Rising to address income inequality Author: Will in ChicagoDate:2015-08-10 10:58:05
One phrase that received little attention during the Republican presidential debate last week was income inequality. While Jeb Bush talked about creating an economic growth rate of 4 percent, I am not sure that we can take him seriously as his policies seem to be a repeat of those of his father and his brother. Instead, talk of income inequality and solutions to it have fallen mostly to the Democratic presidential candidates - Senator Bernie Sanders, Secretary of State Hillary Clinton, and ex-Maryland Governor Martin O'Malley - chief among them.
There is growing evidence throughout the world that the austerity policies practiced in many nations have failed to restore prosperity and have instead created more misery. "Austerity Bites: A Journey to the Sharp End of Cuts in the U.K;" by Mary O'Hara chronicles some disturbing statistics after austerity policies were put in place in the United Kingdom.
Throughout 2012 and 2013 there was little doubt about the degree of the mental strain unleashed by austerity across the UK. In its November 2013 report, Maxed out, even the right-wing Centre for Social Justice concluded that, as well as poorer people bearing the brunt of financial strain of increased personal debt, the corollary was an ‘immense’ impact on their mental health and wellbeing. The lead author of the report said: “The costs to those affected in stress and mental disorders, relationship breakdown and hardship is immense.”
In the summer of 2013, the UK’s largest mental health charity, Mind, reported an unprecedented 50 per cent rise in calls to its national helpline for the 12 months up to March 2013 (this was on top of a rise of 100 per cent in the previous year for money-related calls).The distinguishing feature of the calls was, first, that more of the callers said they were contemplating suicide compared with pre-recession figures and, second, that ‘severe financial worries’ were increasingly being cited. The charity said:
• Calls to the help line rose from 46,000 in 2011/12 to 68,000 in 2012/13.
• The number of calls relating to suicidal feelings jumped by 30 per cent in a year.
Mind’s chief executive, Paul Farmer, summarized the trend thus: “Today many people face the stark reality of severe financial pressures – be it through employment worries, benefit cuts, increased cost of living, or a lethal combination of all three.”
The mental and emotional strain of austerity was everywhere. From as early as 2011, charities including Sane and the Depression Alliance were reporting concerns about links between financial woes and rising stress and depression. According to the Samaritans, the largest suicide prevention organization in the UK, by early 2013 one in six of its helpline calls was about escalating financial pressures. In June that year the charity warned that economic problems were highly likely to have an impact on the number of suicides, since people living in poverty were already at higher risk of suicidal behavior even without the additional tension wrought by an economic downturn as severe as that of 2008 or the unprecedented cuts of austerity policies after 2010.
Half a century after President Lyndon B. Johnson declared a war on poverty, the number of Americans living in slums is rising at an extraordinary pace.
The number of people living in high-poverty areas—defined as census tracts where 40 percent or more of families have income levels below the federal poverty threshold—nearly doubled between 2000 and 2013, to 13.8 million from 7.2 million, according to a new analysis of census data by Paul Jargowsky, a public-policy professor at Rutgers University-Camden and a fellow at The Century Foundation. That’s the highest number of Americans living in high-poverty neighborhoods ever recorded.
The development is worrying, especially since the number of people living in high-poverty areas fell 25 percent, to 7.2 million from 9.6 million, between 1990 and 2000. Back then, concentrated poverty was declining in part because the economy was booming. The Earned Income Tax Credit boosted the take-home pay for many poor families. (Studies have shown the EITC also creates a feeling of social inclusion and citizenship among low-income earners.) The unemployment rate fell as low as 3.8 percent, and the first minimum wage increases in a decade made it easier for families to get by. Programs to disassemble housing projects in big cities such as Chicago and Detroit eradicated some of the most concentrated poverty in the country, Jargowsky told me.
A recent article identified 35 disturbing facts about income inequality. Among these is the fact that in 81 percent of American counties, the median income is $52,000 - less than it was 15 years ago. Over the past 25 years, the economy has grown 83 percent and corporate profits have doubled. Yet despite American workers being twice as productive as they once were, the middle class is shrinking.
There have been warnings by several people, including the rich, that income inequality will lead to problems. You may recall billionaire investor Nick Hanaeur's warning to his fellow 1 percenters last year, "The Pitchforks Are Coming ... For Us Plutocrats."
But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?
I see pitchforks.
At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent,just 12 percent.
But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution. And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last. If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.
Hanauer is still speaking out on this issue. This past week, entrepreneur Peter Georgescu wrote an article in the New York Times warning of rising inequality and calling on businesses to address income inequality. He calls for government to provide tax incentives to pay more to workers earning $80,000 annually or less.
Meanwhile, Senator Bernie Sanders has an upcoming book that proposes such steps as ending off shore tax havens, putting a transaction tax on Wall Street speculators, ending tax subsidies for oil, coal and gas, and establishing a progressive estate tax.
In the end, I think that our country and others will have to address the rising tide of income inequality. History shows that rising poverty leads to political unrest. I have the confidence that we can address this and that the middle class will not be something that students will have to learn about in history books as we wonder which new oligarch will lead what was once the "Free World."