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America: How the rich get richer....and richer

If you are an American - and most likely the same situation applies equally to other Western nations - this piece from Information Clearing House on how the rich have become richer - and richer! - will be an eye-opener, even if not a surprise.

"Since the official end of the last recession in June 2009, the wealthiest 1% households in the USA have captured 91% of all the net income gains, according to university studies based on US income tax records. At the same time, median family real incomes have consistently fallen 1%-2% every year since 2009 in the US—and that’s at the median income level. For those below the median, the real income decline has been even greater. That’s almost 100 million households of ‘production and non-supervisory workers’ in the US, trying to survive on stagnant or falling wage incomes for the past six years.

How has this extreme inequality come about? How is it that wage incomes have been stagnant during a so-called ‘economic recovery’ since 2009, while the wealthiest 1% have captured virtually all the income gains for themselves?
 

It starts with profits. Compressing wages have allowed corporations to enjoy historic record profit margins—i.e. profits not from increased sales of goods and services but from slimming down operations, from cost cutting, which means mostly labor cost cutting.

Grow Profits by $5 Trillion in 5 years

Official government estimates of US corporate profits amounted to $1.3 trillion in 2008, rising to more than $2.4 trillion in 2014. Cumulatively, over the six years since 2009, that adds up to extra profits of $3.7 trillion over and above the $1.3 trillion level of 2008. But that’s not all. That’s only profits from sales of goods and services.

Not included in the $3.7 trillion are profits from corporations’ speculating in financial assets and securities, which is equal to another fourth of total corporate profits. That’s profits from buying and selling stocks, bonds, derivatives, currencies, real estate properties, and so on. At roughly one fourth, that’s about another $1 trillion dollars .

So US corporations have added about $5 trillion extra profits since 2009, give or take a couple hundred billion dollars here or there. The key question is what’s happened to that $5 trillion?






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