OK, the game is up and it’s rigged: Why the inequality gap needs to close now.

We are now in 2016 and inequality is an epidemic that encompasses the world. There is more wealth than ever before, therefore, it would make sense that poverty should be seriously tackled. Agreed? Sadly this is not a view shared by the rich. Money and power are concentrated in even fewer hands than ever since the great recession. It is this oligarchy that appears decidedly disinterested in making any serious effort in reducing the disparity between rich and poor. Reports from 2013 state that corporate CEO’s in the US made 340 times more than what the average worker earned that year. What is even more startling is in 1980, before neoliberalism got a firm stranglehold, the ratio between a CEO and the average worker was 42 . Below is a visual representation of the changes from 1965-2005. Although it is 10 years old, the trend is quite clear and as stated this ratio has increased significantly over the last 10 years.

snap20060621

In 2015 the headline news regarding inequality was that the richest 1% own more than the next 99%. Further to this, an article in early 2016 stated that the richest 62 people own as much wealth as the worlds bottom 50%. These figures alone should raise alarm bells that something is fundamentally wrong with the world, that what we have created is morally unacceptable and practically unsustainable. The extreme rich alongside their apologists will claim that this is ‘just the way it is’, they will vigorously defend the status quo and bombard you with reasons why we need the ultra-rich in society.

Objections to change

So lets look at the sorts of resistance and objections that you may well encounter when discussing inequality.

  • The rich keep the world going by providing jobs and by attacking them with higher taxes will decrease investment and lower job creation

Firstly is all the money really theirs? Owners/CEO’s are in a position to hire the labour of the workers in the form of wages. They also own the means of production; factories, offices, technology, land and so on. However, a combination of labour and means of production creates the profit for the corporation, which obviously is the most important outcome for a company, hence why wages are kept as low as possible. So, are the wages for someone’s labour reflective of the part they have played in creating the profit that show’s itself in the form of executive bonuses and gigantic accumulations of wealth? In the corporations haste to further increase profits, masses of labour have been shipped overseas to countries such as China and Bangladesh, thus increasing unemployment in nations such as the UK and the US. Corporations are not charities, if they can decrease labour cost, whilst simultaneously ‘lining’ the pockets of the CEO’s and shareholders, that is exactly what they will do. Job production and civil responsibility is of no consequence to the vast majority of the ultra-rich.

Furthermore, increasing the tax rate has no correlation to a decrease in job creation. This angle is often used as a general scare tactic from corporations who heavily lobby the government, to dissuade the populous in thinking that higher taxes is a good thing for the 99%. In fact 3 of the largest increases in employment in the US occurred when the top tax rate was 91%. Just to clarify the graph below, the top tax rate is indicated in pink, whilst change in unemployment rates are indicated in blue. What is clear to see is that there is no discernible link either way between top tax rates and employment rates.

tax_emp_4

The same pattern (or lack of) can be seen between lowering the top tax rate and income growth. The ruling classes will tell you that if the top tax rate of the rich decreases, income for the workers will increase. This is commonly referred to as trickle down economics, this is a major component of the neoliberal doctrine, however, there is no such evidence to suggest this works. In this diagram, the top tax rate again is indicated in pink, whilst the medium real income growth is displayed in blue. As you can see from the graph, there is no correlation between the two measures (for correlation coefficients please see the link above). In summary both these proposed arguments from the rich relating tax cuts to increased job creation and higher income levels for workers should be considered weak at best.

tax_inc_2

  • I worked hard for what I have

This suggestion is as irritating as it is arrogant, it implies for example that an executive’s wage is directly proportional to the effort that person produces at their employment. Using the example above, this theory would indicate that the average CEO, toils 340 times harder than the average worker. It is not hard to see how this argument could be potentially inflammatory to someone who may work 2 jobs, averaging 60 hours a week, just to pay their bills and rent on a modest home. This line of defence for the rich is dismissive toward people who struggle, it lacks any expression of compassion towards their fellow human being and displays a suggestion of entitlement. What the rich fail to admit is; their perceived success generally is down to luck. What has really happened is their specific talents have met the needs of the marketplace at that particular time and in that specific geographical place. This gives good grounds to argue that the system is broken; when an individual who speculates in stocks, with no real societal value can earn in the region of 300 times the amount of a nurse, who cares for people on a daily basis and is indispensable to society, we have a real problem on our hands.

  • Life isn’t fair, you just have to go and take it!

