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Slouching towards Sierra Leone?
January 15, 2003 10:42 AM   Subscribe

US income distribution moves towards 3rd world profile? - US Census Bureau data on growing family income inequality, 1947 to 2001. Also see: The "L Curve" (for a graphic depiction of current US wealth distribution). "The most egalitarian countries have a Gini index in the 20s. European countries like Germany, Austria, Belgium, Hungary, Poland, Norway, and Sweden all fall in that range, according to World Bank figures. Canada and Australia are just over 30. The United States is around 40...Once inequality reaches 50 percent, disparities become glaringly obvious, to the point where they undermine a society's sense of unity and common purpose....Sierra Leone takes the prize. At 63 percent, it offers the world's most extreme example of inequality." By multiple measures, income inequality in the US is rapidly increasing, and a substantial percentage of middle class Americans may be gradually sliding into poverty..
posted by troutfishing (137 comments total)

 
This may seem incredibly stupid, as I am not an MBA but , rather, someone who just reads a newspaper once in awhile. Corporations work their numbers to maximize profits. They want to show Wall Street and investors that they can turn a healthy profit. Yet, to the IRS they show something different and many escape taxation. Can't the IRS use the same data that the company provides to stockholders to compute their tax?

Great links, lots to chew on.
posted by pejamo at 10:49 AM on January 15, 2003


Other usefull links on this subject:

CIA: The World GINI Index The US Census Bureau take on growing income inequality. US Census Bureau: average family wealth declined in 2001. Increase in child poverty in US
during last 25 years. Paul Krugman (NYT): the
disappearing US middle class
, the
new US aristocracy
, ( with declines in US income mobility). A cumulative Global wealth divergence?. Bill Moyers/PBS - The squeeze on the middle class. For serious wonks:Data sources for Paul Krugman's "The new Guilded Age"(NYT Magazine article on growing inequality).

The Center on Budget and Policy Priorities analyzes the Bush Estate Tax repeal proposal By the way, there is some (empirical) research arguing for a correlation between unequal income distribution and political instability. The IMF concurs with this view. (See also)

I would suggest the possibility that the US 2000 Presidential Election was the beginning, for the US, of a period of inequality driven political instablity.correlation.
posted by troutfishing at 10:55 AM on January 15, 2003


pejamo: the reason for the two sets of books and numbers is nothing nefarious. stockholders are concerned with how well the business is doing, and the revenue reported in the annual report shows business done in that year. However, the IRS is concerned with taxing cash that comes into a business; its very possible that a business wouldn't have collected any of the cash that was reported as revenue to the stockholders. if you have the chance to pick up an intro to accounting textbook, it's all made very clear.
posted by reverendX at 10:58 AM on January 15, 2003


Many millions of the worlds poor can only dream of being as poor as poor Americans. Speaking as one of the formerly impoverished, there is certainly room for improvement but we have the richest poor in the world.
posted by revbrian at 11:01 AM on January 15, 2003


we have the richest poor in the world

Cold comfort to them, I'm sure.
posted by briank at 11:09 AM on January 15, 2003


So basically what this is saying is that there are a few really, really rich people.

However, that necessarily make the rest of us poor. Personally, I'd prefer to see a drastic 'L' chart to a chart that indicates that *many* people are drastically rich and others drastically poor. All this chart seems to be saying is that there are lots of normal people, and a few bizarrely rich people.
posted by oissubke at 11:09 AM on January 15, 2003


I have to agree with revbrian that the urgency on an issue like this is missing as long as enough people feel fairly comfortable. That is, even if you control millions of times the amount of wealth that I do, I won't care much as long as my wealth is enough to get me around town and keep me in food and clothes.

The real squeeze will come if enough people can't keep up with their bills for truly basic services (food, not cable TV). At that point the change in perception of income disparity will be like a wildfire consuming dry tinder. Whether that will happen or not, I don't know.
posted by argybarg at 11:11 AM on January 15, 2003


i believe the national income accounts incorporate data from the IRS, which is why the fed prefers using them when looking at corporate profits. i think it'd be a good idea if they were made public (the public company ones), but i think the problem is they'd reveal trade secrets and stuff. there should be a way to reconcile the two tho.

btw, pbs is showing the last part of chicago: city of the century tonite and they have a nice bit going on income inequality at the turn of the (last) century that's pretty interesting. like the threat of anarchy got you ten hours pay for an eight hour day :) tune in 9 eastern/8 central for the exciting conclusion!
posted by kliuless at 11:14 AM on January 15, 2003


Incidentally, I'm predicting that the CEO bubble is going to burst any day now. Companies can barely afford to have officers these days....
posted by oissubke at 11:16 AM on January 15, 2003


we have the richest poor in the world

You sure about that? The poor in Europe and Canada have the same access to healthcare as the middle class, and social programs are more generous. Canada's poor aren't exactly sneaking over the border in droves.
posted by bobo123 at 11:21 AM on January 15, 2003


Tax accounting and financial accounting have entirely different rules -- it is entirely possible to have a large financial accounting profit and declare large profits to your shareholders, while having owing no corporate income tax.

Two of the main reasons (although there are dozens more): accelerated depreciation and investment tax credit. Depreciation: the same equipment which depreciates over 10 years for financial accounting may depreciate over 5 years for tax purposes, meaning that you reduce net income by twice as much for tax purposes as you do for financial accounting. Tax credits: an expenditure of $30 reduces your financial accounting earnings by $30. However, if you get a $30 tax credit for that, that credit, in effect, reduces your taxable income by $100, since the $30 credit "pays" the 30% tax on $100 worth of income.
posted by MattD at 11:21 AM on January 15, 2003


The poor in Europe and Canada have the same access to healthcare as the middle class, and social programs are more generous. Canada's poor aren't exactly sneaking over the border in droves.

Europe and Canada have the other richest poor in the world. Bad examples. Think Third World poor...
posted by oissubke at 11:27 AM on January 15, 2003


You can't understand what's happening in America today without understanding the extent, causes and consequences of the vast increase in inequality that has taken place over the last three decades, and in particular the astonishing concentration of income and wealth in just a few hands. To make sense of the current wave of corporate scandal, you need to understand how the man in the gray flannel suit has been replaced by the imperial C.E.O.
The concentration of income at the top is a key reason that the United States, for all its economic achievements, has more poverty and lower life expectancy than any other major advanced nation. Above all, the growing concentration of wealth has reshaped our political system: it is at the root both of a general shift to the right and of an extreme polarization of our politics.


Paul Krugman (NYT link, blah blah)
posted by matteo at 11:28 AM on January 15, 2003


The real squeeze will come if enough people can't keep up with their bills for truly basic services (food, not cable TV). At that point the change in perception of income disparity will be like a wildfire consuming dry tinder. Whether that will happen or not, I don't know.

It already has...

The reason this is such a huge concern, is that capitalistic economics is a positive feedback loop (despite Adam Smith fantasies) - the rich do get richer and the poor get poorer. This L-curve will only be exaggerated with time.
posted by badstone at 11:30 AM on January 15, 2003


Man, didn't I already here this on a Godspeed You! Black Emperor album?
posted by boost ventilator at 11:31 AM on January 15, 2003


we have the richest poor in the world.

I'd be fascinated to see you prove that, beyond its current status as a warm-in-the-belly conservative slogan. And I suspect that the indicators you'd choose would be a little deceptive, rather like when Glenn Reynolds attempted to prove that Mississippi was better off than Sweden.

(The point is somewhat moot, anyway, since the point of the initial posting was to contend that income disparity per se is a more compelling indicator of social dysfunction than the raw GDP numbers.)

As for oissubke's comments, which on preview appear to be heading towards diversionary tactics at a rate of knots, I can't quite decide whether they're advocating the kind of aristocracy that was superceded by bourgeois hegemony in 1776, or that hegemony itself.
posted by riviera at 11:32 AM on January 15, 2003


These distribution charts absolutely fail to prove the adverse economic changes they are alleged to prove because (1) they don't reflect that advances in technology and productivity have dramatically cheapened the real-dollar costs of many important goods and services and (2) they don't reflect the huge amount of immigration that has occurred in recent decades.

(1) is kind of obvious, and has ramifications from everything from the total revolution in the quality of manufactured durable goods (from cars to washing machines to refrigerators) to digital technology to airfares

(2) is more subtle -- the middle quintiles losing their relative share of the wealth can be accounted for by the fact that a large number of members of the middle quintile are immigrants who vastly increased their wealth and well-being by coming here. Accurate charts would have to factor in the average wealth and income of these families in India, China, the Phillipines, Nigeria, Mexico, etc. I think that these charts would show a vastly better off middle class.
posted by MattD at 11:34 AM on January 15, 2003


Nobel prize winner Amartya Sen on inequality
posted by matteo at 11:35 AM on January 15, 2003


Thanks for the links, troutfishing. We've discussed some of Krugman's articles before, but the new links are great.

oissubke—you're right in that a small number of stinking-filthy-rich people skews the Gini coefficient upward. The Gini is a measure of inequality, not wealth per se. While the US hardly has the poverty problems that most developing/third world countries have, we compete with the worst of them when it comes to the unevenness in our wealth distribution.

I tend to think that poverty (inability to secure basic sustenance, safety, security, etc.) as the only real 'economic' problem. Inequality, though, can be a HUGE political problem, particularly in democracies. Since political influence in the US can be measured reasonably well by examining wallets, gross inequality (relative differences in wealth) can effectively translate into disenfranchisement for the people at the bottom, even if they all drive Volvos.
posted by dilettanti at 11:35 AM on January 15, 2003


Oissubke - Sure, I agree: I don't feel 'impoverished' because I am on the long part of the "L Curve", (along with, I suspect, all but several Mefi'ers), except for ONE simple reason: WITH EXTREME CONCENTRATION OF WEALTH COMES CONCENTRATION OF POLITICAL POWER.

ArgyBarg - The "squeeze" is growing. Every year the percentage of Americans not covered by health care increases. The bottom fifth of American (in wages, that is) have lost ground steadily for decades. There are more US children living in poverty than 25 years ago. And, JUST WAIT for the state budget cuts (in the works in virtually every US state) to hit! Last year, the US median family income declined, but the recession has hit white collar workers very hard. I don't think most of those jobs will come back - and a few more million Americans will slide a bit farther down the economic ladder.

RevBrian - Very true! I would argue for redistributing some US wealth - to the world's poor. US world charitable giving, as a percentage of US GNP, is rather low (around 2%, I think), considerably less than other comparably wealthy industrialized nations around the world. I think Americans could get by with less money, BUT.....that's on the average: As wealth inequality in the US grows, we may witness the emergence among the ranks of US poor of a subclass living in actual 3rd world poverty. And this could occur even as the "average" American income grows - the grotesque concentration of wealth at the very top of the US income distribution is already dramatically skewing the average.

The emergence of what amounts to a new aristocracy -the top 1/2 of one percent- and with a corrsponding decrease in class mobility, now less in the US than in most european countries (according to one study cited by Paul Krugman) does not bode well for the stability of the US political system.

