INEQUALITY: WHAT CAN WE DO ABOUT IT?

There are many reasons to reduce inequality: If we reduce inequality of economic outcomes, then this contributes to securing the equality of opportunity that is a key feature of a modern democratic society.
Social evils, such as crime and ill-health, are attributed to the highly unequal nature of societies today. These provide an instrumental reason for seeking to achieve lower levels of poverty and inequality, as does the fear that extremes of inequality are incompatible with a functioning democracy.
There are those like me who believe that the present levels of economic inequality are intrinsically inconsistent with the conception of a good society.
How can a significant reduction in inequality be achieved? The aim is to outline ways forward, not the final destination. I have sought to describe an ultimately desirable state of our society; this is not an exercise in utopianism. Rather, it indicates directions of movements for those who are concerned with reducing inequality. And it starts with the current state of society. Woodrow Wilson in his first inaugural address said that “we shall deal with our economic system as it is and as it may be modified, not as it might be if we had a clean sheet of paper to write on.”
The steps to be taken depend on the reasons are so unequal and why inequality has risen in recent decades. Just why has there been an “Inequality Turn” in the years since 1980? In seeking to apply the tools of economics to answer this question, I have stressed the need to place distributional issues

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Annotated Bibliography

This list of books is a work-in-progress and is intended to be expanded with the help of its readers. We have read some of the books and merely dipped into others. If you, after reading it, wish to correct or expand our description of one of them, or add a new book to the list, we would be highly appreciative and quick to adopt your emendation.                                                                               The editors

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Books About the Very Rich

Liar’s Poker by Michael Lewis                                                                                                                                        A hilarious first-hand account of young men and women working on the trading floor of Salamon Brothers investment bank.

Flash Boys: A Wall Street Revolt by Michael Lewis                                                                                                An insider’s look at high-frequency trading where investment bankers take advantage of high speed computers to buy or sell a fraction of a second before their competitors.

The Big Short: Inside the Doomsday Machine by Michael Lewis                                                                    The inside story of the how the financial crisis of 2008 came about, from which the recent award-winning film was made.

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Meyers                                                                                                                                                                             The author shows how a network of exceedingly wealthy people with extreme libertarian views bankrolled a systematic, step-by-step plan to fundamentally alter the American political system.

Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else by Chrystia Freeland                                                                                            This book is an attempt to understand the changing shape of the world economy by looking at those at the very top: who they are, how they made their money, how they think and how they relate to the rest of us.

Winner-Take-All Politics: How Washington Made the Rich Richer – And Turned Its back on the Middle Class by Jacob S. Hacker & Paul Pierson                                                                                                     The good news reported by Hacker and Pierson is that American wealth disparities are not the residue of globalization or technology or anything else beyond our control, but of politics and policies which tilted toward the rich beginning in the 1970s and can, over time, be tilted back.

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Books About the Poor

The Other America: Poverty in the United States by Michael Harrington                                                     First published in 1962, this book is regarded as a classic work on poverty. “That the poor are invisible is one of the most important things about them. They are not simply neglected and forgotten as in the old rhetoric of reform; what is much worse, they are not seen,” wrote the author.

The American Way of Poverty: How the Other Half Still Lives by Sasha Abramsky                                                                                                                          When poverty flourishes as a direct result of decisions taken, or not taken, by political and economic leaders, and, either tacitly or explicitly, endorsed by large sectors of the voting population, then it acquires the rancid aroma of scandal, capable of eating away at the underpinnings of democratic life itself.

American Hunger by Eli Saslow                                                                                                                         Nearly 1 in 7 Americans – and almost a quarter of all children – now receive food stamps, the highest participation in the program’s history. Hunger remains the lasting scar of the recession.

$2.00 a Day: Living on Almost Nothing in America by Kathryn J. Edin                                                          In early 2011, 1.5 million households with roughly 3 million children were surviving on cash incomes of no more than $2.00 per person, per day in any particular month. That’s about one out of every twenty-five families with children in America.

