The U.S., Mexico, and Turkey are the three most unequal countries in the world, according to major new OECD study covering the past two decades. The Associated Press reports:
The United States has the highest inequality and poverty in the OECD after Mexico and Turkey, and the gap has increased rapidly since 2000 … In the United States, the richest 10 percent earn an average of US$93,000 — the highest level in the OECD. The poorest 10 percent earn an average of US$5,800 — about 20 percent lower than the OECD average. Social mobility is lowest in countries with high inequality such as the United States …
Not good. So do you think such rising economic inequality might feed into today’s financial meltdown and economic crisis?
October 28th, 2008 at 9:34 am
The report identified the UK has closing the gap between rich and poor the fastest (between 2000 and 2005).
Yet, there’s still a financial meltdown and economic crisis in the UK (71% rise in homes repossessed, 12% drop in houseprices compared to last year etc etc).
However, another headline that we often read in the UK is that the gap between rich and poor has increased under Labour’s (supposedly left wing) administration faster than under the previous Conservative one. So it’s confusing as to whether the gap has widened or narrowed.
The answer is probably that the things that have worked to reduce income inequality (tax credits, support for lone parents etc) are those that effect the “working class” and so the people who make the noises – the newspaper readers, the objectors, the writers of letters their MPs etc – don’t notice them.
October 28th, 2008 at 7:16 pm
Richard,
I know you’ve been writing about this at least since “Rise”, the growing gap between the creative class and the working and service classes. Some of it is the result of basic economics, the world is changing rapidly and some kinds of work don’t contribute/earn as much as others. This change is global and technological and can’t be reversed. Your proposed solution of changing the nature of work to make more of it creative is one of many that will be needed.
To go to the growing inequality. The real problem isn’t at the top 10% level, it’s at the bottom 10% (probably actually the bottom 30-40%) level where people struggle to afford housing, food, healthcare and other basic needs. For all the political talk of redistribution, a lot of the problems are bad system design which costs us all. The American health care system is famously inefficient, we could provide everyone decent care and save money. The cutbacks in low income housing since 1980 have added enormously to the costs of health care, crime, unemployment, education and more of not only homeless people but those spending 50% or more of their income on rent.
To address your question of how this fed the financial crisis. The lack of affordable housing fed directly into the real estate bubble — people were thrown into a market where the available housing was scarce and therefore overpriced and that fed the banks hunger to create new “financial instruments” and sell them to customers who couldn’t afford them.
Another issue is general debt. With the end of usury laws in the late ’70’s, credit card interest rates skyrocketed at the same time the lowest 10% started needing them to buy food and pay doctors. If they could afford basic necessities on their wages, the total debt load would be much lower.
So inequality is part of it, but the real culprit is poverty. The top 10% or 1% earning more isn’t the cause of the lowest 10% or 30% not being able to live decently. And I’d add that the crisis is not only financial, its social. Solving the social issues would go a long way to solving the financial ones.
The issues are probably different in Mexico and Turkey, although I’d guess that the underlying problems there are also the poverty rather than the inequality.
October 28th, 2008 at 7:22 pm
Actually, this meltdown has been a major victory for inequality foes everywhere. The richest Americans have been lost the most wealth in this crisis. Poor Americans have lost as well, but not the same magnitude.
So victory for equality!
Does that logic seem backwards?
Well, this is really just the inverse of the process that occurred up until this point.
The poor and middle class gained, just as now they lose, but much less than the rich gained, just as now they lose much less.
That is not say there aren’t legitimate problems of poverty: a massive failure of education, for instance, to impart the skills necessary for many Americans to compete in the global market place.
But led us shed this ‘inequality’ nonsense, and focus on absolute poverty. The poor need to be helped. Those unable to attend schools that will give them the power to succeed need help.
The fact that Bill Gates has made a lot of money on the internet, doesn’t increase or decrease this need. We should not focus on inequality — the fact that many have attained new heights of wealth thanks to the increasing returns on the scarcest skills and discoveries — but on attacking poverty by giving every American the skills to succeed.
October 29th, 2008 at 7:36 am
Gee, ya think we’ve had enough republican agenda for one generation.
Thank G-D these cronies are retiring to their over-inflated lives at the country clubs, good riddance.
Now forward with an America for The People by the People, not for the Affluent, by the Affluent.
G-D Bless Obama
October 29th, 2008 at 12:55 pm
Higher Taxes = Higher Unemployment.
I’ve never been employed by a poor person, so by all means let’s punish the people who actually can create jobs. Sorry to interrupt the group-think, but I am scared to death of an obama/pelosi/reid trifecta of doom.
Socialism has a way of bringing people to the same level, downwards that is. What we’re going to be stuck with is “trickle-up poverty”. If you want to see a real Flight of the Creative Class, then try and target them with your “neighborly” and “patriotic” tax increases. Yeah, that works real well, just like the AMT did.
Those who don’t learn from history are doomed to repeat it. Looks like that’s what the lefties want to do, electing FDR 2.0