By and
For the first time
since 1997, the U.S. economy just added at least 200,000 jobs per month for six months running. GDP grew
at a 4 percent annual clip between April and June. The percentage of Americans
who describe the economy as “good” has climbed to the highest level of President Barack Obama’s
presidency.
Who wouldn’t rejoice
over these happy milestones on the bumpy road to a real recovery?
Wall Street. On July
31, within hours of the release of a bunch of sunny indicators, stocks sank
more than they had on any day since early February. The decline wiped out all
gains the S&P 500 stock index had racked up over the month.
And why exactly does
Wall Street tank on news portending economic gains for most Americans?
Don’t
people with extra money in their pockets boost the economy when they spend more
freely? Isn’t it something worth celebrating?
Not in an economy that
caters to the rich.
You see, there are
practical implications of the chasm between rich and poor for the conduct of
commerce. For several years, retailers have increasingly doted on the affluent, the most alluring
segment of the $10 trillion consumer spending
market.
Consider how U.S. households differ.
The richest 20 percent of Americans now pocket more than half of the nation’s
income. The typical income for this kind of family tops $150,000, triple the
norm for all of us. Together, these “high-value customers” (to borrow a phrase
from LuxuryDaily.com) account for about 40 percent of all U.S. spending.
And the cost of real
luxury has gotten a divorce from reality. A quilted Chanel handbag canset you back $4,900. An
ultra-thin Piaget Altiplano watch could siphon 95 grand from your wallet.
There’s still some
money made from selling cheap stuff to the poor and working class. That’s why the four biggest U.S. retailers are big-box behemoths Wal-Mart,
Costco, and Target, along with the Kroger supermarket chain. Even the very
bottom of the food chain, the people whose households eke by on $30,000 or less
a year, account for a stagnant yet sizable $1 trillion bare-bones consumption
market.
For them, dollar stores
can be a bigger draw than the big boxes. They’re in a bind and so are the
companies relying on their purchases.
“Customers are under
pressure,” Dollar Tree Chief Executive Bob Sasser told The Wall Street Journal.
“Unfortunately, that’s one reason why the space continues to grow.”
In a telling sign of
today’s increasingly unequal times, Dollar Tree is merging with Family Dollar
Stores. The No. 2 and No. 3 companies in this cut-throat market want to team up
to compete with their No. 1 competitor, Dollar General. Together, they’ll fend
off bids by Wal-Mart and its ilk to gobble up some of their territory with new
smaller-box establishments.
Clearly, times are
tough for retailers opting to sell stuff to the rest of us. But they’ve got it
figured out for the most part and Wall Street worships predictability.
Think of all the
economic models and assumptions that would be shattered if the drive toward
wealth concentration were to take a detour toward shared prosperity.
Of course, financial
experts won’t say these things out loud. Instead, they’ll mutter about inflation
and freak out over signs that labor markets are growing tighter. Are those
really big concerns in light of this protracted war on consumers?
If you would like to
know more about how and why the rich are getting so much richer while the poor
become steadily poorer (and you enjoy very long reads), check out Thomas Piketty’s 700-page
masterpiece. In his wildly successful book Capital in the Twenty-first
Century, the French economist has finally organized and footnoted every
lost battle in this tale of class warfare.
Winning the debate, of
course, isn’t enough. Until more U.S. political and business leaders decide
they’ve had enough, this nation will become less of a democracy governed by the
people and more of a plutocracy ruled by the rich.
Emily Schwartz Greco is the managing editor
of OtherWords,
a non-profit national editorial service run by the Institute for Policy
Studies. OtherWords columnist
William A. Collins is a former state representative and a former mayor of
Norwalk, Connecticut. OtherWords.org