A free-market economy gives everyone the chance to get rich. Right? Wrong.
A 2017 study by the Federal Reserve Bank of Cleveland found that a household outside the top 10% would had twice the probability making it into the highest tier within 10 years in 1984-1994 than in 2003-2013.
The classic way to get rich in America is to start a business, but business formation is drying up due to efficient national retail chains muscling out small local businesses. High-growth startups are also on the wane; a few huge tech companies are making it harder for upstarts to reach the highest heights of success.
If you don’t start your own business, you can always invest in someone else’s, but for the average American, the market is a bewildering game, with high-frequency traders and savvy hedge funds ready to take day traders’ money. Most investors turn over their money to institutions, willing to take the more modest, less risky returns on offer.
Middle-class Americans tend to have most of their wealth in houses. But the housing bubble, buoyed by the buying and selling of second and third homes in the 1980s-early 2000s, ruined the real estate dream for many. For the middle rungs of the wealth distribution pyramid housing has barely recovered from the devastating crisis of the late 2000s.
Many Americans still start successful businesses, pick winning stocks, make money in real estate, and get top jobs. Still, with the rise of big companies, institutional investors, tight lending standards, and stringent degree requirements, these paths to affluence have gotten narrower, more difficult, and less certain. As a result, many have flocked to the world of cryptocurrency, where outsiders and people with less formal education have a chance to strike it rich. Yet even there institutional investors are slowly taking over.
If the free-market system of the 20th century has hardened into an oligarchy in the 21st, what will young Americans do with their ambition without the promise of wealth that bold risk-taking and hard work can make them rich? An increasing number may turn against the system. Who knows, socialism may be the next hot growth industry…
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It’s Gotten Too Hard to Strike It Rich In America | Wealth Management