Using the top 10% isn’t the same as using the top 1% or the top 0.01%. The top 10% includes people like you and Voyager (as examples, there are dozens more on this board who’d fit in the top 10%), upper middle class people who are fairly good with money and have good paying jobs.
Wealth discrepency like we are talking about is more about the top 1%, and an even smaller subsect of them (the top 400,000 wages earners, as an example).
If you talk about the top 10% you are talking about doctors, lawyers, computer programmers, college professors, pharmacists, veternarians, etc. So in that regards, it isn’t surprising that the % of wealth owned by the top 10% is not much different among OECD nations. Being a college professor or lawyer probably pays well in France too.
But the gini coefficient is much higher in the US than in the nations you listed.
And the OP’s numbers weren’t that off, the top 10% has 70% instead of 90%.
The wealthiest 400 Americans have between 1.25 and 1.5 trillion in wealth. That is what this thread is about, not about the top 10% or top 20%. That may only be 10% of the wealth in the nation, but 400 individuals own 10% of the wealth. And when you have so much power concentrated in so few hands it runs the risk of being undemocratic. The entire US military only costs $650 billion a year or so. With corporations being labeled as ‘people’ and with 400 individuals with so much wealth, they have massive leeway to influence our nation. An individual can buy and sell political parties, media outlets, military hardware, etc.
On the right you have superwealthy people like the Waltons, Kochs, Coors, etc. and on the left you have the Soros, Gills, etc. But either way, a tiny number of people have massive influence in how our democracy works and who wins elections.
Oligarchy can be undemocratic. And we can’t grow our way out of our economic problems if nearly all the wealth created by the economy keeps going to the top.
I think that is more just world phenomena than calvinism IMO.
There is a strong desire to believe the world is more just, fair, rational and easy to control via conscious effort than it really is. So people delude themselves into thinking ‘if I just make good decisions, I wil be rich and never be poor’ because life feels safer when you are deluded that life has a very short list of simple rules which (all but) guarantee success and protection from harm.
The real world is far murkier and more dangerous than the philosophy of Calvinism.
But I don’t know what role predestination plays in it. If anything there is an anti-predestination meme among the people you are describing because Horatio Alger stories abound in libertarian circles.
Yes, I tried to get across the idea that it’s a general rule that shows up in many places, but it’s not a mathematical certainty. The 80/20 rule is an observation, not a law of nature.
But I think the author is wrong to say that there’s nothing mathematically special about the 80% number. If that were true, that ratio shouldn’t appear any more often than any other ratio. But it does. You run into over and over and over again. Not only that, but it’s fractal in in nature. Often, you’ll find that if you find the ‘vital’ 20%, then examine that set, you’ll find another 80/20 distribution within it. And if you examine that top 4%, you find that again it breaks down into another 80/20 distribution. Not always, but more often than random chance would suggest.
There is surprisingly little information available about the root causes of the 80/20 rule - or if there is, it’s hard to find because it’s swamped by the glurge of 80/20 management advice web pages. My guess is that it pops out of complex, iterative interactions between normal distributions. It’s a statistical convergence. But I don’t have any solid mathematical proof for that.
Just like no one in a discussion of physics gives a wet shit about social or moral attitudes towards science. The study of economics as a science is the study of the world as it is, not a moral philosophy about how you want the world to be.
Where many liberals go wrong, in my opinion, is that they do the same thing consrevatives do with evolution - they try to deny the science and real-world observation of what we know because it doesn’t fit with their own moral judgments.
For example, denying that some people are much more productive than others because you think it would be more moral if everyone shared in the fruits of that productivity equally is simply a denial of reality. You would be better off to formulate your argument in a way that keeps the two separate.
For example, I support public welfare and a certain amount of public health care. I even support progressive taxation. But I don’t support these things because I think the rich are parasites and the poor are being shafted - I support it because it promotes a more stable society, and because I recognize the reality that if the majority of the wealth is held by the top 20% of the people, then more of the burden of funding society is going to have to fall on them.
But because I’m willing to accept the fact that the rich generally are rich because they create the most stuff that we use, and because they are responsible for most of the improvements that have made our lives better, I want to be damned sure that my policy choices don’t destroy their productive capacity or incentives, and I also recognize that ‘fairness’ works both ways - it may not be fair that a kid from a poor family never got a chance to go to Harvard and make the connections that lead to a successful life, but at the same time it’s not fair to simply expropriate the property of others just because they are highly productive or good stewards of their money.
Reasonable political policy AND reasonable morality demands that we consider the rights of both sides, the needs of both sides, as well as the common good.
