The Fruits of Civilization – Inequality

Inequality

The wealth of the world is divided in 2: almost half going to the richest 1%; the other half to the remaining 99%.  ~ Oxfam International in 2016

Among many mammals, inequity is a fact of life. Simians are socially stratified creatures: privileges and rights are practically considered synonymous. The lion’s share goes to those at the top rungs of the social ladder.

The nomadic lifestyle is not conducive to wealth accumulation. Once people domesticated themselves, along with edible plants and livestock, the equation changed: surpluses beget inequality. Agriculture created strata of resource access. Property was inherited generationally.

Even before cultivation became part of culture, inequity had started. The Natufians of the Levant were one of the first peoples to embark on the long transition to farming. Beginning ~14,500 years ago, early settlements were amid rich food resources. Those who staked claims to the best spots gathered surpluses which put them ahead. Agriculture reinforced an already-established status.

Since antiquity, the societal impact of wealth distribution has been a political issue. Inequality wanes in the aftermath of carnage and disaster, then waxes again as peace and stability return.

The world economies produced vast inequities prior to the 1st World War. In 1910, the 10% of European households controlled nearly 90% of all wealth. The top 10% captured over 45% of all income.

The wars and depressions between 1914 and 1950 dragged the wealthy down. With economic recovery, inequality roared back, as owners of capital inordinately prospered once again. Wealth concentration and income inequity are now approaching the peaks of the early 20th century.

This is an economic model developed by the economic elite to benefit the economic elite. ~ US Senator Bernie Sanders

Universality

Material inequality has been, and still largely is, ubiquitously accepted as reflecting a natural societal order. Only egalitarian philosophers have seen such inequity itself as a moral evil, and so take umbrage to the popular assumption.

The essence of morality is fairness. Different perspectives consider acts to be moral intrinsically (moral absolutism), or otherwise adjudged in light of intent and/or consequence. Most people, and legalistic thought, consider intent when determining the morality of acts. Accidents are therefore without moral ramifications, whereas acts which intended to harm, but failed (and thereby of no consequence), are treated as criminal.

Because a market economy is considered by many to be a natural order without inherent intent to harm, commercial acts are commonly construed as moral; only attempted transactions which egregiously violate fairness are considered iniquitous, such as price-gouging. So, even though capitalism may inevitably deliver gross inequity, and by dint of consequence be unjust, few see the market system as immoral per se.

The love of money is the root of all evil. ~ I Timothy 6:10, The Bible (often cited, but never really paid any attention)

Inequality has never been eliminated in any society. So-called “communism” was a scam sold by ruthless revolutionaries to gullible plebs, who invariably were oppressed in the aftermath of the liberation from the previous regime. Any leveling that went on in the Soviet Union, China, or North Korea was barbaric, not civilized. The same applies to the supposed egalitarian spasm known as the French Revolution.

Individuals’ life chances are predictable. There seems to be an inescapable inherited substrate, looking suspiciously like social class, that underlies life outcomes. ~ Scottish American economist Gregory Clark

 Kuznets Curves

In 1955, Belarusian-American economist Simon Kuznets proposed that economic inequality was a function of income per capita. Kuznets’ hypothesis was based upon an idealization of market and political forces during economic development. Decades later, the same unfounded optimism was applied to pollution to create an environmental Kuznets curve. As history amply demonstrates, the Kuznets curves are rubbish. (Simon Kuznets won the 1971 Nobel prize in economics for this contribution of fiction.)

 Africa

Though Africa was the evolutionary birthplace of humanity, it has been the last continent to develop economically. Having all of history to learn what not to do did nothing to prevent inequity on a breathtaking scale.

Tiny Equatorial Guinea is a former Spanish colony. Now ostensibly democratic, it is politically controlled by a strongman who, along with a few business cronies, has appropriated most of the country’s wealth. In the decade 1996–2009, GDP grow almost 40% each year, largely on oil revenues. Little of it trickled down. Though Equatorial Guinea’s wealth per person is the highest in Africa, over 75% of the people there live below the World Bank’s poverty line.

Government spending on health and education in Equatorial Guinea lags far behind the sub-Saharan African average. To go to the hospital, patients must bring their own sheets, and share their rooms with rats. Civil rights lawyer Tutu Alicante says that visiting a public hospital is like “signing your own death sentence.”

A bit north of Equatorial Guinea lies Nigeria, a former British colony, now supposedly a federal republic modeled on the United States. The country is often called the “giant of Africa” because of its large population (182 million) and its economy, which is the 20th largest in the world, and the largest in Africa (having surpassed South Africa in 2014).

The government doesn’t provide anything. ~ Nigerian oil worker Moses Okotie

The Nigerian government is run as a racketeering operation. The “patronage economy” encourages legislators to create ever more government agencies, which they populate with their cronies. Many new agencies then start issuing licenses and permits to rake in revenues.

