Normally in class I would spend a considerable time talking about economic inequality. This is a bit harder to do online. Here are two interesting videos on economic inequality.
Ep. 20: MONKEY BUSINESS | Shola Lynch from We The Economy on Vimeo.
Economic inequality is a tough topic to tackle; it's obvious that there's a problem, but not an obvious solution. The very few people with 40% of the country's population are also the decision makers, and they're not going to make a decision or pass a law that would take that wealth from them. Honestly, I wouldn't, not after I had worked so hard to get to that top spot.
ReplyDeleteThe two best ways I see wealth being redistributed is through donation, and the wealthy spending their money, putting it back into the economy. I agree with the economist in the monkey video- that we should be trying to raise up the poor rather than take down the rich. This can be done through many not-as-economic solutions, such as lowering college tuition costs in order to educate more people, and supporting small local businesses.
Economic inequality is a tough topic to tackle; it's obvious that there's a problem, but not an obvious solution. The very few people with 40% of the country's population are also the decision makers, and they're not going to make a decision or pass a law that would take that wealth from them. Honestly, I wouldn't, not after I had worked so hard to get to that top spot.
ReplyDeleteThe two best ways I see wealth being redistributed is through donation, and the wealthy spending their money, putting it back into the economy. I agree with the economist in the monkey video- that we should be trying to raise up the poor rather than take down the rich. This can be done through many not-as-economic solutions, such as lowering college tuition costs in order to educate more people, and supporting small local businesses.
This is a really good point. Economic change through detriment to any class of individuals (no matter how well-off and impervious to real harm they are despite losing a slice of their pie) will never truly be accepted by those individuals. I would assume that the reason for that is psychological rather than economic, but the point is those people aren't going to all of a sudden see that their capital would have a greater net benefit for another person than themselves (This isn't even always the case, a brilliant philanthropist like Elon Musk or Bill Gates can give a much greater net benefit to the rest of humanity with their capital than you or me if we had said capital; but allowing them to make decisions for the rest of humanity will be detrimental to the dignity of the rest of the populace, despite the fact that they are capable of doing much more good).
DeleteAs for lowering college tuition, I feel like there would be many ways to do that, but enforcing a price ceiling on that commodity is probably not one of them (you never said it was; I'm simply musing aloud). I feel like the best way to lower college tuition is for businesses to create a culture where colleges need students more than students need colleges. I've heard it said many a time that you "need" a college degree to get any "serious" job. If we are talking purely white-collar, cubicle-enclosed labor positions, then that statement is true. But that kind of labor isn't for everyone, and many individuals are unhappy trapped answering a phone and entering data. The problem is, the culture we live in has convinced us that this is the path to happiness and "The American Dream," which cannot be further from the truth. Plenty of people are able to find success and happiness in skilled careers that are not on a college path. A few of my high school friends decided to become chefs and attend culinary school, and I must say that I am proud to have those individuals as friends, because they inspire me. Once we start thinking of quality students, not quality degrees, as the valued commodity here, we should be able to shift the demand (for degrees) curve left and colleges will be forced to lower their tuition rates in order to compensate for dwindling enrollment.
This is an excellent example of what can go wrong with government policy around the topic of economic stimulation. Investopedia.com explains the "trickle-down theory" very well in just three paragraphs (see below). Creation of a more equitable distribution of wealth is now even more difficult to accomplish because the most affluent members of society are also in the best position to influence governmental policies. The poorest households in America have little ability to affect change on their own. From the poorest households to our dwindling middle-class households we need equitable-policy advocates in the upper echelons of the income. We need policies that encourage more domestic government spending that could elevate the household incomes of those who are not in the top 1%. Looking beyond the minimum wage debate, we need policies that encourage tax breaks for companies who have great employee-retention programs with records of fair wage increases based on employee performance. Encourage the companies to reward their workers for their ingenuity and increased productivity. Profit margins might shrink for a few companies, but the economy would grow.
