Cutting up the American Pie.

Since the 70s the size of the American Economy (real income) has essentially doubled. How did this larger pie get divided up?

None of this growth went to the bottom quintile. Two thirds of it went to the richest 20%.

There is a lot of outrage over this and its in many articles.

So here is a dumb question. Since the rich have all the investment dollars and investors want p

ositive real returns, isn't this situation inevitable?

Maybe if I spell it out a bit clearer.

If the pie (U.S. production) is growing at 3% a year and investors in U.S. based investments are seeing their share of the pie grow by, say, 6%, then their gain is someone else's loss. The investors are getting richer at the expense of the wage earners. Only if the investments grow at the rate of economic growth can the situation reach equilibrium. If the investors in the U

.S. are making higher real returns than economic growth, those investors are structurally taking pie away from non-investors. So here is proposition number one:

In the U.S., the capital owners, by design, get a steadily increasing percentage of the pie than wage earners if they get above economy returns. This gets a bit murkier when you consider that U.S. investment will often have some overseas component but in some ways this can apply to many countries.

I've put some numbers together from census.gov to highlight the trend which has been in place since the 60s. The surprise for me was that even a big chunk the middle classes, often the knowledge workers , were losing share to the rich. I would love to do some research into the 50s and early 60s when the trend was the opposite to try to find out exactly what was going on.

One may argue that the rich's capital is necessary to make the pie bigger in the first place, a debate for another time, but it seems its built into the system that the rich's slice of the pie will, by design, grow faster than everyone else's.