Monday, July 4, 2011

The growing gap of income inequality


Search for terms such as "income inequality" or "wealth gap" will turn up some interesting reading. One series of articles I've actually read is by Timothy Noah for Slate called The United States of Inequality: Introducing The Great Divergence. There's good reason this topic is blipping more radars these days.

A block of quotes from Mr. Noah's introduction quickly puts things in perspective:
  • In 1915, University of Wisconsin statistician Willford King published The Wealth and Income of the People of the United States;
  • he was troubled to find that the richest 1 percent possessed approximately 15 percent of the nation's income (it was likely closer to 18 percent);
  • modern income tax was created in part to ostensibly prevent disparities in wealth turn the United Sates into a European-style aristocracy;
  • there had never been a time when class warfare seemed more imminent;
  • that was when the richest 1 percent accounted for approximately 18 percent of the nation's income. Today, the richest 1 percent account for 24 percent of the nation's income.
How did this happen? Thus begins Mr. Noah's examination of a host of possible factors. It's a fascinating and recommended read which arrives at the unambiguous conclusion: this is a problem that needs to be fixed.

To say "I'm Canadian" is of little comfort, because the problem is not hemmed in to the 48 contiguous United States. As Canada's largest trading partner, we suffer if they are unable to meet their demand for our exports; we also suffer for the imports that we buy from the US that fall in availability or quality. And, to the degree that our media is dominated by our neighbours to the south, we are not altogether separate in ideologies, health care and gun control not withstanding.

We've all heard the term "the rich get richer" and at no time in history the history of the United States has this been more true than today. Granted, those stats in 1915 surely didn't factor in all the people who had no income at all - thus the disparity is of income inequality, not socio-economic inequality, which must surely have been worse then than now, especially since social programs have raised the floor for seniors or those who are unable to work.

And this may be the very pivot upon which the gap could have been allowed to expand. Back in the 1930s when the New Deal was forged, society's most destitute really did live in squalor, and poverty was plain to the naked eye. Today, social programs raise the floor and allow most people a standard of living above that of a Hooverville shantytown, so that there's less attention on the topic of poverty.

There's also the manner in which we, as a society, glorify wealth. We watch Lifestyles of the Rich and Famous, and covet the materials we associate with success. We idolize the athletes and entertainers who put on a good show for us and take billions of dollars at the box office and the arena gate, as well as advertising proceeds from the spots during the movies, television shows and sporting events that sponge up increasing portions of the money supply.

Of course, unlike the feudal system of that feared European aristocracy, we don't need to be born into royalty for an opportunity to "succeed" - we can roll up our sleeves, work hard and achieve success for ourselves in this free society. Yet, the numbers Mr. Noah parses shows that many other nations - Canada included - enjoy better average quality of life and higher real social mobility...for now.

Some may quip that America is becoming a third world country. But that shouldn't be a shocking statement. Some may recognize that third world countries are often rendered as such through colonialism and exploitation by first world countries, especially those with in-demand natural resources that are plundered instead of being fairly traded. The American middle-class has been/is being plundered - it only takes a stroll down through history to see what becomes of a group of people after whatever it is they have to offer has been plundered.

What resource did the middle class have that was worth being plundered? Labor.  It was labor that created the middle class in the first place (consider Henry Ford's initiatives to ensure that his workers had a decent house to live in, and could afford to buy what they built) , lifting the poor up from destitution to a dignified living, so it is only fitting that the plunder of  labor wipe out that same middle class it created (if that word seems out of place, consider the modern use of the term "dead peasants" with respect to corporate-owned life insurance policies).

And in this plunder, the rich get richer, and the gap grows, exceeding levels not seen since before the Great Depression.

We Westerners are quick to spew the status quo argument that "unions" are a problem.  Mr. Noah's discussion of the effects of the Taft-Hartley Act as well as Reaganomics actions such as busting the air-traffic controllers' union, slashing top income-tax rates; and stagnating minimum wage at $3.32/hr for his two terms, halting a yearly increase process, when compared to the labor-supportive social democracies such as Sweden and Germany, seem to indicate that "smashing unions" as the UK and US did (two nations who historically have enjoyed high-value currency, by the way) eventually resulted in smashing the industrial base of both nations.

Revisiting minimum wage for a moment, after Mr. Reagan left the White House, his vice-president Mr. George H. W. Bush held a term, followed by Mr. William J. "Bill" Clinton for two terms. During these three presidential terms, the minimum wage increase process was restored and rose to $5.15 by the time Mr. George. W. Bush took office. He again halted minimum wage adjustments for the duration of his two terms, at the end of which time the American dollar had reached a 51-year low in buying power.

Granted, Mr. Noah does examine, and dismiss, the notion that we can "blame the Republicans" for the income gap, conceding that what might be more indicative of the problem is how government works these days. The amount of money invested in lobby groups in Washington D.C. has grown exponentially (again, read his article for the numbers nitty-gritty), and while party powers ebb and flow into and out of Washington D. C. the lobbyists remain.

I can't prescribe "the solution to this problem." The Ought Thought here is that we have a problem, and if we can raise awareness that we have a problem, we can focus some attention on how to fix it.

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