Economy and Depitalism

In today’s WSJ there is an article titled As Middle Class Shrinks, P&G Aims High and Low. WSJ is now a subscriber access only to full articles so I can’t provide a link to the article because I read it on our internal news site. I can share what I found to be particularly insightful about our economy that is not usually so plainly and clearly stated. The following is direct quotes from the article.

In the wake of the worst recession in 50 years, there’s little doubt that the American middle class — the 40% of households with annual incomes between $50,000 and $140,000 a year — is in distress. Even before the recession, incomes of American middle-class families weren’t keeping up with inflation, especially with the rising costs of what are considered the essential ingredients of middle-class life — college education, health care and housing. In 2009, the income of the median family, the one smack in the middle of the middle, was lower, adjusted for inflation, than in 1998, the Census Bureau says.
The slumping stock market and collapse in housing prices have also hit middle-class Americans. At the end of March,
Americans had $6.1 trillion in equity in their houses — the value of the house minus mortgages — half the 2006 level, according to the Federal Reserve. Economist Edward Wolff of New York University estimates that the net worth — household assets minus debts — of the middle fifth of American households grew by 2.4% a year between 2001 and 2007 and plunged by 26.2% in the following two years.

To monitor the evolving American consumer market, P&G executives study the Gini index, a widely accepted measure of income inequality that ranges from zero, when everyone earns the same amount, to one, when all income goes to only one person. In 2009, the most recent calculation available, the Gini coefficient totaled 0.468, a 20% rise in income disparity over the past 40 years, according to the U.S. Census Bureau. “We now have a Gini index similar to the Philippines and Mexico — you’d never have imagined that,” says Phyllis Jackson, P&G’s vice president of consumer market knowledge for North America. “I don’t think we’ve typically thought about America as a country with big income gaps to this extent.”

“This has been the most humbling aspect of our jobs,” says Ms. Jackson. “The numbers of Middle America have been shrinking because people have been getting hurt so badly economically that they’ve been falling into lower income.”

2 cents:
This information confirms what I have been saying, we never got out of the recession and it is pointing to the reality that depitalism of the past is gone – at least for the foreseeable future. I put the qualifying remark on there because we all know that typically we learn nothing from history so we often repeat the same mistakes etc. That “said” the average citizen in our country has been impacted significantly by the practice of depitalism and its inevitable fracture. We will continue to see high unemployment numbers and little if any economic growth. This is the new reality – the new norm. Households have to identify and come to terms with this and make the necessary changes so that they can begin thriving – not in a # of purchases way but a well-being way.

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