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Does Income Inequality Matter?
theodp is concerned about the following: "Alarmed by Goldman Sachs CEO Lloyd Blankfein's record-setting $53M bonus, Charles Wheelan (aka The Naked Economist) argues that income inequality matters. Wheelan notes that the Gini Coefficient (a measure of income inequality) for the U.S. has been moving away from countries like Japan and Sweden and closer to that of Brazil, where the murder rate is 5X that of NYC and crime is materially impacting GDP."
Income inequality drives crime. When everyone is poor, no one steals from each other. When everyone is rich, everyone steals from each other, but there are rules. When some people are very, very rich and some are poor, the poor feel justified in evening out the unfairness through direct action. If everyone had their basic needs met, I don't think income inequality would matter as much. But as long as some people are desperare and feel they are being screwed, and they can find an easy target in a rich person, there will be crime.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
If all comes down to what you believe about human nature. Roughly speaking, some people believe that poor people are poor because they are lazy and violent, while others believe that people are poor because they don't have opportunities available to them, so they turn to violence as an effective, but not ideal, way of problem solving in their miserable lives.
People on either side have fundamentally different views about reality and human nature, and thus there is no common ground in which to have a productive discussion.
Computers are useless. They can only give you answers.
-- Pablo Picasso
There is a limited amount of wealth in our society. It is not an entirely zero-sum game, but it is true that the more wealth the richest have, the less the rest of us have. If you were to take half the money of the richest 10% of Americans and spread it out among the poorest 40%, you'd probably take one of the biggest steps in history towards eliminating poverty.
Not only does America have greater income inequality, but it matters more in America. There's no universal health care, social security is dependent upon you paying into it (something many people forget), single parents are expected to work full-time from the time their child is about 2 months old, etc. Basic benefits that everyone shares equally reduce effective income inequality, and there is a well-known link between desparate poverty and crime.
Furthermore, think of the social problems associated with income inequality. The rich can basically buy and sell poor people, you can see this with many of the semi-rich sex tourists in SE Asia, but the same kind of things are possible in America. The poor have no reason to trust people who run a society that is blatantly rigged against them. Et cetera et cetera
Although the moon is smaller than the earth, it is farther away.
Causality is different, of course, though "indirect cause" is a very medieval concept.
I don't think anybody would suggest that paying a banker a lot of money will suddenly cause someone to become a street robber. But if there is a correlation become income inequality and crime, and given the high cost of crime, there is a case for investigating the nature of any relationship.
As an example, it is known that high incomes in the City of London are associated with cocaine use. This inevitably brings rich people into contact with drug dealers. Given the profits to be made, it might be that the existence of a rich and rather well protected class of drug users made them a very attractive target for drug dealers, causing increased competition for access to this market. Since drug dealing is an illegal, unregulated market, this might cause more turf wars and therefore more visible drug-related crime. That is a possible chain of causation which, if correct, could have implications for policy on drugs (e.g. toleration and a legalised market.)
The US has, I believe, nearly 2 000 000 people in prison. This is a big enougfh cost item that it needs proper study.
Pining for the fjords
Mod parent up, big time.
I like to place meaningful quotes in my sig, so people will know that I know what meaningful quotes are.
"That is an average of $370,000 each. The CEO is getting a lot, but the "peons" you talk about are still getting a huge bonus."
You're telling me that the janitors making $30k a year are getting a bonus of $370,000? I can't believe you let that bullshit fly.
The bonuses aren't evenly distributed throughout the company. You cite an average, which is a figure not worth looking at. You are trying to confuse the issue, making it sound like receptionists and janitors are getting almost half-a-million at Christmastime. A more enlightening number would be the median bonus. I'll bet that there are a very few executives and managers that are getting bonuses in the millions, which make up the bulwark of the $9.5 billion. Which just contributes to the income inequality, which is what we are talking about.
Computers are useless. They can only give you answers.
-- Pablo Picasso
The reason the US founding fathers put in taxes on inheritance is that the sucess of one generation shouldn't create subsequent generations already ensconced in privalege. In a way this is unavoidable, but if the future generations aren't people of merit, they will eventually loose wealth. Now we're hitting a period in American history where ridiculous wealth is tied to a strong push to eliminate inheritance taxes. Already a number of families are bastions of old money and privilege, but watch as their wealth becomes a trivial matter of their heridity. The one thing the American founding father thought was odious about Monarchies - that mediocre men ruled the world because their great-great-great grandfather was a great man - is now becoming part of American society.
