Monday, April 23, 2012

economists calculate that 23% of all national income is going to the top 1%

FT |This spring, an intriguing pattern has developed in the real estate market in Aspen, the upmarket Colorado ski resort. Properties that are worth more than $10m – those sold to mega-oligarchs – have generally held much of their value in recent years. Meanwhile, condos (or flats) that are valued at less than $1m are continuing to sell to vacation companies, albeit for less than five years ago.

However, properties worth between $1m and $10m are seeing a dearth of bidders. The reason? Locals are apt to blame the “bonus belt” problem. More specifically, although some global oligarchs appear protected from economic swings, the top- tier bankers who were splashing around their cash before 2007 – and who typically bought those $1m-$10m ski lodges – no longer feel so flush. Bonuses have been squeezed, jobs are being cut, and many wealthy residents have suffered paper losses on their assets – including real estate in places such as Aspen.

Don’t expect the rest of mainstream America to shed any tears about this. On the contrary, the whole issue of wealth is currently stirring up unusually strong emotion there. Never mind the wave of protests that has occurred in the “Occupy Wall Street” camps, where the “99 per cent” are railing against the richest 1 per cent. What is really sparking polarisation now is a call by President Obama and other Democrats to tax the rich more heavily. Republicans claim that this is tantamount to “class war”.

But in spite of all this emotion – or rather, because of it – what is happening in Aspen is thought-provoking. In recent years there has been growing evidence that income inequality is rising in America. Economists calculate, for example, that 23 per cent of all national income is now going to the top 1 per cent of Americans, double the rate seen 25 years ago. That top 1 per cent also hold around 40 per cent of all wealth. But although such statistics have caused hand-wringing, what is less clear is what has actually caused this trend, who precisely is receiving this cash – or, for that matter, what might change the pattern in the years ahead.