Concentration of Wealth

WEALTH IN THE USA

WEALTH IN THE USA (Photo credit: er00mb0b)

In early 2014 Oxfam International released some interesting statistics regarding the distribution of the world’s wealth. Here are some of the highlights:

 

  •          1% of the population owns about 50% of the wealth.
  •          This 1% owns $110 trillion.
  •          $110 trillion is 65 times the wealth owned by the bottom (economically) 50% of people.
  •          The bottom 50% owns the same amount of wealth as the top 85 wealthiest people.
  •          In the United States, the top 1% received 95% of the growth since 2009 while the 90% lost wealth.

That there is an extremely unequal distribution of wealth is hardly surprising. In my very first political science class, I learned that every substantial human society has had a pyramid shaped distribution of wealth. Inevitably, the small population of the top owns a disproportionally large amount of wealth while the large population at the bottom owns a disproportionally small amount of wealth. This pattern holds whether the society is a monarchy, dictatorship, communist state or democracy.

From a moral standpoint, one important question is whether or not such a distribution is just. While some might be tempted to regard any disproportional distribution as unjust, this would be an error. After all, the justness of a distribution is not a simple matter of numbers. To use an easy example, consider the distribution of running trophies. Obviously enough, there is a very unequal distribution of such awards. First, almost all people who have them will be (or will have been) runners. As such, most people will not have even one trophy. Second, even among the population of runners there will be a disproportionate distribution: there will be a fairly small percentage of runners who have a large percentage of the trophies. As such, there is a concentration of running trophies. However, this is not unjust: the competition for such trophies is open, the competition is generally fair, and a trophy is generally earned by running well. Roughly put, the better runners will have the most trophies and they will be a small percentage of the runner population. Because of the nature of the competition, I have no issue with this. There is, of course, also the biasing factor that I have won a lot of trophies.

Those who defend the unequal distribution of wealth often endeavor to claim that the competition for wealth is analogous to the situation I presented for running trophies: the competition is open, the competition is fair, and the reward is justly earned by competing well. While this is a plausible approach to justifying the massive inequality, the obvious problem is that these claims are not true.

Those who start out in a wealthy family might not make their money by inheritance, but they enjoy a significant starting advantage over those born into less affluent families. While it is true that a few people rise from humble origins to great financial success, those stories are so impressive because pf the difficulty of doing so and the small number of people who achieve such great success.

There is also the obvious fact that those who hold wealth use their influence to ensure that the political and social system favors the wealthy. While this might not be aimed at keeping people from becoming wealthy, the general impact is that existing wealth is favored and defended against attempts to “intrude” into the top of the pyramid. Naturally, people will point to those who succeeded fantastically despite this system. But, once again, these stories are so impressive because of the incredible challenges that had to be overcome and because such stories are incredibly rare.

There is also the obvious doubt about whether those who possess the greatest wealth earned the wealth in a way that justifies their incredible wealth. In the case of running, a person must earn her gold medal in the Olympic marathon by being the best runner. In such a case, there is little doubt that the achievement has been properly earned. However, the situation for great wealth is not as clear. Now, if a person arose from humble origins and by hard work, virtue, and talent managed to earn a fortune, then it seems fair to accept the justice of that wealth. However, if someone merely inherits a pile of cash or engages in misdeeds (like corruption or crime) to acquire the wealth, then it seems reasonable to regard that as unjust wealth.

As such, to the degree that the competition for wealth is open and fair and to the degree that the earning of wealth is proportional to merit, then the incredibly unbalanced distribution can be regarded as just. However, it seems evident that this is not the case.  For example, a quick review of the laws, tax codes, and so on will show quite nicely how the system is designed to work.

Suppose, for the sake of argument, that the distribution of wealth is actually warranted on grounds similar to the distribution of running trophies. That is, suppose that the competition is open, fair and the rewards are merit based. This still provides grounds for criticism of the radical concentration of wealth.

One obvious point is that the distribution of running trophies has no real impact. After all, a person can live just fine without any such trophies. As such, letting them be divided up by competition is fine—even if most trophies go to a few people. However, wealth is another matter. At the basic level, a degree of wealth is a necessity for survival. That is a person needs it (or, rather, what it can buy) to survive. Beyond mere survival, it also determines the material quality of life in terms of general health, clothing, living quarters, education, and entertainment and so on. Roughly put, wealth (loosely taken) is a necessity. To have such a competition when the well-being (and perhaps the survival) of people is at stake seems to be morally repugnant.