Leave the gun, take the cannoli -- Clemenza, The Godfather
If everyone had their basic needs met, I don't think income inequality would matter as much.
Possibly, but as the article points out, happiness and contentment is not so much our absolute wealth, but our relative wealth. Many have their basic needs met, but still feel obligated to put in long hours to increase their relative wealth. The Economist's holiday issue had a nice article on this research.
Bingo - that's it on the nose. It's not that my stack of little green slips of paper is not as tall as you stack. It's that my child dies of leukemia because I don't have enough money to see a doctor, while you child goes to the best hospitals on the planet for a mild thyroid condition. It's about access to health care, education, nutrition, and in some sense luxuries. Imagine how it galls some people in brazil that a group of Porsche driving Yuppie kids spend more money in one night on dinner than they make in a year.
Leave the gun, take the cannoli -- Clemenza, The Godfather
Perhaps a link to Paul Graham's Mind the Gap essay would be worth reading as well.
There's at least four fundamental errors that are made or implied by the Inequality Matters argument:
It is important to remember that no matter how horrific the crime, it happens for a reason. Those reasons are only rarely completely internal to the criminal. Calling somone a bastard, while a reasonable response to such horrors, isn't helpful. It amounts to throwing up one's hands and saying, 'the devil made him do it.' It's not an explanation, but an expression of emotion. In order to come to grips with crime, we must put aside emotion and analyze the root causes dispationately. I say this as a victim of violent crime who was permaently handicapped in an attack.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
Forget Brazil. Imagine how much it galls many Americans that watch some dumb yuppie on television fritter away a couple of million dollars when that's more money than they will ever see in their lifetime. I can tell you that it makes people very angry to think about that. Not angry enough to take things into their own hands, yet, but still angry. And your salary/wage is indeed your direct access to everything you need to survive. If it's below a certain point then you can't afford to buy things like health care and food because they cost more when it's expected that the average person can pay that.
In America we're creating an underclass where the values are completely different, even from the middle class. Our middle class is shrinking in size, with more people dropping below the line between the two classes and winding up poor. When our middle class is gone we lose the perception of class mobility, and then people start fighting.
I can tell you that I get pretty pissed off when I hear about million-dollar bonuses when if I had 1% of that money I wouldn't have to worry about college tuition for the rest of my career. It makes me angry, so I try to ignore it. Watching commercials also gets me a little mad because of the huge disparity between the way the "average american" is depicted on television, and the way we actually live. If you're willing to buy into the commercial vision, then you start to think that everyone but you is living like that, and then you start to wonder how you can get to that point. When you start to think that you can't, you get angry.
SRSLY.
People have been Killed, robbed, beatened, and otherwise harmed by people's greed to acquire these products. Yet, none of these are items that are within the definition of "basic needs". Nobody "needs" these.
You're mistaking the psychology here. People aren't stealing because their basic needs aren't met. They're stealing because they have been able to justify that action to themselves, usually with an internal dialogue along the lines of, "life is unfair. Nothing is fair. Thus stealing, is just another way to get what I want. Why should I be a chump and stay poor just because I was born that way? I'm going to make something of myself the same way a lot of the rich families did, by being unscrupulous and doing whatever it takes."
The "poor" Americans are some of the richest people in the world, just look at the obesity levels. Truly "poor" people are literally dying of starvation, worry about their next meal, wonder where they will sleep tonight.
Crime does not correlate to poverty nearly as well as disparity. People don't rob others because they are poor, they do so because they feel justified since others were born with so much more than they were. Take a look at internet crime, suddenly people in the third world with nothing can rob people in the US. Predictably, there has been an explosion of internet crime from the third world. "An American makes 500 times what I do, despite being a moron. I can live for years off of one case of fraud against them." Of course there are going to be more crimes do to this disparity. Within the US, it is the difference between the rich and poor, not the overall level compared to the world (which most don't see) that drives crime.