Kliuless - Thanks for the heads up. One thought: there is no more "communist threat". Communist ideology is DEAD, and Americans unions and the US labour movement are moribund. So the fear - of a revolution by the poor masses (fueled by the growth of unions) which motivated industrialists to eventually make wage concessions and US politicians to enact the waves of reform legislation - that blunted the worst excesses of US turn-of the-century "Gilded Age" capitalism - is lacking.
posted by troutfishing at 11:39 AM on January 15, 2003


I'd like to amplify on MattD's comment -

Census figures based on agregate family income are not usable for this purpose because like is not compared to like. Family structure/households is/are radically different between two eras. Appropriate comparison is not in aggregate statistics but in breakouts. Example - two parent two child households, where all are native born, of 1946 should be compared to same of 2001. Single mothers aged 30 to 35 with two kids, all native born of 1946 should be compared to same of 2001. And so on. Anything else lets real income changes be obscured by demographic changes and is not valid.

GINI numbers are better, but don't tell the whole story. For example, a society where everyone is starving to death will have great GINI co-efficient, and one where the poorest people have incomes in the $100,000 and the richest have incomes in the billions will have a bad GINI coefficient - but which one would you rather be in.

I don't know what's happened to incomes distribution in the USA over the past 50 years, but I suspect that all the commentators (even Krugman) above don't know either - they are just rolling the same old logs they've always rolled.

I'd like to say more, but I'm getting ready to teach my Group Dynamics class about the Milgram Experiments. Honest!
posted by Jos Bleau at 11:48 AM on January 15, 2003


We're headed back to the time of the Robber Barons. (Great links, trout.)

I hope no one is surprised by this, but it's nice to see numbers supporting it.

MattD: You honestly think this stuff isn't right? Or just that the graphs could be improved?

1976: wealthiest 1% owned 19% of assets, the bottom 90% owned 50%. 1998: wealthiest 1% own 35%, bottom 90% own 31%.

Between 1950 and 1978, the lowest 20% income backet got a 138% income increase, and the top 20% had a 99% income increase. Between 1979 and 1998, the richest 5% had incomes go up 73%, and the poorest 20% LOST 2.7% of income (yes, corrected for inflation).

The US wins (We're Number One! We're Number One!) for the largest percentage of population in poverty of developped nations.

We earn, on average, 15.5% more than our Canadian counterparts. But the income is so unevenly distributed that 60% of Americans have less disposable income than their Canadian counterparts. The poorest 10% of Americans have incomes about 60% lower than the poorest 10% of Canadians.

(from Bleeding the Patient, Top Heavy, Left Business Observer, and Monthly Labor Review)
posted by gramcracker at 11:52 AM on January 15, 2003


and (3) gini coefficients don't account for (inter-generational) migration between the cohorts (except if the estate tax is repealed :)

It already has...

yeah, there's a GE strike going on now! and a police car hit and killed a striker...
posted by kliuless at 11:58 AM on January 15, 2003


The poor in Europe and Canada have the same access to healthcare as the middle class, and social programs are more generous. Canada's poor aren't exactly sneaking over the border in droves.

Except when Canadians come over to the US to pay (again) for the healthcare that they can't "free" in Canada ... eh?
posted by ZenMasterThis at 11:58 AM on January 15, 2003


These distribution charts absolutely fail to prove the adverse economic changes they are alleged to prove because (1) they don't reflect that advances in technology and productivity have dramatically cheapened the real-dollar costs of many important goods and services

MattD: your point (1), to the extent that it has any effect at all in calculating relative measures like the Gini index, tends to imply that changes for the worse have been understated. Most researchers use inflation-adjusted wealth/income figures when calculating these measures, and the US BLS does in fact account for quality changes in a large number of goods (when I worked at the BLS, that was the job I had). But even if unadjusted figures are used, then when the Gini from a decade ago is compared to today's, it may well be that the more recent Lorenz curve is compressed (due to almost everyone being richer in your sense), so the Gini would be reduced (if everyone were given $5000, the Gini index would decline, since a larger percentage of total wealth would now be held by people at the bottom). The only way quality changes are going to screw up the intertemporal comparisons cited in the FPP are if they're accrued disproportionately by the rich AND unadjusted figures are used in the calculation.

P.S. - apologies if I'm redundant; my connection keeps getting refused...
posted by dilettanti at 12:00 PM on January 15, 2003


This reminds me instantly of the British institution of the Royal Family. The British citizens pay for the institution with their support in taxes. Big questions about how much longer they are going to keep paying for an institution that fails to represent the country. Our institution is less tabloid and more of a shock in April.

Do we need Bill like the British need the Royal Family?
posted by xtian at 12:02 PM on January 15, 2003


The FPP is a bit deceiving on the timeline and the third-world bit.

It would be more accurate to say that the US income distribution increased in the 70's and 80's. If you look at the graph in the FPP, it's been flat since the measurement change in 1993 (and the text on the associated pages makes this clearer), and wasn't showing any stable increasing trend from 1990 to 93 either. So we more-or-less stopped having increasing income inequality in 1990, 13 years ago.

And there are plenty of third-world hellholes with Gini coefficients within a few points either way of, say, Canada's or Germany's.
posted by ROU_Xenophobe at 12:06 PM on January 15, 2003


Oops, I meant "can't GET free..."
posted by ZenMasterThis at 12:10 PM on January 15, 2003


also btw, there's a nice chart here on the "distributional issues" of the bush tax cut.
posted by kliuless at 12:11 PM on January 15, 2003


the rich do get richer and the poor get poorer

While the first part is certainly true - the rich are indeed getting immensely richer - can you show me the numbers that prove the second part?

From what I can tell, the per capita income of poor families have been steadily increasing over the years, though not at the same rate as the rich. Everybody is getting richer.

Is increasing income disparity too high a price to pay for an across-the-board increasing standard of living? Must we abandon capitalism just because the poor are not getting richer as quickly as the rich are?
posted by VeGiTo at 12:12 PM on January 15, 2003


MattD - A well reasoned argument -

Re: 1) - yes, I have noticed the considerable drop in ther cost of many consumer goods, BUT what about health care, housing, and the cost of a college education? - all three dramatically outpaced inflation in the last few decades.

Re: 2) - Not a simple argument, this, but I imagine that, for it to hold, US immigration rates would have to been greater, in the mid 70's to mid 90's period, than previously - unless immigrants are becoming wealthier . [By the way, you might want to look at (pro your argument) the US Census explanation in the links I posted above - they have their own explanation.] Also, you might want to investigate (contra your argument) the study Krugman cites concerning a recent (alleged) decline in class (income based) mobility in the US.

Jos Bleau - (re:"I'd like to amplify on MattD's comment -

Census figures based on agregate family income are not usable for this purpose because like is not compared to like. Family structure/households is/are radically different between two eras. Appropriate comparison is not in aggregate statistics but in breakouts. Example - two parent two child households, where all are native born, of 1946 should be compared to same of 2001. ")

Other statistical indices - such as personal, after tax income, show a similar picture -


And no one, as far as I know, challenges the fantastic wealth accumulation (during the last two decades) by the top quintile but, especially, the top one (or even 1/2 of one) percent.
posted by troutfishing at 12:19 PM on January 15, 2003


If the best argument against these figures is "Yeah but our poor aren't really poor" that dog won't hunt.

Part of the part of the political problem is and will increasingly be that the poor are getting worse off while the rich continue to get better.

To put this into realistic terms: As time goes on the bottom economic 5th may not be able to afford the same kind of house/car/goods they can today because their buying power and income levels remain stagnant or drop. This does not make for a happy population period regardless of if they still can afford food and a better standard of living than truly impoverished third worlders.

I doubt many Americans are at all aware of the living conditions of the worlds truly poor much less reflect upon their own condition relative to them.
posted by aaronscool at 12:22 PM on January 15, 2003


VeGiTo - Who said anything about abandoning capitalism? If anything, I'd say we live in a system charactorized by "socialism for the rich, Laissez-Faire capitalism for eveyone else".

The figures in the graph above have been borne out by 2001 US Census Bureau data. The poorest quintile - in after tax income - IS REALLY GETTING POORER.
posted by troutfishing at 12:26 PM on January 15, 2003


bottom economic 5th may not be able to afford the same kind of house/car/goods they can today

The bottom economic 5th of some other countries, say China, can only dream of owning a car. How did the American poor get so much richer than the poor in those counties?
posted by VeGiTo at 12:26 PM on January 15, 2003


Eat The Rich!

(1968 flashback, source is your challenge)

How much fu*&^5ng money does one person need? It's about the power? Oh, now I see! Money = Free Speech, especially lots of money.
posted by nofundy at 12:31 PM on January 15, 2003


Dare I say this, but...could it be...that this is one of the most civil and intelligent MeFi discussions in eons?

Bravo. Sincerely, bravo.
posted by tgrundke at 12:45 PM on January 15, 2003


Troutfisting:

But if you look at the graph for the average pay of production workers, it has been steadily trending upwards. It all depends on which stat you look at. I'm pretty sure that if you look at all post-war data instead of just 1977-1999, you'd see improving standards of living for the poorest in the long run.

Even if I give it to you that what you posted is not a statistical abherration, but a secular trend, you can see that although the poorest of the poor got a little poorer, both the middle and the upper class got significantly richer. Is that a horrendous development? Why should the poor receive the greatest attention?

nofundy:
One person might not need much money, but if it weren't for the chance of making it big, who would want to take the huge risks associated with being an entrepreneur? The chance of making lots of money drives innovation and enterprise which in turns create jobs for the poor.
posted by VeGiTo at 12:46 PM on January 15, 2003


Thanks to those who responded to me.

I did not contend that the charts or their source statitistics were inaccurate -- but that they, in themselves, didn't prove the point that bad things are happening in the economy.

Dilettanti and others regarding my point 1 on the quality buying power of a dollar -- to the extent that the "real dollar" calculations in fact incorporate the higher quality of durable goods, larger square footage of a home, increased technology, I stand in error. With respect to some of the items which appear to have inflated in real terms (education, health care) that can be justified by the increased value -- a college degree is massively more valuable relative to having only a high school diploma than it was 30 years ago, and health care is dramatically more sophisticated and at least moderately more effective than it was 30 years ago.

Regarding point 2 -- household composition changes are very important. It is hard to say anything meaningful about changes in the bottom two quintiles without recognizing the fact that illegitimacy and single-head-of-household rates are tripled or worse in each quintile, and that the male imprisonment rate (and the near-total disability that imposes upon ex-cons to get high-paid work) has probably quintupled in the relevant cohorts. If a common fifth-quintile family was composed of a working father making $20,000, his wife, and two children, that common family may have deteriorated to an ex-con living alone making $12,000 and his ex-girlfriend living with the two children making $16,000. We now have TWO households with an average income of $14,000 -- thus increasing the low end of the quintile and making the 2nd, 3rd, 4th and 5th quintiles each start at a lower income. In addition to the lower average gross income, what used to be the expense of one rent has become the expense of two retnts and babysitting ... increasing statitical poverty by even more than the statistical decrease in take-home pay.

Further regaring point 2 -- the aggregate amount of immigration in the past 30 years has been huge, and, counting second generation families, has accounted for a large amount of new household formation. More importantly than the absolute number is the relative numbers compared the allegedly halcyon period of the prior 30 years. Between the 1920s and the 1960s, there was no mass immigration whatever!
posted by MattD at 12:53 PM on January 15, 2003


Sidenote to Zen: Keep looking for all those Canadians. They're tough to find.
posted by gramcracker at 12:54 PM on January 15, 2003


Sorry troutfishing, what your graphs really say is "Center with a political viewpoint and vested interest in public policy finds it's political viewpoint is correct and that it's policies are needed" - well, what else were they going to find out? I don't trust those kinds of folks to be honest no matter what politics they espouse, even when they agree with me.

