The more I think about this, the less I think the issue is the gap per se (though it does seem to have some bad consequences) as much as the methods/systems that help some people and companies amass outsized wealth restrict a lot of people's ability to achieve a dignified standard of living. (You could argue starting with the system of money itself, which has organized society in a way where sometimes it's impossible for someone to secure food / shelter etc without having to depend on a job that gives them access to currency in the first place)
Well yes, and I do think we should put some regulations in place to make sure the top are not so disproportionately paid from the bottom. But it is also true that the more companies "amass outsized wealth" the better paid the bottom gets too.
Yes, by like absolute currency terms. But I'm not so sure that their "lived dignity" or quality of life (hard to quantify, I know) gets better. I THINK it does? Because access to material goods definitely improves...but I'm not 100% sure. In the US especially we are seeing certain quality of life measures like life expectancy, perceptions of satisfaction, mental health, start to worsen despite peoples wages nominally rising over the years.
I think of the incentive for the wealthy to push people into desperate situations in order to be able to secure cheap labor, which some sociologists and historians name as the driving motivator for the invention of racism as a concept and the ensuing systems of slavery, Jim Crow laws, and now our wildly oversized prison population.
Interestingly though, in a strong economy, the wealthy are less able to push people into desperate situations because those people could easily get a job elsewhere. We are seeing that right now in the US where a lot of companies are struggling to hire anyone good, especially since they have to pay everyone so much more to hire or keep them. It's a job seeker's market right now which means it's very hard for a company to mistreat someone without consequences!
Like Larry I appreciate your willingness to write about the nuance that is easy to overlook, in this case the simple fact of stats being used to support a thesis that should not be paired together. This takes a ton of work, and I appreciate your willingness to do it!
I like the fact that you’re willing to create a post that goes against the zeitgeist of the inequality story-line, even if you’re mostly agreeing with it (and I’m someone who totally agrees with it). We live in a culture where you have to be all in on one side or another and if you say anything that undermines your side, you’re letting down the team. But your post made me think more about the messaging that goes along with fighting inequality.
I’m particularly thinking about the idea that “billionaires shouldn’t exist.” I’m all for taxing billionaires more than we do here in the US so we can have a functioning society. If that means they’ll be taxed so much that they’re no longer billionaires, then fine! But I don’t think that should be the end goal in itself. (I still need to read your essay about your alternative idea to address inequality.)
I do think there’s a link between the rich getting richer and the poor getting poorer when you look at the policies most of the rich in this country support, like abolishing or suppressing the minimum wage, fighting unionization, pushing for a more regressive tax code, scaring people about universal healthcare, etc. And globally, at least historically, the profits of Dole and the oil companies were linked to the immiseration of people in Central America and Africa. But maybe that’s changing? I’m not sure!
I do think a wealth tax and higher corporate tax can help with inequality in the US (it worked in the past!), but I also want to see the money better distributed up front. As in, don't just tax the rich and give the money to the government to redistribute as they see fit, but pay the rich less and their workers more upfront.
In either case, capitalism is the system that will make those at the bottom wealthier. So to demonize it and the people that got "too rich" from it seems antithetical to that goal! I like your approach, don't hate the player, fix the game!
"That some should be rich, shows that others may become rich. Let not him who is houseless pull down the house of another; but let him build one for himself." --A. Lincoln, 1864
Elle, thanks for following up! I do think the increased wealth of people at the top does matter for a bunch of reasons, but one that has come to my attention recently - because it's increasing the gap, not just between the poorest and the richest, but also between the upper middle class and the billionaires. Peter Turchin speaks to this, as I outline in my post that you refer to - mass civil unrest occurs when this gap becomes too apparent.
I definitely agree that we need to fix inequality domestically. In the US and many other wealthy countries we can and should fix wealth distribution. My contention here is that Oxfam is using global numbers to make that point. And if you are comparing the US to Africa, it's not a matter of fixing distribution. It's a matter of creating countries that actually have economies!
Even with all of our wealth inequalities, if you're in the bottom 8.3% of the US (making $15,000 a year or less) you're still in the top 27% of the world. So we should fix our inequalities domestically, but we also need to build more economies like ours globally. I'm not saying we need to have trillionaires, but the countries that are producing them are still much much better off. We need more economies like that. (Not less.)
