The best division of wealth in a society

Great Debates
1

In America, today, 10% of Americans own 75% of the total private wealth of the country. Most people likely think this is out of balance, that total private wealth should wind up being divided ‘more’ equitably. My question is, ‘is there a consensus among economists what the healthy division of wealth should be in a ‘capitalistic’ economy?’

I assume that communes aim to divide everything equally, that in a truly communistic or early Christian Church society everyone has equal access to every asset.

My pov includes the observation that while everyone should start their lives with an equal chance to succeed, we are not actually created equal in intelligence, drive and good fortune. But that would be a good place to start, with everyone having equal access to every opportunity to advance. And, to boot, if someone falls behind and is needy due to illness, accident or bad circumstances of some kind, efforts should be made to correct that imbalance through medical intervention, compensation, retraining and ‘a hand up’.

Most of us, though, want to pass on something to our kids. We want them to have the ‘good luck’ of having something in the bank, mostly money and education, before they set out to prove themselves. That may be good for my family or yours, but how can it be justified if we want everyone to have an equal opportunity?

I’m curious how other folks think on this subject and if they have an opinion as to what the percentage of wealth held by the best off 10% should be.

2

No, but allow me to introduce you to Vilfredo Pareto, the guy who warned that between-World Wars Italy was going to hell in a handbasket as its economy became more and more polarized. The current version of the wiki simplifies his contribution: he didn’t merely find out that a small amount of the population owned most of the land and of the means of production; he showed that historically more extreme wealth distributions correlated with more social stress and upheaval, and warned that since wealth in Italy was becoming more and more concentrated, this was Not Good.

His point wasn’t that there is an optimum of wealth distribution, but that the more concentrated wealth is, the more social tension there is and therefore the higher probability of large social changes. Which isn’t all that surprising once you stop and think about it.

Also, note that in early Christian churches and common-property societies, people do not have equal access to all assets; access gets prioritized as a function of needs and ability. Equality and homogeneity are two very different concepts.

3

There will always be extremes on either end, but you need a fat middle. If the middle is shrinking to create more in the poverty category, with only the same 1% getting richer, the train is going off the track.

Leaving a little something for the next generation is nice, but it’s a bonus, not a requirement. When the super wealthy simply create another generation of super wealthy that’s only helping them, not society in general in my opinion.

But there’s no equal opportunity for success, when only the wealthy suburbs get decent education, while the poor can’t get textbooks for their kids, or decent teachers. When the rich neighbourhoods have NFL quality stadiums, and marching bands in uniforms, and poor neighbourhoods across town have zero music, sports etc, the train is surely destined to go off the tracks, I think.

If you can’t shift jobs without risking your healthcare coverage you’re not much better than an endentured wage slave, in my opinion. Letting Texas decide what’s in all your textbooks isn’t terribly wise either, come down to it. When you have this circumstance, over a couple of generations you shouldn’t be surprised when you find yourself in a post fact world, IMHO.

4

Before addressing OP’s question, I’d like to frame the issues better.

(1) Income is usually measured rather than wealth. It is easier to measure, and, therefore, easier to control.

(2) OP asks ‘How much wealth should the top 10% have?’ Instead why not ask about the top 20? Or the top 1%? Or the top 0.1%? To avoid making this decision, it is common to use the area under the Lorenz curve as the equality-defining statistic, or its inverse the GINI coefficient.

(3) I don’t recall anyone proposing an absolute GINI target. Instead one focuses on trends, and how to improve the trends.

One important goal, as OP mentions, is opportunity — the child of a poor man should have the opportunity to become rich on his merits. This ‘intergenerational mobility’ has been measured and, among developed countries, U.S., despite blustering rhetoric to the contrary, does quite poorly. On a scale where Zero denotes that a son’s income is unrelated to his father’s, and One denotes that a son’s income is exactly proportional to his father’s, the U.S. scores 0.47, about the same as Italy, U.K. and Switzerland. Other developed countries offer much greater opportunity: Japan 0.34, Germany 0.32, Canada is a bastion of opportunity with a score of 0.19.

Another goal would be focus on specific obstacles to opportunity: the high cost of education, lack of free healthcare, impediments to unionization, regressive taxation. Just to focus on the latter, Warren Buffet pays a lower tax rate than his secretary when payroll taxes are included.

But before we discuss HOW to reduce inequality, we must decide if we WANT to reduce inequality, and WHY. I’ll end this post now, but perhaps return to dispose of some of the mistaken answers to these questions which will be presented. :slight_smile:

5

I like all the comments, so far. Thoughtful and useful. Another friend of mine also stressed the need for the middle class to be the grouping with the most collective wealth. I think that correlates with the idea of a typical distribution curve (not much on either end, big mountain in the middle).

