Economic Inequality

It seems to me…

Inequality has risen to the point that it seems to me worthwhile for the U.S. to seriously consider taking the risk of making our economy more rewarding for more of the people.”  ~ Janet Yellen, U.S. Federal Reserve Chairwoman.

Economic inequality has substantially increased in the U.S. in recent years; the wealthy having done exceptionally well.  Why is there then so much opposition to anything that even seems like income distribution?  Corporations are doing well.  Why is there opposition to any environmental regulation?  Churches likewise are doing well.  Why is there so much controversy over separation of church and state?  Internationally, U.S. influence and power never have been greater.  Why are there demands for still further increases in the size of our military?  Why does so much of this just seem wrong?

When people talk about inequality these days, they are often talking about three different issues: the astonishing rise of the very rich, the stagnant wages and weakening prospects of the American middle class, and the large number of people at the bottom of the ladder[i].  These primarily have resulted primarily from structural (globalization and technology help superstars; large and liquid financial markets make the rich richer) and political (lower tax rates and the political influence of the financial sector) factors.

The U.S. economy, having recovered to pre-recession growth rates, has regained its position as one of the most powerful in the world.  Its primary concern now is to maintain that growth and not undertake any policies that would negatively impact it.  Other than for possible negative affects by international markets, major remaining concerns are sustaining that recovery without excessive inflation and extending the recovery to those in the larger labor market who so far have not benefited from it.  Up to now, it has been a two-tiered recovery with growth and employment only at the top and bottom of the economic pyramid: the wealthiest 1 percent received 95 percent of all new wealth created from 2009 to 2012[ii].

20 percent of U.S. families possess 85 percent of the marketable wealth.  The richest 300 persons on Earth have more money than the poorest 3 billion[iii].  Just four hundred persons in the U.S. have as much in assets and income as the bottom 50 percent of Americans.

The U.S. middle class has largely been left behind in our nation’s economic growth; take-home income on average declined over the last quarter century.  Rather than attempting to reverse this trend, legislative policy has tended to reinforce it – taxes have become less progressive; public education quality (in less wealthy areas) has declined…  The U.S. has not only technological innovation, global reach, and huge capital markets but also tax cuts, deregulation, and a powerful financial industry. A McKinsey Global Institute study predicted 230 million U.S. white-collar jobs will be either eliminated or transformed within the next decade[iv].

While the increase in U.S. social inequality can be partly attributed to a transition to a knowledge economy, information technology, and globalization; declining American education and skills have contributed to the stagnation of wages for the median worker.  It is the combination of “a lack of upward mobility” and inequality that is one of the U.S’s greatest economic challenges.

 Since the poor tend not to vote or lobby, they have not received much attention since Lyndon Johnson’s efforts in the 1960s.  American government does not devote much energy or money to the problems of the poor, especially those of impoverished children who suffer from malnutrition, bad health, and poor education which cripples their chances of escaping poverty.

Rather than strictly concentrating on these problems in the U.S., we also need to consider their affect elsewhere in the world.  No one denies that globalization is a fact: international trade and investment have consistently increased more rapidly than the world economy; national economies have steadily become increasingly interdependent.  The downside is that rapidly expanding exports from Third-World nations have negatively affected the income potential of less-skilled workers in advanced countries even as they offer unprecedented opportunities to other workers within newly industrialized economies.

Conversely, while open to criticism over low wages and poor working conditions, new third world export industries have resulted in marked living standard improvements for ordinary people.  Manufacturing growth in these countries affects related areas of their economies:  less intense pressure on land increases rural incomes; reductions in unemployed urban workers results in rising wages; etc.

By accepting labor-intensive imports from Third-World countries, we take advantage of an opportunity to concentrate on what we as a nation do well rather than what we do not.  Rather than closing the door on free trade and open markets, would it not be more beneficial to increase educational and retraining opportunities so everyone in the country could benefit?

While “Buy American” slogans have a certain basic appeal, we also should understand that however desirable it might be to support U.S. workers, it also denies opportunities to even more needy workers in less developed nations.  By concentrating on our own self-interests, we must accept that those policies also are detrimental to most of the world’s poorest citizens.  Assisting those workers to achieve an improved quality of life reduces the probability of future conflict and terrorism while creating new markets for advanced products.

To reduce income inequality, the U.S. needs to increase the capital gains tax, end deductions favoring debt over equity (and disproportionately rewarding the wealthy), increase incentives for firms to invest more into research and development (and less into share buybacks or overseas Bank accounts), and close corporate loopholes[v].

It is becoming increasingly imperative that secondary education be strengthened through emphasis in STEM (science, technology, engineering, and math) subject areas.  The vast majority of the 14 million new jobs predicted to be created within the next decade will require a minimum of two years of college primarily with concentrations in those areas.

There is much that we can do – if our political representatives have the will to do it.

That’s what I think, what about you?


[i] Zakaria, Fareed.  The ‘defining challenge’ of helping the poor, Washington Post, http://fareedzakaria.com/2013/12/19/the-defining-challenge-of-helping-the-poor/, 19 December 2013.

[ii]Foroohar, Rana.  Time To Talk About The I Word, Time, 10 February 2014, p23.

[iii] Karlin, Mark.  Richest 300 Persons on Earth Have More Money Than Poorest 3 Billion, http://www.sanders.senate.gov/newsroom/news/?id=a10e50a7-5b9d-4933-9bb8-decd3ce624dd, 18 July 2013.

[iv] Manyika, James, et al.  Disruptive Technologies Advances That Will Transform Life, Business, and the Global Economy, McKinsey Global Institute, http://www.mckinsey.com/images/dotcom/global/icons/icon_download.png, May 2013.

[v] Foroohar, Rana.  Time To Talk About The I Word, Time, 10 February 2014, p23.

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About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
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2 Responses to Economic Inequality

  1. berlioz1935 says:

    You are rising so many questions. This discussion is not only being had in your country. Here in Australia very much the same questions are being asked. I give you a link to one article published yesterday.
    http://www.smh.com.au/business/were-now-a-nation-of-rentseekers-20140302-33tye.html

    Our governments are not governing in the interest of the majority but only in the interest of the big end of town. The reason is not that the governments are nasty but they think it is the right thing to do. When business is going well, enough will trickle down to the plebs, or so goes the argument. A tax cut or a concession goes straight into profit or debt reduction. Governments live under the delusion that a tax reduction leads to more jobs. This an illusion. New jobs are only created when the producers are sure they can sell their products. Reagan’s supply economics did not work and never will.

  2. lewbornmann says:

    Agree. Politicians serve those that support them. This primarily is the wealthy who are willing (and able) to buy the influence and support of the less than scrupulous politician. Money “talks” but no where does it speak louder than in the corridors of government.

    Supply-side economics benefits the wealthy while penalizing everyone else. The basic tenet of supply-side economics seems to be that tax policy is the primary determinant of economic activity: tax reduction always result in economic growth; that tax reductions always are beneficial regardless of the state of the economy or the nation’s budget expectations.

    Everything I have read related to economics indicates supply-side economics to be, at best, a dis-proven and invalid theory. Experience has discredited supply-side economic theories demonstrating its fundamental inability to account for insufficient decreases in product costs and wages and the corresponding correctness of demand-side macroeconomic theory. But if this is so, why do conservatives, many of whom should know better, continue to support it? I’m not a conspiracy theorist but there seems to be an intentional goal to mislead people so as to gain support for other extremist political ideologies.

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