Monday, March 11, 2013

Wealth Inequality in America Is Nowhere Near As Problematic As It Seems

Wealth inequality: another example of a politically charged phrase. The disparity between the poor and the rich is hardly a new source of contention. It's that economic hard times make the gap between the rich and the poor more pronounced and more noticeable. It is understandable to sympathize with the poor person who is scraping by just to make ends meet while showing disdain for the CEO who "makes bank." A YouTube video (see below), entitled "Wealth Inequality in America," has gone viral, and is one of the latest examples of invoking the previously mentioned sentiment. This video outlines how the actual wealth distribution is so different from what we perceive to be or what we would ideally want it to be. Is it fair that the 1% has so much money while the average American works so hard to sustain a living? Is wealth inequality as terrifying as portrayed in this YouTube video, or is it merely the perceptions created by the wealth inequality? Is there something we should do to make the wealth distribution more equitable, and if so, what should that something be?  

In the past, I have discussed the merits of the income inequality argument and how it is not as big of a deal as people were purporting. Wealth inequality is just a variant of the same discussion and same points. Nevertheless, I do want to go over points that the video makes and see what holds up and what does not.

First, the framing of the issue as "wealth inequality" is problematic. People being wealthy isn't the issue; poverty and social dysfunction are the issues here. Wealth is not just a sign that rich people are doing well. Since we don't live in a zero-sum world, everyone derives benefit from the success of wealthy people. Yes, Bill Gates is rich, but that is because he made such strides in the computer industry, and in the process, many individuals have computers. There are numerous examples of this phenomenon, but it's safe to say that the wealthy are not getting wealthy because they're exploiting the "working class"; it's because they create a product that consumers desire. Also, let's consider that the wealthy did not get wealthy at the expense of the poor, which can be observed by the fact that income in real terms has increased since 1979.

Second, this video is a static snapshot measuring people in economic quintiles, not as individuals. Mark Perry makes a good point here: "Sports statistics are kept in a much more rational way than statistics about political issues. Have you ever seen statistics on what percentage of the home runs over the years have been hit by batters hitting in the .320s versus batters hitting in the .280s or the .340s? Not very likely. Such statistics would make no sense because different batters are in these brackets from one year to the next. You wouldn't be comparing people, you would be comparing abstractions and mistaking those abstractions for people." This point cannot be stressed enough because the creator of the YouTube video implies that zero income mobility exists, which is patently false (see video below). Fortunately, much of this inequality is attributable to long-term demographic factors, such as marital status, age, and level of education.

The YouTube video "Wealth Inequality in America" presents the country's wealth in terms of proportions. Not only does this video not state the average wealth [or income] by quintile, but the video does not even bother to bring up the point of the quality of consumption. In pre-capitalist times, abject poverty was an inevitability for "the 99%." The ability of the everyday person to have access to an unprecedented, absolute standard of living that exceeds that of what people like Queen Elizabeth I or Andrew Carnegie had. Although we might take things like the microwave, dishwasher, television, computer, or cell phone for granted, these conveniences make our lives much more luxurious and comfortable than we realize.

Watching the YouTube video "Wealth Inequality in America" might invoke you to want to have a more redistributive wealth system. But how about we go after the collusion between Big Government and Big Business that provide the rich with the exemptions that exacerbate the wealth inequality? How about going after "zero-sum" policies like minimum wage, unemployment benefits, or Social Security that make it more difficult for the poor to escape the poverty trap? Instead of demonizing wealth, how about we ask ourselves what can be done to help the poor without sticking it to the rich?


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