As probably many of you know, there is a cloud hanging over the future of the US and many other countries, the cloud of wealth concentration. There is nothing in life that will not be affected by this phenomenon. It obviously affects our allocation of resources and it will have tremendous influence on who gets what. It would affect the relations between the social classes and could lead to social unrest if we allow the fissure between the haves and have nots to increase. The following is only one part of an excellent article that speaks to this issue.
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Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable, says Zanny Minton Beddoes
Oct 13th 2012 | from the print edition of The Economist
A bit over a century later, America’s second Gilded Age has nothing quite like the Vanderbilt extravaganza. Bill Gates’s home near Seattle is full of high-tech gizmos, but, at 66,000 square feet, it is a mere 30 times bigger than the average modern American home. Disparities in wealth are less visible in Americans’ everyday lives today than they were a century ago. Even poor people have televisions, air conditioners and cars.
But appearances deceive. The democratisation of living standards has masked a dramatic concentration of incomes over the past 30 years, on a scale that matches, or even exceeds, the first Gilded Age. Including capital gains, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, roughly where it was a century ago. Even more striking, the share going to the top 0.01%—some 16,000 families with an average income of $24m—has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.
This is an extraordinary development, and it is not confined to America. Many countries, including Britain, Canada, China, India and even egalitarian Sweden, have seen a rise in the share of national income taken by the top 1%. The numbers of the ultra-wealthy have soared around the globe. According to Forbes magazine’s rich list, America has some 421 billionaires, Russia 96, China 95 and India 48. The world’s richest man is a Mexican (Carlos Slim, worth some $69 billion). The world’s largest new house belongs to an Indian. Mukesh Ambani’s 27-storey skyscraper in Mumbai occupies 400,000 square feet, making it 1,300 times bigger than the average shack in the slums that surround it.
The concentration of wealth at the very top is part of a much broader rise in disparities all along the income distribution. The best-known way of measuring inequality is the Gini coefficient, named after an Italian statistician called Corrado Gini. It aggregates the gaps between people’s incomes into a single measure. If everyone in a group has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.
The level of inequality differs widely around the world. Emerging economies are more unequal than rich ones. Scandinavian countries have the smallest income disparities, with a Gini coefficient for disposable income of around 0.25. At the other end of the spectrum the world’s most unequal, such as South Africa, register Ginis of around 0.6. (Because of the way the scale is constructed, a modest-sounding difference in the Gini ratio implies a big difference in inequality.)
12 comments:
The gap between rich and poor people does not have to decrease or increase but it will always be there. when Zanny says that it is not inevitable, i believe he is incorrect to some circumstance. some ways that can create less of a gap is government regulation to create a more equal society which most likely will never happen because it is a communism scare. the other way could be if the rich people used their money to help the poor, which also is likely not to happen. the point that Zanny is trying to get across is that the material items in a poor household does not really portray less wealth. they have cars and televisions and many things that poor nations do not have.
The amount of rich people has increased greatly from the 1% of 16,000 families to 5%. Also, America has roughly 421 billionaires, making the difference between the rich and the poor very big. But,the poor in America should not be compared to the poor in another country. Poor Americans still own televisions, air conditioners, and cars. Beddoes tries to emphasize how the concentration of wealth has increased to the top.
I think that top 1 percent of Americans has doubled for a reason. I know that they are the Americans that are making and average income of 24 million dollars a year, but I feel that we should not compare Americans to other countries. Americans are able to buy food and have the luxury goods such as houses and cars. It is great that the top one percent has doubled, but we need the rest of the middle class to work together and try to grow economically. Being a billionaire in America is different than being a billionaire in other countries that are not as wealthy as us because they can not afford some of the things that our middle class can afford. Overall, it is not fair to compare America's middle class to other countries middle class because we are more wealthier. We need to have our country grow economically as a whole not only in the top 1 percent of our country, but also the middle and lower class. We are surviving right now as a whole, but if we want to succeed in the economy we need to have pay raises and lessen taxes among the middle class.
The article “For Richer for Poorer” was a very interesting article to read. In 1889 at the height of America’s first Gilded Age, George Vanderbilt II was building a grand mansion in North Carolina. The home he built, the “Biltmore” contained 250 rooms and was over 175,000 square feet. The Biltmore was 300 times as big as an average house from that time. This palatial mansion had an intercom system, lifts, central heating and an indoor pool, at a time when many houses did not even have indoor plumbing and electricity. A little over a hundred years latter, during America’s second Gilded Age, Bill Gates’ home outside of Seattle is 66,000 square feet, which is only 30 times the size of an average home in modern America. Today the disparities in wealth are less obvious then they were 100 years ago. Even people in the low-income brackets have televisions, air-conditioning and cars. Though everyone is accustomed to more luxuries then a century ago, there are still huge gaps in the wealth of the country as well as around the world. In the past 30 years the national income of the top 1% has been on the rise. “Even more striking, the share going to the top 0.01%—some 16,000 families with an average income of $24m—has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.” All around the world this is going on too, countries including Britain, Canada, China, India, and Sweden have had a rise in the share of the national income that goes to the top 1%. Forbes magazine listed the wealthiest people around the globe, America has 421 billionaires, Russia has 96, China has 95, and India has 48 billionaires. The best-known way to measure the inequality in wealth is by the Gini coefficient, which is named after an Italian statistician named Corrado Gini. “It aggregates the gaps between people’s incomes into a single measure. If everyone in a group has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.” The Gini coefficient number differs around the world. With emerging economies, they are found to be more unequal than richer ones. Scandinavian countries come in with the smallest income disparities, which is roughly .25 for disposable income. While a country like South Africa registers a .6 roughly on the Gini coefficient. I enjoyed reading this article, especially about the Gini Coefficient and how it is used.
