In 1992 DENG Yiaoping famously said: “To get rich is glorious” (致富光荣)[1]. It reflected the “spirit of the times” that affected or infected the REAGAN and THATCHER years. The metaphor was that of a tide that raised all boats – does it matter than some are raised early or faster?
If a few get rich faster than the rest, income inequality rises. Income inequality is conventionally measured by the Gini coefficient[2] (GC). A “high” coefficient means that income is skewed toward the “few”. In 2005 the EU GC was 31[3], as against 46.9 in the US, and (roughly speaking) China. Recently US[4], China, and India have all experienced steep increases in the GC – this perception of rising inequality may be lead to political instability.
The GC is an abstract value – people don’t get a full feel for what it means. I’ve come across a study, recently[5], highlighting the very real impact of changing inequality. Assume that as GDP increases, salaries all grow accordingly. One takes “median income” as the reference, for this is a good indicator of how the “middle class” fared. Compare now this “growth path” with what actually happened between 1975 and 2009 in the US. Here is the resulting graph from pg. 71:
Whether it is a “tax” – an indicated or not is a matter for discussion. Had all incomes just grown at the overall average rate, however, median family income today would be 14% higher. We are talking here of “family income”. Personal income has fared worse, and families have managed to keep up with the standard by adding a second income[6].
[1] http://en.wikipedia.org/wiki/Deng_Xiaoping See also: Ezra P. VOGEL (2011): Deng Xiaoping and the transformation of China. Belknap, Harvard University Press, Vambridge Mass.
[3] http://www.eurofound.europa.eu/areas/qualityoflife/eurlife/index.php?template=3&radioindic=158&idDomain=3
[5] Josh BIVENS (2011): Failure by design. The story behind America’s broken economy. IRL Press, Ithaca, N.Y.
[6] See: Elizabeth WARREN – Amelia WARREN TYAGI (2003): The two income trap. Why middle-class mothers and fathers are going broke. Basic Books, New York.
SCHLUMPP
May 11, 2012
Once we will admit (animals do) that some of us are smarter, faster and stronger there is no reason to be jalouse. It is a major error of humanity to aim on “égalité”. The only equality I know between poor and rich is that they all have to die. This is why religion is an other indicator of instability.
Aldo Matteucci
May 11, 2012
Marianne,
if you have read my blog entries carefully, you’ll have understoud that recognizing “smarts” as animals do is a perilous analogy. First, “smarts” – as also in animals – may be a matter of bluff and self-assertion (see ZAHAVI et ZAHAVI (1997); The handicap principle. A missing piece in Darwin’s puzzle. And the dynosaurs were “smarter” until done in by changes in environment. Even in the natural world, “smarts” is an incxidental concept.
Secondly, genetics plays a lesser role than our social structures, so the “smarts” is a social, not a material construct. I recommend you read Jonnie HUGHES (2011): On the origin of teepees. The evolution of ideas (and ourselves).
True, we are all different, but differerence is a far cry from hierarchy.
You should free yourself of the myth of “survivial of the fittest” and “just deserts” – all ideology by extractive elites on their way to put both trotters in the trough that others have filled.
Aldo Matteucci
May 13, 2012
Marianne,
in the first round I was NOT arguing one way or the other whether the rich deserved getting richer or not.
I was only making visible what it means. The move of the Gini coefficient from 40 to 48 in the US implies that the MEDIAN family income is 14% less that if everything had remained proprtionally the same.
Now, on an individual level, I have no problem with Mr X getting richer.
But wthen the MEDIAN houshold income CLASS loses 14% of its putative income to the rich CLASS I start wondering. Did this CLASS deserve it?
Politically and pragmatically, once the Gini gets above 40, people start grumbling seriously.
Does not matter whether justifyiably or not – such is life.
We move into instability, even pre-revolutionary conditions.
So one should at least understand why people grumble.
Aldo