The Fed’s latest Flow of Funds reports released showed the latest snapshot of the US “household” sector as of March 31, 2021, which confirmed that one year after the biggest drop in household net worth on record when $8 trillion was wiped out in Q1, 2020, in the 1st quarter of 2021, the net worth of US households soared by $5 trillion, or 3.8%, to a record $136.9 trillion.
This data shows that the top 1% accounts for nearly $40 trillion of total household net worth, with the number rising to nearly $90 trillion for just the top 10%. Meanwhile, the bottom half of the US population has virtually no assets at all.
This means that over the past 12 months, US household net worth has increased by a grand total of $25.6 trillion. And since the bulk of this wealth goes to a fraction of the wealthiest 1%, it means that the covid pandemic has been the biggest wealth transfer in history, making America’s richest even richer.
Perhaps you have heard all this wealth inequality mantra before. As conservatives, you may feel that this is all justified, it’s just great capitalism at work building America. Is it? Here are a few uncomfortable questions you may want to ponder:
- Did much of this newfound wealth come from innovation, hard work, or clever risk-taking of America’s finest capitalists? Some perhaps. But the large portion comes from government locking down of small businesses allowing corporates to seize market share, bailouts for large corporations with government stimulus (grants and loans), artificially low-interest rates that only large corporates can get from the Fed, and currency debasement – making their leverage assets worth more.
- Are businesses really taking risks on a “new” business model, that is based on currency debasement (government fiscal and Fed stimulus)? Recently, governments almost always resort to currency debasement to cover past financial sins, so why should one be paid for this non-risk-taking? Much of the recent advances in the stock market are being driven by Fed-driven low-interest bonds issued by corporates.
- Why is it when corporates try to monopolize markets, it is considered “ok?” But when labor tries to do the same, it is considered “not ok?” Listening to some conservatives, one gets the impression that there is there something inherently “evil” about a labor union.
- Why is it that many want free trade with low (to no) tariffs, with unrestricted trade to foreign countries, but fail to recognize that labor does not exhibit these same freedoms? Should product and labor markets not be treated the same?
- Should there be no (or very little) governmental standards and regulations in business? This may include; environmental, governance, accounting, social, and transparency to name a few. What is the right amount of government oversight?
- Why throughout the Iron age, Industrial age, Information Technology age we saw bountiful jobs and GDP growth – and now all of a sudden technology is a problem? Why are so many (not all) worried about robotics taking over our jobs? Do we no longer believe technology advancements won’t produce more jobs not less at higher productivity rates?
- Is it the economic system or is it the people that raised our youth to be, as some imply, “lazy,” that has caused economic upward mobility to dramatically decline? Each consecutive generation is finding it harder to make this economic ascent – see nice infographic here. Since older American’s are more likely to be conservative this question needs to be asked. Will older conservatives blame others, the youth, or ourselves?
If one is in the bottom social-economic strata, is it no wonder they seek solutions – often entertaining the idea of Marxist ideologies, as failed as they may be? The U.S. currently has a Gini-coefficient of 0.434, the highest of any G7 country. Envy politics works. Historically, it has been proven time after time, where large wealth inequality occurs in a population, social conflict and revolution are not far behind.
Nothing in these questions implies that Marxism works. Instead, perhaps we ourselves have forgotten what a “true” free market is and not taught the youth accordingly. We as conservatives need to address these questions with real policies or reap the rewards of ignoring the issues.