To grasp the sheer magnitude of U.S. economic inequality in recent years, consider its two major stock market indices: the Standard and Poor (S&P) 500 and Nasdaq. Over the last 10 years, the values of shares listed on them grew spectacularly. The S&P 500 went from roughly 1,300 points to over 3,800 points, almost tripling. The Nasdaq index over the same period went from 2,800 points to 13,000 points, more than quadrupling. Times were good for the 10 percent of Americans who own 80 percent of stocks and bonds. In contrast, the real median weekly wage rose barely over 10 percent across the same 10-year period. The real federal minimum wage fell as inflation diminished its nominal $7.25 per hour, officially fixed and kept at that rate since 2009.
All the other relevant metrics likewise show that economic inequality in the United States kept worsening across the last half-century. This happened despite “concerns” about inequality expressed publicly across the years by many establishment politicians (including some in the new Biden administration), journalists, and academics. Inequality worsened through the capitalist downturns after 1970 and likewise through the three capitalist crashes of this century (2000, 2008, and 2020). Nor did the deadly pandemic provoke soul-searching or policies adequate to stop, let alone reverse, the ongoing redistribution of income and wealth upward.
No advanced economics is required to grasp that divisions, bitterness, resentment, and anger flow from such a persistently widening gap between haves and have-nots. Among millions who search for explanations, many become prey for those mobilizing against scapegoats. White supremacists blame Black and Brown people. Nativists (calling themselves “patriots” or “nationalists”) point to immigrants and foreign trade partners. Fundamentalists blame those less zealous and especially the non-religious. Fascists try to combine those movements with economically threatened small-business owners, jobless workers, and alienated social outcasts to form a powerful political coalition. The fascists made good use of Trump to assist their efforts.
U.S. history adds a special sharpness to the search for explanations. The dominant argument for capitalism in the 20th century after the 1930s Great Depression was that it “produced a great middle class.” Real U.S. wages had risen even during the Depression. They were generally higher than elsewhere across the globe, and especially in comparison with those in the USSR. High wages showed the superiority of U.S. capitalism according to the system’s apologists in politics, journalism, and academia. Demolition of that middle class at the end of the 20th and into the new century pained especially those who had bought the apologies.
And indeed, the Great Depression and its aftermath had lessened inequality significantly, enabling such a defense of capitalism to have some semblance of validity. However, for that defense to be persuasive required two key facts to be forgotten or hidden. The first is that the U.S. working class fought harder for major economic gains in the 1930s than at any other time in U.S. history. The Congress of Industrial Organizations (CIO) then organized millions into labor unions utilizing militants from two socialist parties and a communist party. Those parties were then achieving their largest-ever numerical strengths and social influences. That is how and why together the unions and the parties won the establishment of Social Security, federal unemployment compensation, a minimum wage, and a huge federal jobs program: all firsts in U.S. history. The second fact is that capitalists in the 1930s and afterward fought harder than ever against each and every working-class advance. The “middle-class” status achieved by a large portion of the working class (by no means all and especially not minorities) happened despite not because of capitalism and capitalists. But it was certainly clever propaganda for capitalism to claim credit for working-class gains that capitalists tried but failed to block.
The reduction of U.S. economic inequality accomplished then proved temporary. It was undone after 1945. Particularly after 1970, capitalism’s normal trajectory of deepening economic inequality resumed through to the present moment. Simply put, capitalism’s basic structure of production—how it organizes its enterprises—positioned capitalists to reverse the New Deal’s reduction of economic inequality. Much of the temporary U.S. middle class is now gone; the rest is fading fast. Over the last half-century, U.S. capitalism brought inequality to the extremes surrounding us now. No wonder a population once persuaded to support capitalism because it fostered a middle class now finds reasons to question it.
In capitalist enterprises, tiny minorities of the persons involved occupy positions of leadership, command, and control. The owner, the owner’s family, the board of directors, or the major shareholders comprise such minorities: the class of employers. Opposite them are the vast majorities: the class of employees. The employer class determines, exclusively, what the enterprise produces, what technology it uses, where production occurs, and what is done with its net revenue. The employee class must live with the consequences of employers’ decisions from which it is excluded. The employer class uses its position atop the enterprise to distribute its profits partly to enrich itself (via dividends and top executive pay packages). It uses some of its profits to buy and control politics. The goal there is to prevent universal suffrage from moving the economic system beyond capitalism and the economic inequality it reproduces.
Deepening U.S. inequality flows directly from this capitalist organization of production—its class system. Occasionally, under exceptional circumstances, rebellious social movements win reversals of that inequality. However, if such movements do not change the capitalist organization of production, capitalists will render such reversals temporary. To solve the extreme inequality of U.S. capitalism requires systemic change, an end to capitalism’s specific class structure pitting employers against employees. If production were organized instead in enterprises (factories, offices, stores) that were democratized—one worker, one vote—as worker cooperatives, economic inequality could and would be drastically reduced. Democratic decisions over the distribution of individual incomes across all the participants in an enterprise would far less likely give a small minority vast wealth at the expense of the vast majority. The same logic that dispensed with kings in politics applies to employers in capitalism’s enterprises.
This article was produced by Economy for All, a project of the Independent Media Institute.
About the Author: Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.