Opinion

The Great Debate

Has rising inequality actually hurt anyone?

By Scott Winship
October 18, 2012

The incomes of the top 1 percent — and especially of the top one-half of the top 1 percent — have skyrocketed over the past 30 years. The latest estimates from the Congressional Budget Office show that the inflation-adjusted average income of the top 1 percent of households was $340,000 in 1979 but $1.4 million in 2007, quadrupling over less than three decades. Popular discussion of the top 1 percent tends to highlight how different, say, Mitt Romney and Facebook founder Mark Zuckerberg are from typical Americans. In reality there is as great a disparity between Zuckerberg’s and Romney’s income as between Romney’s and yours. Disparities in income are so dramatic it is difficult to comprehend them.

Not that there’s anything wrong with that! Or rather, it’s not necessarily the case that there’s anything wrong with inequality levels. Whether American-style inequality’s costs outweigh its benefits remains an open question. Too many accounts of inequality today simply assume that it must be bad — that gains at the top have come at the expense of the middle class and bottom, that high inequality has diminished opportunity, that it has stunted economic growth or led to financial instability, or that it has turned our democratic system into a “plutocracy.” But there is scant evidence for each of these propositions.

Note, first, that the CBO data indicates that median household income — the income of the person in the middle of all households — rose by 46 percent from 1979 to 2007, and the income of the average household in the bottom fifth has risen by a similar amount. To be sure, that’s a smaller increase than Americans saw in the 1950s and 1960s and a much smaller increase than the top has seen. But it’s not the case that the middle class and poor have been doing worse over time. (Male earnings have not increased much over recent decades, reflecting the competing away of the union-based advantages that in earlier decades sent pay levels above what productivity gains would have dictated, but analyzed correctly, the data shows they have not fallen either. Female earnings have risen smartly.)

The poor and middle class are doing far better today than their counterparts in Pittsburgh during the Gilded Age, evoked by Freeland, and far better than their counterparts in most of the rest of the world. That may seem like an irrelevant comparison, but it is not. The reason that offshoring, for example, is profitable for companies despite all the costs incurred in employing workers thousands of miles away is that those workers are so much more productive relative to the pay they demand. This is not an indictment of the work ethic of the American worker — our standards have quite reasonably risen as we have become wealthier.

We are unwilling to sleep in company barracks, work on dangerous assembly lines unceasingly for 14-hour days, labor for Third World wages, accept environmental degradation, forgo weekends and holidays, or send our children into the workforce. We don’t have to — we can not only maintain but continue to improve our nearly peerless living standards with the high pay and benefits, strong worker and environmental protections, generous tax-payer-funded safety nets, tame work hours, and long retirements that we have.

Cross-national comparisons are tricky, but the evidence we have (from the Luxembourg Income Study) suggests that if you could line people up from richest to poorest in the United States, in Europe and in other English-speaking nations[r1] , Americans at every point in the richest 80 percent of households are better off than their counterparts occupying the same place in line in nearly every peer nation. Among the poorest fifth of households, this pattern breaks down, but it is hardly obvious that our inequality levels are to blame.

For one, inequality between, say, the poor and the middle to upper-middle class has not increased meaningfully since the 1980s. Second, to the extent inequality between the bottom and middle rose during the 1970s and 1980s, increasing single parenthood and rising out-of-wedlock births were a big part of the story. Third, it’s unclear that intergenerational mobility has declined over time — there is at least as much evidence that it has been unchanged as there is that it has fallen.

There are plenty of reasons to worry about inequality of opportunity — socioeconomic gaps in college-going are on the rise, and test-score gaps between rich and poor kids have similarly increased, to name just two examples. But the evidence that these problems would diminish if we could limit the top 1 percent’s incomes to those seen in other countries is nonexistent. (Incidentally, the incomes of the top 1 percent have been on the rise in our peer nations too, and middle-class income growth has slowed in those countries as well.) Studies on whether inequality hurts economic growth typically focus on developing countries, and research by, for instance, Christopher Jencks suggests that inequality across rich countries does not go hand in hand with lower growth. The latest research on whether inequality leads to financial crises concludes that it does not — rising inequality tends to co-occur with expansions in credit, but it is the latter that appears to lead to crises.

Similarly, the influential research of economists Daron Acemoglu and James Robinson argues that inequality leads to less democracy and reinforces itself through politics, but it too is based on developing countries. There has been hardly any research that rigorously tests whether economic inequality in the United States is associated with worse political or policy outcomes for the nonrich. In fact, policy preferences do not line up very neatly with the purported “class interests” of voters. The United States is simply not a banana republic.

I would like to see social policy do more to help the poor and to promote opportunity. But I don’t see much evidence that the gains among the top 1 percent have done anything to increase poverty or reduce opportunity. From 2007 to 2009, the average income of the top 1 percent fell by 37 percent while the median household income fell by 2 percent and the average income of the poorest fifth may have increasedslightly. If that reduction in inequality — the extent to which the “plutocrats” were taken down a peg — helped the middle class and the poor, it is not obvious. We should question, then, whether the earlier gains at the top hurt everyone else.

Comments
40 comments so far | RSS Comments RSS

Ridiculous right-wing nonsense.

Posted by MRBarrett | Report as abusive
 

Excuse me, Mr. Winship, but this sort of carefully crafted propaganda is really beginning to get offensive. “CBO data indicates that median household income — the income of the person in the middle of all households — rose by 46 percent from 1979 to 2007″ Without an accompanying statement on how much the cost of living has risen during this same period, this statement of yours is little more than prevarication. On the surface it sounds good, but the reality of it is that, adjusted for inflation, income for the Middle Class hasn’t grown at all during that time period, and what you’re presenting as “good news” is actually devastating for the Middle Class. How dare you.