To start off with, we have to resist the desire to accept bogus numbers and wild exaggerations when they happen to dovetail with our own political biases.
You apparently just made this up. Let me quote the TITLE of the thread:
“Why should I/Anyone care (that/if) 99% of the wealth is held by 1% of the people?”
Notice the numbers? 1%, holding 99% of the wealth. When the OP elaborated, he said:
He didn’t say 10% of the people have 90% of the wealth. That would be the absolute lower bound of his formulation. A better way of stating his premise would be, “Somewhere between 1 and 10% of the people have somewhere between 90% and 99% of all wealth.”
Anyway you slice it, that is just flat-out wrong. To see how wrong it is, let’s look at the inversion:
“Somewhere between 90 and 99% of the people have only between 1% and 10% of the wealth.” In reality, 99% of the people hold about 65% of the wealth. 90% hold about 30% of the wealth, and 80% hold about 20% of the wealth.
In terms of social policy and the amount of social injustice built into the economy, this is a huge difference. A society in which 99% of the people have only 1% of the wealth is a society of oligarchs and peasants. A society in which 99% of the people have 65% of the wealth is a society of widespread social mobility and a large middle class. They are completely different.
The fact that some on the left will dismiss these differences as trivialities that don’t matter suggests that they are blind ideologues, not thoughtful social policy thinkers.
You just finished defending the OP by claiming he was talking about the top 10%, and 70% of the wealth. Now you’re saying that this thread is about the top 400 Americans. Please keep your story straight.
True to an extent. However, you have to consider that the current U.S. deficit is higher than the entire net worth of those 400 individuals. The stimulus package was about half of their entire net worth, and much of that went to lower income individuals. So when considering money flow and who is getting what, you have to consider the effect of government redistribution as well. The problem is that the money redistributed to the lower classes doesn’t stay there. It tends to recollect at the top.
Another problem you have to consider is that it’s not the same 400 individuals who have all the money. Twenty years ago, the list was completely different. Most of the 400 top individuals are not aristocrats who were born into static hierarchies of wealth, but people who simply climbed through the economy. They’re the outliers on the bell curve. It may be the case that in a free society you will always have a small number of ultra-rich. The top 20% of the top 20% of the top 20% of the top 20%.
You also have to be clear on what problem you’re trying to solve. Is this about providing for the poor? Or is it about simply stopping people from becoming rich? Because the problems you’ve mentioned so far could be solved by simply destroying the wealth of those people. Invent a 100% ultra-rich tax, and take everything they have. It wouldn’t even pay for one year’s deficit, and would have no affect on the poor whatsoever in the long run, but hey, you could get rid of the influence peddling. So is that your issue? That society should simply prevent people from becoming rich, because rich people are a social liability? Or are you looking for ways to make the lives of the poor better?
If your desire is to help the poor, I’d suggest that demonizing the most productive people in your country is not a rational response.
Here’s the problem, though - the Pareto principle applies to government power as much as it does to economic power. You think that by making bigger, stronger government you can get rid of concentrated power. That’s noy only oxymoronic, but in reality all it does is change the incentives, and therefore change the way in which people make it to the heights of power and influece. You still get a small group of individuals wielding influence, it’s just that now instead of selecting the powerful by their ability to be productive, you’re selecting for the people who are best able to work within a government hierarchy.
The Soviet Union had its ultra-rich, only they were paid off in state limousines and state jets and state country homes. China has its ultra-rich. France has its ultra rich. Canada has an ultra-rich subgroup.
Nice formulation. Wealth is ‘created by the economy’, and ‘goes to the top’. How about, “Wealth is created by the ‘vital few’, and therefore they become wealthier.”
Economies don’t create wealth. People do. Economists deal in aggregates because they have to, but we must never forget that aggregate measures are abstractions. They are simplifications that hide the fact that wealth is created by individual action.
In a capitalist society, it is individual action organized through a free market which is the engine of wealth creation. This allows division of labor, specialization, and optimization. But ultimately, productivity gains come from individual ideas, or the coordinated economic activity of groups of individuals.
Some people are better at it than others, and so they become wealthier. They’re not skimming off the top of the wealth created by ‘the economy’. They’re engines of wealth creation within the economy. The beauty of markets when they work well is that the only way these people can become wealthy is to provide goods and services to people who need them. So they’re not taking anything from anyone. They’re just better at providing what people want, and therefore make more money.
In an earlier message, I pointed out that 80% of sales are generally driven by 20% of salesmen. This is true. In an economy where a salesman works on commission, that means 20% of salesmen are going to make 80% of all commissions. They are going to eventually have 80% of all the wealth of the subgroup within the economy called “salesmen”. Tell me - do you see a fundamental injustice over that? Just who got screwed? Why is it unfair that 20% of salesmen should make 80% of commissions, if they generated 80% of the company’s revenue?
