Rising Economic Inequality…Does it Matter?

A new report from the Economic Policy Institute shows rising levels of income inequality in all fifty states. From 1979 to 2011, the top 1% saw their income rise 128.9%, while the bottom 99% saw their income increase by a mere 2.3%. To see how your state compares...Try this interactive from the Economic Policy Institute.

My friend and fellow futurist/scifi fan John Mauldin weighs in on the rising use of the word "inequality." He starts with what former Treasury Secretary Larry Summers was getting at in last week’s Financial Times op-ed:

"The share of income going to the top 1 percent of earners has increased sharply. A rising share of output is going to profits. Real wages are stagnant. Family incomes have not risen as fast as productivity. The cumulative effect of all these developments is that the US may well be on the way to becoming a Downton Abbey economy."

Mauldin comments: "That thinking assumes that if income inequality is rising, the top 1% is getting richer at the expense of the working class, because it assumes production still heavily exploits the relatively unskilled labor that most Americans can provide through hard work. It does not discriminate between value-added labor and value-added information and innovation. As I argued three weeks ago, the gains from the Information Age have been unevenly distributed throughout the economy. This is a structural problem in the sense that the productivity gains from the first two Industrial Revolutions are essentially thoroughly distributed through the economy. All workers saw their incomes increase along with increasing productivity for the 200 years of the Industrial Revolutions. Yes, entrepreneurs, innovators, and knowledge workers saw their incomes rise faster, but a rising tide of productivity lifted all boats.

"While populist politicians, mainstream economists, and envious market watchers would like to brand billionaire inventors like Tesla CEO and PayPal Founder Elon Musk, Facebook CEO Mark Zuckerberg, or eBay cofounder Pierre Omidyar as modern-day robber barons, they haven’t really robbed anyone. The emerging class of billionaires is creating value that did not exist before they arrived, and they’re doing it with relatively small teams of highly skilled knowledge workers. And they deserve every penny they earn.

"On the flip side, a growing majority of our labor force is responsible for a much smaller percentage of economic output. Their wages are stagnant because more people are competing for a shrinking number of jobs."

Mauldin admits: "Eighty-five people have as much money as do the poorest 3.5 billion. The top 1% have almost half the liquid wealth that has been accumulated in the world. There are 1,426 known billionaires, and gods know how many additional kleptocrats and people who have managed to maintain some semblance of privacy."

== Alas, it does not wash ==

Okay, here's my middle of the road response. I do not mind sharing the world with billionaires.  I know several on a first name basis -- and that plus $4 can get me a small latte. As long as they got their wealth on an even playing field, by organizing teams of engineers to deliver wonderful goods and services, “good on them.”  All of that applies to the tech moguls John gives as examples. Only…

… only John cherry-picked the very very best examples of self-made billionaires who got it all the way I just described.  Notice that he never mentioned the far greater numbers of New Oligarchs who leveraged inherited positions of dominance in an economic sector to squelch fair competition, or  Wall Street cheaters including those in the cartel-cabal of "seated members" of equities exchanges, or those who pay little or no royalties on resources extracted (with subsidies) from public lands, or those who slow down the economy by acting as Adam Smith described lords doing throughout history… passive "rent-seeking." Which utterly demolishes the lie called "supply side 'economics'."

Oh, there's one more thing about the list of examples of good billionaires that John supplied…. they are nearly all Democrats, who have joined Warren Buffett saying "raise my taxes" so that a society that's mostly flat and open can keep supplying the brilliant engineers who made… them… rich.

There is an IQ test for the rising aristocracy.  Can you spell the word "tumbrels" and do you really want to keep reflexively doing what dullard lords did in every other society before ours, pushing for oligarchy -- rationalizing reasons to ignore how much more power angry mobs will have in the coming era, than they did in 1789 Paris?

See my earlier postings: Does Inequality Matter?  and The Contradiction of Capital Markets.

== Help from the good/smart zillionaires == 

Oh, the here are smart moguls out there, who can spell and even see where the world is heading, and act in its (and their own) best interest!  I've long said that we, the people, have an ace up our sleeve, in this generation's struggle to prevent an oligarchic putsch.  That ace is the loyalty -- to our Enlightenment -- of many "good billionaires." See: Things Only a Zillionaire Could Do to Save America.

