EQUAL IS UNFAIR America. Like millions before him, Yaron came to America seeking to make a better life for himself and his family: he wanted to experience the American Dream, in which he would be free to set his own course and rise as far as his ability and ambition would take him. Would that put him in the top 1 p1 percent or the bottom 10 percent of income earners in America? - It would never have occurred to him to ask, and if someone had asked him, his answer would have been: "Who cares?" Yaron is not unique in this regard. Polls consistently show that in- equality is ty is very low on Americans' list of concerns. Even people who live in rural Michigan and struggle to make their mortgage payments appar ently don't care that, hundreds of miles away in New York, a handful of hedge fund managers fly on private jets and dine at Nobu. What we do care deeply about is the opportunity to make a better life for ourselves-and we are more likely to celebrate the fact that this allows s s some people to succeed beyond their wildest dreams than lose sleep over it. But hardly e day goes by in which we aren't told that our attitude to- ward economic inequality is wrung that even if we don't care about in- equality in and of itself, we should care, because it threatens the American Dream. In one of his most celebrated speeches, President Obama declared that the defining challenge of our time" is "a dangerous and growing inequality and lack of upward mobility that has jeopardized middle- class America's bargain-that if you work hard, you have a a chance to get abrad, Obama is hardly a lone voice on this issue. Nobel Prize-winning econ amist Joseph Stiglitz writes of the large and growing inequality that has left the American social fabric, and the country's economic sustainability, fraying at the edgea: the rich (are) getting richer, while the rest (are] facing hardships that (seem] inconsonant with the American Dream." Journal- ist Timothy Noah warns that "income distribution in the United States is now more unequal than in Uruguay, Nicaragua, Guyana, and Venezn- ela, and roughly on par with Argentina. .1. Economically speaking, the richest nation on Earth is starting to resemble a banana republic." French economist Thomas Piketty, in his celebrated work, Capital in the Twenty- Pirtt Century, warns that "capitalism automatically generates arbitrary and ansustainable inequalities that radically undermine the meritocratic val- us on which democratic societies are based," and to "the risk of a drift EQUAL IS UNFAIR forty years have been marked by a startling rise in income and wealth in- equality, as the rich pot richer and the poor sod middle clans atagosted. Some argus that this rising Inequality is telling symptoms of underlying economic problems, such an tax and regulatory policies that fawit "the CHAPTER ONE WHO CARES ABOUT INEQUALITY? THE DEFINING CHALLENGE OF OUR TIME? A few years ago, one of the authors of this book, Yaron Brook, was invited to give the keynote address at the Virginia Republican Party State Conven- tion. Here's how he started. I was not lucky enough to be born an American citizen. I became an American citizen by choiće. I immigrated to this country. I was born and raised in Israel. I served in the Israeli military where I met my wife of twenty-seven years. And when we got married, after we had fought for our country, we sat down and said, you know, you only live once and we want to make the most of our lives, we want to be someplace where we can enjoy freedom, where we can make the most of the life that we have, where we can pursue our happiness, where we can raise our children to the best of our ability. And we looked around the world. We weren't committed to any particular place, so we looked around the world and we said, "Where are we going to go?" We chose this country because America is the greatest nation on earth, and really is the great- est nation in human history. Of all the questions Yaron considered before he made his decision, one that never came up was how much economic inequality there was in WHO CARES ABOUT INEQUALITY? toward oligarchy is real and gives little reason for optimism about where the United States is headed." The bottom line, according to Obama, is that the "combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe." In his 1931 book The Epic of America, James Trusiow Adams intro- duced the phrase "the American Dream" into the lexicon, referring to "that dream of a land in which life should be better and richer and faller for everyone, with opportunity for each according to ability or achieve- The American Dream is about opportunity-the opportunity to pursue a better life, where one's saccess depends on nothing more (and nothing less) than one's own ability and effort, and where, as a result, in- novators can come from nowhere to spearhead limitless human progress. ment. for On the face of it, that dream would seem to catail enormous inequal- ity: in a land where there are no limits on what you can achieve, some will carn hoge fortunes, many will earn a decent living, and others one reason or another. Yet critica insist that economic inequality is at odds with the American Dream. Their specific arguments vary, but they all boil down to three general claims: in one way or another, inequality conflicts with economic mobility, economic progress, and fairness. L. Inequality vs. Mobility. The best proxy for opportunity, according to the critics, is economic mobility. There are different ways of assessing mobility, but however you measure it, they say, the fact is that if you're born poor in Amorica, chances are you'll stay poor, and if you're born rich, you'll probably stay rich. Some critics argue that rising inequality is a result of the same forces that are limiting mobility, such as the decline of unions or the minimum wage. Others paint inequality as a cause of declining mobility- citing, for instance, the ability of affluent Americans to send their children to exclusive schools that poorer parents cannot afford. In many cases, the connection between rising inequality and declining mobility is never fully spelled out we are simply told that, for instance, the highly unequal United States has less economic mobility than our counterparts in Durope, and that we can increase mobility by molding ourselves in the image of Euro- pean social welfare states. 