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The Pandemic and Wealth Inequality

Photograph by Nathaniel St. Clair

The latest figures from the Federal Reserve Board on wealth inequality cover through the quarter ending in March 2020. They show a reduction in wealth inequality—something that has happened during economic downturns.

More importantly, according to the Fed, wealth inequality has generally been increasing since the first covered period, the third quarter of 1989 to when it reached its highest level in the fourth quarter of 2019 during the Trump regime.

The dramatic change is highlighted in the two tables below. They show the Fed figures for both the percentage and dollar amounts of all household wealth held by each group. The figures in between are from the start of the Trump regime to the highest point of wealth inequality. Most of the increase in the share of wealth since 1989 went to those in the top 1% while the poorest 50% experienced a dramatic decline.[1]

[*From the fourth quarter of 2019 to the first quarter of 2020, total wealth declined from $110.75 trillion to $104.3 trillion.

There was a significant decline in the share of the 1% during the great recession. It went from its then highest point of 29.7% during the third and fourth quarters declining to 25.8% in the first quarter of 2009. That high point was not reached again until the first quarter of 2013 when it came in at 30%. From then on, the share of the wealthiest 1% generally continued an upward trend during Obama’s presidency reaching 31.6% in the fourth quarter of 2016.

The recent decline in the share of wealth held by the wealthiest 1% occurring in the first quarter of 2020 is likely to have been reversed during the second quarter. There has been an upward spike in the stock market, presumably, largely brought on by the federal bailout money and actions of the Federal Reserve including lowering interest rates. From its low point during the first quarter in 2020, the NASDAQ index, as of June 26, is up over 42% and the Dow up almost 34%.[2]

The stock market increase is especially favorable to the wealthiest. According to the Federal Reserve figures, since 2013, the wealthiest 1% have held over 50% of all corporate equities and mutual funds.

The increase in stock prices must be especially pleasing to many, if not all, of the wealthiest among the top 1%. For the year, as of June 26, the stock price of Microsoft has gone from $161 to $196 assumedly adding to the happiness of Bill Gates; and our wealthiest human, Jeff Bezos, has had the good fortune to see his Amazon stock go from $1,898 to $2,692. Tesla has outdone them all, more than doubling from $430 to $960, enhancing Elon Musk’s fortune.

The recent rise in the stock market is certainly not something that can be counted on to last, especially given the recent spikes in Covid-19 infections. It, along with threats to humanity that include the ongoing damage to the environment, the ever-present threat of nuclear war, the possible continuation of depression era levels of unemployment, and the never-ending chaos of the Trump regime may quickly prompt a decline in the stock market.

Wealth by Race and Ethnicity

Figures from another Federal Reserve Table covers household “wealth by race” for whites, Blacks and those labeled Hispanic.[3] Not shown here is the fourth category “other.”

*The holding of wealth is not solely a function of one’s race or ethnicity. Poverty rates among Blacks and Hispanics are roughly twice the rate of poverty among whites. However, despite a much lower rate of poverty, most poor people are white. And women experience a higher rate than men.[4]

*The tables do not appear to take into account the changing size of the population of each group. The relative size of the white population has been declining while the size of the Hispanic population has grown significantly increasing from 9% of the total U.S. population in 1990 to 16.3% as of 2010.

Critical are the dollar amounts. From the third quarter of 1989 to the first quarter of 2020, Black wealth increased almost 600% and Hispanic wealth over 800%, both more rapidly than the increase in white wealth of slightly over 475%.

However, more important is the increase in the dollar wealth gap. In the third quarter of 1989, Whites held $17.3 trillion more than the combined wealth of Blacks and Hispanics. By the fourth quarter of 2020, the gap between them came to $86.37 trillion, an increase of almost 500%. If wealth is the sole factor that determines power, those with power, especially the ones mostly in the wealthiest .01% who are predominantly white, have become that much more powerful.

Another Federal Reserve Board study, Updating the Racial Wealth Gap, covers the continuous wide gap in the average wealth of whites compared to that of Blacks and Hispanics. From Page 2,

“The wealth of white families is considerably greater than that of black or Hispanic families, and the gulf that separates them appears to have changed little over most of the last three decades. The distance between the net worth of white and non-white families – referred to as the “wealth gap” – increased sharply following the Great Recession,[when Obama was president] as non-white families experienced proportionally larger losses in net worth, and then declined modestly between 2013 and 2016.”

From 1989 until 2016, the average net worth of white families has ranged from being 4.6 to 7.2 times greater than the average wealth of Black families and from 3.6 to 6.1 times greater than the average wealth of Hispanic families.

Below is a table in this study titled “Assets, Debt, and Net Worth by Race” that covers average family worth in 2016 dollars.[5] Unfortunately, this study goes through 2016 so there are not figures covering the impact of the leadership of a person who has characterized himself as “a stable genius” and as the “the least racist person there is anywhere in the world.”[6]

*****

There are signs of hope resulting from the recent growth of mass movements struggling for social justice. However, even before the recent downturn in the economy, well over 30 million residents of the U.S. were deemed by the government to be living in poverty, thousands were homeless and millions were enduring food insecurity and a lack of adequate health care. With the loss of millions of jobs and the pandemic, many more are suffering.

Despite these conditions, there has been little talk in the halls of Washington and state Capitals of imposing a wealth tax, especially a windfall wealth tax on those billionaires whose wealth has increased during the pandemic. The funds from a wealth tax could be used to address the growing needs of those who are deprived and suffering.

Hasn’t the time come to use the excessive wealth of the excessively wealthy to provide people with meaningful relief from the difficulties they are needlessly facing?

Notes.

1) There is a huge difference in the wealth between the wealthiest among the 1% and those at the bottom of the 1%. A disproportionate share of the increase gained by the 1% has presumably gone to those at the top of the 1%.

2) The Dow was at $28,868 on January 2 slumping and reaching a low of $18,592 on March 23. As of June 26, it was at $25,015.

The NASDAQ index was at $9,092 on January 2 declining to $6,860 on March 23 before jumping ahead of where it started the year by more than 7% to $9,757 on June 26.

3) Racial categories are problematic. Those considered Hispanic are labelled as such because of what is deemed to be their family’s origins. Those in the Hispanic racial category consists of people from various “races.” This is reflected in government statistics that now have the categories White, not Hispanic; and Hispanic, any race.

4) see https://www.census.gov/content/dam/Census/library/publications/2019/demo/p60-266.pdf

5) See page 47 page 48 https://www.federalreserve.gov/econres/feds/files/2015076r1pap.pdf It has figures for median (half have more, half have less) wealth by race in which white wealth relative to Black and Hispanic is even greater than average wealth differences cited here.

6) https://thehill.com/opinion/white-house/488983-donald-trumps-response-to-coronavirus-proves-erratic

https://www.theguardian.com/us-news/video/2019/jul/30/trump-claims-least-racist-person-in-the-world

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Rick Baum teaches Political Science at City College of San Francisco. He is a member of AFT 2121.

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