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by inoljt

Three Important Moments in America’s Economic History (in Pictures)

2:15 am in Uncategorized by inoljt

The previous post looked at the economic history of the United States over the past two centuries. In that post, what stood out most was the fact that the economy of the United States has always been one of the strongest in the world.

There are three defining moments of American history after 1800, and this post will examine them. They are the Civil War, the Great Depression, and the Second World War. How did these events affect the economy?

The Civil War

Before the Civil War, in 1860, this was how America was doing:
Economically and socially speaking, the United States was better than the vast majority of other countries in the world. The only two countries wealthier than the United States were Australia and the United Kingdom.

The Civil War was a devastating event. It killed more Americans than any other war in history and destroyed the South’s economy. How did that affect the United States?
Well, here’s the United States in 1865. In fact, the population and the economy of the United States has grown. The latter is in large part due to the effective economic policies of the Republican Party under Abraham Lincoln. It is true that living standards have grown slower than elsewhere. Still, the United States is very wealthy and very healthy after its worst war in history.

One ought to ignore the life expectancy statistic here, however. The previous post noted:

…the life expectancy data comes from several sources. From 1989 to the present, gapminder uses US Census Bureau data. From 1933 to 1988 the Human Mortality Database is used. From 1901 to 1932 the Human-Life Table Database is used. From 1880 to 1900 Professor James Riley’s compilation of life expectancy estimates (from over 700 sources) is used.

And what about from 1800 to 1879? Well, here the authors use a simple model. A very very simple model. They assume that all countries go through a health transition, and that the United States had not undergone this transition from 1800 to 1879. So gapminder sets United States life expectancy as 39.41 years for this entire 80-year period.

Obviously this model fails during the Civil War.

The Great Depression

The Great Depression was the worst economic crisis in the history of the United States. Here’s the United States in 1920, before the Great Depression:
The United States is the richest country in the world in 1920, although in terms of health it isn’t doing as great.

Let’s take a look at what happened afterwards.
By 1933, in the depths of the Great Depression, the American living standard is actually worse than almost a generation ago. The good news is that Americans are a lot healthier. So the Great Depression was really as bad as it was advertised.

Look at the other countries, however. As badly as the United States is doing, livings standards are still the world’s best. Only Brunei (due to its oil), Luxembourg, Switzerland, and the United Kingdom have a higher GDP per capita adjusted to inflation and purchasing power parity.

World War II

World War II was good for the United States and bad for most of the rest of the world. In a sense, the United States was more powerful than at any other time in its history in 1945. Let’s take a look at the effect of WWII, beginning in 1940 at the start of the war:
In 1940 Germany and the United Kingdom are almost at par with the United States. As is typical, however, America is slightly ahead of the First World in terms of livings standards but just above-average in terms of life expectancy.

Here’s what five years of war did:
The destruction of World War II does enormous damage to the rest of the world, which falls behind. Only Brunei and Kuwait, due to oil, have higher GDP per capitas adjusted for inflation and purchasing power parity; their low life expectancy shows that this isn’t really an accurate reflection of their true economic strength at this time. At this time, the biggest countries behind the United States are Canada and the United Kingdom. The United Kingdom has a GDP per capita (adjusted for inflation and purchasing power parity) of $9,931; the United States $17,615.

Of course, this nice situation for the United States couldn’t have lasted forever. Absent a nuclear attack against the Anglosphere, the rest of the world would have started to catch up with the United States again. And, indeed, this is what happened.


It’s quite interesting how relatively little affect these great historical events had on American livings standards and life expectancy. Unlike other countries, the United States just keeps on a slow and steady growth path. It remains near the top or at the top. It would take quite a change – something far worse than the Civil War or Great Depression – to destroy this equilibrium.


by inoljt

A History of the United States Economy (in Pictures)

3:11 pm in Uncategorized by inoljt

The United States economy is a subject that is very much on the mind of Americans today. It’s also a very obviously influential part of the world; the American consumer market, for instance, often sets trends around the world.

