Maximum Wage and the Limits of Human Inequality

Pegging the rise of maximum compensation to the rise in the minimum will go a long way towards avoiding global disruptions





The appropriate maximum wage that society should have will be a critical issue in this century. It is generally agreed upon at this point that a neurosurgeon should get compensated more than a tour guide. The Soviet experience of a relatively narrow gap between highest and lowest compensation (top company manager officially earning 3-5 times the entry level worker) shows that society's progress stagnates if tangibly unequal abilities and contributions are rewarded with compensation that's perceived as relatively equal. Yet various banana republics (United States included) around the world demonstrate that stagnation also sets in when wage inequality gets sufficiently monstrous.

It is not enough to look at relatively egalitarian societies like Japan or Sweden to try to find some golden maximum/minimum ratio. What is needed is a common sense and/or philosophical framework that 1) justifies a certain income ratio
and 2) creates conditions compatible with human nature and self interest that allow the set ratio to be maintained.

1) Justification for capping the difference between top and bottom incomes should be grounded in reality and pragmatism and not idealistic popular desires of how a world should be. Theorists like Nietzsche spent considerable time elaborating that humans aren't equal. Yet in an ironic twist, the same reasons (that he gave for not having a leveling system where everybody is assumed to have the same value) can be used to set limits to difference in valuation.

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Like many characteristics of a population, the natural abilities to be exchanged for money are spread along a bell curve. Natural ability is anything that gives a physiological edge in addition to training. An example would be the hyper sensitive and rare taste buds of a top chef or a fighter pilot with remarkable reflexes and fast twitch muscles. If you take a person with poor taste buds and a person with exceptional ones and provide both with identical intensive high quality training on food preparation, there will be a certain intangible limit to how much better one chef is than the other. This applies to all professions. What is known for sure is that one is not 1000 times better chef after the training (or 100 times). Such numbers are simply ludicrous mathematically.

Napoleon Bonaparte is not 100 times superior person to say, a gas station manager and neither does Napoleon deserve 100 times more cars, 100 times more houses, 100 times better quality food, 100 times the salary, 100 times the size of personal land, etc. Think about it. Even without the leveling of military training, if you take the brain of the gas station manager and multiply its function by 10, the gas station manager would give Napoleon a run for his money in most if not all areas of life. Whether intelligence, speed, personality, patience, if you take an ability on one low end of the bell curve and multiply it by no more than 10, you automatically get to the other end of the bell curve (ex: IQ of 30*10=300).

I am using a multiple of 10 for simplicity here since the actual difference cannot be readily quantified (one perhaps can argue better for 15, 20, or 8). Considering the outrage over the bankster bonuses in the last 2 years, it appears the general public intuitively knows that there are limits to salary compensation. What remains to be done is to draw some line in the sand. A person earning 10 times as much as somebody earning 50 grand a year is getting half a million and automatically gets into top 1% income bracket. 10 times the compensation is an enormous leap. This perhaps sounds shocking, the way explaining that a duke does not have divine right to all the local land might have sounded shocking 300 years ago.

"But isn't compensation also determined by social importance of an ability (usually allocated by market forces)?"

As far as social importance, it is a very valid point. In today's absurd dying socioeconomic system, we don't see prime ministers and military generals receiving the same incomes as Lloyd Blankfein or other wall street criminals. We also don't see the operators of nuclear missile submarines getting 400 times the amount a waitress or a new army recruit gets (the way a modern CEO does compared to entry level workers in his/her organization).

Certainly the argument from social importance would indicate societal leaders, augmenters, and protectors to be the most vital. It is a tricky subject which should be properly studied with in depth examination of what professions benefit society the most (hint: engineers and scientists in political power). There are various ways of determining social importance with length and difficulty of educational training being one of them and critical examination of what makes real physical economy grow being the other (to filter out people who spent 13 years in intensive study of psychoanalysis or Gregorian chant from the top compensations).

This leads us to the idea of a free market competition, a concept as utopian and disconnected from reality as pure communism. The unregulated "market" is and will remain a diverse collection of political power centers that evolve the rules of the global private casino as they see fit. The obvious examples of the market giving top rewards to athletes, pop stars, and organized crime (Citigroup, JP Morgan Chase, etc) shows that it is a very poor determining mechanism of socially important tasks. This is where we see a difficult social divergence happening between perceptions of important jobs (nuclear power plant director) and consumer determined rewards for not-so important jobs (national talk show host). Obviously we'd like for both the public and infrastructural demands (that allow the public to live) to have a say in compensation without too much divergence.

