Why Extreme Inequality Matters
Most Americans, if pressed, would probably readily agree that it’s not fair that a small elite controls so much of our nation’s wealth. But few Americans understand the everyday costs, big and small, that extreme income concentration exacts from the rest of us.
Our Ultra-Rich Burden: The Triple Whammy
The intense concentration of wealth and income at the top of the economic ladder creates an enormous dead weight that presses down on society — and everyone in it. That dead weight crushes us three different ways.
One: The enormous rewards that flow to the summits of Corporate America and Wall Street create incentives for economic behaviors that make life miserable for average Americans.
. . . the less job security for workers.
. . . the less leisure time for average Americans.
. . . the more workaholism in our workplaces.
. . . the more stressful the work environment.
. . . the less the retirement security.
. . . the higher credit card interest rates go.
. . . the worse customer service.
. . . the less available home insurance gets.
. . . the fewer good character actors.
. . . the less comfortable airplane travel.
. . . the less cool our society’s high-tech.
. . . the less pleasure that sports fans take from watching sports.
Two: The presence of extremely wealthy people in our midst unleashes social dynamics that frustrate the hopes and dreams of average Americans and aggravate the stresses of everyday life.
. . . the longer Americans spend commuting to work.
. . . the less accessible art museums become.
. . . the harder to find a parking space.
. . . the shorter the life-expectancy, for everybody.
. . . the more stressful applying for and attending college becomes.
. . . the more overpriced our housing.
. . . the noisier our neighborhoods.
. . . the less compassionate our communities.
. . . the less inviting the great outdoors.
. . . the more coins that toll booths demand.
. . . the wider our waistbands.
. . . the less the sum total of our happiness.
Three: The political power of the extremely wealthy undermines society’s capacity to overcome modern life’s core problems and challenges.
. . . the more corruption in the political process.
. . . the less robust a nation’s free press.
. . . the less attractive the helping professions become.
. . . the more resources squandered on guarding wealth..
. . . the harder to confront entrenched special interests.
. . . the less public interest in politics.
. . . the lower the voter turnout in elections.
. . . the less likely politics will seek solutions outside the box.
. . . the more frayed the social fabric.
. . . the less job security for workers.
Layoffs, new research documents, have become irresistibly lucrative for the top execs who make them. The research, published in the Financial Review, examined 229 corporate layoffs that took place in the 1990s and compared the resulting compensation for the CEOs at these layoff-happy companies with CEO pay at companies that had taken no layoff action.
The investigators behind the new study — Jeffrey Brookman and Saeyoung Chang of the University of Nevada, Las Vegas and Craig Rennie of the Sam M. Walton College of Business at the University of Arkansas — found that total pay for layoff-happy CEOs ran 9.3 percent higher, in the layoff year, than the pay for CEOs in non-layoff companies.
But the real gains for layoff company CEOs came in succeeding years. The year after slicing their workforces, layoff company CEOs took home 22.8 percent more pay than their full-employment counterparts. Two years after the layoffs, total CEO pay in layoff companies stood 22.5 percent higher than CEO pay in non-layoff companies — and 41.3 percent higher in the years after that.
The compensation upside for CEO downsizers, the researchers conclude, appears to be “permanent.”
More: Executive Excess 2003, from the Institute for Policy Studies and United for a Fair Economy
. . . the less leisure time for average Americans.
Americans with full-time jobs now average 3.9 weeks a year in vacation and paid holidays combined, notes a statistical round-up from the Economic Policy Institute.
Workers in Germany, Italy, Austria, Denmark, and the Netherlands average nearly twice as much paid time off a year. In Ireland, the European country with the least vacation and holiday time, full-time workers still have nearly two more paid weeks off from work than American full-time workers.
Time off from work stats offer one of the best yardsticks for measuring power dynamics within a society. In societies where wealth — and power — concentrate at the top, average working people invariably have less political and economic clout, less of an ability to win time off, either via legislation or at the bargaining table.
In the United States, the developed world’s most unequal nation, no laws guarantee full-time workers a minimum number of vacation weeks a year. In Europe, Germany, Italy, the UK, Belgium, Finland, Ireland, Norway, Portugal, Spain, and the Netherlands, statutes guarantee full-time workers at least four vacation weeks a year.
France, Denmark, Austria, and Sweden guarantee full-time workers, by law, at least five weeks vacation.
In societies that encourage wealth concentration at the top, notes research published in the Economic Journal, average people work longer hours than their counterparts in more equal nations. Workers in the United States, the developed world’s most unequal nation, worked 450 more hours on average in 2000 than workers in the substantially more equal nations of Sweden, Germany, and Netherlands. Samuel Bowles and Yongjin Park, authors of this new research, trace rat-race pressures to the “desire to emulate” the consumption standards set by the awesomely affluent.
Two-parent Ohio families, adds a 2007 study from Policy Matters Ohio, are working 17 percent more hours — over 12 extra weeks a work a year — than they did back in 1979. But they don’t have much to show for that labor. Incomes for average Ohio families — the middle 20 percent of the state’s households — have dipped, after inflation, from $37,489 to $37,400 since 1988.
Over those same years, the average incomes of Ohio’s wealthiest 1 percent have soared over 40 percent, to $986,000.
. . . the more workaholism in our workplaces.
Some Americans, researchers note, work long hours because their low-wage jobs don’t pay enough to cover their rent. But many others who work beastly hours face no such economic hammer. These Americans can earn ample incomes without working long hours. Yet they work endlessly anyway, in the process shortchanging family — and even their health.
Psychologists and sociologists have been energetically debating this workaholic phenomenon. Now two economists have joined the fray, with a provocative paper that offers a surprising new antidote to workaholism. Our society could place a significant damper on workaholism, argue Daniel Hamermesh from the University of Texas and Joel Slemrod from the University of Michigan, if we chose to set higher tax rates on high incomes.
Our society, the two economists observe in The Economics of Workaholism: We Should Not Have Worked on This Paper, already considers higher taxes a legitimate weapon against socially noxious addictions. We impose high excise taxes on cigarettes, for instance, to discourage smoking.
These high taxes on cigarettes tend to be regressive. That is, they fall disproportionately on lower-income people, who tend to smoke at higher rates. But ”workaholics” tend to come disproportionately from the ranks of highly compensated income-earners.
Given this addiction pattern, Hamermesh and Slemrod contend, the “appropriate corrective tax” for workaholism needs to be highly progressive — and raise the tax burden not on lower-income people, as cigarette taxes do, but on people with our highest incomes.