For those who want to REALLY understand income inequality, how we got here and what it means, I strongly encourage you to check out this talk by Pulitzer Prize winning journalist Hedrick Smith who has recently published a book called Who Stole the American Dream. Mr. Smith doesn’t conveniently cherry pick his information: http://8020vision.com/2012/09/24/hedrick -smith-who-stole-the-american-dream/
Of better yet, read the book.

Posted by flashrooster | Report as abusive
 

Hating on the 1% while grilling steaks in your back yard, beer in hand, smart phone in pocket is ridiculous Liberal nonsense.

Posted by GLK | Report as abusive
 

flashrooster, all my figures are, of course, adjusted for inflation. You can visit the CBO website via the link I provided to confirm that.

Posted by swinshi | Report as abusive
 

Winship says, “But I don’t see much evidence that the gains among the top 1 percent have done anything to increase poverty or reduce opportunity.” So, you are arguing from lack of information (i.e., what you “don’t see”)?

Essentially, what Winship does not see is that money is power and that a society consisting of a servant class and an all-powerful ruling class cannot be a democracy. Yes, there will always be differences, but when a small elite has thousands times greater power than the rest, democracy does not exist in that society.

Winship mentions the “Why Nations Fail” book by Acemoglu and Robinson. Their findings do apply to our society, since they are identifying and discussing the features of the workings (instituions) of societies which result in success or repression and failure.

Posted by bcrawf | Report as abusive
 

Ok, great. Couple questions though:
1)What’s good for the goose is good for the gander- given that the leaders of American companies have done a demonstrably poor job as a group in the last 30 years, and that there are many talented, bright individuals overseas equally willing to bilk and scam their way to the top work at high-level jobs in eg investment banking, why have the top earners who earn via wages (as opposed to capital) not seen their labor equally devalued by the vastly expanded pool of available labor?
2)How has this leveling of global playing fields created such large returns for capital versus labor? Income inequality is increasing around the world- that is, capital is taking the lion’s share of the profits due to increases in productivity. What we are talking about is not just labor in the US suffering from outsourcing, we are talking about the skewing of allocation of productivity gains between capital and labor worldwide.
3)How is this *not* a symptom of capital having a controlling interest in national governments, as opposed to a symptom of some underlying economic factors? It is easy to demonstrate eg capital tax rates far below the tax rates on labor, tax structures which allow the deferral or avoidance of taxes on capital that are not available to labor, union-busting given the tacit Ok or even active support of governments, etc. With that evidence in hand it’s difficult to make a case that growing inequality is driven by purely economic factors.

Remember, it would have made equal sense during the Gilded Age to note that the poor were still much better off than the average person during the Stone Age, or even the Middle Ages. It used to be the defense that ‘a rising tide lifts all boats’- now, it only lifts yachts…

And finally, you’d come off as more honest if you didn’t compare incomes without adjustment (as pointed out above). No one cares how many zeroes are in their bank account, they care what they can purchase with it.

Posted by IAmKam | Report as abusive
 

The US Gini Index – a measure of income inequality – is at an all time high, in the ranks of Rwanda and Uganda.

Here’s a handy “Report Card” that grades your elected officials for how they voted on legislation that helps the middle class and reduces income in equality. http://8020vision.com/2012/10/18/income- inequality-a-congressional-report-card/

Posted by jaykimball | Report as abusive
 

Where on earth are you getting these stats. “Meaningful” inequality growth? What kind of figures are you using to determine it is meaningful?

Perhaps you need to take a look at Stiglitz (2012) jackass.

And it is obvious the gains in the 1% are at the expense of those at the bottom when 93% of income generation from 2011 went to the upper 1% (Bloomberg). You are idiotic sir. Seek the Gini coefficient soon.

Posted by Justaneconomist | Report as abusive
 

GLK – Nobody is “hating on” the 1%. We’re just not going to vote to give them more of our money.

Posted by 4ngry4merican | Report as abusive
 

I guess panem et circenses still holds true: as long as the masses are happy, why should we care that the rich prosper? Nations grow prosperous because they have a growing middle class and can easily transfer between social strata (upward mobility exists). If you’re showing “it’s not the case that the middle class and poor have been doing worse over time”, then you are showing stagnation and a high cost of admission.

America has always prided itself on being a meritocracy, not a plutocracy; you work hard and earn rewards, instead of buying your way to the top. But right now, the greatest factor in determining your future in America is your birth. Kids with wealthy backgrounds have to try hard to fail, and economically challenged have few opportunities to climb the ladder of success. But I guess it’s due to that single mom thing, right? Except that is an effect, not a cause: if there were no single parents in America, the wealth distribution would not change; if you’re wealthy and have a child out of wedlock, you’re still wealthy. That stinks like all of the other ‘blame the victim’ trash conservatives have been spewing out for years.

If “advantages that in earlier decades sent pay levels above what productivity gains would have dictated” led to a healthy middle class, is that re-distribution of wealth wasted? Or put another way, have today’s CEOs quadrupled their productivity since the 70′s, while workers increased their productivity 46%, so the growing inequality is actually a manifestation of this?

As for the validity that inequality reduces democracy being a third world phenomenon, are there any examples of first world countries with massive inequality? Or are we willing to be that example and figure out how it turns out?

Posted by Mike_s1 | Report as abusive
 

What’s wrong with people being rich? We should focus on getting an equal shot for everyone and let the people that can make money do just that. Criticizing people for their accumulated wealth, i.e. success in business is un-american and backward. Next thing you’ll say is that we should forgive people the college debt they agreed to pay because debt is bad. Talk about ethics gone astray…

Posted by jhhoude | Report as abusive
 

I think we’re arguing what kind of country/world we want to live in. I personally judge a country/society on how well EVERYONE lives. 70m without health insurance, 37th in WHO survey comparing countries health care, 1 in 5 Americans are now in poverty, 23m out of work.

The rich are not giving back to our society as they did in previous eras.
I have no respect for those who have gained wealth by cheating. Or hiding revenue offshore to not pay US taxes. Then they use their power to control our government and have laws passed to benefit themselves! This is not Democracy, it’s crony capitalism, it’s corruption and it’s killing this country!

