What Americans don’t know about the distribution of wealth in their own country

Posted on November 30th, 2016 in Capitalism,Culture,Economy,Education,Politics,Religion by Robert Miller

Originally Posted on August 17th, 2011 in Culture,Economy,Government,Politics by Robert Miller | Edit

Fig. 1 Quartile divisions of wealth accumulation: Country A is fictional, Country B is Sweden and Country C is the United States

I am reissuing this posting, all attributed to the election of Donal J. Trump. I expect his administration to be the most corrupt adminstration in history. I am sure we will see many clowns as members of his administration. Perhaps there is some sunshine that will illuminate his administration, because I expect that he will offer no rewards for the people that elected him, and if the Democrats are smart, they will make inroads into the people who elected Trump, by recognizing LABOR UNIONS, once the center point of FDR’s New Deal.

If you were hoping that Americans were well informed about the increasing disparity in wealth distribution in America, this posting will disappoint you. Perhaps you’ve heard the story already. A few nights ago on the PBS News Hour, financial correspondent Paul Solman gave a little quiz as he walked through Times Square, interviewing different people and asking them questions based on the pie chart illustrated in Fig. 1. The three pie charts are divided into quintile (5 x 20%) sectors based on the percentage of total wealth of the country by each quintile (see wealth definition below); yellow is the top 20%, blue the next 20% followed in order by red, green and orange at the bottom 20%). Three different countries are represented by the three different pie charts. The first of two different questions Solman posed was: suppose the country’s wealth was divided into the quintiles represented by the colors–in which country would you prefer to live? The majority pointed to either Country A, which is a fictitious country, with total wealth shared equally among the five different sectors, or the Country B, which is represented by Sweden. Among those interviewed, very few selected the bottom pie chart, Country C, which is in fact the wealth distribution for the United States, in which the top 20% of the wealthiest Americans own 84 percent of the total wealth. That question by itself suggests that the majority of Americans in Solman’s sample would prefer to live in a country that has a more equitable distribution of wealth, which for them, doesn’t exist. But then the more obvious question was put forward when Solman asked, which among these three countries do you live in–which one is America? The majority of those interviewed pointed to Country A or Country B and very few selected Country C. Yet when Solman presented the pie charts to nearby entry level workers, they had no difficulty identifying the United States as  Country C.                                                                                                                                                                                          

Solman’s little quiz would hardly stand the test of statistical scrutiny because his limited sample was certainly skewed, undersized and biased in many different ways. He was actually interviewing the crowd waiting to get into the Dave Letterman Show (except the entry level workers didn’t seem to be in that line). But in fact, he was merely echoing a more complete and extensive  study carried out by two academics, Michael I. Norton and Dan Ariely, professors from, respectively,  the Harvard Business School and the Psychology Department at Duke University. The title of their paper “Building a Better America–One Wealth Quintile at a Time” was published on-line in Perspectives on Psychological Science.They had carried out a larger study asking similar questions, but with a nationally representative  online sample size of 5522, with 51% female (mean age 44.4), randomly selected from a panel of more than 1 million Americans and completed in 2005. Median household income in their sample was $45,000, similar to that reported in the 2006 U.S. census data; in the 2004 election; 50.6% voted for Bush and 46% for Kerry, which was close to the actual outcome. All respondents had the same working definition of wealth which was read to them at the time: “wealth, also known as net worth is defined as the total value of everything someone owns minus the debt that he or she owes. A person’s net worth includes his or her banking account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.” Each respondent was told about Rawl’s expression of a just society: imagine if you joined this nation, you would be randomly assigned to a place in the distribution, so that you could end up anywhere in this distribution, from the very richest to the very poorest. So that instruction makes the study a little different than the simple interview that Solman carried out. Not surprisingly people overwhelmingly selected Country A or Country B. The actual numbers from their paper are shown in the shade covered pie charts of Fig. 2 ; equal distribution got 43%, Sweden got 47% and the U.S. got 10%; the comparisons between individual countries was Sweden 51/49 over equal; Sweden 92/8 over USA and equal was favored over the USA 77/23. These differences were robust across gender lines, political affiliations and personal income. The slight preference for Sweden over the equal distribution country implied that Americans wanted at least some inequality in the distribution of wealth. So the Norton & Ariely study was based on the idea that you had to decide which country you would join, when the economic strata you would occupy was randomized and you could be at the top or anywhere in between, but the decision would not be yours. When asked in this way, Americans chose a more equitable distribution than that found in the United States today.                                                                                                                                                                   

