Top 1% now owns more of the wealth than the remaining 99%
theguardian.com
theguardian.com
How does this make the slightest bit of sense? Counting property but ignoring debt is going to exaggerate the wealth of many Americans by an order of magnitude, for example. Beyond that, one person's debt is another person's investment, so you're double counting all that money.
To offer a slightly extreme example, I'd consider a recently minted surgeon with $300k in loans, a mortgage, and a $500k base salary to be considerably wealthier than the debt-free small-town auto mechanic making $35k.
The fact that not everybody can go get an $800,000 mortgage is pretty much accounted for by the fact that you have to put down some sort of down payment, which translates into equity in the house. If you have an $800,000 mortgage then the purchase price for the house was probably $1 million or more, and if the value has held then that's at least $200,000 in net worth.
It's true that the owner stands to profit from any gains the price sees in the real estate market, but they also stand to suffer from any losses.
It really just makes no sense to count a house's value but not the (negative) value of the mortgage on it. For an extreme case in the other direction, someone with a $1 million house that has a $1 million mortgage on it (because, for example, they bought at a higher price and then prices fell) and who can barely afford their payments (perhaps because they took part in mortgage fraud, or just lost their job) should not be counted as wealthier than somebody with a $100,000 house and no debt.
Fortunately, it looks like the actual study does count debt and the wording in the article was just horrible.
Is this your perception or is it reality? If your hypothetical surgeon overleverages himself to the point where he has less on paper than the auto mechanic, his financial position sounds very brittle. What if there is a large unexpected expense? Like $50k to clean up a mercury spill...
I actually crunched some numbers so you can see exactly what I mean. The surgeon's going to make about $26,000 per month after taxes in Texas (picked somewhat arbitrarily as that's where I live). They're going to pay about $3400/month in loans. And if they got an $800k mortgage, their mortgage payment is going to be something like $4800/month.
Net income: $17800 (i.e., almost 4x their mortgage payment).
Now for the mechanic. Net income: $2400/month. Let's say he gets a $100k home. His payment is about $540/month. So he's got $1860/month left over (i.e., about 3.4 times his mortgage payment).
He's actually less equipped to handle any sort of financial duress than the surgeon, all while living a much more constrained and frugal lifestyle and occupying a house with literally one tenth of the value. The mechanic's situation is actually vastly more brittle than the surgeon's, as on top of all of this the surgeon also has drastically better job security.
Now, sure, you can cook up an example where the surgeon is stretched too thin (e.g., $3-4M home instead of a $1M home, or a collection of exotic sports cars, etc.). However, the fact that the surgeon was even capable of making those unwise purchases in the first place means that they cannot be lumped into the same financial category as the mechanic.
Once debts have been subtracted, a person needs only USD 3,210 to be among the wealthiest
half of world citizens in mid-2015. However, USD 68,800 is required to be a member of the
top 10% of global wealth holders, and USD 759,900 to belong to the top 1%.
See page 11 from: https://publications.credit-suisse.com/tasks/render/file/?fi...
Poor people are not allowed to go into all that much debt. If you have somebody who is $2M in debt, chances are they are wealthy and were only allowed to accumulate all that much debt because of their influence and reputation or some other kind of leverage.
The average graduate who is $40K to $50K is not actually poorer than the homeless beggar who is in the green. They don't live as poor of a life and they have the potential to earn for more.
Sure, that student isn't poorer than a beggar. But they are poorer than their classmate who has the same degree, same skills, and same financial situation in all other respects, but has no debt.
Somebody with a $500,000 house and a $400,000 mortgage and no savings isn't five times wealthier than somebody living an apartment with $100,000 in savings.
I don't think taxes paint the full picture. For the past 7 years or so central banks in the US, Japan, and UK (and recently the European Central Bank) have embarked on aggressive quantitative easing programs, printing and injecting into the economy massive amounts of new cash, propping up banks and stock markets. The first layer that this cash passes through is filled with wealthy folks (i.e. bankers and those with lots of investments). The people at the lower end of the wealth spectrum benefit indirectly through living in an economy which survived and having their investment-backed retirement/pension packages in-tact (for the most part). Thus quantitative easing is fundamentally a regressive stimulus package, with most of the new cash going into the pockets of the most wealthy, and the least wealthy getting table scraps by comparison.
