One of the sleaziest, most disingenuous arguments exploited by politicians is the “wealth redistribution” theme. Whenever an influential corporate sponsor of some creepy politician is confronted with proposed legislation, which might change the status quo by reducing unconscionable profiteering, we are told that the new bill is a “socialist” attempt at “wealth redistribution”. Unfortunately, there are too many sheeple who don’t realize that “wealth redistribution” already happened.
The recent uprisings in the Middle East have demonstrated how difficult it can be to maintain a plutocracy in the modern world. As the American voting public becomes more familiar with the economic circumstances which led to the Egyptian turmoil, attention gradually gets refocused on how our domestic situation compares with Mubarak’s dystopia. Blogger “George Washington” (a former law school professor) of Washington’s Blog recently wrote a piece concerning how the “Gini coefficient” demonstrates that America’s upward wealth redistribution has reduced this nation to banana republic status:
Egyptian, Tunisian and Yemeni protesters all say that inequality is one of the main reasons they’re protesting.
However, the U.S. actually has much greater inequality than in any of those countries.
Specifically, the “Gini Coefficient” – the figure economists use to measure inequality – is higher in the U.S.
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Gini Coefficients are like golf – the lower the score, the better (i.e. the more equality).
According to the CIA World Fact Book, the U.S. is ranked as the 42nd most unequal country in the world, with a Gini Coefficient of 45.
In contrast:
- Tunisia is ranked the 62nd most unequal country, with a Gini Coefficient of 40.
- Yemen is ranked 76th most unequal, with a Gini Coefficient of 37.7.
- And Egypt is ranked as the 90th most unequal country, with a Gini Coefficient of around 34.4.
And inequality in the U.S. has soared in the last couple of years, since the Gini Coefficient was last calculated, so it is undoubtedly currently much higher.
So why are Egyptians rioting, while the Americans are complacent?
Well, Americans – until recently – have been some of the wealthiest people in the world, with most having plenty of comforts (and/or entertainment) and more than enough to eat.
But another reason is that – as Dan Ariely of Duke University and Michael I. Norton of Harvard Business School demonstrate – Americans consistently underestimate the amount of inequality in our nation.
Ariely and Norton’s paper, based on their 2005 poll of 5,522 citizens about their preferences for wealth division, has been the subject of much commentary. Last fall, Bruce Watson wrote an article for Daily Finance discussing Ariely and Norton’s report. As Watson explained, the following empirical data compiled by Professor Edward Wolff, (and incorporated into the Ariely-Norton paper) portrayed the “real world” wealth distribution in America:
Currently, 85% of America’s wealth, which is defined as total assets minus total liabilities, is held by the country’s richest 20%. Meanwhile the upper middle class holds 11%, the middle class has 4%, and the lower class and poor share an anemic 0.3%.
Here’s how Watson summarized the results of the Ariely-Norton research:
In the poll, the vast majority of Americans across the political, gender and wealth spectrum displayed a markedly skewed understanding of how America’s money is divided. On average, respondents thought that the rich hold only 58% of the nation’s wealth, 32% less than their actual holdings. They thought that the middle class controls 13% of the country’s wealth, more than three times their actual holdings. As for the bottom 40% of the population, the assumption was that the lower class and poor own a measly 9% of the country’s wealth. In reality, these two groups control about one thirtieth of that amount.
Who Should Get the Money?
Although the perception that America’s wealth distribution is unfair cut across partisan lines, Republicans and Democrats disagreed about the ideal distribution. People who voted for George Bush believed that the richest 20% of the population deserved roughly 35% of the nation’s wealth. Kerry voters radically disagreed: they felt that the rich deserved only about 30%. When it came to the country’s poorest citizens, Bush voters felt that they deserved about 9% of the country’s assets; Kerry voters preferred to give them 12%.
Respondents making over $100,000 per year, the group most heavily skewed toward a top-heavy distribution of wealth, advocated a system in which the top 20% received about 40% of the country’s assets and the bottom 20% got roughly 7%. Yet even this comparatively Dickensian wealth distribution still gave America’s rich less than half of their current holdings, while giving the poorest more than twenty times their current holdings.
