Why Are The Rich Getting So Much Richer - Road to the Middle Class

BACK AT THE end of the 19th century the rich were very rich. They were, principally, the people who had brought us the industrial revolution in oil, steel, railroads, and finance.

Then, over the last century, inequality declined. But now it is rising again. As Robert Samuelson writes,

Productivity gains (improvements in efficiency) are going disproportionately to those at the top. We do not really understand why.

Actually, we do. John D. Rockefeller became fabulously wealthy because he lowered the price of illuminating oil from about 80 cents per gallon to about 8 cents a gallon. Nobody really was able to compete with Standard Oil Company until they found oil in Texas.

The classic big corporation of the mid-20th century was not particularly nimble and not particularly entrepreneurial. Plus, of course, the high taxes encouraged corporate executives to limit their taxable income.

But since 1980 there has been a frenzy of change in the business world. Almost all the great companies of 1950 are reduced to shells when compared to their glory years. And a host of new companies have risen to take their place.

Have the CEOs of these companies been too greedy? Who knows? Some of them are crooks, and some of them have gone to jail.

But the bottom line is that American businesses are the most productive in the world (Toyota excepted). So it makes sense that their leaders would be the most highly paid.

And if you want to know why �inequality� is rising, maybe it has something to do with the high rate of immigration. If you increase supply of labor, then the price of labor is going to be lower than it would have been without the extra competition.

There is one fly in the ointment. State and local government employees get paid about 45 percent more than comparable employees in the private sector. It seems we are creating a new oligarchy of government employees in the United States.

Now that sounds like a real problem.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

Comments:

Posted by: Gary Stamper on 09/28/06 2:37am

Chris, has the cheaper immigration labor wage decreased by 400% and more? Because that's the difference between what todays' robber-baron-type CEO makes and wages. Time for another corporate "slap-down." Whatever will you do with your book "The Road To The Middle Class" when there is no middle class? You know very well that the real secret to America's success was the middle class with a disposable income. How will these companies market to the "have-nots?"

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