I know, I've been "poor". I've also know what its like to have to get up off my ass and get a job, and do crappy work for a living. If one works hard, is honest and never stops learning, one can end up in IT, with a decent wage.
Yeah for a lifetime of hard work and smart decisions you can make 1/100,000th what one of the people born to extreme wealth and who is a lazy idiot makes from investing all that inheritance in lending firms that lend you the money you need to get started and then collect interest. In fact, over the course of my life I'll make about as much money paying interest on my mortgage and other loans as I will make for myself. Someone else is making just as much off my hard work as I am and they've done nothing but start out with money. That sort of unfairness is what drives people to crime, although usually the crime is committed based upon opportunity, not targeting the wealth specifically.
Americans are a bunch of whiney wimps who would rather get rich quick, while being poor, than work hard.
Who wouldn't rather get rich quick? This phenomenon, by the way, is in no way limited to the US. Wealth disparity correlates to violent crime and robbery levels the world around.
The present situation in which the middle class is losing ground is not as some would have it, the mysterious workings of a competitive, dynamic free market economy. It's the direct result of decades of corporate controlled multi-national trade agreements and labor arbitrage provisions facilitating the offshore outsourcing of work and the importation of "cheap labor" into the U.S.
I've fought this fight in the IT sector for more than 5 years now. Middle and upper middle class American IT workers have been methodically targeted for replacement with lower wage foreign replacement workers. Carly "the Outsourceress" Fiorina was notorious for this activity but she is hardly alone. Her successor at HP, Mark Hurd was part of the same dynamic during his tenure at NCR in Dayton, Ohio. Larry Ellison and Bill Gates have been whacking their American workforce for years while whining to Washington politicians that they can't find qualified American IT workers. The result: politicians keep expanding the number of foreign "guest workers" permitted into the U.S. under non-immigrant visa programs such as H-1b. (There's a push underway even now for an increase.)
I think that the many Americans seeking a middle class life, well-qualified to perform even advanced work who may have lost jobs, are under threat of job loss and seeing their wages/salaries pushed DOWN by offshore outsourcing and NIV work programs SHOULD be outraged at both the politicians and the so-called business leaders and the Wall Street investors who demand that American workers get kicked to the curb.
The wealth now accruing to the already wealthiest segments of our society represents an illegitimate TRANSFER of wealth from the American middle class.
The increasing share of wealth controlled by the richest Americans is NOT the result of any Darwinian "survival of the fittest". Offshore outsourcing, "free trade" and NIV worker replacement programs are POLITICAL creations driven by lobbies funded by the wealthiest segments of our society.
This is a recipe for CLASS WARFARE. You'll find that Sen. Jim Webb of Virginia has spoken out re. this situation since before he entered the Virginia primary in which he defeated longtime ITAA pro-outsourcing and pro-NIV President Harris Miller.
I can tell you that I get pretty pissed off when I hear about million-dollar bonuses when if I had 1% of that money I wouldn't have to worry about college tuition for the rest of my career. It makes me angry, so I try to ignore it. Watching commercials also gets me a little mad because of the huge disparity between the way the "average american" is depicted on television, and the way we actually live. If you're willing to buy into the commercial vision, then you start to think that everyone but you is living like that, and then you start to wonder how you can get to that point. When you start to think that you can't, you get angry.
You get angry or jealous? There is a difference.
1% of one million is $10,000. I spent more than that on college but I'm sure you could get an education for less than that. But let's say that a million-dollar-bonus earner was forced to give it away in 1% increments. He would be able to give $10,000 to exactly 100 people (all before taxes of course). After taxes, he could give approximately $6000 to 100 people, who in turn would only receive $4000 each (after taxes again). Could you go to college on $4k?
Finally, in your perfect world where the rich have to give all their money to pay for your college, why would you want a college education anyway? You bust your ass through college, work hard, long hours in your job, and when you are successful, you'd have to give away your money to some angry kid who despises you for your hard earned success and is too lazy to pay for his own education!
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
But even if I concede your point, I disagree with your valuation. Unless the chairman of goldman sachs cures cancer, productizes cold fusion, and gets ROME a third season, there's no way on earth he is worth 200,000% more to society than the dude who drives the truck that brings milk to my grocery store, my kid's teacher, or the dude who just sold me a coffee.
