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Inequality Becomes Intolerable

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.

15 thoughts on “Inequality Becomes Intolerable

  1. I would be surprised if the bottom 20% had a net worth higher than zero. Debt is a serious problem and that debt is owed to the people who already own 80% of the wealth. This is shocking but a very good video. I hope we see more like it.
    You are right that what to do about it is hard to say.

  2. yes lets all fear socialism – redistribution is bad even when the goods were stolen in the first place – you really want to do something about it the solution is obvious

    • So how would we go about redistributing the wealth? Short of a revolution I can’t imagine how we would even do such a thing (not commenting on its desirability at all).

  3. Larry Agran in 1992 ran in the democratic primary for President. He was the mayor of Irvine California. His platform included a tax on wealth and more urban planning, also addressing global warming. He was essentially shut out by the media.
    Last night I watched a short video by Robert Reich on Salon that was essentially about the same topic, wealth maldistribution. I don’t know if any of these protest videos from academics are working. This afternoon there will probably be 100,000 males driving home from work listening to Joe Souchery or Jason Lewis. If airtime on the television for political ads were evenly distributed who would be the target audience to change or motivate hearts and minds? And could you make those ads FUN, using the language of advertising how could you increase the turnout among the disadvantaged (which could include 1/2 of the population)?

    • Yes, you have an excellent point. This is only a start to me – but we’re talking about inequality for the first time. I don’t think anyone watching this would scream “socialist!” in response.
      OK, then, how can this be made shorter and much more fun? A good question.

  4. In a sense newspapers went are going thru this same thing. The absense of commercial activity due to no classifieds and retail migrating to the internet. Are we going to be moving to a society based on patronage or govt. grants? Just a the cities orchestras may not be self sustaining and rely on others could news be the same? And sorry the Huff Post uses a lot of free labor.

    • I am not a fan of PuffHo and their free labor, that is not a sustainable model. How will we get the word out on bigger topics that don’t lend themselves to another piece like this on a blog? A good question.

  5. Something is wrong with your blog, the format is very messed up.

    Equity of income can never be guaranteed but when people feel the system is totally stacked against them there is no reason to work harder. What Republicans need to understand is that the idea that anyone can be rich one day is their biggest selling point and when that is not longer believed they have a real problem. People are pretty much at that point now I think.

    • I am working on the format problem, thanks!
      A very good point about belief in the system. If this message gets out and sticks, people will no longer feel that the rich might be them someday – and be much less willing to back tax cuts, etc. You’re right – the whole paradigm breaks down if those in power are not careful.

  6. Like the new look. Much softer.
    How did this happen? That’s what I want to know. A lot of people have a feeling the system is rigged against them and this says they are right. So what we do about it comes down to me as how did this happen in the first place. I trust you won’t give a pat answer but I am curious.

    • Thanks, happened almost by accident when things went down today for no reason. I’ll keep working on it. 🙂
      How did this happen? I am asking that very question, and I think it has a lot to do with loose money policies over the last 30 years. The last boom was defined by a big consumer binge – and we have to ask who was doing the borrowing & who was doing the lending – and how much did the lenders have to pay for the money they got versus what those consumers paid.
      Is the system rigged? Yes and no – some of it is horribly rigged, but the greater economy is pretty wide open to anyone with skills.
      I am thinking about this, yes. I’m looking for your help with that, as always. 🙂

  7. Pingback: Inequality: A Feature of the System | Barataria - The work of Erik Hare

  8. Pingback: Sen. Warren, Politics Inside Out | Barataria - The work of Erik Hare

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