Wealth Distribution Society

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Curious About the Distribution of Wealth in the US?

Published On: July 16, 2020

The distribution of wealth in the United States is a hot topic for those interested in sociology, economics, human rights and social justice in general. The ever-growing income disparity in the U.S. (income inequality) is at the heart of social justice movements, political campaigns and economic policy development. Every American from the top to the bottom of the wealth spectrum is affected in many ways by the state of our economy and the widening gap of income equality.

It may seem wealth distribution is a matter of economic data and statistics. But the economy is a representation of socioeconomic conditions and the valuing (or devaluing) of human work and trade. Plus, these socioeconomic conditions are caused and affected by an interconnected collection of factors that result in hierarchies of systemic social stratification. Social stratification and the quantitative and qualitative analysis of economic and social data are fundamental to the multidisciplinary study of sociology, as reflected in the Northern Kentucky University (NKU) Bachelor of Science (BS) in Sociology online degree program.

As the adage goes, the rich get richer and the poor get poorer. This saying is quite accurate for the U.S., considering the sky-rocketing income and wealth of the extremely rich and the stagnant income and wealth of the rest of the population. The richest are getting much, much richer as the poorest stay extremely poor.

There is constant debate as to what policies (taxation, regulation, subsidies, government-supported benefits, etc.) best serve the country’s economy. But there is little debate as to the statistics of income inequality inherent to the distribution of wealth in our country. This disparity has been reflected again and again in reports and the analyzation of data collected by many groups, from human rights-focused nonprofits (e.g., Oxfam ) to non-partisan policy think tanks (e.g., the Institute for Policy Studies [IPS]) to governmental bodies (e.g., the U.S. Bureau of Labor Statistics [BLS]).

A Snapshot of Wealth Distribution and Income Inequality Statistics in the United States

According to a report by NBER, the top 1 percent of earners in the U.S. in 2020 made, on average, 81 times more than the bottom 50 percent. In the upper echelons of wealth, an IPS report in 2020 found that America’s 20 richest people own more wealth than the least wealthy 50 percent of America’s entire population. The “Forbes 400” wealthiest Americans own more than America’s lowest-earning 194 million people.

BLS and Congressional Budget Office reports reflect similar income and wealth disparities and go deeper into comparing the growth of wealth and income over time. The BLS reports that “real earnings” (adjusted for inflation, etc.) of the lowest earners in the United States have not changed significantly since 1979, whereas the top earners’ income has grown steadily, exponentially so in the top 1 percent and even more so in the top .01 percent.

What Is the Effect of Income Inequality on US Urban Centers and Communities?

Increasing levels of income inequality, the relatively slow rate of inflation and minimum-wage increases, and the growing cost of living in most large urban areas have resulted in drastic change in the fabric and demographics of urban communities in U.S. cities. While many urban centers have generally long been home to lower income families, the relatively recent influx of higher economic class populations to these urban centers has caused substantial gentrification.

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Monied people come in, prices of housing, food and services go up, and the locals get pushed out. Gentrification has shaken and dispersed strong, historic communities of people. These localized communities are often generations old. Being priced out of their neighborhoods forces many people to move away from their families, jobs, cultures and support networks.

This has a negative, cyclical effect on the socioeconomic wellbeing of America’s urban low-income citizens. It can denigrate not only the health of people’s economic livelihood (and all aspects of health that stem from that) but also the perpetuation and strength of their cultures and traditions. In addition, the socioeconomic downward spiral of urban communities pushed out by gentrification only serves to further the country’s widening disparity of wealth.

The Bigger Picture for Sociology: Social Stratification

In the context of sociological studies, the distribution of wealth and income inequality in the U.S. (and globally) are considered an aspect of social stratification. Social stratification is a term used by sociologists to describe systems of hierarchy and social class within a society. This broader understanding of socioeconomic status addresses the larger perspective of how resources and power are unequally distributed between lower and upper levels of a society’s hierarchical grouping.

The main variable in how one’s “class” is generally defined is a person’s economic standing (wealth and income). Although economic status is a useful quantitative tool of measurement, sociologists take into account the many other factors that affect a person’s social ranking or socioeconomic status as well as correlations and causality between these various factors. Sociologists focus on the interconnected nature, or the intersectionality, of all of the conditions that affect social stratification of different groups.

The intersectional approach to understanding social stratification recognizes and analyzes the interplay between many factors that affect a person’s socioeconomic class and opportunity. Chief among these factors are the many systems of oppression that still exist in modern society based on race, gender, sexual orientation, religion and economic class.