2. Inequality vs. Progress. According to the critics, econotnic inequal hy is at odds with economic progress. The dominant view is that the last HAY CAR Whatever account any given critic endorses, the conclusion is always the same: if we care about the American Dream, we have to reduce in- equality by propping up those at the bottom arat by bringing down those at the mon And va alone with us to income the min Profiles Tab Window Help t X 2 Micro Ch.17 Flashcards | Quiz utline/edit/document/_8000777_1?courseld=_139450_1&view=content THE PRICE OF INEQUALITY One of the darkest sides to the market economy that came to light was the large and growing inequality that hus left the American social fabric. and the country's economic sustainability, fraying at the edges: the rich were getting richer, while the rest were facing hardships tha: seemed inconsonant with the American dream. The fact that there were rich and poor in America was well known; and even though this inequality was not caused solely by the subprime crisis and the downturn that followed-it had been building up over the past three decades the crisis made matters worse, to the point where it could no longer be ignored. The middle class was being badly squeezed in ways we'll see later in this chapter; the suffering of the bottom was palpable, as weaknesses in America's safety net grew obvious and as public support programs, inadequate at best, were cut back further; but throughout all this, the top 1 percent managed to hang on to a huge piece of the national income-a fifth- although some of their investments took a hit. There was greater inequality wherever one sliced the income distri- bution: even within the top 1 percent. the 0.1 percent of income carners was getting a larger share of the money. By 2007, the year before the crisis, the top 0.1 percent of America's households had an income that was 220 times larger than the average of the bottom 90 percent.' Wealth was even more unequally distributed than income, with the wealthiest I percent owning more than a third of the nation's wealth." Income Inequality data offer only a snapshot of en economy at a single moment in time. But this is precisely why the data on wealth inequality are so troubling-wealth inequality goes beyond the variations seen in year-to-year income. Moreover, wealth gives a better picture of differ ences in access to resources. America has been growing apart, at an increasingly rapid mate. In the first post-recession years of the new millennium (2002 to 2007), the top I percent seized more than 65 percent of the gain in total national income. While the top I percent was doing fantastically, most Ameri cans were actually growing worse-off. X If the rich were growing richer and if those in the middle and at the bottom were also doing better that would be one thing, especially if C Chegg Search results for Many CHAPTER ONE AMERICA'S 1 PERCENT PROBLEM CRISIS Tsion that followed cast vast number of Americane adrift amid the flotsam and jetsam of an increasingly dysfunctional form of capitalism. A half decade later, one out of six Amnericans who would like a full-time job still couldn't find one, some eight million families had been told to leave their homes, and millions more anticipate secing, foreclosure notices in the not-too-distant future;' soill more saw their lifetime say- ings seemingly evaporate. Even if some of the green shoots that the optimists kept seeing were, in fact, the harbinger of a real recovery, it would be years-2018 at the earliest-before the economy returned to full employment. By 2012 many, however, had already given up hope: the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Middle-aged people, ance confident of a swift return to the workforce, came to realize they were in fact forcibly retired. Young people, fresh out of college with tens of thousands of dollars in debt, couldn't find any work at all. People who had moved in with friends and relatives at the start of the crisis had become homeless. Houses bought during the property boom were still on the market or sold at a loss; many more stood empty. The gram underpinnings of the financial boom of the preceding decade lay exposed at last. AMERICA'S PERCENT PROBLEM 3 the efforts of those at the top were central to the successes of the rest. We could celebrate the successes of those at the top and be thankful for their contributions. But that's not what's been. happening. Members of America's middle class have felt that they were long- suffering, and they were right. For three decades before the crisis, their incomes had barely hudged." Indeed, the income of a typical full-time male worker has stagnated for well over a third of a century The crisis made these inequalities worse in innumerable ways, beyond the higher unemployment, last homes, stagnating wages. The wealthy had more to lose in stock market values, but those recovered reasonably well and relatively fast." In fact, the gains of the "recovery" since the recession have accrued overwhelmingly to the wealthiest Americans: the top 1 percent of Americans gained 93 percent of the additional income created in the country in 2010, as compared with 2009. The poor and middle had most of their wealth in housing. As aferage house prices fell more than a third between the second quarter of 2006 and the end of 2011." a large proportion of Americans those with large mortgages-saw their wealth essentially