Let’s take a look at the history of the United States economy. How did the American economy become as big and influential as it is today? We begin two hundred years ago, in 1800. Note that the next post will look at three specific moments during the American economy.

This picture comes from the website gapminder, maintained by a Swedish professor. I have previously used this website to compare North Korea’s development with South Korea’s, here. That post has a good summary of what this graph is saying:

Gapminder shows graphics of different levels of every imaginable type of statistic amongst the world’s varying countries.

This is the most basic graph: it shows wealth and health…The y-axis is life expectancy. The left axis is income per person (in dollars adjusted for inflation and purchasing power parity) put on a logarithmic scale (so that the difference between $1,000 and $2,000 is just as important as the difference between $10,000 and $20,000; this makes comparing things much easier). As one would expect, wealthier countries generally have higher life expectancies.

So this is the world in 1800, more than two centuries ago. Let’s take a look at what happens next:
The United States does pretty badly this generation; it basically ends up making no progress economically nor in terms of health.

Nevertheless, even as early as 1800 and 1820 the United States is one of the world’s wealthiest and healthiest places. A lot of economic analysis has been done on how America became so wealthy. Well, the answer is that the United States always has been this way, as this graph indicates. Even during the colonial era the English colonists enjoyed arguably the highest living standard in the world.

Let’s look at what happens in the next twenty years:
This is the era of Andrew Jackson, and the United States makes progress during these years. The economy grows, although life expectancy does not.

Again, the United States is on top of the world in 1840. There are, however, two European countries (or orange circles) that have been consistently ahead of America since 1800. What countries are these? Well, the bigger circle at the very right is the United Kingdom. It’s unsurprising that the United Kingdom is the world’s wealthiest country during this period, considering that it’s at the forefront of the Industrial Revolution. The smaller circle is the Netherlands.

What happens next?
Well, America’s economy grows at the fastest rate yet. The antebellum era apparently is quite good for the United States economy. Life expectancy, however, remains flat.

While economic growth has been steady during these sixty years, life expectancy has stayed flat. Here the weaknesses of gapminder come into play. One should realize that gapminder is not the literal truth; it’s a graphic that does its best to resemble reality.

This graphic is as reliable as the data it’s based off of. In my analysis on North Korea and South Korea, there was a huge problem for North Korean data – it didn’t exist or was false. So basically the entire North Korean graphic was a model using artificial numbers created by the authors of gapminder.

The economic data for the United States derives from a study titled Macroeconomic Crises since 1870. The authors of that study have created a dataset for their study. This is what gapminder uses. In general, it’s quite reliable; United States economic statistics are the best and most comprehensive in the world, even today.

On the other hand, let’s take a look at life expectancy during the Civil War and Reconstruction era:
The destruction of the Civil War doesn’t stop the United States economy from growing yet again. On the other hand, common sense indicates that life expectancy fell during the Civil War. After all, more Americans died in the Civil War than in any other war in American history – and America’s population in 1860 was a lot smaller than the population today. What gives?

Well, the life expectancy data comes from several sources. From 1989 to the present, gapminder uses US Census Bureau data. From 1933 to 1988 the Human Mortality Database is used. From 1901 to 1932 the Human-Life Table Database is used. From 1880 to 1900 Professor James Riley’s compilation of life expectancy estimates (from over 700 sources) is used.

And what about from 1800 to 1879? Well, here the authors use a simple model. A very very simple model. They assume that all countries go through a health transition, and that the United States had not undergone this transition from 1800 to 1879. So gapminder sets United States life expectancy as 39.41 years for this entire 80-year period.

By 1880, the United States has caught up with the United Kingdom. Out of all the countries in the world, only Australia is wealthier. On the other hand, Americans are generally in worse health than the wealthiest European countries.

Here’s the United States as a new century dawns:
With a new dataset in use and the advent of new medical technologies, American life expectancy jumps enormously. On the other hand, the economy doesn’t do that great. It’s commonly said that during this era the United States undergoes industrialization and becomes a world power.

