It is now common knowledge that the U.S. economy has in recent years been experiencing extremely uneven developments. While the financial sector has been enjoying enormously high rates of growth, the real sector is mired in stagnation or dismal growth rates. Accordingly, while the financial oligarchy is reaping the lion’s share of this fantastic growth of asset-price inflation, the overwhelming majority of citizens are suffering from the systematically declining standards of living.
For example, a recent report by the Federal Reserve Bank shows that while aggregate national wealth in the U.S. rose by $1.49 trillion during the first quarter of 2014, the real economy (as measured by GDP) actually contracted by 1 percentâ€•according to the Department of Commerce, the decline in GDP was actually 2.9 (not 1) percent. In a similar report, the Financial Times recently noted that household wealth as a whole is up 43 percent since the depths of the economic slump in 2008, despite the slow or nonexistent recovery in the labor market and an actual decline in median household income, down 7.6 percent since 2008 .
This obvious and growing gap between the rise of financial wealth in the absence of real growth is, of course, explained by the fantastic asset-price inflation of the past several yearsâ€•a financial bubble bigger than the one that burst in 2008. Of the $1.49 trillion increase in the national wealth in the first three months of 2014, some $361 billion were due to stock price appreciation while $758 billion were due to real estate inflation. Not only has the stock price bubble largely benefited the wealthy, who disproportionately own the major bulk of stocks, but also “the increased home values were concentrated in the mansions of the super-rich, not the modest homes of working people.” According to figures published by Redfin, a real estate group, from January through April 2014, “sales of the top 1 percent of US homes, those priced at $1.67 million or more, have risen 21 percent, while sales of the remaining 99 percent of homes have fallen 7.6 percent” .
The Financial Times, which published the Redfin figures, noted similar trends in consumer sales:
Sales by luxury retailers such as LVMH (Louis Vuitton, Bulgari) and Tiffany rose by 9 percent; sales by retailers with mainly working class customers declined. Walmart was down 5 percent, Sears’ sales fell by 6.8 percent. At the lower end, only cut-rate outlets where more and more Americans must shop to stretch their dollars saw increased sales. Dollar Tree, the largest such retailer, recorded a sales increase of 7.2 percent. . . . The newspaper observed, the gains show the effectiveness of policy in recreating the wealth lost in the recession, but its effect in boosting the economy is limited, because much of the benefit has gone to wealthy households that own stocks and large houses .
The simultaneous enrichment of the financial oligarchy, on the one hand, and the impoverishment of the masses of the people, on the other, is akin to the growth of a parasite in the body of a living organism at the expense of life-sustaining blood or nourishment of that organism. What is more, this parasitic transfer of economic blood from the bottom up is not simply the outcome of the workings of the invisible hand of market mechanism, or the blind forces of competition in a capitalist economy. Perhaps more importantly, the transfer is the logical outcome of insidious but carefully crafted economic policies that are designed to entrench neoliberal austerity economics.