wiped out. At the top, CEOs were remarkably successful in maintaining their high pay: after a slight dip in 2008, the ratio of CEO annual compensation to that of the typical worker by 2010 was back to what it had been before the crisis, to 243 to 1. Countries around the world provide frightening examples of what happens to societies when they reach the level of inequality toward which we are moving. It is not a pretty picture: countries where the rich live in gated communities, waited upon by hordes of low-income workers; unstable political systems where populists promise the masses a better life, only to disappoint. Perhaps most importantly, there is an absence of hope. In these countries, the poor know that their prospects of emerging from poverty, let along making it to the top, are minuscule. This is not something we should be striving for. In this chapter. I lay out the scope of inequality in the United States and how it affects the lives of millions in different ways, I describe not only how we are becoming a more divided society but also how we are no longer the land of opportunity that we once were. I discuss the low X +
EQUAL IS UNFAIR America. Like millions before him, Yaron came to America seeking to make a better life for himself and his family: he wanted to experience the American Dream, in which he would be free to set his own course and rise as far as his ability and ambition would take him. Would that put him in the top 1 p1 percent or the bottom 10 percent of income earners in America? - It would never have occurred to him to ask, and if someone had asked him, his answer would have been: "Who cares?" Yaron is not unique in this regard. Polls consistently show that in- equality is ty is very low on Americans' list of concerns. Even people who live in rural Michigan and struggle to make their mortgage payments appar ently don't care that, hundreds of miles away in New York, a handful of hedge fund managers fly on private jets and dine at Nobu. What we do care deeply about is the opportunity to make a better life for ourselves-and we are more likely to celebrate the fact that this allows s s some people to succeed beyond their wildest dreams than lose sleep over it. But hardly e day goes by in which we aren't told that our attitude to- ward economic inequality is wrung that even if we don't care about in- equality in and of itself, we should care, because it threatens the American Dream. In one of his most celebrated speeches, President Obama declared that the defining challenge of our time" is "a dangerous and growing inequality and lack of upward mobility that has jeopardized middle- class America's bargain-that if you work hard, you have a a chance to get abrad, Obama is hardly a lone voice on this issue. Nobel Prize-winning econ amist Joseph Stiglitz writes of the large and growing inequality that has left the American social fabric, and the country's economic sustainability, fraying at the edgea: the rich (are) getting richer, while the rest (are] facing hardships that (seem] inconsonant with the American Dream." Journal- ist Timothy Noah warns that "income distribution in the United States is now more unequal than in Uruguay, Nicaragua, Guyana, and Venezn- ela, and roughly on par with Argentina. .1. Economically speaking, the richest nation on Earth is starting to resemble a banana republic." French economist Thomas Piketty, in his celebrated work, Capital in the Twenty- Pirtt Century, warns that "capitalism automatically generates arbitrary and ansustainable inequalities that radically undermine the meritocratic val- us on which democratic societies are based," and to "the risk of a drift EQUAL IS UNFAIR forty years have been marked by a startling rise in income and wealth in- equality, as the rich pot richer and the poor sod middle clans atagosted. Some argus that this rising Inequality is telling symptoms of underlying economic problems, such an tax and regulatory policies that fawit "the CHAPTER ONE WHO CARES ABOUT INEQUALITY? THE DEFINING CHALLENGE OF OUR TIME? A few years ago, one of the authors of this book, Yaron Brook, was invited to give the keynote address at the Virginia Republican Party State Conven- tion. Here's how he started. I was not lucky enough to be born an American citizen. I became an American citizen by choiće. I immigrated to this country. I was born and raised in Israel. I served in the Israeli military where I met my wife of twenty-seven years. And when we got married, after we had fought for our country, we sat down and said, you know, you only live once and we want to make the most of our lives, we want to be someplace where we can enjoy freedom, where we can make the most of the life that we have, where we can pursue our happiness, where we can raise our children to the best of our ability. And we looked around the world. We weren't committed to any particular place, so we looked around the world and we said, "Where are we going to go?" We chose this country because America is the greatest nation on earth, and really is the great- est nation in human history. Of all the questions Yaron considered before he made his decision, one that never came up was how much economic inequality there was in WHO CARES ABOUT INEQUALITY? toward oligarchy is real and gives little reason for optimism about where the United States is headed." The bottom line, according to Obama, is that the "combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe." In his 1931 book The Epic of America, James Trusiow Adams intro- duced the phrase "the American Dream" into the lexicon, referring to "that dream of a land in which life should be better and richer and faller for everyone, with opportunity for each according to ability or achieve- The American Dream is about opportunity-the opportunity to pursue a better life, where one's saccess depends on nothing more (and nothing less) than one's own ability