Income inequity has been in the news of late; disparity is increasing. Jared Bernstein, of the Economic Policy Institute, wrote of this in, “The Catch-Up Economy.” Paul Krugman, a writer-economist for the New York Times shared his views in “Left Behind Economics.” Economics Professor J. Bradford DeLong comments on the subject. However, it seems to me that the views of these learned economists are limited. While assessing the statistics, I think experts miss the substance, what lies behind simple “economic” causes and effects.
For years, scholars have discussed whether the situation has changed or remained the same. They discuss cause and effects. Intellectuals say the middle class is shrinking. The prosperous are not growing capital as expected. The “super-rich” are becoming wealthier. Academicians and regular Americans alike wonder, what are we to do?
Welfare is reformed and the results are devastating. Proposals are submitted to increase the minimum wage. Yet, this solution was too little too late. It was also tied to amendments that would ravage federal revenues and thankfully, or not, the measure did not pass. People ponder the discrepancy between rich and poor as though it were unusual; however, for me, this subject is not a novel one.
It has been on my mind for as long as I can remember. I was born into a household of means; however, the family that cared for me, the people I felt closest to lived the inner city. I spent much time traveling from one neighborhood to the other. The disparity was striking. As a child, I began to theorize, what caused such a discrepancy. Why were the rich so prosperous and the poor so impoverished? Why did they not intermingle freely?
Being intimately a part of two very different worlds simultaneously, my mind was stimulated; questions flooded my reality. Fortunately, I was encouraged to think about my concerns and ask of these. My earliest memory was of the streets, which ones were used when and by whom. I was well aware that freeways were the preferred passageways for the affluent. Expressways allowed for a free-flow of traffic. There were few if any visual distractions. The highways were walled off from the city. Slums were not seen; nor were those living there heard from. As the affluent passed through town, all was a blur.
Those with lower incomes were more likely found on the slower urban streets. I often heard how dangerous the metropolitan thoroughfares were. Yet, I played on those avenues when with my second family. I lived there for days at a time. People were always pleasant to me. There was a sense of community in these ghetto boulevards. Still, the well-off avoided these roadways. I concluded the rich did not wish to see the poor. They did not want to be reminded of what they had created and allowed to flourish.
The moneyed preferred to believe that all were thriving, just as they were; thus, they created a world that allowed them their beliefs. However, in truth a large portion of society was barely able to survive. In fact, I think the affluent knew this, and purposely, conveniently chose to ignore it. They knew that they had imposed their reality on the poorer public in order to prosper.
The rich understood they needed the poor to serve them. A less-well-informed, undereducated, underprivileged population could and would meet the needs of the affluent. Those born with silver spoons in their mouths trusted that they would associate with the proper people. They would be groomed, breed, and grow greater. The rich would learn how to build empires and indeed, they have.
It is my contention that the most affluent among us centuries ago established a system that they knew was flawed; nevertheless, it endured. I think, the idea of scarcity, supply and demand breeds a world divided. This economic theory presumes there is only so much to go around; resources are limited. Therefore, those that have, horde, and those without, want. All are dissatisfied, thinking there is never enough, though in truth, there is.
Man creates deficits and depletes resources; nature replenishes continually.
For the most part, the poor have been unwittingly satisfied to just pass. In earlier eons, the poor and middle class were not punished so severely for their station. There was a time when those of lesser means still had hope and some were able to do well and move out of poverty, though their numbers were always kept in check.
A modicum of security, with the potential for limited growth quelled the masses. As a consequence of the freight experienced during the Great Depression Americans embraced the approach of President Franklin Delano Roosevelt. Even the wealthy were willing to accept the initiation of Public Work programs. More people were able to have a scrap of safety. After all, “The only thing we have to fear is fear itself.”
As revealed by Journalist Teresa Tritch in The Rise of the Super-Rich,
In post-World War II America, between 1947 and the early 1970’s, all income groups shared in the nation’s economic growth. Poor families actually had a higher growth in real annual income than other groups.
Still, they remained humble and subservient. Most felt well taken care of. Businesses offered benefits, and the government was a supposed friend, or so it seemed. Employees were loyal to those that served them, not realizing, in truth, they, the laborers were servicing the master. For without a working force there was no wealth for the entrepreneur.
In those post-World War II years, labor and productivity increased. Workers produced more materials. Corporations were generous with their profits. The economy grew and entrepreneurs were willing to share. Actually, the government demanded this.