One reason for American power is due to the population increase, fueled by immigration. The United States population is on par with most big European states during this period. It seems that a lot of the expansion of American power in this time is based on population growth; progress in living standards isn’t exceptional. Despite this, the United States has become the world’s richest country.

This continues during the Gilded Age and World War I:
The Gilded Age is commonly thought of as the time when the United States really became a great power. The population and life expectancy increase is impressive (note that the outlier in terms of low life expectancy is the year 1918). Yet there’s an awful amount of economic backsliding and economic crisis during this period.

In relative economic terms, however, the rest of the world has been doing even worse. This is mostly the result of World War I. American living standards are squarely ahead of everybody else in 1920, although once again American life expectancy is somewhat subpar.

Then comes the Great Depression. Did that knock the United States off its track?
Kind of. Life expectancy continues to improve, but again the improvement in living standards isn’t great. Indeed, this whole era from 1880 to 1940 features regular economic crisis and chaotic patterns in economic growth.

Nevertheless, the United States is still very wealthy and fairly healthy in 1940.

Let’s take a look at World War II:
Here a new pattern sets in. Unlike the previous 80 years, the United States economy starts growing at a steady rather than chaotic rate. Life expectancy also increases, but by a lesser extent. There’s a huge economic boom during the war years and – surprisingly – no drop in life expectancy during the war.

The ’50s and ’60s are commonly and nostalgically seen as the time when the United States was on top of the world, and this picture provides good evidence. Economically the United States is ahead of everybody else to the greatest extent in its history. On the other hand, the Soviet Union does have a bunch of nuclear weapons pointing at the United States. People tend to forget that fact.

So what happens during the Vietnam War and oil crisis?
Well, the economy does pretty well, although it slows down during the latter period. Life expectancy is the opposite; it slows down during the first part and then increases during the second part of these two decades.

After a great economic boom, the rest of the West and Japan have almost caught up to the United States. In a sense, things are back to normal. In another sense, America’s allies are closer to its economic living standards than at any other time in history.

Then come the Reagan and Clinton years:
The pattern here is quite similar to that from 1960 to 1980. Both living standards and life expectancy increase slowly but steadily.

Again, the rest of the First World is nipping at America’s heels. Yet only four tiny countries are actually richer than the United States. As is historically the case, life expectancy in these countries is higher than in the United States.

And finally, the past decade:
It’s a pretty terrible decade; the United States basically goes nowhere.

Strangely enough, however, the picture looks pretty similar to that in 1980. Despite a decade of terrible American economic growth, the rest of the First World hasn’t surpassed the United States. Right now a total of eight “countries” are wealthier than the United States: Brunei, Hong Kong (China), Kuwait, Luxembourg, Macao (China), Norway, Qatar, Singapore. As throughout history, American health is relatively worse.

There are several patterns throughout this analysis. Relatively speaking, the United States has always been at the top. It’s always been wealthier than almost all other nations. On the other hand, the United States has also always had relatively low life expectancy for its living standards.

The United States has also always grown at a slow but steady rate. There are periods of slower growth (such as in the early twentieth century) and periods of faster growth (such as in the middle of the twentieth century). But the growth is always there.

Finally, ever since World War II there has been a cluster of First World countries just behind the United States. This cluster of countries, however, has never actually caught up. I am quite curious to see if that day will ever come. Will countries like France, Germany, Japan, and the United Kingdom ever actually surpass the United States?


by inoljt

The BRIC Fallacy

3:10 pm in Uncategorized by inoljt

(Note: BRIC refers to Brazil, Russia, India, and China. Created by a Goldman Sachs economist, the BRIC countries supposedly are rapidly growing developing countries.)