Fantastically corrupt. ~ British Prime Minister David Cameron on Nigeria in 2016

Senior managers at large companies spend an average of 18% of their time dealing with government demands, while potentially productive investment funds are siphoned off to line the pockets of bureaucrats. On the World Bank’s ease-of-doing-business index, Nigeria ranks 169th out of 190, behind such prosperous and business-friendly countries as Iraq and Sudan.

Oil extraction ushered rapid growth in Nigeria in the early 21st century, which slowed as world oil prices tumbled from the mid-2010s. This source of ready government revenue drying up aggravated corruption in government.

Nigerians are tribal, very social, and those that prosper are agile in business: a combination that has fostered organized crime to flourish, both within the country and among expatriates. Notable trades for Nigerian networks are drugs and sex trafficking.

Nigerian inequality is pronounced. At least 1/3rd of the population is stuck in extreme poverty. 10 million Nigerian children are not in school, and half of all young adults are unemployed or underemployed.

Impoverished rural areas have rebelled. Political and economic violence is endemic throughout the country.

With a 60% population growth rate 1990–2008, and hardly slowing since, the sheer number of Nigerians is exploding unchecked. The country’s largest city – Lagos – grew from 300,000 in 1950 to 21 million in 2016.

Given that, what should be unsurprising is that the environmental quality in Nigeria has grossly degraded in recent decades. Nigeria had the fastest rate of deforestation in the world 2000–2015.

Pollution of every kind is extensive anywhere there are Nigerians. Nigerian cities are filthy.

 China

Starting in 1949, the revolutionary Communist government, led by Mao Zedong, waged war on inequality of all kinds. By the time the Cultural Revolution ended, having wreaked havoc throughout Chinese society, the government had effectively abolished private property, and had even mandated a bland, unisex style of dress.

The equality was a false one. Economic resources were concentrated in the hands of party cadres, in a hierarchical pecking order. That withstanding, inequity between urban and rural residents was not especially pronounced.

Then, in 1981, under reformist leader Deng Xiaoping, China made an about-face: reintroducing land rights, allowing foreign investment, and gingerly spurring private enterprise.

It is good for some people to get rich first. ~ Deng Xiaoping

Since China’s embrace of market economics, inequality has surged to be one of the greatest in the world, as has China’s proliferation of waste and pollution. The richest 10% of Chinese make 13 times as much as the poorest 10%, compared to a 5 times multiplicand for Americans in these income brackets. For how capitalism changes societies and environmental quality, look at China.

(In 2015, the top 10% of Chinese income earners garnered 40% of the country’s total take, just below the US (47%). The richest 10% own nearly 70% of private wealth in China, up from 40% in 1995. The richest 10% of Americans own 80% of US assets (in 2015).)

Germany

In the 2110s, Germany became the economic and political anchor of Europe. Chancellor Angela Merkel often seemed a beacon of sanity among a sea of political buffoons. It was a dramatic transformation which happened only this century. In 1999, with glum businessmen presiding over a sluggish economy, Germany was the “sick man of Europe.”

Fundamental social and economic reforms were implemented in 2003. The German economy only managed a modest revival before the 2008 global financial crisis struck.

The shimmering image Germany now projects internationally has a gloomy underside. Many highly skilled workers have experienced a sharp increase in their wages, but over 1 in 5 workers languishes in problematic employment, barely sustaining themselves. Wages for the bottom 1/3rd of the labor force were lower in 2018 than they were in 2000.

Poverty has been rising. 20% of German children are pauperized.

Among Europeans, the average German household has one of the lowest levels of private wealth. Few Germans own their own homes. While Germans are generally thrifty, low interest rates mean saving accounts do little for wealth accumulation. Germany has one of the highest levels of wealth inequality in Europe.

Economic opportunity and social mobility are dismal. The German gender pay gap is one the largest in Europe.

A person’s income is strongly correlated with his or her parents’ income and education. Children from socially disadvantaged families have a hard time making use of their talents: obtaining good qualifications and jobs. ~ German economist Marcel Fratzscher

 Regional Discrepancies

Economists speak of countries rich and poor, of the industrialized world and developing nations. The reality is much more nuanced. Wealth and poverty coexist in all countries. Quality of life cannot be measured simply by dividing national income by number of people.

In 2015, American per-capita GDP was 56% higher than Italy, but Italian life expectancy was 3 years longer. The life expectancy of black Americans is lower than rural Chinese, and mortality for urban black American infants is higher than those born in Cairo, Egypt. The gross inequities rife throughout the world means that the world’s peoples are all needlessly impoverished. While the poor simply live in fear, the rich live in fear of the poor.

The inequality distinctions between countries are often not as great as the disparities within them. The gaps grew in the wake of the 2008 recession and continue to widen.

Britain has the widest disparities, with average GDP per head in central London over 9 times more than in parts of Wales. In America, the District of Columbia is 5 times richer than Mississippi. Germany’s regional discrepancies are relatively small, yet incomes in the most affluent areas are still almost 3 times that of the poorest.

