The ‘Global One Percent’ Myth

George Rebane

The income inequality issue will not go away.  It is Team Obama’s main causus belli, and underpins all of their re-election strategy.  But the progressive tenets of income inequality are a myth that has again been exposed, most recently using data from a Swedish study that is reported in the 9mar12 WSJ piece by Dr Allan Meltzer.

Citing that data Meltzer points out that the recent increases in the incomes of the developed countries’ top earners are easily explained away by the Great Doubling of the world’s competitive workforce that occurred after the Fall of the Wall.   This affected the middle and lower echelons of workers and caused “the top 1% (to) gain relatively because they are less affected by the hordes of newly productive workers.”



This, of course, is denied by all on the Left ranging from their street twits (aka the recent occupiers) to their ‘honorables’ in Congress.  As Meltzer points out –

The big error made by those on the left is to believe that redistribution permits the 99% or 90% to gain at the expense of top earners. In much current political discussion, this is taken as an unchallenged truth. It should not be. The lasting opportunity for the poor is better jobs produced by investments, many of which are financed by those who earn high incomes. It makes little sense to applaud the contribution to all of us made by the late Steve Jobs while favoring policies that reduce incentives for innovators and investors.

The mythically characterized income inequality is not a phenomenon peculiar to only America, but as seen in the nearby graphic filched from the WSJ, it is common to all advanced countries.  And, as has long been argued in these pages, to ascribe the inequality as some sort of global capitalist plot to beggar the lower classes is simply inane.

Our system is democratic capitalism. In every national election, the public expresses its preference for taxation and redistribution. It is a democratic choice, not a plot controlled by one's most despised interest group. The much-maligned Congress is unable to pass a budget because it is elected by people who have conflicting ideas about taxes and redistribution. President Obama wants higher tax rates to pay for more redistribution now. The Republicans, recalling Ronald Reagan and Margaret Thatcher and much of the history of democratic capitalist countries, want lower tax rates and less regulation to bring higher growth and to help pay for some of the future health care and pensions promised to an aging population.

Comments

[Ryan Mount]

In my limited travels around the world to both modern, industrialized and developing countries, I've made a couple of observations:

1) Despite what you may hear, people greatly admire the USA for all our faults. Yeah, we're an easy criticism target, and I've been cornered on more that one occasion (especially in Europe) for our dysfunctional foreign policy, but at the end of the day, people like us.

2) The USA is one of the few places on planet Earth were the under-privileged/poor are over weight.

[Barry Pruett]

Nice article! Thank you.

[Douglas Keachie]

So let's see, we go from 8% in 1970 to 17% in 2009, and because Europe is lagging slightly, all is well? I thought those were all the evil socialistic medicine, never to be emulated, countries? Following the lead of the quiet sunspot people, how soon before the 1% owns 40%?

[Douglas Keachie]

Oh, I notice the USA chart starts right in 1913? No figures before then, or just hiding the wealth, pre-income tax?

[George Rebane]

DougK 1236pm - I do believe you are again keeping your eyes on the wrong prize. The correct prize is maintaining the quality of life of those who no longer can generate wealth through their own labors. Remove that ability from the 1%, and you have the quagmire of demonstrated universal misery.

Are you and yours not a little disturbed by Obama's bull pucky of promising to bring back millions of "manufacturing jobs" to the US as response to our (the government's?!) overall efforts to increase America's productivity? Manufacturing at increased productivity levels employs ever fewer people. Ask why California's Intel is building the world's biggest chip factory in Arizona - an event demagogued by Obama as he celebrated all the new manufacturing jobs that Intel's enterprise would bring, NOT! The attendees who knew looked at each other in obvious embarrassment, either the President was purposely lying through his teeth, or was butt stupid about modern manufacturing.

[billy T]

Nice link, Dr. Rebane. I liked the part about "unchallenged truth'. Like pissing on yourself. I have posted around the net that taking one dollar out of Bill Gates or Steve Jobs pocket does not put one penny in my pocket. Neither does cutting Kobe Bryant's pay by a grand does not help me a bit. Very negative responses to my point of view, like I don't get it. If you tax my employer to death, 60 thousand employees are on the street, maybe more. Think it was just last year when Microsoft or one of the Big Boys announced setting up a big center in South Carolina or the like. The city and state gave the Evil Big Boy millions in tax cuts with the promise of jobs, jobs, jobs sold by politicians to the public. Then someone noticed there were only 83 parking spaces designed. Must be a mistake. Nope. Tech companies don't need a lot of employees. Think people who are poor or miserable are especially envious towards the 1%ers. From their pitiful state of mind they have chosen for themselves they rail against the rich boys who were born with a silver spoon in their mouths as well as being shot in the ass with diamonds. In their heart of hearts they dream of being like the ones they disparage. It is so unfair and life sucks. In India chewing gum is a sign of wealth. Wrigleys has seen their sales to India skyrocket.