One obvious counter is a variation on the survival of the fittest arguments of the past. The basic idea is that, just like all living things, people have to compete to survive. As in nature, some people will not compete as well and hence they will have less and perhaps even not enough to survive. Others will do better and some few will do best of all.

The obvious reply is that this sort of competition makes some degree of sense when resources are so scarce that all cannot survive. To use a fictional example, if people are struggling to survive in a post-apocalyptic wasteland, then the competition for basic survival might be warranted by the reality of the situation. However, when resources are plentiful it seems morally repugnant for the tiny few to hyper-concentrate wealth while the many are left with very little. To use the obvious analogy, seeing a glutton stuffing herself with a vast tableful of delicacies while her guards keep people away so her minions call sell the scraps would strike all but the most callous as horrible. However, replace the glutton with one of the 1% and some folks are quite willing to insist that the situation is fair and just.

As a final point, the 1% also need to worry about the inequality of distribution. The social order which keeps the 99% from slaughtering the 1% requires that enough of the 99% believe that the situation is working for them. This can be done, to a degree, by coercion (police and military force) and delusion (this is where Fox News comes in). However, coercion and delusion have their limits and society, like all things, has a breaking point. While the rich can often escape a collapse in one country by packing up and heading to another (as dictators occasionally do), until space travel is a viable option the 1% are still stuck on earth with everyone else.

 

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15 Comments.

  1. s. wallerstein

    Besides the excellent arguments which you outline above against wealth inequality (and which I agree with), one might point out those put forth by Wikinson and Pickett in their book, The Spirit Level.

    They compare equal and unequal societies and show that societies with more equality have better physical and mental health, less drug abuse, fewer teenage pregnancies, increased child well-being, better educational results, less violence and more social trust.

    http://en.wikipedia.org/wiki/The_Spirit_Level:_Why_More_Equal_Societies_Almost_Always_Do_Better

  2. There are many people who love running and would dearly like to be a champion, however they just do not have what it takes to achieve those heights. The only sport I follow closely is tennis and I know for a fact that notwithstanding much money spent, time in practice, and eagerness, many players fail to achieve anything of note. I’m sure if you speak to these runners and tennis players few if any are disconsolate, they have given it their best shot but have fallen short of what they would have liked, but nevertheless remain keen in competing at say club level.
    By analogy therefore may we not say that the vast majority of people would like to be rich. It is pretty obvious that of this vast majority there is vast majority who will never be rich. It seems to me that the main reason for this is they are not genetically disposed to acquire wealth although they may need it or wish for it. There are of course many non-genetic variables in this which cannot be controlled, for instance inherited wealth, bad health, criminal activity, sheer blind luck, like winning a lottery and so on. I personally have no grudge against rich people provided their money has not been obtained illegally or by exploiting other people. I would just like to be rich but I’m not and who have I to blame no one but myself. Had I spent less time reading books and dreaming dreams I might have employed what small talents I do have, towards making my fortune.

  3. The Blue Dragon

    Free money for everybody!

  4. David Keith Johnson

    I believe the analogy with athletic competition is misstated. Running is an individual sport. Using a team sport would be more sound, since most people who participate in the economy are directly or indirectly assisting or at least working in combination with others to generate wealth. It is absurd to suggest everyone on the team should be paid the same, but only reasonable that fairness be should be among the criteria for deciding distribution.

  5. You only think you want to be rich, because you’ve been told your whole life that that’s what you want. . . You want to be happy. If you were to become rich right now, there’s a small chance you would be truly happy. But, more than likely, you would realize that even though you have a bunch of stuff, you’re no happier. Alone,this would probably lead to depression, but add to it the obvious moral dilemma associated with having far too much while everyone literally dies around you from not having enough, while at the same time-it’s your money, they didn’t earn it, and you have a cocktail for severe mental instability. Personally, I wouldn’t even want the pressure.

    In “On The Origin Of Species,” Darwin says “survival of the fittest” twice. He says “love” 95 times.

