Magic Poriferan
^He pronks, too!
- Joined
- Nov 4, 2007
- Messages
- 14,081
- MBTI Type
- Yin
- Enneagram
- One
- Instinctual Variant
- sx/sp
Copied from my post in a thread, with all the original writing errors. Seemed like something I should keep for future reference.
Yes, inequality, particularly extreme inequality of wealth (as I imagine it) does harm to a society. I'm going to list some reasons why, although I'll be alternating between wealth and income specifically.
1:
This is number one because it is the most important. The more inequality of wealth there is, the more corruption there is and the less chance democracy has of surviving. As wealth is concentrated a smaller number of people have a bigger share of not just money but power itself. Power to get politicians elected, to lobby for bills, to bribe people that should be monitoring/investigating them, to influence what the media says, etc. It comes to a point when 1% or less of the population has more power in the process of government than the rest of the 99%. There is no representation.
2:
The more concentrated wealth is the poorer publics services will be, in particular, infrastructure will get worse, education will get worse, health care, law enforcement, etc.. will all get worse. The reason is that the more money a private citizen has, the more ability they have to buy private services better than public services. As this becomes available to them, they will become increasingly less cooperative in funding public services, because why would I want to spend money on a road that I'm never going to use when I could spend it on improving my personal helicopter? As the distribution of wealth becomes more hyperbolic, that means a larger and larger percentage of wealth that could be used to fund public services goes into the hands of people who have less and less reason to fund public service, and at the exact same time the number of people who'd benefit from a public service grows, as more people will gradually fall into a position opposite of the wealthy elite (that is, they cannot afford good private service and need to split costs between them just to get any service at all).
3:
Employment incentives become perverted. Concentration of wealth makes it more likely that you can get a well paying job that provides very narrow utility. That is, it increases the odds that you can get paid more for catering a wealthy private citizen than you can for manufacturing, being an engineer, police officer, doctor, lawyer, etc. Economic incentives start weighing toward those things that indulge the whims of an elite few and away from things of great utility to society at large. This could be seen as the other end of the issue noted in point 2.
4:
The economy can actually stagnate as a result of wealth inequality. It is true that rich people spend more money than anyone else, but they also have more money. The important question is how much they spend as a percentage of their wealth, and the answer is that they spend less than anyone else. Once you move beyond the middle class, the richer a person gets the less of their total wealth they spend. When all the country's money pools into a few peoples' hands, that means a larger percentage of all of that money is going to be saved instead spent, at best just paying out interest and probably getting eaten by inflation. This problem is compounded by the fact that as the rich get rich, they will spend even less proportionally. So, more of the country's money falls into the hands of people that will spend it less and less (yes, even as they spend it on their private goods instead of public services), slowing down the economy and making it more vulnerable to recessions, which is great since...
5:
...Volatile financial behavior will become more common. As the elite have a larger cushion of cash to sit on and better ability to evade/manipulate law enforcement, they will become more likely to do questionable and risky business money. I'm talking about crap like our recent great recession or the panic of 1907. And since these people have so much money, they will have the ability to capriciously throw around a much larger absolute and relative amount of money, meaning the impact of their behavior will be greater than if any random person took a gamble.
6
It is possible for wealth to be redistributed so fast that some people will get poorer in absolute terms even as the country gets richer. And thanks to the way a hyperbolic distribution works, the number of people in the demographic that gets poorer will grow, while the number of people in the demographic that gets richer will shrink. This means that if the trend continues you can eventually hit a point where more than half the population gets poorer even as the country is supposedly getting richer. To put it another way, it is possible for both the GDP per capita and the Gini to grow at such a rate that an increasingly large number of people will lose money even as the GDP per capita is increasing, thanks to the Gini. However, let's consider that the situation doesn't even have to be this extreme to be worth stopping. Even if everyone is getting wealthier, odds are you can speed that process up by reducing inequality. If you had two countries with otherwise equal economies, and they set a mark for reducing poverty, and one did it by increasing the GDP PC alone, and the other by increasing the GDP PC and decreasing the Gini, country two would hit the mark a hell of a lot faster. Hopefully I don't have to explain the math behind all of this, because I think it's pretty simple and easy to visualize. The point is, inequality reduces the amount that a country's population actually receives any wealth.
7:
And this is really a culmination of the other points, but, inequality of wealth actually hurts inequality of opportunity. A person at the bottom has higher to climb, fewer sources of support, a much larger pool of competitors, and a more powerful more corrupt authority stacked against them, the more unequal the distribution of wealth is. The odds are no where close to even distributed amongst the population, and the largest chunk of the population has the worst odds.
One last comment I want to make is that discussions of inequality almost invariably settle on a false dichotomy. The settle on the notion that you can either grow the economy or make it more even, but you can't do both, and so then the argument about which is better. I'm tired of the bullshit. I have looked, and looked, and looked, and I have not found evidence that we have to pick. We can both, and doing both is pretty much always better than doing one.