Workaholics, Hamermesh and Slemrod go on to explain, typically fall into one of two camps. Some “do not take into account the future negative consequences of their own behavior.” Others may understand these consequences, on some intellectual level, but lack the self-control to battle their addiction.
Government policy can help, in both these cases. A “corrective tax policy” can force myopic addicts to face up to “the long-term impact of decisions” they fail to consider and, for those addicts who see the future but can’t control their present behavior, a higher tax can help “serve as a substitute” for the self-control these addicts lack.
Hamermesh and Slemrod acknowledge that a separate body of research holds that some people work “too hard” not because they’ve become addicted to work, but because workaholics “overestimate” the satisfaction they stand to receive from achieving wealth and fame and underestimate the price they will pay — in the friendships never forged, in the moments for relaxation never taken — by working endlessly to achieve this wealth and fame.
But in the end, Hamermesh and Slemrod note, the result will be the same, whether or not an addiction is playing out: Individuals, by working too long, impose “costs on themselves.”
And the solution, the two economists add, ought to be the same, too: an income tax system that “not only features higher marginal tax rates than otherwise, but also marginal tax rates that rise with income more rapidly than otherwise.”
. . . the more stressful the work environment.
American workers, says a noted management consultant, are suffering a “psychological recession.” Daily life in today’s Corporate America, contends Judy Bardwick, a former clinical professor of psychiatry, has left workers feeling “vulnerable and unprotected,” a condition “closely tied to the loss of job, health, and pension security.” Only 20 percent of employees, Bardwick told Business Week in November 2007, feel positively engaged in their jobs, according to recent Gallup workplace polling.
Might workers have a reason to feel disengaged? Research from DolmatConnell & Partners, a management pay consultancy, reports that profits for corporations in the Dow Jones industrial average jumped 284 percent from 1997 through 2006, with CEO pay at those companies up 308 percent. The “general workforce,” notes DolmatConnell, “is not sharing in company financial gains,” creating a distinct “dichotomy of increasing pay at the top vs. stagnant pay below.”
. . . the less the retirement security.
Do the corporate powerhouses that make up the Fortune 1,000 still believe in guaranteeing employees retirement security? That depends on where those employees sit. Of the top 1,000 companies in the United States, says a 2007 Wilson Wyatt consulting group report, only 638 guarantee their cubicle crowd a fixed monthly check when they retire, through a defined-benefit pension plan. Of these 638, 138 have either frozen or cut back their plans since 2003.
Meanwhile, 90 percent of the Fortune 1,000 have set up deferred pay plans that let denizens of their executive suites set aside, tax-free, retirement income far above 401(k) limits, and 69 percent have set up “supplemental executive retirement plans” that shield execs from company-wide pension cutbacks. One typical beneficiary of this largesse: former Gannett media chain chairman Douglas McCorkindale, who retired with $46.1 million in retirement savings, with all but $1.7 million of that “derived from a special executive compensation plan that doesn’t apply to normal employees.”
In 2007, meanwhile, IBM proudly announced what may be the largest retirement planning program in U.S. corporate history. Over the next five years, the company will spend $50 million on seminars and Web sites designed to help employees scope out their financial futures.
IBM employees didn’t exactly greet that news with cheering? A decade ago, IBM’s “defined-benefit” pension plan guaranteed long-time employees a comfortable retirement. But the company’s last CEO, Lou Gerstner, replaced that plan with a 401(k) that shifts all retirement responsibility — and risk — onto employees. Big Lou took home $127 million in 2001, the year before he retired with a $1.1 million annual pension.
His CEO successor, Samuel Palmisano, won’t need to attend the new IBM seminars either. He’s set to exit his IBM executive suite, notes the Boston Globe, with an annual pension worth $4 million.
. . . the higher credit card interest rates go.
Citigroup, the second largest U.S. bank, lost an amazing $9.8 billion in 2007’s last quarter, and someone is going to have to pay for that red ink. But not anyone sitting in an executive suite. Citigroup is instead hiking consumer credit card rates, as are most other U.S. banking giants now reeling from wheeling and dealing in subprime mortgages.
Meanwhile, the Washington Post reports that Wall Street financial houses have shelled out $33.2 billion in year-end 2007 bonuses. The top seven, a group that includes Citigroup, lost $55 billion last year speculating on mortgages.
. . . the worse customer service.
Is Philip Schoonover, the CEO at Circuit City, more dumb than greedy or more greedy than dumb? Hard to say. The consumer electronics chain in 2007 announced plans to fire 3,400 mid-level workers making “well above” market rates and replace them with entry-level hires. The experienced staffers Circuit City let go averaged around $11 an hour. The new hires are making around $8.
Upon news of the layoffs, analysts quickly predicted that the new hires would have problems answering customer questions about high-tech TVs — at a time when providing better customer service may be the only way Circuit City can compete against big-box retailers. Their predictions would soon be borne out. Over the year, Circuit City lost $319.9 million.
The controversial firings came just a year after Circuit City handed Schoonover $16 million in stock awards to become the chain’s CEO.
. . . the less available home insurance gets.
State Farm insurance is dropping windstorm coverage for 74,000 Florida homeowners and renters, the St. Petersburg Times reported late in 2007. The move appears to be part of an industry-wide offensive to cut losses “from future storms.” Not getting cut: insurance industry executive pay. State Farm CEO Edward Rust Jr. pulled in $11.7 million in salary and bonus in 2006.
The more wealth concentrates, in general, the more businesses concentrate on society’s wealthiest. Major insurance companies worldwide, Reuters reports, are rushing to set up special divisions that cater to deep-pockets. Agents for these divisions typically do home visits and offer coverage options that mass-market “good-hands” agents could never imagine. High-end insurers, for instance, will cover art collections “from the moment the hammer comes down in a New York auction room.”
No more than 15 percent of the awesomely affluent, notes the British insurer Chubb, are currently working with wealth-centric insurers. Observes one top Chubb official, John Simms: “The growth potential in the high net worth market is huge.”
. . . the fewer good character actors.
The more income and wealth concentrate at the top of America’s corporate ladder, the bigger the squeeze on jobs that used to pay enough to maintain a decent, comfortable, middle class quality of life. The latest middle class casualty of America’s growing divide between the wealthy and everybody else: the character actor.
“Character actors are losing middle ground,” Variety, the trade paper of the entertainment industry, has announced , “as the rich get even richer.”
Hollywood used to abound with actors like Walter Brennan, Edward Everett Horton, and Sydney Greenstreet, players who “could be relied upon to liven up the screen in secondary roles.”
