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Wealth in the US - Synchronicity swirls and other foolishness

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November 28th, 2006


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01:10 pm - Wealth in the US
If you either doubt that economic inequality in the US is vast (unlikely for folks on my f-list) or occasionally argue with conservatives libertarians, or other willfully blind idiots who deny this, take a look at this series of disturbingly informative charts. Some of the results were even more extreme than I had thought. The US is a plutocratic cesspool of greed. I'm fairly certain that the recent election and the changing mood of the populace will help reduce the influence of the fundys and result in far less religious and social oppression. However, both parties support the current plutocracy equally, since they both greatly benefit from it. I'm not certain how it's possible to change this, but it desperately needs to be changed. Information like this is why I'm a socialist who dreams of this nation adopting Euro-style democratic socialism. I don't think this inequality needs to be (or practically could be) totally eliminated, but dear gods the current level is disgusting and should be reduced by at least a factor of 10-50, making the US far more like other first world nations.
Current Mood: angryangry

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Comments:


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From:antayla
Date:November 29th, 2006 06:47 am (UTC)

Going about redistributing wealth...

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I think so too (really, I've always thought so... it's hard to have the best sort of world when power is concentrated in the hands of a few) and that's why I'm starting that worker-owned staffing company. You don't redistribute wealth overnight y'know :). I think the concentration of wealth has less to do with greed and more to do with a system that discourages people from being leaders and entrepreneurs (the current "employment status" and business regulation systems being notorious for stifling underdog competition... I know that my biggest trepidation in my entrepreneurial studies is worrying about legal details.)

Looking at wealth another way: the concentration of wealth is essentially a system of "who has earned the right to coordinate society?"... people earning that right by managing the provision goods and services that people need or want to buy. Granted, such power is only maintained by continuing to provide people with stuff that they want; refusing to listen to the market is the surest way to loss one's ability to manage wealth. Management is a SERIOUSLY difficult job, managing motivations and incentives; people who can keep a company or any organization together long enough to serve society have my deepest respects.

The I think the trick of redistribution is to approach the issue from individual valuation rather than attacking the people at the top (bottom?) of the heirarchy for giving people what they want :P. In order for society to change, SOCIETY must change... it isn't really the fault of the people who find themselves in the position of embodying society's aggregate values. Those at the "top" would lose their power overnight if society decided to move in a different direction overnight. But we won't. We first have to prove there is a better system for the provision of goods and services than the current system, and such changes tend to be incremental and cautious... meaning, it has to start from where we are at and move to where we want to be.

(I'm going to cross post this reply to my journal...)
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From:jonathansfox
Date:November 29th, 2006 10:07 am (UTC)
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If my parents didn't have home equity, my mom would have negative net worth, even though she makes nearly $100,000 a year and can afford linen napkins. People are used to looking at income charts; unless you know what you're looking at, assessing net worth makes 20 year olds look like impovershed bums and causes even relatively well off folks who just happen to prefer to rent and not worry about investment look poor.

Still, if you want to correct this statistical shocker to get back in line with your expectations, a few things that would help would be to: 1) ensure the availability of quality childcare assistance to the poor, requiring only proof of employment, 2) ensure a minimum wage that is workable for parents, not just singles or couples, 3) create a culture that essentially eliminates unsecured credit for the poor, and 4) encourage home ownership even for the poor, discouraging renting as a long-term solution.

The problem (and strength) of using wealth as a measure of economic prosperity is that it reveals not just the things a person has, but also their debts. So it brings to light the fact that the bottom 20% or so has negative wealth, but obscures reality if taken as an implication that the bottom 40% of Americans are in possession of just $1000 worth of "stuff". On the contrary, the seemingly dramatic 76% drop in wealth for the bottom group given is an artifact created by the near-zero value in both dates. The fact that there was a fall at all (of around $3000) is a product of greater availability of unsecured credit and more irresponsible use of it, not a drop in assets.

The United States has unusually high inequality, but if we had ten times or fifty times less inequality we'd be a extremely strange first world conuntry. The difference is not anywhere near that huge. One third less, not ten or fifty times less, would bring us in line with France, for example. Even there the top 10% has half of the wealth.

