In the current issue of Vanity Fair, Nobel Prize winning economist, Joseph Stiglitz, paints a picture of the United States that we may not recognize. He delivers the stark message that the America we thought we knew— “the land of opportunity,”—is no more. Today, the top 1% of Americans take nearly 25% of the national income and control 40% of the wealth. (For reference, the yearly income of the top 1% starts at $500,000 and goes on up to billions.)
Twenty-five years ago, Stiglitz reports, the top 12% controlled 33% of the wealth, which was bad enough. But the income inequality we have today would make third world countries blush. He warns that this continued amassing of wealth and power by a small elite group—one that is served by our elected officials in return for rewards when they leave office—has put the country on a very dangerous course.
Stiglitz offers more statistics to ponder:
While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia, with its oligarchs, and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
In his essay, Stiglitz is describing a country in decline, and there are plenty of facts to back up his assertion:
As 2007 began, only about 26 million Americans were on food stamps, but today over 44 million Americans, or 14% of the population are on food stamps, which is an all-time record high.
The White House is celebrating the adding of new jobs, and a slight reduction of the unemployment rate, but the jobs being added pay significantly lower wages than the 8.4 million lost jobs between January 2008 and February 2010.:
- Lower-wage industries (those paying $9.03 -$12.91 per hour) accounted for just 23 percent of job losses, but fully 49 percent of recent growth.
- Midwage industries ($12.92 -$19.04 per hour) accounted for 36 percent of job losses, and 37 percent of recent growth.
- Higher-wage industries ($19.05 -$31.40 per hour) accounted for 40 percent of job loss, but only 14 percent of recent growth.
Employee compensation in the United States has been the lowest that it has been relative to gross domestic product in over 50 years. Another startling figure is that approximately half of all American workers make $25,000 a year or less.
Today, there are 52 million uninsured adults, slightly more than when the Affordable Care Act of 2010 was passed.
According to the National Center for Children in Poverty, nearly 15 million children in the United States—21% of all children—live in families with incomes below the federal poverty level, which is $22,050 a year for a family of four. Research shows that, on average, families need an income of about twice that level to cover basic expenses. Using this standard, 42% of children live in low-income families. The United States measures poverty by an outdated standard developed in the 1960s.
Stiglitz makes three important observations about the economic realities we are experiencing today:
First, growing inequality translates into shrinking opportunity, and when opportunity declines we are not using the most important asset we have—the people of this country.
Second, preferential tax treatment for corporations and wealthy individuals has undermined the economy. And as Stiglitz points out, the existence of income inequality and lack of opportunity further distorts the economy. For example, talented college graduates, lured by lucrative salaries and bonuses, have gone into finance rather than into other fields that would lead to a more productive, and balanced economy.
Stiglitz’s third point, and I think most important, is that we have lost our sense of the common good. A modern economy requires “collective action, ” that is, we need the government (working with a healthy and fair tax base) to invest in infrastructure, education, and technology for the good of the country as a whole. But America has long suffered from an under-investment in infrastructure. Our highways, bridges, railroads, airports are in bad shape. And even though basic research and education are suffering, our elected officials’ response (in service of the 1% who do not want to pay a fair share in taxes) is to plan further cutbacks.
The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
In closing, Stiglitz quotes Alexis de Tocqueville who held that “the welfare of all is a precondition for one’s own wellbeing.” That sentiment, of course, is not held by the top 1%, nor, I would argue, by the majority of Americans, who continue to embrace the “winner take all” mentality and the false notion of the “self made man.”
I would argue that if America is to return to being a place of hope and opportunity, then we Americans will have to embrace a different value system—one that is invested in the good of all, rather than wealth creation for the top 1%.