Following up on his series in Slate on income inequality Timothy Noah complains that the lower 99% of income earners aren’t ready to start manning the barricades because they’re too stupid:
Americans’ ignorance about wealth (and, probably, income) distribution is encouraging in the sense that it offers hope that most voters might opt for government policies more conducive to equality if only they knew how unequal things were. But it’s dismaying in the sense that people who occupy a position of relative privilege seem to go out of their way to avoid acknowledging it.
I’d like to propose another explanation. The difference between storming the nearest office of Goldman Sachs and switching the channel to American Idol is the difference between desperation and pique. Let’s consider the dichotomy Mr. Noah presents:
In the first installment, I noted that in 1915, when the richest 1 percent accounted for about 18 percent of the nation’s income, the prospect of class warfare was imminent. Today, the richest 1 percent account for 24 percent of the nation’s income, yet the prospect of class warfare is utterly remote. Indeed, the political question foremost in Washington’s mind is how thoroughly the political party more closely associated with the working class (that would be the Democrats) will get clobbered in the next election.
through the prism of my own own family’s experience. In 1915 my great-grandmother, Mary Jane Flanagan Schneider, was 45 years old and in many ways typical of the urban poor. She was the mother of six children. While the oldest, 16 year old Annunziata (the Schneiders were poor in worldly possessions but rich in names), my grandmother, took care of the younger children she worked for meager wages as a cook.
Her husband, August, had been a butcher but was unable to hold a job because of alcoholism. She was ultimately to divorce him, a great scandal at that time.
They lived in a one room houseboat on the banks of the Mississippi, in sight of where the St. Louis arch now stands in the most humble of circumstances. There was no running water. What water they needed they pulled from the Mississippi in a bucket (!).
One of the children died of tuberculosis in her late teens. One starved to death. Another died of epilepsy at 13. Yet another died at 28 under circumstances I haven’t been able to discover. The children were in and out of orphanages depending on whether Mary Jane was able to support them or not. There was no public assistance of any kind. There was no unemployment assistance. There was no disability assistance or aid for dependent children or anything of the sort.
Very, very few women had any education and there were very few decent jobs available to women who had no education. Cook was about as good as it got. How did Mary Jane Schneider keep a family of six on a cook’s wages? Mostly she couldn’t.
Fast forward to the present day. Almost 50% of the poor own their own homes. Three quarters of the poor have air conditioning. Few live in overcrowded circumstances. Three quarters own a car. Nearly all own a color television set and nearly half own two. Three quarters have a VCR or DVD player, two-thirds have cable.
Is it ignorance or the lack of the genuine deprivation of the truly poor that keeps 99% of Americans from marching in the streets?
Having less than the top 1% of income earners bothers the folks on the next rung down a lot more than it does the poor. That’s why they’re whining about it.
Gee Dave, aren’t you a little tough on Timmy? After all he is only a journalist, and not a very good one at that.
(Seriously, this was great.)
As I’ve noted before it isn’t income that is at issue but welfare–i.e. how do people compare in regards to welfare. Your argument is that while incomes might be less equal the welfare gains for even the lowest income households has gone up dramatically thus reducing the chances of some sort of revolution or rioting.
The problem is Noah’s monomaniacal focus on income to the exclusion of other factors. Pretty stupid when you think about it.
Pretty much. One of the biggest whiners was (still is?) Kevin Drum, but there is no way in Hell that guy could be counted as poor.
There was some talk a while back about a new way to measure poverty where the value of social benefits was added. Your post really illustrates the need for that.
I think the bigger problem of income inequality these days is a tendency toward over-leveraging to keep up a lifestyle that a stagnant income cannot support, finally resulting in spectacular financial crises.
We have a much improved social safety net compared with the early 1900s. Without that, I suspect we might be facing major civil unrest.
“Having less than the top 1% of income earners bothers the folks on the next rung down a lot more than it does “the poor”. That’s why they’re whining about it.”
Talked with any “poor” lately? You have decided, apparently, that there is no problem with extreme income inequality. You have also decided to doubt the sincerity with which some have suggested that this might be a problem. That requires ignoring a lot of evidence that suggests otherwise. Let’s hope you are right and extreme income inequality right before financial collapses is just a coincidence. Maybe the wealthy don’t use their wealth improperly, so there is nothing to worry about.
Steve, I hear very few proposals for helping the poor, i.e. taxing Party A to give to Party B (the poor). What I hear a lot of are proposals to tax Party A to give to Party B (the not-so-poor) on behalf of Party C (the poor). It’s unclear to me how this will materially improve whatever problems income inequality actually causes.