Measuring net worth to assess inequality helps to make the case for multiple tax brackets, because it illustrates the way that income levels have an exponential effect on financial security in the long run. It helps people to understand that having double the income actually means a lot more than double the financial well-being when taken over time and compared with required expenses. But it seriously abuses the statistics to make it sound a lot more shocking than it is, and a lot more outrageous and unusual.

A lot of wealth inequality is created by the difference between the 18 year old union worker and the 38 year old union worker at the same place. Their incomes are similar enough, but their wealth is incomparable.
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From:heron61
Date:November 29th, 2006 09:29 pm (UTC)
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The United States has unusually high inequality, but if we had ten times or fifty times less inequality we'd be a extremely strange first world conuntry. The difference is not anywhere near that huge. One third less, not ten or fifty times less, would bring us in line with France, for example. Even there the top 10% has half of the wealth.

Admittedly, 50x is too much for wealth, but it makes perfect sense for wages, given the vast wage gap in the US compared to actual civilized nations (most of which have literally between 1/20th 1/50th the wage gap in the US). OTOH a ten-fold decrease in wealth inequality would not be a bad thing at all, the top 1% would have 3% of the wealth in the US, rather than 1/3rd and 4% of the investments.

It's also worth noting that this variation is by race. When adjusted by age, blacks people have (on average) 1/8 the wealth of white people, the links are broken to the data I read about this, but the figures looked both impressively well researched and deeply. disturbing.
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From:jonathansfox
Date:November 29th, 2006 10:10 pm (UTC)
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Analyzing inequality by comparing CEO wages to blue collar wages is like declaring fruit to be green because Kiwis are green. Hardly anyone, even among savvy wall street financiers, doesn't criticise executive compensation in this country. Issues like ethics and levels of compensation for corporate leadership mean as much or more to rich investors as they do to others, and make a bad argument to use against the entire system. In reality, income inequality is lower than wealth inequality, as the top 10% in income get around 40-45% of the income, while the top 10% in wealth control around 70%. Remember that these are not always the same 10% -- my family is an example of high (top 5-10%) income, but relatively low wealth to show for it.

If the top 1% in wealth controlled 3% of the assets, you could conclude we were living in a strange egalitarian "paradise" where things like home ownership, retirement savings, student loans, state lotteries, and private businesses didn't exist.
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From:heron61
Date:November 29th, 2006 11:00 pm (UTC)
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If the top 1% in wealth controlled 3% of the assets, you could conclude we were living in a strange egalitarian "paradise" where things like home ownership, retirement savings, student loans, state lotteries, and private businesses didn't exist.

I'm a socialist, the obvious answer from my PoV is for the state to take care of retirement, education, healthcare... all paid for with taxes, just like the systems that work exceedingly well in almost all other first world nations and a fair number of third world nations.
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From:jonathansfox
Date:November 30th, 2006 07:42 am (UTC)
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I guarantee you that you're not going to give me examples of successful first world economies where student loans don't exist, nobody saves for retirement, private homeownership is illegal, and people can't make billions of dollars through entrepreneurship.

Take Sweden, where higher education tution is free for even for international students... and a college student can expect to take out thousands of USD worth of student loans each year just to pay living expenses. Americans might even accuse them of having "partially privatized Social Security", where a government program oversees individuals investing in privately managed funds, such that higher income people save more and build up much more wealth over time than those with lower incomes.

Despite being the poster child for the welfare state and government taking care of people, and one of the countries with the least income inequality, Sweden's level of wealth inequality is even greater than ours. The median wealth among our bottom 40% is around $1000, but theirs is below zero.

What is the issue with inequality, anyway? Do you seriously care how big a fence your neighbor has? To me, the question is not whether he is "too rich", but whether there is sufficent class mobility, and whether his wealth causes problems for others. It rarely ever does. Even among mildly left-leaning economists, inequality is generally seen as the necessary sin of a dynamic economy. You can analyze many countries over time to find this to be the case historically.

