USA, land of inequality

10/15/2012

To begin I would like to share a study that was a joint effort conducted by Harvard Business school and Duke school of Psychology. In this study people from all different demographics were asked to choose between three hypothetical countries and the wealth distribution by 20% sections. Here are the three countries.

Now let’s assume that you are randomly assigned to one of the ⅕th sections. Which country would you most like to be a part of. Which country is the most ideal?

Country A is Sweden, Country B the United States and Country C a true hypothetical with completely even distribution. In the study most individuals regardless of personal wealth or political orientation did not choose the United States, in fact only 10% did.

We live in a country in which the top 1/5 of the population controls 86% of the wealth. To illustrate how extreme this can be one need only look at your neighborhood Walmart. The six Walton heirs have more wealth than the bottom 41.5% of Americans! Six human beings > 48.8 million households (not individuals, households). Can anyone say with a straight face that this is morally right, healthy for our country, or a good thing for anyone’s economic future and otherwise?

I understand the viewpoint that we want to attract the best and brightest to positions of influence in our country but is this how drastic it needs to be? The last three decades have seen an incredible acceleration of executive pay. In fact CEO pay has grown 127x faster than average worker pay over the last 30 years. In the 1950’s, 60’s and earlier were people not compensated enough for their hard work and leadership?

I know a rising tide is supposed to lift all boats but it seems that even as our GDP per capita continues to grow the trend of inequality is growing much worse and doesn’t show any signs of letting up (see graph). Unfortunately yet unsurprisingly it harms our country’s minorities, the historically oppressed, the most. This is especially troubling for all when you couple this with the fact that the groups that have the smallest piece of the pie, and therefore least opportunity, are the fastest growing demographic. Does this speak to a bright future for America?

Evidence suggests that slight inequality can be healthy and create drive and motivation, the grease on which the cogs of a healthy economy depend. However when a society becomes too imbalanced as is the case in the United States (which is one of the worst in the industrialized world see map) human beings suffer. Richard Wilkinson has shown that more equal societies do better in many different areas ranging from imprisonment rates, to obesity, to social mobility, drug use, community trust, violence, mental health, education and much more.

This system of inequality is self perpetuating, has entered every level of our politics and with the recent supreme court decision of Citizens United this has grown far far worse. Now wealthy individuals, corporations and lobbyists can donate unlimited amounts of money to political campaigns. And Barack Obama is nearly as beholden to the wealthy as is Mitt Romney. This must change if we want to slow the growing tide of inequality that is wrecking our economic futures both individually and collectively. Thus individually and collectively we must act.

Watch for an entertaining and informative look at the entrenched $ involved in our government

Did you know that the inequality in United States was so dramatic? I did not. To end I return to the Harvard/Duke study. When participants in the study were asked to estimate the degree of inequality that the United States experiences as well as their ideal level. The numbers were way off. (see graph below) Again I emphasize, a representative cross sample of Americans from all levels of wealth, education and race had no idea how imbalanced we are. Not only that but they overwhelmingly agreed that a breakdown like Sweden’s is the ideal. Why do we not have this in America then the land of freedom and dreamers? If we want our children to have a shot at the “American Dream” then we must halt this avalanche of inequality.

Next post will look at some of the spiritual implications of inequality. Till then please leave your comments, questions and criticisms and if you are shocked and appalled with what you have read please share it and find ways you can make a difference then share with me. We are the answer! (o:

12 Comments

Nathan

10/15/2012 02:54:18 pm

So Sam Walton builds a juggernaut of a company, divides his wealth among his heirs and this is morally wrong? By whose morals? Granted, I have no idea what they do with their money, but in a free society, why should anyone be entitled to their money? Do we so easily forget that these wealthy people spend so much more than the rest of us and are actually a huge stimulus to the economy? So again - why is it unfair that they have money? Sounds like an issue of societal envy, and envy is a sin in every religion I've ever studied. We shouldn't envy others' money.

Nobody gave me a free ride to college. I worked my butt off to pay my way through school, then when I wasn't satisfied with the money I was making, I took out loans and went back to school for another degree. After school, I didn't sit around and play video games every day. I didn't sell drugs. I was an average kid. I did homework. My parents didn't disengage from teaching me. They didn't expect the school system to be miracle workers when I didn't do my homework. They held me accountable to teachers and principles rather than excusing my behavior. And because I was accountable, guess what - I got myself into college, and it had nothing to do with my parents income or my race. It had nothing to do with distribution of wealth. It had everything to do with expecting nothing from the government. It had nothing to do with thinking I was entitled to anything. I fully expected it to be hard. I fully expected it to be expensive, so I lived accordingly. And if I follow this path and make a lot of money, I should be giving it up to others that aren't willing to do the same? I should give some up to others that 'look up' and feel entitled...and they did what to earn some of it?

