A lay person’s inquiry into what ‘socioeconomic stratification’ means for us all.
When The Good Men Project approached me about the possibility of writing something regarding the economy I immediately realized there was only one way I could do this. I had to go personal and really explore the ideas behind the sometimes angry rhetoric I spout off in 140 characters or less on a regular basis. I am not an economist or an academic. I am merely a tax paying homeowner and a citizen of the United States who believes we all have a stake in how things turn out.
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Screw the poor. They must be doing something wrong, otherwise they wouldn’t be poor. Right? Ironically, this attitude dominated my thoughts and feelings about people at the lower end of the socioeconomic scale throughout most of my twenties.
Ironic because at the time I was rather poor myself. The day after I turned 18, I left home and embarked on a rudderless career path drifting between the only opportunities available to me back then: short order cook and construction laborer. I earned enough money for a fourth of the rent on a two bedroom apartment, plus beer and cigarettes. I ate peanut butter sandwiches, and I guess I figured I was paying too much in taxes.
My 20s were flush compared to my teen years, which, in turn, were a breeze compared to my childhood. It is without any exaggeration I recall running around with holes in my shoes and eating a steady diet of macaroni and cheese. My brother and I were raised by a single mother, stricken with severe Multiple Sclerosis, and the truth I have always known is sometimes people are poor because they are unlucky.
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The other truth I learned growing up amongst America’s wage slaves is, no matter how hard you try, for many people things never get much better. In spite of my mother’s many challenges, she worked full time and put herself through college. She eventually became a nurse and spent much of her career working for the state with mentally ill, homeless men and women on the streets of Boston.
Although she worked hard in a deeply meaningful and compassionate field, things never got much better for her. She played by the rules and died terribly sick and penniless, miles from where she grew up. She never owned a home, and she sure as hell didn’t have any white picket fences. By any measure, she was plain unlucky.
As it turns out, I’m not so sure luck has anything to do with it anymore. The time frame of this story is 1975 to the present. This is a story about someone who overcame remarkable challenges, worked hard, raised a family, paid taxes, got involved in her community, and did some good.
This is also a story about a time in human history when advances in technology dramatically increased industrial efficiency and reduced the cost to produce goods exponentially. Corporations in America beat their records for reported earnings and profits year after year, yet most people saw no real change in their circumstances.
Well, as it turns out, things do get better for an incredibly small minority of people at the very top. For our leaders in state and federal government making and enforcing the rules of the game and a few people who have direct access to them, things get a lot better. Consider the following charts:
Source: Inequality.org using information provided by the Congressional Budget Office
These charts are made up of publicly available data with no partisan slant. They communicate a clear representation of a problem we have all heard of: the rich get richer and the poor get poorer. It might not be inherently obvious why this is a problem, so I’ll do my best to explain.
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In a purely academic sense, unchecked wealth polarization in any macro-economic system is an undesirable outcome. It leads to riots, labor strikes, unrest, and other circumstances, which have a strong negative impact on markets, the economy, and society as a whole. We’ve seen this outcome play out many times in international news over the last year.
As the poor get poorer, there is an ever-dwindling pile of resources to compete for and eventually the competition gets ugly. Play this tape forward and as time goes by, and risks with increasing complexity and challenges begin to come into focus. Issues like mass starvation, open class warfare, and the collapse of society as a whole.
Recognizing inequality is a problem does not make someone unpatriotic or a socialist or a communist. The game is rigged unfairly, and wealth redistribution is already happening—from the poor to the rich.
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Aside from all this academic theory and existential future risk, there is a very basic and important market force keeping our economy stuck in neutral right now: supply and demand.
Simply put, if most of the people have no money, then demand dries up. When there is no demand, the economy stalls. I honestly can not understand why this principle is not obvious to everyone involved.
“The rich are always going to say that, you know, just give us more money and we’ll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on.” -Warren Buffett, ABC This Week with Christiane Amanpour, November 2010
So what should we do? Someone asked me: Should rich people give their money to the poor? Are you a socialist? The answer to both of these questions is no.
I believe in capitalism, and I do not believe the government should have too much power. The core of my recommendations to solve the problem of inequality is to reduce the effect of capital on our government, not to increase the impact of our government on free markets.
Campaigns should be financed by the public. Accepting bribes while in office or taking a high-paying position within a corporation one previously regulated should be considered amongst the worst crimes a government official can commit. Lobbyists and political action committees should be completely outlawed.
My belief is that once we have ensured our government is completely freed of the corrupting effect of capital, we begin to feel comfortable they are making decisions based on the greater good. This idea is neither original nor new.
In order to get the economy back in gear, it is necessary to stimulate demand. Therefore, I believe it is necessary to immediately eliminate Bush-era tax cuts, close all loopholes, which make it possible for profitable corporations to avoid paying taxes, and lower taxes on the bottom 80% of the tax base.
Before we can begin to address the big picture problems, I think it is important for all Americans to recognize the economy really isn’t a partisan issue. Recognizing inequality is a problem does not make someone unpatriotic or a socialist or a communist. The game is rigged unfairly, and wealth redistribution is already happening—from the poor to the rich.
