Note: this section includes an accurate but simplified synopsis of information covered in Parts 1 & 2. For full background and details please refer to those sections or read them first.
The United States is only one country, but as one of the richest per person, and with the largest economy in the world, it has an outsized influence. The US economy overall is a powerhouse of growth and has made us, as a country, very rich with an average gross national income of $81,000 for every man, woman, and child. That said, in our survey of economic data in Part 2 we found that the growth of the US economy is not benefiting everyone in equal measure. There are many in the US who feel left behind, and plenty of data to confirm that this perception has a basis. Income inequality has grown, wealth concentration is literally off the charts, the homeless population has increased, economic mobility has declined for the poor and near poor, we have a persistently high trade deficit, and the budget deficit continues to grow. On top of that, humanity now faces the limits of what the earth can sustainably support. We almost all realize that human-caused climate change if left to continue will cause huge irreversible economic, environmental, and social damage. In reality, if not in perception, that is the most urgent issue we face and will require major investment and cooperation with the other countries of the world. That is only one of several critical issues we face from the explosion of the human population beyond 8 billion.
None of these economic and sustainability issues are beyond our ability to address. The incredible rise in productivity over the last 100 years means we have the resources and technology required to address them while making life better for all of us. History has clearly shown, however, that while market capitalism is an incredibly powerful driver of productivity and innovation, left on its own it also drives income and wealth inequality and has no incentive to address “externalities” such as climate change. Only broader society can address such issues and the mechanism for doing so is government. In a democracy in particular, we the people decide what our society should look like economically, and our priorities for addressing the issues that we face. Early in the 20th century we in the US undertook to tame unfettered capitalism to make it work more broadly for the country as a whole, resulting in an explosion of the middle class. Later in the century we took up environmental and social issues. But there has been pushback on both, and, as we’ve seen, inequality which fell in the years following the New Deal and Second World war, started rising again around 1980. What happened? As we saw in Part 2 it wasn’t that real incomes fell so much as the gains of productivity went more and more to the top. Mostly to the very top. While we’ve looked at the effects of productivity, trade, migration, deregulation, and de-unionization on incomes and wealth, and will review those findings again later, we haven’t discussed US government taxes and spending and how that has affected the distribution of income and wealth. We’ll look at that now and then put everything together.