Home > Economy
Wealth Disparity: The Coming Political Storm?
How Seventy Years Ago May Soon Sound Really, Really Familiar
In bullish times, the public is largely tolerant of Wall Street's immense salaries and bonuses. But as you know, these are not bullish times -- and "tolerant" ain't exactly the best word to describe the public mood. You may already have noticed some of the stories that reflect the shift.
In 1970, for example, the average for all CEO pay was about 30 times that of an average worker's; this multiple has increased steadily to about 100 times today. And as much as the chart speaks for itself, there's more: the multiple is actually closer to 500 times if you include benefits and stock options.
If that's not enough, recent data can show the income disparity in other ways, such as how the highest one percent of income earners in the U.S. accounted for nearly 25% of total income in 2006. In 2007, it's likely that the current trend eclipsed the 1929 high.
You'll notice that income inequality fell dramatically after 1929, but the reasons why include more than the economics of the Great Depression. Most of us have heard or read about the bank runs and bread lines; less well understood is the hugely important role that politics played, specifically the political policies driven by the public's overwhelmingly bearish mood. Today's so-called negative politics pales when compared with the vitriol that passed between President Franklin Roosevelt and the opponents of his New Deal.
I can give you a flavor of this by describing a bit of history regarding Gainesville, GA, the town where I live today. It was demolished in 1936 when two large twisters joined to create one massive F4 tornado that came directly into the town square (240 dead, 1,600 injured). FDR took a strong interest in the town's plight, and in turn the rebuilding effort included substantial aid from the Federal government.
The May issue of The Elliott Wave Financial Forecast shows how the mood that drives markets can, does and will show up in the political trends of our day: see it for yourself, right now. Click here for details.
In March 1938 the town was ready to celebrate its rebirth: the ceremony included a personal visit and speech from Roosevelt himself. The U.S. economy still had not recovered, and FDR was still embroiled in New Deal-related (i.e. political) controversies. So, while his speech began with a mention of "the fine courage which has made it possible for this city to come back after it had been, in great part, destroyed by the tornado of 1936," most of his comments attacked the "economic royalists" who opposed him:
"Today, national progress and national prosperity are being held back chiefly because of selfishness on the part of a few. If Gainesville had been faced with that type of minority selfishness your city would not stand rebuilt as it is today.
"The type of selfishness to which I refer is definitely not to be applied to the overwhelming majority of the American public. Most people, if they know both sides of a question and are appealed to, to support the public good, will gladly lay aside selfishness. But we must admit that there are some people who honestly believe in a wholly different theory of government than the one our Constitution provides.
"You know their reasoning. They say that in the competition of life for the good things of life; 'Some are successful because they have better brains or are more efficient; the wise, the swift and the strong are able to outstrip their fellowmen. That is nature itself, and it is just too bad if some get left behind.'
"It is that attitude which leads such people to give little thought to the one-third of our population which I have described as being ill-fed, ill-clad and ill-housed. They say, 'I am not my brother's keeper'—and they 'pass by on the other side.'"
So if you're wondering what the "politics of anger" on a national level really sounds like, perhaps now you have a better idea. It's not like politicians in our day who want to say likewise will have to dream it up on their own -- the precedent is on the record. And the just-published May issue of The Elliott Wave Financial Forecast explains why "likewise" is indeed what we should expect in the near future. Click here to learn more.
Tags: