Capsizing the Ship of State
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One perk of being a professor is that I get a chance to talk to experts in other fields about various issues. Recently I was discussing the matter of income inequality in America in the context of both historical empires and recent events in the Middle East.
No doubt some folks will accuse me of being a “professional leftist” or engaging in “class warfare” by discussing such matters. However, I will show that my goal is not to cause class warfare but rather to argue how it can be avoided. My motivations are grounded both in morality and patriotism.
Income inequality in America has increased significantly since the middle of the 1970s. Those Americans in the lower 80% have seen a reduction in their share of the big economic pie. In stark contrast, the top 1% has seen its slice expand over 120%. Now the top 10% of Americans earn roughly 75% of all the income. As such, 90% of Americans only get 25% of the pie. As is often said, the rich get richer and the poor get poorer.
Not surprisingly, some folks will argue that this is a good thing or at least fair. People can speak about trickle down economics and claim that the rich earned their income. I will not argue any of this here. Rather, I will focus on the consequences of this concentration of wealth.
While there are many factors that lead to the fall of empires, there are at least two that are directly linked to income disparities. The first is that the disparity in income is harmful to the general body of society. To use an analogy, society is very much like a human body (which is nicely illustrated by the cover of Hobbes’ Leviathan). It has various parts that make it up and these parts have varying degrees of importance. However, all need resources to survive. In the case of the body, if some organs receive the vast majority of the resources while the others do not receive enough, then those parts of the body will weaken, wither away or even die. In some cases, such as with fat, this is fine and even desirable. However, in other cases this can be very bad indeed and lead to the death of the whole. The same applies to the political body: its parts need enough resources to survive otherwise this can spell the death of the body.
Assuming this is correct, it follows that extreme income inequality is actually a threat to the entire society. Even if the extremely rich argue that they earn every cent, this does not change the fact that such concentration of wealth can prove to be rather harmful.
One obvious reply is that it is not the concentration of wealth that is the big worry. Rather, the worry is that the other parts of the body have enough resources to keep going. As such, there could be great inequality in income while the body as a whole does well.
This is, of course, a reasonable reply. Obviously enough, we are currently in a situation of massive inequality, yet the body as a whole certainly seems healthy enough. No doubt the Romans said the same thing. However, this does not entail that the inequality is not harmful nor does it entail that inequality can continue to grow without leading to harms to the political body as a whole.
Some might suspect that I will call for a redistribution of wealth and are ready to lash me with the whip of socialism. However, I do not advocate forced distribution of wealth via socialistic means. Rather, what is needed is a more equitable tax system and an economy that is more open to competition. Currently the state often serves the needs of the established wealthy very well and protects them. This leads, as it always has, to an ever increasing concentration of wealth. This is not due to a “free market”, but largely due to a market that is manipulated by politicians who are guided by those who hold this wealth. See, for example, the state of Wisconsin.
A second factor is that citizens need to believe (correctly or incorrectly) that they have a stake in society. When citizens believe they no longer have a stake or something to gain, they tend to “check out” of society. This can begin with simply electing not to vote and can end in actual rebellion.
Income, obviously enough, plays a significant role in this belief. True, propaganda can be used to convince people that they have a stake in society and people can also believe they have a stake based on factors other than income. However, income is still an important factor as shown by the situation in the Middle East.
The countries in the Middle East that have been rocked by revolution have many factors in common. One of these is that that wealth is highly concentrated. Others include the fact that unemployment was high and opportunities where low. Naturally, the repressive nature of the states is also a critical factor. However, the economic inequality has clearly been a major driving force.
Interestingly enough, the folks at Fox News, such as Glenn Beck, have claimed that the events in the Middle East are comparable to the protests in Wisconsin. Interestingly enough, Beck was right to make the comparison. The people in the Middle East realized that the system was favoring a small, wealthy minority and had little or nothing to offer the majority. Hence, they checked out of the system and rebelled. In the case of Wisconsin, people are seeing that the state government is beholding to the Koch brothers and is intent of serving the interests of the wealthy minority at the expense of the many. Hence, people are protesting. Obviously, the Middle East is a far more extreme situation, but many of the core causes are the same.
