Who Are The One Percent? Who Cares?

With all of the recent Place Occupying (although currently off the front pages), the United States has been introduced to a question which will remain in the public consciousness for a long time: “Who are the one percent?

Where the phrase “The One Percent” came from is hazy; a 2006 Documentary bears the name The One Percent, but for many it will remain associated with the winter of 2011.  Picking a dividing line in the battle for America’s consciousness was no doubt an attractive call to arms for the first people in the Occupy Wall Street movement who used the phrase.  Encouraging class divisions  – us versus them, the 99% versus the 1% – is an enticing goal for any populist movement.  If the Occupy protests have a lasting legacy it will be, for better or worse, drawing the public’s attention away from Kim Kardashian for just long enough to read about the “unfair” gap between the one percent and the rest of us.

The One Percent and the Deliberate Use of Scare Quotes – Oh, and Class Warfare!

Object to anything I just wrote?  Perhaps my deliberate usage of “unfair” in scare quotes?  Good.  I’m here to do a little class uniting, and I’m going to do it on the back of all of the class dividing that has happened in the last few months.

The truth is, who the one percent are doesn’t matter one bit.  The class warfare rhetoric on both sides (the 53%, the 99%) is a deliberate attempt to create warring factions among a United States population still struggling from our last recession.  If you take one thing from this article, let it be this: all of us – “the 1%”, “the 99%”, “the 53%” and even the “47%” – are better off in the present than at any time in the history of the world.  Yes, the 1% have gotten richer.  However, in the United States (and much of the world), so has everyone else.  The assumption that total income earned is a fixed pie that the rich are slicing bigger and bigger pieces from is ridiculous – the pie is growing so fast not even the rich can eat it all.

Stop worrying about who the one percent are and what they are doing and start worrying about how the rest of us are faring in our current economy.  There’s plenty of pie for all of us.  (Tom Friedman eat your heart out – I carried that metaphor across two paragraphs!)

What Countries are the One Percent?

When pundits talk about American Exceptionalism, they usually are either claiming a politician is wrapping him or herself in the flag, or praising a politician for recognizing that in the United States “It’s Different Here.”  Enough of that.  Let’s talk about the top 1% of countries.  The World Bank recognizes 216 sovereign states, so let’s call out the first three – the 1% of the world’s nations.  Let me introduce you to the United States, China, and Japan.  First, be amazed as I anger you with statistics – just imagine that the United States, China, and Japan are people and not sovereign nations.  This chart will really get you going!

 

GDPs Data from World Bank 2010 Numbers

GDPs Data from World Bank 2010 Numbers

 

Is the United States Unequal?

There are lots of ways to take a guess at ‘inequality’.  Let’s look at just two – the gap between median and mean income and the Gini Coefficient.  Here is your data presented in a nice format for the World and for the United States.  (US Data from 2010 Census Data)

World Indicators
Median GDP $21,795,720,978.91
Average GDP $355,571,398,134.11
Gini Coefficient 0.870752
Median GDP as a Percentage of Average 6.13%
United States Indicators
United States Median Income $26,197.00
United States Average Income $38,337.00
Gini Coefficient 0.503
Median Income as a Percentage of Average 68.33

I hope you realize that what I’m showing you is pretty ridiculous. Inequality isn’t the issue – the issue is improving conditions for everyone (or every country). To show you that these inequality measures are a huge waste of time, let’s flip back to the World for one second. We know that the United States, Japan, and China control an inordinate amount of world income in the form of Gross Domestic Product. Who cares – we only care if the world, in general, is better off. Here’s a chart, in constant 2010 dollars, of how the world has done in the last 50 years (again, from the World Bank).

Worldwide GDP in Constant 2010 Dollars, 1960-2010 (World Bank)

Worldwide GDP in Constant 2010 Dollars, 1960-2010 (World Bank)

 

Despite population only increasing from 3,027,185,898 to 6,840,507,002 GDP shot up massively from $1.3 Trillion 2010 Dollars to $63.0 Trillion.  That’s a lot of people leaving poverty – and considering only around $26 Trillion of that GDP in 2010 was from the top 1% of countries, it’s also not just the US, China, and Japan doing all the lifting.  The whole world is better off.

Are We Better Off Today Than We Used to Be?

The next time you hear people coming up with new ways to divide us, I hope you think back to this article.  The top 1% may have gained a seemingly disproportionate share of the nation’s income.  However, the nation’s income is so much more than it used to be (1960: $520,531,181,568 for 180,671,000 people; 2010:$14,582,400,000,000 for 309,050,816 people, both in 2010 Dollars) that the entire argument is silly. The truth is, we are better off as a whole than we used to be.  Join the 100% today!