If incomes could be broken into 10 levels, it very well could be that a top entertainer should be a level 7 worker (earning 7 times more than the minimum income of level 1) while the nuclear power plant director gets to be level 8. This will be up to the politicians and the needs of the crowds as long as they maintain the ratio system (in this case, based on maximum wage difference of bottom income multiplied by 10).

2) How does one make the maximum wage system stable and compatible with human nature? The simplest solution is to make the rise in maximum salary dependent on the rise in minimum salary. This means that if level 1 worker earns 100 units a day while the top level 10 worker earns 1000, the level 10 would only be able to get a raise of 10% to 1100 units if the salary of level 1 goes to 110. If you are beginning to suspect we are moving beyond capitalism to a more high tech welfare system of the future, then you are correct. Notice how the maximum salary gets to grow while being tied up to the minimum.

Pegging the material progress of the highest compensated to the material progress of the poorest can easily work within the capitalist system but it begins to work even better in a post-monetarist technocratic system. The strongest and richest must be given a personal incentive to improve the lives of the weakest and poorest through an income peg. They will still remain 10 times better off (10 times the cars, 10 times the living space, 10 times the clothing) but at the same time, if they work in their self-interest they will be lifting all boats. This dynamic inevitably puts more technically oriented people into top positions of society where they are most needed anyway. We're talking people who understand how to improve infrastructure, logistics, and basic structural economic welfare provision.

These matters will continue being a major concern as we gradually transition to a post scarcity transhumanist world of the future. It is important that we start discussing the limits to human inequality early on before social disturbances on a planetary scale have a chance to really develop.

American oligarchy and taxation

Increasing percent of budget funded by richest 1% shows dramatic growth in the power of the oligarchs. Key data by conservative "think tanks" hides a call for increased government involvement in plain sight. 




Over the past 3 decades we have seen systematic creation and funding of dozens of prominent "foundations", "institutes", "universities", and "charitable organizations"(in reality being clusters of hired ideologues organized as so called think tanks) that promote reduction of government influence on American oligarchs. Many of these organizations serve as disinformation/public relations propaganda factories to divide and conquer scientists, politicians, economists, and intellectuals as a whole. They are funded by numerous oligarchs (a person rich enough to have extra money to spend on influencing political structures to make even more money and having the psychological will to do it consistently) and have been an effective propaganda arm of the social movement started during Reagan's ascendancy.

Many of the financiers of these propaganda factories are second and third generation oligarchs such as Richard Mellon Schaife. Schaiffe is credited as one of the founding fathers of the Reagan conservative movement and he single-handedly took it upon himself to fund character assassination of Bill Clinton in the 1990s. Schaiffe isn't even an oligarch rich enough to be in the top 100 Forbes list and yet he was able to (through spending enough money on ideological public relations) get millions of foot soldiers and believers for the conservative movement. Whereas some of the original titans of industry, like John D. Rockefeller, sometimes came from humble backgrounds, the children and grandchildren of the tycoons are pure bred aristocracy. Mr. Schaiffe, as such, lives in a social bubble even more isolated from daily realities of most Americans than a French nobility in the 18th century (due to ease of international travel and greater technology gaps between the classes). The heirs see the government as the only organization with enough potential force and legitimacy to influence and stifle the expression of their desires within the world. Many had grandfathers who had their fortunes and organization split or partly suppressed by early 20th century government trust busting and FDR regulations. Instead of dedicating all their energies to aggressively growing the mega businesses from the ground up, the heirs just needed to prevent reversals and hire competent managers. This allowed them to have enough free time to play around with influencing government policy for further enrichment.

Buying out thousands of intellectuals and scientists by giving them salaries in ideological organizations proved to be an effective and relatively cheap way of doing so. The sheer amount of propaganda literature churned out, convinced many college educated and people much poorer than the oligarchs (those making less than 100 grand a year), that government really is the problem when it comes to helping most citizens. Many of the educated whites in America saw themselves as having the potential to make it as big as the oligarchs and thus began to preemptively attack the government. They counted the chickens before they are hatched and said to themselves, "well I will work hard and be successful like those people and nobody better take any of my income to help those uneducated lazies".

