I looked at the total market capitalization of stocks in the United States in 1988 (earliest year the World Bank had) and 2012. In 1988, the market cap was $2.8 trillion, or $5.4 trillion adjusting for inflation, versus a GDP of $9.34 trillion (in 2013 dollars). In 2012, the market cap was $18.7 trillion, versus a GDP of approximately $15.5 trillion (in 2013 dollars). Total market cap was 60% of GDP in 1988; today it's 120% of GDP.
Now look at these graphs:
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You'll notice that from 1988 to 2013, the top 1% saw its income nearly double along with that doubling of market cap. Now see this graph:
This one shows the price to earnings ratio of the S&P 500 from 1988 to 2012 (the S&P 500 captures approximately 80% of the total market cap). The ratio is almost identical, meaning that stocks are approximately valued at the same premium to earnings today as they were in 1988. This means the change in market cap isn't related to stocks being undervalued or overvalued in either of the periods I'm comparing. Thus publicly traded corporate valuation as a percentage of GDP has approximately doubled while the valuation metric has remained the same.
Conclusion: the wealthy are wealthier primarily because they own the financial assets (the top 10% owns 80% of financial assets). Corporations, as noted above, earn twice as much from the economy as they did in 1988 and are thus valued at twice the level they were 25 years ago. Where do corporate earnings come from? Us. Every time a person shops at Wal-Mart, Home Depot, or Starbucks, they leave just a fraction of the money in the community (local suppliers plus the pay to local employees), with the rest going elsewhere (to suppliers elsewhere and to the owners). The reverberations should be easy to spot. By importing cheap Chinese junk, Wal-Mart not only put local stores out of business, they also put the suppliers of the local stores out of business. Consumers got lower prices, but higher wage jobs were replaced with lower wage ones, and a lot of money shifted overseas. Instead of owning a store, manufacturing business, coffee shop, or diner, people were left working at Wal-Mart, Starbucks, Red Lobster, etc.
It's wrong to blame corporate greed for this process. All the corporations did was give consumers what they wanted, primarily lower prices. How do you lower the price? You start by eliminating the "excess wages" being earned by owners and employees, then you switch to cheaper (typically foreign) suppliers, again eliminating the "excess value" that was being paid. You get lower prices at the cost of another person's good living and/or job.
How did humans react to this? Let's just say Wal-Mart took in
$470 billion of our money last year. People vote with their dollars, and they chose to be selfish, paying less for stuff at the expense of whoever sold it before Wal-Mart or any other national enterprise did.
didn't they teach you that at devry?
I have degrees from two top national universities. Sorry to disappoint you.