The latest recession was the largest transfer of wealth from the poor and middle class to the wealthy. The bankers and hedge fund managers used deceit and manipulation to sell phony mortgages. Many people (9m) lost homes! Look at how many jobs were lost because the economy crashed in large part due to derivative investments backed by virtually NOTHING! Then these investments were bailed out by whom- the middle class, who else? The rich in power got richer. In my mind this was unfair, unAmerican and the perpetrators should be jailed.

But no! Another way the rich get off is they buy their way out of trouble. They avoid prosecution or if they are found guilty they get a light sentence in a country club jail.
Again not fair, or democratic.

One other thing is the rich never have enough. They will find ways to get more and take more. They make laws to take peoples land, they cheat on environmental standards, because they must have more.

These are a few reasons that the accumulation of great wealth by a few is very dangerous. How long will the middle class and poor put up with the injustice?
Time will tell.

Posted by frisbeeredcat | Report as abusive
 

@jhhoude
“Criticizing people for their accumulated wealth, i.e. success in business is un-american and backward.”

Leaving aside issues of class mobility (ie how much more difficult it has become to start poor and become rich), this also assumes that there’s a level playing field now. That the rich don’t shelter their income from taxes. That capital isn’t taxes at a much lower rate than labor. That the legal system hasn’t become a de facto protector of entrenched interests (eg the current regime of patents makes starting a new technology business much riskier and more difficult, or that corps often use fleeting ‘employee providers’ to shield themselves from liability, workplace safety, etc laws).
Im not criticizing hard work. Im criticizing the distribution of productivity gains to a small slice of the country via regressive taxation and legal manipulation, and the barriers being erected against class mobility.

Posted by IAmKam | Report as abusive
 

@flashrooster,

As is your statement that “Without an accompanying statement on how much the cost of living has risen during this same period, this statement of yours is little more than prevarication.”

OK. An item that cost $1.00 in 2007 would have cost $2.86 in 2007. All that tells you is that “our ” government has not done their job to protect the purchasing power of the dollar. Anyone surprised at that?

But much better, more efficient automobiles cost the same or less in similarly adjusted price comparisons. Today’s huge flat screen digital TVs are so much better that what you got for similar purchasing power back then it isn’t funny. Same for computers.

A lot of the things necessary to “day-to-day” living cost WAYYY less at Wal-Mart. Back then I qualified for telephone “land line service” that cost less than five bucks in California (plus long distance). Today people remember those days without considering that the considerable convenience of cell phone service (for everyone in the family) with unlimited texting, no long distance charges, internet and data charges plus cable TV or Netflix is a luxury, not a necessity.

Food has not gone up overall in cost at the supermarket any more than the 46% wages rose. Yes, insurance and the expense of medical treatment has skyrocketed; but let’s not forget that back then modern medical “miracles” were in their infancy.

The “bottom line”is that the average American lives a LOT better 2007 or 2012 than they did in 2007 regardless of “wages”. And they are still way ahead of the rest of the world. Apples and apples, people.

America’s “glass” remains more than half full, by far! For crying out loud, our poor DRIVE and most of them are literate (even if they don’t sound like it, considering grammar or “street slang”. Theyseem to have plenty of money for cigarettes, liquor, “bling” shoes and clothes and tattoos.

Have we become a nation that has lost the ability to perceive and appreciate that which we HAVE, lost in the envying or hating others more successful while contemplating some fantasy of what we HAD or MIGHT HAVE?

The “poor” couldn’t get “anything and everything” by dropping into the local hospital emergency department. Today everyone expects “state of the art” heart transplants, knee replacements, hip replacements, stents, chemotherapy, gene therapy, you name it. to be covered by insurance. Guess what, people? SOMEBODY has to pay for all that.

And, by the way, payroll deductions that fund Social Security and Medicare have not been appropriately adjusted along the way to reflect the actuarial financial risks thus assumed. That’s a HUGE “pay” increase you have never been taxed on or for.

Posted by OneOfTheSheep | Report as abusive
 

Borrow money from China to give tax breaks to these filthy rich greedy welfare bums stealing the country blind? Sure, great idea….

Posted by rhess595 | Report as abusive
 

Correction to earlier comment: 2007 to 2007 should (obviously) have been 1979-2007.

Posted by OneOfTheSheep | Report as abusive
 

@Mike_s1,

“Or put another way, have today’s CEOs quadrupled their productivity since the 70′s, while workers increased their productivity 46%, so the growing inequality is actually a manifestation of this?” Yep. You “got it”.

Consider that today’s CEOs have management that, independent of individual capability, are so fortunate to “be at the helm” during a “windfall” economical situation not unlike the “Industrial Revolution”. The availability of powerful and inexpensive computers and useful off-the-shelf software have put countless clerks, secretaries and administrative assistants “on the street”. Those jobs aren’t coming back. Not ever.

In similar fashion, the recent economic downturn revealed company and corporate “flab” that could easily be declared redundant. Each person thus suddenly “on the street” drawing unemployment contributed to an ever-increasing supply of “labor” for skilled, semi-skilled and unskilled positions in which such “oversupply” drives down wages in direct proportion to the increased competition for every open position.

In such an economy, only those with “monopoly employment” in government can organize and unionize without killing the “goose that lays the golden egg”, their companies. Look at what’s happening to American Airlines as we speak.

The government unions will ultimately fall simply because the productivity of tax paying Americans cannot deliver such benefits to all. What’s “in it for them” to tolerate a “privileged labor” class?

Given such oversupply of “the unemployed”, no longer just the dregs of our economy, there are a growing number of “good” job seekers willing to take part time work when they can’t get full time work. It doesn’t take a genius to figure out the “efficiency” of revising “positions” into job tasks anyone with sixth grade math and 9th grade English skills can “master in two weeks “off the street”.

