Wednesday, August 5, 2009

The Richer the Poorer?

I’m accustomed to using the lens of statistics to enhance my understanding of cultural phenomena. Here is such a glimpse. Consider that in 1958 disposable personal income per capita was $9,433; in 2008, the corresponding number was $28,741. These numbers are comparable because both are expressed in constant dollars pegged to purchasing power of the dollar in the year 2000. These two numbers tell us that in 2008 we had three times more real wealth per person than we had in 1958. Dwight D. Eisenhower was president at the time; the Interstate Highway System was under construction, had been since 1956. The highest income tax rate in 1958 was 91 percent on income exceeding $400,000 ($3 million in 2008 dollars); the top rate in 2008 was 35 percent on income above $357,700. To the best of my knowledge, no state, county, or school district tottered on the brink of bankruptcy in 1958. And college education was free to all residents of the several States of the Union.

These thoughts surfaced because Brigitte happened across an article on by Ralph Nader titled “Purloining the People’s Property,” available here. The article’s gist is that the situation has drastically changed. Our legislators are privatizing public functions with a kind of desperation unworthy of those we appoint to govern us. But I need not seek examples in Arizona, Colorado, Pennsylvania, Indiana, or Illinois. I have examples right here at home; the de facto bankrupt Detroit School System comes to mind when I look around.

The value of the statistical underpinning is that it shows, beyond question, that the causes of our deterioration are not really financial. Nor can we blame it on war. In 1958 the end of World War II was thirteen years back. It had consumed $4.1 trillion in 2008 dollars. The Korean war was five years back; it had gobbled up $320 billion (same basis) and, in its peak year, it commanded 4.2 percent of Gross Domestic Product. Something else has changed. Unfortunately we have much less precise access—if any, for that matter—to the invisible structures that represent a collective of souls. If we could see that structure unambiguously—as with patient effort we can see the financial structure—we would know where the problem lies and why it persists.


  1. Hey, how could you stop there? This was too short. It does, however, make the point very clearly. Sigh... I'll have to read Nadar's article too. Thanks for the link and for backing things up with some nice, constant dollar stats!

  2. Just curious, those sound like mean averages. Do you happen to have the median numbers for disposable income in those years? I'm just wondering if that level of disposable income growth is something that most people have experienced, or if it's a reflection of the big increases at the top of the income pyramid.

  3. Median income in 2007 dollars, thus very close to the same kinds of numbers used in the posting, was $31,072 in 1958 for men, $19,469 for women. In 2007, male median income was $45,113, female $35,102. Now let’s compare increases between per capita values for disposable income to median income. Using 2007 rather than 2008 (as in the post), per capita disposable income increased 204 percent between 1958 and 2007. Male median income increased 45.2 percent, female by 80.3 percent. This does suggest a rather drastic redistribution of income toward the top in this period. And, as you infer, John, most people, indeed, have not benefited from the increase in per capita income.