I think the gap between the rich and the poor is going to be big no matter what. I think we cannot compare our poor to other countries because while our lower class still has cars and TVs, lower class in other countries may not even have shelter and can barely afford food. I think that having material items does not show that they have less wealth.
The income of the top 1% of the population will continue to increase over time and this continuous increase will cause the continued distancing between the upper and middle classes. Although this gap will continue to decrease I don't think that it will hurt the middle class and I dont think that the other social classes should be receiving hand-outs taken from this upper0-class because I don't think they need it. The people of the upper class were able to obtain their wealth and therefore have earned the right to a luxurious life. People of the middle class will still be able to afford the necessities and even still be able to afford some luxuries. So although the gap is widening, I don't think it's an issue because everyone has to live their lives within the means that are presented to them.
It is rather interesting to view just how much the income inequality has increased over the last thirty-or-so years. I doubt there are many Americans who can honestly say they have never heard the term "the one percent of America" or, conversely, "the ninety-nine percent." Especially with the upcoming election, talks of income inequality have been widespread, especially during presidential debates. It seems that we have overlooked that the same trend is occurring all over the world: the gap between the "1%" and the rest of each nation is increasing.
I'm not sure the point of the blog was to demonstrate the difference between the lower- and middle-classes and the upper echelon of the world, but rather to point out that while the top "1%" increases worldwide, the rest of the population remains at a steady income, thus increasing the income inequality, which is demonstrated in the Gini coefficient graphs. We've discussed in class how we create more billionaires by the year, but our lower- and middle-classes stay the same. This isn't only true for America, and this is a difficult concept to grasp because we view so many other countries as "poor," so to speak. This is not about comparing the US to South Africa: this is about comparing our countries in terms of our wealth, and how it is being distributed--or rather, how it is not.
Overall, I found the graphs to be incredibly effective in getting the author's point across. They also offer a striking visual, and they really demonstrate the growing inequality among the classes all over the world, and not just in the United States.
The bridge between rich and poor is part of life. There will always be people that will do better and there will always be people who do not try/care to do better. I think in the United States we are fortunate to have a large middle class. There are plenty of countries that are either rich or poor you have everything or nothing. It only makes sense that as the American economy and even the world economy grew that the distribution of wealth grew. Although it will probably never be as equally distributed as it should be, America's living standard is still better off then a lot of other countries.
Louie Fortes said...
I think that the point of this article was to show the gap but more importantly the fact that it takes money to make money. The top 1% will always increase just because of the investments that even show a small return percentage-wise will still give the top more profit than the rest of the country will get while investing, just because the amount invested is so much greater.
The disparity between the rich and the the rest of the nation will always exist in our democratic/capitalist society. The only form of society in which such a disparity would not exist would be a perfectly ideal communist society. However, such a thing does not exist. As evidenced by history, such an ideal communist society could never come to fruition because there will always be those who want more than others. That is why many communist governments of the past developed into dictatorships.
The fact that 5% of our nations wealth is held by .01% of the population is disappointing. Although I commend those wealthy few who led such successful financial lives, I believe it is unfortunate that at the same time 15.1% of our nation is under the poverty line. The fact that some people can become so rich while many more suffer is saddening. I believe every American should have the opportunity to live such successful lives. Sadly, this is not the case, as many Americans inherited their poor financial situation from their parents and those before them.
I am in NO way against capitalism or democracy, I just do not believe that such a massive amount of wealth should be concentrated in such a minute portion of the population at the expense of 15% of Americans.
Zanny Minton Beddoes states that growing inequality is inevitable. I believe Mr. Beddoes to a certain degree. Growing inequality is inevitable when no authorities’ action takes place. In other words, rich people will continue to gain more resources and finances while poor people continue to struggle for finances and resources, unless government intervenes. In addition, the inequality is inevitable because the only way to have rich people is to have poor people. There’s no way to have one without the other.
Tessy Punnose said...
As Income falls the gap or disparity between the rich and poor will only widen, and has since 1967. As Gini's coefficient talks about distributing all income equally than the coefficient is 0, which proves that distributing wont help but if we look at the big picture. The picture that the rate of poverty is increasing and how this poverty can have a bad effect on the nation's long term economic competitiveness. This shows that more children are growing up in poorer households, so instead of causing ourselves to be pulled into a decline in our economy, we must start by stopping early childhood poverty, for the betterment of our nation.
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