Today, fewer and fewer actors are able to make a secure living doing character parts. With payoffs for stars skyrocketing — $210 million for Mel Gibson in 2004, for instance — everybody else is under increasing pressure to take “scale,” the rock-bottom minimum rate producers can pay under the Screen Actors Guild union contract.
Variety reports that 54-year-old character actor Tess Harper, a two-time best supporting actress nominee, couldn’t even earn enough with her character roles to qualify for union health care coverage.
“Twenty years ago you made scale on your first job, then never made scale again," Harper told Variety. Not anymore. Hollywood, says actors union activist Matt Kimbrough, is becoming “a minimum-only industry."
. . . the less comfortable airplane travel.
The basic contemporary corporate two-step: Companies merge. Company executives hit the jackpot. The huge new merged company scrambles to make enough money to pay off creditors and keep investors happy. Consumers take it on the chin. Or sometimes, if the consumers are flying, their butts.
By the late 1990s, America’s deregulated airlines had been merging and purging for twenty years. Those mergers fattened executive wallets — and ended up squeezing passengers into spaces much too small for the standard American tush.
A seat in an average economy car runs 22 inches wide, an ordinary office chair 19 inches. Coach seats on U.S. domestic flights: 17.2 or 18 inches wide. More important to comfort: the seat pitch, the gap between rows. Since the early 1990s, that has dropped from 34 inches to 32 and worse. Continental, to maximize passenger revenue, bolted its airplane seat rows all of 31 inches apart.
But airlines like Continental aren’t completely heartless. They actually do their best to help passengers fit into those little seats. They have stopped feeding them. Passengers can now spend 12 hours getting on and off planes and not get anything to eat more substantial than a bag of pretzels.
. . . the less cool our society’s high-tech.
Top execs deliver top-notch high-tech products and services to U.S. consumers, the argument goes, because they know they’ll be amply rewarded if they do. So don’t begrudge tech execs their good fortune. That good fortune benefits us all.
Well, not exactly. If astoundingly lucrative rewards automatically generated innovation, then the United States — the nation with the world’s highest-paid high-tech executives — ought to be the world’s most technologically advanced nation. That may have been true once, but not anymore. Take, as a prime example, broadband Internet connections.
The United States, back in 2000, ranked fourth in the world in broadband subscribers per capita. We now rank 15th, according to figures released by the Organization for Economic Cooperation and Development in November 2007.
In the United States, a little over one in five homes have a broadband connection. In Denmark, over one in three. In Japan, households routinely download off the Internet at 93.7 millions of bits per second. In France and South Korea, households average over 43Mbps. The average download speed in the U.S.: 8.9Mbps. Overall, on average speed, the United States ranks 19th.
To add insult to injury, Americans pay more per bit than Internet surfers elsewhere in the developed world.
In other high-tech product areas, notes Information Technology and Innovation Foundation president Robert Atkinson, the story runs much the same.
Other nations have “leapfrogged” past the United States, Atkinson points out, “not just in broadband, but in a host of digital applications: Japan in mobile commerce; the Netherlands in health IT; Korea in telematics (applying IT to transportation); Belgium for smart IDs; Germany for smart cards.”
. . . the less pleasure that sports fans take from watching sports.
Over the past two decades, the owners of major league sports teams have turned America’s ballparks, stadiums, and arenas into sophisticated devices for shaking excess cash out of the pockets of affluent consumers. In the process, they’ve virtually declared ballparks off-limits to average families.
The pro basketball New Jersey Nets, USA Today reported in 2006, were marketing center-court “Hollywood Seats” that cost up to $114,000 a season. The baseball Angels, meanwhile, were offering 12-person, dugout-level suites that carry a $240,000-per-season price-tag.
And what do pro sports offer families of more modest means? Not much. According to Team Marketing Report, the average 2006 cost for taking a family out to a ballgame — that’s four tickets, parking, drinks, snacks, and souvenirs — stood at $164 for Major League baseball, $267 for NBA basketball, and $329 for NFL football.
More: Sports without Winners, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
. . . the longer Americans spend commuting to work.
Researchers at Texas A&M University, for some time now, have been tracking traffic congestion — and generating annual reports that show just how much of an ordeal commuting has become. The numbers help explain why road rage doesn’t figure to moderate anytime soon. Back in 1982, rush-hour congestion cost the typical commuter 16 extra hours a year in traffic. In 2003, average commuters lost 47 hours to congestion.
In other words, traffic congestion has just about tripled since the early 1980s. Over these same years, the concentration of our nation’s wealth has more than doubled. So what’s the connection? Start with housing. The further away people live from their work, the more traffic on the roads.
Why do people choose to live far from work, even if that means long commutes? Some people, of course, want to live closer to the country. But most people “choose” to live far out because they can’t afford anything closer in.
And that’s where inequality comes in. The more wealth concentrates, the more speculative the housing market becomes. The wealthy simply bid up the price of the choicest real estate. Wherever prices are no object for some people, prices will eventually become higher for all people.
Now lawmakers could easily counteract this inequality-driven market pressure — by taking steps to increase the availability of affordable housing. But wealth tends to translate into political power, and our nation’s wealthy today have far more of both than they held two decades ago. We have lawmakers, consequently, far more interested in cutting taxes on wealthy incomes than making housing affordable — or improving public transit.
. . . the less accessible art museums become.
The number of wealthy art collectors has, since the early 1990s, multiplied 20 times over — and so have artwork prices, notes economist Don Thompson in his 2008 book, The $12 Million Stuffed Shark (Aurum). Over one six-month period in 2006, four paintings sold for over $100 million each.
With so many super-rich collectors chasing so few art masterworks, Thompson explains, “both museums and private collectors face a ‘last chance’ situation every time a major work comes up for sale.”
“Fearing they may never have another opportunity to add a certain artist or period to their collection,” he continues, “they purchase without consideration of past prices.”
One result: Museums, once free and easily accessible to all, have become costly destinations off-limits to average families.
More: Culture and Art, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
. . . the harder it gets to find a parking space.
Last year, according to figures released in 2007, the average Manhattan apartment sold for $1.3 million. Prices like these have led to the conversion of parking garage space to more lucrative residential buildings. Manhattan parking space shortages, as a result, have become increasingly severe as parking garages in the city continue to close, 40 in late 2006-early 2007 alone, with only 23 new garages opening to replace them.
But not all Manhattan motorists are panicking. Condo developers are thoughtfully offering a solution: below-grade parking spaces that cost up to $225,000 each. These spaces typically also carry a monthly maintenance fee.