and effort, and where, as a result, in- novators can come from nowhere to spearhead limitless human progress. ment. for On the face of it, that dream would seem to catail enormous inequal- ity: in a land where there are no limits on what you can achieve, some will carn hoge fortunes, many will earn a decent living, and others one reason or another. Yet critica insist that economic inequality is at odds with the American Dream. Their specific arguments vary, but they all boil down to three general claims: in one way or another, inequality conflicts with economic mobility, economic progress, and fairness. L. Inequality vs. Mobility. The best proxy for opportunity, according to the critics, is economic mobility. There are different ways of assessing mobility, but however you measure it, they say, the fact is that if you're born poor in Amorica, chances are you'll stay poor, and if you're born rich, you'll probably stay rich. Some critics argue that rising inequality is a result of the same forces that are limiting mobility, such as the decline of unions or the minimum wage. Others paint inequality as a cause of declining mobility- citing, for instance, the ability of affluent Americans to send their children to exclusive schools that poorer parents cannot afford. In many cases, the connection between rising inequality and declining mobility is never fully spelled out we are simply told that, for instance, the highly unequal United States has less economic mobility than our counterparts in Durope, and that we can increase mobility by molding ourselves in the image of Euro- pean social welfare states. 2. Inequality vs. Progress. According to the critics, econotnic inequal hy is at odds with economic progress. The dominant view is that the last HAY CAR Whatever account any given critic endorses, the conclusion is always the same: if we care about the American Dream, we have to reduce in- equality by propping up those at the bottom arat by bringing down those at the mon And va alone with us to income the min Profiles Tab Window Help t X 2 Micro Ch.17 Flashcards | Quiz utline/edit/document/_8000777_1?courseld=_139450_1&view=content THE PRICE OF INEQUALITY One of the darkest sides to the market economy that came to light was the large and growing inequality that hus left the American social fabric. and the country's economic sustainability, fraying at the edges: the rich were getting richer, while the rest were facing hardships tha: seemed inconsonant with the American dream. The fact that there were rich and poor in America was well known; and even though this inequality was not caused solely by the subprime crisis and the downturn that followed-it had been building up over the past three decades the crisis made matters worse, to the point where it could no longer be ignored. The middle class was being badly squeezed in ways we'll see later in this chapter; the suffering of the bottom was palpable, as weaknesses in America's safety net grew obvious and as public support programs, inadequate at best, were cut back further; but throughout all this, the top 1 percent managed to hang on to a huge piece of the national income-a fifth- although some of their investments took a hit. There was greater inequality wherever one sliced the income distri- bution: even within the top 1 percent. the 0.1 percent of income carners was getting a larger share of the money. By 2007, the year before the crisis, the top 0.1 percent of America's households had an income that was 220 times larger than the average of the bottom 90 percent.' Wealth was even more unequally distributed than income, with the wealthiest I percent owning more than a third of the nation's wealth." Income Inequality data offer only a snapshot of en economy at a single moment in time. But this is precisely why the data on wealth inequality are so troubling-wealth inequality goes beyond the variations seen in year-to-year income. Moreover, wealth gives a better picture of differ ences in access to resources. America has been growing apart, at an increasingly rapid mate. In the first post-recession years of the new millennium (2002 to 2007), the top I percent seized more than 65 percent of the gain in total national income. While the top I percent was doing fantastically, most Ameri cans were actually growing worse-off. X If the rich were growing richer and if those in the middle and at the bottom were also doing better that would be one thing, especially if C Chegg Search results for Many CHAPTER ONE AMERICA'S 1 PERCENT PROBLEM CRISIS Tsion that followed cast vast number of Americane adrift amid the flotsam and jetsam of an increasingly dysfunctional form of capitalism. A half decade later, one out of six Amnericans who would like a full-time job still couldn't find one, some eight million families had been told to leave their homes, and millions more anticipate secing, foreclosure notices in the not-too-distant future;' soill more saw their lifetime say- ings seemingly evaporate. Even if some of the green shoots that the optimists kept seeing were, in fact, the harbinger of a real recovery, it would be years-2018 at the earliest-before the economy returned to full employment. By 2012 many, however, had already given up hope: the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Middle-aged people, ance confident of a swift return to the workforce, came to realize they were in fact forcibly retired. Young people, fresh out of college with tens of thousands of dollars in debt, couldn't find any work at all. People who had moved in with friends and relatives at the start of the crisis had become homeless. Houses bought during the property boom were still on the market or sold at a loss; many more stood empty. The gram underpinnings of the financial boom of the preceding decade lay exposed at last. AMERICA'S PERCENT PROBLEM 3 the efforts of those at the top were central to the successes