[Brad Croul]

The way out for the 99% is to become the 1% by creating competition for the money now going into the coffers of the 1%.

If the number of companies making a given product were doubled and the products were equally acceptable to consumers (because of price, quality, reliability, etc.), the newly minted companies would take money from the pockets of the already successful 1% and increase the wealth of the new CEOs. The number of people working in those industries will "double" putting more people to work, possibly driving labor prices higher due to scarcity of qualified workers. Perhaps those workers will demand higher wages, moving them closer to the 1% category.
Sure, there are a lot of "what ifs" with the above scenario, but creating wealth is a more honorable goal for the 99% than crying for a handout.

Start with a food concession and you could become a Taco Bell, McDonalds, Jimboys or a Beach Hut Deli.

The problem with taxing the 1%ers to help the 99%ers through government programs is that the government cannot be trusted to be a good steward of the money.

[THEMIKEYMCD]

To discriminate based on income is no different that to discriminate based on race, religion, sex, etc.

Discrimination is discrimination (even if accepted by a progressive/collective mob).

Bigotry is bigotry.

http://en.wikipedia.org/wiki/Bigotry

http://en.wikipedia.org/wiki/Discrimination

[Douglas Keachie]

So what else is new? Kurt Vonnegut,, "Player Piano" discuss thoroughly a society in which the bulk of the population lived on the edge, and the few ran a technocracy. Funny thing, though, he had no solutions, and I don't see any geniuses here pointing to any solutions other than, "live with it." I suspect this will not work IRL, and that the quality of life for all will suffer.

[Michael Anderson]

"Player Piano" is one of the best. My favorite pieces of alliterative nonsense are all things Samuel Beckett.

[billy T]

"and I don't see any geniuses here pointing to any solutions other than, "live with it." The Warren Buffets of the world are not the problem. They are few and far between. The problem is complex such as the cry from the Marshall plan through the sixties to raise the standard of living for 3rd world countries. Forgive their debt and all that stuff. When the 3rd world and developing countries started making our stuff, then the American worker saw his standard of living decline, albeit our standard of living is the envy of the developing world. As Ray pointed out, our "poor" are overweight. Just remember the pics of all those poor folk sent to the Superdome after Katrina and you had to wonder if missing a couple of meals might actually be good for them. But the real issue is human nature and greed and envy and transferring blame from oneself to others. If one is honest with himself, he can see the totality of every decision he has made during his adult lifetime has placed him exactly in the position he is in now, be that good, bad, or indifferent. Playing the victim card for high student loan debt or buying a house at the wrong time or working in a field that will be a dead end or marrying the wrong person or not having healthy children or not getting the promotion or others not realizing one's true worth or...or....There comes a time when we are no longer victims but volunteers to remain in victim hood mentality. If one says "screw it, the game is rigged", when there are millions of unsung heroes that would take offense to that statement. Change requires risk and saying "what can I do? What can I do to change my situation?" Mrs. Sees started her candy business at the young age of 80. Harriet Beecher Stowe wrote her book at a kitchen table holding crying babies and having pots and pans catching the drops falling from the leaky roof to keep her paper dry. The guy who started the Holiday Inn said his secret was working half time, i.e., half time meant 12 hours a day, 7 days a week. For those of us who have no aspirations to make a killing or be a mover and shaker, the secret is not having what you want but wanting what you have.

[Douglas Keachie]

"The guy who started the Holiday Inn said his secret was working half time, i.e., half time meant 12 hours a day, 7 days a week."

That is neither a secret, and most importantly, no guarantee,
Oh damn, I'm really stuck with ME!

"The Magic Formula, there is No Magic Formula." ~ Douglas Keachie, 1970 or so.

[billy T]

Spot on, Mr. Keachie. Yep, where ever I go, I take me with me. And the man in the mirror is the problem every time.

[Douglas Keachie]

The poor are getting smarter. How much California water could we save from evaporation, while simultaneously generating electricity to pump the stuff?

http://www.facebook.com/photo.php?fbid=341578432551857&set=a.267230346653333.64522.150718398304529&type=1&theater

[Bonnie McGuire]

Thank you George for your article that stimulated some marvelous comments. Thank all of you for your interesting common sense observations.