The next part of the survey will surprise no one. The general strategy is displayed in Fig. 3. The upper horizontal bar graph shows the actual distribution of wealth in America. Notice that on this scale, the fourth and fifth bottom quintiles (purple and light blue) are so small that they cannot be represented adequately using the graph scale.  If you find this shocking, then you should read Barbara Ehrenreich’s excellent book Nickel and Dimed: About (Not) Getting by in America to see how problematic it is for people who do not have sufficient stability in income to keep afloat in America. We do not pay enough for entry level positions, such as maids, janitors, waitresses and WallMart employees. Today, one in six Americans gets food stamps. But, back to the graph.

The middle bar shows the estimated wealth distribution in America, projected by averaging the results of all those surveyed, as they attempted to gauge the wealth distribution of America.  For this bar, each person had to estimate the relative wealth distribution for each of the quintiles. It is apparent that the group way underestimated the amount of wealth owned by top quintile  You will also notice that on this bar, all quintiles have representation, meaning that the average American doesn’t know that the lower 40 percent of Americans do not have enough wealth to have representation on the scale of the bar graph. The relative wealth of the lower 40 percent of Americans is invisible graphically as well as invisible to most Americans. The very bottom bar, shows what those polled would like to see in a “perfect America.” In that non-existent state “perfect America” looks very balanced, with a progressively smaller percentage of wealth assigned to lower quintiles of the wealth scale, but every quintile as a more robust presence. So, here too Americans want to see the “wealthy” better off, but compared to the society we currently have (top bar), they would like to see a far healthier America, with wealth distribution more equitable.

There were other small differences in the outcome Of Norton and Ariely’s study, depending on whether they looked at the results by groups, based on salary differences, gender, Republican vs Democrat, but these differences were small compared to average, indicating that most Americans had similar views when making these kinds of judgements. My conclusion from this  study is that American citizens don’t know how skewed the wealth curve distribution is in their own country, but if they could design a different country, they would generate a more equitable society. So, in terms of wealth distribution, social policies, including health care and social security, the formation of unions and the value of public education, Americans consistently support a view that is to the left of the current President or most members of Congress. The reason why this view does not dominate our political and social philosophy is because our political system is not based on an equitable distribution of representation (imagine how utterly skewed it is that California and Wyoming get the same number of Senators) and the financial costs of running an election are so great that every candidate at the national level needs support from a sugar daddy who is generally from from big business and is always far to the right of where most people are with respect to social policy and income equity. And, thanks to the Supreme Court ruling of three years ago, corporations can throw unlimited funds to sway our political system so that it subserves the interests of corporations–the bigger the better. Whether these problems can be politically solved or not, whether America can reach for a sense of economic justice remains to be seen, but so far the polarization in America, which is now being accelerated by paranoia and demagoguery, has yet to reveal any hint that we can avoid a train wreck in our future. The best we can do is keep plugging away, keep arguing as rationally as we can and hope that the quality of our drinking water improves so that a rational society can re-emerge some time in the near future. American business has failed the country. Perhaps we could rationalize their huge paychecks, if in return they met their responsibilities and provided good paying jobs for all Americans. But in fact the evidence is clear–the interests of big business is to remove more wealth from the middle and lower income classes and make additional profits for themselves. This cannot continue. Many have argued that the wealth distribution in America  was not created by the wealthy, but was in fact a transfer of wealth from the Middle Class and the poor through their failure to keep wages growing with prosperity.

RFM

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What is in our future with the election of Donald Trump?

Posted on November 11th, 2016 in Culture by Robert Miller

First of all, I strongly endorse the new article that appeared in the New Yorker written by David Remnik entitled An American Tragedy.

But let’s switch the subject……….Here is a fanciful notion. Right now the Republican party is conflicted: it consists of the white uneducated voters [Ninety-four percent of black women voted for Hillary Clinton. Sixty-eight percent of Latina women did so. But 53 percent of the white female voters in this country voted for Donald Trump], and that factor alone put Donald Trump in the White House. But the Republican party still contains lots of rich folks and therein lies the problem: the uneducated white guys and white women, want to be a full time member of the club, meaning that they will demand improved wages and the trappings of a middle class life that they lived had many years ago [Did they really live a middle class life many years ago, or is that a lot of hogwash?] But the rich guys in the Republican party are probably not of a mind to let them have what they want; it’s not in their DNA.