Wealth and poverty tend to concentrate geographically and generationally.

Wealth positions at the top and bottom of the distribution are particularly sticky, with very wealthy parents able to secure a substantial wealth advantage for their children, and parents who live in debt especially likely to have adult children who are also net debtors. ~ American sociologists Fabian Pfeffer & Alexandra Killewald

○○○

Over the past 3 decades, 53% of countries have seen an increase in income inequality, with this trend particularly pronounced in advanced economies. Furthermore, today’s economic strains are likely to sow the seeds for longer-term problems. ~ World Economic Forum in 2018

82% of the wealth generated globally in 2017 went to the wealthiest 1%. From 1980 to 2015, the richest 0.1% of the world’s population increased their combined wealth by as much as the poorest 50%: the wealthiest 7 million taking in as much as the most impecunious 3.5 billion. For those in between, income growth has been sluggish or even nil. Wealth inequality is most extreme in Russia and the US.

Wealth concentration is as high as in 1905. ~ Swiss economist Josef Stadler in 2017

The 85 richest people on the planet control as much wealth as the poorest half of the world’s population.

The separation of the elite from the masses may be a recurring process in sociocultural systems that is again coming to a head in hyperindustrial societies. The division of labour leads to a division in lifestyles. Increasingly, the wealthy live in gated communities, go to separate schools, and have their own security, lifestyle, and increasingly separate values. Globalization could well be accelerating the process; not only does it provide opportunities for great wealth, it also breaks the economic tie between the elite and the local economy. ~ Frank Elwell

Labor/Capital Rewards

Global elites are increasingly becoming richer. Yet the vast majority of people around the world have been excluded from this prosperity. While stocks and corporate profits soar to new heights, wages as a percentage of gross domestic product (GDP) have stagnated. ~ Oxfam International in 2017

The root of modern inequality lies in the relative returns of labor and capital. This is essentially an externality of the price mechanism. With a surplus of labor and a high demand for capital, those with a surfeit of funds reap rewards while workers toil for meager leftovers.

Global production chains effectively demand that countries compete for investment and that workers compete for jobs on a global basis. ~ Australian sociologist Kevin Hewison

The stark reality is that globalization has reduced the bargaining power of workers, and corporations have taken advantage of it. ~ Joseph Stiglitz

Based upon historical trends, Hungarian-born English economist Nicholas Kaldor concocted in 1940 a 6-stage model of the economic growth and contraction. One conclusion was that the labor/capital split was stable over the long run, with short-term wiggles due to the ups and downs of business cycles. Owing to his cogent writing, Kaldor’s figure that labor took a 2/3rds cut and capital 1/3rd was uncritically accepted by most economists.

In the United States during the 19th century, 64% of economic gain went to labor. After the 2nd World War, American workers reaped 62%. In the wake of the 2008 recession: 54%, and that figure that has fallen since. Starting in the 1970s, employers no longer shared the benefits of increased productivity with the workers who produced it. Between 1973 and 2016, average hourly wages grew 12%, whereas productivity increased 74%. Kaldor’s labor/capital split is a slippery statistical confection, not an economics constant.

 American Farm Workers

California’s Central Valley is the most productive agricultural region in the world, but the workers responsible for the Central Valley’s wondrous harvests remain impoverished.

The people who grow our food can’t afford to eat it. Those who work in the fields all day long don’t have access to the fresh produce that they harvest. ~ American health policy maven Joel Diringer in 2016

Corporate Inequity

In some countries, those at the top of high-skilled, licensed professions, such as doctoring and lawyering, are quite well paid. More generally, worldwide, money flows into corporations, and especially to those who sit at the peak of its financial pyramid.

 CEO Pay

The wellspring of inequality begins in the boardroom. Top managers of major corporations have the power to negotiate their own remuneration. Hence, they have been able to procure stratospheric incomes compared to others.

The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself. ~ John Kenneth Galbraith

In 1950, the average American corporate CEO earned 30 times that of the average worker. In 2018 it was 330 times. In 2018, which was a good year for the American labor market, CEO pay increased at twice the rate of ordinary wages.

Every US public company must have a board which oversees how the corporation is run. The median compensation of a board member for one of the top 500 US companies (by revenue) was $263,500 in 2015: that’s 5.5 times what a typical worker makes in a year.

Board members’ strenuous task is to attend an average of 8 meetings during the year. Given such rich reward for such meager effort, it is not hard to see why CEO salaries are so stratospheric: overseers are paid off not to bite the hand that feeds them. That, and those on corporate boards are part of the elite that perpetuate the economic oligarchy – rocking the boat upon which they sail would be crass.