Do you care who the one percent are?
Do you think we are better off than we were in the 1960s when income was “more equal”?
Should the 99% countries be mad that the 1% control >40% of the wealth?
Am I throwing gasoline on smoldering embers?

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Comments

  1. says

    Nice post. One of the points that I have been making is that pretty much everyone in the US is in the top 3% or so when it comes to the world, and many are in the top 1%. So all this 99% vs. 1% business — people should look in the mirror and realize just how good they have it.

    At the same time I do think that at least some of the gripes are valid. The debt has more than kept up with the growth, and via inflation, government-sponsored monopolies, insider trading, etc… at least some of the wealth is illegitimate. Via high taxation, distorted incentives and collusion we have less of a free market economy and more of a political economy. Both are reasons for relative stagnation and are valid points to complain about.

    • says

      I know people don’t like the CPI but the US numbers are actually normalized to 2010 dollars, FWIW. But yeah, there are a lot of things that can creep into GDP growth that isn’t straight growth. Inflation, population growth, debt spending… and the second two do have theoretical limits, I think (I don’t want to channel Malthus on this one, but there might be a point where the US population is saturated).

      Your second point is what scares me – the ability for new wealth to be generated without political blessings being bestowed. If regulations and permitting is so onerous that every new business requires the CEO to bow down to her government overlords we’re going to be in rough shape. Unfortunately, I think we’re closer to that than we admit.

  2. says

    I agree that we are better of as the 100% of the country, and that as a country we are much better off than most of the rest of the world. The problem a few people at the top are much, much better off and the bottom are really no better off. If growth is so great for our country, why can’t the people at the bottom move up similarly to those at the top? I don’t think that’s too much to ask for, yet it’s no happening.

    I agree that the pie isn’t “fixed” in size. However, I do think it’s a bit of a myth that everyone has equal opportunity to get their share if they just try hard enough. It’s not that simple, and there are lots of complexities and other things working against that.

    • says

      I don’t know if you caught my article on income mobility (it ran 11/26) but I sort of got into the mobility question. In summary, the study tracked income quintiles in 1996 and 2005 and found that only 42.4% of the lowest quintile in 1996 were still there in 2005.

      I don’t know if we ever reached consensus, but I think the takeaway was ’42.4% is good, but it should be lower’. It’s tough to pin down what it ‘should’ be, but even that number was a surprise to me and some of the readers – I had expected less mobility.

      Put me in the equality of opportunity but not quality of results camp as well! Thank you for your thought provoking comment.

      • says

        Just checked out your income mobility post – that’s fantastic! I would expect less mobility as well, and I’m not sure the 28.6% that moved up the the next quintile is much to get excited about, but I guess it’s an improvement and does prove the mobility point.

        • says

          Haha, probably not. Glad you liked that article… just waiting for 2015 for the Treasury to update that stale data. Odds are that mobility increases – recessions actually cause a lot of income turnover.

          For the record, the cutoff in the bottom 2 quintiles was $17,579 in 1996. You’re probably talking somewhere in the mid $20,000s to leave the bottom in 2005, but I don’t have that number handy.

  3. says

    I’m not going to debate the fair/not fair argument. Instead, I like the focus on mentality. 

    I think too many people worry about holding on to limited pie. when we think in terms of limited pie and I’m not getting my “fair share”, we tend to make choices toward circling the wagons rather than toward growing our overall reach. 

    Instead, I’m a fan of unlimited pie mentality. If I act like there’s more than enough pie for me, I’ll make choices that expand my possibilities and grow my wealth. The fair/not fair argument just isn’t something I have the time or energy to pay much attention to, when there are so many things I need to do with 24 hours to get ahead.

    • says

      I wanted to force the fair/unfair question (Oh no! The US has too much!), but the article is deliberately absurd, as I think you caught.

      I look at it in the same light as earn more money versus cut personal expenditures as a household. Sometimes cutting is not enough – you’ve got to grow the household pie. Flip the script – the Government ‘increases revenues’ by decrees in the form of taxes. Unlike the aforementioned household, I’d prefer they cut back on their spendthrift ways, haha!

      I think this pie thing has legs!

      • says

        You both know what I think of the whole 99% vs. the 1%, Occupy Everywhere, blah blah.  I’m tiring of it, but I liked this post.  

        PKamp3, I like your analysis illustrating just how much the GDP has grown.  I never thought to look at it that way.  Opportunity really is abundant, especially in North America.

        • says

          I get the feeling this post is late – I tried to beat a dead horse but it’s already buried or something. Meh, at least I got my satire on paper. You beat me to the topic, haha.

          Yeah, we’ve got it very good here in our hemisphere. Canada has come a long way since 1995, especially… it’s time for the US to follow suit.

