The Widening Wealth Gap: An Existential Crisis
The new Oxfam report released yesterday showed what anyone who’s paying attention already knew — the wealth gap between the super rich and everyone else is getting wider. According to the latest report by the international charity confederation, Oxfam International, the richest 1% own 82% of the world’s wealth. Just 42 billionaires have as much wealth as the poorest 50% of the population — approximately 3.6 billion people. Just think about those numbers. Somehow, even looking at those numbers, some of the smartest people I know refuse to believe that the deck is stacked, the game is rigged. And even though the top 1% has seen their wealth skyrocket at the same time the average earnings for workers remained stagnant, smart people still insist that our current system is fair. Even as we have seen class mobility drop to its lowest rate since before 1970, the delusion persists that people who aren’t rich just don’t work as hard as those 42 people.
Just focusing on the American economy, there is now an alarming disparity between the richest Americans, and everybody else, and that disparity is affecting the economic prosperity of our nation, and threatens a bleak outlook for the future. Prior to about 1980, the wealth gap was much more ideal. The 1950’s and 1960’s saw the birth of a robust middle class that was one of the strongest in history. While infrastructure expansion and a strong post-World War II economy certainly contributed to our mutual prosperity, there was also heavy support for unions and progressive taxation, along with vigorous anti-trust policies that ensured that the rich did not dominate and subvert the less wealthy.
The current extreme trend of wealth inequality is rather neatly traced back to the Reagan years. Ronald Reagan was a fierce opponent of unions and collective bargaining. Under his command, anti-trust laws were eased, financial markets were deregulated, and tax rates were slashed to historic lows. Reagan coined the phrase “trickle-down” economics, suggesting that as the rich got richer, their excessive wealth would trickle down to the masses. Of course, this has proven to be a complete myth.
While economic gains were made under Bill Clinton, he did little to stem the growing wealth gap. Deregulation continued under Clinton, and while many sectors of society saw modest upward mobility, most of the wealth generated during his tenure went to the richest Americans. And any gains that were made under Clinton were almost immediately reversed under George W. Bush. There was an almost immediate reversion to the “trickle down” economic ideas of Reagan that has since set the U.S. on a downward spiral of economic depression. Well, at least for most of us. You see, the richest Americans have gotten obscenely richer, while most Americans have seen a sharp decline in virtually every metric of success and financial well-being, a trend that unfortunately continued under Barrack Obama, and has become even more stark under Trump and his cabinet of billionaires. In fact, Trump’s sole achievement in his first year is a tax bill designed to funnel over a trillion dollars to the mega-wealthy.
Ratings agency Standard & Poor’s issued a report in 2014 stating that the actual income gap in the U.S. has been worsening and now is approaching an “extreme” threshold that threatens to hamper long-term economic growth. According to experts (and logic), the wealth gap undermines economic growth by dampening social mobility and creating a less-educated workforce unable to compete in the global economy. “Higher levels of income inequality increase political pressures, discouraging trade, investment, and hiring,” the report noted.
Inequality serves as a “wedge” between growth and living standards, funneling income to the most wealthy, and making it more difficult for living standards to improve, or for poverty to fall, during business expansions. Economic growth, therefore, “has become a spectator sport for too many poor and middle-class households.” In fact, following the most recent recession, the stock market has rebounded to its highest level in history, GDP is up significantly, corporate profits and worker productivity are at historical highs, yet median household income is actually down 5%. So the rich have seen massive income growth, while everyone else is seeing their incomes fall or stagnate.
Ultimately, a lopsided economy that benefits a smaller and smaller portion of the populace, can, and does, lead to economic collapse. Many economists now agree that both the Great Depression and the most-recent recession in 2008, were caused — at least in part — by extreme levels of wealth and income inequality. The greed and unfairness that such a system encourages leads to eroding levels of opportunity and mobility for all income levels, and will eventually lead to disaster if we don’t take action to preserve the fundamental American principal of equal opportunity. And despite the 2008 collapse, and a resulting “economic recovery,” inequality has continued to grow.
There is a video on YouTube called “Wealth Inequality in America.” This video was created a few years ago, and has since gone viral with almost 20 million views. It shows three different wealth distribution charts, one showing what most Americans believe is the “Ideal” wealth distribution, one showing what most Americans believe is the actual distribution, and then, a chart showing what the actual distribution really is. Of course, the difference is shocking, at least to average Americans.