 Company Size Wage Discrepancy

Although the rise in CEO pay over past decades has been spectacular, it can hardly explain the rise in aggregate wage inequality. ~ Swiss economist Holger Mueller et al

In 2011, the best-paid 1% of American workers earned 191% more in real (inflation-adjusted) income than they did in 1980. Meanwhile, wages of the middle-5th fell by 5%. This selfsame trend occurred worldwide, despite widely varying policies on taxation, corporate pay, and minimum wage.

Larger firms exhibit significantly more pay inequality. ~ American economist Paige Ouimet et al

The driver of this trend is the oligopolization that naturally occurs as market economies mature. As firms get larger and become more profitable, wages rise; but the benefits of scale are not shared equally. This is illustrated by the fact that the 3 richest Americans – Jeff Bezos, Bill Gates, and Warren Buffett – own as much wealth as the bottom half of the US population.

The correlation between growth in company size and level of wage inequality holds across the rich world but has been most apparent in American and British corporations, where the number of workers employed in the country’s 100 largest firms rose by 53% and 44% respectively 1986–2010. As the trend toward bigger companies is only likely to accelerate, so too wage inequality.

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 hardworking people. ~ English sociologist Mark Goldring

For much of the 20th century, workers at big American companies were better paid than those at small ones; no longer. Since the late 1980s, the pay advantage of working for a large corporation vanished, except for those relative few in high-salary jobs. That change fueled the rise of income inequality.

2 things changed. 1st, many low-level jobs were outsourced in the 1990s as companies more intently focused on rewarding stock shareholders. Contractors paid their workers less than the jobs lost. 2nd, less competition among corporate behemoths meant that they could get away with paying lower wages than they would have to in a more competitive market.

Economists used to mistakenly believe that companies that could afford to pay higher wages would. That fiction died as the hard numbers of reality rolled over them.

From 2016 into 2018, American corporations were rolling in profits. The economy was ostensibly near full employment, and there were millions of job openings. Despite demand exceeding supply, wages remained stagnant, as workers made no demands for raises.

The Great Recession scarred the psyche of employers and workers alike. Businesses maintained the survival mode mind-set they had acquired in the mire of the recession; as did workers, who had been so traumatized by layoffs, foreclosures, and pulverized life savings that they were meekly accepting, and holding onto, whatever jobs they could find.

Increased market concentration, particularly pronounced in the US and UK, means less competition for workers, and therefore little pressure to give raises. This is especially true in industries where skills are highly specialized, because it is harder for workers to find better pay elsewhere. Companies commonly collude to keep wages low by agreeing not to poach each other’s workers and through non-compete contracts.

The lack of money is the root of all evil. ~ Mark Twain

○○○

Those with money can capitalize on opportunities to leverage further returns with little effort, while ordinary working men and women must rely solely upon their labors. That the average American is invested in the stock market is a myth. 84% of all stocks owned by Americans belong to the wealthiest 10%. In 2016, most households had less than $5,000 in stock holdings. Half of American households don’t have a cent invested in stocks.

 Hedge Funds

In the 21st century, the adventurously wealthy have parked some of their money in hedge funds, which are exclusive investment vehicles not available to commoners. Hedge funds use sophisticated computer models and trading stratagems to maximize returns.

Hedge funds held a measly $539 billion in 2001. In 2015 they played with $2.9 trillion.

In 2015, hedge funds’ average return to investors was less than 1%. The best performances, by only a handful of funds, were in the neighborhood of 10%.

JP Morgan Chase, America’s biggest bank, paid its chief executive, Jamie Dimon, $27 million in 2015. That same year, hedge fund manager Kenneth Griffin was compensated $1.7 billion. On average, the 25 best-paid hedge fund managers in 2015 each took home over $500 million in wages. 2015 was a tough year for funders of hedge funds, but a very good year for those at the helm, who could practically set their own payout.

The capital markets are controlled by a bunch of right-out-of business school young guys who haven’t really seen that much. You have a real lack of wisdom. ~ Kenneth Griffin

○○○

There is the idea, still widespread among economists, that economic growth depends largely on the rise of “human capital.” At first glance, this seems to imply that labor should claim a growing share of national income. But that is a whimsical interpretation of an allusion without foundation.

Industrialization and its digital follow-on – robotics – dispelled those droll notions. Workers became dispensable inputs that served machines purchased with capital. The value of skills remained, but this was not enough to overcome the power of corporations, especially before and after the mid-20th century heyday of labor unions in the US and UK.

A surplus of labor ensured the superiority of capital in generating income. Regressive tax policies against ordinary workers and those favoring the wealthy further aggravate the market mechanics of rewarding capital over labor. Inequality begins with capitalism and is reinforced by plutocratic governance.

Economics is a political dynamic, and those with money tip the scales in their favor.

Governments overwhelmingly serve the interests of economic elites to the detriment of ordinary people. ~ Oxfam International

◊ ◊ ◊

When the rate of return on capital exceeds the growth rate of the economy, as it generally does, wealth accumulates among the rich faster than working people could ever hope for from their wages; hence capitalism acts as an amplifier for inequality. Dire circumstances have been the only mollifiers to the propensity of capitalism to generate inequity: most particularly, wars and economic downturns.

