Serious Wonkery: The World Top Incomes Database

Wonkery Warning:

WC was told of an amazing data set available on the web at The World Top Incomes Database, hosted by the Paris School of Economics. It can deliver both data and graphics, some going back to the 1880′s. It easily generates nifty graphics like this:

Top Income Shares, UK, US, Japan and Germany, 1900-2010

You’ll note that the wealthiest one percent of Americans control far more wealth, both as a percentage of their national economy and, given the vastly greater size of the U.S. economy, in absolute dollars, than any of the other three industrial powers. Higher even than the class-ridden United Kingdom.

Want to zero in on a shorter period? Here’s 1975-present:

Top Income Shares, UK, US, Japan and Germany, 1975-2010

If you have wonkish tendencies, this is a great toy…

Too Big to Fail: A Reality Check

We were told in 2008 by the Bush Administration that the post-Lehman Brothers financial industries that were failing were “too big to fail.”

In an eerily prophetic article in October 2000, Cara S. Lown, Carol L. Osler, Philip E. Strahan, and Amir Sufi, wrote in the Federal Reserve Bank of New York Economic Policy Review titled “The Changing Landscape of the Financial Services Industry: What Lies Ahead?”

By allowing financial holding companies to own banks, securities underwriters, and insurance companies, Gramm- Leach-Bliley sets the stage for another round of financial consolidation. Our evidence points most strongly to combinations of banks and life insurance companies. When the compromise on GLB was reached, the stock prices of banks, securities firms, and insurance companies all increased. Particularly sharp increases occurred at bank holding companies and securities firms that act as advisors in financial M&As as well as at life insurance companies. Moreover, our simulated mergers across the financial services industries indicate that the largest diversification benefits would result if bank holding companies combined with life insurance firms.

This Mother Jones graphic from 2009 shows just how accurate that prophecy was.

Financial Services Industry Consolidation 1990-2009

In 1995, there were 37 sizable financial institutions; today there are four. It’s not just the sings on doors, either. The dollars are now highly concentrated. The nation’s 10 largest financial institutions hold 54 percent of our total financial assets; in 1990, they held 20 percent. In the meantime, the number of banks has dropped from more than 12,500 to about 8,000. More and more wealth is being concentrated in fewer and fewer hands.

Bank Numbers and Sizes, 1990-2009

It’s pretty clear, isn’t it, that if any banks were “too big to fail” in 2008, the situation will be even worse the next time there’s a financial crisis.

Which leave government three choices:

1. Break up the oligopoly that has developed, forcing a separation of functions and a reduction in size of these unwieldy behemoths.
2. Face even larger government bailouts to save the economy from a disastrous meltdown and depression.
3. The government fails to bailout the sinking giant financial behemoth, resulting in the aforesaid disastrous meltdown and depression.

Isn’t it absolutely clear that the only sensible course of action is #1, to break up these elephants, before another Jon Corzine type gets control and bets everything on red? And isn’t it also absolutely clear that the Teabegger-saddled Congress is hopelessly incapable of recognizing, let alone acting, on this issue?