ReplyDelete"President Reagan's economic policies, commonly referred to as "Reaganomics" or supply-side economics, were based on trickle-down theory. The idea is that with a lower tax burden and increased investment, business can produce (or supply) more, increasing employment and worker pay. Reagan initially slashed the top income-tax rate from 70% to 50%. Trickle-down policy’s detractors see the policy as tax cuts for the rich and don’t think the tax cuts benefit lower-income earners.
A contrasting theory, Keynesianism, is based on stimulating demand through government spending and other government interventions. An increase in government spending necessitates an increase in income-tax rates – the opposite of what trickle-down theory advocates. Trickle-down theory does not support government intervention in the economy.
According to the trickle-down theory, if tax rates are lower, people have an incentive to work more because they get to keep more of the income they earn. They then spend or invest that income, and either of these activities will improve everyone’s prosperity, not just the prosperity of those in the highest income brackets. What’s more, in the end, the government may actually collect more income tax despite the lower tax rates because of the additional work performed. The Laffer Curve shows how this relationship works. If the government taxes 0% of income or 100% of income, it takes in no money. In between these two extremes, tax revenues vary because different tax rates encourage people to work more or to take more leisure time."
http://www.investopedia.com/terms/t/trickledowntheory.asp
Income inequality cannot be tackled without a special attention paid to the effects of globalization. On a whole, globalization is generally a good thing for most everyone. However, for those adversely impacted by the movement of their lower-skill jobs, we often aren't trying to address their well-being. We ought to be retraining these people to become more competitive in the labor market.
ReplyDeleteAlso, we do actually have to address the situation of the wealth gap. Taxing the wealthiest individuals more isn't going to significantly hurt the economy as some have forecast. The wealthiest people are saving their money or donating it to the campaigns of certain politicians in both parties so as to guarantee legislation conducive to their wants. Perhaps the best way to do this is to raise the capital gains tax and use the tax revenue to subsidize low-income households buying into the stock market.
Income inequality has become a major issue in the US throughout the past two decades predominately because America's GDP has increased while the middle class has shrunk, cost of living has gone up, health care costs have increased, and cities have become more segregated. Rising taxes for the upper 1% of Americans is the easy way out, a cheap shot at spreading the wealth among the average American. But unfortunately one that I think is just due to the role the 1-2% had in the financial crisis of 2008. Most 1%ers work as heads of corporations and banks, and use their engorged wealth to influence the political process, through legislation such as Citizens United. This vicious cycle of wealth accumulation and political donations tend to benefit the wealthy at the cost to middle and lower income people. Such as when politicians did not intervene on Wall Street through the first decade of the 21st century to curb predatory loans and overly risky investment spending. Not to mention how our GDP predominately grew in sectors like real estate and finance, which along with the Bush tax cuts, almost exclusively benefited those with stocks or large amounts of capital to invest. Income inequality is an issue requiring government intervention in areas such as education spending, job training, and tax breaks for the middle class and small business. As well as the often protested tax hikes on those at the top of America's income bracket.
ReplyDeleteAdrian also made an excellent comment on capital gains tax as a means of redistribution.
ReplyDeletei am very shocked at how much different is than the reality, i knew there was a great deal of inequality in America, however i did not imagine that it would be to the level that it is. this is clearly a problem with our economy but i dont see how there is a solution to this problem without making drastic changes, and i dont think these changes will ever be meet. with the wealthy having so much power in our society they have so much influence on policies that they will never be for a policy that will decrease their wealth. with this being the case i dont see how America will ever be able to get down to even what people think the inequality should be. i dont see a soluiton to this problem in the future and as time passes it will only get worse.
ReplyDeleteI wasn't surprised that economists don't agree with each other on how to solve income inequality. After watching both videos I struggled to come up with a solution for this problem. Helping poor people would surely help a little bit, but would it close the inequality gap? It was interesting that one economist mentioned that the middle class can't be helped with affecting the top 1%. I have no idea if society can fix this problem in its current state. I'm in agreement with Quentin that proper government intervention should be required to fix income inequality, but what should the government do differently than it already has?
