There's a lot of talk nowadays about "distribution of wealth" and even more controversially, "redistribution of wealth." The phrase "redistribution of wealth" is used as ammo by both sides of the political spectrum, whether it's Republicans accusing Obama and Democrats of being Socialists that want to take too much money away from hardworking Americans (3/12 blog post: Obama hates hardworking Americans), or Democrats accusing Republicans of wanting to take money from hardworking Americans and give them to corporations (3/11 blog post attacking Rep Joe Barton).
But let's move away from "redistribution" for a minute, and focus on "distribution." Distribution of wealth simply refers to how wealth is divided amongst groups in a society. The rhetoric of Republicans and Democrats seems to suggest that Americans have a pretty varied view of how wealth is divided in society. So what is the reality of wealth distribution in America? And how do the different parties view it?
Michael Norton of Harvard Business School and Dan Ariely of Duke University conducted a survey in 2005 of over 5500 Americans, chosen at random, and asked them how they viewed the distribution of wealth in America and what they would prefer it to be. The data is a few years old, but I found the results to be rather interesting.
And how do Republicans and Democrats differ? Of particular interest in the following graph is a comparison among "Actual" distribution, "Estimated (Bush Voters)" distribution, "Estimated (Kerry Voters)" distribution, "Ideal (Bush Voters)" distribution, and "Ideal (Kerry Voters)" distribution. To make it a bit easier to see, I created a "spliced" graph that follows the graph from the study.
(source: Nolton & Airely, 2010)
What is the distribution of wealth today? Because it takes time to collect and analyze data, the current data is a few years out of date. It is projected, however, that the current distribution of wealth is more unequal today than it was when this study was conducted in 2005 (Wolff, 2010)
So what does all this mean? Well, I think these findings lead to a couple of interesting conclusions. First, the American public greatly underestimates the inequality of wealth distribution in America. And second, Republican and Democratic voters do not differ substantially in how they believe wealth ought to be distributed. Perhaps, then, we are not as divided as we think we are. Idealistic, I know. Particularly because even if we agree on what ought to be, our opinions on how to get there is likely where we all have different ideas.
Additional References: (Motherjones.com), (Domhoff, 2011), (Garthright Blog)
Very good topic Caitlyn. You make some really good points.
ReplyDeletePeople have different philosophies on wealth. Some see wealth as set divided amount that can be broken into parts, such as you bar chart, or a pie chart. Another way to view wealth is to look at it as an unlimited variable, something that can be grown in all groups, even if mis-distributed. This is better expressed in a line graph showing upward (or downward) trends across different groups.
Wealth into part:
Many people believe the government has certain responsibilities to provide goods and services, such as roads and healthcare, as well as to help those in need. The government has to get that funding somehow, but is the money collected from the population equally (such as equal 12 % tax), or on an algorithm based scale allowing a larger percentage of an individual’s income. In theory, if money is collected more (or given less) to the wealthy, that income is now available to the lower income individuals.
Wealth as growth:
Some would argue if the standard of living is comparatively high and income is increasing for most people, who cares about distribution. If I am living 10% better than I did last year, but my wealthy neighbor is living 50% better than last year, does it really matter? Individuals with this mindset care less about unfair sorts of income disparity, and more about allow more people to move upwards. They would like to boost growth for everyone, even if it means a wider than average rich to poor income gap.
“Particularly because even if we agree on what ought to be, our opinions on how to get there is likely where we all have different ideas.”
How to get there is the reason for debate. Are people who earn more income responsible for helping those who earn less? Should the top earners be making that much income? Is it the government’s responsibility to encourage a more even distribution?
Thanks for sparking up the conversation!
-Ryan
The majority of Americans, whether of low, middle or upper income, are but serfs in a feudalistic society.
ReplyDeleteIndividuals with relatively high income, including elected politicians, are far from the level enjoyed by the few who have attained something more: a disproportionate degree of wealth & influence, wielded through real estate &/or media empires, or emanated from boards of global companies &/or global banks. Those who preside have the power to influence what ultimately shapes our lives & even our mindsets, including funding for advertising we absorb, entertainment we desire, as well as the full range of products we consume, including food. Consequently, the $s swim upstream, by design, pausing in the small eddies of our checking accounts here & there. Nor can one with avg, or even upper income, ensure interests & needs are met in D.C, not with a just a vote, but with a vote & the influential funding of select(ed) politicians & lobbies.
What level of income does it take to shape & mold society so that your interests are met? I submit that if in 2007 your income was > $1billion, you would be among the just 943 individuals in the U.S. with an avg income of 3.7billion, a combined net worth of $3.5trillion, and a net worth that rose 35% over the prior year.
Consider, also, that the U.S. in 2009 had a Gini Index (a measure of wealth inequality) of ~47, where 0 = everyone has the same, & 100 = 1 person has all. The U.S. is behind Brazil & about tied with Mexico. Sweden=23 & Nambia=70.
So it's not just about the upper class bemoaning unfair taxes, as compared to the middle class or the growing # on the street in poverty. It's about the even higher "ruling class" & the influence & power that $3.5trillion brings to less than 1000. Are they responsible for helping those in the U.S. who earn less? No, they are largely responsible for helping them earn less - & keep less. The economy in which we live, the loans, the insurance, & every $ from every purchase, ultimately benefits the 3.5trillion mentioned, with a few generous scraps for the upper class & a few tasty crumbs for the rest. Pick up a Golf Digest, Vanity Fair, New Yorker, tune into Discovery, buy a Random House book or visit reddit.com, & Samuel & Donald Newhouse will thank you, as an example. Now it’s OK with me that Messrs. Newhouse earn $$ for their ability to run a large private company (you can’t own stock & vote proxy), as long as they buy primarily U.S. goods&services, you know, like a Ford, & pay their fair share in taxes - oh wait, the IRS recently alleged a $610million tax shortfall, & imposed a $305million penalty.
If I were worth 3.7billion, how would I deal with a tax rate of 12%, or perhaps a higher rate? Will I go hungry? No, but I might put a few extra miles on my Blohm+Voss yacht & be less able to fund that lobby or buy up large strategic tracts of land, the assets of failing small banks, or precious water rights in Bolivia - I will lose power & influence. I may even be disappointed with elections as I lose my influence in that arena, also. What would happen as a consequence? Better representation in D.C, with $$ for education, please, before our Gini Index approaches Nambia’s.
How would I deal with 12% if I were making 20K/yr? I would spend $2500 less on groceries, or walk instead of the bus.
Let’s also check out http://www.lcurve.org/. On the graph, click "zoom in" & then "zoom out" many times to see the full scale of the income distribution curve. The x-axis represents the U.S. population in order of increasing income, & the y-axis the amt of income/individual/year, scaled as the height a stack of $100 bills it would take to total that income. The point is clear: wealth distribution is grossly skewed to the far end.
The accumulation of wealth among the few, derived from the economy & work of the many, is the hallmark of feudalism, not capitalism & certainly not democracy.