. . . the shorter the life-expectancy, for everybody.
The United States has no system that guarantees health care to every citizen. The UK does. Low-income Brits, consequently, figure to be healthier. And they are, says new research published in 2006 by JAMA, the journal of the American Medical Association.
But what about affluent Americans? They have no problem accessing health care. Shouldn’t they be as least as healthy as affluent Brits? They certainly should be. But they aren’t, not according to the same new research.
In fact, high-income Americans turn out to be no more healthy — across a wide range of disease measures — than low-income Brits. What explains this striking health contrast? A greater level of racial disparity in the United States? Nope. The new JAMA study took race off the table, by sampling only middle-age whites.
How about bad habits? Americans could simply engage in more unhealthy behaviors. But bad habits turn out to be a nonfactor, too. Middle-aged white Brits and Americans smoke at the same levels. Americans tend to weigh more, but Brits drink more excessively.
What about health care quality? That doesn’t explain the UK’s superior health outcomes either. The United States is actually spending, at $5,200 per person, nearly twice as much on health care as the UK.
So what does explain why Americans aren’t as healthy as their British counterparts? Epidemiologist Michael Marmot, the co-author of the JAMA research, offers a compelling answer in his recent book, The Status Syndrome: how social standing affects our health and longevity.
Disparities in health, Marmot contends, reflect where we stand in our society’s socioeconomic hierarchy. The lower we stand — and feel — in that hierarchy, the worse our health, even if we make an adequate income.
“Poverty doesn’t drive ill health,” as the New England Journal of Medicine review of Marmot’s new book put it. “Inequality does.”
The more pronounced that inequality, the steeper the hierarchy that we live amid, the more stressful our lives. That stress, Marmot contends, “overwhelms our systems and leads to most of the diseases of modern life.”
British epidemiologists Richard Wilkinson and Kate Pickett make similar points in the November 2007 “Placing Health in Context” issue of Social Science and Medicine. In a nutshell: The wider a society’s gaps between the affluent and everyone else, the more sickly the entire society, or, as Wilkinson and Pickett put it, “as inequality increases so does poor health.”
Levels of ill health, the epidemiological research also shows, drop as you rise up the class ladder. At each rung, people have better health than the people below them and worse than the people above.
What explains this “social gradient”? Some theorists posit that healthier people just naturally gravitate toward the top of the economic ladder, more sickly people to the bottom. In this view, inequality doesn’t lead to ill health. Ill health leads to inequality.
Wilkinson and Pickett’s new work disputes this contention — by going “beyond health.” If other social problems show the same strong association with income inequality, they note, that would suggest that inequality can indeed trigger processes that leave us sicker.
In their new paper, the two researchers pore through data from 24 major developed nations on social problems that range from drug abuse to educational performance. They find in this voluminous data the same strong association with income inequality.
The evidence, Wilkinson and Pickett conclude, helps establish “the simple but important point that numerous social problems associated with relative deprivation — from ill health to poorer educational performance — are more common in more unequal societies.”
And not trivially so. The two British researchers find, for example, “ten-fold differences in homicide rates between more and less equal countries and U.S. states, six-fold differences in teenage birth rates, six-fold differences in the prevalence of obesity, four-fold differences in how much people feel they can trust each other.”
These findings, Wilkinson and Pickett provocatively argue, hold important public policy implications. Raising national standards in health, education, and other fields “may be substantially dependent on reducing inequalities in each country.”
“Rather than providing ever more prisons, doctors, health promoters, social workers, educational psychologists, and drug rehabilitation units, in expensive and at best only partially effective attempts to offset the problems of relative deprivation,” they sum up, “it may be cheaper and more rewarding to tackle the underlying inequalities themselves.”
More: The Population Health Forum
. . . the more stressful applying for and attending college becomes.
A college education is becoming an unaffordable dream for millions of low-income families. But the concentration of wealth at America’s economic summit, Tamara Draut of the Demos think tank makes clear, is also making the college experience a nightmare for families who would consider themselves securely middle class — and this nightmare goes way beyond the costs of tuition and board.
“As the spoils of our economy are increasingly spread among only a small group of top performers,” Draut points out, “getting into the winner’s circle from the outset is imperative.”
A generation ago, in a more equal United States, Americans did not obsess over getting into the “winner’s circle,” for the simple reason that, a generation ago, middle class families were experiencing, at every turn, a higher quality of life — and poor families could credibly see themselves entering the middle class.
But America’s growing concentration of wealth over the last 30 years has pulled the plug on this positive outlook. The “only sure way to the good life,” as Draut notes, now appears to be getting inside that “winner’s circle.” And the surest ticket to that “winner’s circle”? That’s getting a degree from one of the nation’s elite colleges or universities.
For many parents, consequently, getting their kids admitted into an elite institution has become life’s be-all-and-end-all — and an entire industry has sprouted up to help parents grad that elusive admission ticket.
To ready their kids for elite status, parents now feel pressed to shell out many thousands of dollars for prep courses, private tutors, admission consultants, intellectual summer boot camps, and special guided tours through the Georgetown-Columbia-Harvard-Yale circuit.
Back in 1990, only 1 percent of the nation’s families with graduating high school seniors felt compelled to pay the freight for services like these. Over the past 15 years, that percentage has soared six-fold. Those families already in the “winner’s circle” can, of course, easily afford these extra expenses. Few others can.
The National Association of College and University Business Officers, now counts 76 higher ed institutions in a financial winner’s circle of their own. Each of these schools has an endowment worth at least $1 billion. The bulk of this endowment wealth actually sits with a few handfuls of elite schools — the Ivies, Stanford, MIT, the wealthy liberal arts colleges that together educate less than 100,000 of America’s 20 million postsecondary students. Harvard’s endowment now holds $34.6 billion. Overall, the 22 richest higher ed institutions hold more wealth than the entire rest of the 785 institutions the college business officers are currently tracking.
What have elite institutions done with all this money? Have they welcomed more students from families of limited means? Hardly. Over the last decade, undergrad enrollment at the Ivies, MIT, and Stanford has actually dropped, by 1.4 percent. And elite schools are filling their fewer seats with more students from the upper reaches of America’s income distribution. Roger Lehecka, a former dean at Columbia, and Andrew Delbanco, an administrator there now, recently noted that “between 2004 and 2006 — an era of enormous private wealth accumulation — 27 of the 30 top-ranked American universities” actually experienced a net decline in their percentage of low-income students.