So why does my American dream - one where I'm still paying back loans for years to come, why should everyone be entitled to my money? Because they're a historical minority? This doesn't make any sense. You put a hypothetical situation in front of them where they're the 'privileged' and there's no way they're going to say that they should give up their wealth. (my opinion - no fact, obviously)

And another thing - if everyone is supposed to be equal, then you must ignore race, gender, ethnicity. No one gets preferential treatment because they look different, grew up differently, smell different - whatever.

You ask why we don't have the same distribution of wealth in the US as they do in Sweden - you're talking about completely different governments and government oversight. Sweden is very heavily regulated and that kind of oversight would never hold sway in the US. Furthermore, the GDP and the import/export comparisons don't even match up, so if you are to do a comparison, you must first establish that there are extreme differences between the societies. There are less minorities and immigration issues than the US has.

My opinion is that using income as a marker for equality misses the point. If you want equality, income doesn't matter. There is no one in the US that doesn't have the same opportunity I did. I wasn't gifted anything but the first year of tuition by my parents. After that, I had equal opportunity to work my butt off or sit around and get drunk and waste my college years away. I had the opportunity to pay attention in class or to spend my time playing video games wishing I was rich. I had the equal opportunity to expect someone to give me a high paying job just after graduation or to work my way up when others sat around and complained about their boss.

My American dream is that everyone has the same opportunity to be successful. I recognize that we're not there yet, but there are an awful lot of people who make themselves victims. I am no victim of any CEO who earned hundreds of percents of raises. I am no victim of the Waltons and their billions. A rich CEO doesn't hold me back from anything. It's not like he/she is keeping anything from me. Them making money doesn't keep me from making more.

Help me understand why a guy who built an empire (Walton) that provides tens of thousands of jobs owes his money to anyone else. Help me understand how giving his money away equally makes our economy better when he can create more jobs with that money and thereby more income for others instead of giving an equal amount to people who have no idea how to create income. They'd spend the money and then they're broke again-then the economy is worse off. Help me understand how this idea of monetary equality makes people equal. All of the evidence you provide above is well-discussed and well-thought through. It's very thought provoking, but I don't see how achieving this monetary equality makes anyone better.

Please expound.

Nathan

10/15/2012 03:12:34 pm

BTW, the comments above - I think that one might read them and think I'm grumpy or something like that. Just me sharing my thoughts and there's no malice in them at all. It would probably come across less gruff if I actually said it out loud in a conversation

Laramie Woods

10/16/2012 08:59:18 am

I like Nathans comment

Todd Decker link

10/15/2012 03:32:26 pm

This is very interesting information. The experiment at the beginning reminded me of the thought experiment in John Rawls’s book “A Theory of Justice”. I’m guessing you’re familiar with Rawls’s work. In Rawls’s thought experiment it’s not just equality that is the motivating factor, but also the quality of life of the least advantaged person. The interesting thing about Rawls is that his theory is noncommittal toward low inequality or high inequality. Under his second principle of justice, inequality is fine as long as this inequality is arranged so that it benefits the least advantaged members of society. As you mentioned, a certain level of inequality may actually benefit the least advantaged person by creating greater prosperity across the board. But on that point, I think the United States is failing to meet this qualification, i.e. our increasing inequality is not benefitting the least advantaged.

What worries me is not so much the wealth of the rich but the poverty of the poor (and the coexistence of the two). I think there can be much done to improve the quality of life of the least advantaged. I’m not really sure what the best way to do that is. I do think the optimal solution is within the mixed-economy structure, i.e. free market capitalism with government regulation and welfare programs. There are international examples we can look at. You gave Sweden as an example. The Nordic nations, like Sweden, have had functioning welfare states for a while. They also foster a strong, business-friendly environment that creates greater national wealth. Sweden, Norway, Finland and Denmark have balanced budgets, low public debt as percentage GDP, and AAA credit. On the other hand, Singapore has hardly any welfare programs but also has very low poverty, low unemployment, and very high GDP per capita. Singapore just has a remarkably vibrant economy and competent government. They also have a unique health-care program based on mandatory savings with some of the lowest costs in the world and excellent quality.

