Gulf states

Income inequality in the United States is at the highest level since 1928. It is this stark fact that explains why so many Americans support the Wall Street demonstrations and the 99 Per Cent movement that has emerged from them. A Time/Abt SRBI poll found that 54 per cent had a "very favourable" (25 per cent) or "somewhat favourable" (29 per cent) view of the movement.

The richest 1 per cent of Americans took home 23.5 per cent of national income in 2007, up from 10 per cent in 1980 (see graph). Even more remarkably, the top 0.1 per cent received 6.04 per cent, up from 0.9 per cent in 1978. Significantly, it is only in recent decades that the US income gap has become a chasm.


Inequality peaked in 1928 (when the richest 1 per cent held 23.9 per cent of national income), just before the Wall Street crash. It shrank gradually during the New Deal era of the 1930s before falling dramatically in the 1940s. Inequality then remained broadly stable through the long boom of the 1950s and 1960s, but began to rise in the 1970s as wages stagnated and unemployment increased. It then soared in the 1980s as the Ronald Reagan administration slashed income-tax rates for the richest (the top rate was reduced from 50 per cent to 28 per cent).

Thus began the process that the New York Times columnist Paul Krugman calls the "great divergence". Between 1980 and 2005, more than 80 per cent of the increase in US income went to the richest 1 per cent.

As a result, it is no surprise that many Americans are inclined to agree with Bill Gross, the manager of the world's largest bond fund, who tweeted: "Class warfare by the 99%? Of course, they're fighting back after 30 years of being shot at."

George Eaton is political editor of the New Statesman.

This article first appeared in the 24 October 2011 issue of the New Statesman, The art of lying

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Labour tensions boil over at fractious MPs' meeting

Corbyn supporters and critics clash over fiscal charter U-turn and new group Momentum. 

"A total fucking shambles". That was the verdict of the usually emollient Ben Bradshaw as he left tonight's Parliamentary Labour Party meeting. His words were echoed by MPs from all wings of the party. "I've never seen anything like it," one shadow minister told me. In commitee room 14 of the House of Commons, tensions within the party - over the U-turn on George Osborne's fiscal charter and new Corbynite group Momentum - erupted. 

After a short speech by Jeremy Corbyn, shadow chancellor John McDonnell sought to explain his decision to oppose Osborne's fiscal charter (having supported it just two weeks ago). He cited the change in global economic conditions and the refusal to allow Labour to table an amendment. McDonnell also vowed to assist colleagues in Scotland in challenging the SNP anti-austerity claims. But MPs were left unimpressed. "I don't think I've ever heard a weaker round of applause at the PLP than the one John McDonnell just got," one told me. MPs believe that McDonnell's U-turn was due to his failure to realise that the fiscal charter mandated an absolute budget surplus (leaving no room to borrow to invest), rather than merely a current budget surplus. "A huge joke" was how a furious John Mann described it. He and others were outraged by the lack of consultation over the move. "At 1:45pm he [McDonnell] said he was considering our position and would consult with the PLP and the shadow cabinet," one MP told me. "Then he announces it before 6pm PLP and tomorow's shadow cabinet." 

When former shadow cabinet minister Mary Creagh asked Corbyn about the new group Momentum, which some fear could be used as a vehicle to deselect critical MPs (receiving what was described as a weak response), Richard Burgon, one of the body's directors, offered a lengthy defence and was, one MP said, "just humiliated". He added: "It looked at one point like they weren't even going to let him finish. As the fractious exchanges were overheard by journalists outside, Emily Thornberry appealed to colleagues to stop texting hacks and keep their voices down (within earshot of all). 

After a calmer conference than most expected, tonight's meeting was evidence of how great the tensions within Labour remain. Veteran MPs described it as the worst PLP gathering for 30 years. The fear for all MPs is that they have the potential to get even worse. 

George Eaton is political editor of the New Statesman.