China is a place with massive regional inequality. A recent feature by The Economist magazine, titled Comparing Chinese Provinces With Countries, found a stark divide between the rich coast and the poor hinderland. Some of my previous observations about that feature can be found here. In Shanghai and Beijing GDP per person is over $20,000 (as of 2010) - roughly equivalent to a high middle-income country.

In rural Guizhou GDP per person is almost seven times lower. Guizhou is the poorest province in China. It is the part of China the media does not visit and that China tries its best to hide. There are no skyscrapers in the rural parts of Guizhou, just decrepit stone houses dating back to the Maoist era (or earlier).

But there is something else very interesting about Guizhou: as of 2010 its GDP per person was almost exactly equal to GDP per person in India. That is, a person living in the poorest part of China is about as well off as the typical Indian. This fact says something about the constant comparisons between China and India – China is generally far ahead.

Let’s take a look at Brazil. Brazil is a typical Third World country, in the view of many Westerners. Surprisingly, while Brazil is infamous for its massive inequality, its regional inequality is not as great as that of China’s. Nevertheless, there are still vast differences of regional wealth in Brazil. As of 2008 GDP per person in the rich Distrito Federal (of Brasilia) was $25,000; in Sao Paulo and Rio de Janeiro the high incomes of its wealthy elite raise the number to a respectable number as well.

In contrast, almost everybody is poor in the northern coastal parts of Brazil, populated by the descendants of plantation slaves. In the northern state of Alagoas GDP per person is a mere fraction of that in the capital. Alagoas is the third-poorest state in Brazil. It is characterized by a juxtaposition of beautiful beaches and violent gangs. Favelas of ill-built wooden structures dot Alagoas.

There is something very interesting about Alagoas as well: as of 2008, its GDP per person was almost exactly equal to GDP per person in China. A person living in the third-poorest province of Brazil is about as well off as the typical Chinese. So much for the Chinese dragon; the typical Brazilian is far better off than the typical Chinese. And let’s not even start comparing Brazil to India.

These comparisons put a stake through the heart of the BRIC acronym: the concept that Brazil, Russia, India, and China have much in common other than their high economic growth rates. And even the assertion that all four BRIC countries are growing at high economic rates is questionable; Russia certainly isn’t right now.

Indeed, the differences between the richest member of the BRICs (Russia) and the poorest member (India) are stunning. Just look at the map at the beginning of this post; almost everybody is literate in Russia, while literacy rates in India are comparable to those in Sudan and Nigeria.

Or think about hunger. Hundreds of millions of people in India are not getting enough food to eat; India has the highest number of malnourished people in the world. In Russia, on the other hand, everybody gets enough to eat. The last time large numbers of Russians didn’t get enough food was more than half a century ago, which had something to do with a man named Hitler. Check out the difference between google results for Russian malnutrition and Indian malnutrition.

All in all, the differences between living standards and relative global power of the BRIC countries are vast. One could say that the United States and Russia have more in common than Russia and India, with respect to living standards (or many other things, in fact). BRIC is a fallacy.


by inoljt

A Potent Illustration of the Problem With Our Country

4:47 pm in Uncategorized by inoljt

Enron was one of the biggest scandals to ever hit the business world. The failure of Lehman Brothers directly caused the financial crisis from which the United States is still feeling the effects. One would think that the directors of these failed firms – the worst failures in this decade – would have been punished by the market for their poor oversight.

Apparently not. This article indicates that many of directors on these failed companies have prospered quite nicely:

A few of the directors conveniently omit Enron from their biographies, but they do not appear to remain tainted, staying in their chosen professions…

The experiences of the Enron directors over the last decade would appear to offer great hope to the directors of Bear Stearns and Lehman Brothers.

…the Bear and Lehman directors are returning to public company service even quicker than the Enron directors. In part this reflects the old boy network on Wall Street, which keeps people in the same positions because of friendships. It is not a coincidence that two former Bear Stearns directors serve on the Viacom board.

The trend also underscores the decline in the importance of reputation on Wall Street — even since the time of Enron. Prior bad conduct simply is often not viewed as a problem.

