Income Inequality: Myths and Reality

Income Inequality: Myths and Reality

The World is Getting Better

Even as we stare down the maw of a global pandemic, societal unrest, unmitigated natural disasters, and tensions between global superpowers the stats don’t lie. We’re living in the least violent and most prosperous time in human history.

wealth inequality
This comes at the cost of no longer being dashing

This, however, bespeaks a mistake in the way we think about the world. Humanity trends towards improvement, at least in terms of the stats. There are countless examples (and of course, in the likes of events like WW2, counterexamples) of people staring into the past and saying ‘we’ve got it much better now’. The fallacy comes in the complacency that such comparisons might imbue; just because things are getting better on the whole, prima facie, doesn’t mean there isn’t significant backslide and room for improvement.

One domain that speaks to this statistical whitewashing is that of income inequality. Globally, income inequality between the richest and the poorest continues to contract. Extreme poverty, while still rampant and largely unaddressed in tens of countries around the globe, is declining overall. If one decided to take the global view they’d see room for celebration. And, as always, taking the global view does well to ignore the individual trials and tribulations of the actual humans who account for these statistics.

In fact, the only reason that income inequality is falling around the world is that countries like China and India are catching up to the developed world in terms of class. China’s middle class in particular has been burgeoning at astonishing rates, with the only real slowdown in decades heralded by COVID-19. 600 million people suddenly rising out of poverty does wonders for stabilization in income inequality on a global scale.

Wealth inequality, China, and Shanghai

We in the West, however, ought to take a more nuanced view. While income inequality has been falling in developing nations, it’s on the rise in industrialized and first-world economies. There’s no doubt in the mind of anyone who thinks seriously about the nature of money, politics, and power that a grifter class has been expanding its massive influence into every domain where the levers of power may be pressed. However, the conspiracy is more fraught than a basic macroeconomic view would have us realize.

The same statistics that would invest us with optimism (global ones) happen to be most responsible for the rise of wealth inequality in developed nations. Namely, globalism (capitalism without borders, one might say) has divested the US and European economies from their workers. Responsibility to country and to community investment has been anesthetized by profit motives with unbelievably sweeping margins. That this is done on the backs of indentured servants in China or at the closure of entire towns in the US midwest does not matter; globalism serves the bottom line of those capitalists who are no longer beholden to the ideals of country.

There’s much talk in right-wing circles about ‘the globalists’. For a non-conspiratorial view of those who could be described as such, we need to look no further than multinational corporations like Nike and Foxconn.

Redistribution: a real solution?

Most pundits of socialism and redistributive efforts in the US like to look at the Nordic countries for guidance on how effective these schemes are. Comparisons are always of value, and I do believe we should take a close look at how these countries operate and pay for their extensive social programs. This is relevant in context to the article because many believe that redistribution and taxation of the wealthiest individuals is the only way to deal with wealth inequality and that some Nordic countries (like Norway, with the lowest wealth inequality in the world) are dealing with this effectively already.

Wealth inequality and Norway

But are they? Income inequality in the United States tends to center the conversation around billionaires like Zuckerberg and Bezos. To give you some perspective, just the top 9 richest men in the world control more wealth than the bottom 50% combined.

Focusing on these extremes brings up ideas of wealth taxes and minimum wage laws. To further thicken the stew of uncertainty, presidential hopefuls like Sanders liked to bring up the Nordic countries as examples for the US to follow in addressing wealth inequality.

But how do these countries actually pay for their massive social programs?

Anyone who earns more than 1.2 times the national average salary in most of these countries will end up forking over more than 50% of their income in taxes. Payroll and income tax burdens are massive and the Nordic tax base is primarily low-middle class citizens. Taxes on very wealthy individuals are similar to what they are in the US. Corporate taxes are, with the exception of Sweden (thanks to its huge reserves of oil) are lower than they are here.

That’s right: the Nordic countries didn’t ‘address’ income inequality in the way we talk about the phenomenon. They didn’t drive the corporate robber barons to heel or curb the millionaire class’s accumulation of wealth. They just taxed regular people at a rate commensurate with the services people get from those taxes.

Profit: Is it Plunder?

Profit exacerbating wealth inequality

The idea that ‘profit is plunder’ has gained credence mostly among the Marxist intelligentsia, largely because Marx and Engel’s ‘Communist Manifesto’ generated this thesis. They posit that since it’s the workers who push out any products that generate profits it’s also the workers who should reap those profits.

It’s a quaint idea. And if everybody was equal enough before starting a factory to simultaneously generate the same idea for the same product and put in the exact same amount of work to build the factory for that product than it would be justified. Since none of us have yet figured out psychic capitalism, however, then we’re left with giving people the credence for their own ideas (intellectual property) and letting people work for by signing contracts with an employer of their own volition.

Imagine if every author had to split the profits from his books with those he mentioned in his acknowledgments, or with each of his English teachers and the other authors who inspired his work.

Innovation and wealth inequality go hand in hand

Profit is what drives capitalism and innovation. Though we’re socially programmed to reject a profit motive, it stands that capitalism and the riches generated from it find their genesis in human greed and profit motives. It just so happens that this system is better than feudalism, communism, and socialism at increasing the wealth of nations.