This argument from the rich should probably be filed under ‘I’ for ignorant. The rich in the US talk about the ‘American dream’, if you work hard and sacrifice everyone can make it. In reality it should be called the American fairytale, this is a tool to deflect the blame away from rich who manipulate the game for their own personal gain on to the poor who have no policy influence whatsoever. Lets look at this in a little more detail; a report back in 2012 in the New York Times (not the most socialist newspaper known to man), stated that 65% of people born in the bottom fifth of society remain in the lower classes. There is no doubt that if you are poor you are more likely to go to poorer schools, have less influential societal connections and live in an environment that is less conducive to upward mobility. The next thing to consider is; that the number of single parent families are increasing all the time and this has strong links to poverty, which adds another layer of complexity to an already difficult problem. It was reported that 91% of single parent families live below the poverty line, most of the kids in this predicament will never get a chance to go to college let alone fulfill their potential. It’s worth acknowledging that children of the educated and affluent, have access to better schools and are more prepared to thrive in these environments. When you are poor, hungry, cold and inadequately clothed, learning is not going to be at the top of your priorities, you are in survival mode, something that most of the rich couldn’t even begin to understand.

Moving away from the US, the UK also has stats that highlights the lack of social mobility. In recent times the UK government have played a similar trick as the US on the people, deflecting criticism from the rich by diverting attention away from the oligarchy, towards the poor and the immigrant community. Judging by the Conservative Party’s re-election in 2015, this has been a masterstroke of callous deception and a wondrous campaign of propaganda from large sections of the mainstream media . While we are on the subject of politicians it is interesting to note that; 32% of MP’s attended private education and 26% attended Oxbridge, compared to 7% and 1% respectively of the general population in the UK.

Oxford_-_Balliol_College_-_geograph_org_uk_-_1329613
Balliol College, Oxford.

These stats are even more amazing when you consider that 47% of the current cabinet attended Oxbridge. For most kids outside of this ‘magic circle’ Oxbridge is not even on their radar, due to a lack of money or more importantly lack of societal contacts, this alleyway simply does not exist. It was identified in 2015 that 40% of students from Oxford and Cambridge were educated privately, this information alone highlights that for students who attend state schools the odds of getting in to Oxbridge are severely diminished. When projecting this to potential employment, for many students the chance of having a career with far-reaching effects on society or impacting other professions is severely limited from day one. The very top jobs are out of reach for most people and are generally in the domain of the rich and connected. As an example in the UK; 61% of top doctors, 51% of leading journalists, 74% of the top judiciary and 63% of Nobel Prize winners all attended Oxbridge. Further to this, a report regarding employment opportunities from the Sutton Trust stated that; likes tend to recruit likes, also that strong professional social networks, good educational background and costly extracurricular accomplishments such as high quality internships are all aspects that help to gain high-end employment. These advantageous experiences are simply more available for people from privileged backgrounds. This is not an attack on Britain’s top universities, or even the rich, this is to make it clear that there is no such thing as an equal opportunity and that the flippant phrase of ‘you just have to go out and take it’ is utterly ridiculous and unfounded.

  • Equality stifles ambition and creativity

This statement relies on the assumption that ambition is based on purely extrinsic motivation (money). A study of 1.4 million workers by Gallop stated there was no significant difference in employee engagement in relation to pay level and that these findings are consistent in countries that have varying cultures (UK, Australia, Taiwan, India, US etc.). In fact economist Angus Deaton and Nobel prize-winning Psychologist Daniel Kahneman (Princeton) analyzed 450,000 responses, regarding pay and contentment in 2008-2009. They discovered that after $75,000 (US), people didn’t report any greater degree of happiness, however, the further below this threshold the deeper the unhappiness reported. In a study of 200,000 US public sector workers, it was reported that employee engagement level was three times more related to intrinsic than extrinsic factorsDan Ariely professor of psychology and behavioral economics has conducted several experiments regarding intrinsic motivation, below are some of his findings which may offer clues as to what really matters to us in the workplace;

  1. Seeing the fruits of our labour for even a short time can increase our productivity.
  2. The less we feel we are appreciated for our work, the more money we want to do it.
  3. The harder the project the prouder we feel.
  4. Knowing that our work helps others may increase our unconscious motivation.

225px-Vincent_Willem_van_Gogh_127Purely from an experiential point of view, it’s relatively obvious that the vast majority of people do not enter into health professions for example in search of vast riches. I’m also pretty sure that the great artists of the world such as Van Gogh didn’t create masterpieces such as ‘Sunflowers’ with one eye on the bottom line. People need a certain amount of money to live a reasonable life, this is perfectly acceptable, after which point (as in our example of $75,000), motivation is shown to become much more internally driven. Having said that, people are unique, therefore, I would wager that there are certainly a minority of people who are motivated purely by money and power, but studies seem to indicate that most of us are not that way inclined. Sadly it appears that these extrinsically motivated people tend to use their money and power to influence policy not only to maintain, but to substantially increase inequality.

