Earlier this week I started writing about wealth and financial capital as part of examining how the various components of the industrial system are beginning to break down. I will have more to say about the financial capital portion of wealth in upcoming posts but wanted to first provide more data and more context. As was pointed out in the comments Thomas Piketty provides a lot of data that he and others collected and form the basis for his book “Capital in the 21st Century” (which I just started reading). So here is a wealth graph that goes all the way back to 1770 and also shows population growth

What this comparison shows is that much of the total wealth in existence today has been generated post 1900, which supports my claim that the industrial system wasn’t really fully in place until then. In fact from 1920 to 2010 the population grew by less than 3x and wealth grew by more than 15x.

The distribution of this accumulated private wealth is extremely uneven, with just 0.1% of the population controlling 20% of all private wealth in the US today. And the top 10% of the population account for 75% of wealth. But in terms of ability to use wealth the picture is even more lopsided than that when you consider what the wealth for the remaining 90% consists of as the following chart by Emmanuel Saez and Gabriel Zucman shows 

Essentially the wealth of the bottom 90% consists of pension claims and housing both of which are highly illiquid (something we will revisit in the context of changes to income).

Now why does all of this matter? One crucial way it matters is that the governance portion of our current system is based on voting with an original idea of equal representation. This was written into the United States Constitution, Article One, Section 2 which sets up the apportionment of seats in the house of representatives and establishes the decennial population census. The initial exclusionary definition of who was to be counted was later expanded with the Equal Protection clause of the Fourteenth Amendment. As late as the 1960s the Supreme Court upheld these basic tenets with several “one man one vote” rulings.

More recently though two changes have come together to undo this principle, resulting in representation based on money instead of individuals. First, the cost of attention has been rising steadily and has exploded with the advent of the Internet. The cost of Super Bowl advertising is a good proxy here as it measures roughly how much it costs to get a minute of attention in the US. Here is a chart the Business Insider put together

Second, changes in legislation have made it easier for money to be spent by politicians and individuals / groups supporting them to buy attention. This goes as far back as Buckley vs. Valeo in 1976 which took much of the bite out of the Federal Election Campaign Act. It really gathered steam with the Citizens United decision in 2010 which removed limitations on corporations and the recent McCutcheon case which did away with any aggregate limitations.

Do the effects of this show up in the election data? The following chart put together by represent.us shows what happened in 467 district races. The headline sums it up: the candidate who spent more money won 91% of the time.

For one possible legislative attempt to counteract the power of money you should check out the American Anti-Corruption Act.

There is also an interaction between the distribution of wealth and income that impacts the nature and size of the demand for products and services. I will tackle that in another post. Before that though I may dig into the composition of wealth to show the role of financial capital.