Currently, most Americans have good reasons to stay checked in, even though many people do not vote. However, the concentration of wealth and the economic situation means that more people will have less reason to stay checked in. The pundits at Fox, the forces behind much of the Tea Party and others are doing their best to keep people convinced that corporate greed and selfishness are virtues and are in the best interest of the people. They are also working overtime to brand any suggestions that the inequality is a problem as “class warfare” or socialism. Some people do buy into this propaganda. Hence, you see lower income people rushing to defend corporations, the rich, and the free market despite the fact that the system ensures that they will remain in the lower classes. It is indeed a brilliant trick to get such people to passionately defend the rich and rail against those who would do things to make the situation of the middle and lower classes better. However, as Lincoln said, one cannot fool all the people all the time.
I do not, of course, see the solution to the problem in socialism. Rather, what is needed is a means to ensure that the good aspects of capitalism remain in play while ensuring that the concentration of wealth does not reach the point where too many people are checking out. At that point, as has been seen throughout history, a society collapses, is conquered or falls into rebellion. I do not want to see any of these happen here, hence I believe that income inequality must be addressed.
Interestingly enough, the really rich also have an interest in an adequate distribution of income After all, they need a society around them to provide stability, order, products for them to consume and people to work for them. Presumably some of the rich also have a sense of patriotism and community as well. As such, it would seem that everyone has a good reason to ensure that the concentration of wealth does not hit the tipping point.
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“In the case of Wisconsin, people are seeing that the state government is beholding to the Koch brothers and is intent of serving the interests of the wealthy minority at the expense of the many.”
I think people are seeing that Wisconsin is nearly bankrupt, and must make a course correction.
There are more fallacies and assumptions built on top of other fallacies and assumptions in this article than Hogan has goats.
BTW, if you don’t want to be accused of being a “professional leftist” or engaging in “class warfare” by discussing such matters (or perhaps you actually do), you shouldn’t use a Mother Jones article as the starting point for your argument. And especially if you’re going to take your usual pot-shots at Fox News for being unbalanced.
As for your reference to Rome, there are many historians and economists who would attribute the collapse of the Roman Empire to numerous other causes. Some would even say that the “bread and circuses” policy was simply a redistribution of wealth which created an underclass of who consumed without producing, resulting in a degeneration of any work ethic which thus eroded the society from within.
Please specify the fallacies. Be sure to keep in mind that it is not a fallacy to say something that people regard as being a factual error. 🙂
But is Mother Jones in error? If I cite Fox, does that justify accusing me a of being a professional right winger?
I do note that there are other factors to consider. I was careful not to go with a single factor hypothesis. Rarely are complex events the result of a single cause.
“Those Americans in the lower 80% have seen a reduction in their share of the big economic pie.” – Misleading to ignore the fact that there is movement between economic tiers. Most people start out life in that lower 80% and later move up. Many climb too fast and crash back down.
“society is very much like a human body”. Says you. It’s more like a fruit cake or a pile of camel dung, says me. And this line of reasoning leads to “The same applies to the political body: its parts need enough resources to survive otherwise this can spell the death of the body.” Sure, if that’s what you want to attribute it to. See my comment about your comment about Rome, above. It’s parts can go their own way, if they wish, or they can simply die out and the rest of the body moves on. This is just poetic BS.
Furthermore…”However, I do not advocate forced distribution of wealth via socialistic means. Rather, what is needed is a more equitable tax system”
If you tax someone to benefit someone else, you are using force to redistribute wealth.
The top 1% of taxpayers pay 1/3 of the taxes.
The top 5% of tax payers earn 1/3 the income but pay over half of the taxes.
The top 50% of taxpayers pay 96% of the taxes.
What do you propose as “fair”?
Excessively taxing those who create wealth results in less overall wealth. Again, do you think the wealthy have all of this money in mason jars buried in their back yards or stuffed in their mattresses? Or is that money in the economy, invested in businesses or in banks that use that money to make loans.
How about instead of increasing taxes, decreasing spending, instead of increasing class warfare rhetoric, decreasing jealousy and envy?
“Again, do you think the wealthy have all of this money in mason jars buried in their back yards or stuffed in their mattresses? Or is that money in the economy, invested in businesses or in banks that use that money to make loans.”
If you’re going to advocate trickle-down economics, you should tackle it directly. That the wealthy invest their money is irrelevant to the consideration of how much trickle down benefit such investment brings to society.