I didn’t see any point in arguing over the exact figures. The OP’s point was that he didn’t care if 99% of the wealth was owned by 1% of the people. Or if 90% was owned by 9%. So presumedly he wouldn’t care if the actual figures are 35% owned by 1% or 69% owned by 10% or 80% owned by 20%.
Arguing the numbers is quibbling. The Op is the same if he said why do I care if the wealth gets super concentrated into a tiny percent of the population? It is happening anyway.
Apart from predestination, I think many people, even completely non-religious ones, find a peculiar comfort in attributing our ills to poor personal choices and behaviors. Time and again, when the question comes up of why we seem to have so much less security than our parents did, or why $50K annually isn’t enough to support a family in middle class style, when in 1950 that could be done for $5K, someone says, “it’s because of all the iPods and cellphones and flat screen TVs.” While skyrocketing house prices and insurance premiums and the forces of relentless population growth have nothing to do with it, apparently.
To give my answer to the OP, I think the biggest danger is this: When too much wealth is concentrated in too few hands, more and more of that wealth doesn’t get spent to drive local business, but can only be saved or invested. Some of that may trickle down to small businesses in the form of investment capital and loans, but it’s not nearly as good as people generally having more money to spend on what those small businesses are offering to the public. I’m not a businessman of any size, but I’m sure that, if I were, I would rather that 99% of my potential customers each receive a couple more hundred salary each month, than to have 1% receive $21901. Obviously that’s not true of every type of business, but it is of the ones that cater to ordinary consumers.
Why has no one mentioned the simple mathematical fact that this sort of distribution is inevitable? If you’ve got someone making $1 and someone making $2, then you can say that 50% of the population owns 66% of the wealth. If you’ve got 1 person each making $1, $2, $3, … , $100, then you can say that the top 10% owns 20% of the wealth and the top half is now earning 75% of the wealth.
If you keep extending the amounts past $100, all the way out to several million people, it’s not long before you’ll get your 80/20 ratio. And that’s just with a linear progression. It goes up even faster if there’s a curve to the gradient.
It’s got nothing to do with the unfairness of public policy. It’s got everything to do with the simple mathematical fact that if you’ve got millions of people, some making more than others, you’ll get very disproportionate ratio.
It’s important to frame the issue as a numbers issue. Otherwise you do end up discussing why people care. That is fuzzy-wuzzy, touchy-feely thinking and cannot be tolerated by “serious” “adults.”
It might be coincidental that the USA’s largest concentrations of wealth took place in 1928 and 2007, both followed by economic collapse. But probably not. That’s why we should care.
Another historical reason why everyone, including the wealthy, should care is that people act on their perceptions as much as on reality. If at some point, the majority of people believe that the top owners have acted wrongly against the majority, then they may take action against them regardless of whether or not their beliefs are correct. Some people mistakenly think the ultimate in wealth redistribution is high progressive taxation. This is nonsense. The ultimate in wealth redistribution involves guillotines and mountains of skulls.
I don’t personally believe that the United States will end up in some Year Zero. But people who resist any form of economic redistribution have to remember that the situation can go two ways not one. Calls for economic redistribution can be muted. But they can also evolve past plans for mild economic redistribution into much more extreme plans. A 30% tax rate might seem unthinkable to a wealthy person currently paying 15% and he’ll fight it with all his power. But in fifty years, his children who are paying a 90% rate might curse him for his unwillingness to accept what they will consider to have been a reasonable compromise.
Using the ‘production worker compensation’ index (closest thing to “middle class”), for example, $5,000 in 1950 = $84,400 in 2009 (the last year tracked).
So it is no wonder that a family who could survive happily on $5,000 in 1950 find it difficult to make ends meet in 2010 on $50,000. Comparativey speaking, they are actually earning far less, as a skilled production worker who earned $5000 in 1950 would, all things being equal, presumably earn $84,400 in 2009.
You see this sort of error all the time. Sure a movie cost only a quarter when your grandparents were kids. But a quarter was actually worth a lot more then.
Interestingly, the consumer price index has risen much more slowly over time than the worker compensation indexes. Dunno what all the ramifications of that are, but it appears to suggest that wages are rising more rapidly than the prices of stuff.
Well it is pretty damn obvious that the concentration of wealth is not producing more jobs and demand. It is doing the opposite ,which is doing harm to the masses and the country as a whole.
