach the $256,000 level of 1930 again until 1936 and didn’t regain 1928’s $400,000 level — the inflation-adjusted pre-Great Depression high-water mark — until decades later, in 1965.
By that time, the incomes of America’s bottom 90 percent had jumped from just over $9,400 — their 1928 level — to nearly $28,000.
In other words, in the three decades after the onset of the Great Depression, the incomes of America’s top 1 percent — after you take inflation into account — essentially didn’t rise at all. Over those same years, Americans in the bottom 90 percent saw their average incomes triple.
No gains for America’s rich. Big gains for average Americans. By the 1960s, those average Americans were sharing in the wealth their labor created. The United States had become a fundamentally more equal and prosperous place.
A history worth repeating? Absolutely. But this history, new data released earlier this month indicate, isn’t repeating. Not at all. Our contemporary rich have already resumed their rocket ride to ever grander fortune.
The rich back in the 1930s were still reeling three years after the Great Depression hit. The rich today, we now know from the newly released data, are reeling no longer.
The new data come from University of California at Berkeley economist Emmanuel Saez, the scholar who has revolutionized our understanding of America’s highest incomes with his work over the last decade.
Saez has spent this last decade parsing IRS statistical records to tease out the incomes of America’s richest, over time, and compare the incomes of these rich — in the top 1, top 0.1, and top 0.01 percent — to the incomes of much more average Americans.
Earlier this month, using newly available IRS data, Saez updated his numbers, to take the U.S. income story through 2010. The Great Recession, Saez found, is most definitely no longer following the Great Depression script.
Back in the early 1930s, incomes for America’s top 1 percent were still dipping two, three, four, and more years into the Great Depression. In our Great Recession, the dipping of high incomes hasn’t even lasted two years.
In 2010, the incomes of America’s top 1 percent did not decline. These incomes rose sharply — by an average $105,638, or 11.6 percent, over 2009 levels.
Incomes for America’s bottom 90 percent? These incomes did continue to dip in 2010 — by $127, to $29,840. Some perspective: In 1973, after adjusting for inflation, America’s bottom 90 percent took home an average $33,795.
So where do all these numbers leave us? Back in 1929 Coca-Cola filled the airwaves with what would prove to be an all-time classic advertising slogan, “the pause that refreshes.” Our Great Recession, if current income trends continue, may prove to be the pause that refreshes . . . inequality.
The Great Depression began a hammering of incomes at the top that left the United States more equal. The Great Recession, the new Emmanuel Saez data suggest, will have nowhere near that impact. Our rich appear about to regain most all the ground they lost in the Great Recession’s early stages.
But we need some caveats here. The equalizing that began in the 1930s didn’t just happen. Average Americans made it happen. They marched and rallied and staged walkouts and sitdowns. They elected candidates who fought to level up America’s least fortunate and level down our most fortunate and powerful few.
All this mobilizing would take years to make a significant equalizing impact. We today can make a significant equalizing impact, too. We just need to get going. History will only repeat if we make it.