"But wealth is not the problem—poverty is—and we need to stop pairing them together as if wealth is the cause of poverty."
Yes, in theory, but in practice, I don't know that you can completely separate them . . . I think it's an empirical question.
I don't claim to have the answer, but I do think that even if the Oxfam framing is an oversimplification, it's worth paying attention to some of the research that suggests dangers of increasing inequality (even if poverty is decreasing).
Economic research shows that high wealth inequality coincides with lower intergenerational mobility, meaning the presence of a lot of really rich people goes hand in hand with ordinary people struggling to do better financially than their parents did — an observation dubbed the Great Gatsby Curve. According to research by City University of New York economist Miles Corak, wealth chasms make it more likely for “family background to play a stronger role” in determining your success in adulthood, with your “own hard work playing a commensurately weaker role.”
For all that America is championed as a land of opportunities and bootstraps, the hundreds of billionaires that have popped up here since the ’80s may actually mean your hustle and grind matter less today.
According to economist Salvatore Morelli, director of the GC Wealth Project, the US once had a relatively low incidence of inheritance compared to other developed countries, but it has started to shift to a “European level” of inheritance. The gap between the haves and have-nots shapes “the opportunity and the chances that people start with in their life,” he tells Vox. Examples of unequal opportunities include things like education: You might have the grades to attend an Ivy League school, but if someone’s parent is a billionaire who can outspend yours to hire the most expensive college consultants and even make a generous donation to the school, that heir may just snatch your spot. With an exploding number of ultrarich families in the US, the bar for having a chance at financial success — even a slim chance — keeps getting raised.
But I should add: there is a difference between domestic inequality and global inequality. The effects you mention are specific to domestic, whereas the Oxfam report is specifically talking about global inequality where those effects (one person getting into a school vs another) aren’t really the problem.
That's true. I have concerns about global inequality as well, but it is a slightly different scenario.
But . . . I started with inequality because, as a simple mathematical fact if you're worried about inequality you need to be concerned with both the rich and the poor; I also think you're a little too dismissive about the concern of "fairness." For example, I know Brad DeLong has made this point (I was originally looking for a different post; written as a socratic dialogue which I can't find at the moment): https://braddelong.substack.com/p/why-do-economists-ignore-the-greatest-1d7
-------------------------------------------
The utilitarian social welfare function is Ωu = U(1) + U(2) + U(3)… The competitive market economy maximizes a market social welfare function Ωm = ω(1)U(1) + ω(2)U(2) + ω(3)U(3)…, where the ω(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)—indeed, if lifetime utility is log wealth, then ω(i)=W(i). Market failures drive wedges between what the economy achieves and what it could achieve. There are massive, massive differences between the Ωu that is the true social welfare function and the function Ωm that the well-working market maximizes.
Why isn’t the unequal distribution of ex ante expected lifetime income—inequality of opportunity—conceptualized by us economists as the greatest of all market failures? And why isn’t the distribution of political power that creates & preserves a property order of unequal wealth seen as the greatest of all “regulatory capture by a special interest group” flaws in the working of society, economy, and the state?"
I love Brad DeLong but I can't understand him when he talks in numbers? I think he is making a point about market failure? Which is definitely a thing (and the topic of my next post).
Since you didn't respond, I'm removing this comment. I treat my comments section as a literary salon where we can discourse and debate different ideas, and I generally try to avoid (and remove) hot takes that don't engage in or add to productive discussion. You are welcome to reply again if you would like to respectfully address how this idea could be improved.
The more I think about this, the less I think the issue is the gap per se (though it does seem to have some bad consequences) as much as the methods/systems that help some people and companies amass outsized wealth restrict a lot of people's ability to achieve a dignified standard of living. (You could argue starting with the system of money itself, which has organized society in a way where sometimes it's impossible for someone to secure food / shelter etc without having to depend on a job that gives them access to currency in the first place)
Well yes, and I do think we should put some regulations in place to make sure the top are not so disproportionately paid from the bottom. But it is also true that the more companies "amass outsized wealth" the better paid the bottom gets too.