 

 

Books about Our Situation: How We Got into it and How We Can Get Out

The Wealth of Nations by Adam Smith                                                                                                                   Where it all began. The book from which the founding fathers fashioned our economic system.

On Liberty by John Stuart Mill                                                                                                                                 Mill’s believed that true freedom would prevail only when an individuals’ drive to better his/her station could proceed without impeding others in their own efforts to do the same. This clearly-expressed belief has formed the basis for our free enterprise system.

Chicagonomics: The Evolution of Chicago Free Market Economics by Lanny Ebstein                                                                                                                            The University of Chicago, founded by John D. Rockerfeller, and its leading economist, Milton Friedman, are principal purveyors of laissez-faire capitalism as practiced today.

Capital in the Twenty-First Century by Thomas Picketty                                                                                                  The classic work on inequality by the Frenchman who discovered inequality. A Harvard University Press best-seller, highly readable.

 Inequality: What Can Be Done? By Anthony B. Atkinson                                                                        Atkinson, a knighted British economist, is one of the leading authorities on inequality. His book is a difficult read but I believe he has the answer; so be patient and read it.

 The Price of Inequality: How Today’s Divided Society Endangers Our Future by Joseph E. Stiglitz                                                                                             A highly readable exposition of our plight.

Saving Capitalism for the Many, Not the Few by Robert B. Reich                                                                             A myth-shattering breakdown of how the economic system that helped make America strong is now failing us and what it will take to fix it. Reich sees hope for reversing our slide toward inequality and diminished opportunity when we shore up the countervailing power of everyone else.

Five short articles in the Jan/Feb Issue of Foreign Affairs:

 Inequality and Modernization by Ronald Inglehart

 Inequality and Globalization: How the Rich Get Richer as the Poor Catch Up by François Bourguignon

 How To Create a Society of Equals: Overcoming Today’s Crisis of Inequality by Pierre Rosanvallon

 Equality and American Democracy : Why Politics Trumps Economics by Danielle Allen

 How to Spread the Wealth : Practical Policies for Reducing Inequality by Anthony B. Atkinson

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 Books About Quakers in Business

Meeting House and Counting House; The Quaker Merchants of Colonial Philadelphia 1682 – 1763 by Frederick B. Tolles                                                                                                                                                        Almost since the beginning Quakers, in both Britain and America, became successful businessmen, a tradition that descends almost to the present, and hence qualifies them to be leaders in the necessary reform of present harmful and malicious practices.

Quakers Living in the Lion’s Mouth: The Society of Friends in Northern Virginia 1730 – 1865 by A. Glen Crothers                                                                                                                                                              The difficulties of a group of Quakers to accommodate themselves to a slave-owning society, as an example to today’s Quakers attempting to survive the injustices of an abhorrent economic system.

Good Business Ethics at Work: Advices and Queries on Personal Standards of Conduct at Work


Today many people are dismayed by unethical business practices they see around them. They believe that business itself is unethical. This book is to act as a guide and an inspiration to running a better and ethical business for the benefit of all stakeholders.

 

Content of Our Blog on Inequality

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I The Super Rich

By 2007 the top 0.1% was 220 times larger than the average of the bottom 90%.

In 2010 CEOs’ compensation was 295 times that of typical workers after taxes.

Of all individuals with assets over $50 million, 42% (35,400) live in the U.S. followed by Europe with 28% (23,700).

44% of all UHNWIs (ultra-high net worth individuals with assets over $50 million) live in the U.S.; 28% (23,700) live in Europe; 15% (13,000) live in Asia/Pacific

Today’s super rich in America did not inherit wealth. They are working rich, a true meritocracy — Bill Gates, not the Duke of Bedford.

To break into the one percent you have to be earning $100,000 by the time you are 35. A strong early education is pretty much a precondition. In what field? Statistics: the ability to understand data is the most powerful skill of the 21st Century. College degree adds $1 million to a lifetime’s earnings.