As reflected in the aforementioned socioeconomic studies, average income and wealth among individuals in oppressed groups is disproportionately low, and staggeringly so for many. Women and members of minority racial groups make a fraction of what white men do for the same work. Social stratification involves many other layers of systemic hierarchy as well, from inherited wealth to social group connections and associated prestige and influence, not to mention access to education to social mobility.

According to intersectionality, these factors of income inequality and social stratification are mutually reinforcing, having causal relationships that lead to the cyclical support of further stratification. In our system of political lobbying (and donation-based funding) by wealthy individuals, corporations and like-minded policy groups, money can truly buy power, leading to legislation and policy that only reinforces systemic socioeconomic inequalities.

From the IPS to Oxfam, socially responsible organizations around the world have proposed many policies and regulations that could help reverse the trend toward income inequality. The power to pursue that reversal lies in the hands of elected officials and other policy makers, making sociology education and democratic participation more important than ever.

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Myths About Socialism: Redistribution of Wealth?

Probably one of the most common right-wing arguments against social welfare spending is that it constitutes “redistribution of wealth” or “sharing the wealth,” and is thus a road to socialism. Indeed, “socialism” is often defined by these reactionaries as the redistribution of wealth, which is seen as the ultimate evil because it leads to socialism, which is evil, and it’s evil because it entails the redistribution of wealth – you get the idea.

There are a few notable problems with this. First, socialism is far more than simply the “redistribution of wealth.” Second, redistribution of wealth happens all the time under capitalism, yet strangely the right-wing only complains when some hypothetical redistribution favors the working class as opposed to the capitalists. To understand why socialism does not equate to redistribution of the wealth, we must first ask what distribution means.

Distribution in economics refers to the manner in which total output or wealth is distributed among individual people or various factors of production. For the purposes of this article, distribution among individuals is the most relevant.

Human beings in a given society produce wealth, in various forms, and this wealth is distributed among the members of society via various institutions, laws and mechanisms. However, to speak about how and to whom wealth is distributed inevitably leads to asking questions as to who produced that wealth in the first place. Speaking about distribution without mentioning production is simply useless. Thus we must go deeper.

In the capitalist mode of production, commodities are produced socially by workers. Even commodities which are still produced by skilled individuals, such as works of art, require inputs which are produced socially. A single artist may create a painting, but who manufactured the paint, the canvas or the brushes? One of the peculiarities of capitalism is that the socialization of production, meaning commodities are produced socially by many people, leads to a world in which the commodities we buy appear disconnected from the people who produced them. We look on a shelf and see an MP3 player from “Sony,” a large corporation. We understand that Sony made this product,’ but who is Sony anyway? If we buy the MP3 player, it appears as though we have engaged in a monetary transaction with the retailer and the seemingly faceless Sony Corporation. There has been an exchange; money for an MP3 player which you now own. What is not so apparent is the relationship between you and the people that actually produced the MP3 player. In fact this would include not only workers in Sony’s manufacturing plants, but also those workers who build the individual components, who mine or extract the resources necessary for their production, and of course those who transport all these commodities, to name a few. This is in stark contrast to past modes of production, where the few material commodities which existed were often supplied by skilled workers whom everyone in the community knew. When you bought something from a blacksmith, for example, you knew that blacksmith and understood that you were buying the products of his labor. This is not the case under capitalism.

So here we have one MP3 player out of tens of millions manufactured and sold worldwide. And of course Sony and its competitors make not only MP3 players but all kinds of products, the sales of which lead to the creation of wealth in money form. So how is that wealth distributed? If we go back to our pre-capitalist society where skilled craftsmen produced certain commodities, the answer is simple. The master craftsman, owning his own tools and having performed the labor necessary to produce the commodity, appropriates whatever value he can exchange for it. He appropriates that value not simply because he did the work or he owns the tools, but because he also owns any commodity he produces. Now think about all those workers, in several different countries, who produce MP3 players, and think about the amount of money the sales of these products earn. To whom will the large portion of that money, including profit, go?

Under capitalism, private ownership of the means of production such as factories, machines and raw materials is what determines the ownership of not only the commodities produced via those means of production, but also the proceeds of the sales of the commodities. In other words, shareholders and proprietors appropriate commodities they did not produce, and pocket the profit from their sales.

What about the workers’ compensation? How is that determined? Another peculiarity of capitalism is that one’s wages are generally not linked with productivity. Most Americans are aware that many of their products are produced by workers in foreign countries for extremely low wages. In other words, these people work hard, and are extremely productive, yet are compensated with what amounts to crumbs from the table.