Clearly defenders of neoliberalism will have many other arguments defending their position, after all there is a lot at stake, however, this short section covers some common excuses people will use to maintain the ‘status quo’. At this point it’s worth clarifying that when an individual makes a case that inequality should be reduced, it does not generally imply that everybody should be paid the same. What researchers in this field appear unified about is that these current levels of inequality are not conducive to a healthy, contented, emotionally secure society. I will acknowledge also, that there is a distinct difference regarding inequality between countries and inequality within countries. It is widely noted that it is the wealth disparity within a specific country that has the most impact on a population.

The impact of inequality

So far, we have discovered that massive inequality exists and has increased astronomically over the past 35 years. We have touched on arguments that the rich or the propagandized may produce to defend inequality. Next we will investigate why high levels of inequality are so detrimental to society and why it is essential that this is reduced as a matter of urgency.

In this next section I owe a huge debt of gratitude to the equality trust and the endless reservoir of information that can be found using the above link. Fine work has also been achieved by Kate Pickett and Richard Wilkinson, who I had the pleasure to see present in New Zealand, explaining their findings in their fantastic book The Spirit Level. Other valuable information was found at http://www.inequality.org and http://www.inequality.org.nz.

Impacts of inequality are multi-faceted, in this case it I will be broadly categorized these into five major groups;

  • Health
  • Crime
  • Social mobility and education
  • Economic
  • Trust, participation, attitudes and happiness

For the inquisitive among you, all the original data and references can be found at http://www.equalitytrust.org.uk.

  • Health

The first thing to make clear is, the physical and mental health of population is far worse in unequal societies. Below is a chart indicating the ratio between the top 10% of society and the bottom 10% of society. Whilst observing this it is worth considering that the area between the 1% mark and the top 0.1% is where the steepest increases occur, therefore, utilising the top 10% as  this graph will level things out a little, however, this still gives a fair indication as to which nations are the most unequal.

GIMP-Ratio-Top-10p-to-Bottom-10p-Income

Below depicts infant mortality with inequality, which is a good indicator of poor health outcomes, it’s worth noting that the more unequal societies are towards the right of the screen. What is disturbing is that in the so-called western developed countries such as the UK, US and New Zealand, infant mortality is desperately high.

infant-mortality-is-higher-in-more-unequal-countries

In a report using 60 million participants, it was discovered that people living in regions with excessive income inequality had an increased chance of premature mortality and possessed poorer self-recorded health. What is important is that these finding were independent of socioeconomic status, age and gender.

Below is a sobering graphic regarding health outcomes, showing the amount of excess deaths in the US that are related to inequality during 2007 and the chasm since that time has only increased.

GIMP-Deaths-Linked-to-Inequality.png

These health disparities that are caused by inequality can be encapsulated in a single phrase ‘status anxiety’. The increased status competition found in societies with substantial inequality, causes stress which leads to poor health outcome, both physically and mentally. We are constantly bombarded daily with advertisements telling us we are not good enough; we don’t drive the right car or we need to lose weight, we are never allowed just to be. It’s not surprising we are anxious, we are in a perpetual state of updating and improving our lives, from our interior design to the clothes that we wear all to make us feel more complete. Sadly we neglect what really makes us whole and that is deep social connections and time with people who matter.

  • Crime

A study by Hsieh Ching-Chiu and Pugh in 1993 stated that poverty and income inequality were directly associated with crime; particularly regarding incidences of assault and homicide. A further study even suggested that if Spain reduced its inequality to the levels of Canada, it could reduce homicides by 20%. It is strongly suggested that the current way the neoliberal society is constructed, effects the way we think, act and relate to one another. Due to this societal structure of ‘survival of the fittest’ competition among individuals increase, leading to elevated levels of  crime, this generally occurs through a sense of fear and hopelessness. A 2010 study concluded that the key link between violence and income inequality may be trust. It is a combination these factors which are thought to be related to an increased murder rate across unequal societies.

I am not suggesting that inequality is the sole reason for violent crime, however, socioeconomic factors are very much associated and one of these specific aspects is inequality. In my opinion, it is reasonable to hypothesize that if you live in a society that values financial capital far greater than social capital and yet you have no way or means to obtain money legitimately; anxiety status coupled with some form of heightened inferiority will manifest in a multitude of ways. Sadly a lot of people faced with these issues, combined with other complex personal and societal factors can at times turn to crime to obtain this much sought after capital in an attempt to secure some modicum of self-worth.

