July 27, Da Lat, Vietnam
I hate it when politicians tell me what “the people” think or want, what Americans care about or don’t, unless the politicians provide evidence from polls or research that supports their statements–and, they never do. The American people want…” starts the common phrase from candidates and politicians. The American people want to repeal Obamacare. The American people want a big border wall. The American people do not want immigrants from Muslim countries. And on and on.
One that I particularly hate goes like this: “People [implying all people] don’t care about inequality.” The argument follows that [all] people don’t care if the CEO of Wells Fargo makes 300 times the income of the average Wells Fargo employee. After all, the Board of Directors makes that determination based on what other comparable companies pay their CEO’s, and based on the performance the Board assesses for the corporation.
People only care, goes the argument, that they have a decent job and some steady (albeit modest) annual increase in wages. According to US Census Bureau, since 1980, GDP rose by 154%, corporate profits rose by 182%, average income for the top 1% rose by 190%, and median household income rose by only 16%. I can’t help wondering how anyone could not care. I wonder whether those who say people don’t care would be happy to see it even more unequal. No limits?
Nicholas Kristof summarizes this era of increasing inequality in his NY Times column of July 23: “Since the 1970s we’ve seen a long-term trend toward cutting taxes and social services, and there have been a series of grim consequences: rising inequality, stagnant high school graduation rates, rising incarceration rates, rising narcotics use, stagnant earnings for the bottom half of Americans, and so on.” And still people don’t care?
There are many ways to measure economic inequality. Most common are the Gini index, comparisons by tiers, or by measuring consumption instead of income. And, we now know a great deal about wealth inequality, which is greater (worse) than income inequality. Pew Research provides a quick summary. The bottom line is that no matter how you measure it, inequality is very high, and in almost all serious studies, it has increased dramatically since around 1970. My posts offer references and evidence supporting my view that most Americans, most global citizens, do in fact care about inequality.
In a previous post entitled Inequality Matters, I address the reasons inequality matters just as much as all other factors that are offered as sufficient substitutes: shared prosperity, opportunity, mobility, having “enough,” and other such positive outcomes. In Relative Status Matters, I address some of the feelings about inequality that appear to be universal and result in the kinds of negative outcomes Kristof mentions. I also refer to the research which documents these correlations.
But I don’t argue that all Americans care. Pew reports that significantly more Democrats care than do Republicans. I’ll venture to suggest motivations for some of those saying “People don’t care.” First, the speaker may not care about inequality, because he is enjoying the fruits of inequality in the upper crust. Second, he (or she) believes everyone is capable of being rich if they only try hard enough. Some believe they made it all the way to the top echelon based on nothing other than their own drive–forgetting advantages of birth, excellent schools, help along the way, luck, and certainly anything at all that the vast governments of their cities, states, and country did to lay the foundation for individual success.
Granted this is a complex subject. It seems abundantly clear that CEO compensation is not guided by performance, but rather by cronyism among Boards of Directors and compensation consultants, and could be modified by regulation or tax incentives. It is not so easy to imagine how to adjust for star athletes and entertainers. But higher tax rates do offer one part of the solution. Emanuel Saez and others have calculated that raising the top marginal tax rate from 42.5% (average of US and all states and local governments) to 73% would maximize revenue–i.e., there would be no diminution of investment up to this rate.
What is clear is that the current high level of inequality is not the inevitable and natural consequence of democracy and capitalism. Rather, it is the result of decades of legislation that have increasingly favored corporations and the wealthy at the expense of the working man and woman. The vast extent of such changes across the period since 1970 are well chronicled in books by Robert Reich and Joseph Stiglitz, among others.
I suggest all would-be-influencers stick to documented evidence when speaking of what people want. Or, better still, stick to what we want, and why.
We all have many wants. Top of my list is for a reversal in the pendulum swinging toward higher inequality. I want a concerted effort by all three branches of government to restore and strengthen the rights and protections of the working man. I want a top level commitment to shared prosperity. I want to see inequality return to where it was in the 1960’s. We had billionaires then, but they contributed much more in taxes than now, and still felt highly motivated to start businesses and invest.
That’s what I want.