of the rest. We could celebrate the successes of those at the top and be thankful for their contributions. But that's not what's been. happening. Members of America's middle class have felt that they were long- suffering, and they were right. For three decades before the crisis, their incomes had barely hudged." Indeed, the income of a typical full-time male worker has stagnated for well over a third of a century The crisis made these inequalities worse in innumerable ways, beyond the higher unemployment, last homes, stagnating wages. The wealthy had more to lose in stock market values, but those recovered reasonably well and relatively fast." In fact, the gains of the "recovery" since the recession have accrued overwhelmingly to the wealthiest Americans: the top 1 percent of Americans gained 93 percent of the additional income created in the country in 2010, as compared with 2009. The poor and middle had most of their wealth in housing. As aferage house prices fell more than a third between the second quarter of 2006 and the end of 2011." a large proportion of Americans those with large mortgages-saw their wealth essentially wiped out. At the top, CEOs were remarkably successful in maintaining their high pay: after a slight dip in 2008, the ratio of CEO annual compensation to that of the typical worker by 2010 was back to what it had been before the crisis, to 243 to 1. Countries around the world provide frightening examples of what happens to societies when they reach the level of inequality toward which we are moving. It is not a pretty picture: countries where the rich live in gated communities, waited upon by hordes of low-income workers; unstable political systems where populists promise the masses a better life, only to disappoint. Perhaps most importantly, there is an absence of hope. In these countries, the poor know that their prospects of emerging from poverty, let along making it to the top, are minuscule. This is not something we should be striving for. In this chapter. I lay out the scope of inequality in the United States and how it affects the lives of millions in different ways, I describe not only how we are becoming a more divided society but also how we are no longer the land of opportunity that we once were. I discuss the low X +
Social Psychology (10th Edition)
10th Edition
ISBN:9780134641287
Author:Elliot Aronson, Timothy D. Wilson, Robin M. Akert, Samuel R. Sommers
Publisher:Elliot Aronson, Timothy D. Wilson, Robin M. Akert, Samuel R. Sommers
Chapter1: Introducing Social Psychology
Section: Chapter Questions
Problem 1RQ1
Related questions
Question
What fundamental problems/injustices does Joseph Stiglitz believe arise from inequality?
Do the authors Brook & Watkins do a sound job of defending Capitalism against the charge that inequality is something we should worry about and try to fix? Why or why not? (Hint: Important in the criticism and defense of inequality is how each author defines "inequality". Be sure to address the ways in which each author define this concept.)
![EQUAL IS UNFAIR
America. Like millions before him, Yaron came to America seeking to
make a better life for himself and his family: he wanted to experience the
American Dream, in which he would be free to set his own course and rise
as far as his ability and ambition would take him. Would that put him in
the top 1
p1 percent or the bottom 10 percent of income earners in America? -
It would never have occurred to him to ask, and if someone had asked him,
his answer would have been: "Who cares?"
Yaron is not unique in this regard. Polls consistently show that in-
equality is
ty is very low on Americans' list of concerns. Even people who live
in rural Michigan and struggle to make their mortgage payments appar
ently don't care that, hundreds of miles away in New York, a handful of
hedge fund managers fly on private jets and dine at Nobu. What we do care
deeply about is the opportunity to make a better life for ourselves-and we
are more likely to celebrate the fact that this allows s
s some people to succeed
beyond their wildest dreams than lose sleep over it.
But hardly e day goes by in which we aren't told that our attitude to-
ward economic inequality is wrung that even if we don't care about in-
equality in and of itself, we should care, because it threatens the American
Dream. In one of his most celebrated speeches, President Obama declared
that the defining challenge of our time" is "a dangerous and growing
inequality and lack of upward mobility that has jeopardized middle-
class America's bargain-that if you work hard, you have a a chance to get
abrad,
Obama is hardly a lone voice on this issue. Nobel Prize-winning econ
amist Joseph Stiglitz writes of the large and growing inequality that has
left the American social fabric, and the country's economic sustainability,
fraying at the edgea: the rich (are) getting richer, while the rest (are] facing
hardships that (seem] inconsonant with the American Dream." Journal-
ist Timothy Noah warns that "income distribution in the United States
is now more unequal than in Uruguay, Nicaragua, Guyana, and Venezn-
ela, and roughly on par with Argentina. .1. Economically speaking, the
richest nation on Earth is starting to resemble a banana republic." French
economist Thomas Piketty, in his celebrated work, Capital in the Twenty-
Pirtt Century, warns that "capitalism automatically generates arbitrary and
ansustainable inequalities that radically undermine the meritocratic val-
us on which democratic societies are based," and to "the risk of a drift
EQUAL IS UNFAIR
forty years have been marked by a startling rise in income and wealth in-
equality, as the rich pot richer and the poor sod middle clans atagosted.
Some argus that this rising Inequality is telling symptoms of underlying
economic problems, such an tax and regulatory policies that fawit "the
CHAPTER ONE
WHO CARES ABOUT
INEQUALITY?