One can then hire two part-timers (at 20 hours a week each) instead of one 40-hour full-timer. The government statisticians love this…two jobs from every “position filled” even as such management saves boatloads of expense such as holidays, sick time, family leave, worker and dependent insurance, overtime, raises, continuing education and pension contributions. As a bonus, when one is sick, you can have another pick up to 19 hours of their workload and they remain “part-time help”.

Yes, I’d say the growing “inequality” reflects a logical and irresistible “new reality” or those without genuine up-to-the minute current skills specifically required. And the best of those will do better by working as consultants (independent contractors) to big companies than by direct employment.

So as this continues to the logical conclusion, even government needs fewer and fewer “worker bees” than before. Today we see four guys sitting and watching one guy digging on lots of “federal, state, city and county” projects. But, as voters “figure that out”, that, too, will end.

CEOs could and SHOULD have been able to quadruple the “efficiency” of their companies (according to the bean counters) without losing many hours off the golf course. Even a cave man could do it! Also remember that government is slow and ponderous by design. The most dense CEO is twice as nimble in adjusting how their business operates “under effective rules”.

When “new rules” are duly reviewed, debated and adopted only a truly incompetent business is going to be “caught flat footed”. Even then there are myriad ways to collapse one “business” so as to transfer the great majority of assets to another of entirely different location, appearance and function; shedding people, contracts, leases and liabilities along the way.

The only members of the public CEOs are accountable to are board members and those who hold equity; and THOSE they take VERY good care of, always. Learn anything here? Have a nice day!

Posted by OneOfTheSheep | Report as abusive
 

It shows that the honest working schmo’s labor is of no value compared to the gaming of the financial markets that makes up the bulk of the 1%’s revenue; it tells labor that it’s irrelevant.

Posted by borisjimbo | Report as abusive
 

Important to remember is that the whole notion of “the 1%” has to do with class. The ruling class owns the means of production, the tools of labor, factory, warehouses, shipping, stock wealth, and most of the rest. The working class does not, so we sell our labor to the owners of society, creating value they realize on the market, for which we recieve miniscule remuneration, or we can not work for them and sink to the bottom. The grotesque inequality is not just a bunch of disembodied statistics, it is the very social fabric of society based on our relationship to the means of production either as worker proletarians, or owners. Neoclassical economists like this bourgeois twit Winship can pretend all they want they are SO CONCERNED for the poor. The fact that they do nothing but apologize for the system that perpetuates inequity, needlessly, is the proof of their utter lack of concern. This essay is not only smug, it’s an all out attack on reality, and on working class people, and Winship probably knows that. But he gets paid to say what the ruling class wants to hear, just as much as Rush Limbaugh, or Barack Obama do.

Posted by BoredWithLies | Report as abusive
 

What concerns me more than the financial aspect is the loss of the American principle that our country was founded on, and which one would hope we are continuing to strive toward, which is that all men are created equal. Just listen to Mitt Romney on any day and you will hear his philosophy that the rich are entitled to do things differently because they are wealthy, and therefore deserve special privileges, like paying lower tax rates than the average American. He seems to believe that whoever has the might has the right to do whatever they deem to be best, as though our civilization amounted to some kind of football game where the winner takes all. While that outlook may be very popular right now since the US happens to be a superpower, which has at least as much to do with the other nations of the world as it does with some kind of superiority of the American people, it goes against the principal that America was founded upon, and from which its true source of wealth derives.

Posted by thinkb4 | Report as abusive
 

A study of inequality in European countries found that Greece, Spain, Ireland, and Portugal had the least inequality and the Sweden and Germany had the most inequality.

It seems that at least in the Welfare State model of government that dominates Europe that reducing inequality through redistribution doesn’t strengthen a society.

Posted by thesafesrufer | Report as abusive
 

Granted that everything is relative, are you seriously suggesting the American people have no right to complain about the rising inequality until we are living at the level of a third world country?

The suggestion that inequality doesn’t actually hurt anyone is to deny and reject the lessons of history.

I think before the wealthy class swallows your bullshit they should remember, for example, the situation of the French people prior to the French Revolution (1789-99). And particularly the Russian Revolutions of 1905 and 1917 in which the Russian people attempted to “reason” with the government but to no avail, which led to civil war and Communism.

Finally, in current history the Arab Spring, which I believe has not yet run its course. For example, in Egypt Mohamed Morsi of the Muslim Brotherhood was duly elected (i.e. democratically) into power by the Egyptian people after their entirely successful revolution during 2011-12 to replace a Western puppet government. Their living conditions were nowhere near as bad as the French or Russians prior to their respective revolutions, but the Egyptians decided they had had enough mistreatment from those in power. When the opportunity came (i.e. the weakening of the US Empire supporting the Egyptian government) they chose to replace their “rulers”. All things considered, it could have been a whole lot worse, but like war once a revolution begins you just never know for sure how it will end.

The point is that the disparities in income varied widely in each case, but the underlying theme was the same — ordinary people were dissatisfied with their particular government enough to overthrow it — some violently, some not.

The underlying problem in the US today is the wealthy class has quietly (increasingly less so now that they have almost all their previous power back) usurped power for themselves by “legislatively overthrowing” the legitimate US government — the proof being the massive change in laws to benefit only the wealthy class in terms of trade, banking and tax legislation.

The wealthy class has convinced itself that the American people will not rise up against their government at some point, no matter how egregious their “greed is good” philosophy becomes.

You are wrong!

At some point the American people WILL rise up against this wealthy-dominated government to seize power for themselves again. Just because it hasn’t happened here, doesn’t mean it will never happen.

The American people are already more dissatisfied with their government than I can recall in my lifetime (I am 70 years old), but their discontent thus far has not been focused. And there is still hope in many Americans’ minds that somehow the government will see the error of its ways and return to the period following WWII when they “shared the wealth” among the people, thus creating the “middle class” (an anomaly in the history of this country) and the nation enjoyed the greatest few decades of economic growth in its entire history.