So where, if not to expanded access, are the billions in elite endowments going? They’re going into projects that better fit the priorities of wealthy funders. Elite institutions are building up a storm, erecting lavish new facilities that trumpet, naturally enough, the names of their funding benefactors.
At Princeton, one new student residence, named for retiring eBay CEO Meg Whitman, offers rooms with “triple-glazed mahogany casement windows.” Stanford, adds Business Week, “spent $4 million to restore” an equestrian center that “now provides a place for undergraduates to house their own horses.”
How much is this endowment empire-building costing college kids? If colleges with billion-dollar endowments actually spent out 5 percent of their assets on education, says the New America Foundation, an extra $1.5 billion would be “available annually for financial aid.”
. . . the more overpriced housing becomes.
Wealthy people spend more as they become wealthier. That increased spending, in a steeply unequal society, will eventually — and always — raise “the cost of achieving goals that most middle-class families regard as basic,” points out Cornell economist Robert Frank, author of Luxury Fever and Falling Behind: How Rising Inequality Harms the Middle Class.
“Middle-class families don’t look to Donald Trump and worry about what he is spending his money on,” Frank notes. “Likewise, it’s totally irrelevant to most in the middle class that Bill Gates has a 40,000-square-foor mansion on the shores of Lake Washington.”
But the existence of that mansion, the Cornell economist continues, does set off “a chain of local comparisons” that directly and appreciably “affects the spending behavior of people in the middle.” Those folks in the middle may not feel directly impacted by the Bill Gates mansion. Others, the near super-rich, will be.
For these near super-rich, the appearance of a huge new mansion will “alter the frame of reference that defines what kind of house is considered necessary or desirable.”
“And when the near rich, in turn, build larger houses,” Frank explains, “others just below them find their own 10,000-square-foot houses no longer adequate, and so on all the way down the income ladder.”
An interesting hypothesis — and easy to test. One example: If higher spending by wealthy people getting wealthier really does drive up home prices for average people, as Frank argues, then the prices of typical homes should be the highest in those metro areas where the incomes of rich people have risen the fastest.
That’s exactly what the data show. The greater the level of inequality, the deeper the negative consequences on the daily lives middle class people live. To understand why, Frank explains, we need to understand how we as individuals go about making our consumption choices.
Some things we spend time and money on, Frank notes, we value in a comparative context. Suppose, for instance, you could choose to live in one of two societies. If you chose the first, you would live in a 4,000-square-foot house — and everybody else would have 6,000 square feet to call home. If you chose the second, your house would have 3,000 square feet, other houses just 2,000. Which society would you choose? In experiments, Frank observes, most people choose the society that would have them living in the 3,000-square-foot house.
But if you ask the same question with vacation time, something where comparative context makes considerably less difference, most people answer the other way. Most people choose a society that would give them four weeks of annual vacation — and others six — over a society that would give them two weeks of vacation and others one.
In other words, as Frank puts it, we care about “relative consumption in some domains more than others.” We care so much more that we’ll spend our time and money on activities that enhance our comparative position at the expense of activities that don’t.
How does this play out in real life? Spending time with family and friends may bring us happiness, but, to afford a bigger, better home, we’ll short-change that time and devote more hours to working and commuting.
In unequal societies, a middle-income family faces the same dilemma that confronts a nation caught in a military arms race. That family “can choose how much of its own money to spend, but it cannot choose how much others spend.” If others spend more, you have to spend more. You really have little choice.
. . . the noisier our neighborhoods.
Google’s two billionaire co-founders, Larry Page and Sergey Brin, have had an agreement signed that gives their private jet — a Boeing 767 wide-body — access to a federal government airport in Silicon Valley that’s otherwise closed to civilian air traffic. The Google boys will pay $1.3 million per year for their new landing rights. In return, the National Aeronautics and Space Administration gets to place scientific instruments on the Google wide-body — a 180-seater Page and Brin had customized to sport a party lounge and multiple bedrooms — and two other Google private jets.
NASA is calling the deal a “win-win.” Local residents, worried about excessive airport noise, beg to differ. They’ve been fighting, since the 1990s, to keep the airport — just a four-mile drive from the Google headquarters — off-limits to general aviation.
. . . the less compassionate our communities.
Average-income families dedicate much more of their charitable giving to help people in real need than rich people. Twenty-two percent of giving by families making over $1 million a year, Indiana University’s Center for Philanthropy reported in 2005, goes to activities focused on the needs of the poor. Families making under $100,000 a year dedicate 36 percent of their giving to the poor.
How generous are America’s most generously rewarded? Not nearly generous enough, says a new network of philanthropists who call themselves the “50% League.” The League’s four score backers have each given away at least “half or more of their net worth, their business profits, or their income for three years or more.”
Most wealthy households in the United States don’t come anywhere near that level of charitable giving. In fact, researchers point out, if America’s wealthiest gave away the same share of their assets as low- and middle-income families, charitable contributions in the United States would increase by over $25 billion a year. The League, a project of the Zing Foundation’s Bolder Giving Initiative, is hoping to inspire all Americans to give “at their full potential.” The group’s activists range from the sister of billionaire Warren Buffett to a journalist who married into a Wall Street fortune.
The time may also be coming when people who have wealth will give more of it away. But that time, observes Brookings Institution fellow Gregg Easterbrook, hasn’t yet arrived. The 60 most generous wealthy Americans, as tallied by Slate magazine’s annual charity scorecard, gave away $51 billion in 2006. Most of that — $44 billion — came from one single individual, investor Warren Buffett. The remaining 59 “philanthropists” on the Slate 60 list gave away just over 1 percent of their combined $584 billion in net worth. Nike sneaker magnate Philip Knight, for instance, gave away $105 million. Forbes tabbed his net worth last year at $7.9 billion. After taxes, notes analyst Easterbrook, a fortune that large, even conservatively invested, generates at least $1 million a day in new wealth.
More: Charity and Compassion, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
. . . the less inviting the great outdoors.
New research, published by three scientists at Montreal’s McGill University, has “found striking relationships between income inequality and biodiversity loss.”
“Our study suggests that if we can learn to share economic resources more fairly with fellow members of our own species,” notes the McGill Environment School’s Greg Mikkelson, “it may help us to share ecological resources more fairly with other species.”
The McGill researchers compared data on inequality and biodiversity loss for 45 nations — and 45 U.S. states. Their analysis of that data, funded in part by the Natural Sciences and Engineering Research Council of Canada, reveals a consistent “general trend.”
