The Economic Basis of Social Polarization

The economic basis of social polarization is empirically evaluated in the US (from the post-World War II boom through neoliberalism) and comparisons are made with the rest of the G7 (under neoliberalism). Income inequality is explained in terms of three factors: the profit share of net value added, tax redistribution, and the proportion of profit distributed to households. Wealth inequality is explained in terms of two factors: the proportions of assets and liabilities comprising net wealth and the share of financial assets held by the ruling class. The division of net value added between wages and profit is further evaluated and explained in terms of fundamental factors shaping capitalist development: profitability, capital accumulation, capital intensity, and the wage rate.