Master of the Universe emeritus Vikram Pandit has gotten bounced from his perch as CEO of Citigroup, but, unlike most unemployed Americans, he won’t have to worry about how to pay the bills until he can find another job.
Citigroup’s stock today is worth about a tenth of what it was trading at when Pandit took over. Indeed the company exists today only because the U.S. government saw fit to deploy many billions of taxpayer dollars to keep it from going bankrupt in the fall of 2008, after Citi and friends caused a global financial meltdown through their grotesque mismanagement of their clients’ assets.
As a token of the firm’s gratitude for the role he played in all this, Pandit is walking away with approximately $260 million in compensation. (In America in 2012, this is known as “letting the market reward performance.”).
This heartwarming success story ought to be appreciated in the context of the latest statistics regarding the distribution of wealth in America. In what follows, I’ve used the consumer price index to transform all the figures into current, inflation-adjusted dollars:
*Median household income in the US was approximately $51,000 in 2011. This means half of all households lived on $4,250 per month (before taxes) or less.
*One out of five American households, or about sixty million Americans, lived on $20,000 or less, or $1,667 per month before taxes.
*Forty years ago, median household income in the US was $47,000 per year. The poorest fifth of American households lived on $19,500 or less.
*Over the past forty years, America’s gross domestic product has tripled. When taking into account population growth, this means Americans are on average more than twice as rich as they were in 1972. But the word “average” is tricky: as the old statistics joke has it, if you’ve got one foot in a campfire and the other in a bucket of ice water you are on average comfortable.
Obviously neither average American families nor poor ones are appreciably better off in economic terms than they were four decades ago: Household income for most Americans in general, and the poorer half of the population in particular, has barely budged since the early 1970s.
So where have all those trillions of dollars in increased wealth gone? Consider: in 1972 the 95th percentile of household income was $127,500. In 2011 it was $186,000. So what Paul Ryan thinks of as the very bottom rung of the “upper middle class” is doing somewhat better for itself.
But when we look at people even Mitt Romney would think of as “well off” we get a real glimpse into where all the money has gone. In the late 1970s the richest 10,000 American families had an average annual income, in 2011 dollars, of $5.8 million per year. Today this same group’s income has increased more than five times in real terms, to an average of $30 million per year (thanks to the mysterious wisdom of The Market, Vikram Pandit has been smack in the middle of this cohort).
It wasn’t always this way in America. Between 1950 and 1965 the nation’s economy boomed – but so did median family income. Indeed, every dollar of increased GDP during these years resulted in an eighty-one cent increase in median family income, which rose from under $30,000 to nearly $50,000 over that time span, where it’s been stuck ever since.
During the post-war boom, as America got rich, most Americans shared in the wealth. Over the past several decades, the nation as a whole has gotten vastly wealthier, but the vast majority of Americans have seen little or no improvement in their economic circumstances. Instead, crony capitalists like Pandit have profited from a political system that’s more interested in bailing out irresponsible financiers than it is in doing anything about the economic circumstances of people who can’t list “almost wrecked the world economy” as a professional accomplishment.