Inequality

Who owns wealth and who doesn't?

The evidence is that the gap between the rich and the rest has been growing steadily since for over 50 years.

Quote :

Worldwide, it is estimated that the richest 2% own more than half of total global wealth, and that this elite group resides almost exclusively in North America, Western Europe, and rich Asia-Pacific countries

In China, Russia and America, the division has been widening rapidly:


US 2005

http://en.chinaelections.org/newsinfo.asp?newsid=17324
http://www.guardian.co.uk/world/2008/oct/23/population-egalitarian-cities-urban-growth
http://www.wider.unu.edu/publications/books-and-journals/2008/en_GB/personal-wealth-paperback/

Quote :

Ireland is an exceptionally unequal society and has become moreso in recent years:
Despite the transformations wrought by the boom years of the late 1990s and the early part of this decade, progressive economists and commentators – as
well as international organisations such as the OECD – have long pointed out that Ireland is among the developed world’s most unequal societies:

The top 1% of the Irish population enjoys around €1 billion worth of assets … and owns 20% of the nation's wealth

Of the EU-15, Ireland ranks first in terms of earnings inequality

17% of our fellow citizens are classified as being at risk of
poverty

The percentage of children living in consistent poverty actually
increased in 2006, the most recent year for which figures are
available

Research carried out on behalf of TASC shows that the public not only
agrees with that inequality assessment, but also regards inequality as the
central issue facing society.

http://www.tascnet.ie/upload/PDF%20Survey%20Unequal%20Ireland_29_09_08_FINAL1.pdf

The report notes that the top 1% holds 20% of the wealth in Ireland, the top 2% holds 30% and the top 5% holds 40%. When housing is excluded the top 1% accounts for an even larger part of total wealth – 34%. It is forecast that the wealth of the top 1%, excluding residential property, will increase by 50% from 2005 to 2010 and a further 67% by 2015.

There is an inbuilt tendency in capitalism for wealth to be concentrated in the hands of a smaller and smaller proportion of the population. This concentration of wealth in the hands of a tiny number of people is profoundly disfunctional in its impacts on distribution and consumption of resources and also in the way it contributes to economic crises such as the one we are experiencing now. The last few years of boom have seen this inequality increase. There is a great hostility now to the idea that low and average incomes households should shoulder the burden of cuts in living standards, whilst the wealthy remain discretely untouched. The idea is subtly conveyed by the main political parties that taxes and levies on the wealthy are hardly worth while. With 5% of the population owning 40% of the State's wealth, that is surely a gross misrepresentation? If you consider that "wealth" includes the family house, the top 5% must in fact control even more of disposable wealth.

We have been sold the idea that low taxes, particularly at higher rates, will in some way bring well-being to the whole of our society.

Time for a rethink on who should pay what?

One important point about inequality under capitalism is that it massively reduces the capacity of those with less wealth to become employers despite whatever their preferences are. If you have unequal starting points you have unequal end points.

This has to always be the case in capitalism where a tiny minority will be employers and the rest employees whatever their preferences for self-directed work over other-directed work.
Inequality gets worse over time with a minority elite forming and even the tiny proportion of meritocratic elements of remuneration are diminished further.

But I think Keynes' insight about aggregate demand is appropriate with respect to taking the high road out of the crisis.
Driving wages down prevents aggregate demand from increasing as fast as potential production and leads to falling rates of capacity utilisation and then lower rates of economic growth.

You can actually improve things through wage led growth, with progressive high taxes.
A successful economy along with these policies is not mutually exclusive -(see long term Scandanavian growth for 50 years despite these policies)