Now that most of us are sated (bloated) with material holiday blessings, let's reflect on our material health as a society.
This was the Christmas of the Internet billionaire. Dozens of companies that did not exist five years ago, that have never earned a penny of profit, nonetheless each have a stock market value in the billions. Dozens of chief executives under the age of 30 have net worth in the hundreds of millions. Jeff Bezos, the founder of Amazon.com, was Time magazine's person of the year.
Suddenly, the economy is growing at 5 percent a year, more than double the rate that most economists thought sustainable. Can the good times continue? Quite possibly. But can they be more broadly shared? Only if we take some initiatives as a society.
Thanks to very tight job markets, official statistics show wage and salary income becoming slightly more equal. But that figure leaves out stock compensation, which counts as wealth, not income. Wealth is becoming more unequal than ever.
Although more Americans own stock than ever before, the top one percent still owns more than 40 percent of all stock value. The bottom 40 percent still owes more than it owns.
And although ordinary wage and salary earners have finally begun to make modest income gains (since 1996), real wages for most workers are still lower today than in 1979.
Young people, excluding computer whizzes, face relatively low wages and astronomical housing costs, especially in large metropolitan areas. Inflation-adjusted salaries for recent college grads, though slightly higher than last year, are still almost $2 an hour below their 1989 level. For those with only a high school diploma, entry level salaries have fallen almost a fourth since 1979.
These trends are all the more remarkable because labor markets are tight. Yet with weaker unions, less public regulation and globalization, workers lack the bargaining power to bid up wages, to demand profit sharing or to get generous pensions and other fringe benefits. A lower percentage of the work force has pension benefits now than in 1980.
All of this suggests that the public issue of the turn of the century ought to be how we spread this new wealth around, by designing social institutions that allow more Americans to enjoy a piece of the action. If we don't devise strategies for broadening prosperity, the wealth pyramid will become narrower and narrower.
There's a difference between wealth-spreading and welfare. Innovative policies for wealth spreading don't just tax the rich to subsidize the poor. They promote middle-class assets and values.
Historically, America has been a broadly based democracy in large part because we had strategies that offset the natural tendencies of wealth to become concentrated. In the early Republic, President Jefferson pursued land tenure policies that favored free-holding farmers rather than large landlords. These policies were reinforced in the Lincoln administration, with the Homestead acts and legislation creating land grant colleges, as well as policies for universal and free public education.
Today, fewer than 3 percent of Americans are farmers, but the same basic instruments of wealth-broadening apply--the ownership of property and the development of human capital. Yet homeownership is beyond the reach of many young Americans because we no longer subsidize it much--leaving market forces in a booming economy to bid up housing prices.
All politicians pay lip service to education. But few politicians are serious about spending the money to lower class sizes and reward good teachers. It's easier to conjure up new tests and call that educational reform.
The Wall Street Journal recently reported that one school system was outperforming all others in raising the test scores of poor and minority kids. It was, of all things, the Pentagon's system for the families of GIs. The Pentagon's secret ingredients were discipline--and money: $7,279 per pupil, or 23 percent more than the national average.
Any serious version of wealth-broadening requires government action. Another strategy is so-called lifetime endowment accounts, as supplements to Social Security. Children at birth would get a nest egg, which could be used for college tuition, a starter home or retraining, and eventually to supplement retirement income.
The free market is great at generating wealth, not so great at spreading it around. Among the other meanings of the Christmas story is that prosperity is too good to limit to the rich. Like no other society in the history of the world, we can afford to share our blessings, if we only have the imagination and goodwill. Happy holidays.
Robert Kuttner is co-editor of the American Prospect.