Income Inequality

Yesterday was Martin Luther King, Jr. Day.  For some reason a lot of bloggers decided that was the perfect time to rail against income inequality.  Oxfam came out with a report last week stating that the world’s 85 richest individuals have as much wealth as the bottom 1/2 of humanity combined.  The Guardian published an excellent article detailing a lot of the facts.  I am trying to understand why income inequality is bad.  It seems to me that a lot of people are looking at it as a zero sum game.  That is, if rich people have more, then poor people must have less.  Josh Barro explains it in this video I pulled from Andrew Sullivan:

Conveniently, he describes the assumption that I think is incorrect, in general.  That is, the size of the economy does not stay the same over time.  In addition, he talks about how this is politically an issue for those who fail to address it.   Really, I think this means that income inequality is bad because then more people feel bad about what they have.  Whether it is good, bad, more, less, or whatever.  It’s less than Mr. Big Money.  So income inequality is a problem of human nature and perception, not a real issue of need (that is, need is a separate issue).

I have also read several posts describing income inequality in the US.  I will try to find them and link them, but apparently all of the income gains since around 2000 have gone to the top end of the income scale, with the bottom large percent (like 90%) stagnant.  I would like to see that chart including all benefits, as I believe health care that is a benefit not paid as income would increase that actual total compensation for the bottom 90%.  Maybe I’ll see if I can make that chart on FRED.

Andrew Sullivan posted about why income inequality is bad back in November:

I read several pieces today that, together, were a somewhat grim insight into the acute social and economic crisis of our time. The first is a challenging and persuasive historical account by historian Peter Turchin of what Aristotle first observed in The Politics. The graphic (by Jennifer Daniel) is a crude but powerful summary of an historical pattern we see again and again in human history:


In this cycle, I’d say the US is roughly in the elite fratricide moment, which means very choppy waters ahead. Turchin’s thesis is basically the following: the eternal tension between liberty and equality has a recognizable shape in historical and economic cycles, which are perhaps better understood today. The optimal moment for successful societies is when the middle class dominates, where political institutions reflect a mass interest in governing the society well, because everyone feels they have a stake (so more people than usual want and need collective success), and because they share some basic commonalities in experience, and so can find a way to compromise.

When societies grow more unequal, commonalities fray. Wealth accumulates among the few, who begin to see the polity as something to be used for private interests rather than engaged in for public-spirited reform. But as wealth at the top grows and grows, and as more and more of the middle class attempt to become part of the super-wealthy club, the loss of economic demand among the increasingly struggling majority puts a crimp in the social mobility of the wannabe elites. So we have a wealth glut: hugely wealthy one-percenters and a larger group of under-employed or unemployed professionals. It’s from these disgruntled elites that you will get the tribunes of the new plebeians. And they will be guided by revenge just as destructively as the top one percent is now guided by naked self-interest.

What disappears in this moment of the cycle is the lubricant for all successful polities: a sense that we are all in this together. When that crashes into economic stagnation, and the fight for a slice of the pie gets even more frenzied, you’re in for some serious social unrest – which will either lead to a period of reform or to further social and economic disintegration.

So do we have elite fratricide? When a Harvard and Princeton alum like Ted Cruz emerges as a wildly swinging wrecking ball for the entire global economy, you bet we do. When Republicans up the ante on judicial appointments by trying to prevent a president from filling any vacancies and when the filibuster has become much more common than, you know, actual legislation, ditto. When the response to that is to scrap one of the last remaining mechanisms for legislative balance and compromise, ditto. When a major political party offers nothing on a major social and fiscal problem, like our grotesquely inefficient form of socialized medicine, but is content merely to attack, attack and attack the law of the land and sabotage it, ditto. When a former Tory prime minister breaks ranks and accuses his elite successors of ignoring the impact of growing social immobility, ditto. When news channels decide to become propaganda channels, and when there are close to no major media institutions retaining trust as neutral arbiters of our national debate, ditto. When elite sister breaks with elite sister over an appeal to the masses, ditto.

You can probably add a whole litany of additional data points yourselves. But to my mind, what matters now in politics is finding a party or a candidate that recognizes this core problem and tries to ameliorate it.

Obama was and is such a person, but the response to his moderate reforms shows how deeply intractable this crisis now is. It may have to get worse before it gets better – and that may mean a dangerous period of unrest and dysfunction. But the challenge remains: how do we reverse this centrifugal force on the polity, especially when it has been put on steroids by the globalized economy? At some point, someone among the sane Republicans and sane Democrats is going to have to run on a robust and aggressive platform of reform that can – yes – begin sharing the wealth and tackling the entrenched and destabilizing perquisites of the super-rich, as well as tackling the populists who engage in selfish and dangerous exploitation of the resentments of our time.