The wealthy class did not do that. It was the American worker, with pride in this nation, that built this country into what it was. But the wealthy class in their never-ending greed, began to betray the American people in the 1970s with free trade and job outsourcing, claiming it was good for the nation. In the early 1980s, the wealthy class saw their “Holy Grail” in the opening of free trade with China, and that is when the real damage began. China has been using the greed of the wealthy class and their wealthy-driven government to drain this country of all its resources so they can become the world’s next Great Power. Their plan has succeeded beyond their wildest imagination as the greed of the US wealthy class took the bait “hook, line and sinker”.

In just 30 short years the cooperative efforts of the US wealthy class and the Chinese have managed to destroy the economy of this nation and we are reduced to printing money to survive. You don’t have to be an economist to figure out something is seriously wrong with this country when we have to resort to printing money to survive. The wealthy class has been extremely fortunate thus far. The American people know by instinct that something is wrong, but haven’t yet figured out that “it’s the wealthy, stupid”.

If the country continues on this course much longer — and who knows for sure how long that might be — they will at some point realize what the problem really is.

I believe it is the memory of a government that once responded to the will of the people — not just the 1% who are destroying it for their own benefit — that is the ONLY thing keeping this country from an “American Spring”. I think next year may be a pivotal year in their recognition of that fact. Beginning in 2013, no matter who is elected, the government will begin down the path of the eurozone towards austerity, thus putting even more pressure on the American people, who will begin to lose their jobs, homes, healthcare, retirement, etc. — ALL while the wealthy class refuses to pay their fair share of taxes. When that happens it will become obvious what and what is to blame. Only God knows what the American people will do about it, and when.

When this happens the American people will begin to lose hope for their future, and their response will no longer be governed by their past behavior in crises. This is not the generation of the Great Depression that was will and, most importantly, able to “suck it up” to make up for the excesses of the wealthy who destroyed the world in 1929. This generation cannot somehow survive without a functioning government that shows fairness and compassion to its people. I think the reaction will be a violent one.

The American people have “moved on” in history, but the wealthy class wants desperately to return to its past glories, which were ALL at the expense of the American people. Prior to WWII the economic conditions in this country were virtually no better than a third world country, and that is what the wealthy class fondly remembers as the “good old days”. I do not believe the American people will be willing to go backwards in time to live under those conditions again.

The wealthy class needs to remember something it has forgotten. Government exists solely by the will of the people — ALL the people. The wealthy class has somehow come to believe their government can exist without the will of the American people.

They are wrong!

Posted by Gordon2352 | Report as abusive
 

@Gordon2352,

Among men there has always been an insatiable desire for wealth and power. To get it requires simple dominant force in a given geographic or economic area. To then protect (keep) the “gains” becomes more and more complex, involving partnerships, alliances, etc. among those of “common cause”. It is this process and NOT “the people” that form and support “government”.

You ask: “…are you seriously suggesting the American people have no right to complain about the rising inequality until we are living at the level of a third world country?” In return I would ask: “By what “right”, other than an accident of geographical birth, do Americans “deserve more” than others on this planet”? You obviously believe yourself somehow “entitled”. Good luck with that.

You seem to presume to speak for those who own nothing and may never own much of anything. Why? Because they go deeply into debt for degrees that have no current earning potential. Because they have children they cannot afford to feed, clothe or educate. Because they enter into mortgages even they know they cannot afford to pay without interruption for twenty or thirty years even as taxes on their home increase again and again. Because they rent their furniture and lease cars they cannot afford, selling their future to enjoy a better present. Bad choices have consequences.

You speak for those who choose to wear multiple “in your face” body piercings and tattoos that cannot be hidden by normal clothing that then complain they can’t find jobs. Guess what? Society has NEVER had a need for freaks…that’s just not a good “career choice”. Bad choices have consequences.

The Industrial Revolution also made many, many people “redundant”. Ensuing “unemployment” shook the foundations of government order, and many faced or even endured starvation that were eunable or unwilling to relocate to find work of any kind.
Where are your “revolutionaries” today? Sitting on their sofa watching TV or playing computer games or surfing the internet, or out at the mall. They’re spending OPM…other people’s money. Things have to get LOT worse before reality intrudes on their apathy, and by then those who actually make this country work will have figured out what needs to happen and will be on the path to bring it about.

Your losers will follow up in the rear, as always; reacting instead of acting because they are incapable of individual thought or self-sufficient action. They are not part of “civil society” by their own preference.

Posted by OneOfTheSheep | Report as abusive
 

@ OneOfTheSheep –

You state, “Among men there has always been an insatiable desire for wealth and power. To get it requires simple dominant force in a given geographic or economic area. To then protect (keep) the “gains” becomes more and more complex, involving partnerships, alliances, etc. among those of “common cause”. It is this process and NOT “the people” that form and support “government”.”

Yes, I know full well the “sickness” that inflicts men when they achieve power, and the terrible abuses caused by these people in their insane desire to retain power at all costs.

You should read history again, before it repeats itself.

Posted by Gordon2352 | Report as abusive
 

@ OneOfTheSheep –

One other thing, the wealthy class do not live in a separate society as you suggest.

The gains of the wealthy class you mention did not happen without the cooperation of the 99% — that is fact. To arrogantly deny they need the 99% to survive is for the wealthy class to commit suicide.

What you are describing, and what the wealthy class want is “Social Darwinism”. You should be careful what you wish for, since there is no “divine right” of birth that assures the wealthy class will be able to retain their spoils after society begins to collapse.

That is the flip-side of “the survival of the fittest.”

Posted by Gordon2352 | Report as abusive
 

I want to clarify my position.

I am NOT against wealth per se, but when wealth becomes entrenched within a society it ALWAYS destabilizes that society at some point.

Thus, as a pragmatist, I suggest a more equal sharing of the wealth in any society.