Yes, inequality, particularly extreme inequality of wealth (as I imagine it) does harm to a society. I'm going to list some reasons why, although I'll be alternating between wealth and income specifically.
1:
This is number one because it is the most important. The more inequality of wealth there is, the more corruption there is and the less chance democracy has of surviving. As wealth is concentrated a smaller number of people have a bigger share of not just money but power itself. Power to get politicians elected, to lobby for bills, to bribe people that should be monitoring/investigating them, to influence what the media says, etc. It comes to a point when 1% or less of the population has more power in the process of government than the rest of the 99%. There is no representation.
2:
The more concentrated wealth is the poorer publics services will be, in particular, infrastructure will get worse, education will get worse, health care, law enforcement, etc.. will all get worse. The reason is that the more money a private citizen has, the more ability they have to buy private services better than public services. As this becomes available to them, they will become increasingly less cooperative in funding public services, because why would I want to spend money on a road that I'm never going to use when I could spend it on improving my personal helicopter? As the distribution of wealth becomes more hyperbolic, that means a larger and larger percentage of wealth that could be used to fund public services goes into the hands of people who have less and less reason to fund public service, and at the exact same time the number of people who'd benefit from a public service grows, as more people will gradually fall into a position opposite of the wealthy elite (that is, they cannot afford good private service and need to split costs between them just to get any service at all).
3:
Employment incentives become perverted. Concentration of wealth makes it more likely that you can get a well paying job that provides very narrow utility. That is, it increases the odds that you can get paid more for catering a wealthy private citizen than you can for manufacturing, being an engineer, police officer, doctor, lawyer, etc. Economic incentives start weighing toward those things that indulge the whims of an elite few and away from things of great utility to society at large. This could be seen as the other end of the issue noted in point 2.
4:
The economy can actually stagnate as a result of wealth inequality. It is true that rich people spend more money than anyone else, but they also have more money. The important question is how much they spend as a percentage of their wealth, and the answer is that they spend less than anyone else. Once you move beyond the middle class, the richer a person gets the less of their total wealth they spend. When all the country's money pools into a few peoples' hands, that means a larger percentage of all of that money is going to be saved instead spent, at best just paying out interest and probably getting eaten by inflation. This problem is compounded by the fact that as the rich get rich, they will spend even less proportionally. So, more of the country's money falls into the hands of people that will spend it less and less (yes, even as they spend it on their private goods instead of public services), slowing down the economy and making it more vulnerable to recessions, which is great since...
5:
...Volatile financial behavior will become more common. As the elite have a larger cushion of cash to sit on and better ability to evade/manipulate law enforcement, they will become more likely to do questionable and risky business money. I'm talking about crap like our recent great recession or the panic of 1907. And since these people have so much money, they will have the ability to capriciously throw around a much larger absolute and relative amount of money, meaning the impact of their behavior will be greater than if any random person took a gamble.
6
It is possible for wealth to be redistributed so fast that some people will get poorer in absolute terms even as the country gets richer. And thanks to the way a hyperbolic distribution works, the number of people in the demographic that gets poorer will grow, while the number of people in the demographic that gets richer will shrink. This means that if the trend continues you can eventually hit a point where more than half the population gets poorer even as the country is supposedly getting richer. To put it another way, it is possible for both the GDP per capita and the Gini to grow at such a rate that an increasingly large number of people will lose money even as the GDP per capita is increasing, thanks to the Gini. However, let's consider that the situation doesn't even have to be this extreme to be worth stopping. Even if everyone is getting wealthier, odds are you can speed that process up by reducing inequality. If you had two countries with otherwise equal economies, and they set a mark for reducing poverty, and one did it by increasing the GDP PC alone, and the other by increasing the GDP PC and decreasing the Gini, country two would hit the mark a hell of a lot faster. Hopefully I don't have to explain the math behind all of this, because I think it's pretty simple and easy to visualize. The point is, inequality reduces the amount that a country's population actually receives any wealth.
7:
And this is really a culmination of the other points, but, inequality of wealth actually hurts inequality of opportunity. A person at the bottom has higher to climb, fewer sources of support, a much larger pool of competitors, and a more powerful more corrupt authority stacked against them, the more unequal the distribution of wealth is. The odds are no where close to even distributed amongst the population, and the largest chunk of the population has the worst odds.
One last comment I want to make is that discussions of inequality almost invariably settle on a false dichotomy. The settle on the notion that you can either grow the economy or make it more even, but you can't do both, and so then the argument about which is better. I'm tired of the bullshit. I have looked, and looked, and looked, and I have not found evidence that we have to pick. We can both, and doing both is pretty much always better than doing one.
