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All About Wealth Disparity


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2007 Apr 21, 8:43am   28,531 views  219 comments

by HARM   ➕follow (0)   💰tip   ignore  

Disparity? What 'disparity'?

One of the topics that has kept coming up over the 2 years of this blog's existence is wealth and income disparity. It's pretty obvious from a number of different sources and metrics that --after heading down for several generations-- it's been going up over the past 35 years or so in the U.S. In fact the U.S. is now closer to China or Iran in terms of wealth distribution (as measured by the Gini Coefficient) than Canada or Western Europe.

Some of the regulars here (myself included) view this as an alarming trend, with some disturbing implications, such as:

  • A gradually shrinking middle class (however one chooses to define that), and increasingly bifurcated economy/society.
  • Less overall economic/social mobility (fewer opportunities for ambitious, intelligent poor people to join the ranks of the middle class, or move from middle to wealthy class).
  • Potential for greater social/political unrest, as wealth disparity approaches Third-world levels (What good is it to be "middle class" or wealthy, if it means having to live in a heavily fortified compound that you cannot leave without bringing along a small private army to protect you, a-la Mexico or Colombia?).
  • The devolution of our economy, from "free market" capitalism, based (at least somewhat) on the concepts of rule-of-law, meritocracy, competition and personal responsibility, to one based more on kleptocracy, plutocracy, corruption, and political connections.
  • The growing phenomenon of "Privatize Profits, Socialize Risks", where politically well connected big businesses and de-facto cartels attempt to insulate themselves from competition, and seek to transfer the consequences of their own bad financial decisions to taxpayers, via federal laws, subsidies and bailouts.
  • Some of our Patrick.net regulars appear to think this may be a symptom of an inevitable mega-trend that no amount of social engineering or tax redistribution can stop. Some even consider the emergence of a large, prosperous middle class as a historical aberration, that we are now in the process of "correcting". Peter P has often commented that, "no matter how you redistribute wealth, it always ends up in the same hands". And there may be validity to this view: consider the spectacular rise and fall of Communism in the Twentieth Century. There is also the notion that our economy has progressed to the point where wealth disparity is unlikely to lead to the kinds of social/political unrest it has in the past (French, Russian Revolutions, etc.), because for the most part, citizens' basic physical needs are still being met. A.k.a., the "bread and circuses" argument (see Maslow's hierarchy of needs).

    The big questions for me are:
    1) Is the decline of the middle class and bifurcation of the U.S. economy an inevitable result of macro-economic and historical forces beyond our ability to influence (such as global wage arbitrage and the transition from being an industrial power to a primarily service-based economy)?
    2) Is it theoretically possible to reverse this trend through social/economic policies, and if so, how? Is Different Sean-style socialism the only way? (see "How does one regulate 'well'?")
    3) If such reforms are theoretically possible, are they practically feasible? (i.e., is it realistic to assume political opposition from entrenched special interests can ever be overcome?)

    Discuss, enjoy...
    HARM

    « First        Comments 195 - 219 of 219        Search these comments

    195   HARM   2007 Apr 23, 10:16am  

    Malcolm,

    Wow, I guess we're not quite as far apart as I thought. Ironically, I used to be a strong supporter of the minimum wage, but now I doubt it does much good. I've seen some convincing arguments that, if raised high enough, it may even price some marginal labor (student labor, poorest of the poor, etc.) out of the market. Personally, I think a combination of flat tax, enforcing immigration laws, and more shareholder activism could take care of the lion's share of the wages gap.

    I also support a minimum level of healthcare coverage for all citizens & legal residents. Not sure how to structure it to avoid the Fannie Mae/Sallie Mae trap of "anything the government subsidizes eventually grows bigger, more bureaucratic and more expensive" problem though.

    196   Peter P   2007 Apr 23, 10:23am  

    I actually favor minimum wage increases, not so much to aide in stratifying a class but because I do see the disparity in wages that you talk about. I used to be against mandated health care, now I brainstorm all the time about universal healthcare.

    Malcolm, EPI has some interesting research on these subjects (epionline.org).

    Mandated healthcare is not the same as universal healthcare. The first one punishes employers and will lead to mass unemployment.

    I still think the optimal minimum wage is $0.00/hr. I am under the strong impression that increasing minimum wage will cause business closures while destroying the currency.