ReplyDeleteWhat great videos. I find this issue, along with many of the other comment-ers thus far, to be a very touchy subject. I feel that there is far too much inequality and while I certainly don't have a solution right now for it, I do see it in my everyday life. As a gonzaga student, I constantly see the middle and upper middle class. As a middle school teacher who specializes in teaching in low income/at risk schools I see children who are far below the poverty line and find it unacceptable. I personally feel that regulation of wealth is not a bad idea. I can fully see where it would go array, but at this point I strongly feel that something about the extreme wealth gap needs to be done.
ReplyDeleteGoing off of what Bonnie said, I think a lot of this comes down to whether or not you believe in the old proverb "Give a man a fish and he will eat for a day, teach a man to fish and he'll eat for a lifetime." We can either use Keynesian economic theory (giving a man a fish), which according to that school of economics will ultimately help poorer individuals in the long term, as it assists in ending cyclical or generational poverty. Austrian Economics (occasionally coupled with Supply-side or Reaganomics) suppose that it's better to reward prosperity so that people will work harder, earn more money, and have to give less of it to the government (teaching a man to fish). Ultimately, I think that both solutions have their merit, but as a nation we have not been able to commit to either one long enough to see if they will actually succeed in reducing inequality among the upper and lower classes of the United States. Rather, we have flip-flopped between parties (and ideologies) the second a hiccup occurs, then the new party erases all progress the other had made before beelining in the opposite direction. If we were to increase terms for senators, presidents, and house representatives, it's likely that this problem would subside somewhat. Not to say we should do that, but it's one solution.
ReplyDeleteI always knew there was a huge wealth gap in the country, but I had never seen it lined out like that first video did. It was so eye opening to see the wealth of the country distributed in that type of graph with 100 people. I also found it super interesting that the average employee has to work for a whole month in order to make what the CEO makes in one hour. It really doesn't seem right. I wish there was an easy solution to fix this problem, but I think with the mix of economics, government, and psychology, one answer isn't going to be enough. It's going to take a long time with a lot of people working collaboratively to even make a dent in this issue.
ReplyDeleteThe first video was really interesting in the sense that it revealed that many Americans are not even aware of how giant the wealth inequality is in the United States. Its difficult to grasp that 1% of the population holds 40% of the wealth. And to see that economic inequality has been growing, instead of shrinking, is also a striking fact. It would be ridiculous to believe that a CEO works 380x harder than their average employee. I think that yes, some people do deserve higher incomes than others, but at a certain point it becomes absurd. The second video was interesting because it revealed the problems that arise with trying to correct economic inequality. Especially considering that some people do not even believe it is an issue. This is a complicated subject because the it is debated, not only whether or not it is a point of contention, but what to do to fix the problem. The viewpoints of the various people featured in the video highlighted this.
ReplyDeleteThe first video made me become much more aware of how the wealth is distributed in America. I thought along the same lines as what people thought it looked like. I was shocked to see what the reality of the situation is. I am a believe some people should earn more money than others, but this video showed how poorly skewed the wealth really is. I think this is a problem, but I have no idea how we could even begin to fix it.
ReplyDeleteThe first video made me become much more aware of how the wealth is distributed in America. I thought along the same lines as what people thought it looked like. I was shocked to see what the reality of the situation is. I am a believe some people should earn more money than others, but this video showed how poorly skewed the wealth really is. I think this is a problem, but I have no idea how we could even begin to fix it.
ReplyDeleteI've seen the first video in other classes before, and it's still so hard to comprehend the sheer amounts of wealth that such a small percentage of this country holds. This has been escalating since the 70s and still nothing has been done to even curb it, let alone stop it. The worst part is that the 1% are the people who fund our politicians' elections to ensure they don't make any changes to the way things are.
ReplyDeleteThe first video with the three politicians is quite interesting. It was interesting to see what the three economists believe about the income gap between the poor/middle class and the 1%. It was also interesting to see the numbers about the 0.01 % who are making on average $23 million dollars. Its honestly quite astonishing to see how much wealth such a small portion of the total population holds.
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