  4. Tightfistedmiser says

    I agree that class warfare isn’t helpful and we’re well off here in the United States. I’ve been meaning to write a similar article but you beat me too it.  I’ll still write the article since I’ll be doing a slightly different take on the issue.

    • says

      Yeah, I’m certainly not claiming a copyright on this or anything, haha. I hope that you come in on a different side for some of the more opinion type statements I had in this post! I’ll be sure to read it when it goes up.

  5. says

    Yes, despite some cracks here and there, the system is sound. Opportunities
    are still alive and well. However, the shocks of 2000 and 2008 might take time
    to heal.  Unfortunately, at the end of current
    economic cycle (bear), a large number of investors could be too exhausted to
    invest again.  

    • says

      Or we could be blowing another bubble in commodities or higher education, haha. ZIRPs can only last so long – at some point the Fed and other Central Banks will have to raise rates, especially if the specter of inflation becomes unmistakable.

  6. says

    When historians looked at food riots in sixteenth and seventeenth century England, they noticed an interesting pattern. When there were real food shortages, which affected the whole of society, the ‘lower classes’ didn’t revolt. However, when the ‘lower classes’ saw wealthier people had greater access to food in times of relative scarcity (but not famine), they rioted. 

    So riots and protests don’t happen when there is an actual and very real scarcity. They happen when some people feel that they have less relative to a privileged elite. In short, they happen when the rioters’ situation isn’t really all that dismal. 

    I think the Occupy guys and gals should bear this in mind. 

    • says

      Yeah, but it will be tough to change human nature – I just want to point out that we are ridiculously well off. ‘Poor’ in America has been defined up from ‘poor’ in other countries… and when you define poor up, you’ll always have poor.

      In the US, poor still means free education, subsidized housing, subsidized food, welfare, subsidized heating and cooling, and likely enough left over for entertainment. Poor in America can still mean you are always connected to the grid with a cell phone.

      Yes, poor is tough, and from a relative perspective, the poor have a lot less than the ‘well off’. But take a demographic like “the poor” now and toss them into the 1200s – the creature comforts that we have in America (and England, Canada, etc.) would make that poor person of today incredibly well off even compared to the richest royalty.

      So I sympathize – I really do; I know that it can be very tough for people. But to rally the ‘lower 99%’ against the ‘upper 1%’ when there are still people who are actually a lot worse off in so called “Third World Countries”? It just screams politics to me. Thanks for your insightful post!

  7. says

    I’m not so tore up with the 1 percenters. It’s some of the tenth-of-one-percenters that I wouldn’t mind swinging from light poles. 
    And not by their necks, mind you.  In safe, full body harnesses, while paying ticket holders pelt them with rotten tomatoes and cow patties.  Turning a profit on public shaming.

  8. says

    I think so many percentages are thrown around (in general I mean, not in your article) that it only serves to get people confused. I do like the idea of trying to help others instead of worrying about how much of the pie others are getting compared to ourselves.

    • says

      A good point – and my absurd example is if I start an “Anti Left Handed Party” do I automatically have 90% support? Percentages don’t define a movement… people do.

  9. says

    I think we’re generally better off these days but since I wasn’t living in the 60s it’s hard to really compare since I don’t have any personal experiences to reference.  The difficulty we continue to face now is keeping jobs in the US because of the boundless availability of cheaper labor overseas.  And I really don’t know how we’re going to overcome this problem. -Sydney

    • says

      I wasn’t around in the 60s either, so I feel your pain on that, haha. The truth is that GDP has increased over and beyond what inflation alone can measure – an encouraging trend indeed.

      And you’re right about outsourcing, but I do feel it is self-limiting. It used to be the case that India was automatically tossed out as the best idea for outsourcing, but as it has become more popular it has also become more expensive. I’m of the thought that eventually salaries will normalize, even if it means that “outsourcible” jobs will have stagnant pay for a while.

  10. says

    How much of this GDP was financed by borrowing debt inappropriately?  There is no question that the United States has the highest GDP for now, some estimates show China overtaking the US by 2016, but I think the real question is what can the average US citizen buy with her dollar?  Is it the same amount of goods and services they could buy in 1960?

    • says

      I won’t blow up the spot here, but I actually have that article in my queue. Not for 1960, mind you, but a comparison between a recent grad in 1976, 1989 and 2011. It’s sure to be controversial, haha. Just trying to pump out some interesting December stuff!

      As to the borrowing – there is no doubt in my mind that a lot of the GDP growth was debt fueled. The largest component of GDP is personal consumption and expenditures – I’ll get into it more in that article (I’ll probably finish it up this week).

    • says

      Haha I would have blog-spammed you with this one, but I got most of my “one percenter” articles out of the way during the Occupy protests. I was particularly proud when I decided calculating the Gini coefficient of the world was a good idea…

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