The people calling themselves middle class saw the hyper rich as role models. This psychology contributed to the incorrect perception and belief in the idea that it was the uneducated poor who holding the middle class back financially by leeching through the government. The "middle class" thus sided with the small amount of oligarchs when it comes to influencing the government to not interfere in the economy too much. They directly contributed to the poor falling further behind. The oligarchs however, saw the middle class as knowledgeable multitudes trying to get into the oligarch boat, and consistently prevented that by using the uneducated poor through irrelevant wedge issues like abortion and gay marriage.

We saw an absurd scenario develop where the oligarchs relax on a boat and encourage their envious middle class lapdogs (holding on to the edge) to kick the drowning poor still in the water. The rich then yell at the drowning poor to pull at the legs of the lapdogs holding on to the edge (because the lapdogs are no good godless liberals or some other nonsense). The government here are the crew members assisting with prying fingers off the edge and firing cannons at other ships. The blacks and the Hispanics would be those who already drowned through the efforts of the white poor angrily struggling in the water. We now see many ships joining together through globalization with some high rise planks connecting them and the rich mingling and enjoying each others company. The struggle in the water becomes even more violent and desperate.

Many of the thinks tanks (thought only dedicated to evolution of specific propaganda) hide under the umbrella of philanthropy that makes a mockery of actual physical philanthropic efforts of early 20th century tycoons who built hospitals and universities for the poor. This Reaganite "philanthropy" consists of promoting an idealogy of trickle down economics and reduction of government interference in the oligarch's mode of action. Undoubtedly there is some real charitable philanthropy going on as well that serves as an effective public cover. From utilitarian perspective however, the sheer damage done by propaganda tanks to poorest 50% of Americans through PR (and corresponding reduction in government services for education, science, medicine, and consumer protection) vastly outweighs the benefits for the poor from some token scholarship grants and other physical help. For example, George C Marshal "Institute" was funded by entities like ExxonMobil to give money to actual scientists to betray their field and lie about climate change and carcinogenic properties of cigarettes. Many of the propaganda tanks cross link their funding and pass money through chains to avoid direct responsibility. The Schaiffe family is responsible for starting 4 propaganda tanks. One of them, the Sarah Scaife "Foundation", contributed to the same George Marshal Institute that is fighting against consumer warning labels and clean air.

There are hundreds of such examples of propaganda tanks around the world masquerading themselves by various degrees of actual scientific and charitable work. These perception factories have been very effective at co-opting thousands of American intellectuals, researchers, and scientists by paying them to either do meaningless work to hurt the poor or by outbidding their labor and smarts away from genuine organizations that try to be as empirical as possible.

Sometimes however, the actual research done for the purposes of propaganda can backfire by showing in incredible detail the opposite of what's being promoted.

Returning back to the actual title of this article, lets take a look at some of the data provided by the Heritage Foundation. Heritage Foundation is one of the more powerful propaganda tanks for the American conservative movement. It also receives a bit of the Schaife octopus money (although Schaife is one of thousands of people rich enough to give substantial amounts to ambitious politicians who then promote minimal government and who dont care who they need to make an alliance with for money) and actively collaborates with printed media arms of the Republican party such as the Wall Street Journal.

Heritage Foundation has a number of graphs on their website that tries to sell an idea that the rich are being disproportionately burdened by government taxation. The graphs show the richest 1% having paid an increasingly greater share of the total annual revenue collected by the government compared to the poorest 50% of the people. Lets look at one such graph (click graph to enlarge):

It says that the richest 1% paid close to 40% of the tax revenue collected in 2006 while the poorest 50% of the people paid 3%. That is supposed to elicit outrage in the reader in that progressive taxation makes the rich pay many times more and thus unfairly singles them out while many of the poor not only don't pay taxes but get tax refunds. The trend of the top 10% and 1% of richest Americans contributing an increasing % share of the tax revenue (since the early 1980s when Reagan and propaganda tanks took over by the way) is supposed to demonstrate that not only is economic inequality not increasing, but that the fairness of the system is actually decreasing with the rich being singled out for burdens.

The sheer impudence of such argument is best demonstrated at a glance by the same IRS tax revenue reports that is being used. In 2006, the government collected 2,178 billions of dollars from all income receipts to fund its budget and function. The Heritage Foundation 40% figure of the total receipts is 871 billion dollars of the total budget.

