Remember the days when people would complain that our economic system was rigged to favor the top 1 percent? It turns out that’s not precisely true.
New research that examines 15 major nations over four decades finds the benefits of economic liberalization—that is, the relaxed regulations favored by economic conservatives—disproportionately accrue to a far smaller percentage of the population.
In the long run, such policies “increase the income of the top 0.1 percent, but do not return significant results for the incomes of the top 1 percent and the top 10 percent,” sociologists Roy Kwon and Brianna Salcido of the University of La Verne report. “No discernible effect of liberalization is observed for the incomes of the bottom 90 percent.”
Not only don’t the benefits trickle down to the majority of the population—they barely touch the moderately wealthy.
The researchers tracked the economic policies of 15 “advanced industrial societies,” including the United States, Great Britain, France, Germany, Canada, and Australia, from 1970 to 2010. They focused on “liberalization”—that is, the relaxation of government restrictions—in several arenas, including finance and trade, as well as initiatives that lowered taxes and shrunk the size of government.
Using data from the World Wealth and Income Database, they calculated the average pretax incomes of the top 0.1 percent, 1 percent, and 10 percent of earners in each nation’s economy, as well as the bottom 90 percent. After taking into account several factors that could influence income inequality, including the rate of union membership, they found a clear pattern.
Such policies “produce long-run positive effects on the incomes of the top 0.1 percent,” they write in the journal Social Science Research. “Although there is some evidence [they] may increase the incomes of the top 1 percent, these findings are inconclusive, as only one of three models return[s] significant findings for this connection.”
Moreover, the researchers found no evidence that these policies increase the incomes of the rest of the top 10 percent or bottom 90 percent.
If you’ve wondered why economic populism has been on the rise among both those on the left and right—and why major figures in the Democratic Party are releasing tax-the-rich proposals—these figures provide a highly plausible answer.
“In response to the stagflation of the 1970s, many developed countries around the world started a longstanding effort to implement [right-wing] economic policies in hopes of jump-starting their stagnant national economies,” the researchers write. The evidence, they conclude, suggests these policies increased economic growth, but the study “casts further doubt on whether the fruits of [these policies] benefit all, or even most, members of advanced industrial societies.”
The researchers note critics of such policies complain that they increase inequality and increase the gap between the haves and the have-nots, while their advocates claim they increase economic growth. “Both of these contentions are true to a certain extent,” they write.
It’s just that the benefits of this economic expansion are largely confined to the super-wealthy. Or, as they are known in the political world, the donor class.
