Wealth inequality

[Altherion]

I think it is a fairly uncontroversial fact that for the past few decades, the very rich of the United States have gotten much richer while others have (on average) stayed almost the same. Here is this story nicely told in pictures and here is a CNN article saying more or less the same thing. This is not true of all countries (e.g. Scandinavia appears to be immune), but between the ones where it is the case and ones where the elite controls everything in the first place, it's a substantial amount (probably even a majority) of the world.

This cannot go on indefinitely because that leads to precisely the scenario predicted by Marx. I don't think it can stay at this level either because the richer the elite, the more opportunity they have to become even richer. Money is power: on average, they can elect politicians who represent their interests and take even more money from the poor and middle class. This is what is going on now in Wisconsin: under the guise of cutting taxes, limiting spending and balancing the budget, the government is trying to take away the collective bargaining rights of the last strong unions in the state and cut funding to education for the children of the poor and middle class (the wealthy go to private schools).

I am curious: what do people think will happen in the next few decades? Are we due for another balance restoring event like the one seen on the top graph in the CNN article?

[Datepalm]

This cannot go on indefinitely because that leads to precisely the scenario predicted by Marx.

I do not understand the logic of this sentence.

[Fez]

Something needs to give. I don't know what, I don't know when, but there will come a point where one of the "R's" is going need to happen: Reform or Revolution. Right now too many people are deluded into thinking that one day they'll be part of the wealthy class, and so are not willing to see its power revoked too much; after all there'll be there one day themselves. Eventually though people's current situation will simply become too intolerable and they will patiently suffer no more; right now they are bought off with cheap entertainment and electronics and that promise. But not for ever. I don't want to see revolution, its messy, many people die and you don't know that it will end any better. That's why I support reform, massive, sweeping reform. Reform that makes most people who hear it all label me a radical, but the way I see it its the only way to stave off disaster. Also there's that whole moral obligation to all, including the poor, thing that I believe in.

[Former Lord of Winterfell]

Something needs to give. I don't know what, I don't know when, but there will come a point where one of the "R's" is going need to happen: Reform or Revolution. Right now too many people are deluded into thinking that one day they'll be part of the wealthy class, and so are not willing to see its power revoked too much; after all there'll be there one day themselves. Eventually though people's current situation will simply become too intolerable and they will patiently suffer no more; right now they are bought off with cheap entertainment and electronics and that promise. But not for ever. I don't want to see revolution, its messy, many people die and you don't know that it will end any better. That's why I support reform, massive, sweeping reform. Reform that makes most people who hear it all label me a radical, but the way I see it its the only way to stave off disaster. Also there's that whole moral obligation to all, including the poor, thing that I believe in.

This is from the Time article:

There's a growing income gap in America, but it's not necessarily between the rich and the poor.

It's between the super rich and everyone else. Or as George W. Bush once quipped at a swanky campaign dinner, "the haves and the have-mores."

301Email Print Income trends among 90% of Americans are relatively unchanged over the last decade. Nearly all segments of the population are moving relatively in proportion. Which is to say, they're barely moving at all.

I don't really see most people getting too bent out of shape about the emergence of the new "super-rich". I figure that includes guys like Bill Gates, Warren Buffett, tech guys like Zuckerberg, etc. If you look at the list of the 40 wealthiest, it looks to me like "financial" guys only account for 11 or so. The rest are all folks are in a particular industry, invented something, etc.

http://www.forbes.com/wealth/forbes-400/list

I don't get why them being disgustingly rich makes me any more poor. Okay, the dude who founded Oracle is worth $27B. How does that hurt me? People aren't going to rebel because some people make billions. They're going to rebel because they are stuck being poor, and don't believe they have the opportunity to become middle class, upper-middle class, or rich. Not because they're only upper-middle class but not "uber-rich." And at least according to Time, those percentages really have changed much in the last 10 years.

Sorry, but you guys may have to wait a bit longer for that kind of revolution.