Not that, where. And where is very relevant.
During the Eisenhower administration, the top personal federal income tax rate was 91% while the corporation tax rate was 51%. That did not seem to create undo problems and the economy grew, although there was a recession around 1958 if I recall. That would seem to indicate that higher tax rates on the wealthy do not necessarily damage the economy.
Also, other advanced countries typically have much higher tax rates than we have and their economies have been growing quite well.
Here are some data which compare the U.S. with other prosperous countries:
http://www.huppi.com/kangaroo/8Comparison.htm
Government as a % of GDP was 28% then, last year it was about 42%. Much of govt. money was part of the cold war defense build up which went to people who, you know, worked for a living. Far less was being paid to people who didn’t work. Payroll taxes were much lower (3.375% vs. 15.3% today) then and maxed out at $4800, which is approx. $35K in 2009 dollars as opposed to today’s 16.75% of $106K PLUS 4.35% on all income above $106K. Couldn’t find what percent of income earners actually paid that high rate, but I would suspect it was lower than today. I’d also suspect it was much easier to cheat on your taxes back then compared to today, what with computers and financial records easily available, but there’s no way to prove that. Want to roll back to 1958 spending as a percent of GDP? I’m all for it.
BTW, I see Canada on that list in your link. Funny how the US is the one with by far the bigger immigration problem on that list…And who’s miliitary protects them all?
Taxing is only force if it is done without consent. By being a citizen of a democratic state and participating in the process, I thus agree to pay taxes. If I am forced to pay the taxes, this is on par with my being forced not to rob or murder my fellow citizens. Naturally, taxes can be unfair-but this is different from being forced.
I’m fine with less spending provided that it is done in a rational way that is aimed at the, as Locke would say, good of the people. The only significant class warfare in America seems to be being waged by the very wealthy against the middle and lower classes. Even that could be seen as politics rather than class warfare in any significant sense.
I am not jealous or envious of the rich. I, too, could be rich if I placed my emphasis on money rather than being an educator. True, I’d accept more pay. 🙂
Don’t pay your taxes and feel the force. Saying that begin forced to pay taxes is on par with being forced not to rob or murder is a pathetic argument that would shame a teenager, were they so lame as to make it.
We have an obligation to pay taxes to support what is necessary to maintain law and order. Taking money, via taxes, to give to someone else is robbery.
My point was obviously not say YOU were jealous or envious. What I am saying is that in place of rhetoric in support of class warfare, some discussion on the evils of jealousy and envy might be a better use of the time and space.
“I, too, could be rich if I placed my emphasis on money rather than being an educator.” Really? You sure? Doing what exactly?
Steal some stuff and feel the force. Saying the argument is lame does not prove that it is lame. The analogy seems to hold: we decided that certain things are required of citizens, be they things they are not to do (kill, steal, rape) or things they are to do (pay taxes).
I’m not sure how much of a role jealousy plays. The middle and lower classes often seem to be staunch defenders of the rich (witness the Tea Party masses who backed candidates that now so willingly serve their corporate benefactors).
I have many options. If I wanted to take the time, I could hit a 180 on the LSAT, get my degree and start grinding law suits. Or I could stay and academics and go pop hardcore-self promote, crank out shallow books calculated to attract the attention of the chattering classes and cash in on that. Or, I could switch over to politics.
Since I love a good challenge, maybe I’ll follow Thales. According to myth, some fellow said “if you are so smart, why aren’t you rich?” So, he went out and cornered the olive market, becoming rich.
As far as a fair tax goes, that depends on what is meant by “fair.” One way to look at would be that each person is taxed in a manner comparable to paying for services. On this view, each person would pay, to the cent, for all the goods and services received from the state. As such, those who drive would be taxed per mile and based on the vehicle. Those who have wars fought to serve their interests would pick up the tab for that and presumably also pay the death benefits for the soldiers killed. And so on. Pay as you go government.
“each person would pay, to the cent, for all the goods and services received from the state” – The rich would love that one. But how are you going to get all that extra money out of the poor since all most of them have is what has been given to them by the state?
“Those who have wars fought to serve their interests…” What wars in your lifetime have only served who’s interests? How the hell would you determine that? Get real. Literally.