The fact that these people have done so well constitutes a potent illustration of the problem ailing the United States. Simply put, the corporate world is no longer in any sense accountable to succeeding or failing. CEOs like Mitt Romney can personally lead firms to ruin and yet still get paid incredibly handsome “golden parachutes.” Meanwhile inequality continues to increase at an inexorable rate and the economy continues to flounder.

Reading about the denizens of big business succeeding to this extent while America as a whole flounders really strikes a bone of contention with me. There are few words in the English language to describe the wrongness of what is happening – how people who singlehandedly fail at everything that they are supposed to do still get tens of millions of dollars.

Here is one: unjust.


by inoljt

Why Republicans Aren’t Serious About Reducing the Deficit

8:00 pm in Uncategorized by inoljt

Republicans talk a good game about why the United States must reduce its debt. Republican Congressman Paul Ryan:

We face a crushing burden of debt. The debt will soon eclipse our entire economy, and grow to catastrophic levels in the years ahead.

On this current path, when my three children — who are now 6, 7, and 8 years old — are raising their own children, the federal government will double in size, and so will the taxes they pay.

No economy can sustain such high levels of debt and taxation. The next generation will inherit a stagnant economy and a diminished country.

Frankly, it’s one of my greatest concerns as a parent — and I know many of you feel the same way.

Mr. Ryan then proposed a plan whose purpose is purportedly to solve America’s debt problems. To its credit, this plan cuts trillions of dollars in spending. It bravely – or cruelly, depending on your political orientation – cuts the sacred Medicare program.

But then Mr. Ryan’s plan does something very strange, at least if its purpose is to reduce the deficit. Read the rest of this entry →

by inoljt

The Crisis in the Developed World

1:43 pm in Uncategorized by inoljt

I recently had a conversation with a college student hailing from the great country Spain. After talking about my summer activities, I asked him about the internships and jobs he had available in Spain.

He said that there was nothing. No jobs, no internships for anybody his age in Spain. No work at all. It was a crisis that had become normality. A global crisis.

It’s true. The developed world is facing an unprecedented period of weakness. All the titans of the First World are trembling. America is in the throes of high unemployment and a stagnant economy. Even so, it is better off than the other pillars of the developed world.

Japan has been stagnant for decades. The tsunami and the nuclear meltdown have intertwined with political weakness to further damage the nation.

Then there is Europe. Europe’s periphery is in danger of going bankrupt (or already bankrupt). Countries with enormous economies, such as Spain or Italy, are being sucked in this very moment.

So the developed world is in an unprecedented crisis. There are pockets of strength. Canada’s economy is strong. Germany’s economy is too strong. Australia and South Korea are benefiting from China’s economic coattails.

While the First World languishes, the Third World is booming. Brazil and Peru are leading the charge in Latin America; Africa is experiencing its best decade for a long time. And then there are the titans of India and China.

The result is that global inequality is on the decline. People have said for decades that the Third World is catching up to the First World. Sometimes this has been true; more often it has been not.

But now the Third World really is catching up, and catching up fast. It’s not pretty for the First World.


by inoljt

The Biggest Threat to President Barack Obama’s Re-election Chances

10:34 pm in Uncategorized by inoljt

Almost everybody agrees that President Barack Obama’s re-election chances depend almost exclusively on one thing: the state of the American economy. If, for instance, unemployment is below 7% by November 2012, Mr. Obama could very well win a Reagan-style blow-out. If, on the other hand, unemployment is still in double-digits by November 2012, Mr. Obama may as well kiss his re-election chances goodbye.

The second scenario would probably occur in the event of another recession. The greatest danger, therefore, to the president’s re-election chances would be something that would hurt the economy badly enough to knock it back into recession.

What could cause such an event?

There are a number of possibilities, ranging from the very unlikely to the frighteningly possible. The latter – “the frighteningly possible” – actually has occupied the front pages of newspapers for almost a year. This is the continuing European debt crisis, which started with Greece, moved to Ireland, defeated Portugal, and is currently searching for its next victim *cough* Spain *cough*.