  • Social mobility and education

We touched upon this issue earlier; children of highly paid people are much are more likely to be higher earners in the future than children from lower incomes, for all the reasons previously mentioned in the objections for change section. This graphic encapsulates this theory, but adds in health problems too. As explained in a previous graph, more unequal countries are displayed on the right.

health-inequality-health-and-social-problems-worse-in-more-uneaqual-countries

 

So just to clarify;

  • Higher inequality has stronger links to poor social mobility than poverty alone.
  • Research suggests that the link between inequality and poor social mobility is lifelong.
  • Education scores are on average are lower in unequal societies and education is a much bigger driver in income levels for people towards the lower end of society.

educationslightlysmaller

Some reasoning behind this correlation is that there is a strong link between educational achievement and high aspiration. Conversely unequal societies display lower levels of trust leading to a decrease in quality societal and family relationships; this lack of support in turn damages learning.

  • Economics

There is a substantial body of information that suggests an increased level of inequality can lead to economic instability, shorter periods of sustained growth, therefore, ultimately leading to financial crisis as experienced in 2007-2009. There is also evidence to suggest that increased personal and institutional debt are strongly linked with increasing inequality.

There are a few suggestions why these economic issues occur; the first being rent seeking. This is when people at the upper end of the economic ladder use their position and power to increase their personal gains beyond what is needed to sustain their employment.The second potential cause is deceased productivity; the theory is that although increased wages over a certain threshold (example as used earlier $75,000) has diminishing returns after a certain point low wages have a substantial effect on productivity. This is especially true if the worker considers their pay to be unfair or if the employee is struggling to pay for basic necessities. It is suggested that this mental energy lost whilst living with scarcity could be used at their employment, therefore, increasing productivity. A third suggestion is a dear friend we have met before and that is ‘status anxiety’. Inequality leads to status competition, which drives an increase in consumption, as the citizen tries to maintain respectability and living standards within their peer group. These issues can put pressure on people to borrow more money, in turn increasing personal debt levels.

  • Trust, participation, attitudes and happiness

You may have noticed that trust seems to come up a lot regarding inequality, it appears to be the glue that binds us together, but as inequality increases trust declines. As mentioned earlier a lack of trust has far-reaching effects, in particular it has strong links to violent crime and poorer health outcomes. It is theorized that rising inequality increases the social distance between the individual and society, which leads to a feeling of alienation from your societal peers. This individualism can cultivate a feeling of mistrust, which in turn prevents relationships forming, leading to a decrease in support networks. This lack of social capital and low levels of trust can cause breakdowns in society as highlighted earlier.

A decrease in trust created by unequal societies manifests in low participation in politics and a general mistrust of parliament. These particular societies tend to believe that more respect is needed regarding authority figures, that children should be more obedient and less independent. Incidentally, these are traits that resonate strongly with people who are socially conservative. Unequal societies are inclined to believe that the people at the top are more competent than individuals towards the bottom of society and that inter-group competition leads to competent outcomes. Personally I think this is fascinating, as this is exactly the same narrative we have been fed in the west for approximately 40 years, these very traits are also characterized in popular culture and media on a daily basis. A study in 2011 suggested that people in unequal states in the US appear to be less agreeable, cooperative, empathic and altruistic. This would imply that these unequal states have led to a more individualistic, less harmonious society. It is also worth noting that more unequal states and countries have more punitive prison systems and less rehabilitation options available. Lower levels of wellbeing and life satisfaction are strongly linked with unequal societies, but it’s conceded that happiness is much more transient and therefore difficult to measure in relation to inequality.

What does all this actually mean?

To politicize this; inequality has led to a break down in society, it has contributed to poor health outcomes, atomized communities, decreased life satisfaction, it has promoted competition, decreased trust, whilst also contributing to lopsided education and economic outcomes. In summary inequality has torn us apart. Which at the risk of sounding like an alarmist, benefits the ruling elite. If we are fragmented, unorganized, suspicious of each other, apathetic, demoralized, politically absent, then we are not a cohesive, coherent force and we will be unable to initiate viable alternatives to neoliberalism.

I believe we deserve more than what we have right now. I believe that at a time of global unrest, dwindling energy supplies and an unstable economic system, we need a huge rethink of what is important in life as a collective. To re-evaluate our priorities and find a solution that positively affects the maximum amount of people. It is imperative that we investigate how we can achieve these goals so nobody gets left behind. At the same time maintaining the planet so we can pass it on to our children/grandchildren in reasonably good health.

Below I have added a Ted Talk from the fantastic social psychologist Paul Piff asking the question ‘does money make you mean’? I strongly suggest you watch this, I hope you feel as I do, that we can do a much better job within society and people need to know, it doesn’t have to be this way.

 

 

 

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