If they cannot pay, they shall be denied. Cash and carry government.
I’d say that Vietnam, Iraq and Afghanistan failed to serve my interests.
“I have many options. If I wanted to take the time, I could hit a 180 on the LSAT, get my degree and start grinding law suits. Or I could stay and academics and go pop hardcore-self promote, crank out shallow books calculated to attract the attention of the chattering classes and cash in on that. Or, I could switch over to politics. ”
Man, Mike. The classic liberal bitterness is really dripping out of you in the last 5 posts or so. Envy is one of the 7 deadly sins, too, just like greed.
Libarlism is the codification of envy.
“I’d say that Vietnam, Iraq and Afghanistan failed to serve my interests.”
Did they harm your interests? Would you know about them but for the news?
Yes. The wars killed a lot of people and that is against my interests. They have also wasted resources that could have been used in more positive ways. I would know about them but for the news-after all, I read history. Plus, I have friends and former students who have served or who are serving there.
If by interests you mean things you care about–ok. But in the case of the last two wars 99% of American’s lives are not measurably any different. In Vietnam there was a draft, so many people who didnt want to to in the mililtary were. But now, it’s volunteer. Probably a smaller percentage of people fighting in two wars than in any nation’s history. Just a guess, but I think it’s probably true. ‘
I’m for a 10 year period of military isolationism, just to show the world how bad things could truly get. I don’t agree with the way we prosecuted the Afghan War–even the people at the top are starting to see that nation-building was not the way to go. But America’s mere existence keeps a dozen or so wars from breaking out. I think we should back off for a while, like making a kid go to bed without supper. Makes him appreciate what he has a lot more. Europe would have to spend on its military; most of the countries in NATO don’t even spend the required 2% GDP for membership–even Germany and Britain.
But, many countries don’t fight each other not because they fear their enemies, but because they fear American intervention. We already see what’s happened to the world when it thinks America has a weak leader and is distracted by two conflicts.
It’ll be worse in 2 years.
“Those Americans in the lower 80% have seen a reduction in their share of the big economic pie. In stark contrast, the top 1% has seen its slice expand over 120%.”
In stark contrast? Simple mathmatics, Mike. If the top 1% grew faster than the rest, of course the lower 80% has a reduced percentage share. It does not mean that the lower 80% are worse off than they were in the 70s, just that the top 1% are better off.
But this is the age of envy, so rage away.
But it does seem that they are worse off, after all they do have less of the pie. Naturally, it could be claimed that the pie is bigger now and that a smaller slice of a bigger pie is better than a bigger slice of a smaller pie.
I’m not sure why writing critical posts counts as evidence as envy. After all, I would not infer that your claim that I am envious is evidence that you are envious of me.
Good discussion on inequality in The Economist (generally a better source of news that Jon Stewart or Fox News).
http://www.economist.com/node/17959590
For much of the past two decades the prevailing view among the world’s policy elite—call it the Davos consensus—was that inequality itself was less important than ensuring that those at the bottom were becoming better-off. Tony Blair, a Labour predecessor of Mr Cameron’s, embodied that attitude. His New Labour party was famously said to be “intensely relaxed” about the millions earned by David Beckham (a footballer) provided that child poverty fell.
Now the focus is on inequality itself, and its supposedly pernicious consequences. One strand of argument, epitomised by “The Spirit Level”, a book that caused a stir in Britain, suggests that countries with greater disparities of income fare worse on all manner of social indicators, from higher murder rates to lower life expectancy. A second thread revisits the macroeconomic consequences of income disparities. Several prominent economists now reckon that inequality was a root cause of the financial crisis: politicians tried to counter the growing gap between rich and poor by encouraging poorer folk to take on more credit (see article). A third argument is that inequality perverts politics, with Wall Street’s influence in Washington often cited as exhibit A of the unhealthy clout of a plutocratic elite.
If these arguments are right, there might be a case for some fairly radical responses, especially a greater focus on redistribution. In fact, much of the recent hand-wringing about widening inequality is based on sloppy thinking. The old Davos consensus of boosting growth and combating poverty is still a better guide to good policy. Rather than a sweeping assault on inequality itself, policymakers would do better to take on the market distortions that often lie behind the most galling income gaps, and which also impede economic growth.