For now, though, we actually have a figure in the middle of this polarizing vortex still straining to forge a middle ground. He’s our president. If he doesn’t succeed, someone else more radical will follow him. That’s why I, as a conservative, continue to support him. It’s time to leave ideology in the dust and see our predicament with unblinking eyes. It’s time for a conservatism that can grasp the necessity for reform – despite the ideology that made sense thirty years ago but has obviously become incapable of adjusting to our time – and build a new majority from the center on out. That small-c conservatism – the type that cares about the coherence and stability of the polity above all other considerations – can take shape among Democrats and Republicans. If Obama cannot succeed in it, more radical options will present themselves. But if real reform cannot find an anchor in this society anywhere, we will all face the consequences.

I find a lot wrong with that post, starting with pretty much all of the assumptions, but it is AN EXPLANATION of why income inequality is bad.  (oh, and don’t get me started on Obama.)

But really, I don’t like linking it to MLK.  That just seems wrong to me.  What he did was so monumental, that now, to link it to the scourge of the day, seems diminishing.  Just got this in an email from Marriane Williamson, who I love:

Dear Susan,

Today we honor as a nation the life and work of Martin Luther King, Jr. It is a day when all of us have the opportunity to remember the extraordinary difference one life can make.

Around the country, there are those who are performing works of charity and national service to mark this day. But in truth, Dr. King was not simply about alleviating the pain and suffering of individuals; he worked to counter the huge political and economic forces that kept entire groups of people shackled by injustice.

If Dr. King were alive today, there is no doubt he would be a tireless soldier in the battle against income inequality. For the forces of oppression that he so eloquently called to account have not disappeared in the decades since his death. Today, it is up to us to continue the work of protecting and fostering justice in America.

The Civil Rights movement, through which Dr. King applied the philosophy of non-violence to the struggle for Civil Rights in the 1960’s, was an example of what happens when groups of Americans forge the political power to channel the power of the heart. According to Dr. King, the desegregation of the American South was the political externalization of the Civil Rights movement — but its ultimate goal was the establishment of the beloved community.

Today, it is time once more for the American people to address a fundamental gap between the compassion and decency of the American people and the policies of our government.  For we are experiencing today a historic, dangerous swerve away from our ethical, democratic center – and in the spirit of Dr. King, it is up to all of us as citizens to ensure that our country, in his words, “live out the true meaning of its creed.”

For over thirty years, the American government has been systematically siphoning off large portions of the material wealth of our country — through banking, tax and trade policies — into the hands of a relatively few Americans. In addition, many who have promoted such policies have promulgated a public relations scheme to demonize those who struggle in America, creating the caricature of everyone having a hard time as merely lazy “takers” who are parasites on the U.S. economy. In the words of Dr. King, “If they give it to the poor, they call it a handout. If they give it to the rich, they call it a subsidy.”

America needs a new pro-democracy movement, once again creating a political vessel for the highest yearning of our hearts. May we, as today’s stewards of American democracy, do the work necessary to take America back to its soul. Not all of us are historic figures like Dr. King. But all of us are imbued with the same spirit of God, and the same rights and responsibilities as Americans.

Dr. King is not here to address income inequality and economic injustice; but we are. He is not here to address to scourge of child poverty in America; but we are. He is not here to address the injustice of our high mass incarceration rate; but we are. He is not here to resist America’s corporatist and militarist leanings; but we are.

May Dr. King’s work continue, in our hearts and in our country. May a renewed passion for  the ideals of democracy rise up from our depths and spread its blessings far and wide.

With love,

Marianne Williamson

Now, I am certain that she is right about MLK and poverty.  Yesterday I read an interesting post about his ideas to eliminate poverty through a guaranteed minimum income from the government (possibly with a work requirement attached).  However, that is a far cry from eliminating income inequality.

She has conflated income inequality, poverty, and crony capitalism.  This is the common problem.  Crony capitalism, regulatory capture, whatever you want to call the wholesale ownership of the political process by the large corporations, is an issue all on its own.  Even the MLK quotes support that he saw this issue as its own problem, not a way to fix some other issue.

Poverty is also an issue all on its own.  (here’s a good post from Noah Smith at Noahpinion blog).  That’s the issue MLK was interested in solving.

Sorry this is not a very good post but I just wanted to get some of this out there all together.





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