But even if you did trust their analysis of the data, demographic & other trends could make comparisons meaningless unless you have the raw data. What is the lowest fifth in the graph above are signifigantly younger and more likely to have been recent immigrants than in 1977?

Or, what if the difference is racial? - the income lowest 5th of today is likely to be much browner & blacker today than in 1977. What if all these disparities that you complain about are increasing are due to social and political discrimination, not 'faulty' capitalism in the US? I haven't heard anybody in this thread make that argument (sorry if someone did & I didn't notice).

With the data cited, we just can't say one way or another. That's why we need to get into the raw data, and not trust the people who have another study that 'prooves' what tehy already believed before the study.
posted by Jos Bleau at 12:54 PM on January 15, 2003


Except when Canadians come over to the US to pay (again) for the healthcare that they can't "free" in Canada ... eh?

A red herring, since I doubt that poor Canadians are coming across the border for health care. Poor people are still better served by an imperfect health care system they can afford access to, even if it's sometimes too slow for rich people.
posted by Armitage Shanks at 12:54 PM on January 15, 2003


Consider too that many states are now cutting back to 4 day school week because they are out of money. While such things may reflect a bad or ill economy at the moment, and while the Bush economic plan may or may not help improve this economy, for sure it is that at low end of scale, many workers replaced by illegals (at least in my neck of the woods), and that union membership has consistentyly gone down these past 15 or so years, and that the American govt and S. Africa are the only two industrialized nations allowing for worker replacement during a strike, and that many people yearly losing health benefits and those that are not are paying a larger and larger share of the costs, and that costs for both private and public colleges go up yearly well beyond cost of living, etc etc
The most important thing: Capitalism and Democracy are two different things, though many people believe they are one and the same.
Joe Hill: Don't mourn for me boys. Organize.
posted by Postroad at 12:57 PM on January 15, 2003


Rou-Xenophobe (re:"So we more-or-less stopped having increasing income inequality in 1990, 13 years ago.") - I rather doubt this. The current recession isn't reflected in the Census Dept. data. Krugman (who posts his data sources in the link I posted above at the top of this thread) concurs:

"The concerted effort to deny that inequality is increasing is itself a symptom of the growing influence of our emerging plutocracy (more on this later). So is the fierce defense of the backup position, that inequality doesn't matter...a recent study by the nonpartisan Congressional Budget Office used income tax data and other sources to improve on the census estimates. The C.B.O. study found that between 1979 and 1997, the after-tax incomes of the top 1 percent of families rose 157 percent, compared with only a 10 percent gain for families near the middle of the income distribution...Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent, rather than the next 9 percent. In 1998 the top 1 percent started at $230,000. In turn, 60 percent of the gains of that top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the top 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million. ...A stickler for detail might point out that the Piketty-Saez estimates end in 1998 and that the C.B.O. numbers end a year earlier. Have the trends shown in the data reversed? Almost surely not. In fact, all indications are that the explosion of incomes at the top continued through 2000. Since then the plunge in stock prices must have put some crimp in high incomes -- but census data show inequality continuing to increase in 2001, mainly because of the severe effects of the recession on the working poor and near poor." (Paul Krugman, "For Richer", New York Times Magazine, October 20, 2002))
posted by troutfishing at 12:59 PM on January 15, 2003


For the "richest poor in the world" argument (which I think is pretty damn weak), not only does that not cover healthcare but also the U.S. system of justice, which is so skewed toward the rich as to be laughable.

Thanks for all the resources, graphs and what-not. The problem isn't that there are rich and poor, that will always be so, the problem is when the rich are too rich and the poor are too poor. Nice to see there's an index that attempts to predict the tipping point.
posted by wah at 12:59 PM on January 15, 2003


From the Chandler page: "Increase in net worth IS income."
This is debatable. And misleading.

He also does a poor job of putting dates on his data. Best I can tell, he's studying the late nineties. And, of course, if you have a few behemoth tech stocks with relatively concentrated ownership, and the techs mount a huge rally, their owners will profit. When the companies reach the multi-billion dollar market capitalizations of Microsoft, Intel, Sun, Oracle, and Dell, their owners will see their net worths go up. He calls this "income". Fine.

Using similar methodology, I could create a similar class-baiting, ill-conceived series of charts showing that, over the past three years, millions of people have had negative incomes. In fact Bill Gates (back of the envelope math here) had a negative income of $25 billion in the year 2000!

And halfway down the page, here comes trout again with another chart showing that income went up sharply for the rich between 1997 and 1999. I reckon much of that was people selling their shares after a decade-long runup in stock prices.

And the knee-jerk Metafilter left throw a pity party for the poor, poor bottom pentile, who pay nearly no income taxes, receive subsidized food, subsidized heat, subsidized housing, etc, courtesy of the wealthiest pentile who pay the vast majority of taxes!

If you ask me, it's nothing short of a miracle that Gates and his ilk continue to employ people despite a system that confiscates outrageous sums of their income, and thanks them for innovating and creating millions of jobs by crying "foul" at their successes and bemoaning a system that lets them keep about half of what they've earned.
posted by trharlan at 1:01 PM on January 15, 2003


VeGito,

Pay for the "average worker" has nowhere kept up with the increased productivity of same "average worker." All that gravy went straight to the top.

Also, pressures of inflation skew such small seems-to-be increases to actually be steady losses in real income.

socialism for the rich, Laissez-Faire capitalism for eveyone else".

Exactly troutfishing! It's also known as privatizing profits while socializing risk. Common practice. Reference the very recent insurance industry "terrorism" bailout. BTW, where are those 300,00 jobs that bailout created in the construction industry? Anyone seen them?
Getting rich on the backs of the poor is what I'd call the practice VeGito.
And I endorse the idea that demand for products creates jobs for the poor, not being trickled down upon by the wealthy.
posted by nofundy at 1:02 PM on January 15, 2003


But if you look at the graph for the average pay of production workers, it has been steadily trending upwards.

How I wish they had put in the nice line for inflation above the wage increase for the worker.

The chance of making lots of money drives innovation and enterprise

What chance? If you hit the lottery? If you notice they said the top 1% is owning more and more that means the chance of owning SOME (not all mind you) is less and less, thus by your theory, in turn creates less jobs and thus MORE poverty.

The bottom economic 5th of some other countries, say China, can only dream of owning a car.

The bottom 5th in, say, the US can't buy shoes for their kids, much less buy a car, oh the luxury!
posted by Pollomacho at 1:05 PM on January 15, 2003


Oh and by the way its TroutFISHing VeGiTo, that conjured some truly disturbing images!
posted by Pollomacho at 1:08 PM on January 15, 2003


I apologize for the typo.
posted by VeGiTo at 1:15 PM on January 15, 2003


I suppose we could narrow the gap between the "rich" and the "poor" simply by making "rich" people poorer. Problem solved, right?

Gosh...isn't that the strategy of the Democratic Party in the United States?
posted by Durwood at 1:24 PM on January 15, 2003


Gosh...isn't that the strategy of the Democratic Party in the United States?

Not judging by Democratic senators' net worth, it isn't....
posted by oissubke at 1:27 PM on January 15, 2003


trharlan: If you ask me, it's nothing short of a miracle that Gates and his ilk continue to employ people despite a system that confiscates outrageous sums of their income, and thanks them for innovating and creating millions of jobs by crying "foul" at their successes and bemoaning a system that lets them keep about half of what they've earned.

that's one of the craziest things i've heard in a loong time. "it's nothing short of a miracle that Gates and his ilk continue to employ people ..." wow. well, how else would they run their businesses? how on earth would they have made their fortunes without employees?

capitalism is necessarily based on exploiting the labor force, i.e. paying workers less than they are worth.

and you seem to think that "Gates and his ilk" could have made their billions without any workers?!?!?
posted by mrgrimm at 1:30 PM on January 15, 2003


Gosh...isn't that the strategy of the Democratic Party in the United States?

No, you've got it all wrong, we want to pay unwed minority mothers to have welfare babies by the dozen, silly! Your comments weren't all that funny or accurate when Rush Limbaugh said them 15 years ago either. No body is "punishing" the rich for having money, but plenty of people seem bent on punishing the poor for having it. Why do you want to reward a tiny minority of people in this country with huge tax breaks anyway, I thought Republicans hated minorities? (rimshot)
posted by Pollomacho at 1:35 PM on January 15, 2003


There is nothing new under the sun.
posted by timb at 1:37 PM on January 15, 2003


The trackback post is interesting, btw. I don't entirely agree with all of it, but it has some well-written points.
posted by oissubke at 1:37 PM on January 15, 2003


mrgrimm: I didn't say it was a miracle that Gates employed people in the first place, I said that it was a miracle that he continued to employ people. Were I Bill Gates, I would have bought a big pile of gold, some nuclear weapons, and a desert island.

Or perhaps I would pull a Francisco D'Anconia.

As for your statement that "capitalism is based on exploiting the labor force, i.e. paying workers less than they are worth." --I don't know where to start. In capitalism, the market determines the value of labor. Do you think your assessment of a laborer's value is more accurate than millions of intelligent, independently-acting people? Perhaps we could put you in charge of a central planning organization that assigns values for labor.
posted by trharlan at 1:45 PM on January 15, 2003


I suppose we could narrow the gap between the "rich" and the "poor" simply by making "rich" people poorer. Problem solved, right?

Gosh...isn't that the strategy of the Democratic Party in the United States?


Gosh that would assume that both the Democratic Party had any semblance of power and that monied interests did not have a larger voice in ANY political party.

And really is this a Dem/Rep issue? The last time we were facing these kinds of disparate economic distributions it was my all time favorite president Teddy Roosevelt (R) who took steps to correct it.

The reality of the situation is that the more money that coagulates and pools into fewer hands the less money will be available for the majority to spend. Over time this can have a negative impact on the economy (if not already).
posted by aaronscool at 1:46 PM on January 15, 2003


And the knee-jerk Metafilter left throw a pity party for the poor, poor bottom pentile, who pay nearly no income taxes, receive subsidized food, subsidized heat, subsidized housing, etc, courtesy of the wealthiest pentile who pay the vast majority of taxes!

trharlan—the Census Bureau has produced Gini indicators on both pre-tax and post-tax income (I believe post-tax is also post-transfer, i.e., it includes food stamps, TANF transfers, Medicaid, etc., but I haven't been able to verify that for the linked figure. At any rate, post-transfer Gini's are not dramatically different and are still much worse in the US than in other developed countries).

I must say it again, this time with emphasis: wealth/income inequality and absolute poverty are formally unrelated. The FPP links (except the last, sort of) deal with inequality, which has political consequences. Do you have as much influence in the political process as a Ken Lay or an Arthur Levitt? Does your wealth alone have anything to do with that? Some people think it might. Just how poor the bottom "pentile" are is a separate question entirely, though I find it somewhat (!) dismissive to brush away that question because the poor in other countries are even more poor or because we hand out a few food stamps.

