WEALTH DISPARITY: Inequality and a Wealth of Dithering
Source: http://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States

WEALTH DISPARITY: Inequality and a Wealth of Dithering

Perhaps no debate in the American political atmosphere has been as persistent or as divisive as the question of what—if anything—to do about national wealth disparity.

This debate has served as a fulcrum for our socioeconomic identity as well as government policy—foreign and domestic—for more than a century. Political careers have been forged and broken over it, communism was embraced or reviled due to it, and the echoes of this debate are reshaping the global sphere every day. In the aftermath of the near economic meltdown of 2008 and the tepid recovery, this topic has never been more in the spotlight.

First let’s look at some quick data.

Economic Recovery Graph

Credit: Pew Research Center

The United States has the fourth highest degree of wealth inequality in the world, just trailing behind Russia, Ukraine, and Lebanon.1 The wealthiest 20% of Americans own 88.9% of the all the wealth2 and this gap has been growing for the last forty years. Moreover, the recent economic recovery has disproportionately benefited the wealthiest 7% of Americans by a margin of 28:-4—in other words, those in the top 7% saw their wealth grow by 28% while the rest of us actually saw ours fall by 4%.3

The nature of some of this disparity has to do with where Americans accrue their wealth from. If you are a stockholder who stuck it out through the recovery, the last five years have been profitable. The S&P 500 rebounded to pre-recession levels by 2013 and has since gone on to set record highs.4 If you rely on a wage income, however, the last five years have been difficult. Payroll jobs have only recently (May, 2014) risen back to pre-recession levels and this does not take into account population growth — there are 15 million more working-age people in the market now than before the recession. So the boost in jobs is actually a weak consolation prize for the 44% of Americans who don’t own stock.

The disparity between wealth and poverty has always been in flux but it has been exponentially growing since the seventies and is now at its highest level since the 1920s, just before the Great Depression. Most Americans are aware of this and in fact most Americans also feel our economic system favors the rich. As it turns out, so do the economies of a great many other countries.

inequality pew poll

Source: Pew Research Center

In a recent survey of 39 countries, including the United States, roughly 70% of all respondents said their system favors the wealthy; an even greater portion of the population recognized that the gap between the rich and the poor has increased in the last five years.5

And yet we’re a rather fickle bunch. A majority of respondents also felt that income inequality should not be a major priority for their governments. Of all advanced economies (the US, France, the UK, etc) only Germany felt their government should focus on closing the income gap. This illustrates a trend in American and global politics: a public concern fizzles down to a muted and, in some cases, illusory reaction.

Herein lies the crux of the issue: stagnation. This sulky response to wealth inequality is entirely counter-productive. We unanimously recognize a problem yet aren’t willing to prod our governments into doing anything about it.

The trouble is the severity of poverty in advanced economies is relatively low compared to the rest of the world. In many cases we imagine an impoverished American can still find ways to provide food for their family, while nearly 70% of Ugandans struggle to afford food. Relatively speaking, that makes Americans feel good. This is not to say Americans do not struggle, they do. Despite being the wealthiest nation in the world a higher percentage of Americans scramble to put food on the table than nearly any other advanced economy (S. Korean and Greece having a slightly higher percentage). Our relative comfort is just enough to keep us content, willing to work more hours for less pay, and worse case, borrow our way to a standard of living to our liking.

Add to this is the volatility of the “haves” and “have-nots,” which is in such flux that the opportunity for mobility appears quite good. According to a recent survey of income data, 12% of Americans will find themselves in the top 1% for a least a year and nearly 70% will be in the top 20%.6 We want to believe in economic mobility. We need to if we are to justify the sacrifices that have been made by the middle class at the behest of the wealthy in the form of decreased benefits and stagnant wages.

So how much “unfairness” is inherent in the system and how much is acceptable? Is capitalism really the best of the worst ideas or is it an addiction? Does capitalism “work” for everyone, or a select few? Do we even care?

I’m going to break the third wall here and speak directly and plainly for a moment. I have no idea how to answer these questions with any degree of confidence. How can one tackle such a subject without being biased? If I make a genuine attempt to do so, how do I respond to criticisms that I’m either a “liberal entitlement junkie,” a “socialist,” or in the other direction a “white privileged capitalist?” In other words, is the discussion even worth having if the consequence is to simply have derisive division? Partisan feeling and antipathy in the United States is higher than it has been in twenty years7 and, in fact, there is a direct correlation between wealth inequality and partisanship.

There is a game a-foot here and I believe we are lost in the minutia. The facts seem pretty clear. But when ideas and pictures of wealth and affluence are dangled before us like meat on the end of a stick we are encouraged to run the rat race and stay the course. And while it may not even be a conscious decision to pursue the American Dream — to idolize success and to chase after prosperity — perhaps the way to change course is not to rethink the rules of the track but to take our eyes off the prize. What is that prize, after all, but a means to an end? We know money does not equal happiness but we hope that money makes it easier to find happiness. That is the fairy tale, it is where the “dream” comes in. In the words of the great Hunter S. Thompson:

“Myths and legends die hard in America. We love them for the extra dimension they provide, the illusion of near-infinite possibility to erase the narrow confines of most men’s reality. Weird heroes and mould-breaking champions exist as living proof to those who need it that the tyranny of ‘the rat race’ is not yet final.” —The Great Shark Hunt, 1979

Whether or not one feels it is “fair” to have such a large income gap, most Americans are content to let the politicians duke it out. No one can agree on what to do about it, nor can we even agree whether we should do anything at all. So we are content to let the finger-pointing, the chastising, and the politicizing stay where it belongs: locked behind great white pillars. And perhaps that’s the way it should be. Perhaps if we stop pointing our fingers at the government, casting blame, we might start to take responsibility into our own hands. Of course, we have to figure out what we really want first and that has always been easier said than done.

Posted by Zimmerman. This is the first in a series of articles on wealth disparity.

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Notes:
1. OECD (2013, July 30). Income Distribution and Poverty. OECD.StatExtracts. Retrieved from: http://stats.oecd.org/Index.aspx?DataSetCode=IDD 

2. OECD (2013, July 30). Income Distribution and Poverty. OECD.StatExtracts. Retrieved from: http://stats.oecd.org/Index.aspx?DataSetCode=IDD 

3. Fry, Richard. (2013, April 23). A Rise in Wealth for the Wealthy; Declines for the Lower 93%. Pew Research. Retrieved from: http://www.pewsocialtrends.org/2013/04/23/a-rise-in-wealth-for-the-wealthydeclines-for-the-lower-93 

4. Desilver, Drew. (2014, June 23). Five years in, recovery still underwhelms compared with previous ones. Pew Research. Retrieved from: http://www.pewresearch.org/fact-tank/2014/06/23/five-years-in-recovery-still-underwhelms-compared-with-previous-ones 

5. Pew Research (2013, May 23). Economies of Emerging Markets Better Rated During Difficult Times. Pew Research Retrieved from: http://www.pewglobal.org/2013/05/23/economies-of-emerging-markets-better-rated-during-difficult-times 

6. Rank, Mark R. (2014, April 18). From Rags to Riches to Rags. New York Times. Retrieved from: http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html?_r=0 

7. Pew Research. (2014, June 12). Political Polarization in the American Public. Pew Research. Retrieved from: http://www.people-press.org/2014/06/12/political-polarization-in-the-american-public 

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