Quantitative easing may have spared us a collapsed global economy, but the effects are increasing wealth inequality. I don't know what the best solution is, and in fact I don't think anybody does. Everyone is kinda shooting in the dark here.
Prices between country are adjusted to Power parity purchases (PPP)
The recipe for greater wealth equality is to subsidize mortgages and restrict new construction, so that everybody's house values move up a notch, which makes everyone feel a little bit better about themselves.
I assume this suggestion was made "A Modest Proposal"-style, right?
Those are the policies we've been following, and they cause great harm. It's already nearly impossible to buy a home in many American cities if you're not upper middle class at a minimum, and even then you're paying an unsustainable portion of your income. Restricting construction further and subsidizing mortgages (so that home prices simply float up to their current value + subsidy) will put homes even farther out of reach.
This is a recipe for increasing wealth equality, an abstract statistical value the press tells us we should be outraged about.
Wealth distribution within a country is an interesting thing to look at, but I think at the global level it's not nearly as compelling as, say, wealth distribution among countries.
Suppose A has 50$, B has 30$ and C has -20$ (owes a creditor). A seems to control ~82% of all the wealth, but B is actually in much better shape than that number suggests.
https://chrome.google.com/webstore/detail/%E2%9A%A1%EF%B8%8F...
Does seem odd me to point that out on a Guardian link - it's never struck me as particularly slow (on mobile or otherwise).
Top 1% singers better than the remaining 99%.
Top 1% sprinters better than the remaining 99%.
Top 1% producers better than the remaining 99%.
Where's the surprise here? It's a variation of Sturgeon's Law.
EDIT: the top 1% of wealthy americans are better producers than everyone else, yes. They are not better people than everyone else, no. How is this so hard to understand to HN-level people?
And another point: I don't think all of Sam Walton's kids are even in the top 1% of producers even though they are at the very tip-top of wealth owners.
And the top 1% of owners don't have the same wealth as the other 99% in other countries, or even in this country in the past. It's not a normal thing at all.
The happiest countries in the world are those where income equality between the residents of the country is more evenly distributed, people want fairness. The greater concentration of wealth to fewer people and businesses will likely in the near future cause further social upheaval amongst the masses, i.e. those that consider the current system unfair.
It's not something that you can just let sit, it's going to get bloody if it is not addressed soon. We have seen this everytime in history. It is not possible to sustain such levels of income inequality.
Democracy exists for stability on national and international levels. Everything else is just a side effect.
You comment just funny since it's the perfect billionaire's first world problem.
To your point, who are the very wealthy to decide who needs what all on their lonesome?
Gently, there. There's a big difference in practical outcome between "we've all decided that we need fairer rules" and "we've all decided that we need your stuff".
That's part of why the US isn't actually a democracy. There is wisdom in limiting people's ability to "decide what we all need".
"Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism."
http://scholar.princeton.edu/sites/default/files/mgilens/fil...
There will still be a hierarchy and it's not a bad thing but we need to reduce the leverage and power being concentrated in a few hands that have the potential to change everyone else's lives (for better or worse).
I'm a big supporter of capitalism and believe in everyone being able to do what they want and to succeed to whatever levels they can, but we need to have checks and balances when it comes to how wealth can affect the rest of society.
It's an extraordinary proposition that sifting more money to the top instead of paying people fair wages would somehow help the economy.
Turning your example on the head: what if making the distribution more equal would in the long term give all brackets more money, even the very rich ones? Would you then support distributing the wealth for the common good?
Debt (when used prudently) is a useful financial instrument and an enabler. In low-rate environment are we really that surprised it's being used extensively?
Not surprising, of course. I think the difference is, central banks expected the ZIRP to be a chainsaw used to clear enough space for a village, not tear down the entire forest.