    197   Malcolm   2007 Apr 23, 10:36am  

    HARM, on minimum wage I agree with you about the high end, I just don't see how paying $8/hr really makes that big a difference as opposed to $5.75. I almost think the idea of paying someone $6/hr to do anything is exploitation, but I always err on the conservative side. Like I said, I used to be against it for all the reasons you and Peter say, now I am for it, for all the reasons you outlined.

    198   Malcolm   2007 Apr 23, 10:38am  

    Mandated, Universal, I don't care how we name it, like HARM, I recognize that things happen, and no one should have to face a debt of $100,000 for some unforeseen illness or accident, there HAS to be a safety net in there.

    199   HARM   2007 Apr 23, 11:17am  

    @Malcolm,

    100% agree. It's nuts that in the richest country on earth, you can be bankrupted for getting sick or injured.

    201   Malcolm   2007 Apr 23, 1:03pm  

    BAP, I favor medical savings accounts with insurance just for the catastrophic stuff. That to me strikes some sort of balance, and it forces people to shop and save.

    202   Peter P   2007 Apr 23, 3:05pm  

    I favor medical savings accounts with insurance just for the catastrophic stuff.

    I agree. That is a good balance. But as usual, the avocates will cry foul because they think the system is a "regressive tax."

    I do not oppose universal health care but:

    1. Employers should not have to bear all the costs. This will put a lot of small/medium companies out of business.

    2. There needs to be dramatic welfare reforms.

    203   Jimbo   2007 Apr 23, 4:36pm  

    The city of Tijuana Mexico had over 300 murders last year. That’s an unsafe city, picking out the projects of Compton to try to draw a parallel is intellectually dishonest.

    Sorry, you are just wrong. What percentage of the murders in San Francisco last year happened in the Hunter' Point/Bayview neighborhood? Bayview-Hunters Point has an infant mortality rate comparable to Bulgaria or Jamaica.

    "A lot of these kids don't get to go out of their houses at all when they get home after school because of the danger," said Tareyton Russ, principal of Willie Brown Academy elementary school, which draws children from the area with the greatest child population increase. "And that's the best thing for them in a lot of cases."

    Overall San Francisco had 96 murder in 2005 and 25 of them were in Bayview. 25 out of a population of 10,000 residents is a murder rate of around .25%. This has been constant for the last few years. And Bayview is not even as rough as many other poor neighborhoods. The Tijuana population is 1.6M and if it had 300 murders as you state, then the murder rate is .018%, less than 1/10th that of Bayview!

    25M Americans used soup kitchens or food banks last year. This is hardly a nation that is feeding its poor well. And people starve in America all the time, granted most of them (all of them?) are mentally ill, but 38M Americans are "food insecure" meaning they one paycheck away from standing in the soup kitchen line.

    Just because you don't know any poor people doesn't mean that it isn't dangerous and difficult to be poor in America.

    204   Jimbo   2007 Apr 23, 5:00pm  

    Oh, by the way, the figures for Baghdad are 1800 civilian deaths a month, according to the Baghdad government. That works out to 22k a year, in a population of 9M, that is .25%, the same as Bayview-Hunter's Point.

    205   Different Sean   2007 Apr 23, 8:02pm  

    Before you put up a bunch of poop DS, you may want to visit any emergency clinic or ward in Mexifornia and take a head-count of three main things: “Of those of you without proper insurance…. 1) Who’s an illegal invader?, 2) Who is on some form of state aid?, 3) Who has illegal drugs in their system?.” Ask them three questions and 90% of the “uninsured” will be counted in any Mexifornia medical place.

    well, your health care system is currently ranked 37th in the world for quality, based on the insurance system. the reason is probably that enough lame-brained americans like bap think enough crazy thoughts that it will never be reformed in line with the preceding 36 countries to improve the quality. the HMOs and big pharma need lots of people like bap to keep the current system chugging along nicely, thank you very much....

    why not visit some other country and see how it works, bap -- hilary clinton did... it costs half as much in some countries to deliver better quality care with better universal outcomes than in the US through a tax-based citizenship guarantee system... and bap wants to make it *more* regressive... maybe slip to 100th or so, in line with sierra leone...

    MEDICAL EMERGENCY / Neglected for a decade, health care is metastasizing into a new crisis / Live sicker, die younger: The plight of the uninsured

    206   Different Sean   2007 Apr 23, 8:05pm  

    you should also read the bible more to help you get away from those commie-lib notions like 'love thy neighbor' -- tough love obviously works best... and the tougher the better... hanging, drawing and quartering is the toughest love of all...

