The Winners and Losers in 21st Century America

Statistical games can be played to mask the realities of our neofeudal economy, but "narrative control" can't obscure the facts or the banquet of consequences that these realities have set.

Not everyone in America gained ground as a result of the rampant hyper-financialization and hyper-globalization of the 21st century. Let's begin our analysis of who gained ground and who lost ground in the year 2001, when China entered the WTO (World Trade Organization) and offshoring / globalization shifted into high gear and when the Federal Reserve began ramping up its financialization / monetary manipulation--oops, sorry, policy interventions.

The top 1% and the top 10% gained ground. The bottom 90% lost ground, especially the bottom 50%. Wage earners lost ground, while corporate insiders, financiers, speculators using leverage and those lucky enough to be born long enough ago to buy assets at pre-bubble valuations gained ground.

If you want to argue with these facts, argue with the Federal Reserve Database. All these charts are drawn from the St. Louis Federal Reserve FRED Database.

Let's start with the varying multiples generated by asset bubbles since 2001.

NASDAQ up 9.3X
Corporate profits up 6.2X
Case-Shiller Housing Index up 3X

Those are some serious bubbles, given that $1 in 2001 is $1.80 in today's currency.

If the NASDAQ index had risen at the same rate as inflation since 2001, it would be 3,340, not 17,166.

Corporate profits would be $1.26 trillion annually, rather than $4.3 trillion. Hmm, $3 trillion a year is a nice chunk of extra change for gutting national security, quality and durability by offshoring essential industries.

The Case-Shiller Housing Index would be up from 110 in 2001 to 200 today, rather than 323.

So how did each household sector do since 2001?

Net worth of top 1% up 5X
Net worth of 90-99% up 3.9X
Net worth 50-90% up 3.2X
Net worth bottom 50% up 3X

How much of the nation's total household net worth does each sector own now in dollars?

Total net worth: $160.2 trillion
top 1%: $49.4 trillion
90%-99%: $58.3 trillion
Top 10%: $107.7 trillion
Bottom 90%: $52.5 trillion
Bottom 50%: $4 trillion


Note that the top 1% own roughly the same net worth as the bottom 90%.

How much of the nation's total household net worth does each sector own now as a percentage of total net worth?

Total net worth: $160.2 trillion
Top 1%: 31%
90%-99%: 36.5%
TOP 10%: 67.5%
Bottom 50%: 2.5%
50%-90%: 30%
BOTTOM 90%: 32.5%

Since wealth is concentrated in the top layer of each sector--the top 1% own the lion's share of the top 10%'s net worth, and the top 10% of the 50% to 90% sector own the lion's share of that sector's net worth--we can say with confidence that the top 20% own roughly 80% of the net worth--in line with the Pareto Distribution (the 80/20 rule).

What's lost in this aggregate number is the extreme concentration of income-producing wealth (and thus political power) in the top 0.1% of the citizenry and the mere crumbs left to the bottom 60%. As many of us have pointed out over the past 15 years, the only accurate description for this system is neofeudal, where a New Nobility owns the wealth and political power, the bottom 80% are modern-day debt-serfs and the "middle class" is now the 90% to 99% sector, with those in the 80% to 90% sector having just enough home equity to fancy themselves "middle class" in name if not in ownership of income-producing assets or political influence.

What do we call a system in which the top 1% own roughly the same net worth as the bottom 90%? Neofeudal. Any other description is misdirection / propaganda aimed at protecting the interests of the Nobility at the expense of the serfs.

The NASDAQ stock market index: up 10X at its recent peak.



Corporate profits up 6.2X as surveillance pricing, monopoly price-gouging, crapification, planned obsolescence and extortion have worked marvelously well in stripmining the citizenry to enrich the top 10% who own 90% of all stocks, the "shareholders."



Wage earners' share of the nation's income has been slashed over the past five decades. Unsurprisingly, hyper-financialization and hyper-globalization did nothing to reverse this decline of American labor in favor of global capital.



If housing fell 40% from its current valuation, it would return to the trend line.



Here's a chart of net worth since 1950. Approximately $100 trillion was added above and beyond what inflation dictated.



Some percentage of the bottom 50% benefited from the housing bubble, but even with the bump to $4 trillion in net worth, the bottom 50% owns a grand total of 2.5% of total net worth.