[Fez]

I don't get why them being disgustingly rich makes me any more poor. Okay, the dude who founded Oracle is worth $27B. How does that hurt me? People aren't going to rebel because some people make billions. They're going to rebel because they are stuck being poor, and don't believe they have the opportunity to become middle class, upper-middle class, or rich. Not because they're only upper-middle class but not "uber-rich." And at least according to Time, those percentages really have changed much in the last 10 years.

Sorry, but you guys may have to wait a bit longer for that kind of revolution.

Its not just the folks with billions, its also everyone with lots of millions, and there is a lot of them. The top 1% of this country has over 1/3rd of the total personal wealth in this country, that is too much money tied up with too few people to allow for enough money to exist for enough people to be in the middle class and be contend. That added to the fact that the next 19% have half the wealth, that leaves 80% of the country fighting over 15% of the wealth. That's not sustainable. You're right that it hasn't changed much of the past 10 years, this situation was a long time coming and was pretty much fully realized by then. And of course there hasn't been a revolution yet.

However the recession changed things, it hurt a lot people and right now some of them are expressing that through the Tea Party. But the Tea Party won't change this underlying issue, even if it got its way, and now some on the left are talking about forming an anti-Tea Party to charge up the other side. Eventually all this populism will turn against that 1%, maybe a great deal of that 19% as well. In my mind the tipping point will be when there is just too much that the rich can afford that the rest of us can't; maybe its just healthcare costs skyrocketing too much, maybe its something else. But it will happen.

Its true, people don't get too bent out of shape at the super, super rich. But they should. There's not a lot of them, but they hold an incredible amount of the total wealth in this country; eventually people will realize that and turn against them. It will just get worse as the country's infrastructure crumbles and basic government services are no longer provided.

ETA: And I say this as a person who, although nominally a graduate student facing an uncertain job market and a lot of debt, have parents very well off in the economic scheme of things. Not top 1%, but definitely top 5%. The reforms I want will hurt me and my inheritance significantly, but that changes nothing for me.

[Jaime L]

I don't get why them being disgustingly rich makes me any more poor. Okay, the dude who founded Oracle is worth $27B. How does that hurt me? People aren't going to rebel because some people make billions. They're going to rebel because they are stuck being poor, and don't believe they have the opportunity to become middle class, upper-middle class, or rich. Not because they're only upper-middle class but not "uber-rich." And at least according to Time, those percentages really have changed much in the last 10 years.

Sorry, but you guys may have to wait a bit longer for that kind of revolution.

Because economic growth is irrelevant if it only accrues to 2% of the population.

It still surprises that people don't realize that GDP growth is only half the equation. The other half is who benefits from it.

Chats,

I like you but you gotta understand talking about economic equality is not, in and of itself, class warfare. It's like saying striving for racial equality represents racial warfare. Recognizing a problem is the first step to fixing it.

[Former Lord of Winterfell]

Robert Shiller argues that wealth inequality was the reason for the recession.

There's plenty of evidence out there that wealth inequality creates economic crises.

Okay, I don't want to get in a battle of dueling links. I'll simply say that if that is true, then we should see those negative effects hit the "90%" by driving them all down into the poorer categories. But at least according to the Time article, that hasn't happened yet.

ETA: IMHO, Capitalism is a zero sum game.

Well, if you believe that, then your conclusion is inescapable. Of course, I'd question how GDP can ever grow if it is truly a zero sum game, but I suppose you're free to assume that if you so choose.

[Former Lord of Winterfell]

Because economic growth is irrelevant if it only accrues to 2% of the population.

"irrelevant" in what sense?

It still surprises that people don't realize that GDP growth is only half the equation. The other half is who benefits from it.

I don't understand the point. If my income goes from $50k to $55K, but Zuckerman's goes from $6B to $7B, how does that rising gap make me any worse off?

As long as I'm doing okay, I could give two shits how he's doing.

[Iskaral Pust]

I've been surprised for a long time that in the tug-of-war between capital and labor (from the Marx POV), the US populace has enabled capital for so long. I keep expecting the pendulum to move the other way but the culture resists, largely at their own expense.

In the 90's labor had a bit of a hey-day with big raises, stock options for rank and file, booming stock wealth for even the hoi-polloi, but even then capital was even better because profits grew. And in this past decade labor seemed to really lose power over it's share of wealth, although they were briefly enriched by the housing bubble.