THE DEFINING CHALLENGE OF OUR TIME?
A few years ago, one of the authors of this book, Yaron Brook, was invited
to give the keynote address at the Virginia Republican Party State Conven-
tion. Here's how he started.
I was not lucky enough to be born an American citizen. I became an
American citizen by choiće. I immigrated to this country. I was born
and raised in Israel. I served in the Israeli military where I met my wife
of twenty-seven years. And when we got married, after we had fought
for our country, we sat down and said, you know, you only live once
and we want to make the most of our lives, we want to be someplace
where we can enjoy freedom, where we can make the most of the life
that we have, where we can pursue our happiness, where we can raise
our children to the best of our ability. And we looked around the world.
We weren't committed to any particular place, so we looked around the
world and we said, "Where are we going to go?" We chose this country
because America is the greatest nation on earth, and really is the great-
est nation in human history.
Of all the questions Yaron considered before he made his decision,
one that never came up was how much economic inequality there was in
WHO CARES ABOUT INEQUALITY?
toward oligarchy is real and gives little reason for optimism about where
the United States is headed." The bottom line, according to Obama, is that
the "combined trends of increased inequality and decreasing mobility pose
a fundamental threat to the American Dream, our way of life, and what we
stand for around the globe."
In his 1931 book The Epic of America, James Trusiow Adams intro-
duced the phrase "the American Dream" into the lexicon, referring to
"that dream of a land in which life should be better and richer and faller
for everyone, with opportunity for each according to ability or achieve-
The American Dream is about opportunity-the opportunity to
pursue
a better life, where one's saccess depends on nothing more (and
nothing less) than one's own ability and effort, and where, as a result, in-
novators can come from nowhere to spearhead limitless human progress.
ment.
for
On the face of it, that dream would seem to catail enormous inequal-
ity: in a land where there are no limits on what you can achieve, some will
carn hoge fortunes, many will earn a decent living, and others
one reason or another. Yet critica insist that economic inequality is at odds
with the American Dream. Their specific arguments vary, but they all boil
down to three general claims: in one way or another, inequality conflicts
with economic mobility, economic progress, and fairness.
L. Inequality vs. Mobility. The best proxy for opportunity, according
to the critics, is economic mobility. There are different ways of assessing
mobility, but however you measure it, they say, the fact is that if you're born
poor in Amorica, chances are you'll stay poor, and if you're born rich, you'll
probably stay rich. Some critics argue that rising inequality is a result of the
same forces that are limiting mobility, such as the decline of unions or the
minimum wage. Others paint inequality as a cause of declining mobility-
citing, for instance, the ability of affluent Americans to send their children
to exclusive schools that poorer parents cannot afford. In many cases, the
connection between rising inequality and declining mobility is never fully
spelled out we are simply told that, for instance, the highly unequal United
States has less economic mobility than our counterparts in Durope, and
that we can increase mobility by molding ourselves in the image of Euro-
pean social welfare states.
2. Inequality vs. Progress. According to the critics, econotnic inequal
hy is at odds with economic progress. The dominant view is that the last
HAY CAR
Whatever account any given critic endorses, the conclusion is always
the same: if we care about the American Dream, we have to reduce in-
equality by propping up those at the bottom arat by bringing down those at
the mon And va alone with us to income the min](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3038be94-0016-4418-984c-85b815162ffe%2F909d2432-1189-4276-abaa-3bc33bbe6384%2Fcc9uea_processed.jpeg&w=3840&q=75)
Transcribed Image Text:EQUAL IS UNFAIR
America. Like millions before him, Yaron came to America seeking to
make a better life for himself and his family: he wanted to experience the
American Dream, in which he would be free to set his own course and rise
as far as his ability and ambition would take him. Would that put him in
the top 1
p1 percent or the bottom 10 percent of income earners in America? -
It would never have occurred to him to ask, and if someone had asked him,
his answer would have been: "Who cares?"
Yaron is not unique in this regard. Polls consistently show that in-
equality is
ty is very low on Americans' list of concerns. Even people who live
in rural Michigan and struggle to make their mortgage payments appar
ently don't care that, hundreds of miles away in New York, a handful of
hedge fund managers fly on private jets and dine at Nobu. What we do care
deeply about is the opportunity to make a better life for ourselves-and we
are more likely to celebrate the fact that this allows s
s some people to succeed
beyond their wildest dreams than lose sleep over it.
