Cross-posted at Reports from the Economic Front.
Many expected that the severity of the Great Recession, a recognition that prior expansion was largely based on unsustainable “bubbles,” and an anemic post-crisis recovery, would lead to serious discussion about the need to transform our economy. Yet, it hasn’t happened.
One important reason is that not everyone has experienced the Great Recession and its aftermath the same. Jordan Weissmann, writing in the Atlantic, published a figure from the work of Edward Wolff. The charts shows the rise and fall of median and mean net worth among Americans: how much one owns (e.g., savings, investments, and property) minus how much one owes (e.g., credit card debt and outstanding loans).
Both the mean and the median are interesting because, while they’re both measures of central tendency, one is more sensitive to extremes than the other. The mean is the statistical average (literally, all the numbers added up and divided by the number of numbers), so it is influenced by very low and very high numbers. The median, in contrast is, literally, the number in the middle of the sample of numbers. So, if there are very high or low numbers, their status as outliers doesn’t shape the measure.
Back to the figure: as of 2010, median household net worth (dark purple) had fallen back to levels last seen in the early 1960s. In contrast, mean household net worth (light purple) had only retreated to the 2000s. This shows that a small number of outliers — the very, very rich — have weathered the Great Recession much better than the rest of us.
The great disparity between median and mean wealth declines is a reflection of the ability of those at the top of the wealth distribution to maintain most of their past gains. And the lack of discussion about the need for change in our economic system is largely a reflection of the ability of those very same people to influence our political leaders and shape our policy choices.