Here's the 50% to 90% sector:



Here's the 90% to 99% sector:



Here's the top 1% sector:



Statistical games can be played to mask the realities of our neofeudal economy and society. But narrative control by the well-paid apologist-punditry class--everyone's doing great because I'm doing great--can't obscure the facts or the banquet of consequences that these realities have set.

A simple request of those who copy any of these charts: could you please publish the chart with the annotation credit intact rather than lop it off? Thank you.

New podcast: Adaptability: The Key to Future Success, with the Contrarian Capitalist (53:40 min)

New podcast: Trade, Tariffs and Globalization with Richard Bonugli (35:51 min)

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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Wile E. Coyote Recession

So where are corporate profits going to come from as globalization, price-gouging, planned obsolescence, shrinkflation and immiseration run out of rope?

We all know there's a time lag between the moment Wile E. Coyote runs off the cliff at full speed and the moment he realizes there's nothing but thin air beneath his feet. His expression in the second before he begins his descent communicates surprise, fear and a woeful awareness of impending impact with unforgiving ground.

This is an apt description of the present moment. The economy has already run off the cliff, but we haven't yet experienced that second of realization that there's nothing but thin air below.

We can call this the Wile E. Coyote Recession, as there is a time lag of around one quarter between the moment we left the cliff edge and the moment we start falling. The economy has momentum, as what's in transit and in the warehouses is already in the pipeline. But now that Deglobalization has disrupted supply chains, once what's in the pipeline has been distributed, the new realities start playing out.

Legions of economists and financial pundits are claiming to measure the odds of a recession. This is akin to Wile E. Coyote attempting to measure his odds of catching the Roadrunner in mid-air: the recession is already a matter of gravity.

Similar prognostications are being issued about the stock market, which depends on many factors, but the one that looms largest is corporate profits. If profits rise, this justifies higher stock valuations. If profits fall sharply, then stock valuations will adjust downward.

Two charts reveal the primary sources of soaring corporate profits: globalization from 2001 to 2024, and profiteering from 2020 to 2025.

Here we see that corporate profits were in the $700 billion to $800 billion range all through one of the greatest booms in American history, 1995 to 2000. This was sufficient to spark an economic boom and a booming stock market.



Then globalization kicked into high gear in 2001 with China's entry into the WTO (World Trade Organization). As corporations rushed to offshore production. profits soon tripled to the $2.2 trillion - $2.4 trillion range, a range that held steady through the 2010-2019 boom in GDP and stocks.

The Covid pandemic lockdown triggered a mini-crash which was reversed by unprecedented monetary and fiscal stimulus. In the span of a few years, corporate profits nearly doubled. Since globalization had been a force for two decades, this extraordinary rise can't be attributed to that factor.

The reality was much uglier, and so we don't dare discuss it in polite company. Corporations boosted profits not by increasing productivity or generating higher quality goods and services; they boosted profits by:

1. profiteering / price-gouging

2. Shrinkflation

3. Crapification of goods and services (a.k.a. planned obsolescence)

4. Immiseration: reducing the quality of standard services to force consumers to "upgrade to premium," and forcing consumers to agree to subscription services via mafia-type extortion.



With globalization reversing and prices / inflation set to rise as consumers run out of savings and credit, what happens to corporate profits going forward? As for jacking up profiteering, planned obsolescence, shrinkflation and immiseration / extortion, these strategies have already been pushed to 11 (recall the dial stops at 10).

What's next--a can of tuna the thickness of a slice of bread? A cereal box so thin it can no longer be stood up on a shelf? Shrinkflation has already reached absurd extremes, and there isn't much left to squeeze out of this gimmick.

As for immiseration, that's been pushed to the limits of human endurance as well. Once the reverse wealth effect and layoffs start taking a toll on consumers' incomes and willingness to spend, the most miserable services will be the first ones to be axed.

So where are corporate profits going to come from as globalization, price-gouging, planned obsolescence, shrinkflation and immiseration run out of rope? Maybe corporate profits will experience a Wile E. Coyote type impact with reality as gravity takes hold.



Note that if corporate profits had kept pace with inflation since 2002, they would be around $1.26 trillion annually, not $4.3 trillion. Maybe reversion will re-align corporate profits with inflation since 2001.

