A Vox reader asks: What is wealth inequality and class warfare and why is it extra bad at this point in time?
“Wealth” is someone’s net worth — that is, their assets (like savings, stock portfolios, and the value of their property) minus their debts (like student loans). “Wealth inequality” is measured by looking at how total wealth is spread out across the population. The more wealth there is at the top, the more inequality there is because there’s less to go around for everyone else.
Today, there’s a huge gap in incomes between rich and poor. Even though incomes across the board rose at relatively similar rates in the decades after World War Two, incomes at the very top started to grow much faster after the 1970s — a trend that’s driven, at least in part, by shrinking union membership. For instance, CEOs’ compensation has grown by 1,085 percent since 1978 while the average worker’s salary has only grown by 24 percent.
And though wages at the bottom have grown at a faster clip than those at the top in recent years, that change has not been enough to reverse the overall trend. Since 1979, the top 1 percent of earners saw their wages grow by 182 percent; the bottom 90 percent saw their wages grow by 44 percent. As a result, the concentration of money at the top of the income ladder is at the highest it’s been in nearly 100 years.
But that’s income inequality, which just looks at the distribution of people’s wages. What’s more extreme is the gap in wealth between rich and poor households. According to the Federal Reserve Bank of St. Louis, the bottom half of households have an average net worth of $51,000. Collectively, they own just 2.5 percent of household wealth in the country. By contrast, the top 10 percent of households had an average net worth of nearly $7 million and own more than two-thirds of household wealth — a share that has only been growing over the last three decades.
There are other worrying aspects of the wealth gap, including racial inequality. On average, for every $1 that white families owned, Black families and Latino families owned 23 cents and 19 cents, respectively.
Class warfare, or class conflict, happens when the tension between social classes comes to a boil. That happens when the interests of different classes diverge, building resentment between them. Oftentimes, this comes in the form of protest or revolt and is generally viewed as a struggle between workers and the ruling class or elites in society. Sometimes this gets violent, as was the case in the Great Railroad Strike of 1877, when workers in multiple states went on strike after railroad workers saw their wages get repeatedly cut. Eventually the rebellion was squashed by the National Guard and private militias, and about 100 people were killed.
Part of the reason you might be hearing phrases like “wealth inequality” or “class warfare” more often these days is because the concentration of wealth and power in the hands of the few has been on full display. In January, for example, Donald Trump, a billionaire, was sworn in as president while being surrounded by other billionaires. (There were many, many millionaires in the audience as well.) So as most Americans who watched Trump’s inaugural address saw it on their screens, a handful of the world’s richest men had a front-row seat. In fact, the combined wealth of everyone at the Capitol that day topped $1.2 trillion.
At its very core, the reason this level of inequality is bad is because it’s deeply unfair. But it’s not just a matter of fairness. It’s also dangerous. The fact that so few people own so much wealth is a threat to democracy.
In his farewell address, former President Joe Biden warned the nation that the United States was becoming an oligarchy — a system of government in which power is only shared by a small group of elites. It’s a warning that politicians like Vermont Sen. Bernie Sanders have been talking about for years, especially after the 2010 Supreme Court decision Citizens United allowed corporations to spend unlimited amounts of money on elections.
The hoarding of wealth is already having an impact on our government. Since Trump returned to the White House, he’s handed over a lot of power to Elon Musk, who, with a net worth of hundreds of billions of dollars, stands to be the world’s richest man. And while Musk is charged with gutting the federal workforce, he’s not required to adhere to certain government standards.
Why is it that Musk has been able to evade the ethics rules that typically apply to other government personnel? And why is it, anyway, that Musk — now an unelected bureaucrat — has so much influence over policymaking? The answer is that Musk likely gained access to so much power because he spent hundreds of millions of dollars on the election last year in an attempt to help Republicans win, and his investment seems to have paid off. He operates by different rules than everyone else because he can simply buy his way to the White House.
The concentration of wealth has also degraded some of the country’s institutions outside of government. Amazon founder Jeff Bezos, for example, who owns the Washington Post, directed the newspaper’s opinion pages to avoid publishing views that are in conflict with his own, focusing their coverage on “personal liberties and free markets.” Bezos also killed the Post’s endorsement of Kamala Harris last fall.
It’s not necessarily the case, though, that America is on the brink of a class war, despite the fact that there’s so much inequality that billionaires are taking joyrides to space while millions of Americans are struggling to make ends meet. In fact, the last election cycle showed that people in different income brackets are becoming less politically divided, with Trump making gains among poorer voters, who historically have overwhelmingly voted for Democrats.
But if history is any guide, this level of inequality is unsustainable, and the economy might course-correct. Between 1800 and 1920, for example, inequality in the US grew very quickly. But in the 60 years that followed, the gap between rich and poor shrank significantly. During that period, the wealth of the average family grew 40 times its size while the wealthiest Americans saw their fortunes double.
It’s hard to say how the situation will improve this time. But chances are, at some point, that the rich will push their luck and the rest will say enough.