However, this is a point that is lost on those in power, who usually acquire a “bunker mentality” and refuse to listen to good advice.

I don’t think the wealthy class in the US is any different, and ALL of us will suffer for it.

That much is guaranteed.

The operative question now is when.

Posted by Gordon2352 | Report as abusive
 

@Gordon2352,

You say: “the wealthy class do not live in a separate society as you suggest.”

I say look at the gated communities and the country estates with their electric security gates. They are only as much a “part” of the local community as they choose to be. In many cases the lives they live are much like the freeways that course through (but above) economically and socially blighted communities. Those not in and of the bottom economic and social strata NEVER get “off the freeway” or shop in such communities unless mechanical failure or fuel exhaustion forces them to.

And, to be clear, I’m NOT in or of the “wealthy”. As a middle class product with middle class capabilities and expectations, my “way of life” is much nearer to that lived by the 40% thru the 99% than it is to those below 39%. There is some “percentage” (that may vary between individuals) at which the “personal responsibility” gene seems to become rare. The only thing I have in common with such people is that we live our separate lives in relatively close proximity on this planet, but I doubt we even go to the same theaters or enjoy the same entertainment.

What I “wish for” is to preserve my modest “spoils” at an ever-advancing age. That may well increasingly require a “bunker mentality” and a continuing ability and will to shoot straight and quick as required. No problem whatsoever with that, given the alternative(s).

Posted by OneOfTheSheep | Report as abusive
 

I’m not sure that Mr. Winship isn’t channeling Jonathan Swift, but just in case he is in earnest …
- unequal societies are not stable, as has been pointed out by others. We may not be on the verge of a violent revolution, but we sure are not able to function any longer as a society.
- income trends tell only a fraction of the story of what’s happened to the middle class. To the extent that we do all have more stuff now than we did in 1970, we have had to trade income security and health care access for it. I’d happily trade in all my gadgets for a solid social security system and Medicare-for-all. Why have a society if we are all responsible only for ourselves and can’t pool our resources to improve all our lives?
- the degree to which our government responds to the needs and even whims of the top .1% is quite clear, and has a lot to do with why the gap keeps widening.
- we have so many kooky ideas floating in the air anymore it’s tough to keep track, but the idea that people have to be lured with the promises of riches beyond imagining in order to be motivated to innovate and improve the lives of our society is right up there. Who got rich off of these inventions: the Internet, the cell phone, the stored program computer? These innovations and many others (need I mention the classic case of the polio vaccine?) were invented by people who worked in private or public research labs. They had jobs that paid well, great benefits packages, and mondo security compared with today’s worker. THAT’s the environment that spurs innovation. The promise of riches just as often creates infomercial hawkers and hedge fund managers as people whose work actually improves our lives.

Posted by Sanity-Monger | Report as abusive
 

@ OneOfTheSheep –

If all you desire is “to preserve my modest “spoils” at an ever-advancing age” — note this is my goal as well, which is one reason I mentioned above that I am 70 years old — and historically the elderly have not fared well when a society declines and fails, why do you argue the “extremist” position of the wealthy class, which is that only the “fittest should survive”?

Also, your comment immediately after that stating “That may well increasingly require a “bunker mentality” and a continuing ability and will to shoot straight and quick as required. No problem whatsoever with that, given the alternative(s)” makes no sense, since we are no longer living in a world where a single individual (or a gated community of individuals) can withstand the forces a mob bent on revenge can bring to bear.

I know there is nothing I can say to persuade you that your course of thought and action — as well as that of the wealthy class — is likely to make any difference unless you are receptive to reason.

When societies collapse, one of the first casualties is “reason”. All appeals to be reasonable at that point will certainly fall on deaf ears.

History is on my side in this argument, not yours.

If you do not learn that now, you may not have a chance to do so later.

The only “reasonable” thing you have said in this discussion is “Bad choices have consequences”, but obviously you do not understand the import of that statement.

You apparently do not understand what Pogo really meant when he said “we have met the enemy, and he is us” — he meant ALL of us.

I have nothing further to say in this discussion.

I have made my point, and you (all) can either accept it or not. It makes no difference to me.

Posted by Gordon2352 | Report as abusive
 

Let’s set this straight.
American’s do not want complete equality in income. That would mean that everyone is paid the same despite ability, effort, need, or benefit. Our country is founded on the concept that great risks, great ideas, and great effort can give great rewards.
Much of the reasons for the recent surge in top income growth is due the emergence of the information age and world integration. These advances allowed for an dramatic increase on productivity, GDP growth, and Forbes 400 net worth over the last 3 decades. I am not sure that you can get the great growth without the over-sized rewards.
We don’t play the lottery to win $50 but mega-millions.
There is a limit to what we will accept. We don’t want total inequality any more that total equality. But I don’t think the current divergence has been a nefarious plot. It is just the natural result of a long productive boom & that boom created major benefits for most Americans.

Posted by slotowner | Report as abusive
 

This piece is so rife with statistical sleight of hand that I was certain it must have been fabricated by the Cato institute. Imagine my surprise upon discovering that it was produced by someone from the “liberal” Brookings Institution. A quick review of more of Mr. Winship’s work makes his slant quite obvious.

You claim that there is “scant evidence” “that gains at the top have come at the expense of the middle class and bottom”. Rather than using actual income figures to demonstrate the growing inequality I find it much more revealing to use the percentage of total pre-tax income as an indicator. Through this lens we can see that the top 1% received 9.3% of all income in 1979 and the same group received 19.4% of all income in 2007 more than doubling their share. Given that the share of income received by the first four quintiles (the lower 80% of income earners) all declined over this same period I would say that this is quite obviously condemning evidence that the top 1% acquired their gains at the expense of the bottom 80%. Obviously, had everyone retained the same share of the income pie the bottom 80% would have seen their incomes rise significantly more than they actually did during that time period. The onus is on the 1% to demonstrate that they’ve done something to deserve doubling their share of total income. Given that this group derives the majority of it’s income from capital (allowing other people to use their money) I find it absurd to even entertain the idea that the top 1% was responsible for more than 100% of the productivity increases over that time period.