This is all very interesting stuff. I’m looking forward to your next post on the spiritual implications of all this. I like getting into the numbers and stats but I enjoy even more getting into the doctrine and spiritual side of these things.

Jared link

10/16/2012 05:50:45 am

Thanks for the excellent insights Todd. And yes it is John Rawls that the study actually reference in their query of inequality. I totally agree and it statistically shown that our country's greater prosperity is NOT benefiting the poor.
As Nathan pointed out it is very true that the America has a very different makeup than the Scandinavian countries but just as we believe other countries with different culture and demographics can and often should model after our democracy I believe we can improve based on the positive examples of other countries...of course tailoring it to our own strengths and nees.

Sharry BD

10/16/2012 03:51:15 am

Nathan, in response to your comment, I would argue, from a progressive theoretical perspective, that the notion of “equal opportunity” in this county and “equal” access to the “American dream” is a fallacy perpetuated to propagate a broken system. This notion of “hard work=financial success” is a common debate among conservatives and liberals and it gets to the heart of the two political parties, revealing two conflicting theoretical systems. Both parties agree that hard work and accountability are important factors and can lead to financial success, higher education, and the idyllic American dream. However, the idea that hard work is the key to higher education and financial success is debatable at best.
Not to diminish your success, which is of course admirable and involved a great deal of hard work and perseverance, but it was a statistically likely outcome to your middle class existence (no offense). Your parents were educated, went to college, encouraged you to go to college, encouraged your siblings to go to college, owned a home, etc. Whether or not they paid for your college, or you paid for your own (which again is great), has little to do with the likelihood of you getting an education and becoming financially independent. I too fall into this category. I have two highly educated parents who modeled success in both school and the workplace. They both attended college wanted all their kids to go to college, read to us in bed, and, similar to yours, provided a small amount of financial support to make their dream happen (a $3,000 college savings account-one for each of their seven children). Because of their emphasis on educational success, I believe all seven of us received full scholarships to college and graduated with honors. Although some attain scholarships and succeed in higher education primarily through their own gumption (which is awesome), I believe my siblings and I we were all definitely products of our environment. And we are not alone. The vast majority of Americans follow their parents’ educational trajectory making family background the number one predictor of financial and educational success.
For example, compare our somewhat similar middle class experiences with that of many low-income immigrant families. It is likely that their parents did not attend a university, do not know how to navigate the educational system, and may not even speak English. Although these folks are educated through the same public schools, many of these kids have not seen educational success modeled. Instead, what they have seen modeled, is “hard work = manual labor” and “dangerous work =selling drugs.” This is especially true for first generation undocumented immigrants who do not have access to scholarships, grants, loans, or, in most states, in-state-tuition. I don’t know about you, but if I hadn’t at least had access to loans and in-state-tuition, I would never have even considered college. It would be almost impossible to save up enough money at a high school level job to pay for out-of-state tuition without loans, I don’t care how hard working you are.
A great deal of research has been done on the topic of class mobility and the notion of “hard work = success.” Despite the Abraham Lincoln and Henry Ford success stories, Americans actually enjoy “less economic mobility than their peers” (“Harder for Americans to Rise From Lower Rungs,” NY Times, January 2012). Even our very own, extremely conservative, Paul Ryan recently argued that “mobility from the very bottom up” is “where the United States lags behind” (“Harder for Americans,” NY Times, January 2012). Although the premise of the American dream hinges on social and economic mobility, Americans actually fall behind the majority of wealthy, “developed” countries.
I agree we need to talk about taking accountability for these problems, problems in which an extremely unequal society has allowed for the failure of so many smart, capable, talented, passionate, hardworking children. Again, speaking from a progressive theoretical perspective (and the fact that family background is the strongest predictor of future success), encouraging a greater amount of financial equality where young people do have access to good education, scholarships, successful role models, and realistic opportunities would go a long way in improving this country. In contrast, perpetuating the belief that gumption alone will fix the problem inherently leads to a society that emboldens the interests of the rich who already control all the wealth, power, and political system, and silences the voices of the poor. And I for one would always like to be on the side of the poor and oppressed.

Jared link

10/16/2012 05:51:46 am

Amen Sharry, amern.

Nathan

10/16/2012 04:37:59 am

Sharry,

You may be surprised, but I actually agree with most everything you said. I don't think that we're very far apart or that many of the things you shared are in conflict with my opinions. Truth be told, I loved it! I like people that think differently than I do, because it makes me think and opens my mind to new ideas and thoughts.