Government policies worked to ensure that productivity gains translated into more pay for Americans at all levels, including regular increases in the minimum wage and greater investment in the social safety net . . . Full employment was also a government priority.
Fair wages, generous salaries, and reasonable benefits were given to employees. Laborers were recognized for their worth. A happy worker is and was a good worker. A satisfied staff would serve the customers well. The businessmen and women would benefit; corporate owners would reap the greatest rewards.
In those years, unions were a driving force. Workers had bargaining power. Of course, that was before the Reagan reign, and prior to his presidential dictums, those that promoted union busting.
Then beginning in the
mid-1970’s until 1995, the trend reversed. The gap between the rich and poor widened at a rapid clip. The upper echelons ?” generally the top 20 percent of American households ?” experienced steady gains, while families in the bottom 40 percent were faced with declining or stagnating incomes.
Once again the planets were aligned, or at least an ancient economic theory was.
For centuries, there was a well-known belief that twenty percent of the population owned eighty percent of the wealth. In 1906 one man, Italian Economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of dollars that he observed within his own country. Later that code would be named the Pareto’s Principle. This principle presupposed that there was only a given amount of assets. These limited treasures must be divided among the masses. However, because the supply was small and the rich already retained much of the wealth that was, there was little leftover for those of lesser means. As the population increased the prosperous became more so; they understood the rule of 72.
This canon is evident in recent reports.
Rich people are also being made richer, recent government data shows, by strong returns on investment income. In 2003, the latest year for which figures are available, the top 1 percent of households owned 57.5 percent of corporate wealth, generally [realized as] dividends, and capital gains, up from 53.4 percent a year earlier.
The Center on Budget and Policy Priorities, a Washington think tank, compared the latest data from Mr. Piketty and Mr. Saez to comprehensive reports on income trends from the Congressional Budget Office. Every way it sliced the data, it found a striking share of total income concentrated at the top of the income ladder as of 2004.
• The top 10 percent of households had 46 percent of the nation’s income, their biggest share in all but two of the last 70 years.
• The top 1 percent of households had 19.5 percent (see graph).
• The top one-tenth of 1 percent of households actually received nearly half of the increased share going to the top 1 percent.
Whether we speak of centuries past or the present, the poor continue to pound the pavement. They were, and are, searching for their lump of salt.
a Calvinist value emphasizing the necessity of constant labor in one’s calling as a sign of personal salvation. Protestants beginning with Martin Luther had re-conceptualized work as a duty in the world for the benefit of the individual and society as a whole. The Catholic idea of good “works” was transformed into an obligation to work diligently as a sign of grace.
However, few noticed that the most well-off worked little. They had and have servants, slaves, and subordinates. For many of the moneyed, wealth was and is handed down. The truly well-to-do worked and labor little; yet it was believed and thought true today, they are superior and certainly would be well received at the Pearly Gates.
It was and is the majority population, the masses that labor diligently. The poor and the middle class hope to get ahead. At least they yearn to stay solvent. The middle and lower classes sweat, they slave, they survive, and looked forward to salvation. They do this while the wealthiest continue to reap greater gains from their toil [capital gains.]
It seems obvious that the populace has adopted a misleading notion, that there is only so much to go around, or they believe that they must pay their dues before they can prosper. It seems to me that people, for the most part accept their station, and expect others to recognize theirs.
Those of color, minority races, ethnicities, or creeds rarely are given opportunities to excel; nor do they truly and deeply believe they will be able to do so in a society such as ours. Individuals in the middle, as few as there are nowadays, are gratified when they have enough. They expect little more than meets their needs. They have been taught not to crave more than creature comforts. They learned their lessons well. The wealthiest among us are the masses mentors.
In 1906, Italy, and in America today, I think poverty is imposed. Scarcity is supported; the idea of abundance for all is avoided, intentionally.
I have actually heard many prosperous persons speak of their need and desire to keep the poor, poor. Thus, I present my personal theory for your “consumption.” I think until we truly address the issue of attitudes, and more importantly, the perception of scarcity, nothing will change.
I believe this myth was originated within the world to preserve opulence for the few. The fable has long been maintained by “superior” beings. The blue-bloods believe they are deserving. Thus, they deem it just. The poor and impoverished must sacrifice their souls while working in meaningless jobs; they must spill their blood while the rich wage war and they do.
I proclaim the legend is not true. There is abundance for all. Let us look at nature.