Just as I’m sure in post-revolutionary Russia, the children of former dukes and counts, returning to their hovels of an evening after a long day of forced labor, must have wished that the Russian ruling classes, pre-1937, could have been a little nicer and more amenable to social progress, like the English. Hell, England even kept its monarchy and didn’t dispossess or murder its aristocrats.
Are you able to have a debate that doesn’t involve you being condescending and rude anymore? It makes it far less pleasant to talk to you.
If it weren’t for redistribution the inequality would be worse. And many wealthy individuals opposed programs that redistributed the wealth like social security, minimum wages, labor laws, medicaid, etc. This can be a problem because a handful of powerful people can drastically alter the course of a society if they desire to do so. The Koch brothers and the democracy alliance fight against each other for the direction of the government with their pocket change.
Fundamentally, our resources are not infinite. Even though standards of living are constantly growing, there is finite wealth and some zero sumness to the game. If the top 1% are making 25% of income instead of the 8% they were making back in the 1960s, that means the bottom 99% have to make due with 75% of GDP rather than 92%. With health care, education and real estate costs skyrocketing that means they will be pressed into desperation. A result of this is skyrocketing levels of bankruptcy and foreclosure as well as a sense that the concept of a stable middle class is dying.
If we were all wealthy enough that we didn’t have to worry about those things, then income inequality wouldn’t be so bad. The potential oligarchy would still be a problem, but people would have enough wealth to make ends meet. Right now they do not. More and more people are living on the edge of disaster, and as more GDP flows to the top that means more and more people are going to have to pay for higher expenses with stagnant incomes. And since our economy is mostly consumer driven, that doesn’t bode well for our long term growth.
This philosophy makes no sense to me. The idea that the most productive members of society are also the wealthiest is not even remotely true. The guy who invented the ‘girls gone wild’ franchise makes more in a month than a postdoc working in a renewable energy lab at CalTech will make in 5 years.
Postdocs & medical residents are extremely productive, low paid members of society. The mentality that productivity/value to society = wealthy isn’t true.
Is Oprah more valuable to society than 10,000 post-docs and medical residents? She earns about $275 million a year. They earn about $30,000 a year. The answer is obviously no.
The concept that productive to society = wealthy isn’t true. Besides, the wealthy had far less wealth relative to everyone else before the late 1970s and society functioned fine. The wealthy have far less power in western europe and society functions fine.
Resources and wealth are not infinite. Even though our standards of living slowly grow over time, there is a finite amount. And if the top 1% are earning 25% of income, that means the bottom 99% have to make due with 75%. If the top 1% earn 40%, then everyone else has to make due with 60%. With a GDP of about 14 trillion whether the top 1% earns 8%, 25% or 40% makes a huge difference in how everyone else lives.
If we had less income inequality and as a result the bottom 90% had more income and security the economy would likely function better for several reasons.
People would not have needed to go so far into debt over the last few decades. Student loan debt and credit card debt would have been lower with less inequality. As a result they wouldn’t be so close to the edge when the economy suffers like it has recently.
The housing and stock market collapse wouldn’t have destroyed retirement security as badly as it has because people would have more of a cushion.
Foreclosure rates would be less, resulting in a more stable housing market.
The result is people feel more secure and more stable. But because people are being asked to pay for higher expenses with stagnant wages (because nearly all economic growth goes to the top), people are not secure. In a consumption driven economy like ours that will lead to problems.
That is nice and all, but the economy and GDP grew fine when income inequality was far smaller. back in the 60s the top 1% took home about 8% of income. Now it is up to about 25%. GDP growth was 3-5% back then, just as it is now (or was until recently.
The economy has grown fine with far less income inequality. This myth that productivity leads to inequality isn’t true. The GDP, personal income and scientific R&D grew in the 40s, 50s, 60s and 70s back when inequality was not nearly as bad of an issue.
How is an oligarchy conductive to meritocracy? As states and federal governments go bankrupt they cannot invest as well in education or infrastructure, which means the next generation of productive people may not achieve as much.
Pretty much every argument you’ve made is invalidated by the fact that GDP growth, standards of living and wealth creation are just as good in societies with far less inequality as they are now. In some ways they are better. GDP growth in the 60s was higher than it is now, but saying lower income inequality caused that would be a stretch.
Why did the top 1% make about 8% of income in the 60s, but now make 25% or so? Did they become 3x more productive? What happens in 20 years if/when the top 1% are taking home 40% of national income? Will they be 5x more productive than they were in the 1960s? Nope.
The reason it is bad is because power concentrates. Wealthy, powerful individuals can buy up and use levers of powre to make themselves more powerful and wealthy. Media outlets, think tanks, political organizations, etc. get bought up and used for this purpose.