A reduction in economic inequality took place in most developed countries between 1930 and 1950. The World Wars and Great Depression caused greater drops in the income of the wealthy than workers, and so temporarily lessened inequality.

Recovery meant resurgence, abetted by governmental tax policies and subsidies for the well-off, which were engineered, via political lobbying, to favor wealthy individuals and corporations. A lessening of economic inequality in no way spelled a loosening of political inequity.

The falling share of income to labor means that productivity gains no longer translate into fatter pay packets. Instead, a bigger slice of the returns from growth accrue to owners of capital.

Apart from the richest of Americans, income growth stagnated starting in the late 1970s. ~ American economist David Cutler

Between 1982 and 2017, the wealth of the 400 richest people in America increased 29-fold – from $93 billion to $2.7 trillion – while many millions of hardworking citizens remained stuck on an economic treadmill. During this period, the tsunami of wealth didn’t trickle down. It surged upward. ~ Warren Buffett

While America’s super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off. Today 1% of Americans own 37% of the total national wealth. Millions of Americans are struggling to survive. The gap between rich and poor is wider than ever, and the middle class is disappearing. ~ German economist Thomas Schulz in 2010

Even among wage earners, the rich have done vastly better than the rest. The share of income earned by the top 1% of workers has gone up even as the share of income to labor overall share has dropped. Excluding the 1% cream of the crop, the decline in labor’s share of income in the US has declined twice as fast.

(The US federal government mandates a minimum wage level which only brings full-time workers to just above the federal poverty level. About half of the state governments impose a slightly higher minimum wage on employers. Pro-business politicians (Republicans) are against minimum wage impositions, arguing that it costs jobs. This is untrue. Further, the redistribution of income–from business owners to labor–stimulates the economy, as poorly paid workers spend all their wages to survive.)

Men in their thirties have lower wages than their fathers’ generation did at the same age. ~ American political scientists Ron Haskins & Isabel Sawhill

The lower end of American real wages has stagnated for over a half century. Owing to a surfeit of labor, workers entering employment typically make less, adjusted for inflation, than the generation before them: a declining trend in the real entry-level wage rate. This applies more to men than women, who are ever the underpaid gender. American women retail workers make, on average, 28% less than men for the same work. Women’s increasing presence in the labor pool since the 1970s has helped suppress overall wage levels.

Since the late 1960s, every new American generation has made less in median lifetime income than the previous one, and it all starts at age 25. ~ Turkish-American economist Fatih Guvenen

Mobility has fallen sharply over the past half century: from ~90% for children born in 1940 to 50% for children born in the 1980s. ~ Indian American economist Raj Chetty et al

In 1978, American men made an average income of $45,879. In 2015, the average was $700 less (in inflation-adjusted dollars), and that figure hides a gross discrepancy between those at the top and the masses below.

While the income of 90% of American workers has stood still since 1973, incomes tripled for those in the top 10%.

We cling to the myth of meritocracy. ~ American economist Robert Frank

The top-earning 400 US households increased their income by 20% in 2014 (over 2013) and paid an average 2.3% in income taxes. Those that made the list raked in at least $126.8 million.

Taking tax evasion into account increases the rise in inequality markedly. ~ Norwegian economist Annette Alstadsæter et al

In 1979, 33% of American profits went to the richest 1%. Today it is nearly 60% and rising.

The United States has the highest rate of income inequality among Western countries. The $1.5 trillion in tax cuts in 2017 overwhelmingly benefited the wealthy and worsened inequality. In 2018, the United States had over 25% of the world’s 2,208 billionaires. There is thus a dramatic contrast between the immense wealth of the few and the squalor and deprivation in which vast numbers of Americans exist.

For almost 5 decades the overall policy response has been neglectful at best, but the policies pursued over the past year seem deliberately designed to remove basic protections from the poorest, punish those who are not in employment and make even basic health care into a privilege to be earned rather than a right of citizenship. ~ the United Nations in 2018

After narrowing from 1940 to the mid-1970s, the median black-white earning gap in the US has since grown as large as it was in 1950. ~ American economists Patrick Bayer & Kerwin Charles in 2018

Meritocracy is a myth. Social systems that reward through wealth, and which increase inequality, don’t aid social mobility, and people pass on their privilege to their children. ~ English sociologist Jo Littler

◊ ◊ ◊

You can never be too rich or too thin. ~ English Duchess Wallis Simpson

The Duchess of Windsor had a point: people who make a surfeit of income report being happier than those who struggle economically.

Money does not buy happiness, but at least you can suffer in comfort. ~ American author Lillian Bernstein

Societal Impact

Inequality has a lot of subtle and pernicious effects on societies. ~ American evolutionary anthropologist Tim Kohler

The rich getting richer has had little effect on those who can only dream of not working until the day they die. It is those who expect to retire by retirement age that are most rankled by the excesses of the 1%.