So my question is this: how do you help a less-privileged child gain access to better education/better jobs? In my opinion, the idea of distribution of wealth is far removed from the answer, but maybe you feel differently. I'd love to hear your thoughts.

Jared link

10/16/2012 06:31:09 am

Nate I really enjoyed all of your posts on here. Very well thought out and open. Obviously there is not one silver bullet to fix this problem. But here are a few small steps I think may help: raise taxes on the top brackets (not a crazy amount, but it needs to be done), institute the Dream Act to give students a possible reality to their dream, end for profit prisons whose botom line is driven by imprisoning Americans (primarily minority americans)...to name just a few.
I am not arguing for equality of results but rather equal opportunities which unfortunately is not a reality for more and more americans while others take them totally for granted, myself very much included.

Sharry BD

10/16/2012 09:35:06 am

Nathan,

Of course we have a lot in common! Much of the rhetoric from the two political parties would lead us to believe we are in constant conflict with each other, yet despite one’s political affiliation, creating a more equal society in which underprivileged/low-income families have access to good education and a better life is in the best interest of all us. We all want positive solutions to the same problems! Unfortunately, the complexity of these issues tends to lead us down two dominate political paths: work harder (conservative) v. some form of government interference (progressive). And, as you know from my earlier comment, I do not tend to fall into the “if you just work harder” camp.

To take a step back, I assume that we can agree with the proverbial phrase money = power and influence. For me, as a student (and lover) of literature, rather than economics, the problem ultimately comes down to a disparity in power. I have to agree with Rosabeth Moss Kanter (1979) who said:

“Power is America’s last dirty word. It is easier to talk about money- and much easier to talk about sex- than it is to talk about power. People who have it deny it; people who want it do not want to appear hungry for it; and people who engage in its machination do so secretly.”

We often debate financial concerns but my real beef lies in the disparity of power in America. With the continual increase in financial inequality, we also face a decrease in the voices of the poor and underprivileged. Clearly, the more money the rich collect, the more power and influence they have over our government, economy, and education system (especially with the passage of Citizens United). This reinforces our tragic political system which silences the poor through the lack of education, influence, and involvement. Although some may be comfortable with a tiny percentage of the population holding the vast majority of wealth, I doubt many would argue the same group ought to hold all the power and access to government, education, and jobs. Yet, unfortunately, they for the most part do. They pick our political candidates, attend the most prestigious schools, and have access and connections to the highest paid jobs. It’s sad to say, but they are our future.

My response to your question touches on Todd’s and Jared’s earlier comments. Essentially, there is no one “best way” approach. On the one hand, public education, grants, and scholarships for low-income and minority populations are a few ways in which our country is making efforts to combat the drastic inequality in our nation but clearly it does not eradicate the problem. Although scholarships for minority and low-income populations may seem like an injustice to the rest of us, it is the only way many of these young people would be able to attend college, period. Since many of these low-income folks will be the first in their families to go to college, they are likely to need a little more support than those who know the system and are expected to succeed (i.e. you and I). On the other hand, many government programs are admittedly ineffective and do not necessarily provide both incentives for hard work and the support needed to succeed. In this area I may diverge from other progressive folks in that I do think that government programs need to be reevaluated but this does not apply solely to so-called “entitlement” programs but also military (talk about a huge government expense) and private interest policy. Markets definitely can be beneficial to our economy and inequality but deregulation of the private sector has only increased the disparity between the poor and usurped power from the bottom and awarded it to the top. Decreasing inequality in this country will likely involve a complex mix of the ideas mentioned by both Todd and Jared but it’s definitely worth some kind of effort and, thanks to Jared, some dialogue.

Brad

10/18/2012 01:54:26 pm

Or the loI believe that some people have very difficult lives because they don't know/have access to fix it. That goes for wealthy and poor. It does seem easier to be unhappy rich than to be unhappy poor. It is awesome to see people that find happiness living in a situation that would terrify me. Trying to fix an economic crisis or draft legislation while receiving death threats would terrify me. Is it bad that I don't want to be upper class or the poorer class? I want there to be rich people, but not really poor people. I don't care that someone has limitless dollars, I just want someone not to fear today. Is that possible?

Brad

10/18/2012 01:59:23 pm

Typing on a kindle doesn't work very well, so some of that didn't come out right.

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My name is Jared I am an individual that struggles with faith in the 21st century. I find great meaning & joy from religion and spirituality yet also conflict & confusion in this pluralistic world full of suffering. This blog's aim is to examine and discuss current spiritual and political issues informed by an LDS, Christian and Buddhist background.

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