More Inequality: GDP Per Capita Grows Faster than Median Household Income

Speaking of income inequality (thank you, Senator Sanders!), Governing offers this clickable map showing that economic growth has outpaced median income growth in every state:

From 2000 to 2013, GDP per capita in South Dakota grew 26.9%. Median household income in South Dakota grew over the same period by only 2.6% (yes, we’re adjusting for inflation here). We’re actually in relatively good shape: in most states, inflation-adjusted median household income has gone down since 2000. Only four states and D.C. are at their highest historical median income; the other 46 states, including South Dakota, are down from their peak median income (we’re down 2.5% from our 2008 peak).

GDP per capita rising faster than median income means only one thing: new wealth is concentrating at the top and not trickling down to the masses. More wealth concentration means a shrinking middle class. Weakening the middle class weakens democracy:

A strong middle class, as thinkers from Aristotle to James Madison to modern political scientists have noted, fosters better governance by helping ensure government is well-run, increasing citizen participation, minimizing factional fighting, and promoting policies for the benefit of all of society rather than special interests. In contrast, economic inequality and a weak middle class make the political system imbalanced and depress the political participation of the non-wealthy, reducing voting, discussion, and interest in public policy. Political scientist Frederick Solt’s 2008 study of advanced countries found that a rise in inequality from low to high levels reduces political discussion by 12 percentage points and voting by 13 percentage points. Since even in relatively equal societies the non-wealthy are less likely to participate in politics than those with greater economic resources, inequality and a weak middle class have a profound impact on who is politically engaged [David Madland, “Growth and the Middle Class,” Democracy, Spring 2011].

Democracy demands an engaged citizenry. Capitalism demands a big middle class that provides strong consumer demand. The wealth concentration we see on the above map shows South Dakota and America are moving away from healthy democracy and healthy capitalism. Again, that’s why Bernie Sanders tells us that income inequality matters.

7 Responses to More Inequality: GDP Per Capita Grows Faster than Median Household Income

  1. Bernie Sanders is not the answer to this, i.e. “The problem with socialism is that you eventually run out of other people’s money” Margaret Thatcher.

  2. mike from iowa

    The problem with capitalism is all the money goes to the 1% and eventually you run out of other people’s money. “If it is not nailed down,it is mine and if I can pry it loose,it is not nailed down”. Commodore Vanderbilt

  3. Roger Cornelius

    Very good quote to answer Mr. Sol mike from iowa.

    The problem Margaret Thatcher and Mr. Sol as well as all republicans is they don’t have a clue what Bernie is talking about. They have in their minds a Hitler whenever they hear the word socialist.

  4. Deb Geelsdottir

    I think income inequality is a much more dangerous threat to the USA than any terrorist anywhere, including white male American terrorists. The only presidential candidate who recognizes the severity of the problem is Bernie. The only candidate with a viable solution is Bernie.

  5. Deb, I’m slogging through Piketty’s Capital. He agrees that increasing income inequality can create enormous upheaval. I worry more about income inequality than about ISIS because the angry, anxious American middle class may not recognize the real problem, and their anger will translate into harmful distraction movements like the Tea Party of 2010 and the Trump Party of today, which lead to rule by demagogues who are less capable of recognizing and confronting real threats.

  6. Fascinating juxtaposition of Thatcher and Vanderbilt. Socialists and capitalists both are after everyone else’s money. Who runs out of target money first?

  7. I agree Deb. How much more can the one percent take from its low income workers? One out of every four children live in poverty today in the world’s most richest country. Is this all the better America can do? The GOP are more worried about fetuses and LGBT people getting married.