A Worrisome Recovery?

by Patrick Appel

Judis doubts that “the current recovery is leading toward the buoyant growth and widespread prosperity that we enjoyed after the country’s last great crash and downturn.” Among his reasons:

During the golden years, wages often accounted for almost 60 percent of national income. They are now at an abysmal 43.5 percent. Productivity has continued to rise faster than median wages. In January, incomes fell by the largest amount in twenty years. Consumer spending increased because the savings rate declined. That’s exactly the pattern that occurred in the years prior to the crash and Great Recession.

After a brief hiatus at the beginning of the Great Recession—when the crash eliminated wealth at the top—the top of the income scale has resumed expanding at the expense of everyone else. Corporate earnings increased 20.1 percent a year since 2008, but as much as $1.5 trillion of these profits remain uninvested. In other words, we have a growing accumulation of wealth at the top that is at the expense of consumer demand and that could potentially create new speculative bubbles.