Thursday, April 22, 2010

Unequal Nation

The biggest plague besetting our nation and holding us back today isn't government interference in the economy but government’s failure to create opportunities for economic equality. In short, the government does not redistribute too much wealth, it redistributes too little. Income inequality is a symbol of a failing society. What is important in any society that wishes to remain viable for long is not the guarantee of financial, social and other advancement from one generation to the next but the guarantee of unobstructed opportunity for advancement, the removal of barriers and construction of pathways to a brighter future, the delivery of opportunity sufficient to overcome hopelessness. Individuals can not create such opportunities by themselves nor can they be created by small groups of individuals in most cases. They can be created only by a force large enough and powerful enough to overcome the forces that work against the expansion of opportunity, a force large enough and powerful enough to do battle with the strong and powerful in the name of the less strong and less powerful. That force is government.

We have become a nation of extreme income inequality. In his book Ill Fares the Land, Tony Judt reminds us that “From the late 19th century until the 1970s, the advanced societies of the west were all becoming less unequal…Modern democracies were shedding extreme wealth and poverty.” (Judt, p. 12) Starting in the early 1980s, income became increasing unequal. In 1980, the top 1% of earners in the U.S. received 8% of the total national income of all workers. In 2007, they received 23%. The richest 20 percent of the population of the U.S. today earn nearly 8.5 times the income of the bottom 20 percent. In Japan, Finland, Norway and Sweden—all countries with low income inequality—the richest 20 percent earn 4 are less times the income of the poorest 20 percent. Nowhere is income inequality more evident than in the difference between the pay of CEOs and the average workers in their companies. American CEOs in the 1950s and 1960s earned 25 to 35 times the wage of the average worker in their company. In 1980, they earned 40 times. In 1990, 100 times. And, in 2007, 350 times. In other words, the average CEO today earns as much in one day as the average worker earns in almost an entire year. It is worse the larger the company. In 1968, the CEO of the U.S. largest company at that time, GM, earned 66 times the pay and benefits of the average employee in his company. In 2005, the CEO of America’s largest company, Walmart, earned 900 times the pay and benefits of the average employee in his company.

It is not just a matter of unfairness, inequality has consequences, severe consequences. Income inequality is associated with increased crime and the need for more prisons and more police, more drug abuse, more mental illness, increased obesity among children and adults, shorter life expectancy, increased infant death, increased teen pregnancies, increased homicides, lower student math and literacy scores, higher high school drop out rates, and lowered aspirations of young people for obtaining more than low-skilled work. (See Richard Wilkinson & Kate Pickett, The Spirit Level: Why Greater Equality Makes Societies Stronger for a good analysis of the impact of income inequality.) Additionally, income inequality makes social mobility (the ability of children to be better off financially than their parents) more difficult. From 1950 to 1980, the percentage of a son’s income that could be explained by his father’s income declined from 15% to 10%. Between 1980 and 2000 it increased to 20% in 1990 and 33% in 2000. If you are born poor today, you are likely to remain poor regardless of your talents and efforts to improve your condition.

If we want a future as a country, then we must become less of an unequal nation. How? I'll suggest what we might consider doing in another post.

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