One of the things wealth gives you is safety and security. As labor markets become more insecure, and as public safety nets become more porous, the role of private safety nets – wealth – becomes even more pronounced. ~ Fabian Pfeffer

The Upper Middle Class

I’ve been told ever since a boy that’s what one ought to be: a part of the UMC. I’ll pretend to be liberal, but I’ll still support the GOP, as part of the UMC. ~ American singer/songwriter Bob Seger in the song “UMC” (1974) (The GOP is the “Grand Old Party”: the American reactionary, pro-corporate Republican party.)

In the 21st century, the incomes of the American upper middle class, excluding the top tier, have not grown much. The income premium earned by those with a top university degree has plateaued.

This economic stagnation has invigorated the patrimonial upper middle class (UMC) to maintain their social position by resisting any roll back in political and economic privileges. Many of the mechanisms by which the protected class defends itself fuel a sense of precarity.

The value added of an Ivy League degree relative to a high-quality public university may be small, but desperate UMC families may feel the need to shell out for the more-expensive option. Political candidates that pledge to retain the privileges of the middle class – of which the top layer receive the sweetest slice – must be paid for.

High house prices in prosperous neighborhoods shut out those outside the protected class, and simultaneously add to the pressure to stay on the rich side of the divide. For those in the American upper middle class, these are the trenches of class warfare.

The United States is more calcified by class than Britain, especially toward the top. ~ British-American economist Richard Reeves

The protections erected by the upper middle class aim to raise, or at least maintain, the share of income captured by them, at the cost of a smaller share for those below. For those in the UMC, minimum wages are not an issue: it’s maximum wages that worry them. Those in the upper middle class want to hoard the American dream.

As America has become more and more unequal, affluent parents have become desperate to pass on their privileges to their children and avoid downward mobility at all costs. ~ American sociologist Jerome Karabel

The Middle Class

To be middle class today is to be in an edgy position. ~ English historian Simon Gunn

The British and American middle class are a dual portrait of struggle to make ends meet. In both the UK and US, the middle class isn’t just being squeezed: it is shrinking and sinking.

In 2018, with a booming economy, an official government survey found that 39% of US adults could not meet a $400 emergency expense without borrowing or selling something they owned. 64% could not cover 3 months of expenses. 25% skipped necessary medical care in the previous year because they could not afford it. 17% of Americans cannot pay their monthly bills in full.

The British middle class are no better-off. The average working Brit suffered a 10% pay cut in real terms in the 2008 Great Recession, and the median salary is not expected to get back to where it was in 2010 until 2020.

There is an ongoing hollowing-out of the middle ranks in the British job market. People at the top end are doing OK, but the rest feel that their lives are getting worse. ~ English labor-market maven Stephen Overell

Poverty

The greatest of evils and the worst of crimes is poverty. ~ Irish playwright George Bernard Shaw

Poverty and inequality are disturbingly widespread. 1 in 5 people live in absolute poverty. Even in rich countries, such as the US, 1 in 6 people live in (relative) poverty. ~ Ha-Joon Chang in 2014

Globally, poverty is worse than reckoned. World Bank estimates are widely used in the international community to figure poverty. The World Bank uses an arbitrary ‘dollar a day’ to define poverty, which is not a reasonable metric for basic human needs. A study of children in Vanuatu found that only 5% lived in poverty according to the ‘dollar a day’ standard, but 17% live in poverty when considering basic needs.

The current international poverty line seriously underestimates global poverty levels. If the World Bank had used a poverty line grounded in basic needs, the number of poor people in the world would increase by as much as 30%. ~ English sociologist Christopher Deeming

Over 45 million Americans were impoverished in 2016 (14%). That rate is much higher for teenagers and the elderly.

Abject poverty grossly understates the inequity of American society: 43% (140 million) barely get by. The so-called ‘middle class’ – working to do their best – is on the bleeding edge of poverty.

The only explanation that makes any sense are structural shifts. ~ American sociologist Deborah Thorne

Many older Americans are a single financial mishap away from destitution. From 1991 to 2016, the number of Americans aged 65–74 who filed for bankruptcy leapt 204%.

The people who show up in bankruptcy are always the tip of the iceberg. ~ American law professor Robert Lawless

Inequity has widespread societal effects beyond the sheer economics of depriving people of income, education, and employment opportunities because they were not born into the right family. Inequality is the wellspring of property crime, and it takes a severe toll on the health of the underclass.

