One remarkable consequence of the Great Recession of 2007–09, the worst global economic crisis since the Great Depression, was the emergence of economic inequality as a major political issue in many countries, particularly the United States. Created in part by reckless speculation in mortgage-backed securities (MBSs) by underregulated banks and other financial concerns, which created a housing bubble that burst with devastating effect in 2007–08, the Great Recession impoverished millions of persons in the United States, western Europe, and elsewhere, depriving them of their homes, their jobs, or their savings. To contain the damage to the global financial system, governments initially used public funds to bail out banks and other businesses that were deemed “too big to fail,” hoping in the process to stimulate interbank and consumer lending; some governments also committed significant funds to public-works projects in order to alleviate unemployment and encourage consumer spending.
Perhaps understandably, those who suffered the worst effects of the crisis—the poor and the middle classes—were generally unsympathetic to the notion that their taxes should be used to rescue the very entities that had created it, through irresponsible and frequently illegal lending and financialization practices. Nor could they avoid noticing that, with few exceptions, top executives at the rescued institutions did not suffer materially for conduct that nearly destroyed their businesses, ruined the lives of millions, and brought the global financial system to the brink of collapse. Most of them continued to be compensated lavishly, at historically high rates compared with the incomes of average workers, though some were forced to accept huge bonuses as going-away presents when publicity regarding the extent of their mismanagement became too much of an embarrassment for their firms. None of them went to jail.
The public’s justified anger naturally became directed at a financial and economic system (“Wall Street”) that seemed designed to serve the interests of the very rich at the expense of everyone else. Indeed, the very rich did not lose as much in proportional (as opposed to absolute) terms in the Great Recession as did the poor and middle classes, and, unlike everyone else, they recovered from it very quickly, having largely regained their losses by 2010. In the United States the Occupy Wall Street movement from 2011 drew attention to long-standing, ever-increasing economic inequality in the country—which the Great Recession had made even worse—calling for a reformed government and economic system that would benefit those other than the superrich—the lower “99 percent” rather than the top “1 percent” of the population by wealth and income. They pointed to the obvious pernicious consequences of persistent economic inequality, apart from its offense to basic fairness: a shrinking middle class, fewer educational and economic opportunities for most people, poorer overall economic performance with weakening consumer demand, outsized influence by the rich over government economic and financial policy (e.g., tax policy)—which exacerbates inequality, because the rich favor policies that benefit themselves—and social unrest and alienation as many people lose faith in a system in which they cannot get ahead or even stay afloat, despite their honest efforts. For such people, the American Dream—the idea that those willing to work hard can eventually lead a decent life and make better lives for their children than the one they had—is dying or dead.
The scale of economic inequality, both in the United States and globally, is staggering. In 2015 the richest 1 percent of the world’s population owned as much wealth as the rest of the world’s population combined. The richest 62 people in the world owned more wealth than the poorest 50 percent, some 3.6 billion people. The wealth of the richest 10 people in the world is greater than the gross domestic products of most countries, including those of Belgium, Norway, and Austria. In the United States economic inequality has been generally increasing since the late 1970s, a period roughly corresponding to the advent of financialization, banking deregulation, and supply-side economic policies based on large tax cuts for the wealthy. Inequality in the United States is now far greater than it is in most other developed countries. In 2013 the top 1 percent of the U.S. population received more than 21 percent of aggregate income, while the top 0.1 percent received nearly 5 percent. The richest 1 percent owned 42 percent of the country’s wealth, while the richest 0.1 percent owned 22 percent.
Although the Occupy movement greatly raised the public’s awareness of economic inequality, it never produced any concrete goals, which made it easier for many establishment politicians to pay lip service to reducing inequality without actually accomplishing or even proposing meaningful reforms. Nothing specific was ever demanded of them. As the movement gradually petered out, the issue of economic inequality remained a theme without a program in U.S. politics.