The science of income disparity

In this TED video, researcher Richard Wilkinson discusses real work data based levels of income disparity one finds in "rich developed-market democracies." As you can see (at 4:11 of the video), nations with low amounts of GNP don't tend to exhibit aberrant levels of health and social problems. On the other hand, countries that exhibit substantial amount of income disparity (3:44) exhibit high levels of health and social problems. GNP per capita is thus a poor measure of a country's well-being.  Further, we should be alarmed at high levels of income disparity. The same relationship (5:01) is apparent when one compares GNP to the UNICEF scale of child well-being. "The national well-being of our societies is not dependent any longer on national income and economic growth." The same tests were run on the 50 states of the U.S. with the same results. What else suffers along with high income disparity? Trust (5:45), involvement in community life (6:00), mental illness (6:50), violence, percentage of the population in prison (7:40), the percentage of dropouts in high school (8:16), social mobility (poor parents having children who end up poor) (8:24), drug abuse, life expectancy, obesity, math and literacy scores and many other problems (9:10). Wilkinson sums it up by saying that the countries that do worse---those that have higher social dysfunction--tend to be more economically unequal. How do the various low income disparity nations and states attain their earning levels? Sweden does it by heavily taxing the rich. Japan has more comparable wages to begin with. Wilkinson's numbers show, however, that it doesn't much matter how you get your equality as long as you get there somehow. He adds that it's not only the poor that are affected by income disparity (12:20). Additional statistics show that the wealthy significantly benefit from general equality, not just the poor. What is the proximate mechanism for all of these startling numbers. Wilkinson points to the following consequences of inequality:

  • More superiority and inferiority;
  • More status competition and consumerism;
  • More status insecurity;
  • More worry about how we are seen and judged;
  • More "social evaluation anxiety" (threats to self-esteem & social status, fear of negative judgments).
Wilkinson offers an unsurprising solution to countries and states with high levels of social dysfunction: Even out the income, either by offering more opportunities to folks at the lower end of the scale or by taxing the high earners (16:17). The bottom line is that we can improve a country's overall well-being by reducing economic inequality. I am not at all surprised by Wilkinson's findings. It combines many ideas that I've previously discussed. No, GNP (and GDP) is a terrible measure of well-being (and see here) and people are deeply compelled to display their self-worth through material acquisitions. And all of this would seem to be exacerbated to the extent that TV and magazines pump images of the haves (and their expensive toys) into the homes and lives of the have-nots, causing all kinds of frustrations and degradations of self-worth among the have-nots. That was my suspicion prior to viewing Wilkinson's video and now all of this and many other measures of social dysfunction are backed up by Wilkinson's real-life numbers.

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What is the financial sector up to?

If the financial sector does not mostly consist of real banks, taking deposits and lending money to businesses, what do they do? Christopher Ketcham explains, in an article titled "The Reign of the One Percenters," in Orion Magazine:

At one time, the financial sector could be relied upon to allocate capital for the building of things that society needed—projects that also invariably created jobs. But productivity is no longer its purview. Lord Adair Turner, a financial watchdog and former banker in the city of London—the other world capital of finance—recently denounced his class as practitioners and beneficiaries of a “socially useless activity.” Paul Woolley, who runs a think tank in London called the Centre for the Study of Capital Market Dysfunctionality, observed that the “presumption that financial innovation is socially valuable” was a kind of metaphysics. “It wasn’t backed by any empirical evidence,” Woolley told John Cassidy, a staff writer for The New Yorker. Structured investment vehicles, credit default swaps, futures exchanges, hedge funds, complex securitization and derivative pools, the tranching of mortgages—these were shown to have “little or no long-term value,” according to Cassidy. The purpose was to “merely shift money around” without designing, building, or selling “a single tangible thing.” The One Percenter seeks only exchange value, as opposed to real value. Thus foreign exchange currency gambling has skyrocketed to seventy-three times the actual goods and services of the planet, up from eleven times in 1980. Thus the “value” of oil futures has risen from 20 percent of actual physical production in 1980 to 1,000 percent today. Thus interest rate derivatives have gone from nil in 1980 to $390 trillion in 2009. The trading schemes float disembodied above the real economy, related to it only because without the real economy there would be nothing to exploit.

.   .   .

Finance as practiced on Wall Street, says Paul Woolley, is “like a cancer.” There is only maximization of short-term profit in these “financial services”—they are services only in the sense of the vampire at a vein. There is no vision for allocating capital for the building of infrastructure that will serve society in the future; no vision, say, for a post-carbon civilization; no vision for surviving the shocks of coming resource scarcity. The finance nihilist doesn’t look to a viable future; he is interested only in the immediate return.

When reading the above numbers, keep in mind that the annual tax receipts of the United States only amount to about $2 trillion.

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Ostracized no more: America’s disenfranchised 99% begin to form their own group.

Two years ago, I was excited to see Barack Obama elected President because I had listened closely to his campaign speeches and I assumed that I would now have a meaningful voice in how my government was being run. I assumed that we would see an immediate decrease to America’s warmongering, domestic spying and fossil-fuel dependence, for example. Since that election, though, I’ve witnessed Mr. Obama cave-in to right wing demands on numerous major issues. I’ve seen Wall Street “reform” that allows bigger “banks” than ever. I’ve seen health care “reform” that shoved single payer under the table and consisted of a sell-out to for-profit monopolistic insurers, without any meaningful price controls. Government spying and secrecy are more prevalent than ever. I’ve seen big business spend more money more flagrantly than ever to purchase politicians, including Barack Obama. As all of this has transpired, I keep being reminded of George Carlin’s words, (at the two-minute mark) that there is a “big club . . . and ain’t in it. . . . You and I are not in the big club." [More . . . }

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Here’s what $2 billion/year for 10 years gets you

We drained the economy of the United States because we needed to enrich the officers of so-called banks, and for this: Afghan President Hamid Karzai has said if the United States and Pakistan ever went to war, his country would back Islamabad, drawing a sharp rebuke Sunday from Afghan lawmakers who claimed the country's top officials were adopting hypocritical positions. In the meantime, as reported by Glenn Greenwald, Bradley Manning, who will likely die in prison, appears to have helped bring an end to America's other major psychopathic, dishonest, infrastructure-draining exercise in warmongering. And here is Iraq, by the numbers.

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