The top marginal percent for income tax was 35% in 2006 (for those making over 350,000 grand a year and thus falling into the top 1%). 871 billion includes money collected from capital gains. Only the top 1% is primarily effected by capital gains taxes since their incomes are the most dramatically augmented by capital gains money generation (through stocks and such).

In 2006, the top 1% made 1,844 billions of dollars from all their taxable activities (if they did contribute 40% as claimed by pro-capitalist think tanks). As you see above, a large chunk of that money was generated from capital gains (that the bottom 90% of the population virtually don't come into contact with as part of their annual income). However, the total income was not taxed at 35% throughout since various capital gains (short, long) have taxable limits that are lower than 35%. If all their income was taxed at the same top rate of 35%, it would be very easy to calculate the total wealth that the top 1% made in a year ( total of 871 billion dollars as 35% of the whole).

If the richest 1% ( around 1.5 million people out of the 150 million taxable workers in 2006) made a total of 1,844 billion dollars (23% of all the taxable income money in the society for a year) and gave away 871 billion dollars of it to the government to make that 40% of the total 2,178 receipt contribution, that would mean they gave away 871.2 billion dollars (47% taxed in total) to the government, funding almost half of it. And this is according to the propaganda tank defending them and playing with data as much as possible.

The poor babies.

After taxes, a handful of the crybaby parasites (less than half of 1% of total American population) have half as much money to play around with as the entire American federal government with all its nuclear submarines, millions of workers, and agencies. They have almost as much money as the government of a "superpower" before taxes. Heritage Foundations data actually broadcasts this to the world trying to sell this as some sort of injustice to people much poorer. The taxes collected from the top 1% bring 2.5 more money than the funding of the entire Russian federal government.

It's remarkable that the biggest demonstration of rising inequality (oligarch's increasing tax burden in absence of rising top income tax rates) is shown as the opposite of what it is. If for example, the top 1%'s share of the budget contribution grew to 70% by 2020 instead of 40% (using same top 35% income tax level), it would mean they doubled their income at the expense of everybody else. The poorest 50% contributing less to income tax burden is not a sign that they are becoming more parasitic but that they are becoming increasingly destitute.

Right after World War 1, the top income tax rate was over 70% to help pay for the conflict. In mid to late 1920s, the top rate fell to 25% with consequences that perhaps should not be used by economic libertarians as a social success story. Throughout the 1950s-1970s period, the richest paid up to over 80% in income taxes. What do we remember about that period? A husband could go to work and support a stay at home wife and children with one paycheck as well as have a house and 2 cars. The middle class was growing rapidly and people felt so wealthy, empowered, and secure that they actually decided to help the poorest members of the country through Great Society. Money really did trickle down back then, with the IRS making it trickle down from the oligarchs to most of the people. Majority of the population was not over taxed as much as today, did not resent IRS as much ideologically, and weren't as fearful of the future and other Americans. One of the most corrupt oligarch backed presidents, Richard Nixon, (who began to destructive campaign against the poor with the drug prohibition) was even forced from office by the educated Americans. The decade of 1960s, with the richest paying over 70% in taxes and the bottom 50% having a larger contribution to the IRS, was one of prosperity compared to today.

(click graph to enlarge)

Heritage Foundation actually states that the US system is highly progressive (maybe they're comparing us to the role models of South America instead of hells on earth that are Germany and Scandinavia). Billionaires like Steve Forbes actually ran for office on the single issue of having a flat income tax. Sure, the flat income tax was a good easy way to fund budgets in Eastern Europe in recent years with corresponding social side effects of creating enormous income inequality in the former socialist space. When applied on an existing incredibly unequal society such as United States, the flat tax would just dramatically accelerate oligarch ability to influence the government structures since their money versus the government would grow. There are plenty of superior tax schemes like Land Value Tax that focus on real moneyed interests like land lords to create a more equitable and efficient economic system.

People who don't have enough money to buy politicians and policies must not allow themselves to fall for propaganda organizations (many of which actually get tax free status as "non-profits") that are becoming almost as socially detrimental as organized religion. It is very hard for educated people to side with poor rural whites, blacks, and Hispanics against the oligarchs due to vast cultural differences. Strategically however, an alliance against the

oligarchy makes far more sense for middle class and national survival. Modern Internet fund raising allows mass small donation funding of anti-oligarch propaganda tanks (any education that has a social/political goal motive, influence seeking, and self interest based rather than purely empirical is propaganda).