Profit creates wealth inequality. The question has to be asked: would we be better off without Bill Gates and his billions of dollars even though we wouldn’t have Microsoft? And, further, would that 50 billion dollars controlled by Gates have even been created out of the ether if Microsoft never existed?

Microsoft created wealth inequality, but improved our lives

This is not to say there’s no middle ground. It’s ridiculous that some humans can buy the political sphere of entire geographical regions. But the reality of inequality in developed countries is that it’s not necessarily making us poorer; there’s not much evidence that without these uber-capitalists the rest of us would have more money in our wallets.

Businesses and corporations simply aren’t bound by geographic borders the way government agencies are (besides, you know, the CIA). If they don’t like US corporate tax policy, possibly rewritten by a socialist president at 50%, they can set up headquarters in Dublin and then operate their plants from China while still selling in the US market.

Ireland, the tax haven
Ireland is actually green because of all the money you save in taxes by setting u shop there

In other words, uncompetitive corporate taxes and judicious regulations drive businesses and corporations out of the US. The reason they can accumulate so much wealth by operating elsewhere is that they don’t have to pay their workers very much or abide by environmental standards. Though they may sell as many products if they decided to produce those products in the US, the profit margin wouldn’t be nearly as large.

Wealth inequality in developed nations, once again, is an offshoot of globalism. It’s not that we don’t want to hold corporations accountable. Everyone knows it’s not OK to use Uighur slave labor to put your products together and that dumping your toxic waste in the river is evil. However, we’d be hard-pressed as a nation to force corporations not to leave. As will be expanded on below, there’s no easy answer to this question of global corporate ethics (something which actually doesn’t really exist anyways).

What’s certain though is that driving businesses out isn’t likely to fix wealth inequality any time soon. We need to be realistic about who innovates in this country and how innovation can provide jobs to people in the US.

Manufacturing leaving the US created wealth inequality

The best way to tackle the problem of uneven wealth is readily available jobs with opportunities for advancement and good pay. Tech companies have been providing such jobs, but the US obviously needs more of them. Part of that will come from finding a solution to the globalist model of corporatism, but another part will come from people being incentivized toward creativity with the promise of affluence.

What about Minimum Wages?

Here’s an example that surprises most people: most Nordic countries (and Switzerland) don’t have minimum wage laws (as referenced in the article cited above). Instead, trade unions use collective bargaining to set the industry standards for minimum wage. This practice goes all the way back to WW2 and is one of the reasons the Nordic countries were able to avoid fascism.

And fascists don’t do well in cold weather

Unions come with their own problems, of course; however, in the Nordic countries, they seem to do well because societies have accepted unions as experts in the professional domains, something that the government certainly cannot claim to be.

Companies themselves often fall on different sides of the picket line. On the one hand, they want to pay their employees less and up their profit margin. On the other, mega-corporations know that getting a minimum wage law passed can eliminate their competition without them having to do a thing (because they have the capital to narrow their margins until their mom and pop competitors are out of business).

Wealth inequality used to be more systemic
Interestingly, police forces were created for union-busting

This debate also leaves out a crucial piece of the inequality puzzle, discussed earlier: globalization. Supply-side manufacturing and businesses have the most to gain by ‘going global’ and paying their workers 2 dollars an hour in Bangladesh. These arrangments labor under the awkward trinity of decreasing wealth inequality in developing countries, increasing it at home, and getting people to buy cheap products produced with possible slave labor.

The problem, then, becomes one of policy as well as of public responsibility. How can we force companies to stay in the US? Just how much government control do we want to give our representatives over a private business, and how much is too much? What incentive would companies have to operate here if they know they’ll be stuck and possibly nationalized?

The onus falls just as readily on the general public, even for all our complaints about billionaires, grifters, and inequality. Namely: we vote with our wallets. We throw money at Amazon, Nike, Apple, Mcdonalds, and Walmart. If the US population collectively decided to stop buying from companies who produce their supplies in China or elsewhere then we’d see a mass exodus of companies back to the United States. It’s easy to put the blame on greedy capitalists while forgetting that we’re all equally greedy consumers.

One fruitful solution would be passing minimum wage laws for companies that balloon over a certain size, like Walmart and McDonalds. When McDonalds can pay workers $8 per hour in Virginia but must give them $15 per hour in Seattle we know intuitively that McDonalds is still operating at a high-profit margin in Seattle. It’s small businesses that get hurt by minimum wage laws, so it probably ought to be giant corporations with ridiculous margins who must pay cog-in-the-machine employees for their soulless work. If the CEO has to take a pay cut for that to happen, then boo-hoo.

Wealth inequality starts at McDonalds
McDonalds may be the exception by making literally no one’s life better

Is there a Solution?

This is one of the hardest questions we at Liberty Revolt Media have yet had to contend with. Obviously there’s no easy answer; we’d be lying if we said there was. This article seeks to illuminate the issue as multi-faceted can of worms that it is. We all balk at Bezos’s 100 billion while simultaneously thanking our stars that Amazon Prime is a thing.

Even billionaires know their wealth is ridiculous. Zuckerberg has admitted as such, and so has Warren Buffett. But still, no one’s sure exactly what can be done about it. Looking to Scandinavia is no help. We’ve seen now that the fecundity of their welfare state is wholly dependent upon a tax base most Americans aren’t willing to carve themselves into.

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