“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” -Warren Buffett, The New York Times, November 26, 2006.
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Sometimes things do change. I don’t have holes in my shoes anymore (but I do still eat a steady diet of macaroni and cheese). At some point in my 20s I decided to learn everything I could about the World Wide Web. Eventually, when the dot com labor market got desperate enough to hire knuckleheads like me, I landed a job building web sites. Over time, things slowly improved.
Today my attitudes about the working poor, how they got that way, how they can change, is all very different. Some might say ironically different, since I now pay more in taxes than I earned in my 20s, but I don’t look at it that way.
Today my truth is I believe I can do better. I believe if I want to consider myself a good man I must take better care of the world and the people around me. I believe there is enough to go around.
—Photo jamesfischer/Flickr
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I couldn’t agree more with your observations. I don’t entirely agree with Mr. Buffet but he makes a good point. Lobbyists are a necessary evil in the current workings of government and there are some good ones out there. I will say that in general Lobbyists usually don’t have the interests of the masses on their side because the masses don’t write them checks.
I’m curious what your thoughts are on a flat or fair tax? Good article by the way.
Thanks Christopher. I believe a fair tax is one which includes consideration of the taxed individual’s ability to pay.
Love this! Thanks so much for writing it.
I would just like to mention that poverty also serves a purpose. Everyone is so concerned with distribution of money, but no one is really taking a look at why people get stuck in their situations.
http://www.sociology.org.uk/as4p3.pdf
This link is to a essay called “The uses of poverty: the poor pay all”
Very interesting. You should read it if you get the chance.
Thanks for sharing this Kristin, I will definitely take a look.
Thoroughly enjoyed the article; well written and concise. Hope there’s more on the way!
I would also point out that the “poverty line” is often determined using an average of all the incomes in the country. Guess what, when you use an average, by definition that means there will ALWAYS be data points lower than that. When you calculate poverty using an average of income, it is impossible to eliminate poverty so defined. You can talk about increases or decreases in the number of people below the line, but poverty will always exist if calculated this way.
An average is meaningless. Poverty should be calculated using the median as a starting point.
Well written. Nice to see there is some hope if we choose to finally consider we are all in it together.
There are several things being tangled together here that need to be disentangled. Polarization, the gap between rich and poor, is not really the same kind of problem that poverty is. Just because there is a growing gap between the richest and the poorest does not mean that the poor are getting poorer. The poor may be getting poorer, but that’s not necessarily because the rich are getting richer. Maybe, maybe not. Not every increase in a person’s wealth means that someone else has to lose wealth. I got a tiny raise last year. Is that a theft from someone… Read more »
Anonymous, while I appreciate your comments I’m not clear on how they relate to my message.
I was reacting to the following section: “In a purely academic sense, unchecked wealth polarization in any macro-economic system is an undesirable outcome. It leads to riots, labor strikes, unrest, and other circumstances, which have a strong negative impact on markets, the economy, and society as a whole. We’ve seen this outcome play out many times in international news over the last year. As the poor get poorer, there is an ever-dwindling pile of resources to compete for and eventually the competition gets ugly. Play this tape forward and as time goes by, and risks with increasing complexity and challenges… Read more »
Thanks for clarifying. I definitely accept your point if it is inequality will not absolutely lead to unrest in 100% of the cases. Things might improve before that happens. People’s perceptions may change, etc. However, when observe history, it is quite easy to see certain parallels emerge. For instance, it is widely accepted one of the primary causes of the French Revolution was unfair tax burden on the poor during a financial crisis. This ultimately lead to the collapse of the Monarchy and a complete reset of the French system of government. This is only one of many, many examples… Read more »
Yeah, that’s not at all how poverty is determined. The poverty line instead mark the minimum income needed to achieve a satisfactory standard of living. Has nothing to do with averaging people’s wages.
No, it isn’t. The average of all incomes is the mean income. The “poverty line” or “poverty threshold” is an estimate of the MINIMUM amount necessary for a family to meet its shelter and food needs.
“The average of all incomes is the mean income.”
I admit I may be wrong about the current use of an average in calculating the poverty line. But, I do know for a fact that an average and a mean are not the same thing. With a relatively even distribution of things measured, the average and mean are pretty close to each other. When a few data points are way off the scale, like the few multibillionaires in the country, then the median and the average can be very different from each other.
I think you’re confused: average & mean are the same thing. Average and mean are different from MEDIAN (but similar if the distribution is not skewed).
All great points. I feel that only those that have personally climbed into higher economic classes can truly empathize with the working lower class struggles.
This is a tough issue and unfortunately I do not have any clear solutions. But… the one thing that is clear to me is that all previous advanced civilizations throughout history have crumbled when the rich got richer and there was greater disparity created between socioeconomic classes.
Very well written. I thoroughly enjoy the Buffett quotes, especially when you make note of the dates of said quotes. Well put my friend.