Article: Why Income Inequality Matters

[brennan]

I just want to establish what expert insite you have about being poor in America.

What the hell's so different about being poor in America? Oh yes, no social security because you're (looks at the other thread) ... a lazy, stupid, illegal immigrant.

Being poor sucks, most people simply don't have the wherewithall to get out of it and it perpetuates itself. Poor people don't care about education because it never got their parents anywhere but a dead-end job, poor districts all over the world stagnate and it's precious few people that manage to drag themselves out.

 

[CIVPhilzilla]

Tell me how many millions have Bill Gates and Warren buffet given away?

Oh I'm sorry I believe the number you were looking for was billions.

 

[innonimatu]

Education, Education, Education.

Educaation, education, education… you don’t have to repeat the word, that answer is very spent by now. Besides, it is not an answer for the problem we are discussing here (that of inequality per se, not that of social mobility). Social mobility is just a band-and for inequality, a carrot to show the donkeys who are pulling the economy that they, too, might one day become rich. It is useful as a safety valve to release the pressure of frustration, but education does not address the problems of inequality!
I’ll elaborate…

If you want to prattle against income inequality, you should be ashamed of our primary educational system, as its very much responsible for the economic situation of lower-income families.

Any system that allows large inequalities of income (i. e., any system of beliefs that tolerates such inequalities as legally and morally acceptable) will have a certain number of poor people and a certain number of rich people. That number can be expected to remain stable, regardless of social mobility, if all other conditions are equal. You can have a greater “turnaround” of people in the system, but that does not stop inequality from existing exactly to the same extent as before.
So, even if education was working to improve social mobility (which we agree it does not seem to be) that would not be a solution.

Capitalism works well in creating wealth.

Technological progress works well at creating wealth. Capitalist is but one of the systems under which technological progress can occur. However capitalism seems well suited as an economical system for liberal democracies (certainly more so than communist, the other bit contender) so we’re likely to stick with it for the foreseeable future.

But what form of capitalism should we use? There are lots of variations to pick from. As the differences not only in the Gini coefficient but in the whole of society between, say, the US and Sweden, prove. Capitalism is not a religion, it does not has dogmas (contrary to what many economists would have us believe), nor definitive truths, it it’s not even stable over time! Capitalism as is practiced today would not work a century ago in the US or in Europe, and I bet it wont a century from now. Current “US capitalism” or “european capitalism” does not work in many nations today, because their societies are different. To attempt to apply it there will lead to disasters such as that which beset Russia in the 1990’s, or much of Latin America for decades now.
What may seem “optimum” in a given place at a given time may not be so under other conditions. The economic strategy that best maximizes current “welfare” may be very bad for growth, of the opposite may be true. Economics is not really a science, if it were it would be thoroughly discredited by now, given the sheer number of failed recommendations and predictions economists have made over the years.

No one said or claims it creates income equality (just equality of opportunity). It is on the educational system, and your politicians, to ensure that the state and local authorities provide the KSA's necessary for people to rise through the ranks.

In order to talk about “equality of opportunity” you must make clear what is supposed to be achieved by that. If the sole purpose of the current system (which I assume you endorse) was to provide “equality of opportunity”, should that occur at all times, or only once in a lifetime? Up to a certain age? Or from a certain age?

Because “equality of opportunity”, if applied at all times, means that all people, regardless their wealth, should have the same opportunity to get, say, the best and most expensive cancer treatment. Or anything else. This is clearly not the case. If it was, then a generalization of the principle of “equality of opportunity” would make money meaningless.
You could propose a “one-shoot equality chance”: give everybody the same education up to a certain age, and let their lives evolve form there. Except that it is impossible to give everybody the same education - even discounting the fact that people are already born unequal. It would require at least the absolute abolishment of individuality, at least up to a certain age – something worse than even what the communists proposed.
So you are left with a grand principle and no way to apply it. Do you know what that is called? An excuse.