My question, more or less, is what the distribution should look like, not how to fix it, or what is wrong with the way it is. Sure, 100% estate tax sounds good, but, of course, there are many ways around that if you want to pass along your accumulation to your kids.

6

Is anyone actually advocating for 100% estate tax? To whom do you imagine it sounds good exactly?

Sounds like a cheap scare tactic, not worth taking seriously to be honest.

7

I don’t know much about economics,politics given that I’m a pretty young fella but the argument I’ve heard from some people is that the idea of an “egalitarian” society is pretty much incongruous with human nature.

People seem to acknowledge that we’re humans and maybe perhaps the painful truth is, there will be some winners and some losers. Even in places like Switzerland which can be considered the most egalitarian, one can see that their wealth and a lot of wealth in the West comes from the voluntary exploitation of poorer nations by the corrupt leaders.

8

If A has 6,777,342 times more wealth than B because C-ZZZZZZY has given him more, where does ZZZZZZZ come into the picture?

9

It can also lead to very different results. For instance, Sweden is known for relatively low income inequality, but its wealth inequality is quite high.

10

Income inequality is inevitable in a free society. People are different and therefore are compensated differently. If the people who have alot of money got it by building honest businesses and not stealing and the people at the bottom have a decent standard of living then income inequality does not matter. Since income has a lower bound and not an upper bound, richer societies are generally going to be more unequal than poorer ones.

11

I believe that the biggest element we miss in this calculation is the fact that today’s very rich control assets that they have no real connection to and are only interested in maximizing profitability. By what logic should one person or small group of people be managing properties all over the country, many of which they have never even seen?

Really, there is a threshold where wealth surpasses comfort and becomes a road to power. I feel that power is the engine of “evil” (whatever that is), so allowing individuals to gain vast power through wealth is not a net positive.

12

Give it all to me.
All of it.
Now.
Please.

13

I would argue for an estate tax that approaches 100% for amount above a few million dollars with an exclusion for special needs trusts.

What social value is there in leaving more than a few million dollars to your kids? Is there anything good to be gained from having a class of trust fund kids that never have to produce or work in their lives?

We no longer need dynastic accumulations of wealth to fund capitalism, we have the stock market and mutual funds. We don’t need a few really rich people, we can have a shit ton of middle class people fund capitalism.

14

This.

Also, you can track trends, and the middle class has been diminishing since the 1980s and Reagan’s disastrous tax cuts for the wealthy.

We’ve already seen the second greatest re-distribution of wealth in history (the first being money paid to the oil-producing nations.) And the imbeciles in charge are accelerating it!

15

Intrestingly according to the EU Commission found that only 4.7% of Finland’s working population is dissatisfied with their work.

The top quintile compared to the bottom quintile is 3.8 in Finland and 9.4 in the US.

For the top 10% it is 5.6, 9.4 and 18.5 respectively.

But Finland also has very flat corporate structures, and you tend to call your boss by their first name and consider them as a peer etc…

Of course the myths surrounding romantic nationalism in the US would never allow that to happen within most dopers working lives, but it appears that we don’t, collectively, have enough impulse control as a country to care about life satisfaction, we are far more interested in the dream of being lucky among the unwashed no matter how much suffering that involves.

16

I have yet to read this book a friend just recommended - written by a Finn - but it sounds intriguing.

17

The problem is that great fortunes become institutions in and of themselves and, like all institutions, become principally concerned with survival. Wealth is power, and the first use of that power is the accrual of more wealth. Lather, rinse, repeat. I have no problem with folks being rich. Paper your bathroom walls with money. Have butlers for your butlers. Jump stark naked into a vat of ice-cold Roosevelt dimes. But the minute you start using your economic power to game the public system, it become’s the public’s business.

18

Germany has a GINI coefficient of 31, the US has a coefficient of 41. Both are wealthy western nations with western infrastructure and high R&D spending.

As a nation increases in wealth, income inequality goes down, not up. Governments can pass a wide range of legislations and social programs designed to reduce income inequality.

19

I don’t think anyone should be born and not have to ever lift a finger in their lives. That’s my line.

20

The CIA has a list of coutries and their Gini’s and so does the World Bank. Topping the lists (worst inequality) are countries like Lesotho, Central African Republic, Haiti, Botswana, all with Gini near 0.60. These are NOT rich countries. At the other end of the scale, find Netherlands (0.29), Sweden (0.26), Finland (0.24). These low-Gini countries are NOT poor.

It’s refreshing to see that most Dopers have avoided the usual right-wing “slippery slope” argument:
“A Gini near Zero implies teh horrid repression of Freedom, therefore we want a (Freedom-maximal?) Gini as close to One as possible. ‘Happy mediums’ are a liberal myth.”