In October of 2008, before the full extent of the Wall Street megabank bailouts had been completely understood by most Americans (and before those multi-million-dollar bonuses had been awarded to the malefactors who caused the financial crisis) the Gallup Organization conducted a poll on the subject of wealth redistribution. This is what they observed:
A majority of Americans (58%) say money and wealth should be more evenly distributed among a larger percentage of the people, although slightly less than half (46%) go so far as to say that the government should redistribute wealth by “heavy taxes on the rich.”
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Still, in each of the four times Gallup has asked this question in recent years, between 45% and 51% of Americans have gone so far as to agree with the fairly harsh-sounding policy of “redistribut[ing] wealth by heavy taxes on the rich.”
Because the polls discussed above reveal that the current wealth distribution is unacceptable to most Americans, the “wealth redistribution” argument — as it is often used by politicians – should be a non-starter. Perhaps a program of “enhanced tax incentives for generosity” might enjoy more widespread acceptance than Gallup’s “heavy taxes on the rich” – to the point where an overwhelming majority of Americans would support it.
Unfortunately, unless that “overwhelming majority of Americans” has an army of lobbyists to advance such an initiative, the cash registers politicians portraying the effort as “socialism” will be the only voices that matter.
Occupy Movement Gets Some Respect
Much has changed since the inception of the Occupy Wall Street movement. When the occupation of Zuccotti Park began on September 17, the initial response from mainstream news outlets was to simply ignore it – with no mention of the event whatsoever. When that didn’t work, the next tactic involved using the “giggle factor” to characterize the protesters as “hippies” or twenty-something “hippie wanna-bes”, attempting to mimic the protests in which their parents participated during the late-1960s. When that mischaracterization failed to get any traction, the presstitutes’ condemnation of the occupation events – which had expanded from nationwide to worldwide – became more desperate: The participants were called everything from “socialists” to “anti-Semites”. Obviously, some of this prattle continues to emanate from unimaginative bloviators. Nevertheless, it didn’t take long for respectable news sources to give serious consideration to the OWS effort.
One month after the occupation of Zuccotti Park began, The Economist explained why the movement had so much appeal to a broad spectrum of the population:
Reports eventually began to surface, revealing that many “Wall Street insiders” actually supported the occupiers. Writing for the DealBook blog at The New York Times, Jesse Eisinger provided us with the laments of a few Wall Street insiders, whose attitudes have been aligned with those of the OWS movement.
By late December, it became obvious that the counter-insurgency effort had expanded. At The eXiled blog, Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement. In January, New York Mayor Michael Bloomberg lashed out against the OWS protesters by parroting what has become The Big Lie of our time. In response to a question about Occupy Wall Street, Mayor Bloomberg said this:
The counterpunch to Mayor Bloomberg’s remark was swift and effective. Barry Ritholtz wrote a piece for The Washington Post entitled “What caused the financial crisis? The Big Lie goes viral”. After The Washington Post published the Ritholtz piece, a good deal of supportive commentary emerged – as observed by Ritholtz himself:
Once the new year began, the Occupy Oakland situation quickly deteriorated. Chris Hedges of Truthdig took a hard look at the faction responsible for the “feral” behavior, raising the question of whether provocateurs could have been inciting the ugly antics:
Chris Hedges gave further consideration to the involvement of provocateurs in the Black Bloc faction on February 13:
Despite the negative publicity generated by the puerile pranks of the Black Bloc, the Occupy movement turned a corner on February 13, when Occupy the SEC released its 325-page comment letter concerning the Securities and Exchange Commission’s draft “Volcker Rule”. (The Volcker Rule contains the provisions in the Dodd-Frank financial reform act which restrict the ability of banks to make risky bets with their own money). Occupy the SEC took advantage of the “open comment period” which is notoriously exploited by lobbyists and industry groups whenever an administrative agency introduces a new rule. The K Street payola artists usually see this as their last chance to “un-write” regulations.
The most enthusiastic response to Occupy the SEC’s comment letter came from Felix Salmon of Reuters:
John Knefel of Salon emphasized how this comment letter exploded the myth that the Occupy movement is simply a group of cynical hippies:
Even Mayor Bloomberg’s BusinessWeek spoke highly of Occupy the SEC’s efforts. Karen Weise interviewed Occupy’s Alexis Goldstein, who had previously worked at such Wall Street institutions as Deutsche Bank, where she built IT systems for traders:
Chris Sturr of Dollars & Sense provided this reaction:
If Chris Sturr’s expectation ultimately proves correct, it will be nice to watch the pro-Wall Street, teevee pundits get challenged by some worthy opponents.