That is already happening to a degree with left-center organizations emerging. People making less than $100,000 a year still do not have as much money as the rich to spend on anti-oligarch PR but their message would have more effect in Hispanic and black demographics that are resistant to conservative propaganda tank economic messages in the first place. Religion and nationalism are diminishing as wedge issues for the rich to exploit so there is opportunity for majoritarian push to get the top income tax brackets back above 50%. The argument that the rich and their businesses will be driven abroad is a false one since that that is happening anyway and since social networks of government control take time to build. If 100 of the American rich decided to escape to Germany to escape the higher taxes (but still lower than in 50s and 60s), they'd have even more of a hard time influencing and getting to know German political elites. If they decide to emigrate to South America, then perhaps they'd be in their proper place at last and rid American society of bad rubbish.

Main Causes of American Decline: Culturally Internalized State Ideology and Vast Economic Inequality

Peak of American Civilization Occurred Between 1969 and 1973




Decline of USA can be traced back to after the peak of industrial capitalism in early 1970s. After that, declining resources allowed socially damaging irreparable inequality to develop as well as for population to internalize state slogans as truth



The words equality and inequality have been been thrown about so often that they bring a knee jerk sickening reaction. People just don't want to hear about it even if they recognize the various abuses and corporate influence over government policy. Anything that is endlessly regurgitated for decades, passionately opinionated, and presented by inappropriate messengers can become ridiculously dull and inspire an instinctive shrug. This includes pushy religious moralizing babble by rich adulterous preachers, factional agenda by poorly educated silly demagogues like Al Sharpton, or appeals to income equality by college educated white comfy children of the bourgeois. Whenever their mouths open we want them shut immediately since we understand the background of hypocricies, corruption, temporary fad following behavior, lack of education, superstition, and blatant factional interest. Decades of the passionate babble and counter-babble has trained us to ignore it as an irritating noise akin to one found on crowded subway platforms.

It doesn't help that Americans have to live in a hyper ideological great power that no longer has an ideological great power competitor. Cold war competition at least allowed for an extreme opposite point of view to be presented to the world and brought attention to blatantly obvious problems like race relations. However, the world wasn't faced with a "fair and balanced presentation". Non-superpowers had to endure decades of a situation similar to a modern news talk show with two guests talking over each other (or Jerry Springer). The talking head equivalents from Moscow and Washington DC poured at each other endless streams of factual data mixed with propaganda. Factual positive domestic developments and enemy's factual shortcomings were of course exaggerated.

Besides exaggeration, everything was viewed through an increasingly sharpened and distorting ideological lens. On top of all these lies the intelligence agencies of both countries waged endless information/propaganda warfare directed at the whole globe. After decades of this full orchestra brainwashing, one society finally collapsed and started dealing with reality. After hitting rock bottom, Russians finally started to at least try to be objective when it comes to actual statistics, numbers, scientific findings, and facts on the ground. Basing national policy on faith based notions of the Soviet dream and way of life proved to be destructive. The Russian society however readily accepted American capitalism (to a higher degree than Germans or Japanese) since it was easy to replace one rigidly ideological construct for another. We'll see American gangster finance live in Eastern Europe long after it declines here.

United States did not undergo a similar transformation since they didn't have to. The tired Soviet talking head that Americans were shouting at finally went blue in the face and had a heart attack. This was taken as complete affirmation of years of American propaganda as at least effective if not totally factual. Major players in the world (India, Japan, Brazil, Turkey, Poland) stood up and cheered like satisfied Jerry Springer guests while getting pats on the back for good participation. They stepped further from central command economic structures and dismissed concerns formerly brought by socialist theorists.

Obviously it's impossible to disentangle ideology from empirical evidence. Even objectivity and scientific agreements are just forms of concensual intersubjectivity. However, it's always possible to at least try to approach a situation like a disinterested anthropologist. It is certainly possible for a rich white British person to study poverty in India and describe it with relative accuracy without being an emotional "bleeding heart" or being accused of being in the pocket of the poor Indian lobby group. An educated American can study the income inequality in Brazil or Mexico and describe the political situation without being accused of siding with a particular ideological faction in either of those countries. It is very possible to be relatively disinterested when describing observable reality for the purposes of history, empirical prediction, and research to be used by individual who craft policy. Americans definitely study and report on other societies like this all the time and even make predictions.

