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Sunday, October 20, 2013

Inequality - AGAIN

Did you ever have one of those periods where everything seems to come together on one idea? I've been sitting here in the North Woods of Wisc., reading and perusing the Internet. I've come across some very interesting things about inequality in our society. You might also find them of interest. These are TED talks, but I have found that the YouTube version is a bit more consistent - and the commercials less annoying!

The Disparity Problem is BAD
This first talk, by a Canadian, Chrystia Freeland, explains how great the inequality is these days. The top 1% have bunches of stuff, mostly, it seems, at the expense of the bottom 10 to 20% and the rest of us in the middle class.  We are growing wealth and productivity - but that wealth is NOT being spread about. It is captured by the very top. She makes the point very well.
She also talks about the risk of instability in our society if this is not addressed.

But We Can Fix it
She closes with some words about what we might do to correct this problem. Taxation, investment, etc. But the key thing she is looking for is a major social innovation.  We solved these problems once - after the industrial revolution - although it took us 100 years and the pits of the Great Depression. We need to do it again! Hopefully we will get to it before the wheels totally come off this time.
 
Disparity Correlates Negatively to Health and Wellbeing in the Society
The other talk is even more interesting. This fellow, Richard Wilkenson, uses data - statistics - to show that societies with large income disparities have worse health, higher murder rates, etc., Income inequality is divisive and corrosive. It threatens the stability of the society.

Some surprises in there.

The speaker starts with the surprising fact that income inequality ACROSS nations by GNP does not correlate with any human health factors. But within a nation, income inequality correlates very closely with every measure of human health and social well being.  Even more surprising, it does not seem to matter HOW a society gets to a lower income disparity. Norway does it through taxation, and Japan in a totally different fashion. Both have the benefits of a healthier society in all categories. The speaker cites 200 different studies.

At the end of this talk, he makes the point that I have been wont to repeat - we are all in this together. In a society with great income disparity, the folks at the very top, the very richest, suffer as well. They are less healthy than the comparable level in a society with a lower level of disparity.

He makes a conjecture as to the causation - the stress of the society, the class structure, the lack of respect drives the health and behavior. I think he is on to something there. The frustration of the American Dream denied is a big problem in our world. We are healthier and better off where that disparity is not so obvious.

I know it's a lot of stuff. Let me know what you think.

Monday, October 14, 2013

Inequality is a Choice - Joseph Stiglitz

This is an interesting article by Joseph Stiglitz.
If you are not familiar with the author, he is a world renowned economist –  Noble prize winner, and one of the founders of the approach called “behavioral economics”.
 https://en.wikipedia.org/wiki/Joseph_Stiglitz
My point, he is a wise and learned fellow among economists, and we would do well to pay attention to what he says.

I have been reading a bit in economics of late. If you have been following along here at all, you would know that I tend to think that economic disparity is the result of our cultural mindset – our world view. Dr. Stiglitz differs on that. In this little piece, he makes it clear that a large part of our economic disparity comes from the actions of our government. Given that our form of government is drawn from our cultural world view – that makes some sense. But  . . . the problem is that the once champion world view that dominates the US culture, seems to have led us to a situation where our government is now inhibiting wealth creation, and fostering rent seeking. Our sense of “individualism” has finally triumphed over our “commonality”, and we are heading down the path to increased poverty comparable to that of many developing nations.

I have despaired of changing world views, but there is no reason we can’t change our government. We have to get back to the sense of commonality, the common good. And let go of this protection of the richest and most powerful.

As he points out in this article, although income inequality had been falling around the globe and in the US, that trend has stopped and reversed. The US, in particular, is leading a new wave of greater and greater income inequality. In virtually all developed nations – there are a few exceptions – income inequality has grown enormously, with the top 10% benefiting immensely, and the bottom 10% become even worse off. Global poverty and US poverty is growing.

Some would argue that the trend is automatic. They would say it is the result of globalization and free movement of capital and services. But Stiglitz points out that it is the result of conscious choices of our government. In the US, it is the result of tax breaks for the rich, easing of regulations on the financial sector, and the lack of adequate investment in our education and health care infrastructure. This inequality is eroding our democratic system. It is the root cause of our “recession” – the lack of investment, and the lack of disposable income in our middle class. And the touted “austerity” programs are only making the problem worse.

American “rent seeking” has gone global. That is where those who can seek to benefit by manipulating the system, by getting a larger share, not by making the system work better, or the pie larger – truly growing wealth. Avoiding taxes is one modest example – as even the best and brightest do in major ways. Apple’s tax avoidance is legendary. While they benefit enormously from government programs which create the technology they use, they pay as little as possible in taxes, using all the tax avoidance schemes created by our fearless leaders.

The worst outcome is the poverty of our children. In the US, 1 in 4 children live in poverty. In Spain and Greece, it is 1 in 6. In Australia, Britain and Canada, 1 in 10. We are a disgrace among developed nations!


Bottom line – we have chosen this path, and the outcome will not be a place where any of us want to live – even those at the top. As Red Green says, we are all in this together. If we do not increase our investment in ourselves, the few rich at the top will have to find someplace else to live. They won’t like it here anymore than the rest of us.