Tuesday, March 22, 2011

Hidden Costs of Wealth Inequality Imperil America

Most Americans are blissfully unaware of the appalling wealth inequality in the United States.  Further, they are even more uninformed about the negative impact this wealth inequality has on their daily lives. Americans haven't fully realized that the rampant wealth inequality among their citizenry has imperiled their children's future, threatened their own retirement security, and despoiled the air they breath and the water they drink. Americans haven't realized that the vast disparity between the haves and have-nots condemns them and their offspring to a steadily deteriorating quality of life.

The New York Times recent valuable discussion on wealth inequality didn't touch on the real reasons wealth inequality imperils American democracy and the lives of its people.  Centered around a thoughtful and revealing study by Michael I. Norton and Dan Ariely, the contributing panel examined Americans' attitudes about wealth inequality and speculated that Americans' general lack of alarm about inequality could be attributed to ignorance about the severity of the inequality, along with the notion that each person believed that someday his ship would come in.

The Norton and Ariely study revealed that Americans on average believed the wealthiest 20% of Americans owned just 59% of all the wealth in the US.  In fact, the richest 20% of Americans owns 84% of everything.

Yet, even if the rich only owned 59%, Americans said that was still too much, and believed they should only have 32% of everything. Americans thought it was OK for people to have a little more than the rest, but not too much.

This is a completely understandable and natural sentiment.

The fact that the richest 20% of Americans owns 84% of all the nation's wealth comes as a complete surprise to most.

Let's break that down.  Assuming there are 300 million Americans, for every $100 million of wealth, the richest 60 million have $84 million, while the rest of the nation, some 240 million individuals, would split the remaining $16 million. To make matters worse, the study reveals that the bottom 40%, or 120 million Americans, would actually be splitting just $300,000, as the quintiles immediately above them are doing much better than they are.

While the raw numbers are staggering, the real problem is the power and influence that $84 million is buying for the richest 20%.

Most Americans think of wealth in terms of the kind of houses, and clothes, and big screen TVs it can buy them.  Most Americans are keenly aware whether someone in their peer group gets to go on a better vacation, or has a bigger bass boat, but these aren't reasons to loathe or be afraid.  Americans say corporate execs get paid too much without even realizing how much those people are really making. However, most Americans aren't jealous. After all, they might win the lottery, or a TV home makeover, or the Publisher's Clearing House, and they'd be right up there with Warren Buffett, or at least Jimmy Buffett.

The problem with the massive wealth inequality is what it does to American democracy.  Wealth inequality is, by its very nature, undemocratic.  The reasons are complex, and goes beyond the fleets of private jets and mega yachts and lavish parties railed against even in this space.  In fact, the ostentatious conspicuous consumption of outlandish consumer durables isn't the problem at all.  If people wanted to slather themselves with designer labels to the point of looking like a Nascar driver with very prissy sponsors, that alone wouldn't matter one whit to America's democratic institutions, and wouldn't even represent a very big slice of the wealth pie.

It isn't the exclusive country club memberships in and of themselves. It isn't the junkets to Ibiza, or the Chanel accessories, or the Manolo Blahnick shoes, or the Medoc wines, or the luxury boxes at Yankee Stadium.
Those are all just things, and most people have some form of those sorts of things, even if the junket is to Disney World, and the accessories are knock-offs, and the seats are on the upper deck. This is why Americans aren't so upset by wealth inequality, because, in America, everyone gets to eat cake sometime.

The real problem with wealth inequality at the astronomical levels we're seeing in contemporary America is that it makes the country a functional plutocracy. 

The super rich can hire legions of attorneys to file mountains of legal briefs to run roughshod over anyone who might object to toxic wastes pouring from a power plant, or natural gas fracking despoiling groundwater, or a chemical plant pumping carcinogens in the air. The legal system favors those who can pay the most billable hours. It often has little to do with the relative merits of a case. If you want to sue XYZ Corporation for blatantly injecting carcinogens directly into your veins, your chances of success rests almost completely on whether you can hire enough lawyers long enough to answer the literal pallet loads of briefs XYZ Corporation is going to file in the case. Chances are, you can't, so you're out of luck and probably out of health insurance to boot.

The super rich can hire armies of lobbyists to wine, dine, and cajole every official, elected or not, in your government.  They can hire close colleagues and associates of your Senator, or town council member, or building inspector, to buy lunch and talk about their old school days, and maybe chat about adding a line to a bill here or striking one there, or looking the other way when the new development doesn't quite meet the requirements on the Environmental Impact Report, and perhaps a few years or months down the road, join his old pal at that very lobbying firm.

The super rich can pump mountains of cash into 501 PACs, into election campaigns, into very worthy-sounding charities run by some politico's wife or brother or son, and take everyone out - in a private jet - to a lovely retreat at some far-flung island paradise for a little golf.  You can't do that, and any amount of letter-writing or placard-waving isn't going to stop that radioactive widget plant from being built next to your kid's day care center.

The super rich can assemble hordes of lackeys to write crazy legislative propositions that let their companies ignore health and safety rules, pollution regulations, building standards, or child labor laws and put them on the ballot in every state in the Union, with hardly a care whether they get their way, while the local constituencies have to sink every cent of their hard-earned savings into a fight to just maintain their existing quality of life.

The super rich can reign over the land wielding the blunt instrument of their money.  In any contest between what's best for the ultra-rich 20% against what's best for the relatively impoverished 80%, the ultra-rich will win every time. That is the very definition of a plutocracy.


  1. It is shameful this is what America has become. So many still believe we have a democracy-that our elected representatives are working for the average citizen. It is difficult to fathom the lack of any moral character these people have. I hope the people will finally wake up and get involved in taking back this country. Unfortunately, most are just trying to survive day to day. It would be a nice dream if the House and Senate and President would unite and spend their time reforming tax codes and campaign financing. I won't hold my breath.

  2. Thank you, Anonymous. We can try writing our elected officials and try holding them accountable. We can try to keep up with the news, and talk to our friends. Hope you can drop by again.


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