The worst case scenario would involve a country such as Italy – the world’s seventh largest economy – going bankrupt, or a collapse of the euro (and with it, the European Union). Such scenarios are far-fetched, but quite within the realm of possible. They are what many analysts spend hours worrying about every day.

A bankruptcy of a major European country, such as Spain or Italy, would do major damage to the United States. As Paul Krugman writes:

Nor can the rest of the world look on smugly at Europe’s woes. Taken as a whole, the European Union, not the United States, is the world’s largest economy; the European Union is fully coequal with America in the running of the global trading system; Europe is the world’s most important source of foreign aid; and Europe is, whatever some Americans may think, a crucial partner in the fight against terrorism. A troubled Europe is bad for everyone else.

Indeed, the United States has already experienced the consequences of Europe’s debt troubles, minor as they may seem compared to the worst-case scenario. It is no coincidence that job growth, after increasing steadily in the spring of 2010, stalled right as Greece’s budget woes hit the front pages that summer.

The most troubling thing about all this, for Mr. Obama, is how little control he has over this event. It is Germany, not America, which holds the fate of the European Union in its hands; German decisions – or, more specifically, the decisions of German Chancellor Angela Merkel – will either save or destroy the European Union. Mr. Obama can successfully influence Germany; indeed, his behind-the-scenes lobbying was one factor behind the trillion-dollar European bail-out fund. But ultimately the fate of Europe, and with it the American economy, may lie in Germany’s hands.

And whither goes the American economy, so goes Mr. Obama’s re-election chances. In the end the president may lose re-election because of events thousands of miles away, over which he has precious little control, which seemingly have nothing to do with American politics.


by inoljt

Is China’s Economy Overheating?

9:56 pm in Uncategorized by inoljt


steam by westy559, on Flickr

Much interest – and muted apprehension – has been focused on the rapid growth of China’s economy. The Great Recession barely put a dent on the country’s continuing expansion, in stark contrast to the troubled economies of the First World.

Yet now an interesting thing is occurring; one hears murmurs about weakness in the Chinese economy, murmers which were not heard last year. Analysts are starting to advance the possibility that China’s economy is overheating. This is based upon economic indicators such as rising inflation (a classic sign of an economy running too fast).

Perhaps the most widely held view is that China faces a property bubble, whose bust would do quite a bit of damage to the economy. The New York Times, for instance, has written several articles examining excesses in China’s property boom. One article talks about a city named Ordos in northeastern China, full of recently built apartments that sit empty of residents. Such stories strongly recall tales during America’s property bubble, of empty suburban lots built around cities like Phoenix and Las Vegas, founded on the confident assumption that prices would keep on rising forever.

To be fair, there is a rationale for the speculation in Ordos. Despite its economic success, China has a lot of room to grow. Per capita income in China is still below that of Jamaica, for instance. So the new houses in Ordo will be filled, eventually, as poor peasants migrate to the cities.

Another article in the Times describes the building boom in Hainan Island – something that is harder to defend as economically rational. The Chinese government is apparently hoping to make the place a tourist destination, and such plans have set up an orgy of new construction. It is not immediately apparent, however, why Hainan Island is a better tourist spot than anyplace else in the world. In ten years its numerous golf resorts may well be languishing in red ink. The Hainan Island boom constitutes a strong indication of a property bubble.

China’s government seems to be recognizing these signs; the official rhetoric has shifted to cooling down the economy. Recently China’s central bank surprisingly raised interest rates in an attempt to do just that.
Read the rest of this entry →

by inoljt

An Unmentioned Cause Behind America’s Economic Woes

2:25 pm in Uncategorized by inoljt

America’s economy is in a bad way. The economic recovery has turned out to be disturbingly weak, and joblessness rates are still actually rising. Investment is down, Americans are depressed and angry, and there are even worries about a double-dip recession.

