Look Out Below

The 2012 U.S. Presidential campaign focused, in large measure, on the efficacy of increasing taxes on wealthy Americans to help reduce the country’s unsustainable deficits and ballooning debt. Fuel for this debate is the fact that income inequality is now at levels not seen since the Great Depression. A study by the Economic Policy Institute, a research group in Washington, found that the top 1 percent of households in the U.S. now holds a larger share of overall wealth than the bottom 90 percent. The concentration of income in the hands of a few is more than a fairness issue. According to Jonathan D. Ostry and Andrew G. Berg, two economists at the IMF, countries with high levels of inequality had shorter periods of economic expansion and, therefore, less growth over time.

Growing inequality is not just an American issue – it is a worldwide phenomenon. Britain, Canada, China, India and even egalitarian Sweden, have seen a rise in the share of national income vested in the top 1 percent. In fact, as the number of extremely wealthy people has soared, most people now live in countries where income disparities are bigger than a generation ago. According to Forbes magazine’s list of the ultra rich, there are now 421 billionaires in America, 96 in Russia, 95 in China and 48 in India. It wasn’t too long ago that becoming a mere millionaire was an uncommon achievement.

Mind the Gap: Dangers Lurk as Income Inequality Widens is an article I wrote in 2010 that was published by Green Herald magazine. It discusses some of the many reasons for the inequitable distribution of income – “geography, ethnicity, sexual and religious prejudices, transparency and corruption issues, ineffective tax and education policies and unrestrained greed.” It also points out two of the major concerns associated with increasing income disparities – poverty is perpetuated when the poor lack access to quality education and resentments fester and can lead to social unrest. In addition, economic research suggests that income inequality weakens overall demand for goods and services and often produces policies that sow the seeds for financial crises. More controversial studies purport to link widening income gaps with everything from obesity to suicide.

There is growing agreement that the world is becoming more unequal, and that the speed of these changes are particularly dangerous. Two widely- cited programs for mitigating this trend are to minimize fraud and cronyism and invest in the education of the young, particularly the disadvantaged. While there are other views on how to solve this gnawing problem, ignoring the issue is no longer a viable option.

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