Economic insecurity has led to widespread anxiety within the population, with greater numbers of households struggling to stay afloat. Hopes and dreams for many ordinary Americans have been getting further and further out of reach. ~ American sociologist Mark Rank

Millions of poorly educated Americans will have a shorter life span than the previous generation as they succumb to despair. Meanwhile, in the top 1/10th of 1% now owns almost as much wealth as the bottom 90%. 58% of all new income is going to the top 1%. ~ Bernie Sanders in 2016

If you handpick services and goods where there has been dramatic technological progress, then the fact that poor people can consume these items in 2014 and even rich people couldn’t consume them in 1954 is hardly a meaningful distinction. That’s not telling you who is rich and who is poor, not in the way that Adam Smith and most everyone else since him thinks about poverty. ~ American economist Gary Burtless

American men in the top 10% of income earners on average live 14 years longer than those in the bottom 10%. For the wealthiest American women versus the poorest 10%, the longevity gap is 13 years. Life expectancy in the US is dropping because of economic stress on the vast majority of its population.

The immense wealth in the United States stands in shocking contrast with the conditions in which vast numbers of its citizens live. About 40 million live in poverty, 18.5 million in extreme poverty, and 5.3 million live in Third World conditions of absolute poverty. It has the highest youth poverty rate, and the highest infant mortality rates. Its citizens live shorter and sicker lives compared to those living in all other rich democracies. ~ United Nations in 2018

Geographically, American poverty is becoming more isolated and more concentrated. In 2000, 11.4% of all Americans lived in high-poverty neighborhoods; a rate which climbed to 14.1% in 2014. For black Americans, those figures are 80% higher.

America is evolving into durable islands of wealth and poverty. ~ American economist Benjamin Austin et al

There is a 35-year difference in life expectancy between the richest US neighborhoods and the most deprived. ~ American sociologist Abigail Sewell

Racism is a significant factor in American inequity. Despite ostensible legal equality, blacks and other minorities suffer abiding indecency from the white majority. This animosity affects education, employment, financing, housing, and other aspects of life. The economic consequences, which go back for centuries, are profound.

The historical pervasiveness and contemporary persistence of racism in America is a scandalous state of affairs to race-based economic inequality. ~ American law professor Paul Campos

The racial wealth gap is deeply rooted in American society. ~ American economist Caroline Ratcliffe

A lot of social, educational, and economic resources are tied to neighborhoods. Concentrating poverty has consequences for the quality of life now and in the future.

The poor often behave in ways that reinforce poverty. Scarcity leads to attentional shifts. ~ American psychologist Anuj Shah et al

Being poor means coping not just with a shortfall of money, but also with a concurrent shortfall of cognitive resources. The poor are less capable not because of inherent traits, but because the very context of poverty imposes cognitive load and impedes cognitive capacity. ~ Indian behavioral economist Anandi Mani et al

Poverty is a grind on the mind.

When you’re poor, money is not the only thing in short supply. Cognitive capacity is also stretched thin. That’s not to say that poor people are less intelligent than others. The same person experiencing poverty suffers a cognitive deficit as opposed to when they’re not experiencing poverty. It’s also wrong to suggest that someone’s cognitive capacity has gotten smaller because they’re poor. What happens is that your effective capacity gets smaller, because you have all these other things on your mind, you have less mind to give to everything else. ~ Indian economist Sendhil Mullainathan

In 2015, nearly half of American children lived in poverty. Impoverished American youth are the poorest in the developed world. (Child poverty is at a higher percentage than grown-ups because indigent adults breed regardless of their economic condition. On that score, Malthus was on the money.)

Child hunger is a recipe for wasted life potential and societal degradation. 33% of American teenagers did not get enough to eat in 2015.

Food-insecure teens sometimes resort to extreme measures to cope with hunger – from saving school lunches for the weekend or going hungry so younger siblings can eat to stealing or trading sex for money to buy food. The stress of hunger and poverty takes a tremendous toll. ~ American sociologist Susan Popkin

○○○

One outcome of the stresses that come from inequity has been a rising rate of suicide. In 2016, 45,000 Americans killed themselves; most had no mental health issues. Suicide is a leading cause of death in the US.

As the most vocal and vigorous proponent of capitalism, the US is noteworthy in its exaltation of wealth and its indifference to inequity; but the trend is universal. 70% of the world’s populations live in countries where economic disparity is growing.

Rising inequality is widespread across rich countries in spite of differences in national policies and in spite of aggressive welfare policies in some countries that seek to limit it. ~ Scottish American economist Angus Deaton

Political Implications

The political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy. ~ Angus Deaton

Morality aside, a continuing worry over inequity has been the potential for vivifying malcontent among the have-nots, and so fomenting social unrest.

Poverty is the parent of revolution and crime. ~ Aristotle

People’s motivation to rationalize and defend the status quo is a major barrier to societal change. If people knew how unlikely it is to realize the American dream, they would demand a better system. ~ American social psychologists Martin Day & Susan Fiske

Democracy is founded upon an illusion of equality, at least at the level of opportunity. Shattering that illusion for the general populace could be a revolutionary event: which is exactly what political leaders fear most.