“Societies with more unequal distributions of income,” the research indicates, “experience greater losses of biodiversity.”
How significant an impact on extinctions does inequality make? If the developed world’s most unequal nation, the United States, were to distribute incomes as equally as Sweden, 44 percent fewer plant and vertebrate species in the United States would likely face extinction.
Why does inequality have this impact? The McGill environmental scientists are hoping that future research can help pinpoint the “underlying mechanisms.”
But certain dynamics already appear clear. One example: In nations where a wealthy few monopolize the best farmland, the resulting poverty pressures the poor to till marginal — and environmentally fragile — landscapes.
And in societies where a wealthy few accumulate grand fortunes, they also accumulate disproportionate political power, often enough to prevent — or bulldoze away — environmental regulations.
“With biodiversity loss,” sums up McGill biologist Andrew Gonzalez, “if we don’t link the science to the social causes, we will never solve the problem.”
More: Our Imperiled Natural World, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
. . . the more coins that toll booths demand.
Fifty years ago, almost all major corporations and wealthy individuals in the United States paid a hefty chunk of their income in local, state, and federal taxes. Those tax dollars, in turn, helped build and maintain roads and bridges, sewers and schools, airports and harbors — what economists call our “public infrastructure.”
This tax-and-spend cycle helped keep America both relatively equal and efficient. The taxes on high incomes discouraged grand accumulations of private wealth. The spending on infrastructure encouraged economic growth and opportunity.
In today’s United States, unfortunately, this cycle no longer spins. The wealthy no longer pay hefty taxes. Local, state, and federal governments no longer invest in infrastructure. Yesterday’s United States built bridges. Today’s builds fortunes.
And now those private fortunes are taking aim at America’s public infrastructure. Wall Street bankers and investment firms, Business Week reports in a thoroughly unnerving cover story, are rushing to raise cash for public infrastructure buyouts.
“Investors can’t get in fast enough,” Business Week notes. “They recently deluged Goldman Sachs with $6.5 billion for its new infrastructure fund, more than twice the $3 billion it was seeking.”
The buyout artists at outfits like Goldman Sachs, Business Week estimates, will soon have $500 billion to wave before governors and lawmakers “scrambling for cash to solve short-term fiscal problems.”
These governors and lawmakers, unwilling to tax the rich to maintain America’s roads, are now taking bids to sell these roads to the rich. In Harrisburg, for instance, Democratic Governor Edward Rendell is busy privatizing the 537-mile Pennsylvania Turnpike. In 2006, in Indiana, state lawmakers cut a $3.8 billion deal that gives private investors a 75-year lease to run the Indiana Toll Road.
Why the investor rush to public infrastructure? Leases to run toll roads and bridges amount to licenses to print money. Governments need to win public approval before they can raise tolls. Private road managements can charge whatever tolls the market can bear. Tolls on the Chicago Skyway stood at $2 in 2005, the year the road became the first modern thoroughfare to go private. The Skyway toll, investors expect, will hit $5 by 2017.
Private investors have, of course, other ways to squeeze earnings out of infrastructure. They can skimp on maintenance — or attack worker wages. Toll-takers on the Chicago Skyway, Business Week points out, “used to be full-time city employees with rich benefits.” The Skyway’s new private operators now run their show with a mostly part-time, no-benefit workforce.
. . . the wider our waistbands.
We now know, thanks to two decades of epidemiological research, that people who live in relatively equal societies live significantly longer lives than people who live in societies that are deeply divided between the rich and everyone else.
But why should this be the case? How can inequality, a economic phenomenon, possibly translate into physical ill-health? A team of British epidemiologists — scientists who study the health of populations — has published research that explores one possible answer.
Studies have already established, these researchers note, that obesity increases the risk of disease, for everything from cancers to diabetes. And studies have also linked excessive stress to excessive poundage. Might that excessive stress be linked to the inequalities that excessive concentrations of income inevitably create? The British researchers set out to see — by exploring whether obesity rates and caloric consumption run higher in more unequal developed nations.
This British research team also collected and crunched data to see whether unequal nations show higher death rates from diabetes, a common consequence of obesity.
The researchers, in each of the 21 developed nations they examined, measured inequality by comparing the income share going to each nation’s richest 20 percent to the income share for each nation’s poorest 20 percent.
The resulting ratios ranged widely. In Japan, the most equal nation in the study, the top 20 percent averaged 3.4 times the income of the bottom 20 percent. In the United States, the most unequal of the 21 nations, the top fifth of the population averaged 9 times the income of the bottom fifth.
These rates of inequality, the British researchers would find, closely track rates of obesity and overeating. Japan, for instance, has the lowest rate of obesity among women, the United States the highest. American women are over 10 times more likely to be obese than their Japanese counterparts.
“Increased nutritional problems,” they conclude, “may be a consequence of the psychosocial impact of living in a more hierarchical society.”
Public health officials in both the United States and Europe, the British research team adds, have been slow to consider these psychosocial factors behind obesity. These officials have focused instead on approaches to fighting obesity that encourage physical activity and healthier food choices.
But these approaches, the British researchers note, overlook “the reasons why people continue to live a sedentary lifestyle and to eat an unhealthy diet.” These approaches also overlook how these unhealthy behaviors, in a deeply unequal society, can “provide comfort.”
Many habits we now know as unhealthy — smoking, overeating, engaging in substance abuse — are practiced more by people who rank low in wealth and income. All these unhealthy behaviors, from smoking to obesity, carry what epidemiologists call a “social gradient.” Their frequency increases as social and economic status decreases.
So do low-income, “low-status” people simply “choose” to be unhealthy? Researchers think not. Lower-status people practice unhealthy behaviors not because they want to be unhealthy, but because they need relief — from social stress.
People typically respond to stress, researchers note, by increasing their intake of our society’s readily available relaxants, disinhibitors, and stimulants. They smoke. They do drugs. They consume “comfort foods” loaded with sugar and fat. The more chronic the stress, the more likely a reliance on one or another of these comforting props.
And the more chronic the stress, the harder to end that reliance.
Researchers, for instance, have found a clear “social gradient” in smoking cessation programs. People of lower social and economic status who attend such programs are less likely to give up smoking than people of higher status. But “the desire to give up smoking,” interestingly, carries no social gradient. Clerks turn out to be just as eager as CEOs to stop smoking.
What then explains the economic differentials in cessation success rates? Stopping an unhealthy habit may simply be easier for people of means. They can always afford, after all, to engage in other forms of relief.
