Most Americans do not know it. When they hear it, many people do not believe it. Since the early 1980s, in the U.S., most income gains have gone to the top one per cent of income earners. From 2002-07, two-thirds of new income went to one per cent of Americans.

Going back further to measure the period from 1993 to 2008 and comparing, one-half of new income had gone to one per cent of Americans — with 99 per cent of U.S. residents getting the same increase in income as the top one per cent (defined as those earning over $308,000 in 2008).

Indeed, most new income has gone to the top one per cent within the one per cent (0.1 per cent, or about 150,000 families). Within that top 0.1 percent, the top one per cent (0.01 percent) of the U.S. population now gets one dollar for every US$17 earned by the entire population.

So 15,000 families are the real beneficiaries of American capitalism.

These statistical trends were first revealed by two economic researchers in 2003. Since then no one has been able to refute the work done by Thomas Piketty and Emmanuel Saez. Worse still, economists have been unable to explain why the rich got so much richer. Sociologists fare no better. Lane Kenworthy, a leading researcher, suggests that sociologists tend to focus on how the income is attained, not on why the structure of income has become so skewed to the benefit of so few.

Two political scientists have just published a serious attempt to account for the emergence of a super rich group. Winner-Take-All Politics is the title of their article (soon to be a book), and it has already provoked a lively debate in the pages of the journal Politics and Society.

It comes as no surprise that income in the U.S. is distributed unequally, or even that the distribution has become more unequal. What Jacob S. Hacker and Paul Pierson say needs explaining is why such a small group have managed to secure so much of the newly created income.

Their explanation focuses on two factors. The first is that the political process shapes the economy, by setting the rules within which business operates. This is a standard view within political economy, but the authors point out students of U.S. politics neglect political economy, while economists tend to imagine that markets operate autonomously with governments only intervening after the fact to tax, and redistribute some income. The second is that business has taken over the American political process under the noses of conventional political scientists who operate under the assumption that voters run the show.

Hacker and Pierson point out that the political weakness of U.S. trade unions translates into tax and social policy changes that go against the interests of modest income earners. Tax cuts for the wealthy can be enacted because trade unions, virtually the only group fighting for modest-income people are unable to match the political organizing of business and the wealthy.

Political change occurs not just when governments act in favour of the rich. What Hacker and Pierson call political “drift” matters as well. By not changing unjust rules, and protecting such wealth bonanzas as non-regulation of stock option benefits, legislators serve the interests of the wealthy just as if they were reducing capital gains taxes (an important factor leading to huge benefits for a small number). Allowing hedge fund managers, the richest of the rich, to continue to pay tax at a reduced capital gains rate, instead of the regular income tax rate, is the result of this “drift” — intense lobbying to leave an obviously unjust loophole in place.

In their article, Hacker and Pierson show how excessive executive remuneration practices linked to lax corporate governance, and tax changes enhanced the fortunes of American capitalist managers and business owners alike. Benefits for the very wealthy were distributed under Democrats, and not just Republicans. Lowered taxes were an added incentive to increase pay packages.

The plutocrats who run the U.S. economy are fighting like crazy to maintain all of their privileges. Demonizing the U.S. president as a socialist or “worse” is part of the game. Updating American social science, so that interested observers can figure out what is actually going in the U.S., is a welcome first step in overcoming the business propaganda that structures U.S. politics, and overwhelms reasoned policy debate.


Cathryn Atkinson

Cathryn Atkinson is the former News and Features Editor for Her career spans more than 25 years in Canada and Britain, where she lived from 1988 to 2003. Cathryn has won five awards for her...