  6. n8sthinkin March 28

    You speak as if becoming rich or being born into wealth is almost a recipe for unhappiness and ill-health. I agree that in certain instances this may be the case, but I am sure it is nowhere near as widespread as you seem to suggest. You are going to find more unhappiness and ill-health in those who are poor. If you are rich and you have ill-health from whatever cause. You are assured of at least, being able to get the best medical attention. Such is not the case for those who are poor. Again if you are rich and you do not like being rich, you find it depressing and overbearing, then you have the option of giving your money away, again such an option does not exist for the poor they have to remain in their unfortunate condition. I’m reminded here of what the actor Michael Caine said “I have been poor, and I have been rich, and rich is better”.

  7. s. wallerstein

    I agree with Don Bird that it’s better to be rich than to be poor.

    What’s more, I’ve always suspected that the story that the rich are less happy than the poor is a myth told by the rich
    to keep the poor from rising up and rebelling.

  8. Charitably, it is perhaps a scenario in which there is a sudden receipt of great wealth by a person not in dire poverty that may be what n8sthinkin was thinking of. Cases of ‘ordinary’ people winning truly vast sums of money on the lottery might be an example of what he had in mind. In such cases I can see how it might very easily play out that a person might not only fail to become happier on account of a multi-million windfall, but may find their life actually becoming a lot more troublesome.

  9. Obviously if you go from actual poverty or financial insecurity to a position such that all the ‘basic’ needs of you and your family are met and look likely to stay met for the foreseeable future this is very likely to cause a significant increase in personal happiness. But once one reaches some not wildly immodest level of security and comfort, I don’t see that further accumulation of material wealth will – in most cases – bring greater happiness in anything like the same way. Thus, it seems to me that for individuals there are diminishing returns from increasing material wealth.

    So, I’d agree that being rich is better than being poor but I just don’t know that being rich is necessarily or usually better than just being relatively comfortable and secure.

  10. s. wallerstein

    Hello Jim:

    I agree that there’s a point of diminishing returns in accumulating wealth. For example, it would make little difference in happiness whether one has as much money as Bill Gates or as George Soros.

    As Don Bird says above, I’ve spent my life reading books and doing lots of other things than worrying about money.

    I don’t regret that much, but it would be great to fly first class (it’s a lot more comfortable), to skip lines in so many places (as the very rich do), to solve problems with a phone call to the president’s personal cell phone, to
    have the very best doctors attend me (without waiting), to never have to wash a plate or clean another toilet in my life, to never worry again about whether there are enough tomatoes for the salad in the refrigerator, to eat exactly what I want at every meal, etc., etc.

    Work is the realm of necessity; leisure the realm of freedom, but daily work absorbs so much time that little time for leisure is left and I assure you that I work less than many people. Money buys leisure.

    Now I’ve always felt uneasy about having people work for me, because I sense that no one likes working and I don’t like having people do things that they don’t like to do, at least when they’re close-by. If I were as as rich as George Soros, however, I’d be able to pay them very very well for making sure that there were always good tomatoes on my kitchen table.

    Money can buy lots of pleasant things. True, it can’t buy friends or love or wisdom, but it’s better to have friends and love and wisdom with money than without it.

  11. Hi Amos

    Well, just because there are diminishing returns from increasing material wealth doesn’t mean the returns diminish to nothing before one gets to the point of being very rich I guess.

    Indeed to be ‘relatively comfortable and secure’ in somewhere like the UK or US is to be astoundingly wealthy in global terms.

  12. Who makes them rich? Us.
    Who makes them rich and selfish?Them.

    Man who dies rich dies disgrace”.
    Carnegie.

    Present Wealthies do not care for our planet nor for human beings.
    Present governments especially US are to lazy to take money from rich and turn to people’s behalf such education,health,social issues etc.

    God save us,

    Dave

  13. I am currently writing a paper on this topic in my political science class. I believe that some degree of inequality, does serve a purpose in a country (ie. to encourage hard work, and the utilization of talents,) because as said in some of the other comments, it is natural for us to want to be more wealthy. At some point though, I believe that the gap between the top earners and everyone else becomes so great that it actually hinders growth, and can thus no longer be justifiable on those grounds.

    For instance, in America the gap has grown so wide that 1% of the population earns more than the bottom 40% annually, and as studies have shown generational movements across social classes has become much lower in America then in other developed countries over the past few decades. I guess my concern is more from an economic/political point of view, rather then completely moral based, but from a national policy perspective, at what point do the benefits of “some inequality” become overrun by the disadvantages and injustices created by a massive amount inequality?

  14. Go invent something or start a service that you can turn a profit on. Quit whining and thing ‘productively’, not how the world doesn’t give you something.

  15. Think, not thing

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