How bad has wealth inequality become in the US? Thanks to a video that is becoming viral, a new discussion about inequality has fired up – sadly, just after our election cycle. It takes off from work done 6 months ago by Dan Ariely and Mike Norton, first reported humbly in a simple blog. But thanks to new graphics and explanation it’s lighting up the ‘net in a way not seen before.
As discussed previously, income and wealth inequality is the best indicator of a future slowdown in economic growth around the world. More attention to this problem is certainly a good thing. But the context of how this comes to be and what can be done about it remains elusive. Let’s take a long view and see where the problem came from – and what can be done about it as we work to set up the next period of expansion that comes after the Managed Depression we are in now.
Like any good story, we should start in the middle with the video that is making its way around the ‘net and firing up the discussion:
How did it get this bad? Whenever I discuss with Democrats the way all of the recent bubbles converged into a Managed Depression which defines this business cycle, starting about 2001, they invariably state that they see the problem starting back much earlier. The fault is usually assigned at the start of the previous cycle, in the excesses of the Reagan administration, which dates to around 1983. That’s fair enough, as the seeds of the downfall are often sowed in the previous cycle. It also follows logically that we won’t have a robust expansion in the next cycle, the economic Spring, until we restructure ourselves past this.
But as useful as this discussion of inequality is, we are far from talking about solutions. Changing our tax code so that it falls more heavily on the wealthiest is difficult enough in this political climate, but even that doesn’t address inequality directly. The only thing that would make a real difference is greatly enhanced economic opportunity for everyone. What that means to us through the next phase has yet to be defined.
The problem is generally a social problem. Why on earth have stockholders tolerated executive pay being as high as it has? We have had very public rumination about how Apple’s pile of cash could be redistributed to shareholders, but we have yet to have a strong movement that targets pay to the top of the company as a similar theft of shareholder value. Videos like this become useful when people of all kinds start to demand real change – and many of the levers of that change are already in our hands.
But beyond that a genuine redistribution of wealth remains very distant and unlikely. The only real example of this comes from Alaska, home of the Alaska Permanent Fund. Since the state took ownership of a lot of land that became oil producing, they set up a fund for the income charged to companies that drill on public land and redistribute it to every citizen. The take is down to $878 per person in 2012, but has been as high as $2,069 in 2006. Yes, Sarah Palin’s Alaska is home to more than Grizzly Bears and Hockey Moms, it is also the Land of Midnight Socialism – the only such experiment in the US.
Could we do something similar on a nationwide basis, as resources are drawn from Federal Land? No one has proposed such a thing since the New Deal, and back then Vice President Henry Wallace was more or less shouted down for the idea. Real income redistribution through a mechanism like this has never been part of our plan.
So while the renewed attention on the terribly skewed wealth distribution is important, a real solution that sows the seeds of the next economic expansion is unlikely in the short term. What has to change is not our economics and not even our politics – but our social structure and how active we remain in defining the world we live in, together. An economy is nothing more than a collection of values, and the state of ours right now shows that not only are our values rotten, they don’t even match up to what we profess.
This video is a good first step to changing that. But like the end of this depression, the solution is not some event that we have to wait to happen. It will take a process of waking up and all of us, together, working to express our values more clearly. What we see now is quite horrific, but it must change. Making that change is vital if we are to be the people we say we are.