Are the Rich Really Worth More?

Why, yes. They are.

To a point.

That point is far below the Gilded Age level of wealth that has arrived again. The distribution of wealth has come to unfairly benefit the very rich, at the cost of nearly everyone else. In so doing, it has simply reverted to the historic norm.

I don’t think anybody but the most old-fashioned communist believes that money should be distributed evenly. What I believe is that the measure of a nation is taken by what happens at the low end of the income and wealth scales, and by that measure we’re sinking slowly into the mud.

One of the better measures of inequality is the Gini coefficient, which was described by the Italian statistician Corrado Gini in 1912. The US on the Gini scale scores as one of the least equal countries in the advanced world, ranking #33 of the 36 OECD countries. We’re at #94 for inequality worldwide. Pretty grim, for the wealthiest economy in history. There is more than enough money that nobody need live in poverty. To our great shame, many millions do.

The Gini score of the US puts us
at #33 out of 36 OECD countries.

There needs to be a wealthy class, because this is where the capital comes from that moves the economy forward. We need people who expect to profit from their investment in the national commerce and innovation. What we don’t need is what we have: a tiny number of individuals who take half of the nation’s new wealth, far beyond the point where their investments would move the economy forward. This level of unequal wealth greatly exceeds what would be needed to bring economic improvements. Instead, great wealth is making everyone else poorer, and doing nothing for national wellbeing.

If there were perfect equality (which is not desirable), every man, woman, and child in the country would have earned $41K in 2012, $165K for a family of four. (These are all back-of-envelope figures for purposes of making a point.) The national income is nearly $13T. Figuring from this, the share for a family of four is $92,000. But that’s not what we got, because the top 10% got half of all wealth created. The median household income for the other 90% was $51K, and the income for the poor was much lower.

Obviously, inequality rules. The richest don’t need to have that much wealth to contribute to a healthy economy. Their great wealth contributes exactly zero. In fact, that is what creates unnecessary poverty. Thomas Piketty shows us why the process is inevitable in Capital In the Twenty-First Century. Everyone should at least read a summary of his thoughts. Equality is important because we are supposed to be a democracy, and opportunity is supposed to be available equally to all. The focus of our economy was to avoid extreme wealth and wealth from inheritance. But what we’re getting is extreme wealth and inherited wealth, and much of the reason derives from the fundamental nature of capitalism. The rest can be attributed to manipulation by the very rich and their lackeys in Congress.

The great wealth of the very rich
is completely worthless.

I believe it all comes back to the purpose of government. I believe that the purpose of government is to assure that all citizens are treated fairly, that everyone has an equal opportunity to live a good life, everyone receiving a fair share of the national wealth. This is why economic equality is important, and this is why our government and our economy are failing, so unequal and unfair, even with more per capita wealth than any other nation in history.

Economic equality does not mean that every person has equal wealth. Besides the impracticality of such a plan, the failure of communism proves that complete equality is soon compromised. Equality under communism everywhere soon gave way to wealth and favors rewarded to those who embraced the correct political ideology. The others were not allowed into the magic circle, and remained poor, and any attempt they made to improve their lot was foiled. In his later years, even Karl Marx let it be widely known that he was not a Marxist, as interpreted by those who followed him.

Defining how a nation’s wealth should be distributed (by which we do not mean re-distributed by government) is difficult to determine. The rich really are worth more—to a point—because they tend to contribute more to the economic health of the nation than those of us who simply do our work well. But the nature of capitalism creates geometric growth of wealth among the most wealthy, and, not far down the ladder, stagnation or falling fortunes for most of us. A large part of the misappropriation is the political transfer of wealth to the already wealthy. It is the very wealthy themselves who arrange for this maladjustment, this extraction of wealth from the poor. This does not fulfill my ideal of democracy.

It’s hard to imagine a more
abhorrent economic injustice.

People at the highest levels do not earn their money. They may well have made important contributions to the country, but once they are rich, future wealth arrives without any particular effort, an effect of great wealth already owned, and managed by a staff of bright financial professionals. Billionaires may find that their wealth has increased by a billion in a year, but that has nothing to do with how much or how wisely they work.

“Earned income” at the highest levels has become obscene, and no better example will be found than the handful of Wall Street Banksters whose annual bonuses last December totaled in the tens of billions. This was as much as the bottom 60% of the population of the entire US—189 million people—earned working full time for all of 2013. It’s hard to imagine a more abhorrent economic injustice.

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  1. Reblogged this on Citizens, not serfs.


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