People whose prospects seem hopeless, on the other hand, often cannot. Smoking may well be their “only relaxation and luxury.” Do they “choose” to smoke? Literally speaking, yes. Is their “choice” a purely individual decision, totally unrelated to their subordinate place in the social and economic hierarchy? Clearly not.
The stresses that hierarchical life generates, in other words, encourage behaviors that can contribute, over the long run, to poor health outcomes, to reduced life expectancies. In other words, if we want our societies to become fashionably slim, we need to have equality once again become fashionable.
. . . the less the sum total of our happiness.
The Washington, D.C.-based Pew Research Center has released an epic report on who’s happy in the United States today and who’s not. The happiest of all? The biggest smiles seem to belong to people with the biggest paychecks.
Fifty percent of people who make over $150,000 a year, the study relates, report themselves “very happy.” Only 23 percent of those under $20,000 feel that way. And those in between? The higher the income, the higher the happiness level.
Most media reports on this new Pew study have noted these numbers — and left the income side of the happiness story at that. But the Pew researchers actually had more to say on that subject, and that more speaks directly to the most striking theme that has emerged over the past several decades of happiness research.
That theme in a nutshell: More money does increase well-being, but only up to a point. Above that point, more money makes people no more or less happy. Above that point, it’s how much others make, not how much you make, that impacts your happiness.
“The trend data,” the Pew report sums up, “show that what matters on the happiness front is not how much money you have, but whether you have more (or less) at any given time than everyone else.”
Researchers have been documenting this same finding for years now. Two American sociologists, Glenn Firebaugh of Penn State and Laura Tach of Harvard University, surveyed the increasingly massive research on subjective well-being in a paper they published in 2005, Relative Income and Happiness.
“If richer people are happier because of what money can buy,” they observe, “then the unprecedented income growth of the past two centuries should have led to unprecedented growth in human happiness.”
That hasn’t been the case, and that reality has created a “general consensus among happiness scholars that the effect of income on satisfaction typically depends in part on comparison — on the size of our income relative to the incomes of our peers.”
“We find,” Firebaugh and Tach conclude after an analysis of U.S. happiness data from 1972 through 2002, “that the higher the income of others in one’s age group, the lower one’s happiness.”
Some social scientists have been endeavoring to rigorously measure human well-being on a comparative national basis. Back in 1990, Indian Nobel prize winner Amartya Sen and three other distinguished economists developed the global benchmark of population well-being that has become the UN’s annual Human Development Index.
The 2007 index rates Iceland, a nation with “a remarkably even distribution of income,” the world’s most desirable place to live. Norway, another of the world’s most equal nations, ranks second. The index rates nations by life expectancy, education levels, and gross domestic product per capita. The world’s two wealthiest countries — Luxembourg and the United States — rank 18th and 12th on the overall well-being index.
. . . the more corruption in the political process.
We live, our daily headlines make clear, in corrupt times. But epochs of corruption, history makes clear, tend to come and go. Some societies, at some times, exhibit far more corruption than others.
Why should that be so? In 2005, at an international conference at Sweden’s Göteborg University, University of Maryland political scientist Eric Uslaner shared his answer. Some societies turn out to be more corrupt than others, Uslaner argued, because some societies distribute wealth and income far more unequally.
“The roots of corruption,” Uslaner noted, “lie in the unequal distribution of resources in a society.”
How do these roots bear corrupt fruit? In unequal societies, those with the deepest pockets have the wherewithal “to subvert the political, regulatory, and legal institutions of society for their own benefit.” Ordinary citizens, notes Uslaner, come “to see the system as stacked against them.”
In this environment, people start to feel that connections matter more than honest hard work. And that leads to “a willingness to do whatever is necessary to make your way in the world,” even cheat on other people. And if you’re willing to cheat on others, they must be willing to cheat on you.
Mutual trust, the prerequisite for honest and fair dealings, cannot survive in this sort of poisoned environment.
Uslaner’s new research advances “a model where inequality, mistrust, and corruption are mutually reinforcing.” To make his case, he taps a wide range of data sets, everything from indexes of civil and political rights to cross-national opinion polling of average citizens and business executives.
Equality, all this data crunching ends up showing, makes for “the strongest predictor of trust.” Levels of generalized trust, Uslander’s research demonstrates, invariably shrink as inequality rises.
Uslaner’s analysis offers no easy happy ending. Ending corruption, he notes, would be difficult but doable if that task essentially boiled down only to the fixing of corrupt institutions. But the roots of corruption sink far deeper, Uslaner argues, so deep that reformers will never be able to pull these roots out unless they confront, head on, their society’s rich and mighty.
“Changing institutions may not be easy,” Uslaner explains, “but its difficulty pales by comparison with reshaping a society’s culture or its distribution of wealth (and power).”
. . . the less robust a nation’s free press.
The more unequal a society, data from Harvard researcher Maria Petrova help demonstrate, the less free, open, and accessible that society’s mass media.
Petrova’s paper, Inequality and Media Capture, suggests a model for understanding the relationship between media freedom and income inequality and then tests that model empirically, for over 100 nations, via data indexes that track inequality and media freedom over the decade that started in 1994.
Her basic finding: In democracies where wealth tilts toward the top, the wealthy have more of a vested interested in “capturing” the media and limiting the range of policy options that media grant time and attention.
. . . the less attractive the helping professions become.
Why are Americans at the top of America’s income distribution raking in so much more income today than they did a generation ago? Certain lines of work, business journalist Louis Uchitelle notes in an analysis published in 2006 , simply pay far more than they once did.
“Three decades ago,” points out Uchitelle, “compensation among occupations differed far less than it does today” — and today’s much larger pay gaps, he adds, are having a powerful impact on the career choices young professionals are making.
One example: The American Bar Association reports that “fewer law school graduates are going into public-interest law or government jobs.” In medicine, where doctors can now make millions evaluating drugs for bio-tech start-ups, the Medical Group Management Association “says the nation lacks enough doctors in family practice, where the median income last year was $161,000.”
The same patterns show up in academia. Cancer researchers are becoming health care management consultants.
“The bigger the prize, the greater the effort that people are making to get it,” sums up New York University economist Edward Wolff. “That effort is draining people away from more useful work.”
More: Professions without Pride, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
. . . the more resources squandered on guarding wealth.
In just five years, economists Samuel Bowles and Arjun Jayadev point out, the United States will sport “more private security guards than high school teachers.”
The two researchers don’t find this recent projection from the U.S. Labor Department surprising. In the economically “polarized” United States, they observe in a recently published paper, many millions of Americans are no longer creating wealth. They’re guarding it.