    207   Peter P   2007 Apr 24, 4:06am  

    well, your health care system is currently ranked 37th in the world for quality, based on the insurance system.

    That is way better than median! I think there are more than 150 countries in the world. :)

    208   Peter P   2007 Apr 24, 4:11am  

    I definitely think we need to reform the cost structure in the health care system. At the present level, there is no hope of universal health care getting political acceptance.

    Sean, unlike in other countries, many liberals (not all, I know many good-hearted liberals too) here just want to use other people's many to pay for what they think should be free. They will cry for more welfare but they will refuse to pay an extra dime.

    209   Tesh   2007 Apr 24, 5:14am  

    Answering the original thought about income disparity, I figure there's no possible way that anyone, regardless of what you do for society (the measure I use for salary calculation), is worth a hundred-plus times more than anyone else. I figure at most a scaling factor of three to five. Whether that means minimum and maximum wage (or other) systemic legislation or genetically engineering greed out of the race, I'm not sure.

    210   Peter P   2007 Apr 24, 5:54am  

    I figure there’s no possible way that anyone, regardless of what you do for society (the measure I use for salary calculation), is worth a hundred-plus times more than anyone else. I figure at most a scaling factor of three to five.

    Again, "worth" is not a meaningful word. The only question: whether having the disparity is good for the society as a whole.

    211   Tesh   2007 Apr 24, 6:40am  

    How about this, then. There is no contribution that an individual can make that would cause such an impact on society that their compensation should be astronomically larger than anyone else.

    And no, the disparity is not "good" (if that word has any meaning) for society. It breeds hatred, envy, lust and pride. If those mean anything.

    212   LowlySmartRenter   2007 Apr 24, 6:53am  

    Agreed Tesh.

    I'm reminded of the disenfranchised young men in polygamous communities. There we see the results of economic disparity, artificially forced by polygamy. These young men can never have even one wife, and of course, no children. They are left to live on the outskirts of town without any means for or access to economic growth. They are ripe for terrorists groups, looking for young men who have nothing to live for, nothing to lose.

    It's a dire example of how disparity can play out. I'd prefer a society where the rungs of the ladder are maintained, so that anyone can climb (or fall) freely. Knock out the middle rungs and we create a subculture of throw aways.

    213   Malcolm   2007 Apr 24, 10:23am  

    Hi Jimbo,
    Your points are very well taken, and at least paint a picture of the very worst in this country. Your stats are good, I would point out again, that yes you can go to the very worst neighborhoods and get a stat equal to a war torn country's overall rate. Iraq has some safe, and some very unsafe areas as compared to a gang infested neighborhood. As a society it should be a goal to have no areas left like this, but you have to eventually conceed that these situations are so small that statistically they aren't significant, and perpetuate an exageration when these small hot spots are held up as the example of what a typical poor neighborhood in America is like.

    214   LowlySmartRenter   2007 Apr 25, 3:38am  

    "Here's what's really going on behind closed doors in affluent America"

    http://tinyurl.com/27rkhb

    215   Jimbo   2007 Apr 25, 10:52am  

    Fair enough, not everyone lives in such dangerous neighborhoods, but the poor in America live lives that are vastly more dangerous than the poor in any other 1st world country. Sure, it is better than Tijuana, but that is hardly something to aspire to.

    The poor in America generally are fed, generally are housed and live in less violent regions that most of the world's poor and this is something to recognize. But compared to other developed nations, we are doing badly, that is my point.

    216   Tesh   2007 Apr 26, 3:09am  

    Cable TV and cell phones are the new drugs of choice, Bap; the new addition to the cigarette and beer stable. If people knew how to prioritize their money (and stifle addictions), things would be different.

    217   anniecoyote   2007 Apr 26, 3:18am  

    Harm,

    I live in Bucarmanga, in the state of Santander. Been pretty much all over the country...not the jungles or southern half however. Lots of time in Bogota. I have been there 1 1/2 years. My Colombian husband and I bring US & European paragliding tourists there to fly and see the country. Actually, at this moment, I am back in California for about a month, to visit family and do some business.

    218   Tesh   2007 Apr 26, 9:06am  

    He who makes the laws? He who has the most money to buy the courts?
    :shrug:

    Or are we talking about ultimate laws of theology and such, because any time these things are left to people, they will be botched.

    219   Tesh   2007 Apr 27, 2:16am  

    Not unnoticed, nor ungrieved, Sid. It's one of the biggest mistakes in US history.

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