Those who got rich fairly, via great new goods and services developed by appreciated engineers and artists, and who feel grateful to an open and egalitarian and generally-flat society that is socially mobile and welcoming to fresh competition. Every generation -- especially of Americans -- has had to refresh markets and such, by retaining the competitive creativity of capitalism and the allure of wealth from innovative goods and services -- while finding clever ways to prevent a return to feudalism, while leveling the playing field just enough for the next wave of smart new competitors.  The balancing act recommended by Adam Smith.

See list of billionaires who have committed to the Giving Pledge -- to dedicate the majority of their wealth to philanthropy, including Paul Allen, Bill and Melinda Gates, Joan and Irwin Jacobs, Elon Musk, Nicola Berggruen, Mark Zuckerberg...

Now see this article about how one billionaire retired investor is forging plans to spend as much as $100 million during the 2014 election, seeking to pressure federal and state officials to enact climate change measures. The donor, Tom Steyer, a Democrat who founded one of the world’s most successful hedge funds, burst onto the national political scene during last year’s elections, when he spent $11 million to help elect Terry McAuliffe governor of Virginia.

All right, my admiration seems partisan.  Seems. But I don't like him because he's a democrat.  I like him because he wants to divert destiny from calamity. Because he can see what's in his own self-interest and his kids… and therefore ours. And the only place Rupert Murdoch has ever steered us has been over cliffs.

==And Finally==

There are glimmers of signs that some voices on the right want to move away from the murdochian madness.  I have cited the folks at The American Conservative.  Now comes a glimmer of cogency that was published from the belly of the monster itself -- the American Enterprise Institute, suggesting that conservatism "declare peace on the social safety net."  

I am boggled as much by the venue as by the brash reasonableness of the offer to negotiate and to stop waging war upon the poor..  Could it be that more of the smartest folks on that fringe are starting to realize what Tea Party Populism might become, if the lower middle class starts waking up and turning off Fox?

Does Inequality Matter?

During his State of the Union Address, President Obama brought into the open, a topic we've all been mulling, lately… the worrisome rise in wealth and income disparity.  Especially in the U.S., where two generations have grown up under the blithe illusion (unprecedented in human history) that matters of class are no-big-deal.

Knowing that we're about to discuss the calamitous effects of a rising plutocracy, some of you will click away.

Heck, I understand; we all have "elites" we are worried about, and others we deem to be goodguys.  You conservatives out there have been taught to admire "job creators."  But, before you leave, might I ask: is there some level of wealth disparity that YOU would at last find worrisome?

When one percent owns 80% of the wealth?  When 0.01% owns 90%?  When five people own it all?

== A hard-working oligarchy ==

Okay, we're not quite there yet.  But the combined wealth of the world's richest 85 people is now equivalent to that owned by half of the world's population -- or 3.5 billion of the poorest people -- according to a new report from Oxfam.  And that is roughly equivalent to the disparities seen just before the French Revolution.

It's important to note this does not mean 85 people own half the world's wealth!  Though we all know that is rapidly changing, with both the first and second derivatives of wealth flow pouring toward about 1000 uber-aristocratic families.

Indeed, the same Oxfam report does address the "who owns half" question. The answer? Just 1 percent of the world's population controls nearly half of the planet's wealth, according to a  report released ahead of the World Economic Forum's annual meeting in Davos.

This all boils down to being an IQ Test for zillionaires.

If they are as smart as the "trillies" I portray in Existence, they will start holding deeper meetings, to discuss the trait called "satiability" in order (if for no other reason) not to kill the golden goose and drive the world back toward class radicalism.  Because this era is different from others in crucial ways. The middle class holds every expertise, in technologies that could be used in a mind-spinning variety of science-fictional ways. At such a time, the surest aristocracy intelligence metric will be whether they can act in their own self- interest, in time, keeping that middle class 90% hopeful, mobile and -- if necessary -- sovereign. And ensure that the middle class absorbs ever-greater numbers of the easily radicalized poor.