But hardly e day goes by in which we aren't told that our attitude to-
ward economic inequality is wrung that even if we don't care about in-
equality in and of itself, we should care, because it threatens the American
Dream. In one of his most celebrated speeches, President Obama declared
that the defining challenge of our time" is "a dangerous and growing
inequality and lack of upward mobility that has jeopardized middle-
class America's bargain-that if you work hard, you have a a chance to get
abrad,
Obama is hardly a lone voice on this issue. Nobel Prize-winning econ
amist Joseph Stiglitz writes of the large and growing inequality that has
left the American social fabric, and the country's economic sustainability,
fraying at the edgea: the rich (are) getting richer, while the rest (are] facing
hardships that (seem] inconsonant with the American Dream." Journal-
ist Timothy Noah warns that "income distribution in the United States
is now more unequal than in Uruguay, Nicaragua, Guyana, and Venezn-
ela, and roughly on par with Argentina. .1. Economically speaking, the
richest nation on Earth is starting to resemble a banana republic." French
economist Thomas Piketty, in his celebrated work, Capital in the Twenty-
Pirtt Century, warns that "capitalism automatically generates arbitrary and
ansustainable inequalities that radically undermine the meritocratic val-
us on which democratic societies are based," and to "the risk of a drift
EQUAL IS UNFAIR
forty years have been marked by a startling rise in income and wealth in-
equality, as the rich pot richer and the poor sod middle clans atagosted.
Some argus that this rising Inequality is telling symptoms of underlying
economic problems, such an tax and regulatory policies that fawit "the
CHAPTER ONE
WHO CARES ABOUT
INEQUALITY?
THE DEFINING CHALLENGE OF OUR TIME?
A few years ago, one of the authors of this book, Yaron Brook, was invited
to give the keynote address at the Virginia Republican Party State Conven-
tion. Here's how he started.
I was not lucky enough to be born an American citizen. I became an
American citizen by choiće. I immigrated to this country. I was born
and raised in Israel. I served in the Israeli military where I met my wife
of twenty-seven years. And when we got married, after we had fought
for our country, we sat down and said, you know, you only live once
and we want to make the most of our lives, we want to be someplace
where we can enjoy freedom, where we can make the most of the life
that we have, where we can pursue our happiness, where we can raise
our children to the best of our ability. And we looked around the world.
We weren't committed to any particular place, so we looked around the
world and we said, "Where are we going to go?" We chose this country
because America is the greatest nation on earth, and really is the great-
est nation in human history.
Of all the questions Yaron considered before he made his decision,
one that never came up was how much economic inequality there was in
WHO CARES ABOUT INEQUALITY?
toward oligarchy is real and gives little reason for optimism about where
the United States is headed." The bottom line, according to Obama, is that
the "combined trends of increased inequality and decreasing mobility pose
a fundamental threat to the American Dream, our way of life, and what we
stand for around the globe."
In his 1931 book The Epic of America, James Trusiow Adams intro-
duced the phrase "the American Dream" into the lexicon, referring to
"that dream of a land in which life should be better and richer and faller
for everyone, with opportunity for each according to ability or achieve-
The American Dream is about opportunity-the opportunity to
pursue
a better life, where one's saccess depends on nothing more (and
nothing less) than one's own ability and effort, and where, as a result, in-
novators can come from nowhere to spearhead limitless human progress.
ment.
for
On the face of it, that dream would seem to catail enormous inequal-
ity: in a land where there are no limits on what you can achieve, some will
carn hoge fortunes, many will earn a decent living, and others
one reason or another. Yet critica insist that economic inequality is at odds
with the American Dream. Their specific arguments vary, but they all boil
down to three general claims: in one way or another, inequality conflicts
with economic mobility, economic progress, and fairness.
L. Inequality vs. Mobility. The best proxy for opportunity, according
to the critics, is economic mobility. There are different ways of assessing
mobility, but however you measure it, they say, the fact is that if you're born
poor in Amorica, chances are you'll stay poor, and if you're born rich, you'll
probably stay rich. Some critics argue that rising inequality is a result of the
same forces that are limiting mobility, such as the decline of unions or the
minimum wage. Others paint inequality as a cause of declining mobility-
citing, for instance, the ability of affluent Americans to send their children
to exclusive schools that poorer parents cannot afford. In many cases, the
connection between rising inequality and declining mobility is never fully
spelled out we are simply told that, for instance, the highly unequal United
States has less economic mobility than our counterparts in Durope, and
that we can increase mobility by molding ourselves in the image of Euro-
pean social welfare states.