Here is the new opportunity for the Democrats

What if we went back to the old days when the Democratic party sided with labor unions and we attempted to rebuild the Democratic party based on strong unions. Remember that it has only been since the election of the presidencies of Bill Clinton and Barack Obama, that we have failed to endorse labor unions. FDR built his entire New Deal on the force of labor unions, he referred to Detroit as the “Arsenal of Democracy.” Now look at the contrast: the Republican party is split due the recent election of Donald Trump. But that same Republican party is split down the middle [I don’t think we know the true differences in party membership since the election of Trump]. How difficult would it be to have the Democrats go back and foster labor unions? Every Democrat is somehow affiliated with labor unions. I did not know until I read Frank Thomas’s new book  Listen, Liberal: Or, What Ever Happened to the Party of the People? Until I read that book, I didn’t know, that as a Democrat, I was supposed to be against labor unions. In truth, I have always favored labor unions and I believe to this day that the entire basis of the Democratic  Party should center their party organization around strong labor unions, and because the Democrats, are at the very least opposed to them I wonder if we should start a new party that emphasizes labor unions and take the Trump votes away from the Republicans. Now I am not naive enough to know there are problems with this idea. Long ago the working class white guys got caught up in the idea that the cultural wars restricted the direction that the Democratic party was headed during these cultural wars. Things like abortion, religion and Terry Schiavo and all the other trappings that determined the cultural split between the union guys and the college educated white guys. But these cultural wars are beginning to fade and now is the time to strike while the iron is still hot. I have written several articles on this problem, the most recent of which is Crossing Over into Dover, Redux.

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I Am Sad Today

Posted on November 10th, 2016 in Politics,Science,War by Robert Miller

Two nights ago, we witnessed the election of a man who assaults women, and someone who is a practitioner of nativism, authoritarianism, misogyny, and racism. All in one bundle: you get one and you get them all. Donald J. Trump is not known for his compassion for the average Joe Blow. I think he is repulsed by the very people who supported him throughout this historic election: he doesn’t have a history of helping those less fortunate than himself. In fact, if anything, he has a history of stiffing the very workers hired to make his buildings for him. Here is what we have to look forward to in the coming weeks and months and years of his presidency: we will see the radicalization of the Supreme Court, the suspension of the Paris climate accords (he can’t do anything about this for 4 years, but after the grace period he is free to run his own game), the resumption of drill-baby-drill. Of these, I am mostly distressed about the president-elect, turning his back on climate change, because we only have a little time left, before the doomsday clock rushes in and takes all of our options away. Trump is so taken by his inflated image of himself, that he will be robbed of the capacity to act quickly and decisively in the best interests of the United States and our precious democracy. Suddenly, I see our democracy as being highly fragile and in need of life support. How did we get here?

I am dumbfounded as to how this happened, but in many ways, I do not blame the people who elected him. The dividing line for the election was sharply on the line of those who have prospered from globalization and those who have not.  I blame the level of inequality that has grown, once we embarked on the period of financilization and globalization which began in the 1990’s and the greed we have manifested in this country. Will this be end of America as we have known it, will our annihilation as a democracy be laid  on the doorstep of greed and avarice. Will we long for the country we had just one a day prior to the election. At the same time, I hate to think about our future and I wonder how we will come to regard those who elected him. I think we will have further animosity between the Trumpites and the Clintonites. Donald Trump has promised to renounce the trade deals represented by NAFTA and the new one referred to as TPP (Trans-Pacific Partnership). If he succeeds in doing this, the prices of household goods for this followers with go up in cost. Those more affluent will be able to afford this increase; thereby creating an additional level of income inequality.

Tony Schwartz, the co-author of The Art of The Deal, who got to know Trump by hanging out with him while writing the book, refers to the him as a “sociopath.” I am truly sorry about what we are about to go through, I am numbed beyond capacity to imagine all of problems that await us with a Trump presidency. Where all the trends were pointing to a more progressive era, with Bernie Sanders stroking the notes of a new progressive era, we have now taken such a hard right turn, I am breathless and speechless at the same time.  I am not breathing normally since the election and I suspect that applies to some of you as well. I wish I had more soothing news to report, but this is the time to batten all the hatches. In many ways we are all alone. The Republicans control the House and the Senate and with the election of Donald Trump, they now control the White House. They appear equipped to do anything that want, and there is little we can do about it. But we need to hunker down and do all we can to preserve our democracy. At the same time the Democratic party has made a let us down big time, and I wonder if a third party is now long overdue.

 

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