The United States may have more income inequality than most countries, but we also have a bigger pie to begin with, and these are not unrelated. That is not to say that high inequality is a virtue, but it should only be treated as a problem if it approaches extreme levels that threaten to create unrest. So long as people maintain a strong committment to social justice, equality of opportunity, and philanthropy, that won't be a problem. America is not perfect in this regard, and we can always do work to improve, but Europeans' relatively fatalistic views on merit are not the examples we should seek to emulate. Inequality is far more a problem if people come to believe that fate left them where they are.
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From:jonathansfox
Date:November 30th, 2006 09:52 am (UTC)
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By the way, I hope I don't come across as saying "the poor don't matter". The poor do matter, but a lot of times what looks like poor people suffering is just the transitory and not altogether bad pattern of a relatively stable number of young people and college students who haven't had an opportunity to grow at any given time. What really doesn't matter is the ratio of poor to rich, and that's because it's the rich who don't matter. They're rich, good for them. Let them be rich as long as they don't hurt anyone else. Actively trying to prevent people from getting rich is counterproductive, because it penalizes some of the hardest working and most visionary people, as well as discouraging investors and capitalists from trading in the ownership of private companies, something that forms a key part of the backbone of a thriving economy that helps everyone. Without investors and visionaries, you wouldn't see companies like Google, which provides tons of free of charge services that anyone with even the most simple internet connection can take advantage of. The founders of Google are multibillionaires, but who suffers for this? That money is just an estimate expressed through the amount other relatively wealthy people would likely voluntarily pay them for the stock in the company they founded, were they to decide to sell it. No backs were stepped on, and no little man was put down, to make them who they are, among the richest people in the entire world.

If everyone were to try to convert their net worth into cash simultaneously, every dollar that is measured in stocks would shrink tremendously, and you'd see that the actual distribution of material wealth is not nearly that dramatic. Stocks would go from speculative to merely the net value of assets and debts of the corporation, which would be liquidated at far less than the value of the corporation as a whole, which is valued for its economic potential, not just its material wealth.

I'm not mitigating or ignoring the concerns of those who don't have wealth -- I'm just stressing that it's my view that this isn't something that really impacts them. There are times when inequality can be caused by abuses by companies, but these are considered market failures that economists generally hate with a passion and try to find ways to mitigate or resolve. The debate is about what is or isn't a market failure. Libertarians seem blind to them, but most people aren't, and understand that the environment and monopolistic control are places where capitalism collapses like a bag of bricks unless the government does something. When this isn't happening, our efforts to deal with inequality should be focused on ensuring that the poor have every opportunity (things like education, equal rights, child nutrition at a minimum) and incentive (avoiding excessive means testing in welfare, ensuring livable wages) to climb the ladder, and enforcing good laws to make sure that nobody pulls it up behind them on the way up.

Well, that and letting the government skim huge inheritances, which are not in keeping with the spirit of equal opportunity. I can understand the point of view of people who oppose the estate tax, but disagree with them. To paraphrase Warren Buffet, it's fine to leave your kids enough money to do anything, but not enough to do nothing.
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From:jonathansfox
Date:November 30th, 2006 09:58 am (UTC)
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When I say the ratio of poor to rich doesn't matter, I mean the relative wealth of different parts of society, not how many people are truly poor relative to the number of people who are truly rich. That's a bit more meaningful than the raw ratio of wealth between the groups.
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From:kitten_goddess
Date:November 29th, 2006 05:28 pm (UTC)
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Having some kind of national health care system - any kind, it doesn't matter what - that covers EVERYONE would be a good start. Yes, I know that means higher taxes.

National health care by itself would go a long way towards reducing the inequality in our society. Currently, only the wealthy and those lucky enough to have affordable health insurance through their jobs are OK. The rest of the people either do without health care or use the emergency room for routine visits. The former is an economic drain due to lost productivity due to more sickness among the uninsured, the latter is a more obvious cost that gets passed on to the taxpayers. Having a national health care system would get rid of the latter cost, since there would be no more uninsured, and cut the former considerably. It's a win-win: money is saved and quality of life is improved.
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From:heron61
Date:November 30th, 2006 10:05 am (UTC)
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One of the more disturbing facts about globalization I recently learned is that more US corporations are having tech support and other middle-class jobs done in nations like Pakistan, both because wages are lower and because Pakistan (a relatively poor 3rd world nation) has national healthcare, and so the corporations do not have to pay for any healthcare or health plans for their workers. That Pakistan has this and the US doesn't is a vast and horrid disgrace.

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