The Bowles-Jayadev analysis, The Garrison State, endeavors to distinguish those Americans producing the goods and services we consume — what Adam Smith called “productive” labor — from those who provide guard labor, a category that covers “the police, private security guards, military personnel, and others who make up the disciplinary apparatus of a society.”
Bowles and Jayadev actually calculate several different guard labor totals, each one based on a slightly different variation off their basic definition. Under one more restrictive version, they count a guard labor population that covers about a fifth of the U.S. workforce.
The ranks of guards in the literal sense — “police, corrections officials, and private security personnel” — have boomed over recent years. That boom, Bowles and Jayadev find, reflects a statistically “quite robust” relationship between guard labor and income inequality.
Why might inequality and guard labor go hand in hand?
“Two decades of behavioral experiments,” Bowles and Jayadev observe, “have provided convincing evidence that humans in diverse cultures are inequality-averse, and that violations of fairness or reciprocity norms provoke costly conflicts.”
“Illegitimate inequalities,” they note, will always be “costly to sustain.”
. . . the harder to confront entrenched special interests.
A telling case in point: the prescription drug “reform” story.
Big Pharma entered the 21st century the most profitable industry in the world. In 2002, notes Harvard Medical School analyst Marcia Angell, the top 10 drug companies in the United States netted more earnings than all the rest of the companies in the Fortune 500 taken together.
Big profits like these translated into hefty paydays for top Big Pharma executives. In 2001, the five most lavishly paid drug company execs averaged over $30 million each. The fuel for these big earnings: revenues from outpatient prescriptions that were rising at a remarkable 15 percent annual rate.
But no industry can sustain, over the long haul, such lofty annual revenue increases. For Big Pharma, the first big sign of trouble would come in 2003. In that year, after over two decades as Corporate America’s most profitable sector, the pharmaceutical industry lost its number one profitability ranking, dropping to third place. The industry would waste no time. In that same 2003, Big Pharma would team with the Bush White House to push through Congress legislation that added a prescription drug benefit to the Medicare program.
This new Medicare legislation guaranteed all seniors eligibility for some form of drug benefit by January 2006. But the legislation didn’t guarantee any decrease in prescription drug prices. Indeed, the new law specifically prohibited any federal action to negotiate for lower prices directly with the drug companies.
“The key goal,” notes Ron Pollack of the health care watchdog Families USA, “was to make sure there’d be no interference in the drug companies’ abilities to charge high prices and to continue to increase those prices.”
To safeguard this price-inflating provision, Big Pharma would spend the next three years overrunning Capitol Hill with lobbyists and cash. Through 2005 and the first six months of 2006 alone, the Center for Public Integrity reported last April, drug companies and their trade groups spent $155 million on lobbying Congress. Those dollars unleashed an army of 1,100 paid lobbyists — over two lobbyists for every Capitol Hill lawmaker.
Big Pharma spent millions more ushering members of Congress into America’s economic elite. In 2005, for instance, the industry’s top trade association named former Rep. Billy Tauzin its new CEO. His pay package: $2 million, over 15 times his lawmaker take-home.
These Big Pharma investments all paid off. Attempts to amend the 2003 drug “benefit” legislation went nowhere. The legislation went into full effect exactly as the drug industry wanted.
The results would be predictable. In 2006, overall outlays for prescription drugs “accelerated for the first time in six years,” soaring 8.5 percent.
An analysis of that increase, published recently by the U.S. Centers for Medicare and Medicaid Services, hands the credit to the new federal Medicare benefit. In 2006, $41 billion taxpayer dollars went toward underwriting the drug benefit. Over the course of the year, the share of the nation’s total prescription drug costs paid by Medicare leaped from 2 percent to 18 percent.
In short, an unalloyed victory for the drug companies. They can now continue to overcharge with impunity. America’s taxpayers have come to their rescue.
. . . the less public interest in politics.
In a plutocracy, politics only addresses the problems that vex the privileged. A democracy, under this pressure, steadily wilts.
“When politics does not deliver for people,” notes Robert Kuttner in The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity, “the people give up on politics. Or they see politics as a realm mainly for cultural warfare, for battles over patriotism, or as something for other people.”
. . . the lower the voter turnout in elections.
The wider the gaps between top and bottom, researchers have found, the less voting overall. In the 1996 elections, the ten states with the smallest income gaps averaged a 57 percent voter turnout. The ten with the widest income gaps averaged 48 percent.
More: A Dying Democracy, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
. . . the less likely politics will seek solutions outside the box.
“Income inequality, notes Cornell economist Robert Frank, “has prevented us from adopting efficient solutions to many problems that affect rich and poor alike.”
One example: the “clean air” struggle against auto emissions. The worst emissions come from older cars. In Los Angeles, Frank notes, fewer than 10 percent of the vehicles are older than 15 years old, But “most jurisdictions exempt older vehicles to avoid imposing unacceptable costs on the mostly low-income motorists who drive them.”
What to do? We could, suggests Frank, “levy higher taxes on the affluent to pay for a vehicle buyout program for the poor.”
“By raising taxes on high-income motorists,” he explains, “the government could pay for vouchers that would enable low-income motorists to scrap their older vehicles in favor of cleaner used cars of more recent vintage. . . Both rich and poor motorists would win.”
. . . the more frayed the social fabric.
Our community institutions – our schools, our parks, our libraries – make up our “commons.” In a relatively equal society, a middle class society, most everybody depends on this commons.
But where wealth starts to concentrate at a significant level, not everyone needs the commons. The wealthy don’t send their kids to public schools. They don’t take books out of public libraries. They don’t use public transportation. They don’t spend time at public parks. They live in their own private worlds.
The bigger these private worlds get, the more rich people grumble about paying taxes to support the public world. And they don’t just grumble. They bankroll campaigns to cut taxes. In a deeply unequal society, with small armies of really rich people, these campaigns start to succeed. Taxes get cut — and then public services.
The more public services get cut, the more that people other than the wealthy start thinking about private services. Soon the modestly affluent feel better off going life alone, on their own nickel — better off joining a private country club, better off sending their kids to private school, better off living in a privately guarded gated development.
The greater the number of affluent who forsake the commons, the smaller the number of people who care about public services. With fewer people using public services, still more budget cutbacks become inevitable. Services deteriorate even further. The public space in our society no longer functions as a place where we all come together. We go our own separate ways. Our sense of community crumbles.
More: A Fraying Social Fabric, a chapter from the 2004 book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives, now available free to read online.
