Demonstrators have been gathering on Wall Street and elsewhere to complain about banks and brokers and the grossly unequal distribution of income and wealth in this country. They certainly have something to complain about. Most people have no idea how unequal that distribution is. The figures are stunning.
Economists define wealth as the value of your assets—everything you own that’s readily convertible to cash—minus your debts. The most recent reliable data we have is from 2007, but no one argues that things have gotten better in the past four years. As of 2007, the top 1 percent of households owned 34.6 percent of all privately held wealth, and the next 19 percent had 50.5 percent, which means that the top 20 percent of households controlled an astonishing 85 percent of the wealth.
By the way, almost all the wealth of the bottom 80 percent comes from the value of their homes, a value which has been evaporating for the past few years.
And, as you tumble down the economic ladder, things get worse. The bottom 40 percent—in other words, almost half of U.S. households—hold a trivial 0.3 percent of the wealth in this nation. No, that’s not a misprint; that’s zero point three, essentially nothing.
And what do the people at the top have? The top 10 percent have 80 percent to 90 percent of stocks, bonds, trust funds, and business equity, and more than 75 percent of non-home real estate. Some people—oh, those class-warfare types!—argue that when a group controls that much of the income-producing capacity of a country, they essentially control the country.
How come the riches of this country are held by so few people while the overwhelming majority has so little? Well, the biggest and simplest reason is that different people earn vastly different amounts of money for their work. Can you stand just a few more mind-bending statistics? In 2006, the top one percent of earners walked off with 21.3 percent of the nation’s income, the next 19 percent below the top took 40.1 percent, and the rest of us, the usual bottom 80 percent, got a crummy 38.6 percent of what was earned in this country.
Yes, there’s always going to be income inequality. Some jobs pay more, some pay less. No one is planning to arrange the economy so that all jobs pay the same wages and everyone earns the same amount of money. But some countries have more income equality than others. The United States has one of the most unequal distributions.
OK, no more statistics! Here’s just a simple list. Sweden has the most equal distribution of incomes, followed by Norway, Austria, Germany, Denmark, Australia, Italy, Canada, France, (yes, we’re pretty far down on the list) Switzerland, the United Kingdom, Egypt, India, Japan, Israel, China, Russia, Iran and (oh, here we are!) the United States.
Most people don’t know the miserable facts. (You do, simply by having read the above paragraphs.) In 2010, psychologists Dan Ariely of Duke University and Michael I. Norton of Harvard Business School showed pie charts representing various levels of wealth distribution and asked people to choose the one they thought represented distribution in the United States. In another, they asked people to choose which society they would prefer to live in. Ninety percent or more of the 5,522 respondents—whatever their gender, age, income level or party affiliation—thought that the American wealth distribution most resembled one in which the top 20 percent has about 60 percent of the wealth. In fact, as you now know, the top 20 percent control about 85 percent of the wealth. Recently, the same experiment was carried out by Paul Solman on PBS’ News Hour. No surprises. He got essentially the same results.
Our fellow citizens aren’t mean-spirited bastards. Yes, they’re uninformed. And yes, they hold the comforting belief that the top 20 percent possess only somewhat more than half the wealth of the country. They can’t believe the top fifth actually control 85 percent. It’s clear they would like to live in a country that has a more equal distribution of wealth. And some of them are beginning to act on that desire for more equality.
Those demonstrator assembling on Wall Street, those 700 arrested on the Brooklyn Bridge this past weekend, are drawing attention to some nasty facts about our economy. Similar crowds have sprung up in other cities as well. For our economic system isn’t part of nature; it’s manmade and can be changed. Currently we live in a nation where poor people buy lottery tickets knowing that the odds of winning are astronomically against them. But they also know that greater odds are stacked against their ever earning enough money to climb out of poverty, no matter how hard or long they work.