Perhaps it's a casino effect. The temporary enrichment from various bubbles distracts from the long term erosion of labor's share of the pie. After the bubble bursts, the inequity becomes obvious, but another bubble comes along to distract again.

I think there are a couple of structural factors that influence this too:

(1) In this new global economy, labor is cheap. A lot of jobs can be off-shored or are replaced by automation/technology, thereby increasing supply of labor for those jobs that remain. This over-supply of labor reduces its power to demand a bigger share of profits.

(2) Despite relative inequity, most people in America have a very comfortable standard of living, especially compared most of the rest of the world. There is a strong incentive to not rock that boat too hard.

(3) Entrepeneurship is really hard and for most it is a losing game. Most people want someone to provide them stable paid employment rather than take on the risk themselves of starting a business. So long as entrepeneurship is so risky, and risk averse people avoid it, the capital that is successful will capture a big chunk of the rewards.

(4) As FLOW pointed out, much of the greatest inequity is because of a very small number of massively wealthy people. We live in an age where success can be much more leveraged. Although we haven't made any effort to really progressively tax the super-wealthy, so this point still depends on the culture of enablement from the masses.

[Altherion]

I do not understand the logic of this sentence.

I am referring to proletarianization. If the trend continues, the elite will eventually control the entire economy and the rest of us will have nothing to do except work for them on their terms. They'll then keep squeezing (real wages will not merely stagnate, they will decrease) until enough people have had enough and sologdin & Co. will do their thing.

[Shryke]

This is from the Time article:

There's a growing income gap in America, but it's not necessarily between the rich and the poor.

It's between the super rich and everyone else. Or as George W. Bush once quipped at a swanky campaign dinner, "the haves and the have-mores."

301Email Print Income trends among 90% of Americans are relatively unchanged over the last decade. Nearly all segments of the population are moving relatively in proportion. Which is to say, they're barely moving at all.

I don't really see most people getting too bent out of shape about the emergence of the new "super-rich". I figure that includes guys like Bill Gates, Warren Buffett, tech guys like Zuckerberg, etc. If you look at the list of the 40 wealthiest, it looks to me like "financial" guys only account for 11 or so. The rest are all folks are in a particular industry, invented something, etc.

http://www.forbes.com/wealth/forbes-400/list

I don't get why them being disgustingly rich makes me any more poor. Okay, the dude who founded Oracle is worth $27B. How does that hurt me? People aren't going to rebel because some people make billions. They're going to rebel because they are stuck being poor, and don't believe they have the opportunity to become middle class, upper-middle class, or rich. Not because they're only upper-middle class but not "uber-rich." And at least according to Time, those percentages really have changed much in the last 10 years.

Sorry, but you guys may have to wait a bit longer for that kind of revolution.

Except it's not just the super-rich. The trend has been pretty thus: the more income/money you had, the more it grew. It's a straight trend all the way down.

The super-rich are outpacing the rich, yes. But the rich are also outpacing the middle-class and the poor.

The rich are getting richer in proportion to how rich they are.

EDIT: Also, Chats brings up "Class Warfare" within like 6 posts. I think that's a new record.

[Jaime L]

"irrelevant" in what sense?

Irrelevant to the 98% of the population who didn't benefit at all. Income has declined in real terms for the majority of American population over the past decade. This is not reflected in GDP.

I don't understand the point. If my income goes from $50k to $55K, but Zuckerman's goes from $6B to $7B, how does that rising gap make me any worse off?

As long as I'm doing okay, I could give two shits how he's doing.

The problem is your income isn't going up from $50k to $55K while Zuckerman's goes up $6B to $7B. Your income is flat, or more likely declining due to health care costs eating a greater and greater share of your disposable income. If income were actually increasing 10% for the majority of the population, as in your example, we wouldn't be having this conversation.

ETA: Iskaral phrased it well: It's the culture of enablement of the masses that has allowed income inequality to manifest. People stopped fighting for their own interests at about the same time "income redistribution" became a bad word. People have no sense of what got them to the quality of life they enjoy today...and have stopped fighting to maintain it.