“It’s a brutal world. You have to be really on the ball and fast to survive,” says the richest man in Brazil. To quote a young opponent of Occupy Wall Street, “We are Wall Street … We get up at 5 am and work until 10 pm or later … We eat what we kill.”

The average tenure of a Fortune 500 CEO has fallen from 9 1/2 years to 6 1/2 years in the last decade.

Steve Jobs may have been an egotistical jerk but we need men like him to succeed in business because of their sheer superiority to everyone else.

Today’s super-elite live longer even though they lead anxious, overworked and uncertain lives, due to our adoption of the winner-take-all philosophy.

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 II The Poor

Poor Americans are people who lack education and skills, who have bad health, poor housing, low levels of aspiration and high levels of mental distress. Each disability becomes more intense because it exists within a web of disabilities. If one problem is solved and others remain unchanged, there can be little gain.

In 2011 46 million Americans, nearly one in six, were living below the poverty line as defined by an annual income of $22,314 for a family of four.
The U.S. poverty gap, those living below the official poverty line, is 37%, one of the lowest rankings in the club of developed nations.

Almost a quarter of all children in the U.S. live in poverty.

Equal opportunity no longer exists in this country. The poor rarely have access to the best education. When they do, they emerge encumbered by an unsupportable debt.

Employers take advantage of the poor by requiring them to compete against each other for slimmer and slimmer wages. On top of which many employers steal from their employees’ wages by requiring additional hours without additional pay.

The poor are victimized in every possible way. Theirs is an indecent way of life:
•Lack of medical insurance forces them to resort to emergency room use. Consequently they remain in a state of poor health.
•Lending institutions charge high interest rates for short-term loans, then pile on late fees this until debt is unsupportable.
•Similarly home ownership is favorably tilted towards the banks, forcing so-called owners into foreclosure and homelessness.
•Parking fines are skewed against the poor car owner to support municipalities.
•Poor people’s right to vote is stripped from them by senseless restrictions.
•Our all-volunteer army is constituted of those who have little other recourse.

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III What can be done about it?

First, has it always been this way? No, hardly. Take a careful look at this chart of the top 1% share of wealth since the 1960s:

Source: Thomas Picketty and Emmanuel Saez, “Income Inequality in the United States,1913-1998”

It was not always like this. A reduction in inequality took place in after 1910 in the Progressive Era which followed the excesses of the Gilded Age. And again in 1940 after the Roaring Twenties, both as a consequence of war and policies adopted to cope with the shock of war.

In the immediate post-war decades, the welfare state kept up with the widening inequality of market incomes. It is since 1980, as a result of explicit policy decisions to cut back that it has failed to do so.

We are talking about the New Deal, the World War II policies of F.D.R., the strengthening of the labor unions. An important factor was collective bargaining by trade unions. Rising wages in the post war decade reduced inequality, as did the GI bill and a highly progressive tax system erected during World War II. Progressive taxation was at high level from 1959 to 1979. The top rate was 75%. Over the next thirty years it dropped to 39%.

The top 1% share in total personal wealth fell between 1950 and 1980. And rose again from 1980 to the 2000s. By 2007 the top 0.1% income was 220 times larger than the average of the bottom 90%. CEO’s compensation rose to 243 times that of the typical worker.

What is needed?
• A fairer distribution of the cost of the operation of the government and the raising of revenues to finance redistribution.
•A maximum fair marginal rate (what people keep as a result of their extra effort) should be the same for everybody. The marginal rate at the top of income distribution should be the same as at the bottom.

Policies are available that would simultaneously increase growth and equality, creating a shared prosperity. The question is more one of politics than of economics. Japan has, since 1989, managed to avoid high levels of unemployment and limit increases in inequality that have marked others. Brazil, one of the up-and coming world economies, has seen a reduction of inequality as a result of investments in education and programs to protect poor children.

