koshersalaami

koshersalaami
Birthday
October 01
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Male, Jewish, in my fifties, married with kids (well, at this point I guess that should be "kid"). Thanks to Lezlie for avatar artwork - sort of a translation of my screen name. "Salaam" is peace in Arabic, hence the peace sign. (No, my name doesn't mean "hunk of meat" and yes, the pun is intentional.)

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Salon.com
JANUARY 8, 2013 7:59AM

What Would Less Absurd Look Like? (prev. posted on OurSalon)

Rate: 5 Flag

This continues from a very recent post of mine called Absurd

This post is all conjecture; I'll admit that right up front. However, the mechanisms I'm talking about exist.

Looking at my last post, "Absurd," what would a better distribution of wealth look like?

I'll give an off-the-cuff suggestion of a target. Not a target that would strike anyone as communist; in fact, a target that is still wildly inegalitarian. Here it is, divided like my last post into Quintiles (fifths, or 20% blocks of America's population):

Bottom quintile 3%
Lower middle     6%
Middle                12%
Upper middle 24%
Upper                 55%

So, we're still talking unequal enough such that no quintile is more than half the size of the one above it. The ratio of top quintile to bottom is 55/3. This is not an egalitarian solution.

What would something even this skewed mean?

The top would take a cut of 29% in terms of percentage of the whole economy, but they'd still be left with well over half the country's wealth for just 20% of the population. Also, unlike any other quintile, they would be more than twice the size of the one below them. Keep in mind that this is cut in percentage of the economy, not an absolute number. This becomes important later.

The results for everyone else:

The upper middle better than doubles in wealth.

The middle triples in wealth.

The lower middle and lower each have their wealth multiplied by 30. Yes, thirty.

Keep in mind that this puts the lower middle quintile at more money than the actual middle has now.

What would this mean in consumer spending? What would it mean for all these extra people to be able to afford (or afford more, better, and in some cases just new):

Cars?
Housing?
Travel?
Restaurants?
Clothing?
Home furnishings?
Consumer electronics?
Event tickets for entertainment (concerts, sporting events, movies)?
College degrees?

Businesses would make fortunes.

Tax revenues would skyrocket, in part because lower income people don't shelter their income like the wealthy do.

Primary and secondary education would actually be paid for without our cutting it to ribbons. We'd end up with educated kids because of improved tax revenues.

Social service spending would plummet. Crime and associated expenses and opportunity costs (like prison) would presumably drop as more people had legal ways to make a decent living.

And here's the kicker:

Businesses would expand by enough that general economic expansion might very well make up for the cuts in the top quintile's share. In other words, 55% of a larger pie might add up to as much money as 84% of a smaller one (84% being the current share of the top quintile). The top end of the population would be less rich in comparison to the rest of the population but might not actually end up less rich at all in absolute terms.

In other words, in the long run, this might not even end up costing the top quintile any money.

Are you beginning to see why policies leading to this kind of polarization are so fundamentally stupid? There are hardly any winners and hundreds of millions of losers.

As I have said many, many times before:

I do not understand why Wall Street and the business community in general tolerate the status quo. They of all people would profit enormously from average Americans having money.

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I read your previous post, Kosher. The way it is divided, 0.1/0.2/4/11/84 is pretty shocking. I don't know what fair is exactly, but everyone should have enough to live on, a home, good & nourishing food, enough heat, clothes, and free time to savor their life and loved ones. With the way the environment is, maybe selling more & more consumer goods won't be the best way to help our economy in the long run...but maybe the arts, sports, services, fresh & local food, and smaller & more eco-friendly cars, appliances, electronics is the way that the economy will grow in the future. I feel that even though the distribution is so lopsided, overall, we still consume so much & dispose of so much in a very wasteful way. I guess it's a different issue, but still related...how to distribute things more evenly, have a healthy economy, & at the same time live sustainably? Great post! Nice to see you posting back here. :)
Clay,
Glad I'm able to come back on occasion, though e-mail notification of comments on our blogs and of incoming PM's apparently hasn't started back up, and I'm getting way more traffic at OurSalon these days.

My point isn't about rampant consumerism in terms of waste. Having a newer car, for example, typically means getting better mileage. Living closer to where you work because you can afford the housing saves gas. Nutritious, fresh food is usually more expensive than packaged.
You ask why Wall Street and the business community tolerate the status quo; maybe it's because they're risk-averse, and that they're part of the status quo? Could it be because they're so focused on immediate profit and not the future, because their mindset is firmly rooted in the short term? They're the least likely group to push for change, is what I'm thinking although I admittedly know next to nothing about how this stuff works.
How you get from here to there is an interesting problem. The elite didn't get that way by carefully managing the economy.Their behavior is marked by a rapacious grabbing of all they could get and frustrating all attempts to stop them. It is the behavior of many species that ravages thir food supply and increases to the point of final collapse. Beyond that the planet is obviously not tolerating this policy of total grab and the atmosphere is just beginning to tip towards disaster.
The seemingly inherent policy of US world dominance through military adventure is sucking such great amounts of funding out of basic social essentials that, I suspect, collapse of the whole shebang is just a matter of time and not very much time at that.
I don't know Kosh. Like everything else that sounds good, once put in practice by hoarders and thieves, it loses a little glitter . But, what do I know, It might just work. I've heard worse.
I haven't actually made a suggestion
Interesting analysis, which I have not seen before. Thanks for this.
Next year will mark the centennial of Henry Ford's announcement of the $5 daily wage in his auto plants which. if the conventional wisdom is to believed, helped create the middle class that has now been hollowed out by the demise of manufacturing in the US. I was recently in New York City, which at one time was a largely middle-class city but now is apparently one of extremes. A short walk from the West Village to the Lower East Side opened my eyes and made me shut them again.
First off kosher I was shocked to actually get some notifications in my email. Re the income distribution, the Wall Street overlords are doing just fine as is. They're multi-multi-millionaires by the time they're in their 40s and don't much care of the welfare of the bottom 90%.

I saw an article sometime last year that laid out the income & wealth distributions of three countries - Sweden & the US being two. Sweden has about the most egalitarian distribution as the US was the worst of the countries in the example. Now about 2/3s of the world's countries have more equal distribution than the US so the other country must have been around the 33rd percentile.

Anyway, when shown a distribution graph without naming the countries, most respondents picked Sweden as their preferred society with the US finishing a dismal last. Wish I could find it again. I think most people remain unaware of just how unequal the society has become of the past generation or two.
I also just got e-mail notification. It looks like OS may finally be functioning fully.

Abra,
The article in the Chronicle of Higher Education was actually about what you're talking about: Ideal and perceived distributions rather than actual ones. No one has any idea that this has gotten this bad. I think most people would find my proposal above too polarized, not realizing how much less polarized it is than current American reality. I mean Really, would anyone predict that in order to get as high as 3%, the bottom quintile would have to have it's wealth multiplied by Thirty??

Ordinaryjoe,
I've been pushing Henry Ford's philosophy on this since I started blogging here. He seems to have been one of the only capitalists to have ever figured out that employees and customers are the same people, and that's why you need high wages: because you need your customers to have money.