[Shryke]

Irrelevant to the 98% of the population who didn't benefit at all. Income has declined in real terms for the majority of American population over the past decade. This is not reflected in GDP.

The problem is your income isn't going up from $50k to $55K while Zuckerman's goes up $6B to $7B. Your income is flat, or more likely declining due to health care costs eating a greater and greater share of your disposable income. If income were actually increasing 10% for the majority of the population, as in your example, we wouldn't be having this conversation.

Or, basically, if GDP growth isn't leading to better real wages or living standards or purchasing power for most of the US, why does it even matter?

[Solmyr]

I remember back in 2007, when we had no idea the crisis will even occur, me and some friends were discussing the issue of inequality. One of them said: "If, for just one day every person comprehended what's really going on, cities will burn."

[Jaime L]

Or, basically, if GDP growth isn't leading to better real wages or living standards or purchasing power for most of the US, why does it even matter?

Exactly.

[Former Lord of Winterfell]

(4) As FLOW pointed out, much of the greatest inequity is because of a very small number of massively wealthy people. We live in an age where success can be much more leveraged.

When the product of a person's labor was tied more closely to the physical work they were capable of performing, incomes obviously were more even because physical capabilities didn't vary that much. One person generally couldn't add that much more value to a product than another. But I think as technology and information have expanded, the ability to leverage intelligence and other non-physical traits via good decision-making/entrepeneurship means that a single person can add tremendous value to a product. One good engineer can triple the ability of a workforce over that same body of people without the engineer. Alexander the Great could only swing one sword, but his presence and abilities greatly increased the net fighting capabilities of his troops.

Although we haven't made any effort to really progressively tax the super-wealthy, so this point still depends on the culture of enablement from the masses.

FWIW, I'm not opposed to jacking up those rates some.

[Altherion]

I completely agree with FLoW, and would like to point out that perhaps "Mother Jones" is not the most unbiased source? Sure, CNN is more credible in their use of statistics, but of course it's "news", so it must be written in an alarmist standpoint.

I linked to the Mother Jones site because it has this information in nice, easy to understand pictures. My basic point is that the GDP has grown much faster than inflation over the past few decades, but almost all of that has gone to the very wealthy since inflation-adjusted median wages have stagnated (there is a small increase, but nowhere near what the rich got). You can get that from the US Census if you're willing to look through tables.

I don't understand the point. If my income goes from $50k to $55K, but Zuckerman's goes from $6B to $7B, how does that rising gap make me any worse off?

As long as I'm doing okay, I could give two shits how he's doing.

Ah, but you should. The problem is that some of that money (I don't mean Zuckerman since I have no idea what he is doing, I mean the wealthy in general) is inevitably going to make its way to political campaigns, think-tanks and various other such organizations where it will be used to fight for laws that benefit the wealthy at the expense of most others. For example, the wealthy lose nothing (except maybe in the very long term) when a state cuts spending on public schools, but that frees up money that can be given back to them in tax cuts. They'll share these with the middle class, but it won't be anywhere near being even and the children of the latter will lose a lot more than what the parents gain. The same thing happens with stuff like environmental regulation (the wealthy don't live in industrial zones), prisons (they have effectively a separate system and various other places. Money is power and it can be used to change the rules in a way that tilts the playing field even further.

[Solmyr]

As has been pointed out, because Mark Zuckerberg's share of the pie is X doesn't mean that mine has been reduced.

Actually, that's exactly what it means.

[Datepalm]

enough people have had enough and sologdin & Co. will do their thing.

You somehow seem to be thinking that this is the problem rather than the solution. Odd mistake to make, really.

I seem to be in the odd position of becoming more of a radical the older I get. If at 16 I firmly belived that a decent public education system and a tax rate just a teeny bit more progressive would inevitably lead us all into a golden age of equal lives well lived, I now know that given the nature of the system this is just something thats never going to be allowed to happen, even if we assume that its enough. There is a fundamental imbalance of power here, making a mockery of democracy, and nothing will change until that shifts.

[White Walker Texas Ranger]

I understand the concern. Wealth isn't a zero sum game, but power surely is. Unfortunately I don't imagine any large scale society would distribute power equally.,