Basically, taking data from a Harvard poll conducted a few years ago, the first chart shows the “ideal” wealth distribution as reported by a majority of those polled. It shows a very healthy income curve, starting with the bottom 20% almost completely above the poverty line, with a smooth transition between all levels, and a top 20% that is only about 10–20 times wealthier than the poorest folks.
Of course, most Americans know that our wealth distribution is anything but “ideal,” thus, when they described what they believed the distribution actually is, the response showed a graph that was much more skewed toward the wealthy. This graph shows the bottom 20% quite a bit worse off, with a small portion actually below the poverty line, and it shows the wealthiest Americans with roughly 100 times the wealth of the poorest, and even a middle class that is struggling a bit.
The shocking thing is that this graph is nowhere near the actual distribution of wealth. In the actual distribution graph, the poorest don’t even register, and almost the entire lowest 20% is below the poverty line, while the middle class is barely distinguishable from the poor. And of course, the top 1% is so far off the chart that there had to be a special column just for his portion of the wealth — roughly 40% of the overall wealth of the nation, concentrated in the hands of 1% of the people.
In the U.S, the wealth gap has reached “spectacular” heights. And the rich are actually wealthier than previously thought. It is estimated that America’s top 1 percent, the nation’s wealthiest group by a long shot, control almost 40 percent of wealth, rather than the 30 percent that had previously been estimated. Let that sink in. The top 1% has nearly half of the nation’s wealth. While the bottom 50% only has 7% of the wealth. The 1% has more than five times as much wealth as the entire lower half of this nation’s population.
The richest 1% earn almost 25% of the nation’s annual income, while in 1976 they only took home about 9%. 82% of the total value of stocks and investments is owned by the top 10%, while 54% of Americans have zero. Obviously, the bottom half of the country is not investing, just barely earning enough to get by. CEOs of our richest corporations take home somewhere around 380 times as much income as the same rich corporation’s average worker — not its lowest paid employees, but the average earner. That means the average worker would need to work an entire month to earn what the CEO makes in a single hour of a single day. And again, this is a trend that we have seen grow steadily more pronounced since the 1970’s, and the end of the economic policies of the 40’s, 50’s and 60’s that helped create the most robust middle class in world history.
This picture of the American economy strongly suggests an uneven playing field. As the rich get richer, the poor get poorer, until virtually all of the nation’s wealth is controlled — either directly or indirectly — by a handful of mega-wealthy individuals. When enough wealth is concentrated in the hands of a few billionaires, it becomes easier for those few billionaires to buy politicians, to repeal regulations, skew the tax code in their favor, thus allowing them to keep even more of their wealth, and to pay their workers less and less, while eliminating any competition.
In fact, the recent Oxfam report specifically cited “tax evasion, erosion of worker’s rights, cost-cutting, and businesses’ influence on policy decisions” as reasons for the widening inequality. Mark Godlring, an Oxfam executive, said the numbers indicate “something is very wrong with the global economy… the concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food.”
“Oh, you’re just jealous. Don’t attack rich people because they worked for what they got.” I know, i know, anytime anyone starts talking about income and wealth inequality, some libertarian zealot hollers “Class Warfare.” There is a vocal group of opponents that view every mention of inequality as a challenge to the rich and powerful. A battle cry by the poor masses against the wealthy elite that are literally in charge of everything. They are the “job creators” and we should all be thankful for their contributions to our society — and the crumbs they throw to working class Americans. But these wealthy titans are busy buying elections, and influencing public policy, and consolidating economic power by engaging in unhindered mega-mergers, all to make it even harder for hard-working people to achieve that mythical American Dream. And don’t forget that the majority of the nation’s wealthiest didn’t exactly “work for what they got.” Almost 2/3 of those on the Forbes 400 list were born rich, and will do anything to preserve that legacy for their progeny. As Warren Buffet — a mega-wealthy proponent of capitalism himself — once stated, “There’s class warfare alright, but it’s my class, the rich class, that’s making war.” And we, the intrepid 99%, are the casualties of that war. Think about that.
