At the apparent zenith of its triumph, its enemies confounded, America seems headed for disaster. What may seem a hyperbole is only to repeat what I hear on every side. The country is visibly decaying. I do not know of anyone who sees a bright future for it.
Yet I also believe that a dramatic, and effective, program to change the direction of the economy is possible. By “possible” I mean without requiring drastic sacrifice or unrealistic improvements in social attitudes. But it cannot so confidently be asserted that the country will find the political resolve to make the changes necessary. That will depend, at least in part, on a vision of what can be done, and how to do it.
The basic facts can be briefly summarized. For almost two decades, the United States has been suffering from what the economist Wallace Peterson calls a “silent depression.” “In spite of the vaunted prosperity of the Reagan years,” he writes, “the real weekly income of a worker in 1990 was 19.1 percent below the level reached in 1973.” During the same period, average family income managed to inch ahead—a rate of improvement of 0.04 percent a year, compared with 2.72 percent over the fifteen years prior to 1973—but this near-invisible gain was only achieved because more mothers and wives entered the labor force. Thus, the overall growth in GNP has masked a serious decline in well-being.1
This seemingly contradictory state of affairs is the consequence of an unprecedented shift toward income inequality during the Reagan years. What appears to be a positive, albeit miniscule, improvement in the income of the “average” family is a statistical illusion arrived at by adding together a great many small declines with a much smaller number of substantial gains. If we look at income “deciles”—tenths—between 1977 and 1988, we discover that real incomes declined in every family decile except the highest ones. In the lowest decile, family incomes (which averaged a distressing $3,504) were 14.8 percent lower in 1988 than in 1977, in constant dollars. In the middle-income brackets—the fifth, sixth, and seventh deciles—average family incomes were lower by about 5 percent, again in inflation-adjusted terms. Even the eighth and ninth deciles—the upper middle class—saw a slight shrinkage in its real incomes, off 1.8 percent in the eighth decile, up 1.0 percent in the ninth.
Not until we reach the tenth decile ($119,635 per family in 1988) is there real growth. Here the ten-year gain, in real terms, is 16.5 percent. And if we look “inside” the top decile we can see even more plainly how GNP could rise and “average” income fall at the same time. The income of the top 5 percent of families in 1988 averaged $166,016. This was 23.4 percent over their real income in 1977. The income of the top 1 percent in 1988 averaged $404,566. This was up by 49.8 percent over the same period.2
Finally, the silent depression testifies to a decrease in productivity. During…
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