Your attempts to claim this must all be fair since everyone is making more money than they did in 1979 is a blinding non sequitur. This is either incompetent or disingenuous. You simply have to account for why the top 1% deserves to have more than doubled it’s share of the income and why the lower 80% deserves a smaller share. Just because the lower 80% aren’t actually making less money does not mean that they haven’t been cheated. No one should be fooled by this kind of trickery.

You also claim that there is “scant evidence” “that high inequality has diminished opportunity”. Then later in the article admit that “There are plenty of reasons to worry about inequality of opportunity — socioeconomic gaps in college-going are on the rise, and test-score gaps between rich and poor kids have similarly increased, to name just two examples.” but then go on to make the absurd assertion that “the evidence that these problems would diminish if we could limit the top 1 percent’s incomes to those seen in other countries is nonexistent.” which, again, completely misses the point. The point is obviously not to just reduce the income of the top 1%, it is for the top 1% to take something closer to their fair share (more in line with the 1979 level of 9.3%) and allow the bottom 80% to simply retain their share. Had this been the actual case then the bottom 80%, and especially the bottom 20% would undoubtedly have faired better regarding the socioeconomic gaps you mentioned as well as many others.

Perhaps the most ridiculous claim though is that there is again “scant evidence” that high inequality “has turned our democratic system into a “plutocracy.”” Perhaps if you’ve been living under a rock for the past half century. I suppose you think it mere coincidence that capital gains, the means by which the top 1% makes the majority of their income, is taxed at a rate significantly lower than wage income, the means by which the vast majority of the rest of Americans make nearly all of their income. I suppose that the millions of dollars spent lobbying to create the totally illogical rules concerning taxation of carried interest, the means by which the top 0.00001% acquires nearly all of their money, are no indication of plutocracy. I can’t imagine that anyone is naive enough to believe that the recent rulings by the Supreme Court allowing essentially unlimited financial support of political candidates is not helping to turn our democracy into a plutocracy. If you haven’t read Michael J. Graetz’ “Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth” I would suggest that you do so, it presents a clear picture of plutocracy in action. And regarding Acemoglu and Robinson’s latest work I would say that Francis Fukuyama’s “The Origins of Political Order” makes a far better case for the dangers of inequality in society, developed or not.

“Cross-national comparisons are tricky” indeed which makes them perfect material for the statistical trickster. Essentially all you are saying in this paragraph is that Europe and other English speaking nations have a lower GNI per capita and less inequality than the United States which provides you the opportunity to exclaim how much better off the top 80% of Americans are than their equality burdened peers in Europe.

Finally, your assertion in the last paragraph that “From 2007 to 2009, the average income of the top 1 percent fell by 37 percent while the median household income fell by 2 percent and the average income of the poorest fifth may have increasedslightly. If that reduction in inequality — the extent to which the “plutocrats” were taken down a peg — helped the middle class and the poor, it is not obvious.” again completely misses the point. And again it’s hard to tell if this is incompetence or intentional misleading. The idea that the income of the middle class would increase as a result of the decline of the income of the top 1% due to the collapse of the stock market is downright laughable and, quite frankly idiotic. Can your concept of causality truly be that lacking? I think not.

Your whole effort seems to be shaped by the silly class warfare arguments that abound these days. This just misses the whole point. Wealthy people make their money off of other peoples labor. If you cost your employer $50k/yr then you’d better be generating more than that in revenue. The meaningful discussion is about how much of that revenue you get to keep and how much your employer gets. If the plutocrats take a little bit less and allow the workers to keep a little bit more then inequality will decrease. Could that be such a bad thing?

Posted by jtfane | Report as abusive
 

@thesafesrufer said “A study of inequality in European countries found that Greece, Spain, Ireland, and Portugal had the least inequality and the Sweden and Germany had the most inequality.

It seems that at least in the Welfare State model of government that dominates Europe that reducing inequality through redistribution doesn’t strengthen a society.”

If you used the information in your first sentence to draw the conclusion in your second you should be interested to know that it is complete rubbish and the truth is the exact opposite of your claim. By far the most common measure of economic inequality in a nation is the Gini coefficient. These numbers are readily available and it so happens that the Gini coefficients (as per the CIA) for Greece (33), Spain (32), Ireland (30.7) and Portugal (38.5) are amongst the highest of the developed European nations. Conversely, Sweden (23, the lowest inequality of any nation on earth) and Germany (27) have some of the lowest inequality on the planet. I somehow doubt that having the correct information will alter your conclusion.

FWIW, the CIA Gini coefficient for the US is 45, which places it between Cote d’Ivoire and Uruguay, places where, if you’re not familiar with them, the wealthy don’t just live behind gates, they commonly employ and regularly travel with armed guards.

Posted by jtfane | Report as abusive
 

“Rose by 46 percent from 1979 to 2007.” That math is 1.64% per year. I’m fairly certain inflation rises more than 1.64% per year. Since Congress gets an automatic pay raise of 2.8% per year (which they can, and do sometimes, turn down) — I wouldn’t call that anything to jump for joy about.

The bottom line is this, if consumer spending is the thrust of our economics, looking at current quintile incomes, I predict a total economic crash in less than 1 decade. The false belief that the bottom quintiles are living large, heaps coal on the fire. (Although, at the crash, the lower quintile incomes can move into the extra houses of the top quintile, and then they truly can be living large.)

Logically, what do you think 60% of the nation will do when they can no longer afford daily living expenses? It’s not inequality in incomes that is the problem — it’s 60% of the nation becoming incapable of affording housing, utilities, transportation, food, and clothing without some kind of government assistance.

The problem is the national ignorance of the state of the union.