It seems quite true that strong redistribution schemes reduce entrepreneurial and investment incentives, which may in turn slow growth and technological advancement, though the magnitude of these effects are not well documented or understood. There seems to be a trade-off to be made—political equity vs. economic efficiency. I think there's a strong case to be made that small economic distortions could bring about large gains in political fairness, and I'm an economist (but not a very good one...)
posted by dilettanti at 1:47 PM on January 15, 2003


Just an offhand note here that the working poor are also working more hours.
posted by five fresh fish at 1:47 PM on January 15, 2003


Jos Bleau, VeGiTo - I can't respond quickly to those arguments....I need time to.....analyze.....ruminate.... (*chews cud*) But - Jos Bleau - here is the Census Data itself. Endless tables to answer at least some of your questions (maybe).

For example: Table RDI-5. Index of Income Concentration (Gini Index), by Definition of Income: 1979 to 2001

THarlan - (re: "And halfway down the page, here comes trout again with another chart showing that income went up sharply for the rich between 1997 and 1999"): you have the dates confused there: it's 1977, not 1997 - And the US Congressional Budget Office concurs " The C.B.O. study found that between 1979 and 1997, the after-tax incomes of the top 1 percent of families rose 157 percent, compared with only a 10 percent gain for families near the middle of the income distribution...Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent, rather than the next 9 percent. In 1998 the top 1 percent started at $230,000. In turn, 60 percent of the gains of that top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the top 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million"

By the way, the top tax bracket has declined dramatically since the late 1940's - from over 90% to 40% top marginal rate of today (the latest Bush proposal cuts the top rate to 33%). Meanwhile, the payroll taxes of the poor are used to float the Federal debt. Will Americans paying into the SSI system see benefits in two decades? Well...............Oh yeah - here's how US tax rates compare to those of other wealthy nations

Jharlan - I guess you're of the "Tax the poor!" camp, huh? (See "Hey lucky duckies!" (Krugman piece on a recent Wall Street Journal editorial proposing tax increases for the poor. The piece called the poor "Lucky Duckies"). - Ever been down and out yourself?

"Hey Lucky Duckies! (Tom the Dancing Bug cartoon, courtesy of Salon)
posted by troutfishing at 1:53 PM on January 15, 2003


I for one, welcome our new billionaire-plutocrat overlords!....errr.....maybe not......
posted by troutfishing at 2:04 PM on January 15, 2003


Aren't the NFL playoffs going on right now? Shouldn't we citizens be discussions matters related to sports instead of this unhealthy "class warfare"?
posted by Space Coyote at 2:18 PM on January 15, 2003


Troutfishing: Jharlan - I guess you're of the "Tax the poor!" camp, huh?

It's trharlan, and, no. I'm in the "tax no one"camp.

I concede to misreading the chart. Though I don't believe it weakens my argument.

And the bottom quintile has a negative tax rate, according to CBO numbers. So even the top rate has dropped, the poor, on average, pay nothing.

Unless you want to dispute what "poor" means.
posted by trharlan at 2:19 PM on January 15, 2003


The rich has always been shouldering a disproportionately large share of public expenditure and I believe the tax-cuts are well-deserved. I always doubted the government's role in income redistribution.

There are some truly poor countries in the world, like North Korea, where the average household can't afford the electricity to lid a freakin' light bulb. But how would you feel if rich countries like the US were forced to pay 40% of their GDP to the poorer countries?
posted by VeGiTo at 2:23 PM on January 15, 2003


How would you like it if say the US had to pay significantly less in UN dues than, say, North Korea even though North Korea can barely feed people. Its not like the top 5th are the only tax payers anyway, I pay a hell of a lot in taxes, more, in fact than my boss, who funnels his cash into shelters and write offs and makes millions to my thousands. Sure, I could, theoretically channel my income through shelters, but I tend to need to use my income for things like food and rent. So, while my boss writes off charitable work and the loss he takes on his beach house's hurricane damage, I, like my large numbers of coworkers continue to "shoulder the burden" for the poor that can't afford things like food and rent. That's sort of like the US just not paying its UN dues at all while Mexico pays for the UN relief work being done in Malawi.
posted by Pollomacho at 2:34 PM on January 15, 2003


Yes, we must discourge charitable work by making them no write-offable. It's not like the needy are the ones benefitting from charities anyway.
posted by VeGiTo at 2:39 PM on January 15, 2003


Rou-Xenophobe (re:"So we more-or-less stopped having increasing income inequality in 1990, 13 years ago.") - I rather doubt this. The current recession isn't reflected in the Census Dept. data. Krugman (who posts his data sources in the link I posted above at the top of this thread) concurs:

You shouldn't doubt it; it's right there in the link you posted. The Gini coefficient has been about flat, if noisy, since 1993, or 1989 or so if you exclude the bump from changing measurement schemes. Look for yourself; it's plain as day. There's no secular increase post-89 except for the shift from the data-collection change.

The data Krugman talks about and that you pasted, you'll note, are from 1979 to 199x. Sure, but the significant changes to income inequality happened 1976--1989 or 1968--1989 depending on what you want to count. He talks as if big changes in income inequality just now happened, when in reality they happened in the period between about 15 and 35 years ago. He masks this by using datasets that run to just about the current year and happen to include the period with the big shift.

As for 1999--2002, we'll just have to see what the data are. I claim no foreknowledge of them.
posted by ROU_Xenophobe at 2:46 PM on January 15, 2003


So VeGiTo are you denying that in a fully Capitalist system the tendancy is towards oligopolies, monopolies and a sharp division between the rich and poor? Is this the sort of society you wish to live in?

It still amazes me that people believe that voodoo economics works.
posted by aaronscool at 3:13 PM on January 15, 2003


This is a fascinating thread, especially since I just finished reading Nickel and Dimed. I recommend it highly. The conclusion author Ehrenreich draws from her experiment in low wage earning is that even $10 is not enough to live on in this country.
posted by Lynsey at 3:22 PM on January 15, 2003


Er, make that $10/hr.
posted by Lynsey at 4:19 PM on January 15, 2003


Just a cool thing I found the other day : The Columbia Journalism Review Dollar Conversion Calculator allows you to compare the value of a US dollar in the past to its current value.

For example $1.00 in 1800 dollars becomes $14.29 in 2002 dollars.
posted by revbrian at 4:22 PM on January 15, 2003


Somebody told me about a recent article in NYT ( or was it another newspaper? ) regarding an opinion pool asking the question: "do you consider yourself richer than 99% of the population?" It seems that 19% of the people answered Yes!

p.s. I know MetaFilter is about supplying the links, not asking for them, but I would be grateful if you know about the article and post a link to it.
posted by MzB at 4:26 PM on January 15, 2003


are you denying that in a fully Capitalist system the tendancy is towards oligopolies, monopolies and a sharp division between the rich and poor

Not at all. I am saying that the sharp division between the rich and poor is not that bad of a thing.

The chance of making big bucks creates motivation for you to become better than your neighbours. This results in the society as a whole having a higher performance. The Trackback post says it very well.
posted by VeGiTo at 5:01 PM on January 15, 2003


I am saying that the sharp division between the rich and poor is not that bad of a thing.

Well I guess that's where we'll disagree. I cannot think of a single society in history that has been very successful politically with that kind of economic division.
posted by aaronscool at 5:12 PM on January 15, 2003


It's certainly very noble to aspire to wealth, but if you're too poor to feed yourself it's a little more difficult to come up with the necessary capital to start a business and actually get a crack at becoming richer. A false dream of oppourtunity won't keep people happy in their shit jobs for much longer.
posted by Space Coyote at 5:43 PM on January 15, 2003


Empty Stomach = No Time for politics
posted by elpapacito at 5:57 PM on January 15, 2003


So, now we know why Marxism will be reborn in the US in the near furture. Amazing stuff.
posted by ugly_n_sticky at 5:59 PM on January 15, 2003


the sharp division between the rich and poor is not that bad of a thing

Oh please.

A widening income gap makes it increasingly difficult for anyone to jump across that gap: it's real hard to start that new business if you're spending 60 hours a week flipping burgers just to cover the rent. Only when a middle class exists can you have a realistic expectation of moving up incrementally, gradually get your kids into a better school, moving up to better jobs, the whole American dream.

If all you've got is rich people and poor people, there's no way to cross over, and no incentive for the poor to even try. Which is a dangerous, unstable kind of society to live in whether you're poor or rich.
posted by ook at 6:18 PM on January 15, 2003


are you denying that in a fully Capitalist system the tendancy is towards oligopolies, monopolies and a sharp division between the rich and poor

Yes. Explain how a perfectly efficient "capitalist system" tends toward inefficient arrangements like oligopolies and monopolies.
posted by yerfatma at 6:39 PM on January 15, 2003


VeGiTo: I am saying that the sharp division between the rich and poor is not that bad of a thing.

Aaronscool: Well I guess that's where we'll disagree. I cannot think of a single society in history that has been very successful politically with that kind of economic division.

How about the United States? For better or worse, the U.S. affects every other nation in the world in politics, economy, culture, warfare, language, religion, media, and just about everything else.

Considering that we're the only real superpower in the world at the moment (China currently lacks the globabl influence necessary to fall into that category), I'd say that United States is quite successful politically.
posted by Erasmus at 7:04 PM on January 15, 2003


How about the United States? For better or worse, the U.S. affects every other nation in the world in politics, economy, culture, warfare, language, religion, media, and just about everything else.

Considering that we're the only real superpower in the world at the moment (China currently lacks the globabl influence necessary to fall into that category), I'd say that United States is quite successful politically.


I believe we're concerned more with the quality of life of a nation's citizens moreso than that nation's ability to beat up on its neighbours.
posted by Space Coyote at 7:14 PM on January 15, 2003


The Columbia Journalism Review Dollar Conversion Calculator

wow, that's better than the bls' inflation calculator :D thanks!

19% of the people answered Yes!

that's like how 80% of us think we're better than average drivers :D which btw comes from "the winner-take-all society" by frank & cook (which explains why capitalist systems tend toward ineffcient arrangements -- imperfect information!)
posted by kliuless at 7:14 PM on January 15, 2003


I'd say that United States is quite successful politically.

Has been ... the future awaits. Which is the point of this thread ... how do we avoid becoming that which we dispise?
posted by Wulfgar! at 7:15 PM on January 15, 2003


yerfatma - I rather doubt that even the most respected and credentialed of academic apologists for what currently passes as our "capitalistic" system claim pefection. So I think your challenge is ridiculously hypothetical. But I would suggest a potential area of inquiry: Chaos Theory, and 'basins of attraction'.

ROU_Xenophobe: First of all, let me quote Kevin Phillips: " 'Corruption dominates the ballot-box, the Legislatures, the Congress and touches even the ermine of the bench. The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind; and the possessors of these, in turn, despise the Republic and endanger liberty. '
—National platform of the Populist Party, 1892

The debate over the compatibility of wealth and democracy is as old as the republic. From the start, concern that the egalitarian-seeming United States of the late eighteenth and early nineteenth centuries might develop wealth concentrations to match Europe's was a worry for many but also the guarded hope of an important few.