Dude, I think I can see my house from here.
1) Extremely high executive compensation attracts people for management who are extraordinarily greedy and selfish. These traits lead them to make business decisions that are both self-serving and short term in outlook; exactly the opposite of what any business needs to grow and prosper.
2) A top management receiving pay that is so much higher than most of the people working in the business allows them to live in ways far beyond the means of most other employees. As a result, they lose touch with the day-to-day problems and issues of their workforce and consequently make poor decisions.
3) People who are paid far above others soon begin to think that they are somehow wiser, more intelligent, more creative, harder working, etc than others and begin to devalue their contributions and opinions. This can have disastrous consequences for any organization.
4) Extremely high compensation usually carries a built-in obligation for a 100 percent time and life commitment, something that is unimportant to selfish people but critically important to many talented people who might otherwise seek higher positions.
The most talented top managers often seem to stumble into their positions by chance after the organization has been nearly destroyed by the self-seeking opportunistic managers to the point that those types no longer find the position attractive.
I would rate *your* post +5 pandering to stereotypes as well, to assume that "cultural differences" (which usually is just the politically correct way to say "uncivilized slant-eyed brutes" whenever I've ever heard it) even matters in this case. I admit my "evidence", though it was never meant as such, is anecdotal, but considering how prevalent and worrisome the issue was at the time, I would say the majority of the country's elite felt the same pressures.
Honestly, unless you are also an Asian immigrant, I would contend that I have a far better sense of "cultural differences" between East and West. I was born and raised in a bilingual environment, lived in both the east and west, speak both English and Mandarin fluently, and I consider myself a pretty even mix of Chinese and American/Canadian cultural traditions.
So let me comment on your post from that perspective:
First, in the West there has been a concerted (and almost completely sucessful) effort to stamp out kidnapping for ransom. The penalties are steep...
And how does that matter? Don't be quick to assume that there have been no major effort to stamp out kidnapping for ransom in Taiwan. Massive undertakings have been taken, with some limited success. Oh, and by the way, we shoot kidnappers (not that I agree with it entirely, but that's the penalty of kidnapping). On the whole Asian penal systems have harsher penalties: prisoners are rarely afforded the kind of quality of life that you see in American jails, and we still shoot people in a public venue (such as a stadium), as opposed to pump them full of anesthetics till they die.
This isn't a commentary on supporting or opposing capital punishment, but rather my belief that when the wealth gap is sufficiently wide, no level of punishment or threat of punishment will deter the people from trying to even the playing field. If you and your neighbours cannot afford to eat, have corrugated aluminum over your heads, while behind a chain-link fence lies huge mansions of exorbitant excess, you will try and take it.
and typically the top echelons of the police get involved.
And they didn't in Taiwan? You try to sound diplomatic and neutral, but clearly you're biased against Asian culture and capability. Considering that the kidnapped children were always part of the rich elite, you can bet your ass that the top echelons of the police were always involved. There were nation-wide manhunts for alleged kidnappers, where absolutely no expense was spared to apprehend the criminals (and then shoot them).
Secondly, in the West - families don't typically cooperate with the kidnappers. They go to and cooperate with law enforcement authorities.
As they did in Taiwan. See my point above. Why are we assuming that an Asian family would be more likely to keep the kidnapping to themselves instead of going to the authorities? What reason do you have to make this assumption?
Thirdly, when the crime of kidnapping for ransom involves children - it invokes the 'protect the children' meme that appears much stronger in the West than in Asia. (For example, you hear tales of children in Asia being sold into chattel bondage, often sexual. Such tales are noticeable by their near complete absence in the West.)
Ooh, this is a huge can of worms. Having seen the media first-hand during this time of my life, I can say without a doubt that the "ZOMG protect the children from eeeeevil!" thing was as strong in Asia as I've seen in America. Are you trying to tell me that the Chinese culture is somehow less susceptible to the ancient "think of the children!" ploy?
Oh, and the tales of children being sold into chattel bondage, often sexual, are really not prevalent. They are equally absent in Asia as they are in the West. Keep in mind that much of Western media's portrayal of Asia is extremely negatively biased, probably for the enjoyment of people such as yourself. Why? I don't really know, but it reinforces the stereotype o