I am concerned that the growing wealth inequality in our society is leading to higher poverty and deprivation. While the rich are getting richer, the poor are getting poorer.
The top 20% of US households own more than 84% of the total wealth and the bottom 40% have a mere 0.3%. One mega-rich family on its own – the Walton family – actually has more wealth than 42% of the poorest Americans. To me, this is very shocking. And, it appears that most Americans have no idea the extent of the wealth gap that these figures show.
The belief that anyone who works hard can climb the economic ladder is a fundamental principle of the American Dream. However, the reality is very different. Social mobility is falling, and evidence shows that by far the most significant indicator as to whether someone will be wealthy is if they come from an affluent family.
The US is now the most unequal society on the planet, with one of the highest child poverty rates of any western nation, at the same time as having the greatest number of billionaires. The UK is not so far behind…
Trickle Down Economics
In my view, one of the catalysts to this problem is the idea of ‘trickle down economics’. The idea is that giving tax breaks to the rich, will lead to more employment and stimulate economic growth. This does happen in some cases, but all too often evidence has shown that the extra money is simply pocketed.
Poorer people actually spent a far greater proportion of their wealth, which means that en masse they make a more significant contribution to the economy. As Bill Clinton’s former labour secretary Robert Reich put it “When so much of the purchasing power, so much of the economic gain, goes to the very top, there’s simply not enough purchasing power in the rest of the economy.”
Of course, I am not saying that we should entirely eliminate any income inequality. This would be totally impractical, and it is essential to have a pay structure that rewards people for working hard. However, I do think that if wealth were spread more evenly, there would be significant benefits to our economy and society as a whole. This is well argued in the TED talk below.