Broad Oak: your emotional support animal

Sunday, July 20, 2008

Inequality

An anonymous spam-rant comment on one of my recent posts claimed that 1% of Americans owned 50% of the wealth, and this was destroying the system. Is it really a problem? I've had a quick trawl for information on inequality.

  • Gini Index/Coefficient of inequality explained here
  • Wikipedia lists countries by inequality here
  • The CIA Factbook gives the Gini Index of the USA as 45 (in 2007), the UK as 34 (in 2005)
  • Increase of USA's Gini coefficient since 1967 here
Here's some relevant articles and posts:

Richest 2% Own Half World Wealth; Bottom 50% Own 1% - UN Report (5 December 2006)
"the richest 1% of adults alone owned 40% of global assets in the year 2000"

The wealth gap is widening again (Daily Mail, 26 June 2008)

Why is the 'wealth gap' a bad thing? (MSNBC says it's not, what matters is opportunity)

Wealth gap widens (CNN, 29 August 2006)
"In the early 1960s, the top 1 percent of households in terms of net worth held 125 times the median wealth in the United States. Today, that gap has grown to 190 times..."

Wealth Gap Is Increasing, Study Shows (ScienceDaily, 9 August 2007)
"The poorest ten percent of families actually had a negative net worth---more liabilities than assets..."

*** Sackerson's Prophet Prize for this: ***
Globalization Has Increased the Wealth Gap (interview with Nobel prize-winning economist Joseph Stiglitz , author of "Globalization and Its Discontents", posted 15 January 2007)
"I think we are in a precarious position. We might be lucky and wander our way through this mess. There is a significant probability, however, that global interest rates could rise. If that happened, households with a large amount of debt would find it very difficult to meet their mortgage payments, and home prices would go down, which would lead to a reduction in consumption. Last year Americans consumed more than their income, something that is obviously not sustainable. The only way they could get away with it was by taking out money from their houses. But if home prices go down, they won't be able to do that any more. So there is a significant risk of a large economic slowdown. And government, by piling on so much debt and having such a large deficit, does not have much room to maneuver."

Why the wealth gap keeps growing (essay by Paul van Eeden, 17 November 2006)
"The fact is that people all over the world are getting poorer -- not because of free enterprise, open markets or globalization but because government created monetary inflation robs them of their living standards. The only ones who can immunize themselves are those with sufficient capital and that is why the rich get richer and the poor get poorer."

14 comments:

John East said...

If the socialist idiots achieved their dream and wealth was magically divided equally to each individual in society, then within a decade 50% of the wealth would gravitate to 1% of the population.

The top and bottom groups in society; the motivated, entrepreneurial, and intelligent; and the unambitious, lazy and dull both get what they deserve.

What we must fight to preserve is mobility from one group to the other.

It's an ever growing middle group, the leftie intellectuals, the Guardianistas, and the chattering classes as a whole who get more than their deserved share. They consume well above the average but contribute next to nothing.

dearieme said...

Hang on. It is implausible that world inequality is increasing while China, India and so on get richer and richer. That must mean that huge numbers of people are now getting living standards that are trending towards First World standards, albeit that it'll take a few generations to get there (if we avoid a worldwide depression).

Wolfie said...

I read the Joseph Stiglitz piece a while ago, yes very prophetic. I have been saying for a long time that Globalization will reduce most of the population to poverty. It also fuels the printing of money in the client nations, which then flows outwards and poisons the producer. Its all inevitable really.

Bugger.

Wolfie said...

DM : Please define "China, India and so on get richer and richer"? Who gets richer exactly?

dearieme said...

I don't know their names but presumably people by the tens of millions. If people at the bottom of the heap in the First World get poorer at the same time, that would be viewed as a Bad Thing by such as I, but Socialists must presumably approve because it reduces world inequality.

SACKERSON said...

Wolfie - you seem to have a clear idea of the operation and consequences of globalisation, money printing etc - could you maybe elaborate this into one coherent piece for me to read?

DM, John: thanks for your comments. I think I agree with John's observation re the trendy middle class. To me it seems that Blair-types want to do well out of doing good: less Mother Teresa, more well-paid chair of a steering group for a charitable government initiative, you know the sort of thing.

Cassandra said...

The idea rests on Rousseau's faulty premise that economics are a zero sum game; in other words there is a pie - a given quantity - and politics is concerned with carving up this pie. Although now economists know better, the Leftist base feels the need to re-affirm the fallacy at least twice a year when one or another "research has found that the rich are getting richer and the poor are getting poorer." Thanks to capitalism, all are getting richer (to date).

Cassandra said...

"I have been saying for a long time that Globalization will reduce most of the population to poverty. It also fuels the printing of money in the client nations, which then flows outwards and poisons the producer. Its all inevitable really."

Wolfie, would like to support Sackerson's request for one comprehensive post with your views, if it's not too much trouble, please. Fascinating stuff...

sobers said...

I was just about to put my thoughts down, but saw John East had beat me to it. Can't agree more.

With regards to whether the concentration of wealth is a good/bad thing, it is really just a function of a free capitalist society. If I am free to start a business that may (if I work hard enough) make my fortune, then I will accumulate more wealth than the average man. Bill Gates is free to become a multibillionaire because he is free to start Microsoft. Equally, unless the state is going to nationalise all businesses on death, I am free to pass on my business to my heirs. It would hardly be in the interests of the state to tax business too hard on death either as that would just lead to closures to pay the tax, thereby reducing jobs, tax income etc etc. So business wealth will always accumulate in the hands of the few - the clever and hardworking, and their successors.

If you don't like it, try living in a Communist state - 1970's eastern bloc take your fancy? Equality of misery maybe. I prefer to take my chances in a freer but less equal world.

Wolfie said...

What you ask is a reasonable request but is still quite a tall order to do justice. It would take a modest sized book to do the subject justice. Others are picking-up on the issues, one by one.

Is the business model flawed?

SACKERSON said...

"It would take a modest sized book to do the subject justice."

I forget who wrote, "I haven't time to write a short letter, so I've written a long one." Go on, please, make the time and write a short piece.

Nick Drew said...

On the subject of prophesy, you perhaps saw the 2006 Taleb quotation on the precarious position of Fannie Mae that I posted here

Lord James Bigglesworth said...

The Gini is interesting but how does it take into account the difference between say Chad and Monaco, where the gap between rich and poor are both insignificant in a different way?

SACKERSON said...

Thanks, Nick.

James: yes, what about economies that aren't all in money terms (subsistence farming etc)? I'm sure the Gini Index is only one, limited way to measure equality, happiness etc.