>The original report states: Once debts have been subtracted, a person needs only USD 3,210 to be among the wealthiest half of world citizens in mid-2015. However, USD 68,800 is required to be a member of the top 10% of global wealth holders, and USD 759,900 to belong to the top 1%. Which is more clearly stated and uses the same numbers as the Guardian article. https://news.ycombinator.com/item?id=10493143
"Economy" is the measurement of the movement of money.
Rich people hoarding money slows the movement, thereby slows the economy.
Any one wanting to help the economy would logically oppose the ever growing inequity.
"We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good."
There is a vast amount of evidence. For example, much of it is cited in the famous book "The Spirit Level".
The real problem might just as well be obesity, teenage births, imprisonment, educational performance or drug use.
If inequality is just one of the symptoms and not the real devil, then eradicating inequality would probably be rather destructive. Just like eradicating drug use seems to be destructive, because the underlying cause is mental problems.
Taking a quick glance at the book, they are over 400 such references made in the text.
Furthermore, rich people are powerful and influential. As a result, rules and regulations and choices and decisions are made for them first, then maybe the poor. When it should be the other way around, also known as the [1] option for the poor. Yes, this negatively effects society.
Let's take an extreme case: every person in the world has their wealth increased by 10% over what they have today, except for one person who has his wealth increased by $1 quadrillion.
Everybody is better off, right? Except that wealthy person is going to rule the world, and stack the deck to help himself, and there's nothing that says he's only going to do it in such a way that everybody else keeps increasing their wealth too, or even keeps their wealth at all.
We can see this at work in the US where the political process has become pretty corrupted, to the point that half the politicians act like wealthy people in the US suffer under a tremendously high tax burden when they actually pay less as a percentage than the average person, and the other half pays lip service to getting the wealthy to pay more but only proposes weak measures that never go anywhere, and where systematic lawbreaking in the financial sector that led to a gigantic financial crises went completely unpunished, except for the one guy who made the mistake of ripping off wealthy people.
They are not perfectly linked, but I think they tend to come together. If someone has a lot of economic power, which they can use to get a bunch of people to give them things or do things for them, that's an avenue to political power. If someone has a lot of political power, they can leverage that to get economic power.
Your statement about how the original US government was closer to this than today doesn't sound right to me. Weren't only people^H^H^H^H^H^men^H^H^Hwhite men who owned land allowed to vote?
The Scandinavian countries re-distribute their wealth quite heavily and yet are still some of the richest countries in the world. I.e. everyone is better off.
Germany has a pretty big welfare state and are 80million people and they even had to take on eastern germany.
Of course, Norway has oil, so selling it gives money. And Sweden has lots of old money, from the time when ball bearings were selling for good money while everyone else was at war, but it has fallen from the top place of the wealthiest nations where it was decades ago. Finland, on the other hand, is in deep trouble with the same model.
Finland has slow growth but still doing relatively well. And low (by EU standards) debt.
And debt is not yet high but the debt growth is really really bad.
I don't think there is any civilized government that does not perform redistribution. Taxes are a form of redistribution. Any government functions such as free schooling, are a one way to redistribute the wealth back to society.
Political institutions can and do decay but not all of them so this is not a general rule. As an example, Britain, Sweden, Switzerland have quite old governmemts and they are among the most prosperous countries in the world. When speaking of redistribution of wealth sweden has taken it as far as it can in economic terms and they seem to be going strong ahead - it seems they balance social and business needs quite well.
http://www.politico.com/magazine/story/2014/06/the-pitchfork...
But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.
And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.
If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.
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The thing about us businesspeople is that we love our customers rich and our employees poor. So for as long as there has been capitalism, capitalists have said the same thing about any effort to raise wages. We’ve had 75 years of complaints from big business—when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened. In fact, the data show that when workers are better treated, business gets better.
Just one point: the minimum wage ensures that the disabled, the incompetent, the inexperienced, the frankly semi-useless, the old and a few other losers - anyone beaten to the post by a smart productive young blade - will never ever get a job but can be thankful to subsist, courtesy of the taxpayer, until he or she fades away.
Wealth and Democracy: A Political History of the American Rich http://www.amazon.com/Wealth-Democracy-Political-History-Ame...