Alexander Hamilton, who favored both a financial class and an aristocracy, would have cherished the possibility of such an elite. John Adams, who thought aristocracies inevitable, would not have been surprised. Thomas Jefferson brooded that such a danger could flow all too easily from urban growth, finance, and commerce. Richard Price, the British reformer friendly to the American Revolution, warned the new nation against foreign banks and finance; and Alexis de Tocqueville, in 1837, hedged his praise for democracy in America with concern that the new industrial elite, "one of the harshest that ever existed," would bring about the "permanent inequality of conditions and aristocracy."

By the beginning of the twenty-first century, when the first clocks along the international date line struck midnight, the United States had met, at least broadly, the hopes of Hamilton and the fears of Jefferson and de Tocqueville. The transformation was hardly linear, given the interruptions of the populist and progressive eras and the New Deal. By 2000, however, the United States was not only the world's wealthiest nation and leading economic power, but also the Western industrial nation with the greatest percentage of the world's rich and the greatest gap between rich and poor. "............"Market extremism doesn't wear hoods, white sheets, or armbands. Skinheads in its ranks are few. Suicide bombers in its cause are even fewer. ...But the essence of extremism, as opposed to other specific "isms," is to extend -- harshly, rigidly, and dangerously -- a commitment and ideology that in softer and milder forms can be acceptable or useful. Worship of an unfettered, self-justifying marketplace developed in exactly this harsh, rigid form during the 1980s and 1990s. The infamous practices of Enron -- where market mania turned abusive, with the help of the Bush family -- are only the tip of one berg in an ice field that continues to threaten national political and economic navigation. ....Over the last 15 years, market-based excesses have run the gamut from crony-driven privatization of public assets and attempts to remold U.S. law into a branch of laissez-faire economics to even bolder efforts to recast U.S. election finance as a marketplace. These unchained markets have reshaped the global economy around international mechanisms -- such as the World Trade Organization (WTO) -- empowered to override local and national laws and regulations in the name of investment flow. Market mania has emerged as the both the pivotal crippler of U.S. democracy and the driving force behind the upward redistribution of U.S. wealth. It has made the egalitarian principles and patterns of the 1950s and 1960s vanish in a cloud of dust. "

posted by troutfishing at 7:21 PM on January 15, 2003


yerfatma: monopoly
OK, it's not ECO 101, but close:
1) there is no such thing as perfectly efficient "capitalist system"
2) even in that case, if a firm faces diminishing average costs it will evolve into a monopoly. [Monopoly, one more time, scroll down to "Natural Monopoly and Average Cost"]

kliuless: 19% said yes
I am inclined to suspect a network effect (though I am not sure the same is true for "above the average driver" case), but I need to find the original article before speculating.
posted by MzB at 7:28 PM on January 15, 2003


ROU_Xenophobe: Anyway....(thanx for yr. patience...response below this post)

VeGiTo: "Troutfisting" indeed....I LIKE it!

trHarlan: sorry about the mispelling. I think the poor pay a lot more than you realize:

HIDDEN POVERTY TAXES IN US SOCIETY [see: "Lucky Duckies" (above)]:

1) Non home ownership. This is a big one. With (at least) a $30,000 annual income requirement to secure a mortgage, the Wall Street Journal's hypothetical "lucky
ducky" will NEVER be able to buy a house and so build up any home equity. Instead, this "ducky" will be
consigned to a life lived in shabby apartments - and may be at the mercy of
abusive or irresponsible landlords (in cities and states with weak tenants'
rights laws).

2) The "inner city crime" tax. Our "lucky ducky" most likely lives in the inner
city. Even if this "ducky" is completely law abiding, he/she is prey to crime at
rates far exceeding theose effecting the home owning class. This tax includes
theft, assault (even murder - the "death tax"?) and a general environment of
violence, stress, grief and mayhem. [Our "ducky" is prey to the "inner city crime
tax" partly because of #1 due to a partial correlation between crime rates and
home ownership. Higher rates of home owership correlate with lower crime rates.]

3) The "inner city cost of living" tax. It is well established that basic
necessities are much more expensive in the inner city. Foodstuffs, etc. This is
partly due to the longstanding reluctance of large supermarket chains to build
inner stores (this may be changing a bit). And the cost of owning and driving a
car (if the "ducky" can actually afford one) is far higher in the city - due
parking fines, theft, vandalism and astronomical insurance rates (ostensibly tied
to greater insurance company payouts for cars insurance within city limits but,
probably, tied in part to #4: the most expensive - by far - insurance payouts
come from accidents involving the death of auto occupants. These tend to happen
at dramaticsally higher rates outside cities because the average driving speed in
cities is far lower due to traffic light, congestion, etc. The many "duckies" who
cannot aford to own and drive a car are subject to the "public transportation
tax" - often inadequate and unreliable public transit service.

4) The "easy target" tax. The lowest quintile "duckies" will (generally) not have
cash or credit reserves and so pay inordinately high rates of fines, fees, late
payment penalties and so on. Because of this they are considered far less
"creditworthy" and so - If they are lucky enough to have access to credit cards
or other lines of credit - they wil be subject to astronomical interest rates.
Or, in a crisis, they turn to loan sharks.


5)The "Weak Voice" tax: furthermore the lowest quintile "duckies" do not exactly
represent a constituency, for they do not generally behave as one by aggressively
fighting for their collective interest -- as do the other four quintile groups.
In life, the "lower fifth quintile duckies" generally lurch from one crisis to
the next (one of the general little noticed, pervasive "taxes" on poverty) and so
lack time and energy (not to mention money) to promote their interests in the
usual ways - through lawyers and lobbyists, political organizing and so on. So
they are subject to predatory pricing of various sorts (interest rates, auto
insurance rates, etc.). And, due to the lack of a strong "poverty" lobby, federal
and state legislation will tend to ignore their interests.

6) The "self-tax": the high stres rate associated with "taxes" 1-5 leads to a
dramatically increased appetite for alcohol and illegal drugs leading to the
"death tax" (not the republican kind!) and the "prison tax"...

7) The "No lawyer" tax. While the "ducky" if accused of a crime, will be
apppointed a lawyer (of varying quality and dedication) the same "ducky" will not
be able to afford to hire a lawyer for civil litigation - but legal
representation in civil cases is usually crucial to the outcome. In the inner
city I have seen whole courtrooms filled with elderly women (perhaps a bit
bewildered and confused) - not one with a lawyer - pleading their cases in
landlord/tenant disputes and confronted by phalanxes of lawyer assisted
landlords. Guess who (almost inevitably) wins?

posted by troutfishing at 7:36 PM on January 15, 2003


Yes. Explain how a perfectly efficient "capitalist system" tends toward inefficient arrangements like oligopolies and monopolies

Not sure what you mean by "Perfectly Efficient" but when talking about true capitalism I am referring to the free market that is free from government intervention or regulation.

In this scenario there is no protection from large and successful companies from imposing their will on smaller less financially capable ones. It's economic darwinism and the natural inclination is that the stronger companies eventually eat the weak.

This trend is traceable even in our more or less watered down version of capitalism. How many Commercial Airplane manufacturers are there in the world today compared with 50 years ago? 2 to 100? And going into the future all it would take is a single mistake to suddenly make it one.
posted by aaronscool at 7:43 PM on January 15, 2003


Jos Bleau - the botton quintile (more black? Less black? More poor - or less?) is a RED HERRING! The real issue (scroll up thread) is the fantastic weath accumulation (of the overall US "pie") by the top 1%, as noted by the Congressional Budget office. ....THIS sounds like a continuation of the trend to me. As the benchmark records for US corporate bankruptcy - set in 2001 AND bested (doubled) again in 2002 - suggests for consecutive US corporate bankruptcy records: Over $500 BILLION in 2002 corporate bankruptcy filings. These amount to a mechanism for upward wealth transmission......"We are now living in a new Gilded Age, as extravagant as the original. Mansions have made a comeback. Back in 1999 this magazine profiled Thierry Despont, the ''eminence of excess,'' an architect who specializes in designing houses for the superrich. His creations typically range from 20,000 to 60,000 square feet; houses at the upper end of his range are not much smaller than the White House. Needless to say, the armies of servants are back, too. So are the yachts. Still, even J.P. Morgan didn't have a Gulfstream.

As the story about Despont suggests, it's not fair to say that the fact of widening inequality in America has gone unreported. Yet glimpses of the lifestyles of the rich and tasteless don't necessarily add up in people's minds to a clear picture of the tectonic shifts that have taken place in the distribution of income and wealth in this country. "
(Paul Krugman)

ROU_Xenophobe: First of all: "...The C.B.O. study found that between 1979 and 1997, the after-tax incomes of the top 1 percent of families rose 157 percent, compared with only a 10 percent gain for families near the middle of the income distribution...Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent, rather than the next 9 percent. In 1998 the top 1 percent started at $230,000. In turn, 60 percent of the gains of that top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the top 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million" (US Congressional Budget Office) MEANWHILE...

" former executives of embattled companies like WorldCom and Tyco are living the high life as their companies struggle to stay afloat.

Author Kevin Phillips, whose recent book Wealth and Democracy tracks the history of corporate greed in America, tells Ross the nation's corporate elite sometimes act as if they're above the law.

"These people have become convinced that they are kinds of princes and dukes and czars of something," says Phillips. "This is a major historical greed period." "

posted by troutfishing at 8:09 PM on January 15, 2003


Uhhh.... troutfishing....

What does any of that have to do with the timing of just when the Gini coefficient was rising? It's plain and obvious that it rose.

It just bugged me that your post was about how it is sliding as if it were some very new thing that was just happening when in fact it's (1) old news and (2) something that there's no data to indicate is going on right now. Why be inaccurate if you don't have to?
posted by ROU_Xenophobe at 8:10 PM on January 15, 2003


Aaronscool - I bet you know this (but just in case...): the "Darwinism" referred to by economists no longer bears much resemblance to the "Darwinism" of biologists in that cooperation is now held (by biologists) to be as important a factor as competition. ..... "Nature red in tooth and...HUG?!"
posted by troutfishing at 8:15 PM on January 15, 2003


troutfishing:

That's exactly what I mean. 1979--1997.

But it's not really in 1979-1997. All of the change in the Gini coefficient is concentrated before 1990. Since then, there hasn't been any discernible increase in income inequality.
posted by ROU_Xenophobe at 8:19 PM on January 15, 2003


ROU_Xenophobe - The US just hit a major recession, and US government data does not yet show the effects. US gov. data lags at least several years behind current trends.

So: the Dot-Com boom spread around a lot of cash, and the cash is now drying up. Are you saying: the 30 year trend in the Gini index simply stopped in 1994, or so? If so, what do suggest as a factor which interrupted this trend? And, if this trend is imaginary, and cash is still flush, why are US state governers contemplating historic spending cuts? ("Finances of US States called worst since WW2")
posted by troutfishing at 8:27 PM on January 15, 2003


ROU_Xenophobe: "That's exactly what I mean. 1979--1997.
" - - Are you trHarlan too? Anyway...Not according to the US Congressional Budget Office. (see above) :

This is an awfull lot like arguments about Global Warming: "So...the US National Academy of Sciences has thrown it's weight behind the theory that human activity is responsible for Global Warming?...well they are probably biased and, in any case, there's a scientist somewhere in the world who disputes this picture.....Oh, so the North Polar ice cap has failed to form this winter, and scientists claim it's due to Global Warming?.... the West Antarctic Ice Sheet has collapsed? LIES... LIES and propaganda, I say!!"