And, yes, I talk to people who would probably be considered poor nearly every day. And we’re not in the top 1% of income earners. We’re not even in the top 10% of income earners.
As I have said here repeatedly I have no objection to being taxed to help people who are genuinely in want. I do have an objection to being taxed so somebody who makes $1,000 less than I do can get HBO. And I have an even greater objection to being taxed so that somebody who makes more than I do and nominally works on behalf of the poor can get a raise.
In specific policy terms I always opposed the Bush tax cuts and I support their lapsing now. I thought they were the wrong tax cuts and I think they’ve been continued too long. If there are concerns about raising taxes during an economic downturn, letting the cuts lapse should be offset by permanent reductions in business taxes. And, as I’ve said before, I’d prefer a more egalitarian society. I’m not sure how we’re going to get there while importing millions of uneducated unskilled workers or as many people drop out of high school as continue to do so.
I’ve also said repeatedly that I’d support Pigouvian taxes to strip away the incomes of those who’ve realized significant income increases specifically as the result of policies. That’s probably not going to affect the top .1% so much as it does the top .9 to 5%.
I have yet to see anybody’s evidence of actual problems being caused by income inequality per se. I see lots of evidence that there’s income inequality and lots of fears that it will cause problems.
“I’ve also said repeatedly that I’d support Pigouvian taxes to strip away the incomes of those who’ve realized significant income increases specifically as the result of policies. That’s probably not going to affect the top .1% so much as it does the top .9 to 5%.”
Having all of your income defined as capital gains, and taxed at 15% seems like a good policy if you are wealthy. Buying up and controlling the media seems like a good thing to do if you are wealthy. Who gets more access to politicians? Policies that make it possible to gamble using MBS’s as collateral, then never have to pay for the losses, actually recording record profits a few months later. Think that happens for a bunch folks in the 95%-99% group?
“I have yet to see anybody’s evidence of actual problems being caused by income inequality per se. I see lots of evidence that there’s income inequality and lots of fears that it will cause problems.”
Without an alternate universe, you can set the bar high enough to never have proof. There is plenty of indirect evidence. Income inequality is prevalent in weak economies, whether as cause or symptom. You see people making more money off of hedge funds than starting and running a new business. You see lobbyists writing the regulations that restrict competition so that wealthy do not face competition. On principle, anyone who believes in markets should be concerned about concentrating decision making among very few people. Definite proof? Nope, but you will never have that.
Ritholtz has some further ideas.
I wrote that I’m not opposed to the idea that income inequality is potentially bad when Dave first started this series. I still am not opposed to it. What I’d like to see is something a bit more than” its bad”. I think Dave’s thinking is similar to mine. He’s open to the idea, might even been leaning in favor of it, but just hasn’t seen anything that will make him jump on board.
In reading your Ritholz link I think this is potentially interesting,
However, I’d argue that what is critical is the word ‘and’ in there. If we lived in a country where the government’s ability to interfere in the market place was far less than today concentrations of wealth would be less of an issue. Sure you could buy your Senator or Representative, but so what they can’t do much. Perhaps the concentration of wealth coupled with an interventionist state is where things can really go wrong. It is like rent seeking with a feedback loop. The end result can be a corporatist type of government.
And here is the bad news…you aren’t going to solve the problem by making government stronger or granting it more power. You will simply end up giving more power to those who have the money in our system. The solution is to cut government power. Seriously try reading Robert Higgs’ research on the Great Depression and WWII. He notes that with the rise in government power you also had a rise in corporate power and at that time it was what has now become known as the defense industry. Back then the guys who were brought in to run FDRs massive rearmament were….wait for it….guys from the defense industry. Clicking over to Ritholz,
A bit late there Barry boy, but welcome to the party none-the-less. And the deals the defense industry got were simply amazing. Sometimes they’d get an entire plant for a meager $1/year with an option to buy at the end of the hostilities. What a deal, no actual initial capital investment by the corporation yet at the end IF the plant is still beneficial to the corporation they get to keep it. This is one of the first instances of private profits/public risks or losses.
Yes, we are losing. We are losing because individuals are diffuse, have different view points and overall…Americans don’t really value freedom. Sure as an abstract concept it sounds great, but the reality is its also kinda scary. As Crispin Sartwell wrote,
It is similar to the type of despostism democracies have to fear that de Tocqueville wrote about.
By the way, I’d also argue that based on that post Ritholz has to think Obama is a bad president just as Bush was a bad President. Consider this part of Ritholz post,