For the first time since 1997, the U.S. economy just added at least 200,000 jobs per month for six months running. GDP grew at a 4 percent annual clip between April and June. The percentage of Americans who describe the economy as “good” has climbed to the highest level of President Obama’s presidency.
Who wouldn’t rejoice over these happy milestones on the bumpy road to a real recovery?
Wall Street. On July 31, within hours of the release of a bunch of sunny indicators, stocks sank more than they had on any day since early February. The decline wiped out all gains the S&P 500 stock index had racked up over the month.
Global instability contributed to the sharp drop, but so did investors’ fretting over indications that workers are finally getting higher wages and more benefits.
And why exactly does Wall Street tank on news portending economic gains for most Americans? Don’t people with extra money in their pockets boost the economy when they spend more freely? Isn’t it something worth celebrating?
Not in an economy that caters to the rich.
You see, there are practical implications of the chasm between rich and poor for the conduct of commerce. For several years, retailers have increasingly doted on the affluent, the most alluring segment of the $10 trillion consumer spending market.
Consider how U.S. households differ. The richest 20 percent of Americans now pocket more than half of the nation’s income. The typical income for this kind of family tops $150,000, triple the norm for all of us. Together, these “high-value customers” (to borrow a phrase from LuxuryDaily.com) account for about 40 percent of all U.S. spending.
And the cost of real luxury has gotten a divorce from reality. A quilted Chanel handbag can set you back $4,900. An ultra-thin Piaget Altiplano watch could siphon 95 grand from your wallet.
There’s still some money made from selling cheap stuff to the poor and working class. That’s why the four biggest U.S. retailers are big-box behemoths Wal-Mart, Costco, and Target, along with the Kroger supermarket chain. Even the very bottom of the food chain, the people whose households eke by on $30,000 or less a year, account for a stagnant yet sizable $1 trillion bare-bones consumption market.
For them, dollar stores can be a bigger draw than the big boxes. They’re in a bind and so are the companies relying on their purchases.
“Customers are under pressure,” Dollar Tree Chief Executive Bob Sasser told The Wall Street Journal. “Unfortunately, that’s one reason why the space continues to grow.”
In a telling sign of today’s increasingly unequal times, Dollar Tree is merging with Family Dollar Stores. The No. 2 and No. 3 companies in this cut-throat market want to team up to compete with their No. 1 competitor, Dollar General. Together, they’ll fend off bids by Wal-Mart and its ilk to gobble up some of their territory with new smaller-box establishments.
Clearly, times are tough for retailers opting to sell stuff to the rest of us. But they’ve got it figured out for the most part and Wall Street worships predictability.
Think of all the economic models and assumptions that would be shattered if the drive toward wealth concentration were to take a detour toward shared prosperity.
Of course, financial experts won’t say these things out loud. Instead, they’ll mutter about inflation and freak out over signs that labor markets are growing tighter. Are those really big concerns in light of this protracted war on consumers?
If you would like to know more about how and why the rich are getting so much richer while the poor become steadily poorer (and you enjoy very long reads), check out Thomas Piketty’s 700-page masterpiece. In his wildly successful book Capital in the Twenty-first Century, the French economist has finally organized and footnoted every lost battle in this tale of class warfare.
Winning the debate, of course, isn’t enough. Until more U.S. political and business leaders decide they’ve had enough, this nation will become less of a democracy governed by the people and more of a plutocracy ruled by the rich.
Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national editorial service run by the Institute for Policy Studies. OtherWords columnist William A. Collins is a former Connecticut state representative and a former mayor of Norwalk, Conn. This piece originated at OtherWords.org.