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."