Once we factor production into the equation, we can now examine distribution. Under capitalism, the majority of the means of production are owned privately by a minority of people. The majority of people are deprived of their own means of production, meaning they do not have the means to support themselves either directly via the land or by the production of commodities which they can sell for money. They possess only one commodity – their capacity to do labor. The capitalist has a huge pool of labor to choose from; as workers are ultimately compelled by the threat of homelessness and starvation, there will always be someone desperate enough to accept a lower wage. If they don’t find such people in their own country, they can move their production operations elsewhere. Since they own capital, and means of production, the deck is stacked in their favor. The workers produce wealth, but it is distributed primarily to the capitalists. This is true whether we look at the world as a whole, or the wealth of one particular country.

In the case of the United States, productivity rose sharply along with the introduction of computer and other digital technology in the 1970s, creating a massive amount of wealth. Prior to this point in history, Americans’ real wages rose steadily alongside productivity. Afterwards, distribution changed; real wages stagnated or even fell, Americans started working harder and longer for less pay, while at the same time CEOs and owners started appropriating a vastly larger share of the wealth. That is to say, the wealth they did not produce in the first place. Thanks to this process, the United States has an income inequality ranking on par with several developing nations.

So what does this all mean? Simply, it means that redistribution of wealth, from the producers to those who do not work, occurs under capitalism.

Of course, when forced to admit to this, the right-wing will raise various objections in an attempt to distract from the obvious exploitation that is occurring here. Fox News, and the rest of the right-wing noise machine has recently started referring to America’s capitalists as “job creators,” the implication being that these multi-millionaires and billionaires deserve their massive wealth simply because they “create jobs,” even if they personally did not produce anything.

This argument fails right out of the gate. For one thing, “jobs” are “created” out of necessity. If any of us found ourselves dropped onto an island somewhere, we would go about laboring to produce the means for our survival without the intervention of another party to “create jobs.” Next, we could apply this term “job creator” to all kinds of individuals throughout history, including slave-owners, feudal lords, pimps and Nazi concentration camp commanders. If one chooses to limit the discussion to modern industrial nations, one might find it difficult indeed to explain how socialist nations such as the U.S.S.R. or Albania managed to have full employment without the existence of “entrepreneurs” to create jobs. If lower taxes and higher profits inspire “entrepreneurs” to create jobs, one has to wonder why the official unemployment rate is over 9% at the time of this writing. As an attempt to justify the massive distribution of wealth to those who don’t produce it, the “job creators” argument falls flat on its face.

Other justifications abound. For example, entrepreneurs “take risks,” and thus deserve their massive compensation. This fails for a number of reasons, but the most obvious being that human labor, not risk, is what creates wealth. Risk is not a commodity, it does not have a price, and we do not buy and sell risk. Corporations and investors actually prefer to avoid risk as much as possible, often spending a great deal of money to minimize their risks. Does a company which goes to great lengths to avoid risks necessarily end up poorer than those that don’t? Usually this is not the case; wise investments pay off. If one wants to get rich with risk, go to Vegas.

Lastly, another justification is that investors, bankers, top managers, etc., earn their massive compensation with their own “hard work,” not only in business but in university when they were younger. This argument fails just as hard as the others. For one thing, we know that “hard work” and productivity do not determine wages. If they did, we would have no explanation for the past thirty years of stagnant real wages in the U.S., for one. Second, we have no way of knowing exactly how hard these people “worked” through college, and this is irrelevant because these companies are selling commodities, not their “hard work” in college. Lastly, while all these individuals may perform daily tasks, which may indeed be stressful or require great intelligence or talent, it does not mean that this work is actually productive, that is to say that it produces wealth. Lastly, investors and bankers are entitled to profits merely by their ownership of stocks, bonds, loans, etc; they will derive wealth from these assets regardless of what they do or do not do.

So if “redistribution of wealth” inevitably goes on under capitalism, and socialism isn’t necessarily the redistribution of wealth, what then, is socialism?

Socialism, in its most basic form, entails not the redistribution of wealth, but the expropriation, that is seizure, of the means of production by the working class. If capitalism is a system where production is socialized, meaning commodities are produced socially by many people, while the products and the value from their sales are privatized, socialism merely balances out the equation. That is to say that production is still socialized, but the appropriation of the value that is produced, including surplus value, is also socialized. Thus society benefits as a whole.

Why this system is better than capitalism is a matter for another article, but what the reader can conclude from this is the following: “redistribution of wealth” occurs under capitalism, and when it results in massive inequality, standards of living and society suffer. Socialism is something far more comprehensive than a simple redistribution of wealth.

Wealth Redistribution is Not Economic Justice

Monday, August 21, 2020
Tegan Truitt

The famed observer of democracy, Alexis de Tocqueville, writes that, though democratic nations love freedom, “for equality they have an ardent, insatiable, eternal, invincible passion; they want equality in freedom, and, if they cannot get it, they still want it in slavery. They will tolerate poverty, enslavement, barbarism, but they will not tolerate aristocracy.”