If income inequality trends in the US have abated in the 1990's: who is buying the new, popular, 20-60 thousand square foot houses? - "Back in 1999 this magazine profiled Thierry Despont, the ''eminence of excess,'' an architect who specializes in designing houses for the superrich. His creations typically range from 20,000 to 60,000 square feet; houses at the upper end of his range are not much smaller than the White House. Needless to say, the armies of servants are back, too. So are the yachts." (Paul Krugman, cited above)
posted by troutfishing at 8:47 PM on January 15, 2003


Are you saying: the 30 year trend in the Gini index simply stopped in 1994, or so?

I'm saying that your own damn post said that it did. Go look at the graph again. You'll see that it peaks in 1989, is steady up to the discontinuity from data-collection changes in 1993, and is steady after. There's simply no discernible trend post-1989. Why pretend that there is when there plainly isn't?

I said before that I don't know what the data from 1999/2000-2002 will tell. Neither do you. They'll say what they'll say. Even if it's been rising again in the past 2 years, though, note that it was still flat for 10 years.

If so, what do suggest as a factor which interrupted this trend?

I have no frikkin' idea. I'm not an economist, and certainly not an econometrician.

It's merely obvious that the trend came to a screeching halt in 1989, for whatever reason.

And, if this trend is imaginary,

When did I say it was imaginary? What part of "It's plain and obvious that it rose" do you fail to understand?

I'm disputing the timing and pointing out the plain fact that it's been on hold for 10 years now or more depending on what the more recent data will say.

and cash is still flush, why are US state governers contemplating historic spending cuts?

Because states cut their taxes back when the economy was booming so that their surpluses wouldn't be too big, and because they're too stupid to run a cyclically balanced budget (or rather the voters are too stupid to allow them to). Now they have lower tax rates on a struggling economy and more demands on their funds. You do the math.
posted by ROU_Xenophobe at 8:48 PM on January 15, 2003


ROU_Xenophobe - Between '92 and '93, the methods used to calculate the Gini index were adjusted (hence the discontinuity in the graph) but, despite you claims - the Gini has been rising since 1995. You can call it "flat", but since 1995, the graph goes steeply upward.

the US Congressional Budget Office concurs " The C.B.O. study found that between 1979 and 1997, the after-tax incomes of the top 1 percent of families rose 157 percent, compared with only a 10 percent gain for families near the middle of the income distribution...Most of the gains in the share of the top 10 percent of taxpayers over the past 30 years were actually gains to the top 1 percent, rather than the next 9 percent. In 1998 the top 1 percent started at $230,000. In turn, 60 percent of the gains of that top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the top 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million"

Come on in - The water is warm!
posted by troutfishing at 9:00 PM on January 15, 2003


ROU_Xenophobe: "That's exactly what I mean. 1979--1997." - - Are you trHarlan too?

Why would you think I was anybody? There's no political argumentation of any sort whatsoever in any of my posts in this thread, and any you read in is entirely in your own mind. I'm merely pointing out that your post has a big, boringly factual flaw in it. Personally, I don't care what your opinions or trharlan's opinions about income inequality being a good, bad, or indifferent thing are. It just irritates me when people assert things that are plainly, demonstrably false, at least in part, and refuse to see or at least admit it.

Anyway...Not according to the US Congressional Budget Office. (see above) :

Yes, I saw the above. The data they describe ran from 1979 to 1997. Just like I said before, and as I expect I'll have to say another three or four times. Since the period of rapid increase in income inequality seems to have been 1968--1989, their study will of course find rising income inequality.

who is buying the new, popular, 20-60 thousand square foot houses?

Rich people, presumably. I'm pretty sure I don't have one. I don't claim to know whether this is because there are lots of new rich people with more money than sense or because extant rich people became dumber and started buying big showy houses. The data will tell soon enough anyway.
posted by ROU_Xenophobe at 9:04 PM on January 15, 2003


Between '92 and '93, the methods used to calculate the Gini index were adjusted (hence the discontinuity in the graph) but, despite you claims - the Gini has been rising since 1995. You can call it "flat", but since 1995, the graph goes steeply upward.

A little bit, but not anything that you can be sure isn't just noise. There's still no secular trend post-1989. There's ups and downs, yes, but no trend to it.

From the Census Bureau's pages that you posted -- they use 1993 as a baseline since they're good conservative statisticians and don't want to make comparisons across the 1993 discontinuity:

What has happened to the income distribution since 1993?

Data collected since 1993 indicate that the trend of increasing income inequality, which characterized the 1980s, has slowed or disappeared. The share of aggregate money income received by households in the top quintile has not experienced a significant increase since 1993. Households in each of the lower quintiles (i.e., those below the top quintile) had roughly the same share of aggregate income in 1998 as in 1993.

Since 1993, the Gini coefficient has not experienced a single statistically significant year-to-year increase. Nor was the change in the Gini coefficient over the entire 1993-1998
period statistically significant.
As Figure 3C shows, there was no change in the aggregate shares either. Only one measure, the MLD, suggests that household income inequality has increased since 1993. The MLD indicates that income in-equality grew by 4.5 (+/- 2.2) percent from 1993 to 1998.

posted by ROU_Xenophobe at 9:12 PM on January 15, 2003


Tell you what Xenophobe...I'll give you my hypothesis on 1993-1998. I'd expect to see only moderate to no growth in the Gini Index during that period. Why?

1. We had a number of tax increases from 1992-93 and few if any tax cuts (particularly for the upper income brackets).

2. From 92-93 we were coming out of a recession and moving into the tech fueled late 90's boom. A period of slow but consistent growth.

3. The bulk of the wealth made during the Tech boom wasn't until about 1998-2001

I'd speculate that recent changes (and further proposed cuts) to our tax structure along with the hyper growth of the late 90's will show that the Gini index gets skewed even further towards the rich and further from the poor. Of course we'll have to wait for the data to see for sure but that really seems to be the behavior we are seeing now with companies failing and job cuts but ever increasing salary and compensation packages for execs.
posted by aaronscool at 9:26 PM on January 15, 2003


Damn Lies, and statistics: "Income dropped everywhere but the top. The average income of the top 5 percent rose from $259,445 in 2000 to $260,464 in 2001. Income at the top is actually understated because the Census Bureau excludes capital gains income, for example, which goes disproportionately to the wealthy.

Inequality has grown substantially. In 1967, the lowest fifth of households had 4 percent of aggregate income, the middle fifth had 17.3 percent and the top fifth had 43.8 percent. In 2001, the lowest fifth had 3.5 percent, the middle fifth had 14.6 percent and the top fifth had 50.1 percent. The top 5 percent of households had 17.5 percent of the income in 1967 and 22.4 percent in 2001"


Furthermore (blah blah!): "DESPITE THE TREMENDOUS overall economic growth of the 1980s and 1990s, and the low unemployment rates of the late 1990s, the gaps between high-income and low- and middle-income families are historically wide, according to "Pulling Apart: A State-by-State Analysis of Income Trends," the new study by the Center on Budget and Policy Priorities and the Economic Policy Institute.

New York had the widest gap between high-income and low-income families in the late 90s, followed, in order, by Louisiana, Texas, California, Massachusetts, Tennessee, Kentucky, Alabama, Arizona and North Carolina. In general, income inequality was the greatest in the Southeastern and Southwestern states, and least in the Midwest Plains states and northern New England. While the national trend toward greater income inequality has received widespread coverage, less attention has been focused on how this trend has varied by state.

The report breaks down government data, using information from the Census Bureau's March Current Population Survey, to arrive at state-specific figures on before-tax income for families of two or more related individuals. The study compares combined data from 1998, 1999 and 2000 to data from the late 1970s and late 1980s, time periods chosen because they stand as high points of their respective business cycles.

The study also found that it was not only the poor who failed to share fully in national prosperity. Over the past two decades, the gap between high-income families and families in the middle fifth of income distribution also grew in 44 states. Because Census data do not capture income from capital gains, executive bonuses and other non-wage sources, it is likely that the growth in incomes of top earners, and hence the growth in income inequality, may be even greater than reflected in the study especially considering the sharp run up in stock market wealth in the late 1990s.

"People from all walks of life, from laborers to corporate executives, contributed to the strong level of overall economic growth that dominated much of the 1980s and 1990s. It is a problem when everyone does not share in the resulting prosperity," said Elizabeth McNichol, director of CBPP's State Fiscal Project and a co-author of the report. "The United States was built on the ideal that hard work should pay off, that individuals who contribute to the nation's economic growth should reap some of the benefits."

"The fact that the strongest economy in 30 years failed to lower the level of income inequality reveals both the depth and the tenacity of this social and economic problem," said Jared Bernstein, EPI economist and report co-author. "Exceptionally low unemployment rates brought gains to low-wage workers and fairly broad-based wage growth, especially in the last few years of the 1990s. Still, high-income families gained the most in the 1990s, and inequality grew over the decade."
"

posted by troutfishing at 9:40 PM on January 15, 2003


No need to speculate about the trend from 1989 to 2001. It's right here. The gini was flat for about three years but has been steadily increasing since 1992.
posted by JackFlash at 12:03 AM on January 16, 2003


Vile, overpaid CEOs aside, the real question is whether you can tax the rich more without having them slack off, thereby reducing our nation's overall wealth. And why do we have a right to tax the rich more? Because they benefit disproportionately from our system: their wealth is assisted/made possible by the infrastructure of our government and society.

In any case, it's hard to fathom the Bush admininistration when it comes to taxes: a truly aloof group.
posted by ParisParamus at 3:28 AM on January 16, 2003


Sidenote to Zen: Keep looking for all those Canadians. They're tough to find.

Sidenote to gramcracker: Not being Canadian myself, I forwarded your link to a close friend in Canada (whose wife, incidently, is a nurse in Ottawa). His comments:

"Bunk.

What is actually happening is that people are putting up with a health care system that is on the brink of collapse, where essential medical tests that would be available on a "next-day" basis in the U.S. (i.e. for cancer diagnosis, etc.) take weeks to months to become available in Canada. It can take SIX MONTHS to get an MRI or CAT scan done here. Government (and private) health plans will not pay for out-of-country services if the same service is available in Canada within a "resonable" time frame. The net result is that the WEALTHY get better health care, because they can afford to go to the US.

The existence of private clinics to provide supplementary services on a user-pay basis is prevented by law in many cases. Private MRI clinics are just beginning to pop up, which should help a bit.

The system is very broken, and the government is finally beginning to admit this."
posted by ZenMasterThis at 4:57 AM on January 16, 2003


Does anyone really think a recession is going to even out the playing field? If anything, recessions create fear to invest, which means that the rich will simply be holding on to their cash.

Unfortunately, the middle class and lower don't have this option, because most of our paychecks go to keeping a roof over our head.

Just about the only thing the rich are going to be spending their ducets on is real-estate. It's relatively cheap now, and getting cheaper in the cities. But this doesn't help the economy, it just keeps the lower caste in a perpetual serfdom where they will never own their own land.