But what happens when say, academics in France or China observe the American domestic situation and conclude that the situation is negative and unhealthy? That's right, they are immediately considered either darned socialists, know-nothing bleeding hearts, and/or ideologues with their own anti-American agenda. Even domestic Americans who give descriptions of unpleasant realities are scorned and rejected even if they are Ivy League respectable authorities on the subject (and in many case scorned because of that). This is analogous to a person with a drinking problem accusing everybody who mentions it that they have an agenda, that they need a drink as well, that they don't know anything since they don't live in the person's house, or that they want the alcoholic to fail.

How did it come to this? Well, Americans suffer from the same problem Soviets did in the 1970s when it comes to living within a rigidly ideological social bubble. Americans got so used to their own authorities blatantly using faith based ideological slogans, distorting facts, and being ridiculously one sided, that they started thinking all world's authorities do the same. The way a thief thinks everybody else steals, rigid ideologues are incapable of looking at opposing points of view without thinking it's not ideology as well. This is best seen in the fundamentalist religious communities. The clergy had told the faithful that their lifestyle is moral for so long, that whenever the flock encounters people who live/think differently, it considers the different lifestyles as immoral and backed by a sinister agenda.

It is time to start differentiating between the blatant agenda pushing factional messengers (ex. Jesse Jackson and Dick Cheney) and milder subconscious agenda of people trying to be reporters and scientists. To this day, there are 20% of Russians who vote for the communist party and march in the streets and talk of how good it was during the slow rot in the 1980s. Similar ideological inertia will happen with the American elderly in the future after the current system transforms itself to survive in the modern world. One might laugh at the notion of American propaganda (of the capitalist American dream) being as extensively imposed as in the authoritarian Soviet Union. However, before the American version of glasnost became available with the Internet, serious opposing points of view were heard even less by the general public. One never really heard national television news stations and radio shows seriously discuss Scandinavian style welfare, using more money on building real industry and jobs instead of more aircraft carriers to outspend Moscow, or creating a better quality of life than the Germans.

We must remember that serious discussion (on improving American quality of life, on solidifying socioeconomic standing of an average American, or creating Japanese level industrial workforce), did not materialize even after Soviet Union collapsed. Instead the only discussion that briefly bubbled up concerned the next plan of action for the American military.

It took a few paragraphs to prepare the reader for discussion about economic inequality in the United States. Why is the discussion of inequality even necessary? It's obvious that inequality among men exists naturally in any system. Western style hybrid capitalism as we know it is here to stay for years into the future in one form or another. Inequality found in United States however, stopped being sustainable a while back and is now the key cause of United States declining into the 21st century relative to rising powers of China and EU. The decline at this point, is unstoppable and the only discussion is whether it will be a slow gradual one (similar to Spain in 19th century) or a rapid one with potential mass social instability.

Yes, there were also the crushing economic burdens of being an expansionary ideological power and the transfer of heavy industry to competitors like China. These burdens pale compared to the root problem of monstrous inequality that allowed most of the deeper structural problems and superficial symptoms to occur. We've heard people throw around rugged unresearched statements concerning how the top 1% owns half of the wealth and the like. Simultaneously, we've also heard the counter statements that the richest pay the biggest share of taxes. When such statements are thrown about, the discussion becomes another yapping Jerry Springer episode to tune out of.

There is actual historical data constantly being collected, shown, and ignored by highly skilled people. Lets look at some.

In April of last year, one of the oldest and most read propaganda mouthpieces, The Wall Street Journal, decided it was a good idea to throw a few bones to its readers. The readers of course are the people who consider themselves financially independent "middle class" and not just the equivalents of delivery boys for the politically connected oligarchs. The readers are likely to include newer assimilated ethnic groups like Irish and Italians trying to catch up and overworking to get their 60-150 grand a year. The oligarchs themselves would never turn to WSJ for their news and opinions. Summer of 2007 to summer of 2008 saw historic rises in gas prices and we saw people like Lou Dobbs throw daily fits concerning the illegal immigration. Occasional articles began to appear in nationally circulated media to cater to rising concern about "middle class" problems. Some of these articles increasingly began to include deep probing studies about structural and social infirmities of American civilization.

