One of the most disturbing trends in this country is the rise of extreme wealth and income inequality.
As the following charts show, America is rapidly becoming a country of a few million overlords and 300 million serfs.
Unfortunately, this issue has been politicized, which means that people don’t think about the implications of it — they just start yelling.
But extreme inequality is bad for everyone, even the overlords.
Because when inequality gets bad enough, serfs can’t afford to buy products from overlords. This hurts the overlords’ ability to get even richer.
And that’s what’s wrong with the American economy right now. The serfs are tapped out. The overlords are responding by cutting costs (firing serfs), to increase profits. Unfortunately, one person’s “costs” are another person’s “wages,” so this is making the problem worse.
The best way to start reversing our inequality trend is not to increase taxes on overlords and give the additional money to the serfs. That just inflames class warfare and gets people yelling about “socialism.”
The best way to fix inequality is to persuade our overlords that it is in their best interests to share more of their wealth by paying their employees more for their work — work that, not incidentally, is what makes the overlords rich.
In other words, the best way is to persuade companies that it’s better to focus on creating value rather than just profit.
Given America’s current obsession with short-term profit, however, this will likely take a while.
So let’s just start by helping everyone understand just how extreme the inequality in this country has become.
It’s way worse than most people think it should be. And it’s way worse than most people think it is.
The following screenshots are from a video created by a pseudonymous videographer called “Politizane.” You can watch the video here or at the end of this presentation. There’s one criticism of it that I’ll address at the end, but the basic message is correct:
A couple of years ago, professors Dan Ariely and Michael Norton asked 5,000 Americans about wealth and inequality.
They wanted to see what wealth distribution Americans thought would be IDEAL ... and then compare this to the ACTUAL distribution of wealth in America.
To illustrate the findings, a videographer named 'Politizane' reduced America's population to 'quintiles' based on their wealth. ('Bottom 20%, Top 20%, etc.)
This is what Americans THINK inequality looks like: The top 20% have most of the pie, then the rest of the country splits up what's left.
The IDEAL wealth distribution, meanwhile -- the bar on the bottom -- looked like this: A more equal share of the wealth among the various quintiles.
In other words, both Republicans and Democrats think inequality in America is more extreme than it should be.
The REALITY is that the Top 20% of Americans own the vast majority of all wealth in America. The middle class and poor, meanwhile, have almost nothing.
The top 1%, in fact, own more than the average Americans (Republicans and Democrats alike) think that the whole top 20% SHOULD own.
If we divided this $US54 trillion up equally, we would have the dreaded 'socialism.' No one wants that.
What Americans want -- Republicans and Democrats alike -- is this: The top 20% have the most, the middle class have plenty, and the bottom 20% have some.
This wealth distribution, everyone agrees, would provide an incentive to get rich, without resulting in an impoverished life for those who don't.
Importantly, in this IDEAL distribution, the middle class is very strong. This would help drive strong consumer spending.
Here's what this PERCEIVED distribution looks like relative to the IDEAL. The poor are hosed. The rich are doing much better than most people -- Republicans and Democrats alike -- think they should.
So, inequality is vastly worse than most Americans think it should be. It is also much worse than most Americans think it is.
Here's how high the bars for the 2%-5% richest Americans would be if the chart was big enough to fit them.
The richest 1% of Americans, meanwhile, are so loaded that their bar would be 10 times as high as it is possible to show here.
The richest 1% of wage earners now take home 24% of the country's total earnings. This compares to only 9% four decades ago.
Again, here's what people think inequality SHOULD BE compared to what they THINK IT IS compared to what it ACTUALLY is.
Now, there's one point that people who like the status quo say this study ignores: The mobility of Americans throughout the wealth quintiles throughout their lives. If this mobility were very common, it would be a fair point. But it mostly isn't. Most people stay in the same general wealth zone as their parents.
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