Posted by 70Jacqueline | Report as abusive
 

I see a common thread in the responses criticizing Winship that doesn’t deal with his argument. Those characteristics are envy, jealousy, and covetousness. It is not a mistake that those are considered deadly sins because they really are. Those also seems to be a high level of denial of facts in the argument, but when the truth is inconvenient denial is a common response.

Simply look at those countries in Europe with low inequality and you end up with Greece, Ireland, Portugal, and Italy.
Country Top 10% Bottom 10% Gap
Sweden 2.4% 0.4% 2.0%
Britain 2.5% 0.9% 1.6%
Germany 1.6% 0.1% 1.5%
New Zealand 2.5% 1.1% 1.4%
USA 1.5% 0.1% 1.4%
Norway 2.7% 1.4% 1.3%
Finland 2.5% 1.2% 1.3%
Holland 1.6% 0.5% 1.1%
And there were four countries where income is more equal:
Portugal 1.1% 3.6% (2.5%)
Greece 1.8% 3.4% (1.6%)
Spain 2.5% 3.9% (1.4%)
Ireland 2.5% 3.9% (1.4%)

http://www.oecd.org/els/socialpoliciesan ddata/49499779.pdf

Posted by thesafesrufer | Report as abusive
 

@thesafesrufer, it would probably be wise for you to stick with the tired old “envy, jealousy, and covetousness” accusations and interpretation of the gravity of various sins because you are in way over your head when it comes to the numbers. From your previous post I’m guessing that some “think tank” fed you these numbers (maybe the good ole number twisters at Cato worked their way into this thread after all) and you are simply regurgitating them without having any clue whatsoever what they actually are. The numbers you have posted do not represent a measure of inequality of any sort. So your statement “Simply look at those countries in Europe with low inequality and you end up with Greece, Ireland, Portugal, and Italy.” is simply not true. The numbers you have posted represent the average annual increase in income for the top and bottom deciles for those countries and are not an indication of their current income inequality. The simple fact is that both Sweden and Germany have lower income inequality than Greece, Portugal and Italy and if you had actually read (and were able to understand) the document that you linked you would realize this. Regardless, this is mostly a waste of time since any suggestion that the troubles of Greece, et al have anything to do with levels of inequality is completely unsubstantiated. Even if you did have the numbers right (and you obviously don’t) any proposal that low income inequality is an incontrovertible guarantee against any sort of economic difficulties is an obvious strawman. The real world is a bit more complicated than that. Done.

Posted by jtfane | Report as abusive
 

Despite all the fashionable rhetoric, middle income households are actually doing pretty well.

Based on a 40+ year study of household income data from the US Census, the losses in numbers of middle class households has been offset by an increase in the number of upper income households (the number of lower income households has held constant).

Middle class households are becoming upper income households. This is a problem?

http://unrepentantcapitalist.blogspot.co m/2010/08/act-one.html

Posted by jambrytay | Report as abusive
 

and scott’s next article will be:

“Has unionism actually hurt anyone?”

in defense of better worker rights, both in america and

foxconn factories

Posted by scythe | Report as abusive
 

obviously, you don’t buy gas and food on a daily basis. If you did, you would notice that a dollar does not go a very long way these days. next thing you know, you’ll be writing an article that there’s no inflation either.

Posted by rikfre | Report as abusive
 

I wonder why intelligent folk bother to waste words debating the sort of nonsense that Mr Winship has the gall to propose, given the bleak economic reality facing the middle class, let alone the poor, in so many parts of the world. I recall (and commend) an excellent presentation made by Elizabeth Warren (if I’m not mistaken) that clearly delineated the many many ways in which TWO income-middle class families in 2003 in the US were far far more vulnerable, economically stressed than single income ‘traditional’ families thiry odd years prior. Her analysis clearly showed that despite enlisting mothers in the workforce with all the social harm entailed in the form of parenting issues, these two-income households had LESS disposable income than single income families of three decades ago. In her impeccable (as opposed to cherry-picked) presentation, she proved the exact antithesis of Mr Winthrop’s proposition beyond any doubt, and further warned of the impending collapse of the middle-class as we know it, with just a small subset rising up into the sphere of the upper-middle class and the rich, with the rest in free-fall towards endemic, virtually irretrievable indebtedness and ‘not-so-genteel’ poverty. Its incensing to feel the obligation to cross swords over straw arguments with ‘nowhere men’ who are so obviously themselves insulated from the harsh challenges facing modern families, not only in the US but right across the developed world. Why must we be subjected to the odium of such opinion-makers? Several responders have rightly pointed out that we have only to wait and see – the fallout of this neocon economic model is going to occur well within this decade, and there will be no mistaking it then. I am absolutely opposed to opening up large tracts of prime media real estate to disengenuous journalists and commentators. Such battles should be relegated to personal blogs, where folk may rant, opine on innumerable bizarre conspiracy theories and cling to economic theories whose underpinnings and terrifying consequences are unravellling before our very eyes. To call this a “great debate,” and then have this piece as a leader does a real dis-service to the steadily eroding practice of sound journalism and the morale of dedicated academic and lay writers. What is, to my mind, interesting, is the extent to which – in opposition to the moral and intellectual laziness that this piece embodies – certain ‘leftist’ (I just call them realist) principles are finding common ground with certain elements of Libertarianism (aka Ron Paul, in some of his positions) This common ground lies in the battle against a neo-con statism that is more than happy to take to a whole new level the process of feeding off its very own middle class (as foreign sources of surplus value become harder game eg with the fallout of the formation of BRICS). Now THAT is a truly great debate worth having – namely whether its conceivable for principled people from opposite sides of the political spectrum to agree to set aside their many, many significant differences in the interests of what are starting to show as perhaps even more important and urgent commonalities. Perhaps when the middle class as we know it ceases to exist in all but name, the next few election cycles in the US will begin to explore hitherto unthinkable alliances.

Posted by aaronm | Report as abusive
 

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