The source of the example article above comes from a very interesting Berkley study by Emmanuel Saez, a John Bates Clark Medal award winner in 2009 (Milton Friedman and Paul Krugman amongst the past winners), and possible influence on Obama's taxation thinking. The data in excel format is here:
( elsa.berkeley.edu/~saez/TabFig2006.xls ). We see a ridiculous graph that shows a few things not readily noticed due to the study's percentile breakdown of the top 10% of earners. The data shows annual wealth generation both including and excluding capital gains like stocks.

First, lets analyze the top 1% of the earners without looking at additional wealth they get through capital investments. The reported real income (adjusted for inflation) of richest 0.01% of the working population (14,000 oligarch households making an average of $16.5 million a year with at least $6.5 million annual income to be part of the group), grew 22% from 2000 to 2006. Average real incomes of the richest 0.1% of households (133,000 oligarch households making an average of $3 million annually and needing to make from $1.4 million up to $6.5 million annually to be part of the group), grew 8.5%. To be included in the richest 1%, a household had to just pass the measly threshold of $376,000 dollars a year. There were 1,333,249 households that made up most of the top 1%, were above 99% of American workers, but paled compared to 0.1% of the population. Many were the professional elites and not necessarily financial wizards and money changers.

This means that 10% of 10% of 1% of the richest households (1 out of every 10,000 households), were able to almost triple their annual earnings compared to 1,500,000 households who are also in the richest 1%. This is with capital gains EXCLUDED from earnings estimates. It is very telling that the elite professional and managerial class numbering over a million (represented by nationalist democratic capitalist faction) was not able to politically outspend less than 150,000 oligarch households in the last few elections. The attractiveness of financial capitalism allowed many nationalist democratic petty millionaires to be co-opted.

Lets put above breakdown into a couple of charts that also include income made from capital gains. We see the sheer jump elite's income makes if capital gains are added.

We can see how capital gains begin to matter exponentially once you start getting into 5% of the population. Capital gains only added 95 billion dollars in wealth for 90% of the population (split between over 130 million households) but they added 678 billion dollars to richest 10%. Incomes of the non-professional elite oligarch class, of those 0.1%+ jumped 60%. Capital gains only increased income of bottom 90% by just 2.3%. Republican leadership effectively convinced a large portion of 50-100 grand a year white collar demographic that they're working in their interest and that capital gains will actually unburden them financially. It was remarkable that the same tactic always used on poorly educated religious blue collar demographic also worked on petty white collar. Even the petty millionaires, tied to expensive property bubble speculation, got politically seduced sufficiently to throw their financial support to the internationalist super rich.

In 2003, something historic happened. For the first time since 1928, the top 1% of the population surpassed bottom 99% when it comes to rate of wealth generation. Rate of wealth generation is a good indicator of the overall political power of a faction when it comes to dividing the limited resources of a nation.

Recently, government of Brazil has declared major success in reduction of poverty by citing that the top 10% went from owning 49.47% of annual national income in March 2002 to owning 46.31% in October 2008. Obviously we don't know to what degree the stock crash and capital gains reduction in fall of 2008 played into that. The fact of the matter is that Brazilian leadership, presiding over one of the most economically unequal societies on the planet, cited rise in share of bottom 10% and decline in share of top 10% as a measure of progress. In United States however, the richest 10% began to earn 49.3% of national annual income in 2006. The GINI index of inequality shows that US has been becoming more like Brazil for the last 30 years. US gap between the poorest and richest started off roughly in same category as other Western nations (even Norway) in the 1960s and is now surpassing some South American nations in size.

We also see how the "Reagan revolution" allowed American oligarchs to substantially outplay their counterparts in Europe:

CONCLUSION:

Political scientists consider extreme levels of socioeconomic inequality to be socially destabilizing in terms of factional infighting, violence, and authoritarian control of government organs by the elites for self enrichment. United States seems to have escaped social instability due to its great power status and most of its population living in an ideological bubble (and most people never traveling outside of the country). Only in relatively recent times, did the top 30% of the population begin to get exposed to other hybrid systems through increased international travel.

The peak of American civilization seems to have occurred in 1968-1973 period. Data points to 1973 as being the furthest extent of American industrial capitalism and real physical influence for most of its population. This strength even existed after being partially drained through resources devoted to colonial occupation.

The richest 1% expanded their share of wealth far less than the bottom 99%. The rise in prices briefly corresponded to real incomes. American workers were able to save and better their condition without constantly being a few steps behind either inflation or oligarchical factions. The country had historically high degree of economic equality, the burden of natural resource imports was only in its infant stages, and American workers were at the peak of their political and purchasing power. This allowed them sufficient leverage to effectively compete with oligarch factions for influence over the federal government. Federal government was prompted to engage in a number of nationalist measures that benefited all instead of some.

