I The Very 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.
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.
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 1950s:
Source: Thomas Piketty : Capital in the Twenty-First Century
For comparison, take a look at this table from the same book. Piketty’s deduction for the future on the right hand column is truly frightening:
It was not always like this. A reduction in inequality took place 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?
Beginning with 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.)
IV Why we Quakers are the best suited to take on the challenge of poverty in
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 poor and the dispossessed to be a credible and objective voice.
A short list of some of the best known Quaker businesses:
Huntley and Palmer’s
Imperial Oil (now Exxon)
Bryant & May Matches
Strawbridge & Clothier’s (now Macy’s)
John Hopkins University