As income on the top ranks has gone up their tax rate and regulations have gone down. You buy think tanks to push your views that policies that benfit you indirectly benfit the voters too. etc.
Can you follow the subject?
The concentration of wealth results in turmoil. If you think the poor will just get to be a bigger and bigger part of the population and docilely accept it, you underestimate the people. They will eventually get fed up.
Krugman said extending the Bush tax cuts is equivalent to writing 3 1/2 million dollar checks to the top 1200 wealthiest people in America. I don’t want to do that.
To the original poster, whether you care or not is entirely up to you. If you are happy with your Xbox and iPod than that is you. However, if you want to know the why’s and how’s please read on.
One way to measure inequality of wealth is by using the Gini Coefficient: Gini coefficient - Wikipedia . According to that site, in 2008, “While developed European nations and Canada tend to have Gini indices between 24 and 36, the United States’ and Mexico’s Gini indices are both above 40, indicating that the United States and Mexico have greater inequality.”
So why does our country have such inequality? The answer is that our system for society was setup that way intentionally. Counter to what others have said the US is neither a Democracy or a Capitalist society. It is not a society where decisions are made by the people (Democracy) or a society in which market forces drive wealth (Capitalism). While it has elements of those things, it is more accurate to describe the US as a Poliarchy, or even Corporatocracy or Corporate Welfare State.
Again, by design, our country was created with the interests of the elite in mind, not the general populace. As one of the framers of the constitution James Madison once said, the government “ought to be so constituted as to protect the minority of the opulent against the majority”. He was basically against the Democratic form of government and feared “mob rule” and wanted to protect the interests of the wealthy elite against the masses who will work to dissolve concentrations of wealth and power.
America is not a Democracy
One of the leading scholars of Democracy is Robert A. Dahl of Yale University. He listed a number of attributes that a Democratic society must have. They were things like: Effective participation, Voting equality at the decisive stage, Enlightened understanding, Control of the agenda and Inclusiveness. Unfortunately the US fails at being a Democracy. In fact no country today can call themselves a Democracy. Again we do have a elements of Democracy, such as free and open elections, but they are meaningless and ineffectual in the context of true communal decision making without the rest of the other attributes. What we have is a phantom Democracy where we are given the illusion of decision making. When was the last time you voted for an issue that was really important to you?
America is not a Capitalist society
In a Capitalist society, market forces determine how wealth is distributed. You are free to trade goods and services and if you are shrewd you can make a buck. The government does not interfere and those that work hard, have good business sense and exersise some creativity will excel. We do not live in that type of society. There are may protectionist policies that run counter to that. Government bailouts, intellectual property rights, pro-corporate policies all fall into that category. An online book by Dean Baker called “The Conservative Nanny State” illustrates this.
The myth that we live in a Meritocracy, where “if you work hard you will succeed and if you are lazy or stupid you will be poor” is not entirely true. Again, it has elements of Capitalism, especially for people like you and me, but it does not apply to the elite. If you open up a lemonade stand and I open one up across the streets, market forces will definitely come to bear on who makes money, who survives, etc… If I choose not to work or deliver a poor product, I will fail. If you do the opposite you will succeed. However, those rules don’t apply to huge industries that account for the vast majority of wealth in this country. Just look in the news for talks about industry bail-outs. That’s not capitalism that’s corporate welfare. It doesn’t matter that you make poor business decisions, the government will bail you out if you are in with the right crowd.
It is only with popular struggle that some of those conventions have been overturned and some of the institutions that promote narrow concentrations of wealth have been mitigated. For example, recently many banks got in trouble due to poor lending practices and a large auto manufacturer was on the verge of bankruptcy. Immediately, there were talks of government bail outs to which there was huge popular opposition. Why was there even talk of government intervention? Because we don’t live in a capitalist society - we live in a Corporate Welfare State.
Back to the issue of whether you should care if you feel that you have enough of what you want a comfortable life style and are able to acquire the things that you want. According to David Cay Johnston, a Pulitzer prize winning investigative journalist, although the economy has been growing steadily year after year, real wages for the people are shrinking. People have to work harder and longer to maintain their previous life style. Basically what’s happening is that the middle class is shrinking. The elite concentrations of wealth are getting wealthier while most people are getting poorer.
One last point is that middle class, the adequately educated working class, basically you and me are often the worst propagators of the myths, to our own detriment. As it turns out, we are the ones that uphold the myths and believe that we live in a type of society that we actually do not. This allows the elite to run amok with their own interests. Interestingly, if you ask a poor person they will be the first to tell you that they there is no Democracy and that Capitalism only applies to them and not the elites.