> Who cares about socialist propaganda like this?
Discussing inequality in society isn't "socialist propaganda".
> There is no evidence that "equality" in the distribution of wealth is good for middle class and low income persons.
https://www.americanprogress.org/wp-content/uploads/2013/12/...
> The evidence suggests that the channel through which inequality hurts growth is asset bubbles and financial-market instability, so policies that impose adequate oversight in that sector also flow from this research
http://www.oecd.org/social/Focus-Inequality-and-Growth-2014....
> The evidence is strongly in favour of one particular theory for how inequality affects growth: by hindering human capital accumulation income inequality undermines education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.
There is evidence that the current level of inequality contributes to toxic asset bubbles and the quality of human labor available to industry. I'm not sure how improving both those situations are "bad" for the average person?
> For example, if the distribution were more equal on a relative basis, but all brackets had less money than before, is that supposed to be an improvement?
Yeah, that isn't how it works. Hint: The biggest gains are via education subsidization & shifting the tax burden.
Hell, it can be done with just shifting money from Defense -> Education and removing clauses in the tax code that primarily benefit those making 6 figures. [i.e. Capital gains tricks for multiple residences, mortgage interest exemptions]
No one says "get rid of inequality at any cost" but rather "How can we improve growth by reducing inequality?"
http://www.oecd.org/eco/growth/49421421.pdf
> Reforms to increase human capital are important for improving living standards, and are also likely to reduce labour income inequality. New analysis shows that a rise in the share of workers with upper secondary education is associated with a decline in labour earnings inequality (Fournier and Koske, 2012). Examples of policy initiatives to raise upper secondary education attainment include inter alia enhanced accountability for schools, better teacher recruitment and training, and special support for pupils at risk of dropping out.
> Raising social mobility by making educational outcomes less dependent on personal and social circumstances should boost GDP per capita by enhancing entrepreneurship, the overall quality and allocation of human capital and, ultimately, productivity.
> Taxes do not only affect the distribution of income; they also affect GDP per capita by influencing labour use and productivity, or both (Johansson et al., 2008). Some tax reforms appear to be win-win options – improving growth prospects while narrowing the distribution of income. Many, however, may imply trade-offs between these objectives. Following the same approach as for labour market, product market and education policies discussed above (Table 5.2), these complementarities and trade-offs are drawn out in
> Reduce distortions in taxing capital income. Tax relief – such as reduced taxation for capital gains from the sale of a principal or secondary residence – often distorts resource allocation without boosting aggregate savings and growth, and benefits mainly high-income groups. Specific tax relief may also provide tax avoidance instruments for top-income earners. In particular, there is little justification for tax breaks for stock options and carried interest. Raising such taxes would increase equity and allow a growth-enhancing cut in marginal labour income tax rates.
> Re-assess tax expenditures that benefit mainly high-income groups (e.g. tax relief on mortgage interest). Cutting back such tax expenditures is likely to be beneficial both for long-term GDP per capita, allowing a reduction in marginal tax rates, and for a more equitable distribution of income. Lowering tax expenditures would also reduce the complexity of the tax system, and thus tax compliance and collection costs.
A San Franciscan has a cost of living index that is ten times higher than a resident of Flint Michigan for the same standard of living. Read that statement twice, then realize that the San Franciscan _must_ pay more than twice as much in taxes as a percentage of income just to afford the _same_ standard of living. The hypothetical San Franciscan working an identical job as the Michiganite will not be able to afford the same standard of living. In what world is this "equality"? This is the problem with drawing arbitrary numbers out of thin air and labeling one number "rich" and one number "poor".
Granted, all things diminish on a relative scale in the extremes. A billionaire is rich in San Franciso or Flint Michigan. But how about a millionaire? Who gets to decide to draw the line between them, the citizens of Flint or the citizens of San Francisco! If you just said popular vote you fail. The problem is again with scale, you can't have millions of people voting on the fate of a minority.
This is why a centralized Federal government will never be equitable or fair. The Federal must necessarily be subordinate to the State, and the State subordinate to the municipality.