Is Unprecedented Inequality the Reason the Economy Can’t Recover?

Business-minded people hear the word “inequality” and their reproductive organs crawl back up inside their bodies reflexively.

The “I Word” smacks of socialism and it runs counter to everything we learn in free-market capitalism and private enterprise. The way it’s supposed to work is that the winners are separated from everyone else because of how smart, hard-working and, yes, occasionally lucky they are.

But what if, after decades and decades of this – along with a rewriting of many rules and the pulling up of ladders after they’ve been used, the club just becomes too hard to join? What if the opportunity  distribution just becomes so prohibitively lopsided that mere effort and chance aren’t going to cut it anymore? And what if The Law of the Jungle can no longer be relied upon to keep the system fair for new entrants?

And more than this, what if rampant inequality is what’s really holding back the economic recovery for everyone?

There are facts and figures that make this case very cogently. The interesting news is that you’re no longer automatically dismissing this idea out of hand, even if you are a believer in free enterprise.

Witness the reaction to my tweet this morning:



That ludicrous stat comes from a new piece by James Surowiecki at the New Yorker that you’re going to want to read:

Open Season (New Yorker)

What do you think? Are we making to much of the wealth and income disparity of this decade – which is unprecedented until you get back to the Gilded Age and Robber Barron society from before the turn-of-the-century.

I’ll also add one more article from this week into the mix, while we’re thinking out loud. Profits are are record highs for US corporations – and yet we’re only reinvesting about twice as much as we’re returning to shareholders in the form of dividends and buybacks. In the 1970’s, corporations were investing 15 times as much – hiring, training, building, R&D, etc. See:

The profits prophet (The Economist)

Every other data point concurs that we’ve just witnessed a massive wealth transfer from the lower, middle classes to the very top of the pyramid, whether intentionally or not. Is this kind of thing what’s causing us the aggravatingly slow pace of economic recovery?



This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. w88 commented on Sep 21

    … [Trackback]

    […] Find More here to that Topic: […]

  2. commented on Sep 28

    … [Trackback]

    […] Information on that Topic: […]

  3. immediate edge commented on Oct 03

    … [Trackback]

    […] Find More to that Topic: […]

  4. dark net markets commented on Oct 11

    … [Trackback]

    […] Read More here on that Topic: […]

  5. fun88 commented on Oct 13

    … [Trackback]

    […] Read More on on that Topic: […]

  6. S&W commented on Oct 14

    … [Trackback]

    […] Find More Information here to that Topic: […]

  7. commented on Jan 07

    … [Trackback]

    […] Find More Information here to that Topic: […]

  8. Milwaukee 6511 manuals commented on Jan 19

    … [Trackback]

    […] Read More on that Topic: […]

  9. go commented on Feb 04

    … [Trackback]

    […] Find More to that Topic: […]