The greatest challenge, in my mind, is rising inequality. In OECD countries, the gap between rich and poor is at its highest level in 30 years. Household debt has been rising, and youth are now at a greater risk of living in poverty than their older counterparts – OECD Project Leader Tracey Burns
Recent research found that in 1980, adjusted for inflation, the top 1 percent of the American economic bracket earned on average an annual income of $428,200— about 27 times more than those in the bottom half, whose annual income was just $16,000. By 2014, the average income of half of American adults remaining around the $16,000 it was over three decades prior, while members of the top 1 percent brought home, on average, $1,304,800 (or 81 times as much).
This statistic is indicative of a worrying trend in the U.S. economy: the rise of gross inequality and the pathway for the possible creation of two completely separate classes of Americans.
When the most important economist of the twentieth century, John Maynard Keynes, wrote Economic Possibilities for our Grandchildren, he conceived of the idea that our economic engine, in the long run, might ultimately solve some of the most serious problems facing mankind. He predicted, “that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is today… [and] it would not be foolish to contemplate the possibility of a far greater progress still.”
Though the world had just plunged into the despair of a Great Depression, Keynes was uncommonly optimistic. He saw the rapid improvement in technology as an opportunity to forever solve the problem of poverty. His dream echoes one of our own: a society where people, though perhaps unequal in total wealth, are rewarded for hard work and the distribution of good and services is divided such everyone is allowed the opportunity to live flourishing and meaningful lives.
Keynes thought that, once we had the technology to produce far more commodities than we could ever need for every single person on the planet, capitalism would no longer be needed. Cut-throat competition would become an antiquated economic system, getting in the way of distributing resources to those who need it most.
But, even then in 1930, Keynes saw many obstacles to solving the problem. He thought that “war and population growth” could stifle progress. He also prophetically warned of, “a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come–namely, technological unemployment.”
Technology, today, has already begun to eliminate more jobs than it creates. Nothing demonstrates this more clearly than comparing the big three automakers back in 1990 to the big three tech companies of today. In 1990 GM, Ford, and Chrysler brought in $36 billion in revenue and employed over one million workers. Today, Apple, Facebook, and Google bring in more than one trillion dollars in revenue yet they employ only 137,000 workers.
Renowned futurist and acclaimed cosmologist, Stephen Hawking recently warned that, with the rapid advances in computer technology and robotics, we will see economic inequalities continue to grow at alarming rates creating a plutocratic class of capitalists with unprecedented amounts of wealth. Hawking believes that, if machines do end up replacing human labor and begin producing all of our commodities, and we continue on the current route, we will eventually produce a sort of dystopia; society threatens to cleave in two: an ownership class, with immeasurable power and money, and the masses living in abject poverty.
And while Keynes had seen clearly the threat of technology to working class jobs, there was another threat to progress that he woefully misunderstood: the American culture of greed.
Keynes thought that, after we’ve made enough household resources for everyone, we would give up greed:
We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession -as distinguished from the love of money as a means to the enjoyments and realities of life -will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.
He thought that capitalist greed—accumulation of wealth solely for the sake of the social stature it comes with—would eventually die off as a social practice. He figured society would recognize capitalists as ‘disgusting’ and ‘semi-criminal,’ forcing them to go to psychologists to be cured of their need for wealth as if it were some sort of a mental illness. Obviously, this did not happen. Greed and the desire for wealth remain the ‘pseudo-moral principles’ they always were, ideas deeply ingrained into American social life. (The mantra: “Greed is good.”)
It’s tempting to even say that the culture of greed has perhaps become the preeminent social force in the U.S.
And, while it’s easy to scapegoat the ‘1%’ and ‘rich people’, the ‘rich’ in America are not a monolithic, unchanging class. The problem of greed that we are faced with is less of a personal, ethical one than it is a cultural one. As a society, we’ve learned to love money, to covet decadence, rich and poor alike, and have forgotten that there was once a time we were ashamed to admit it.
These days, networks such as CNN run frequent “news stories” with titles such as “Best cars for the super rich.” We have a plethora of television shows dedicated to people self-importantly showing off how wealthy they are (think: MTV’s “Cribs”, and VH1’s “The Fabulous Life Of…” or “Lifestyles of the Rich and Famous.”) Hollywood continually puts out movies glorifying the lifestyles of the elite. If the protagonist ends the film with more money than he or she started with—as in a heist film for instance—we usually consider that to be sufficiently ‘happy ending’ to the story.