The objection to wealth disparity is understandable.

It is this hatred of aristocracy – this predilection against the wealthy – that threatens the American democratic experiment today.

On the one hand, the objection to wealth disparity is understandable. When some people in the world are starving, when there is homelessness, when there is poverty, how can it be just that some people have so much? Is it illegitimate to reject the “aristocracy” of wealth? Is it not right – or morally imperative, even – to distribute economic gains to those who are left behind?

You Can’t Distribute What You Don’t Have

Despite the visceral reaction we have to poverty, if we truly wish to establish equality, and keep aristocracy minimized, we must allow the market to distribute wealth as it wil l.

A n economic system of free exchange is largely meritocratic . By this, I mean that generally, those who offer the products that are most desired by others are the most rewarded by the market. Likewise, those who fail to understand what their world needs, or fail to effectively meet that need, typically end up with comparatively fewer rewards.

Those who have higher proportions of society’s wealth have often provided higher proportions of society’s amenities.

This is how the business structure operates. One enterprising man or woman, with a vision for how to supply his or her society with something it lacks, develops a means of producing what the community needs. Others, who prefer to forgo the insecurities of entrepreneurship, content themselves with employment for the businessperson. They are compensated with pay and all of society benefits from access to the new commodity supplied by the business.

It, therefore, makes sense that income distributions would be somewhat disparate . Some people contribute more to society than others. Capitalism incentivizes the risk-taking visionary by promising greater compensation that he or she might otherwise receive.

In fact, economist Thomas Sowell notes, “The very phrase ‘income distribution’ is tendentious. It starts the economic story in the middle, with a body of income or wealth existing somehow , leaving only the question as to how that income or wealth is to be distributed or ‘apportioned.’” Wealth, he notes, is produced . It is not manna from heaven.

Those who have higher proportions of society’s wealth have often provided higher proportions of society’s amenities. However, there are certainly those who acquired their wealth undeservedly and those who are destitute and yet whose characters might be most meritorious. Should the collective public intervene?

Shifting Today’s Burden to Tomorrow

Perhaps social safety nets on local levels can work. Church organizations, charities, even local governments c oncerned with people living in the immediate area, whose objectives are much more homogenous than those of people scattered across a nation, can have a massive impact on the alleviation of poverty – and provide economic justice .

But the structure of the economic justice system in modern America is antithetical to the natural institutions that were designed to help the poor. Our welfare system ultimately spoils the values which it seeks to uphold.

When we consider persons, we must not only consider those living here and now, but also those yet to come. It is as unjust to allow some to prosper at the expense of today’s poor as it is to supplement our quality of life at the cost of our children’s. And yet , it is exactly this latter sin that our welfare system commits.

Professor Laurence Kotlikoff delivered the following testimony to the Senate Budget Committee: “Our country is broke. It’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.”

The millennial generation finds itself heaped with financial burdens as a result of a bargain made not by them.

It is only a matter of time before the hour of reckoning arrives. Until then, America sustains its fiscal insolvency by passing off its burdens to the next generation of Americans.

What has caused this tremendous spending beyond our means? Largely, the institutions of social welfare programs.

Kotlikoff continues: “Indeed, were we to go back in time and re-label all past Social Security taxes as borrowing, official federal debt held by the public would not be $13 trillion, but $38 trillion, which is 211 percent of U.S. GDP.”

The return on investment that millennials will receive when it comes to Social Security is dismal by any standards, and grossly unfair compared to the benefits received by prior generations. Indeed, the millennial generation finds itself heaped with financial burdens as a result of a bargain made not by them, but by their parents and grandparents – who the bargain disproportionately benefits.

And it is not just the Social Security program. Pension law, labor market regulations, etc. all end up fleecing the young. Lauren Lomasky writes, “From the Social Security Act of 1935 to the Patient Protection and Affordable Care Act of 2020, better known as “Obamacare,” a stream of legislation differentially benefits the old at the expense of the young.”

America’s social welfare program is designed to redress the problem of aristocracy. It is designed to curb the prosperity of the rich at the expense of the poor. In function, it deprives society’s greatest contributors of their rights to their justly earned compensation, and creates a greater economic disparity in the end. Our government largely gets away with it – no one will witness the disparity until it’s too late, until my generation is forced to suffer the consequences of the fiscal incompetency of welfare advocates nearly a hundred years ago.

The problem with America’s democracy is that we’ve realized we can vote ourselves free stuff. But that has crippled our entrepreneurs today, and will cripple our children tomorrow. We cannot fault our electorate’s intentions, but we must recognize where we have erred. The dream of equality can exist to its fullest only when we leave ourselves free.

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