If we enter the ocean and exit with a bucket full of water, we will leave no hole. The space we made will be filled instantly. If we scoop up a pail of sand, no void will be visible. Within minutes the wind, the water, and Mother Nature herself will replenish what we took away. Granted we can strip the land naked. Nevertheless, we cannot kill it, though human beings certainly try.
A polluted pond will produce algae in abundance. Life grows. A concrete highway will not seal away the weeds. Look between the cracks. Consider the bugs, the vermin, and viruses. Man tries to kill these; yet, they never truly die. More emerge where others once existed.
You may question my thinking and suggest our limited supply of oil. I offer this. Were it not for man’s spoils, his need to accelerate the depletion/reproduction cycle within his surroundings, the Earth would be replenishing the petroleum supply. Actually, it is. We simply steal from the source before it can create greater resources.
The super rich have created the illusion of scarcity and we all believe it. They have sold society this package of goods and we buy it. Those that live lavishly have created a civilization of consumerism. They need us and we want to be them.
However, contrary to popular belief, I think a world of disparity devastates our social order. I have little complaint for the rich getting richer. I struggle with the poor getting poorer, and the comfortable middle becoming less so. Again, I contend there is abundance for us all.
I invite you to explore. Please take some time to assess life, the real world of plenty, and the artificial world of scarcity. Observe it from an alternative perspective. I ask you to be cogent; are you accepting and expecting less because you were taught, “you should.”
Please witness nature and absorb the wisdom. Watch the plants, the animals, the insects, the water, the sand, and see for yourself. Ponder the prospect. Were it not for the influence of man would resources be in balance, reproducing and reducing only to ensure stability and beauty? I think they would. Oh, what we do and have done. Then we wonder why is there income inequity. We continually create it.
~ You may enjoy discussions on the New York Times article, Real Wages Fail to Match a Rise in Productivity, By Steven Greenhouse and David Leonhardt. August 28, 2006.
• Brad DeLong offers, Greenhouse and Leonhardt on Real Wages and Productivity
• Max Sawicky presents The Poverty of Pedantry
• Mark Thoma tenders Paul Krugman: Wages, Wealth and Politics
Plunge into Poverty, Pass into a Life of Simple Pleasures, or Seek the Land of Plenty . . .
• The Catch-Up Economy, By Jared Bernstein. The Economic Policy Institute. August 22, 2006
• Left Behind Economics; [Op-Ed], ByPaul Krugman. New York Times. July 14, 2006
• Jared Bernstein, Economic Policy Institute.
• The Official Paul Krugman Web Page
• J. Bradford DeLong
• Pulling Apart, A State-by-State Analysis of Income Trends. By Jared Bernstein, Elizabeth McNichol, Karen Lyons. Center on Budget and Policy Priorities and The Economic Policy Institute. January 2006
• Driving Forces Behind Rising Income Inequality: Tracking the Internet Debate, By Brad DeLong, Economist. August 20, 2006
• Welfare Deform — A Sad Anniversary, By Robert Reich, Former Secretary of Labor. August 23, 2006
• Real Wages Fail to Match a Rise in Productivity, By Steven Greenhouse and David Leonhardt. New York Times. August 28, 2006
• The Rise of the Super-Rich, By Teresa Tritch. New York Times.July 19, 2006
• Wages, Wealth And Politics; [Op-Ed], ByPaul Krugman. New York Times. August 18, 2006
• Paul Krugman: Wages, Wealth and Politics, By Mark Thoma. Economist’s View. August 18, 2006
• Rural Oregon Town Feels Pinch of Poverty, By Erik Eckholm. New York Times. August 20, 2006
• As rich-poor gap widens in U.S., class mobility stalls,By David Wessel, The Wall Street Journal. Friday, May 13, 2005
• Protestant Work Ethic. Wikipedia.
• Scarcity. Wikipedia.
• Dividend and Capital Gains Tax Cuts Unlikely to Yield Touted Economic Gains, By Joel Friedman. Center on Budget and Policy Priorities. Revised October 7, 2005
• Pareto’s Principle – The 80-20 Rule. About.
• The Rule of 72, By Joshua Kennon. About.
• Supply and Demand. Internet Center for Management and Business Administration, Incorporated.
• Economics Basics: Demand and Supply Investopedia Incorporated.
• “The Long Tail: Why the Future of Business Is Selling Less of More”,The 98 Percent Rule. By Chris Anderson. USA Today. July 11, 2006
• Richest Are Leaving Even the Rich Far Behind, By David Cay Johnston. New York Times. June 5, 2005