f you follow the reporting on wealth inequality closely, you may have noticed that things have taken a darker turn. Just a few years ago, we were focusing — quite appropriately — on the ongoing accumulation of massive fortunes at our economic summit. But a second and equally compelling story has of late emerged. The world’s billionaires, the activist global charity Oxfam reports, grew their wealth by $900 billion last year. Households in the world’s poorest half, meanwhile, saw their wealth decline, by a fairly stunning 11 percent.
The wealth of America’s median black households, adds a recent Institute for Policy Studies report, has dropped to half the wealth level of 35 years ago.
Have we passed a tipping point, the threshold at which the rich can’t get any richer without the poor — and middle class — getting significantly poorer?
Quite possibly, yes. Wealth typically concentrates at the top because the wealthy can generally invest their wealth at a rate of return greater than the rate of increase in the country’s overall wealth. Thomas Piketty’s 2013 bestseller Capital in the Twenty-First Century famously explained this phenomenon with a simply equation, r > g.
That equation only holds, mind you, for the wealth held by those who can invest large sums they don’t need to set aside for their basic household financial support. The wealth ordinary folks hold in the form of home equity, savings accounts, and modest retirement accounts can’t grow nearly as quickly.
So does all this make the concentration of wealth in a nation like ours unavoidable? No. Any country may choose tax and other economic policies that slow how fast the rich can accumulate wealth and, in the process, keep wealth from concentrating. Over the last several decades, unfortunately, the United States has opted against such policies — and our wealth is concentrating.