If you ask me, (and no one appears to have asked), the problem with the country's economy right now is not that the middle or lower classes aren't spending. They're spending everything they get. The problem is that the rich aren't spending. They aren't investing. They aren't taking any chances. They should be forced to, if you ask me. Forced to invest, forced to buy hundreds of crappy 25" TV's, forced to rent apartments. Let's get this economy started right!
posted by Civil_Disobedient at 5:00 AM on January 16, 2003


1) there is no such thing as perfectly efficient "capitalist system"

I know. However, what I was reacting to was the suggestion that a "fully capitalist" system (I took "fully," perhaps unfirly, to mean ideal) creates inefficient markets by definition. There seems to be confusion here between true capitalism and what goes on in the US. To wit:

This trend is traceable even in our more or less watered down version of capitalism. How many Commercial Airplane manufacturers . . .

The airline industry might be the best example of what was referred to above as our private profits, socialized risk system in the US. Moreover, commercial airliners are so expensive that the marketplace is an inherently global one (is there a manufacturer that sells exclusively to US airlines?) and therefore affected by the large subsidies companies like Airbus receive. Not that I'm saying US manufacturers aren't subsidized too, after a fashion, just that I don't see airplanes as a good test of this theory.
posted by yerfatma at 5:11 AM on January 16, 2003


Well stated parisparamus.

Geroge H. W. Bush probably stated the intent best when he said:

"We must drive money up into higher, righter, and tighter hands."

Sounds like exactly what is happening. Our founding fathers would not be pleased and democracy cannot be well served by this trend.
posted by nofundy at 5:16 AM on January 16, 2003


JackFlash - You're a GOD (for finding the GINI data for 1990-2001 missing from my census bureau chart). Now we just need a statistics GOD to graft that data onto the chart...calling all statisticians....calling all statisticians....calling all statisticians

ParisParamus - heaps O' praise for: "why do we have a right to tax the rich more? Because they benefit disproportionately from our system: their wealth is assisted/made possible by the infrastructure of our government and society." But concerning - "it's hard to fathom the Bush admininistration when it comes to taxes".....I'm afraid I DO fathom the Bush Adm. attitude. I think it's charactorized by utter contempt for the intelligence of the average American voter, and also a corresponding extreme faith in Karl Rove's PR tactics to hoodwink the public come election time.

And I have to assume that the Bush/Rove calculation is that a few timely WARS will come in handy to distract attention from the seismic shifts - that the Bush tax cuts are accelerating - in US wealth distribution (upwards, to the top 1%).

WARS! - they're good for other purposes too - They slice!~ They dice!~ They secure the oil!~ They test the new weapons, systems and tactics!~ They cow our foes and teach them to not oppose US interests!~ They secure the oil!~ (did I mention that already?)...

Indeed, maybe they'll let a few Islamic terrorists (perhaps Hamas, this time) slip through into the US to cause moderate havoc (smaller than 9-11) also...sometime around...I'd guess late in '04.

As Henry Kissinger said: "Today Americans would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful. This is especially true if they were told there was an outside threat from beyond, whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will plead with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well being granted to them by their world government."
-- Henry Kissinger speaking at Evian, France, May 21, 1992 Bilderburgers meeting. Unbeknownst to Kissinger, his speech was taped by a Swiss delegate to the meeting."
-- Whether real or promulgated? (!)

"The illegal we do immediately. The unconstitutional takes a little longer." -- Henry Kissinger
posted by troutfishing at 5:53 AM on January 16, 2003


CODA - Despite argument to the contrary on this thread, data from the US Census Bureau (thanks again, Jackflash) reveal that the US trend towards greater income inequality continued through the 90's and up to the present. (link to data)

Here are the numbers - the GINI index for US "Measures of Household Income Inequality: 1967 to 2001" from the US Census Bureau (see link above. also: I cut off '67 -'72 when I made this GIF. No trend deviations in missing years, though.)

The first column after the years (2001, etc.) is the GINI, and higher numbers = greater inequality. They don't look good.

posted by troutfishing at 6:30 AM on January 16, 2003



posted by troutfishing at 6:41 AM on January 16, 2003


Uhhh... that's not what those data say.

There's no trend from 1989--1992. There's a dip and bounce, but that makes no trend.

There's also no trend from 1993--1999. The gini goes from .454 to .457, a difference swamped by the surrounding noise from another dip and bounce.

There is a trend up for 1999--2001. Probably a statistically significant one, too. I wouldn't have expected that with the dotcom bubble bursting; interesting.

It's still interesting to me that it was flat for ~10 years though; that's not something I'd known or expected, since it gets masked by everyone with an axe to grind one way or another. Axeless, I find it interesting, is all.
posted by ROU_Xenophobe at 6:58 AM on January 16, 2003


From 1984:

But it was also clear that an all-round increase in wealth
threatened the destruction -- indeed, in some sense was the destruction -- of a hierarchical society. In a world in which everyone worked short hours, had enough to eat, lived in a house with a bathroom and a refrigerator, and possessed a motor-car or even an aeroplane, the most obvious and perhaps the most important form of inequality would already have disappeared. If it once became general, wealth would confer no distinction. It was possible, no doubt, to imagine a society in which wealth, in the sense of personal possessions and luxuries, should be evenly distributed, while power remained in the hands of a small privileged caste. But in practice such a society could not long remain stable. For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.


and later...

The secret accumulation of knowledge -- a gradual spread of enlightenment -- ultimately a proletarian rebellion -- the overthrow of the Party. You foresaw yourself that that was what it would say. It is all nonsense. The proletarians will never revolt, not in a thousand years or a million. They cannot.
posted by Civil_Disobedient at 7:12 AM on January 16, 2003


I'm seeing all italics. Attempting to close... Did that work?
posted by oissubke at 7:17 AM on January 16, 2003


That seemed to work oiss.

Nice quotations C_D!
posted by Pollomacho at 7:23 AM on January 16, 2003


C_D - indeed. Orwell is spinning in his grave.

ROU_Xenophobe. Your argument seems strange to me.

"There's no trend from 1989--1992. There's a dip and bounce, but that makes no trend....There's also no trend from 1993--1999. The gini goes from .454 to .457, a difference swamped by the surrounding noise from another dip and bounce....There is a trend up for 1999--2001. Probably a statistically significant one, too. I wouldn't have expected that with the dotcom bubble bursting; interesting."

As far as I know, no statistician would try to pluck out a 'trend' from two or three years of data as you try to do here. The SURROUNDING NOISE would render any such attempt statistically insignificant. I am staring at the same numbers as you. We see very different things, apparently. I see a steady progression in the GINI index numbers over the course of three decades.

Try these three data points. They are representative of the curve of the rising GINI numbers:

1967: GINI: .399
1977: GINI: .402
1987: GINI: .426
1997: GINI: .459
2001: GINI: .466

Between 1967 and 1970, the US achieved it's LOWEST (most equal) GINI numbers of the century. The first graph I posted, this one goes back to 1947. It shows a two year dip in the GINI, from '92-'94.

Since then, as the most recent numbers which I posted above in the form of a GIF reveal, the GINI has been UP UP UP. I call thirty+ years of rising GINI numbers (with a two year dip - not that significant in the overall picture) a.......what's the word for it?.....oh yeah! - A TREND!
posted by troutfishing at 7:42 AM on January 16, 2003


Oops....that's FIVE data points. I got carried away there.
posted by troutfishing at 7:50 AM on January 16, 2003


troutfishing: you are correct in believing that there is a 40+ year upward trend in the income Ginis, but it may well be appropriate to break the data into separate segments, as ROU_Xenophobe has done, because the determinants of income inequality change over time. Tax structures change. The composition of the labor force changes. Welfare programs change. You get the picture. Unfortunately, I can't think of a good "model" for Gini determination that is (1) analytically tractable, (2) sensible and (3) meaningfully testable on small yearly samples. After all, the Gini is a summary function of ordered data... From 1993-2001, there is a "statistically significant" upward trend of 0.0013, but a similar calculation done on percentage changes comes up with no significant trend (partly due to the loss of a degree of freedom). But both these models are quite meaningless.

BUT, this is all beside the point. The real question is what is happening, not to income, but to wealth. Generally, wealth inequality increases even when income inequality is flat, provided mobility is low. However, inequality measures (particularly on income) are deceptive on that point—they don't reveal anything about dynamics. The people at the top of the distribution today may not be the same people at the top from last year. What is needed is some measure of income mobility to augment the inequality measure. They're out there, but I'm too lazy/busy to find them right now.
posted by dilettanti at 8:03 AM on January 16, 2003


troutfishing: You're forgetting the discontinuity in 1993 in that series. The 1987--1997 "jump" looks to me to be due to that.

I'm saying: clear trend up 1968--1989, flat 1989--1999 (but it's admittedly hard to tell because of the data-collection change), looks like an increase 1999-2001 but might or might not turn out to be statistically significant. I've said nothing about what is good or bad here; I just find the changing slope interesting.

Dilettanti: there's got to be some package in R to deal with it, probably by simulating it a jillion times. Lord knows there's a package for everything else. The coffee it makes isn't very good though.
posted by ROU_Xenophobe at 8:11 AM on January 16, 2003


Geroge H. W. Bush probably stated the intent best when he said:

"We must drive money up into higher, righter, and tighter hands."

Nofundy, do you have a link for this quote, I cannot google it up.
posted by thirteen at 8:57 AM on January 16, 2003


Rou_Xenophobe. You may be right. By the same token, I may be right. And there you have it - it seems as if we're stuck at this point, in entrenched positions. Once again, this debate reminds me of where the scientific community was on Global Warming in 1995. The trends seemed clear to some, but others pointed to "noise" in the data which might suggest the absence of clear trends. In 2001 - well, the US National Academy of Science has endorsed the reality of the trend, and is warning about Global Warming driven sudden climate change. I suspect the GINI trend will become more clear in even two or three years - in favour of MY argument, of course!

Dilettanti - Krugman (in one of the pieces I link to above) cites a new study which shows that income mobility in the US has considerably declined in the US in the last two decades, so much that income mobility in the US is less than that of most European countries.

Until we get more GINI data, we can rely somewhat on "proxy" data - construction of mansions, sales of yachts, etc.

Consider these trends in the US economy -

1) the migration of manufacturing jobs overseas and even the migration of IT and some service sector jobs (such as phone based customer service to India) as well as the growing financial entrance requirement for decently paying jobs (an increasingly expensive BA or higher, or some sort of college education).

2) The records set two consecutive years for corporate bankruptcies - new record in 2001, ($250 billion or so) then another new record in 2002 ($500 billion)

3) Increases in numbers of Americans not covered by health insurance.

4) The heavy hits most 401k's took in the DOT com bust and the recent stock market dive.

5) The trend cited by Krugman of increasd mansion construction.

6) The surge in personal bankruptcies in 2002: "NEW YORK, November 26 (LendingIntelligence.com) — Personal bankruptcy filings climbed 12% to 391,873 last quarter — the highest single-quarter volume ever — according to data released yesterday by the Administrative Office of the U.S. Courts.
By comparison, 349,981 personal bankruptcies were filed in the third quarter of 2001.
For the 12-month period ending Sept. 30, consumer filings, which make up the majority of bankruptcy filings, also rose to record highs, increasing 1.5% to 1,508,578 for the same period last year.
The hope for revised bankruptcy legislation — which had been in negotiation for five years and would have made it more difficult for consumers to discharge their debts — was dashed last week when the Senate adjourned without voting on the bill."