There has not been much analysis of the causes behind today’s economic stagnation. Most experts talk about how weak recoveries generally follow financial crises. Politically, Republicans blame Democrats, and Democrats are generally too busy trying to fix the problem than to think about what caused it.

Yet there is indeed something that did badly damage the recovery – an event very few nowadays link to America’s economic woes. This event was much like the 2008 financial crisis (indeed, it actually was another financial crisis). It dominated newspaper headlines, threatened to severely weaken several economically mighty countries, and in the end required international intervention to the tune of one trillion dollars.

On the surface, the European sovereign debt crisis – and more specifically, the bankruptcy of Greece – might have little to do with the United States. Greece, after all, is quite far away from America. Yet, as 2008 showed, the fall-out from a financial crisis goes wide and far; if Europe was hurt by America’s financial crisis, it stands to reason that America was hurt by Europe’s financial crisis.

Moreover, both crises had much in common. Panic hit the market and risk spread wildly, from the original contagion to even the safest strongholds. In the United States, banks went bankrupt; in Europe, countries went bankrupt. For both crises, the “fix” cost hundreds of billions of dollars.

There is another, more ominous analogy. The Great Depression, it is commonly held, started with the collapse of the American stock market. What really made it “Great,” however, was a series of bank failures that followed. These started in Austria. If the 2008 financial crisis was Black Tuesday, then the Greek crisis holds a disturbing parallel with the chain of bank failures that started in Europe.

Fortunately, the European Union was able to put a halt to the Greek crisis – unlike what happened during the Great Depression. Due to the lessons learned from that era, unemployment is less than half what it was during the Great Depression’s peak (which is, unfortunately, still quite high).

Nevertheless, the fact that the European debt crisis was halted probably did not it from inflicting the harm it had already done. Much as the 2008 financial crisis raised unemployment to jump to 10%, fall-out from the European financial crisis seems to be keeping it at that number. It is interesting that almost nobody, whether in politics or economics, seems to be publicizing this fact.


by inoljt

Illustrating Inequality in the United States

4:53 am in Uncategorized by inoljt

Inequality constitutes a rising problem in United States. Ever since the 1970s, it has been steadily increasing; today, income inequality is at its highest since the Great Depression. The fact that America is currently mired in the worst economic crisis since that period may not be a coincidence.

This site has found fifteen striking charts of inequality. Some are better at conveying the problem than others. Nevertheless, overall it does a decent job at presenting the magnitude of American inequality. Pictures like the one below are especially effective:

Illustrating Inequality in the United States

The causes of this growing inequality remain complex. Experts attribute numerous causes. Some point to the decline of manufacturing and blue-collar industry since the ’70s – which probably plays a part. Liberals blame conservative tax-cuts which helped the rich disproportionately.

Whatever the reason, it remains undeniable that the well-off have benefited most from the economic growth over the past few decades. Another graph illustrates this point:

Illustrating Inequality in the United States

What is most striking about this chart is the degree to which CEO pay increases, almost without regard to how well the companies under their management do. The stories of massive Wall-Street bonuses to CEOs responsible for bankrupting their banks have become infamous; the practice continues.

At some point something will have to be done to curb this trend. Taxes on the rich will almost certainly be raised, although it would be better to do this after the recession. Even the analysts on Fox News acknowledged this on their Sunday discussion forum. The estate tax – which falls on the inheritances the rich give to their children – is going back to its level before President George W. Bush cut it. The New Yorker and other sources are proposing a “millionaire’s tax,” something for which broad public support probably exists.

All in all, increasing inequality remains a threat to the overall wellbeing of a country. As a matter of fairness, income inequality goes hand-in-hand with opportunity inequality – leading to rigid social stratification. This sets the ground for social unrest, as the rich increasingly feel disconnected from the poor, and vice versa. In the worst case, things may end in revolutionary violence.

Of course, the United States is nothing near that situation now. Best keep it that way.