When did we go astray?
•The election of President Reagan.
•The deregulation of the financial sector.
•The reduction of the progressive tax system. the top rate of 70% was lowered to 28%, then raised by Clinton to 39.6% (1993), then lowered by Bush to 35%.
•Deregulation led to excessive financialization of the economy. 40% of all profits went to the financial sector. The top 1% earned more than half of the capital gains taxes, lowered by Clinton to 20% (1997) and by Bush to 15%.

The far greater inequality in this country in comparison to all others comes out of distinctively American policies:
•A less progressive tax system.
•Weaker safety nets and social protection systems.
•Educational, economic and social attainments are more closely linked to those of parents. A stronger link existed between parental and children’s socio-emotional outcomes in the U.S. than in any other country investigated including old Europe.
•A larger role for banks due to deregulation.

Prior to Reagan, matters in this country were improving. Our economy, our democracy, our society would all benefit from reducing inequality of opportunity. House divided cannot stand.

Instead of tempering the excesses of the market in America today, the two (government and Wall Street) have been working together to increase income and wealth disparities.

If a country doesn’t give its population the education they need to earn a decent living, if employers don’t pay workers a decent wage , if society provides so little opportunity many people become alienated, that society and its economy won’t work well.

Our system can’t work if there isn’t a deeper sense of community. A dual economy, two societies living side by side, hardly imagining what life is like for the other, is what we have today. “That the poor are invisible is one of the most egregious things about them. They are not simply neglected and forgotten as in the old rhetoric of reform, but what is much worse, they are not seen.” (Michael Harrington in The Other America.)

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        IV Why we Quakers are best suited to take on the poverty in the U.S.

The real solution to the inequality crisis lies in focusing on community rather than simply on self-interest.

The Quakers are a small sect who have produced a disproportionate number of business men. Quakers were traditionally barred from public and civic offices along with other non-conformists. Neither medicine nor law was open to them as you had to be a practicing Anglican to take a degree at the university. So they gravitated to business and commerce.

Many went into the cocoa business, which they saw as a desirable alternative to alcohol, and became part of the temperance movement.

They were among the first to set a firm price on goods which gave them a competitive advantage as customers didn’t feel they would get ripped off.

Quaker confectioners were seen as trustworthy with good and safe factory conditions.

Quakers religious ethos and self reliance make them natural capitalists. Non-conformism puts the burden of responsibility for salvation on the individual.

The testimony of truth and integrity gave rise to a refusal to swear oaths which eventually gave Quakers a reputation for being honest business men and led them to establish some of the most successful enterprises of the 18th and 19th centuries.

Simplicity lede them to live and dress plainly without ostentation and to reject excessive consumerism and the unsustainable use of natural resources.

Ernest Bader, a Quaker and head of a chemical company, Scott Bader Commonwealth, gave his very successful business to his employees in the early 1950s.

The Quakers are ideally suited to make the case against inequality. Of all the religious denominations they are in the strongest position. There is a solid tradition of successful and trustworthy middle-class business men and women among us. We are an integral part of the capitalist system, neither too rich nor too poor, ideally located to point out its faults and the necessary corrections. The Episcopal Church within which I was raised is too closely associated with the moneyed class to be useful. The Catholic Church is too embedded among the the poor and the dispossessed to be a credible and objective voice.

A short list of some of the best known Quaker businesses:
Cadbury’s
Rowntrees
Fry’s
Carr’s Biscuits
Huntley and Palmer’s
Barclay’s Bank
Bethlehem Steel
LLoyd’s Bank
ImperialOil (now Exxon)
Bryant & May Matches
Strawbridge & Clothier’s (now Macy’s)
Sony
Waterford Crystal
Cornell University
John Hopkins University

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John Cadbury (1801-1889)