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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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What's "Normal" in a Hyper-Normalized World?

Now that the entire economy depends on these hyper-normalized speculative bubbles for its "growth" and "wealth," there is a profound fear of a future based not on artifice but on the real world.

Humans are quick to habituate to current conditions, i.e. consider them normal. This rapid normalization has advantages and disadvantages.

Normalization is an adaptive strategy, enabling humans to adapt readily to conditions that are considerably different from their previous "normal" state of affairs. So those ripped out of their "normal" lives and thrown into the Gulag soon consider the wretched conditions of the prison camp "normal."

The downside of normalization is that it erects a defensive barrier between the real world and the perceived i.e. normalized world. In systems that have failed but are incapable of real reform, normalization phase-shifts into Hyper-normalization (generally one word, Hypernormalization), a peculiar adaptative state described by Alexei Yurchak, a Russian anthropologist who used the term in his 2005 book Everything was Forever, Until it was No More: The Last Soviet Generation.

Documentary filmmaker Adam Curtis described Hypernormalization in this way:

"'HyperNormalization' is a word that was coined by a brilliant Russian historian who was writing about what it was like to live in the last years of the Soviet Union. What he said, which I thought was absolutely fascinating, was that in the 80s everyone from the top to the bottom of Soviet society knew that it wasn't working, knew that it was corrupt, knew that the bosses were looting the system, know that the politicians had no alternative vision. And they knew that the bosses knew that they knew that. Everyone knew it was fake, but because no one had any alternative vision for a different kind of society, they just accepted this sense of total fakeness as normal. And this historian, Alexei Yurchak, coined the phrase 'HyperNormalisation' to describe that feeling."

I submit that the U.S. economy and stock market have been hypernormalized to the degree that what is now viewed as "normal" is completely detached from the real world. What we inhabit is a system that has lost all authenticity and survives entirely on the ceaseless marketing of artifice, a.k.a. narrative control that benefits the few at the expense of the many.

In effect, "normal life" is stripped of authenticity in favor of a simulacrum "normal" that supports those at the top of the status quo. This "new normal" reaches extremes of artifice, hence hyper-normalization.

As long as everyone thinks there are no alternatives to this hyper-normalized simulacrum, this artificial construct appears to be immutable--everything is forever.

But once the power structure admits, however minimally, that it no longer has the answers to the decay of the social-economic order, then the entire artificial construct collapses in a heap. This is the sociology of collapse: people accept a facade of artifice and propaganda without actually believing any of it, though they do have a limbic loyalty to the founding ideals of the nation.

What's real is denial, repression of non-conforming realities, group-think, virtue-signaling and a profound loss of competence.

In this hyper-normalized state, madness of crowds speculative bubbles are now considered normal, not just in stocks but in housing, commodities, quatloos and everything else that can be commoditized, marketed and sold:



So Housing Bubble #2 is not viewed as an insane extreme that is bound to succumb to gravity, it's "normal."



Here is the real world: speculative frenzies are abnormal and the collapse of these bubbles is normal and predictable.



Now that the entire economy depends on these hyper-normalized speculative bubbles for its "growth" and "wealth" (two additional examples of hypernormalization), there is a profound fear of a future based not on artifice but on the real world.

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The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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The Family Home: From Shelter to Asset to Liability

The deflation of asset bubbles and higher costs are foreseeable, but the magnitude of each is unpredictable.

With the rise of financialized asset bubbles as the source of our "growth," family home went from shelter to speculative asset. This transition accelerated as financialization (turning everything into a financial commodity to be leveraged and sold globally for a quick profit) spread into the once-staid housing sector in the early 2000s. (See chart of housing bubbles #1 and #2 below).

Where buying a home once meant putting down roots and insuring a stable cost of shelter, housing became a speculative asset to be snapped up and sold as prices soared.

The short-term vacation rental (STVR) boom added fuel to the speculative fire over the past decade as huge profits could be generated by assembling an STVR mini-empire of single-family homes that were now rented to tourists.