A core tenet of the American ethos is that there is considerable economic mobility. Americans seem willing to accept vast financial inequalities as long as they believe that everyone has the opportunity to succeed. ~ American psychologists Thomas Gilovich & Shai Davidai

Rising income inequality has changed the attitudes and behavior of American voters, sowing resentment, fanning prejudice, and eroding the sense of shared values, shared purpose and shared destiny that once held the country together. ~ American journalist and columnist Steven Pearlstein

The widespread belief in the equality of opportunity is false in every so-called democratic nation. Furthermore, this largely covert institutional discrimination is not limited to a few areas of an individual’s life but is comprehensive and all-encompassing. ~ English psychologist Jim Sidanius & American social psychologist Felicia Pratto in 2001

Those on the political right are notably wrong in their faith that upward economic mobility still thrives in America.

Conservatives think that there is more economic mobility in the United States than liberals do. ~ Thomas Gilovich & Shai Davidai

Americans generally still believe that there is more upward mobility than downward. Further, they overestimate upward mobility and underestimate downward mobility. Poor folk believe there is more mobility than the wealthy do: hope in the hopeless, and a richer sense of reality among the rich.

The rise in US inequality has been accompanied by increasing hardship among those at the bottom. Americans as a whole do not seem as concerned as you might expect about this increase in income inequality. A strong faith in the possibility of upward mobility (along with relatively little concern about downward mobility) dampens people’s reactions to prevailing economic inequality. ~ Thomas Gilovich & Shai Davidai

In 2010, there were 650,000 homeless Americans: a visible presence in virtually every city. 46 million Americans were sunk below the poverty line: a 50% increase since 1980. Homelessness and poverty worsened from 2010 to 2018, even as the economy supposedly fully recovered.

By all but the pathologically romantic, it is now recognized that this is not the age of the small man. ~ John Kenneth Galbraith

Only 4% of Americans in the lower middle class ascend to the upper middle class in their lifetimes. That number is lower than almost every other industrialized nation.

The US has the lowest rate of social mobility of any of the rich countries. Zip codes, which are usually reliable proxies for race and wealth, are tragically reliable predictors of a child’s future employment and income prospects. High child and youth poverty rates perpetuate the intergenerational transmission of poverty very effectively and ensure that the American dream is an illusion. The equality of opportunity, which is so prized in theory, is in practice a myth, especially for minorities and women, but also for many middle-class white workers. ~ United Nations in 2018

The rigging of the economic game in the United States has been systematic and systemic. Income mobility – being able to ascend to a higher economic level from that experienced in childhood – dropped by half from 1940 to 1984, and its decline has accelerated since. The salutary American dream of economic mobility has passed into legend.

Globally, only 50% of the offspring born in the 1980s earn more than their parents did at the same age. That’s a sharp fall from 1940, when the figure was 90%.

In 2016, 1/3rd of Americans aged 25–29 lived with their parents or grandparents: the highest percentage since the Great Depression.

The crash of 2008 showed how globalization creates losers as well as winners. In many countries, middle-class wages are stagnant, and politics has become a battle over a shrinking pie. Populists have replaced contests between left and right with a struggle between cosmopolitan elites and angry nativists. ~ English political scientist Mark Leonard

The steepest decline in income and wealth has been in middle-class families. The enfeeblement of the working class has crippling consequences in much of the world, where consumer spending accounts for over 2/3rds of the economic engine.

When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the 21st, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. ~ French economist Thomas Piketty

American voters insensibly registered their malcontent with the status quo in 2016 by electing the demagogue Donald Trump as president: an instance of proverbially hiring the fox to guard the henhouse.

Extreme inequality often leads to the capture of the powers of the State by a small group of economic elites. ~ United Nations

Trump was elected by expressing solidarity with aggrieved, white, blue-collar men and other fools who were gullible enough to believe his boastful lies. As payback, Trump and his plutocratic Republicans passed the most generous tax relief for the wealthy in the history of the republic, while yielding next-to-nothing to the ordinary workers who voted him in. Middle- and lower-class workers even saw their taxes go up while their government-doled benefits dropped.

I play to people’s fantasies. ~ Donald Trump

◊ ◊ ◊

National and ethnic identities are often dug up to distract attention from discontent over income difference. ~ German economic historian Jörg Baten

Mercantile fringe politicians, often blaming immigrants and minorities for their society’s problems, have improved in European and Asian elections for the same reason as Trump: that they may upset the status quo, and provide greater equality – so they claim. Like Trump, these fomenters are not what they advertise themselves to be.

There is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently. ~ Thomas Piketty

◊ ◊ ◊

Sustained inequality may not be as destabilizing as assumed. Given the persistent ignorance and indifference of the masses, the political implications of deep and abiding inequity in modern societies may be incidental. After all, money is latent power, and poverty is powerlessness.

The more unequal a society, the less likely its citizens are to notice. Paradoxically, citizens in some of the most unequal countries think theirs is the paragon of meritocracy. ~ Dutch economist and sociologist Jonathan Mijs