Why Giving Back is Not Enough

Why Giving Back Isn’t Enough
By Darren Walker
During this season of giving, I will join millions of Americans in volunteering to feed the homeless, contributing to clothing drives and donating to poverty-fighting charities. Yet I worry that through these acts of kindness, I absolve myself, of asking deeper questions about injustice and inequality. We Americans are a remarkably big-hearted people, but I believe the purpose of our philanthropy must not only be generosity, but justice.
The origins, of formal philanthropy date from at least 1889, when the American industrialist Andrew Carnegie composed his “Gospel of Wealth.” It was the peak of the Gilded Age, when inequality had reached extreme levels. Carnegie argued, as many still do, that inequality is an unavoidable condition of the free-market system — and that it was even desirable, if the promise of wealth incentivized hard work. Philanthropy, he believed, would ease the pressure of rising social anxiety that followed from inequality — ameliorating the afflictions of the market without altering the market system itself.
During the 20 th century, iconic Ameri-can families — Gates, Knight, MacAr-thur, Mellon, Rockefeller—followed Carnegie’s lead, endowing and expanding foundations that built schools and libraries, developed vaccines, revolutionized agriculture and advanced human freedom. My own organization, the Ford Foundation, has given billions to support everything from public television in the United States to microlending in Bangladesh.
And yet, for all the advances made in the last century, society’s challenges may have outpaced philanthropy’s resources. Today, the cumulative wealth of the most generous donors seems a pittance compared with the world’s trillions of dollars’ worth of need. Generosity is no longer enough.
The world may need a reimagined charter of philanthropy — a “Gospel of Wealth” for the 21st century — that serves not just American philanthropists, but the vast array of new donors emerging around the world.
This new gospel might begin where the previous one fell short: addressing the underlying causes that perpetuate human suffering. In other words, philanthropy can no longer grapple simply with what is happening in the world, but also ‘with how and why.
Feeding the hungry is among our society’s most fundamental obligations, but we should also question why our neighbors are without, nutritious food to eat Housing the homeless is an imperative, but we should also question why our housing markets are so distorted. As a nation, we need more hivestmentin education, but not without questioning educational disparities based on race, class and geography.
Our self-awareness — our humility — shouldn’t be limited to examining the problems. It should include the. structures of solutions, like giving itself. As the Rev. Dr. Martin Luther King Jr. said not long before his assassination, “Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.” It is, after all, an offspring of the free market; it is enabled by returns on capital.
And yet, too often, we have declined to question our own circumstances: a system that produces vast differences in privilege, and then tasks tire most privileged with improving the system.
Whatever our intentions, the-‘truth is that we can inadvertently widen inequality in the course of making money, even though we claim to support equality and justice when giving it away. And while our end-of-year giving might support Worthy organizations, we must also ask if these financial donations contribute to larger social change.
In other words, “giving back” is necessary, but not sufficient. We should seek to bring about lasting, systemic change, even if that change might adversely affect us. We must bend each act of generosity toward justice
We, as foundations and individuals, should fund people, their ideas and organizations that are capable of addressing deep-rooted injustice. We should ensure that the voices of those most affected by injustice—women, racial minorities, the poor, religious and ethnic minorities and L.G.B.T. individuals — help decide where and what philanthropy puts money behind, not in simply receiving whatever philanthropy decides to give them.
We can wield data and technology, see through a diversity of viewpoints, and draw upon a century of philanthropy’s success and failure to identify and address the barriers holding people back.
This modern giving charter should look different in different settings. At the Ford Foundation, our efforts will focus oninequality: not just wealth disparities, but injustices in politics, culture and society that compound inequality and limit opportunity. We will ask questions like, are we hearing — and heeding — those who understand the problems best? What can we do to leverage our privilege to disrupt the drivers of inequality?
Others in philanthropy will take differ
ent, but no less effective, approaches.
Many already are answering King’s call,
working intensely toward a world that
renders philanthropy unnecessary. Ulti
mately, we each must do Our part to en
sure that giving not only makes us feel
better, but also makes our society more
just.
Darren Walker is the president of the Ford Foundation.