January 6, 2017
Please, please, show me why this set of facts is wrong: “Between 1980 and 2014, the richest 1 per cent have seen their average real income increased by 169 per cent (from $469,403, adjusted for inflation, to $1,260,508) and their share of national income more than double, from 10 per cent to 21 percent…Over the same thirty-four years, median household income grew by only 11 per cent.” Even so, these modest gains were mostly in the earlier part of the period. “…by 2014 [median income] was only .7 per cent higher than in 1989….” Furthermore, most of the modest gains for those of lower income are due to longer working hours. And, this while the percentage of Americans with college educations has doubled, suggesting that it’s not only those with only high school diplomas who have suffered. In fact, that group has actually seen a decrease in real income across this period (Stiglitz, 2016).
I understand some Conservatives simply detest Paul Krugman and Joseph Stiglitz, whose views are on the liberal side–favoring policies to achieve a more egalitarian society, believing government is as important as the free market in achieving just outcomes. The above quotes and facts are from Stiglitz. And, I admit the same distrust when I see “facts” quoted by ultra-Conservative economists–I admit I look carefully to see if the facts are correctly calculated. When studying in London in 2012/3, I learned a lot about data–how it can be chosen and manipulated to reflect the bias of the writer. So, I respect all of that. So, please challenge these facts!
Here is a little of the color behind these facts: CEO/pay of average worker has risen from 20:1 in 1965 to 354:1 in 2012. Financial executives took some of the greatest advantage. The top five C level Wells Fargo executives made $9 million to $11 million each in 2015, and the CEO made $19 million. While the average Wells Fargo bank teller’s salary was $12.40 per hour, the top consumer banking executive left the bank with a stock package of $125 million. Can there really be any argument that pay is in accordance with performance for these execs, when that particular executive oversaw a multi year performance of creating fake accounts, costing 5,300 lower level people their jobs (and probably their reputations and careers) and disgracing the bank, costing millions in correction and lost shareholder value. For a patient reader, Stiglitz has a much deeper analysis to disprove the theory that this kind of exorbitant executive pay is correlated with performance.
So, these are some of the facts. If you dispute the overall picture, explain why. For example, some have argued that inequality should be measured based on consumption, not on income (e.g., costs of some goods have declined). However, recent studies show the two measures produce about the same result–an alarming widening of inequality. So, show me where there is an accurate picture of a more egalitarian nation, such as we were in 1960.
For a good example of how data can be chosen and interpreted as it relates to inequality see this short treatise provided by Inequality.org, objectively explaining the many ways in which the “Gini index” of inequality can be calculated. However, the conclusion to the explanation gets to the bottom line, no matter how you calculate it: “So we’re right back to the haves and have-nots. That we’re a society of haves and have-nots may not be literally true, but it’s more than just a metaphor. America is suspended roughly half-way between full equality and a situation in which all of the country’s income is concentrated in one person’s hands.”In other words, we’re half-way between a socialist utopia and an absolute monarchy. America in 1968 was hardly a socialist country, but it was much closer to the utopia. Maybe it’s time to turn back the clock on income inequality. Utopia doesn’t sound so bad.” Our Gini index of .46 is back to that of the Robber Baron Era early in the 20th century.
There are at least three compelling reasons we must: One is that we will face the prospect of a revolution, with blood on the streets if we don’t do something, start to reverse the trend now.
Another is that a more egalitarian society is now thought to be able to grow faster than an unequal society, and all can benefit financially. After all, who’s going to buy the products if the lower classes have no income?
Finally, it is a moral imperative that we continuously work to create opportunity for all, food, shelter and health for all, education for all.
I have two requests: Show me how these facts present the wrong picture, if they do. Show me a radically more attractive set of historical facts. I’m open to learning. And, if the Stiglitz picture is a fair picture, tell me why we should live with this, or what we can do about it, so that it doesn’t persist, or worsen as seems likely to be the outcome with the new administration.
Show me or tell me.