It is called enlightened self-interest. We see it among the smartest of the rich… the tech billionaires. (Who almost universally say: "raise my taxes!") But will the true heavyweights - those who got rich through favored-deal resource extraction or collusive financial manipulation, or CEO pay circle-jerking through interlocking directorates… or… by inheriting it) follow suit?

Or will they (as they have so far) replicate every impulse of the French aristocracy in 1789?

It's not too late to hold those honest meetings that I described in fiction. Failure to pass this test will prove they are just not smart enough to deserve the lordship that they seek.

== An IQ test already-failed ==

An extensive study into the financial networks that support groups denying the science behind climate change and opposing political action has found a vast, secretive web of think tanks and industry associations, bankrolled by conservative billionaires.  It replicates - sometimes using the very same public relations firms - the successful 40 year delaying tactics used to stave off action on tobacco.  But… why are they doing this?  It cannot just be dullard obstinacy or short term self-interest to preserve the value of coal interests.

Could they be taking short positions on coastal properties? And maintaining buy-calls by convincing fools that the sea levels won't rise?

Are they aware that a radicalized future will look for exactly that kind of correlation, when seeking goats to scape for all the pain?  Are they truly certain that the computers of 2030 will be unable to parse every twisted scheme… or that the homes of the schemers will not be given to climate refugees?  No, sorry.  There are no levels at which they are passing the IQ test.

Alas, that upsets me. Because even though I will fight for the Enlightenment to continue till we reach Star Trek, I admit the odds are always against us. And if the Enlightenment does fail, it would be better to be ruled by genius lords than dismally self-delusional ones.

== Speak of the devils ==

Read about the Koch Network of ultra-secret super Pac manipulation of US politics. Then, if you shrug, ask yourself -- is there ANY degree of this that might make you (or your Fox-watching uncle) suspicious or angry?

See the Koch Network (image from the Washington Post).

And here's a more leftist perspective… Who Buys the Spies? After pages of tedious ranting, this article finally gets to the point, promising to correlate who donates to political campaigns (from the wealthiest moguls and corporations) and who benefits from actions by those recipient politicians. It is hard to read past the leftist bile -- (there truly is danger on that side too, boys & girls: though muted at the moment) -- but still, the topic truly is interesting and I hope they eventually succeed in making a strong case for what we all know must happen… getting (most of the ) money out of politics.

Getting more fundamental. Do you believe that social class correlates with inherent superiority of mind or spirit?  This was the absolute assumption across nearly all past ages and places, relentlessly preached from thrones and pulpits.  Today, we're not supposed to believe in that, but rather  in the self-made person, free of any burdens from the previous generation and able to prove yourself by innovation, work and goodwill alone.

Social Darwinism isn't Dead: Alas, the old way of thinking runs in our blood and is soooo tempting, especially when you are on top.  Now researchers have found that higher social class was associated with greater social class essentialism, or belief that your class derived from inherent birth quality far above any other factors… like luck. This pattern remained even after controlling for political orientation as well as objective measures of a participant’s income and education level, indicating that it’s one’s sense of being above or below others, not one’s actual resources, that drives the result.

Just glance at human history and the endless waves of rationalizations for rule-by-inherited-oligarchy.  This is in our blood, our bones. It is what we do.

== Irony heaped upon Irony ==

See The Geography of the American Dream in The Atlantic. Class rigidity and lack of social mobility have been measured in a study that ranks all 100 largest U.S. cities for the chances of a person born poor to rise from the bottom 20% to the top 20%. All except just three of the bottom 21 cities are in Old Dixie. "In other words: virtually all of this nation’s class-rigidity still remains in the U.S. South, even after the Civil War."

I would quibble with "virtually all"… but it shows how the cultural traits that got a million poor whites to fight (bravely) and die for a few thousand slave owners still lives on.

