85 People Own Half of the World’s Wealth!

"Princes or lords may flourish, or may fade;
A breath can make them, as a breath has made;
But a bold peasantry, their country's pride,
When once destroy'd, can never be supplied."
             Oliver Goldsmith 1728-1774 The Deserted Village

There has been great concern among lots of Americans that the government’s present course of redistribution of wealth, intended to reduce inequality in the country, will harm our nation’s financial status and growth direction. The fear is that taking money away from the rich will impair their ability to invest money and will impede real job creation. To a considerable extent, this fear has some truth to it.

On the one hand, it is common knowledge that inequality in world wealth is at an all-time high. There is also a fear that inequality is bad for our society.

Nicholas Kristof writing in the New York Times on 7/23/14 (An Idiot’s Guide to Inequality) http://nyti.ms/1rMPSuh (control+click) reports that the top 1% of people in the income distribution of our country now own more wealth than the bottom 90 percent. As a result of this maldistribution of wealth, it was found that in 2010, 93% of the increased wealth created in the United States went to the top 1% of our population who live in the upper economic levels of society.

 Oxfam estimates that 85 world citizens own as much as the bottom half of the world’s population! (Oxfam is an international confederation of 17 organizations working in approximately 94 countries worldwide to find solutions to poverty.)

There is a tentative agreement in the literature written by economists about growth that inequality can undermine progress in health and education, causing investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of major shocks, and thus that it tends to reduce the pace and durability of growth. Markedly unequal distribution of wealth also causes the wealthy class to seek rents instead of actually contributing to real growth (“Rent-seeking” is the practice of using wealth to create more wealth, without actually contributing to the stock of goods and services in the country.) This practice diminishes economic growth in the country.
 
It has long been known that lower levels of economic inequality are correlated with faster and more durable growth. So…governmental gurus who run the Treasury Department and the Federal Reserve always seek ways to redistribute wealth through fiscal and monetary means.

Modern-day politicians with a “progressive” viewpoint think that redistributing wealth by increasing taxes and government spending on roads, dams, and other infrastructure will help the underclass by giving them more money and, thus, stimulate growth. The problem with this idea is that the jobs created by government spending on such things do not last; and, in the end, they do not help with national economic growth. Only jobs created in the private sector will give long-term economic growth.

Writers at the International Monetary Fund point out that inequality may impede growth at least in part because it calls forth efforts to redistribute through the fiscal system, efforts that themselves may undermine growth. In such a situation, even if inequality is bad for growth, taxes and transfers may be precisely the wrong remedy. http://bit.ly/1dzoFjl (control+click)

So much for the bad news. What is the answer to the inequality/slow-growth problem? The answer to this is very hard to say; and economists have wrestled with this question for a long time. It is the considered opinion of several that the answer does not lie in more governmental redistribution through the monetary and fiscal system. The answer probably lies in efforts to equalize opportunity rather than income.

Rather than dumping money into more roads and dams, I believe that the United States would do better to put more money into equalizing educational opportunities for our people. It is a fact that in America, the sharper edge of public funding for education still goes to the rich rather than to the poor. If our people would have less inequality in financial affairs, they must have less inequality in opportunity to advance themselves. http://nyti.ms/1nDoyvC  (control+click) That means they must be able to compete better as a result of better education.