2. Inequality vs. Progress. According to the critics, econotnic inequal
hy is at odds with economic progress. The dominant view is that the last
HAY CAR
Whatever account any given critic endorses, the conclusion is always
the same: if we care about the American Dream, we have to reduce in-
equality by propping up those at the bottom arat by bringing down those at
the mon And va alone with us to income the min
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THE PRICE OF INEQUALITY
One of the darkest sides to the market economy that came to light
was the large and growing inequality that hus left the American social
fabric. and the country's economic sustainability, fraying at the edges:
the rich were getting richer, while the rest were facing hardships tha:
seemed inconsonant with the American dream. The fact that there
were rich and poor in America was well known; and even though
this inequality was not caused solely by the subprime crisis and the
downturn that followed-it had been building up over the past three
decades the crisis made matters worse, to the point where it could
no longer be ignored. The middle class was being badly squeezed in
ways we'll see later in this chapter; the suffering of the bottom was
palpable, as weaknesses in America's safety net grew obvious and as
public support programs, inadequate at best, were cut back further;
but throughout all this, the top 1 percent managed to hang on to a
huge piece of the national income-a fifth- although some of their
investments took a hit.
There was greater inequality wherever one sliced the income distri-
bution: even within the top 1 percent. the 0.1 percent of income
carners was getting a larger share of the money. By 2007, the year before
the crisis, the top 0.1 percent of America's households had an income
that was 220 times larger than the average of the bottom 90 percent.'
Wealth was even more unequally distributed than income, with the
wealthiest I percent owning more than a third of the nation's wealth."
Income Inequality data offer only a snapshot of en economy at a single
moment in time. But this is precisely why the data on wealth inequality
are so troubling-wealth inequality goes beyond the variations seen in
year-to-year income. Moreover, wealth gives a better picture of differ
ences in access to resources.
America has been growing apart, at an increasingly rapid mate. In the
first post-recession years of the new millennium (2002 to 2007), the
top I percent seized more than 65 percent of the gain in total national
income. While the top I percent was doing fantastically, most Ameri
cans were actually growing worse-off.
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If the rich were growing richer and if those in the middle and at
the bottom were also doing better that would be one thing, especially if
C Chegg Search results for Many
CHAPTER ONE
AMERICA'S 1
PERCENT PROBLEM
CRISIS
Tsion that followed cast vast number of Americane adrift amid the
flotsam and jetsam of an increasingly dysfunctional form of capitalism.
A half decade later, one out of six Amnericans who would like a full-time
job still couldn't find one, some eight million families had been told
to leave their homes, and millions more anticipate secing, foreclosure
notices in the not-too-distant future;' soill more saw their lifetime say-
ings seemingly evaporate. Even if some of the green shoots that the
optimists kept seeing were, in fact, the harbinger of a real recovery, it
would be years-2018 at the earliest-before the economy returned to
full employment. By 2012 many, however, had already given up hope:
the savings of those who had lost their jobs in 2008 or 2009 had been
spent. Unemployment checks had run out. Middle-aged people, ance
confident of a swift return to the workforce, came to realize they were
in fact forcibly retired. Young people, fresh out of college with tens
of thousands of dollars in debt, couldn't find any work at all. People
who had moved in with friends and relatives at the start of the crisis
had become homeless. Houses bought during the property boom
were still on the market or sold at a loss; many more stood empty. The
gram underpinnings of the financial boom of the preceding decade lay
exposed at last.
AMERICA'S PERCENT PROBLEM 3
the efforts of those at the top were central to the successes of the rest.
We could celebrate the successes of those at the top and be thankful
for their contributions. But that's not what's been. happening.
Members of America's middle class have felt that they were long-
suffering, and they were right. For three decades before the crisis, their
incomes had barely hudged." Indeed, the income of a typical full-time
male worker has stagnated for well over a third of a century
The crisis made these inequalities worse in innumerable ways,
beyond the higher unemployment, last homes, stagnating wages. The
wealthy had more to lose in stock market values, but those recovered
reasonably well and relatively fast." In fact, the gains of the "recovery"
since the recession have accrued overwhelmingly to the wealthiest
Americans: the top 1 percent of Americans gained 93 percent of the
additional income created in the country in 2010, as compared with
2009. The poor and middle had most of their wealth in housing. As
aferage house prices fell more than a third between the second quarter
of 2006 and the end of 2011." a large proportion of Americans those
with large mortgages-saw their wealth essentially wiped out. At the
top, CEOs were remarkably successful in maintaining their high pay:
after a slight dip in 2008, the ratio of CEO annual compensation to
that of the typical worker by 2010 was back to what it had been before
the crisis, to 243 to 1.
Countries around the world provide frightening examples of what
happens to societies when they reach the level of inequality toward
which we are moving. It is not a pretty picture: countries where the
rich live in gated communities, waited upon by hordes of low-income
workers; unstable political systems where populists promise the masses
a better life, only to disappoint. Perhaps most importantly, there is an
absence of hope. In these countries, the poor know that their prospects
of emerging from poverty, let along making it to the top, are minuscule.
This is not something we should be striving for.
In this chapter. I lay out the scope of inequality in the United States
and how it affects the lives of millions in different ways, I describe not
only how we are becoming a more divided society but also how we are
no longer the land of opportunity that we once were. I discuss the low
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