The Gap Between the Poor and the Super Rich

There has always been a large gap between the poor and the super rich. In the USA today that gap is really between the super rich (let's say for the sake of argument the top 1%) and everybody else. In 1990 the richest 1% in the US owned 40% of the countries wealth. This figure comes from the Federal Reserve a corporation not known for spreading liberal conspiracy theories. This inequality in wealth distribution is nothing new to the US it is the inevitable result when the financial oligarchs have too large a say in the political process in particular in the laws that govern taxes and corporate governance.

Just as bad as the inequality in wealth distribution in the US is the inequality in the income distribution. This level of inequality, which is still growing, has not been seen since the years just before the Great Depression. How do we know this? There is a very simple mathematical means to measure the inequality in wealth distribution it is called the Gini coefficient or index.

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Understanding the Gini index is not that complicated. It is a number that has a range of zero to one. Where zero means perfectly egalitarian wealth distribution and one means perfectly unequal wealth distribution. For example if there was a country with a population of 100 and that country had a 'national wealth' of $100. If everybody owned one of those dollars then the Gini index for that country would be 0. If a single person owned the entire $100 and 99 people had nothing then the Gini index for that country would be 1. So how do you calculate a Gini index? For that you need to do a little math and it is based on something called Lorenz integration.

The more interesting question (unless you just love math) is what does a high Gini index mean? Well it means that to afford the house, food, cloths, healthcare to raise a family that one wage earner could pay for many decades ago now requires two jobs for two members of the family while still slowly sinking into debt

Once you look up from the pile of debt and realize that it wasn't always like this (just look at the Gini index over time) the very next question that you should be asking is; how did this come to be?

The transfer of wealth turns out to be a complex discussion. It happened through a confluence of events and people all working towards the same goal. It would be easy to try to read into the previous statement the notion of a conspiracy theory, however no conspiracy could have been as efficient at the transfer of wealth that has taken place. What is more efficient than a conspiracy (besides a dictatorship) it is the magic hand of greed coupled with corporate influence of government under a free market system gone berserk.

It was an unplanned, uncontrolled, unregulated move that; suppressed real wages, increased the cost of living, move from a manufacturing economy to a service industry economy (meaning lower wage service jobs for the many and huge bonuses for the financial services industry few) and here is the crucial part, funding the entire transformation with a tsunami of credit (which helped the financial services industry grow from 8% of the GDP in the 70's to over 40% of the GDP today).

Of course credit is just a euphemism for debt. The drive to suppress real wages meant that people had no choice but to acquire debt to pay for living expenses. The common right wing rant of people living beyond their means buying luxury items on credit is nonsense. It is a fallacy in two regards. The first is that a large number of people are putting housing payments and food expenses on their credit cards. The second is that the US economy is 70% consumer spending. In order to fuel the economy (i.e. create corporate profits) the financial services industry had to make it as easy as possible for people to continue to buy products using credit. Without real wages this is the only way for the economy (GDP) to grow. The financial services industry grows, and consumers are stuck with debt. Hey two out of three isn't bad, right?