Inequality in the US

Here’s a fascinating quote from Martin Ford’s Rise of the Robots:

“Surveys have shown that most Americans vastly underestimate the existing extent of inequality, and when asked to select an “ideal” national distribution of income, they make a choice that, in the real world, exists only in Scandinavian social democracies.”

The amazing thing is that most people simply don’t realize just how bad things are. Human beings have a tendency to compare their life quality with that of their neighbors and relatives, not with the millionaires and billionaires.

Surveys show that Americans generally believe that the top 20% of wealthy Americans possess just 59 percent of wealth [source]. Or that the bottom 40% possess 9 percent of wealth. This is nowhere near the truth (actually, the top 20% possess 84 percent of wealth, and the bottom 40% possess only 0.3 percent of wealth)[source].

Here’s How Bad Things Actually Are:

  • Between the years 1983 – 2009, Americans became more wealthy as a whole. But the bottom 80 percent of income earners saw a net decrease in their wealth. At the same time, the top 1 percent of income earners got more than 40 percent of the nation’s wealth increase.[source].
  • Overall, the earnings of the top 1 percent rose by 278 percent between 1979 and 2007. At the same time, the earnings of the median people (that’s probably you and me) only increased by 35 percent [source – The Second Machine Age].
  • Inequality (as measured by the CIA according to the GINI index) in the US is far more extreme than it is in places like Egypt, Croatia, Vietnam or Greece [source].
  • Between the years 2009 – 2012, 95 percent of total income gains went to the wealthiest 1 percent [source].
  • Economic mobility in the US – i.e. whether people can rise (or sink) from one economic class to another, is significantly lower in comparison to many European countries. If you were born to a family in the bottom 20% of income, you have a 42 percent chance of staying in that income level as an adult. Compare that to Denmark (25 percent chance) or even Britain (30 percent chance) [source]. That means that the American dream of achieving success through hard work is much more practical if you’re living in a Nordic country or even in the freaking monarchy of the United Kingdom.
  • Inequality also has implications for your life expectancy. Geographic inequality in life expectancy has increased between 1980 and 2014. Some counties in the US have a life expectancy lower by 20 years than the highest counties. Yes, you read that right. The average person in eastern Kentucky and southwestern West Virginia basically has twenty years less than a person in, say, central Colorado. And the disparity between the US counties shows no sign of stopping anytime soon [source].

What It All Means

Reading these statistics, you may say that inequality is just a symptom of the times and of technological progress, and there’s definitely some evidence for that.

You may highlight the fact that the ‘water rises for everyone’, and indeed – that’s true as well. Some may rise more rapidly than others, but in general over the last one hundred years, the average American’s life quality has risen.

You may even say that some billionaires, like Bill Gates and Mark Zuckerberg, are giving back their wealth to society. The data shows that the incredibly wealthy donate around 10% of their net worth over their lifetime. And again, that’s correct (and incredibly admirable).

The only problem is, all of these explanations doesn’t matter in the end. Because inequality still exists, and it has some unfortunate side effects: people may not realize exactly how bad it is, but they still feel it’s pretty bad. They realize that the rich keep on getting richer. They understand that the rich and wealthy have a large influence on the US congress and senate [source].

In short, they understand that the system is skewed, and not in their favor.

And so, they demand change. Any kind of change – just something that will shake the system upside down, and make the wealthy elites rethink everything they know. Populist politicians (and occasionally ones who really do want to make a difference) then use these yearnings to get elected.

Indeed, when you check out the candidate quality that mattered the most to voters in the 2016 US elections, you can see that the ability to bring about change is more important by far than other traits like “good judgement”, “experience” or even “cares about me”. And there you have it: from rampant inequality to the Trump regime.

Now, things may not be as bleak as they seem. Maybe Trump will work towards minimizing inequality. But even if he won’t (or can’t), I would like to think that the politicial system in the US has learned its lesson, and that the Democratic Party realized that in the next elections cycle they need to put inequality on their agenda, and find ways to fight it.

Do you think I’m hoping for too much?

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Cover image from the Economist
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2 thoughts on “Inequality in the US

  1. According to data I saw in the past, the wealth inequality in Sweden is actually higher than in the US and in Israel. The income inequality in Sweden is lower, but I think that wealth inequality is much more important. Maybe people doesn’t know the inequality level because it does not matter to much for their level of happiness? And how can you infer from the inequality level that the system “is skewed, and not in their favor”? you cannot deduce that. People are borne different.

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  2. Let me be the devil’s advocate here.
    When have we ever seen anything resembling equality, except in the slogans of the French Revolution and the Russian Revolution? In fact, was inequality in France during the reign of Louis XVI greater than in the time of Louis XIV? Was inequality in Russia in 1917 greater than a hundred years prior, before serfdom was abolished? In both cases, the leaders of the revolution did not belong to the lowest-income 20%. Social mobility too had increased prior to said revolutions – the middle class was bigger than it had been centuries prior.
    So, in both cases, people wanted change, people got change – the top 1% got knocked down, some form of redistribution of wealth ensued, but did it go well for the general population? Were Stalin’s and Robespierre’s Reigns of Terror better to the middle class than what they had before?
    In light of this, should the minimization of inequality and the increase of social mobility be goals we set ourselves despite accepting the impossibility of achieving them completely? Maybe we should instead learn to “know our place” as they would have said it in the 19th century? Maybe then we’d be happier: as Ben Zoma said “Who is rich? He who is happy with what he has.” There’s a story of an Englishman travelling in America a short while after the revolution (and after such travel became possible again). He commented on how unfair it is that the millionaire treats his coachman as an equal, encouraging the coachman to think that he too might one day become a millionaire; but the coachman can never become a millionaire, and thus only grows dissatisfied with what he does have.

    (I know I still owe you an answer to your reply to my comment to your previous post. Lots to think of there.)

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