Yes, by like absolute currency terms. But I'm not so sure that their "lived dignity" or quality of life (hard to quantify, I know) gets better. I THINK it does? Because access to material goods definitely improves...but I'm not 100% sure. In the US especially we are seeing certain quality of life measures like life expectancy, perceptions of satisfaction, mental health, start to worsen despite peoples wages nominally rising over the years.
I think of the incentive for the wealthy to push people into desperate situations in order to be able to secure cheap labor, which some sociologists and historians name as the driving motivator for the invention of racism as a concept and the ensuing systems of slavery, Jim Crow laws, and now our wildly oversized prison population.
Interestingly though, in a strong economy, the wealthy are less able to push people into desperate situations because those people could easily get a job elsewhere. We are seeing that right now in the US where a lot of companies are struggling to hire anyone good, especially since they have to pay everyone so much more to hire or keep them. It's a job seeker's market right now which means it's very hard for a company to mistreat someone without consequences!
Like Larry I appreciate your willingness to write about the nuance that is easy to overlook, in this case the simple fact of stats being used to support a thesis that should not be paired together. This takes a ton of work, and I appreciate your willingness to do it!
Thanks Brian! There is certainly a lot nuance here.
Well said!
I like the fact that you’re willing to create a post that goes against the zeitgeist of the inequality story-line, even if you’re mostly agreeing with it (and I’m someone who totally agrees with it). We live in a culture where you have to be all in on one side or another and if you say anything that undermines your side, you’re letting down the team. But your post made me think more about the messaging that goes along with fighting inequality.
I’m particularly thinking about the idea that “billionaires shouldn’t exist.” I’m all for taxing billionaires more than we do here in the US so we can have a functioning society. If that means they’ll be taxed so much that they’re no longer billionaires, then fine! But I don’t think that should be the end goal in itself. (I still need to read your essay about your alternative idea to address inequality.)
I do think there’s a link between the rich getting richer and the poor getting poorer when you look at the policies most of the rich in this country support, like abolishing or suppressing the minimum wage, fighting unionization, pushing for a more regressive tax code, scaring people about universal healthcare, etc. And globally, at least historically, the profits of Dole and the oil companies were linked to the immiseration of people in Central America and Africa. But maybe that’s changing? I’m not sure!
TL;dr: Tax the rich, don’t hate the rich.
I do think a wealth tax and higher corporate tax can help with inequality in the US (it worked in the past!), but I also want to see the money better distributed up front. As in, don't just tax the rich and give the money to the government to redistribute as they see fit, but pay the rich less and their workers more upfront.
In either case, capitalism is the system that will make those at the bottom wealthier. So to demonize it and the people that got "too rich" from it seems antithetical to that goal! I like your approach, don't hate the player, fix the game!
"That some should be rich, shows that others may become rich. Let not him who is houseless pull down the house of another; but let him build one for himself." --A. Lincoln, 1864
Wow, that's a good quote!
Elle, thanks for following up! I do think the increased wealth of people at the top does matter for a bunch of reasons, but one that has come to my attention recently - because it's increasing the gap, not just between the poorest and the richest, but also between the upper middle class and the billionaires. Peter Turchin speaks to this, as I outline in my post that you refer to - mass civil unrest occurs when this gap becomes too apparent.
I definitely agree that we need to fix inequality domestically. In the US and many other wealthy countries we can and should fix wealth distribution. My contention here is that Oxfam is using global numbers to make that point. And if you are comparing the US to Africa, it's not a matter of fixing distribution. It's a matter of creating countries that actually have economies!
Even with all of our wealth inequalities, if you're in the bottom 8.3% of the US (making $15,000 a year or less) you're still in the top 27% of the world. So we should fix our inequalities domestically, but we also need to build more economies like ours globally. I'm not saying we need to have trillionaires, but the countries that are producing them are still much much better off. We need more economies like that. (Not less.)
https://www.statista.com/statistics/203183/percentage-distribution-of-household-income-in-the-us/
https://wid.world/income-comparator/
"But wealth is not the problem—poverty is—and we need to stop pairing them together as if wealth is the cause of poverty."
Yes, in theory, but in practice, I don't know that you can completely separate them . . . I think it's an empirical question.