Now that housing has become unaffordable to the majority and the costs of ownership are stair-stepping higher, housing has become a liability. I covered the increases in costs of ownership in The Cost of Owning a Home Is Soaring 11/11/24). Articles like this one are increasingly common:

'I feel trapped': how home ownership has become a nightmare for many Americans: Scores in the US say they're grappling with raised mortgage and loan interest rates and exploding insurance premiums.

The sums of money now required to own, insure and maintain a house are eye-watering. Annual home insurance for many is now a five-figure sum; property taxes in many states is also a five-figure sum. As for maintenance, as I discussed in This Nails It: The Doom Loop of Housing Construction Quality, the decline in quality of housing and the rising costs of repair make buying a house a potentially unaffordable venture should repairs costing tens of thousands of dollars become necessary.

Major repairs can now cost what previous generations paid for an entire house, and no, this isn't just inflation; it's the result of the decline of quality across the board and the gutting of labor skills to cut costs.

Here's the Case-Shiller Index of national housing prices. Housing Bubble #2 far exceeds the extremes of unaffordability reached in Housing Bubble #1:



Here's a snapshot of housing affordability: buying a house is now an unattainable luxury for those without top 20% incomes and help from parents.



The monthly payments as a percentage of income are at historic highs:



Property taxes are rising in many locales as valuations bubble higher and local governments seek sources of stable revenues:



Home insurance costs vary widely, but all are skewing to the upside.



As I often note, the insurance industry is not a charity, and to maintain profits as payouts for losses explode higher, rates have to climb for everyone--and more for those in regions that are now viewed as high-risk due to massive losses in fires, hurricanes, wind storms, flooding, etc.



All credit-asset bubbles pop, and that inevitable deflation of home valuations will take away the speculative punchbowl. What's left are the costs of ownership. As these rise, they offset the rich capital gains that home owners have been counting on for decades to make ownership a worthwhile, low-risk investment.

The deflation of asset bubbles and higher costs are foreseeable, but the magnitude of each is unpredictable. The ideas that have taken hold in the 21st century--that owning a house is a wellspring of future wealth, and everything is now a throwaway destined for the landfill--are based on faulty assumptions, assumptions that have set a banquet of consequences few will find palatable.

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The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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This Nails It: The Doom Loop of Housing Construction Quality

Add in the doom loop of an unprecedented credit-asset bubble and housing as a sector is in trouble.

Sorry for the punnish-ment, but this nails it: How Contracting Work Became a Race to the Bottom The reality of being a contractor includes labor shortages, brutal competition and low, low margins.

This is not a new or unique trend, but it's accelerating into a Doom Loop where the resources needed to reverse the decay are no longer available at the needed scale.

As a former builder, I experienced this same dynamic back in the 1980s, after the 1981-82 recession gutted the auto and construction industries. The 1981-82 recession was the deepest economic decline since the Great Depression in the 1930s, as the Federal Reserve jacked up interest rates to snuff out the inflation expectations that were becoming embedded in the economy.

Sectors that depended on consumer borrowing--autos and housing--tanked. Contractors' sunk capital--the investment of time and effort required to learn the tradecraft, the financial investment in tools and equipment, office leases, etc. and the social capital of relationships forged with subcontractors, suppliers, lenders, etc.--is substantial and not easily replaced.

So everyone in the trades tries to survive the downturn by cutting costs, as the alternative--walking away from the construction industry and trying to establish a new career in a field that pays as well as construction--was difficult enough in good times, but in a recession became nearly insuperable.

The building trades are unique in a number of ways. Skilled labor still commands a higher-than-average wage, which offers a rare leg up for those (mostly men due to the physical demands of the work) with little interest or aptitude for classrooms or white-collar office work.

While manufactured housing and kit homes have been around for decades (Sears sold kit homes in the early 1900s with great success), the trades cannot be fully automated. Housing is one of the few things that's still expected to be durable, and so as dwellings age, repairs are needed, and each situation has both commonalities with similar repairs and aspects unique to the specific problem.

All dryrot is the same, but each instance of rot is unique, and it takes a great expanse of varied experience to figure out the most efficient and effective solution.

Those with deep tradecraft skills are naturally reluctant to abandon their livelihood, but recessions leave many with no choice. Before giving up, contractors will lower their bids to get work just to pay the bills, never mind make a profit.

Offices can be given up, but there isn't much fat to be cut out of bids, as labor, materials and overhead expenses cost what they cost.