== And finally… more good news ==

All told, health care costs have been growing more slowly over the last three years than any other time period since 1965. More recently, yearly health cost growth slowed from an average rate of 3.9 percent between 2000 and 2007 to 1.3 percent between 2011 and 2013.

and… nearly 2 billion people have gained access to clean toilets, or at least a decent outhouse, since 1990, the nonprofit UNICEF Thursday.  But toilets aren't only the reason the world is becoming a better place for kids. Children around the globe today have more access to education, medicine and food than they did two decades ago.  Though we still have a long way to go!

Oh, but… 6500 highway bridges in the U.S. in "failing" condition.

And… How the US, during the 2000s, let itself be out maneuvered and cornered out of Rare Earth elements mining and marketing and manufacturing, to become utterly dependent upon China.

So it's mixed and complicated?  get used to it. Complexity is the source of our hope.  Relearn how to negotiate.

On Income Disparity

Thanks, those of you who have been trawling for images of tribal barbeque socializing and GROOVE-style online meetings. Please keep an eye open.

Now back to politics. I am still catching up from my two months of e-hell... probably caused by powerful forces desperate to shut me up, right? ; ) Oh, but now they’ll move on to other methods.....

==Moyers on Income Disparity==

Many of you know that I find Bill Moyers highly annoying. For someone so bright and articulate to be so often mired in cliches... well, it’s a lot like William F. Buckley and George F. Will on the other side. Proof that brains do not equate to wisdom. Still, I read Mayers for gems amid the dross.

What follows is not one of his gems; it is simply a distillation of fact:

“2005 - the editors of The Economist, one of the world's most pro-capitalist publications, produced their own sobering analysis of what is happening in America. They found great and growing income disparities. Thirty years ago the average annual compensation of the top 100 chief executives was 30 times the pay of the average worker; today it is 1000 times the pay of the average worker.

"They found an education system "increasingly stratified by social class" in which poor children "attend schools with fewer resources than those of their richer contemporaries." They found our celebrated universities increasingly "reinforcing rather that reducing" these educational inequalities. They found American corporations no longer successful agents of upward mobility. It is now harder for people to start at the bottom and rise up the company hierarchy by dint of hard work and self-improvement.

 "The editors of The Economist studied all this evidence and concluded - and I am quoting a pro-business magazine, remember - that the United States "risks calcifying into a European-style, class-based society."

People who talk about this are accused of fomenting class warfare. In fact, we are the ones trying to prevent it.

More from Moyers:

 The number of lobbyists registered to do business in Washington has more than doubled in the last five years. That's 16,342 lobbyists in 2000 to 34,785 last year. Sixty-five lobbyists for every member of Congress.

    The total spent per month by special interests wining, dining, and seducing federal officials is now nearly $200 million. Per month.

    But it's a small investment on the return. Just look at the most important legislation passed by Congress in the last decade.

    There was the energy bill that gave oil companies huge tax breaks at the same time that Exxon Mobil just posted $36 billion in profits in 2005, while our gasoline and home heating bills are at an all-time high.

==On the National Anthem==

This from Larry Brilliant: “Pres. Bush's comments that the national anthem should be sung only in English remind me of an earlier Texas governor's equally deeply thoughtful (!!) and related comments, as cited in Jimmy Carter's 1997 Commencement speech at Duke:

"The year I was born, Texas had a governor, a woman named Ma Ferguson. Her husband had been governor before her. There was a debate in Texas, which is still going on by the way, about what to do concerning Mexican immigrants who don't speak English well or at all. The debate was should we let them learn in Spanish, or should we force them to go to classes with English only. Ma Ferguson settled the debate. She held up a Holy Bible. She said, "If English is good enough for Jesus Christ, it's good enough for us."

==Miscellaneous==

Check out “I’m The Decider” (to the tune of “I Am The Walrus”).   Turn it UP!

Bad news for Donald Rumsfeld. Support for the “grumpy half-dozen” is growing.  His troops are siding with the generals.  An Army Times poll has 64% supporting his resignation.

Henrik Hertzberg of The New Yorker sure can write.  Here's his take on the "Revolt of the Generals" (This was pre-Colin Powell.)

PPI Trade Fact of the Week | April 19, 2006 “U.S. Imports Have Grown By 38 Percent Since 2000” - Export growth between 2000 and 2005, by contrast, was an historically feeble 19 percent.