There are hordes of motivational speakers, self-help books, and ‘life coaches’ that claim that they alone have the secret to being ‘successful’ in life. Every small movement in the stock market is carefully monitored by the news media. And in the world of faith, there is an entire class of ministers known as ‘prosperity preachers’; even God is not safe from the ethos of greed.
America elected Donald Trump, a president who ran on a platform of a single qualifying and (clearly) overriding factor: he’s rich.
Psychologists think that greed leads towards a lack of empathy and that wealth can make people generally more immoral. A study by Dr. Paul Piff at the University of California, Berkeley contends that wealthy people are more likely to lie, cheat, and break the law for personal gain without compunction. The study concluded, “upper-class individuals unethical tendencies are accounted for, in part, by their more favorable attitudes toward greed.” And studies show that wealthy people tend to give a smaller percentage of their wealth to charity than poor people do.
Economist Paul Krugman, writing in the New York Times, argues that “self-pity among the privileged has become acceptable, even fashionable,” and that “a belligerent sense of entitlement has taken hold.”
Even as the stock market reaches unprecedented heights, the middle class is dying and one out of every five children in America is living in poverty. On a global scale, the wealthiest one percent now have 65 times more wealth than the entire poorest half of the global population does.
The ultra-wealthy have approximately 32 trillion dollars (that we know about) stashed in offshore banks around the planet. That amount of money would almost be about enough to pay off the entire U.S. national debt and buy every good and service produced in the United States for an entire year.
Big majorities of the population, including poor people, still believe that it is still possible to: start out poor in this country, work hard, and become rich; many reject the view that it is the government’s job to narrow the income gap. The problem with this view of the ‘American Dream’ is that it is increasingly becoming detached from the grim reality.
Recently The Washington Post reported: “American Dream collapsing for young adults, study says, as odds plunge that children will earn more than their parents.” Estimates show, after adjusting for inflation, that only half the children born in the 1980s grew up to earn more than their parents did. That’s a serious drop from 92 percent of children born in 1940.
Perfect equality is certainly a moonshot and may not be a realistic (or even very desirable) goal. We may, as a society, believe that overall economic growth is more important than closing the gap between the rich and poor. We may hope for an economic ladder that rewards hard work and innovation—a smooth transition from lower-class to middle-class and from middle-class to wealth—and a social structure that recognizes merit. But when the odds are stacked against even those who are talented, take their education seriously, work hard, and play by the rules, when inequality is so stark that it stagnates overall growth and breeds widespread economic despair, we face a problem that even our more aspirational selves are hard pressed to accept.
It is easy to suppose that raising taxes on the rich would provide more money to help the poor. And it (mostly) would. But the problem facing the poor is not only that they have too little money, but too few skills and opportunities to advance themselves.
Making the poor more economically mobile has far less to do with taxing the rich than with finding and implementing ways to teach the poor marketable skills and encourage them to join the workforce. What is needed is improved education and access to skills with a more equitable system of education finance and admission. For those who continually toil in the workforce and still face stagnating wages, we need reforms of labor market institutions to boost workers’ bargaining power and agree on a higher federal minimum wage. We need corporate governance reforms and worker co-determination of the distribution of profits.
Leading economist Thomas Piketty perhaps said it best:
“If we wish to live in a fair and just society, we have to formulate more ambitious objectives which cover the distribution of income and wealth in its entirety and, consequently, the distribution of access to power and opportunities. Our ambition must be that of a society based on a fair return to labor, in other words, a fair wage and not simply a basic income. To move in the direction of a fair wage, we have to re-think a whole set of institutions and policies which interact with each other: these include public services, and in particular, education, labor law and organizations, and the tax system.”
This project is, ultimately, about finding ways to unite people against the social and economic forces would bitterly divide them, to cast light on their common humanity, and to have a conversation about what kind of future we want our grandchildren to share with each other. If we continue to exalt competitiveness as the highest virtue it will be all of our children who inevitably lose—left poorer for having missed out on a chance get commune with fellow Americans who are different from them, with whom their past, present, and future are, together, ultimately entwined.