I probably can dig up much more proxy evidence, but I have work to do. On the basis of the evidence above, though, I think it's very likely that I'm right, and that the GINI is still rising - faster than ever, in fact.
posted by troutfishing at 9:19 AM on January 16, 2003


How is using income equality to measure the quality of an economy different from using any other arbitrary measure. Many nations with severe income inequality happen to have low standards of living, but it's a fallacy to assume that correlation is the same as causation.

Income inequality could be the result of an unstable, undesirable nation, rather than the cause of it. It's also possible that income inequality correlates with other undesirable factors because of some third factor that's not being considered.

I'm no rampant defender of the rich, I'm just seeing a lot of bogus logic being tossed around in here.
posted by oissubke at 9:25 AM on January 16, 2003


Oissubke - Your enourmous red herring has expired and is now beginning to rot in the sun:

How is income equality an arbitrary measure? It is actually considered a rather significant measure by institutions as disparate as the CIA, the US Census Bureau, the World Bank, (I could go on, but I think you get the point). Income inequality is considered significant in that 1) At the national level, greater or lesser amounts of income equality or income inequality TEND to correlate with (repsectively) greater or lesser amounts of politcal stability or political instability.

This does not mean that the GINI index, in itself, is a determinant of anything, and I have not argued that case on this post. (And I don't recall anyone else doing so) The GINI index does TENDS to correlate with national affluence, but with many significant exceptions. And there are a few poor countries represented in the low GINI index ranks. But the GINI is employed by the CIA, the World Bank, The US Census Bureau, and so on because..........

At the GINI level of Sierra Leone (63)...the concentration of wealth at the top is so extreme that there is no real national social cohesion. The glue which, in the long run, binds nations together is that of shared values, shared experiences, shared culture. That is, by the way, why US social conservatives argue against teaching recent immigrants in their native languages (if not English) and for the teaching of a core cultural "cannon".

With a GINI index of slight over 40, the US - I would argue - is on the edge of a breakdown in social cohesion. What do people who can afford 40,000 square foot mansions - and the attendant other priveledges which come with such wealth - have in common with Americans at the median income level? Very, very little - less each year, in fact, as the GINI index rises. The class which wields, by far, the greatest political influence in the US, the upper 1% in terms of yearly income, is losing concern for (and interest in) the bottom 90% of Americans. The top 1% does not need the services of the federal government, but for defense and a few other limited services. In fact, this class has more in common with the top 1% in nations around the world, really, than with most Americans. But......appearances must be maintained and hence the pretense of the "common touch", the forced empathy of the US politician's photo op with the "common man"..............
posted by troutfishing at 10:25 AM on January 16, 2003


Communist ideology is DEAD

really? So what's the origin of the desire to redistribute income?
posted by quercus at 10:38 AM on January 16, 2003


really? So what's the origin of the desire to redistribute income?

Socialism.
posted by aaronscool at 11:10 AM on January 16, 2003


And the difference is...?
posted by quercus at 11:14 AM on January 16, 2003


I wonder how many citizens know what Gini Index is, or what mean and median mean. I think they could be easily tricked into believing that a part of data is voodo economics and the another part, the supportive analysis part, is exact science, the word of God himself.

Let's look for instace at Walmart employees, not just because they work there , but because it seems they're very unhappy with both the overall employee treatement and their wage. What have they done to address the problem ? Why, if the problem is so felt, there isn't a Walmart Union already ?

I remember a few years ago there was a truckers strike in France : they managed to paralize the whole transportation business more or less for a week. Pretty effective political action, government couldn't but give up.

It seems to me that a lot of propaganda has done its job well. Market will solve anything, don't worry. Unions are evil and corrupt. Stocks are good, Wallstreet will always rise. Don't listen to economists, they're all smoke and mirrors, unless they're on our side. No-Global protesters are evil commy rioters. That's all you can see and hear on the media, but you don't really find many tv shows about macro and micro economics, or simple accounting. No wonder we're so f**cked up.
posted by elpapacito at 11:19 AM on January 16, 2003


Not that I'm saying US manufacturers aren't subsidized too, after a fashion, just that I don't see airplanes as a good test of this theory.

Well what would? I have a hard time thinking of any industry that over time won't congeal into 3, 2 or left unregulated a single company.

Further examples:
The record industry in the last ten years moved from about 10 major labels to 3 corporate parents.

Automobile industry it trending to more and more consolidation. We now have Daimler-Chrysler as well as Ford/BMW/GMC buyouts of Saab, Rolls Royce, Jaguar, Lotus, Cooper etc.

The point I think many people are missing is that money tends to coagulate and congeal. The more money fewer people make the less money is available in the general economy.
posted by aaronscool at 11:20 AM on January 16, 2003


And the difference is...?

Socialism is the economic system of Communism but not the political system. That is to say that in a socialist country you can and do still have democracy.

Many European countries consider themselves to be more Socialist than Capitalist Sweden being the prime example but the UK, France, Germany, Italy and Spain all have strong Socialist agendas/parties.

Personally I think that unregulated Captalism is as bad or worse than full Socialism. We need a balance and there is no perfect answer. The problem we are facing today is that the income distribution in our country is getting further and further out of whack. Whether this is a cause or symptom of the greater problem doesn't really matter because most institutions recognize this to be the seeds for wide scale discontent and/or political instability.
posted by aaronscool at 11:33 AM on January 16, 2003


When I was a kid in the 70's in a family of four, my father worked a white-collar, professional job where he was employed for life. My mother stayed at home. We lived in a firmly middle-middle class house in a middle-class neighborhood. There was money and plenty of leisure time for long summer vacations.

Today, I'm an adult of the new century in a family of four, working at a white-collar, professional job, but I'm always scouting for other jobs since my employer has no concept of loyalty and I could be laid off in favor of foreign outsourcing at any time. I'm making more than double in constant dollars than my father did at my age, but my wife is returning to work after staying home the past few years despite a medical condition that makes any work difficult, and we're moving from a middle-middle class house in a middle-to-upper middle class neighborhood to a lower-middle class house in an upper-lower class neighborhood as an effort to reduce expenses even further. There's money, but only enough, but there's no leisure time to spend it in anyway-- I get less vacation than my father did at my age.

Yeah. Everyone does better when the rich get richer. Tell me another one.
posted by Cerebus at 11:35 AM on January 16, 2003


Quercus - How about.......EQUITY?

Of late, many fortunes in the US have been built (and augmented) through ponzi schemes and creative accounting which have amounted to, in the final analysis, mechanisms for the upward distribution of wealth. So: the workers of Enron who lost their jobs also contributed their 401K's - to whom? Well, to the top Enron execs. Sure a lot of Enron stock valuation was hot air - but not all. There was real wealth creation going on in Enron, by thousands of talented and dedicated employees who were, it turns out, swindled in an especially brutal way by the top management.

So, the $250 billion in corporate bankruptcies in 2001 and $500 billion in 2002 represent MASSIVE upward wealth transfers - essentially from the pockets of average Americans (and from their retirement accounts and stock market investments).

This is not unusual really. In recent history, the US experienced a similar upward wealth transfer with the Savings and Loan Scandals of the late 80's to early 90's (with a public financed bailout). Indeed, many of the great family fortunes in US history have (certainly in the initial stages) been built on criminal behavior - such as the small fortune earned by one tycoon (JP Morgan I believe, but I'm not positive) by buying thousands of defective rifles during the Civil War and then selling them to the US Government for the Union Army - at a fantastic profit. This sort of behavior is typical.

The recent tradition of the last few decades of the revolving door between government and corporate management resembles a newly emerging "national socialism" through which corporate fortunes are augmented by especially sympathetic government officials (sympathetic in the way that Dick Cheney was to the oil and coal industries when forming his energy plan) who are then rewarded when they leave public office - with lucrative, top corporate positions in the companies their policies have benefitted.

I could go on and on in this vein, but my basic point is: in many ways US capitalism is coming to resemble a sort of National Socialism for the wealthy - but without the Hitlerian "a Volkswagon for every family" populist appeal:

And the growing refusal, on the part of the American upper class, to recognize any sort of obligation whatsoever to the society which ennabled them to make their fortunes? - to the schools, the overall national infrastructure, to the government at large - with it's diplomats and soldiers, it's police and judiciary......or even to their employees (if they have any) - and to the nation as a whole ( which has in a multitude of ways ennabled their fortunes ) ----- I could brand this attitude with pejoratives, as "grotesque" (or whatever) ----- but this is pointless.

But it is grotesque.
posted by troutfishing at 11:35 AM on January 16, 2003


Why, if the problem is so felt, there isn't a Walmart Union already ?

One reason is Walmart's unfriendly policies towards unionization makes it had for a union movement to get a foothold. Another reason is that Walmart corporate headquarters and a large number of its stores are located in the South East, a region with a decidedly anti-union culture (thus the shift of manufacturing from the rust belt to the bible belt as well). Union is a bad word in many southern towns!
posted by Pollomacho at 11:46 AM on January 16, 2003


Pollomacho: and I may agree that some Unions were and will be corrupt as much as any other organization made by man on this earth, but what manages to almost scare me is the complete refusal of the concept of union, not even considered as a possibility by many. I guess that some people is so stubborn it requires famine to make them refuse a system that isn't working as well as promoted.
posted by elpapacito at 12:02 PM on January 16, 2003


There's 10 people in this lifeboat in the middle of the trackless ocean, and there are 10 cans of rations aboard. One man, a businessman by his dress, takes 4 cans for himself and tells the passengers that they can split the rest. When the passengers object, the businessman tells them that if they can just find a way to double the number of cans of rations, they'd *all* be better off...

A parable for modern times.
posted by Cerebus at 12:28 PM on January 16, 2003


Your basic problem is the majority of the poor in America don't begrudge the rich-they want to be just like them. I'm sympathetic to your argument, troutfishing, but to me the solution would appear to be less government intervention in the economy not more. That's a pipedream I know.
posted by quercus at 2:00 PM on January 16, 2003


I paid full price to see The Lord of the Rings.

Twice.

Gini coeffecient? The content are apathetic.
posted by blogRot at 2:11 PM on January 16, 2003


Quercus - less? more? The older I get, the less clear such answers become. But I would say this: it's like the global arms race, in that the US could not just stop playing the "global cop" all at once, even if it desired to do so. It would need to disengage gradually, while at the same time building up the strength of international institutions. Otherwise chaos would ensue. (and..."achtung!"...we must have ORDER, right?)

Blogrot - this has been said before, most notably as (more or less): "In the Americas, socialism foundered upon the shoals of roast beef." Indeed. But the topography has shifted, and the beef shoals are migrating elsewhere (to China even?).
posted by troutfishing at 6:54 PM on January 16, 2003


Well I agree that the corporate-government cabal is a problem. Of course-it's a direct result of human nature, i.e. greed-so you can't hope to stop it, only contain it-
the simple fact is nothing, I mean nothing, is stopping people from telling the government what to do and look what we have. The real problem is the majority of people suck.
posted by quercus at 8:59 AM on January 17, 2003


The real problem is the majority of people suck.

All economic and political systems are attempts to one way or another cope with this single, undeniable fact.
posted by ook at 8:10 AM on January 18, 2003


OK - So our only hope is re-engineering the human genome?
posted by troutfishing at 7:31 PM on January 19, 2003


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