Friday, March 8, 2013

Wealth Inequality in America

Serge Melki/Wikimedia Commons
We know that wealth inequality has been increasing in the U.S. - and in many other countries - : stories about CEOs making hundreds of times more than their average employees; bonuses of millions of dollars awarded to executives who leave, stay, sign up, perform well, perform ok, or perform lousy while average pay is under pressure; individual hedge fund managers making billions a year, while countries are on the verge of bankruptcy for lesser amounts. I discussed this subject in a previous post, Money, Power & the American Dream. Books have been written, studies performed about the negative consequences of too great of an inequality, but political discussion or social outrage has been quite limited in the U.S., with the exception of the Occupy Wall Street movement. Till now, perhaps, with the following video which has been going viral. It gives a simple but clear overview of wealth inequality in the U.S., showing that the gap between the haves and have-nots is much worse than many of us think:

Economic inequality is a controversial subject which draws many different views and opinions, which makes it hard to understand causes and effects well. Still, here are a few sources to look into and consider. The British Equality Trust is an organization that  "works to reduce income inequality in order to improve the quality of life in the UK." They claim:

"People in more equal societies live longer, have better mental health and have better chances for a good education regardless of their background. Community life is stronger where the income gap is narrower, children do better at school and they are less likely to become teenage parents. When inequality is reduced people trust each other more, there is less violence and rates of imprisonment are lower." and they back this up with research. Here are a few examples:

People in more equal societies live longer, a smaller proportion of children die in infancy and self-rated health is better.
- Obesity is less common in more equal societies
- Children do better at school in more equal societies
- Unequal societies are harsher, they imprison a higher proportion of people

- There is more social mobility in more equal societies (especially interesting as the U.S. doesn't score very well here, to say the least.)

Read also a very interesting blog about economic issues, oftwominds by Charles Hugh Smith, who discusses the sources of inequality in his post Inequality and the Decline Labor blaming politics and technology:

"I have long held that the greatest source of wealth inequality is political: those with great wealth have captured the for-sale machinery of governance, and "persuaded" the Central State to carve out quasi-monopolies and cartels that enable artificially high premiums. They also buy subsidies, exceptions and tax breaks for their income streams...."

and Smith continues:
"Many observers (including myself) have noted that robotics and networked software are replacing both unskilled and skilled labor at a faster clip than technology is creating jobs."

Continue to read what he says about do-it-yourself checking in at airports and do-it yourself check out at department stores. This may be good for the companies' bottom-lines (i.e. the 1% stakeholders benefit mostly from this), but jobs for the 99% are being replaced or their wages are under pressure.

Another interesting, and more libertarian leaning blog is Mish's Global Economic Trend Analysis by Mike Shedlock, an investment advisor, who believes that inequality is mostly caused by monetary and government actions In his post: What's Really Behind Gross Inequalities In Income Distribution?

he describes specifically the following causes:

1) Fractional Reserve Lending
2) Inflation targeting by the Fed
3) Moral hazard policies of the Fed that encourage winner-take-all speculation
4) Government interference into free markets
5) Public unions

Whatever the causes of inequality may be, for now two things seem clear: there is an increased and growing inequality in income and wealth in the U.S.and several other countries  and secondly, there are adverse consequences for less equal societies as a whole. That in itself should offer sufficient reason for concern and action.

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