Tuesday, September 6, 2011

Economic History of the Great Divide, in one chart

Robert Reich included a great chart in his recent article on the necessity for increasing the middle class. The argument is: Increasing the middle class increases demand. This is because of the very well verified reduced "marginal propensity to consume" with rising income. The richer people spend less of their income. So when the economy is more unequal, demand drops. The most beautiful thing in the article is a chart that tells the sad story of the past 50 years, and in particular all the bad things that started happening from Reagan on. Here's the chart (click on the chart to magnify):

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