At no time in the recent past has the distance between the “Haves” and the “Have Nots” been so great. If you look at the United States in 2024, the top 1% of the wealthy hold 30.2% of the wealth. If you extend this to the top 10%, over two-thirds of the wealth are held here. Compared to 1977, the top 1% of the wealthy in the United States held 24.0% of the wealth. This gap is increasing over time. Given the policies of the new administration in the US such as massive tax cuts, deregulation of more consumer-friendly organizations such as the Consumer Financial Protection Agency, this increase will only further accelerate.
Looking at this data over time, a study by the Paris and London School of Economics shows how the trend plays out over time:
Clearly, we are well on track to see a wealth gap similar to that of the “Gilded Age” with the infamous Robber Barons such as John D. Rockefeller make a return to the scene.
What was so unique about the period of time from 1930 to 1970 and why was there such as accelerated increase from 1970 to today? Well, during the decrease in wealth disparity and the relatively stable period up to the 1970’s, we saw two key factors contributing. First was the conscious effort by politicians in the US (and around the world) to recognize that the fruits of leaving the less advantaged members of society to fend for themselves (high unemployment and in some extreme cases, famine) were massive social unrest and sometimes outright revolt. The second was the massive growth in industry that accompanied World War II and the economic boom that followed it as that industrialization moved from wartime production into that of consumer goods.
This can be seen in the period of time leading up to the 1930’s in Germany. At this point, the victor of the Entente over the Central Powers in World War I left Germany is sorry shape. They had nearly bankrupted themselves pursuing the war and then the victors imposed punitive war reparation payments on them in the Treaty of Versailles, while at the same time taking away much of their industrial base. The end result was that a very small minority in Prussia held vast estates and most of the wealth, while the rest of the populace suffered under crushing unemployment and massive, runaway inflation.
Such a political landscape was a very fertile ground for the growth of a demagogue such as Adolph Hitler who could play on this “economic anxiety” (as it was later called in the run-up to the 2016 US presidential election) of the times, identify a convenient scapegoat (the Jewish people and non-German immigrants for the Nazis in the 1930’s) and create a massive political groundswell that completely upturned the Weimar Republic of its time. Such a situation was only narrowly avoided in the Allied powers leading up to World War II through such things as the creation of social protection safety nets in many of the allied countries as well as the growth of labor unions who could push back against the baser instincts of those holding the reins of economic power.
During the 1970’s, a pair of energy (oil) crises hit the world, the first in 1973 when OPEC launched an oil embargo against the west, and the second in 1979 following the Iranian revolution which massively inflated the price of oil on the global market and sent the economies of the west into a deep recession, coupled with significant inflation. The end result of this confluence of factors (called “stagflation” at the time) was the growth of support in major governments in the west to a new school of thought – Economic Liberalism. Not to be confused at all with the general term “liberal” in terms of left-leaning groups in politics, this school of economic thought was all about deregulation and a move away from the “welfare state” into a world where capitalism and market forces shape the economy.
Ronald Reagan of the US and Margret Thatcher of the UK were two major power politicians who promulgated this theory and put it into execution. The end result was an end to the stagflation crisis; however, the impact of the changes they brought into mainstream led to the massive acceleration of the wealth gap seen in the chart above. Such wealth gap accelerating policies (collectively dubbed “Reaganomics“) included a reduction in upper tax rates in the US from 70% to 50% in 1981 and later down to 33% in 1987.
Disturbingly, the same factors that led to the rise of fascism in Europe in the 1930s are back on the main stage of the world today. Unsurprisingly, politicians are either directly or instinctively recognizing this fertile ground, leading to the growth of far-right politicians in western democracies such as the US, the UK, the Netherlands, Italy and France, and outright oligarchies in countries such as Russia. Even Germany is starting to trend in this direction despite constitutional and legal frameworks that have been explicitly put in place to prevent a resurgence of fascism in that country.