The Problem of Economic Inequality

A topic that has received a fair amount of attention recently is that of economic inequality. The new Catholic Pope, Francis, has spoken about the issue, criticizing the concept of "trickle-down" economics and calling for greater efforts to end disparities in wealth. A report released a little over a week ago by the humanitarian group Oxfam revealed how extreme these disparities are. The 85 richest people in the world (just over 0.000001% of the total population of over 7 billion) have as much wealth as the 3.5 billion people who make up the poorest half of the world's population, though the latter are 40 million times more numerous. The richest 1% of the world population hold nearly half the world's wealth, or 65 times the amount owned by the poorest half. What's more, in many countries, including the United States, the gap is widening. In his State of the Union address the other day, US President Barack Obama spoke about the need to face this issue, and took a small step towards doing so by raising the minimum wage for federal contract workers to US$10.10 an hour.

Amazingly, there are some who criticize anyone who speaks out on this issue, whether it is Pope Francis, Oxfam, or President Obama. Incredibly, they seem to imply that the wealthy deserve everything they have, and that the poor for the most part likewise deserve to be poor, as if the richest of the rich really work thousands or millions of times harder than the poor, or have that much more ability. Aside from being absurd on the face of it, this ignores the many ways in which wealth breeds wealth, particularly when aided by a tax system that favors the rich, such as in the US, where low taxes on capital gains and other forms of income favor the richest Americans, or even more egregiously in Taiwan, as discussed in this fascinating but depressing article, which notes that in 2005 it was revealed that of the 40 wealthiest individuals in the country, "15 paid effective tax rates of under 1 percent, and eight of them paid no taxes at all." This problem is compounded when wealth enables the rich to buy political power. In the US, ridiculous court decisions such as Citizens United mean that rich individuals like the Koch brothers can spend millions to influence elections. While defenders of the Citizens United ruling claim that restricting election spending by private individuals and groups somehow restricts freedom of speech, that is absurd. If everyone has equal rights to post a blog or stand on the soapbox on a corner and say what they want, than we can say that everyone has freedom of speech. But when some people can spend millions to buy ads on television and the Internet in order to propagate their speech, then their speech, to paraphrase George Orwell, is more equal than that of everyone else, and their influence is correspondingly greater. While my opinions may be far more objective, fact-based and logical than that of a number of extremely wealthy individuals I can think of, that does little good when few people know of mine and they can ensure that millions of people hear theirs.

The ironic thing is that a more equal society would benefit most of the wealthy as well as the poor. Not only would the rich be less of a target for resentment and hostility, but a better educated, more affluent workforce would benefit the corporations who employ them and sell their products to them. While Henry Ford was an awful person in many ways, he did one thing that was very sensible. He realized that if he paid his workers well enough, not only would they be more content, but they could afford to buy the cars he was selling. Today, on the other hand, big corporations like Walmart and McDonald's pay their workers so little that the employees often have to rely on food stamps and other government assistance to get by. This short-sighted approach ultimately does no good to anyone. While there is no instant solution to the problem of disparities in wealth, raising wages for the poorest people while ensuring that the wealthiest pay more taxes – and, through reforms like public financing of elections, are less able to influence the political system – is a good place to start (for some more general suggestions about tackling global inequality, see this blog post by an Under-Secretary General of the United Nations).