There is one big expense that is temptingly open to arbitrage: labor overhead, the non-wages costs paid by employers for tradecraft workers. Due to the physicality and inherent risks of construction, injuries are common and so construction workers compensation insurance rates are high--generally between 25% and 50% of the hourly wage, but can approach 100% for high-risk work categories.

There's a raft of other labor overhead expenses: disability insurance, unemployment insurance, and the employer's share of Social Security, currently 7.65%. In recessions, state unemployment funds are drawn down and so the rate paid by employers increases sharply to replenish the fund.

Some states mandate healthcare insurance coverage for all full-time workers (or all employees working more than 20 hours, etc.), which is another labor overhead.

Add these up and the cost may equal or exceed the wages paid to the worker. To pay a worker $25 an hour, the contractor is paying $50 per hour. So to survive lean times and not go bankrupt from a low bid, contractors either pay workers cash (i.e. under the table) to avoid paying the labor overhead, or they hire quasi-legal subcontractors who do the same thing--pay all their workers as 1099 independent contractors who are responsible for their own insurance, Social Security taxes, etc.

The subcontractors aren't paying their workers $50 an hour, they're paying them $25 an hour, and the 1099 workers don't pay any overhead except the Social Security / Medicare taxes, if that.

This was my experience in the early 1980s as the Great Recession crushed new housing and remodeling. The only contractors who made money were those who avoided paying labor overhead. The rest of us scraped by doing all the work ourselves or we lost money. (The old joke: we lose money on every job but we make it up on volume.)

As the article describes, the same dynamic gutted the sector in the aftermath of the 2008-09 Global Financial Meltdown, with one key difference: many of the older, experienced tradecraft workers have retired or left the construction industry, and the people doing the work now often lack the kind of deep, varied experience needed to do work above the most routine kind.

I've discussed the crippling long-term consequences of this under-competence at some length: workers are trained just enough to competently complete routine tasks, but they lack the training and experience needed to problem-solve / do demanding work outside the narrow boundaries of routine tasks.

The Catastrophic Consequences of Under-Competence (8/17/24)

Automation Institutionalizes Mediocrity (2/14/25)

The soaring costs of materials and construction-related regulatory burdens have now systemically optimized construction-worker under-competence as contractors cannot afford to hire competent workers and still win bids. Homeowners facing sticker-shock on bids for repairs, additions and remodels gravitate to the lowest bid regardless of such niceties as contractors paying all the required labor overhead.

The combination of high costs, optimization of under-competence and the scarcity of truly experienced workers generates a doom loop: shoddy workmanship and low-quality materials cause leaks, but few have the experience to make the needed difficult repairs.

The cultural penchant for McMansion-style homes with complicated roofs generate more opportunities for slipshod workmanship to cause leaks, and the substitution of cheap materials adds to these risks, many of which remain hidden until major damage has been done behind the drywall or siding.

McMansion-style homes built in a hurry by inexperienced crews may pass the purchaser's home inspection, but harbor defects that will manifest later as horrendously costly repairs.

As for who can do the work competently and on time--good luck finding "old timers" who are still in the trades. Those few who can do the work have high costs and are often booked far in advance, and so they can charge a premium. As a result, you hear about roof replacement bids in the $40,000 to $60,000 range--sums that would have been considered astronomical in decades past.

Many homeowners can't swing the costs of repair, so the house rots away.

Personally, I wouldn't do any work in this environment by bid; I'd only work by the hour. This requires an element of trust in the contractor to not pad the daily expenses, but unfortunately it's boiling down to either take a chance on the low bid, knowing the workers are likely getting stiffed because the labor overhead costs that protect them aren't being paid, or the customer pays the contractor the full costs plus a fee for their time and expertise.

There aren't many old hands left in the trades who have the decades of experience necessary to do a wide range of tasks.

Add in the doom loop of an unprecedented credit-asset bubble and housing as a sector is in trouble. Here's a snapshot of housing affordability, which is in the basement:



The monthly payments are at historic highs, while the cost of non-mortgage expenses such as home insurance and property taxes soar.



If you can find an old hand who's still working, don't try to chisel their price down or hurry them. Be grateful you'll only pay once, cry once rather than pay later and cry a river.

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