The 1% dilemma
Joseph E. Stiglitz recent article in Vanity Fair argues about the increased inequality in wealth distribution among the people. He points out that America’s top 1% of the population controls a quarter of the national income. Talking in terms of wealth instead of income this number approaches the 40%. We will not argue about the perfect accuracy of these numbers, for there are several studies for example the Piketty and Saez estimate which points out that the top 1% income has increased of 18%, or the CBO which says the top 1% share was 17%. The main idea behind all these studies is that the richer are getting richer.
We might rejoice ourselves of this news, thinking that this increase in wealth for the top 1 percent benefits the rest of the population. But it would be misguided to think of it that way. The truth is that the richer are getting much richer, the poorer much poorer, and if that was not enough, the so beloved middle class is thinning out.
But maybe this is just a stage of capitalism, which well after a while mutate itself in a mutual benefit system. Smoothing the inequalities, and making the economy healthier than it is for the moment. For it is right to think, that the richer are the ones who have made it. These are the people who understand how to use in the most efficient way this economy. And under their command we will prosper towards an increasing richer world.
However, J. Stiglitz points out that due to several reasons this vision on the long run is erroneous.
First of all, the increase in wealth naturally brings a rise in political power. Everyone wants to do what`s good for himself, so it is comprehensive that with an increase in wealth, it is easier to back political parties, or to start a political career. These events lead to distortions such as preferential tax treatment or feeble antitrust laws, enabling the creation and the survival of monopolies. Which then increase the inequality of wealth between the population.
Second is the shrinking equality of opportunity. The diminish equality of opportunity is not just a social problem; it affects as well the economy. It undermines its efficiency by not using in the most productive way its assets, for example a lot of the most brilliant students go into finance, instead of entering fields which would lead to a healthier economy.
And third is the under-investment in collective action. This point is a major issue for Joseph Stiglitz, he reckons that the rich do not need to rely any more on the state for health purpose, educational wise, etc... Thus, the rich distance themselves from the common people. This leads to a divided country, where plutocratic elites govern and where the ordinary people are drowned in an aristocratic democracy.
These distortions in our economic system are not benefit for anyone, and tend to make the economy go towards an unhealthier and unstable phase. This will create a bigger gap between a few privileged persons and the common mass, whipping all hope of opportunity for the hard working people, making the economy less effective. I do not believe in the worldwide upraise which J. Stiglitz professes, but it is true to point out, that when a country’s population feels oppress, that inequalities persist, and that the illusion of opportunity lays on thin ice, the outcome is hardly joyful for the oppressors.
A radical change in method would hardly work, I rather think of a balancing in our present economic system, which would help correct the present flaws. This would be possible with the help of the State, establishing an equilibrated use of public investment, an effective tax system, and a stricter control over economic regulation.
Public investment will not be the same in all countries, in most developed countries the installation of high internet broadband across the country, the renovation of the high ways, etc… are an option. A higher heritage tax for the top 1 % would help cancel the continuation of an aristocratic capitalist system, and more power to state regulation offices would help make our world economy healthier and more productive on the long term.
Solomon Moos
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