The health of the American society caused a multitude of reversals for socialist causes in the imperial periphery of Western Europe. Reactionary forces in Europe were able to stabilize their societies since American workers demonstrated that American way of life is more effective than the socialist one. Many European states elaborated on JFK/Lyndon Johnson's great society promises to solidify state capitalism.

In United States itself, the oligarchs took a number of years to reorganize and stage a comeback. The last nationalist president, who really tried to preserve American way of life and appeal to all Americans instead of some, was Jimmy Carter. He tried to improve efficiency of American capitalism through deregulation, improvement of workers' rights, new energy policy, and actually leading imperial periphery through ideological example. He had the misfortune of being in control of the nation right after its civilizational peak. Oligarchs effectively destroyed Carter's reputation and created a reactionary wave that relied on formerly apolitical religious rural population. Wedge issues, militarism, racial tensions, and rural resentment against the cities were exploited to put an appealing puppet (a former actor) in power. It took a few years to dismantle previous nationalist policies of Johnson and Carter. Once dismantled, the oligarchs began rapid expansion of their income in late 1980s that just accelerated to the present day. In the first half of the 20th century, many oligarchs were rooted to the American soil since travel on propeller aircraft was dangerous and ships/trains took a long time. That led to many early oligarchs to have nationalist tendencies, improve value of nearby land, and to focus on real industry. With increased globalization, the oligarchs of 1980s now looked at the whole world as their playground and their cosmopolitan sentiments had little allegiance to United States. Physical decline of US and the debt were irreversible and mass looting began in the form of moving factories and personal material wealth abroad to other growing societies.

The fall of Soviet Union accelerated the process and allowed the looting to go on longer. American dollar could now be pushed onto hundreds of millions of new people and the national debt could be expanded. The Bush administration was the most blatant show of force by the top 1% and this period saw the peak of illusionary oligarchical finance capitalism. In 2008, millions of elite professionals and petty millionaires were finally able to outspend and wrestle away control from oligarchs. They were not making as much money from property speculation and energy prices made their businesses less profitable and lifestyles more expensive. Even then, the poorest of top 5% were only able to take power due to successful mobilization of college educated and blacks in sufficient numbers, financial capitalism declining for a few years, and occupational reversals in the Middle East. The resilience of the oligarchical faction is demonstrated by the fact their candidate only lost by less than 10% during the biggest economic crash since 1929.

Regardless of change in leadership, the petty millionaires now in charge, will only advance their own interests. Interests of the bottom 90% will only be satisfied if they are congruent with the nationalist industrial interests of democratic power elites. Socioeconomic inequality created over the last 30 years has become self perpetuating and can only be reduced through decades of top down effort combined with growing industrial economy producing tangible exports. Efforts in that direction are unlikely until United States hits economic rock bottom with corresponding social destabilization. Today the top 1% live in a country within a country.

The fragmented elite America (that John Edwards liked to talk about until the character assassination) is more advanced and freer than any country in Western Europe and with access to better medicine/education, cheaper land/energy, and more political control over their governance. US is structurally a more advanced South American society. The average citizen thinks there is progress due to modern expensive cars, clothing, and housing mingling with the rest. The old Anglo ruling ethnic group has learned during the gilded age to not make the extent of their material wealth obvious. In that, they followed their South American counterparts.

The newer assimilated ethnic groups of Irish/Italians/Slavs/Jews are more blunt with demonstrations of their material possessions. The consumeristic efforts of newer whites to fit in and catch up have infected all Americans. The poorest least educated people are encouraged to spend a month's paycheck on a new gadget or brand name clothing. This is no different than a Soviet worker spending 2 months worth of salary to buy blue Western jeans from a black market in the 1980s. The only difference between Soviet Union's black market and gigantic electronics stores in today's America, is that the latter is legal. However, the electronics and clothing stores are similarly dominated by goods made in foreign factories and operated by oligarchs exploiting cracks in ability of American industrial capitalism to provide for people's needs. This system is even less sustainable than the Russian one since it combines the Soviet infrastructural stagnation of 1980s with Yeltsin's gangster capitalism and economic inequalities of 1990s. Only rapid industrial/technological breakthroughs can make national decline safe and gradual.