I don't claim to have the answer, but I do think that even if the Oxfam framing is an oversimplification, it's worth paying attention to some of the research that suggests dangers of increasing inequality (even if poverty is decreasing).
I find _The Spirit Level_ findings that greater inequality contributes to worse social outcomes (on a number of metrics) interesting. They don't demonstrate a cause, but there a number of correlations: https://equalitytrust.org.uk/sites/default/files/SpiritLevel-jpg_0.pdf
There's some evidence that high amounts of inherited wealth make society less dynamic: https://www.vox.com/2024/1/22/24043104/billionaire-get-rich-people-parents-generational-wealth-transfer-trust-fund
________________________________________________
Economic research shows that high wealth inequality coincides with lower intergenerational mobility, meaning the presence of a lot of really rich people goes hand in hand with ordinary people struggling to do better financially than their parents did — an observation dubbed the Great Gatsby Curve. According to research by City University of New York economist Miles Corak, wealth chasms make it more likely for “family background to play a stronger role” in determining your success in adulthood, with your “own hard work playing a commensurately weaker role.”
For all that America is championed as a land of opportunities and bootstraps, the hundreds of billionaires that have popped up here since the ’80s may actually mean your hustle and grind matter less today.
According to economist Salvatore Morelli, director of the GC Wealth Project, the US once had a relatively low incidence of inheritance compared to other developed countries, but it has started to shift to a “European level” of inheritance. The gap between the haves and have-nots shapes “the opportunity and the chances that people start with in their life,” he tells Vox. Examples of unequal opportunities include things like education: You might have the grades to attend an Ivy League school, but if someone’s parent is a billionaire who can outspend yours to hire the most expensive college consultants and even make a generous donation to the school, that heir may just snatch your spot. With an exploding number of ultrarich families in the US, the bar for having a chance at financial success — even a slim chance — keeps getting raised.
---------------------------------------------------------------
Fully agree that inequality is still an issue. We definitely still need to fix that!
But I should add: there is a difference between domestic inequality and global inequality. The effects you mention are specific to domestic, whereas the Oxfam report is specifically talking about global inequality where those effects (one person getting into a school vs another) aren’t really the problem.
That's true. I have concerns about global inequality as well, but it is a slightly different scenario.
But . . . I started with inequality because, as a simple mathematical fact if you're worried about inequality you need to be concerned with both the rich and the poor; I also think you're a little too dismissive about the concern of "fairness." For example, I know Brad DeLong has made this point (I was originally looking for a different post; written as a socratic dialogue which I can't find at the moment): https://braddelong.substack.com/p/why-do-economists-ignore-the-greatest-1d7
-------------------------------------------
The utilitarian social welfare function is Ωu = U(1) + U(2) + U(3)… The competitive market economy maximizes a market social welfare function Ωm = ω(1)U(1) + ω(2)U(2) + ω(3)U(3)…, where the ω(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)—indeed, if lifetime utility is log wealth, then ω(i)=W(i). Market failures drive wedges between what the economy achieves and what it could achieve. There are massive, massive differences between the Ωu that is the true social welfare function and the function Ωm that the well-working market maximizes.
Why isn’t the unequal distribution of ex ante expected lifetime income—inequality of opportunity—conceptualized by us economists as the greatest of all market failures? And why isn’t the distribution of political power that creates & preserves a property order of unequal wealth seen as the greatest of all “regulatory capture by a special interest group” flaws in the working of society, economy, and the state?"
I love Brad DeLong but I can't understand him when he talks in numbers? I think he is making a point about market failure? Which is definitely a thing (and the topic of my next post).
This was the other post I was looking for, and that his point is that the market is designed to maximize the preferences of people weighted by their wealth; but given unequal wealth that makes for a poor allocation of resources: https://www.bradford-delong.com/2016/02/a-non-sokratic-dialogue-on-social-welfare-functions-hoisted-from-the-archives-from-2003.html
OH, yes that's true.
Since you didn't respond, I'm removing this comment. I treat my comments section as a literary salon where we can discourse and debate different ideas, and I generally try to avoid (and remove) hot takes that don't engage in or add to productive discussion. You are welcome to reply again if you would like to respectfully address how this idea could be improved.