The big problem with inequality is not poverty (which is a problem related to it but that can even be tacked independently) but power balance within society. Poverty, especially in a wealthy nation, is just a symptom that something has gone wrong.
A possible and verifiable goal for an economic model for society (any model for society) might be “to ensure a degree of equality that is enough to allow any people do make use of the fundamental rights recognized to any citizen in a liberal democracy” (mind you, those rights are vague enough anyway). This is not achieved merely by stating we wish everyone to have “equality of opportunity”. No one who is very disadvantaged, wealth-wise, in a capitalist society, comparatively to other people in that society stands a good chance to have his fundamental rights enforced against the interests of the wealthier and more powerful. And we fall into situations such as that of Brazil… Brazil’s problem with inequality is caused not just by poverty but fundamentally by power imbalances. In fact that’s what perpetuates it.
The choice that must be made is not just between a greater or lesser degree of inequality, or between this or that form of capitalism. It is between having a functional liberal democracy, or having a political and social regime that maintains the trappings of one but has ceased to be one.

And achieving an acceptable level of inequality can only be done effectively through a range of policies targeted to solve specific situations, and managed by the state, for it is the state’s responsibility to ensure those fundamental rights usually enshrined in constitutions are enforceable. It’s not ok (nor feasible) to just leave the solution of issues such as poverty or inequality up to private organizations.
Can a society remain stable without too many concerns with inequality? Of course it can, so long as the cast outs are few or powerless. It just shouldn’t pretend to be a fair society, fundamental freedoms and rights cannot really be guaranteed in an effective manner to those cast outs.

 

[Whomp]

Hmm....could you give me the executive summary of what you just said. It seems like a lot of words without substance.

 

[innonimatu]

Hmm....could you give me the executive summary of what you just said. It seems like a lot of words without substance.

Thanks, that means I must be ready to get into politics!

Very well, three points:
1) Education is no solution to inequality. What education can do, in the right conditions, is increase social mobility. So poor people can become rich, and rich poor. But you still risk having pretty much the same number of rich and poor. The cause of inequality is not in differences in education, and even if it were a free market system for education would not solve it. Nor could, or should, people be forced to pursue the same level of education, even if it were provided.

2) “Equality of opportunity” also cannot be guaranteed by education. What [/I]is “equality of opportunity”? How can it be provided? Under what circumstances?
The problem of improving equality of opportunity will, in the end, be as hard to solve as that of improving equality. So it is more logical to concentrate on equality itself, talk about “equality of opportunity” only deviates attention from the real problem.

2) In wealthy countries the problem with inequality is how it skews power balance within society to favour a minority. This is the opposite of what all liberal democracies promise: the rule of the majority, for the greater welfare of the majority, restrickted by guarantees that the fundamental rights of all individuals will always be respected and by separation of powers.
In a greatly unequal society richer people will hold greater political and economic power (thus making a mockery of the principle of democracy), be able to afford better access to the law (thus making a mockery of the principle of equality before the law), and occupy the most important public offices. This is inevitable, because in any modern society money always buys influence. So in order to maintain a working liberal democracy the extent of inequality allowed must be limited. It cannot simply be dismissed as a problem for markets to solve or as a tolerable evil.

The conclusion, in the end, is that governments must intervene, through progressive taxation, minimum wage laws, even occasional direct interventions in the economy.

 

[Whomp]

I think we'll disagree on education then. I feel education is the great equalizer. Granted, it won't necessarily guarantee success (because you still need to be able to sell yourself) but it will open up the potential for opportunities. Warren Buffet is a good example of this when he only provided education to his chidren and grandchidren. When an opportunity arose for a field trip for his granddaughter (which would cost money out of his pocket) he shut her down because it would separate her from the rest of the students. They will not receive any of his massive wealth as we've seen by his recent gift to the Gates Foundation (education again).

Maybe this is not a discussion for this thread but the vast majority of wealthy in the US are first generation. Money tends to recycle in the US. These people had considerably less education than their children too however a common thread amongst this group is they took a risk and started a business (close to 2/3 of wealthy in the US are small business owners). Very few of these people have received any type of legacy (inheritance).