Saturday, July 02, 2016

Redistributing Wealth Into the Top Quartile

I wrote something - as a Facebook comment - that was wrong.

Worse, I think I wrote it because I wanted to write something that people would like. I wanted a conclusion that people would favor.

However, I was wrong.

I wrote the comment in response to the claim that the poor are getting poorer while the rich are getting richer.

This is not true.

An examination of global income levels in the past twenty-five years shows that the rich have gotten richer.

It also shows that, except for a few hundred million of the very poorest people on Earth, the poor have also gotten richer.

However, incomes for the global "upper middle class" - the people in the 75% to 90% range - have stagnated. They have not gotten any poorer - but they haven't gotten any richer either - over the past 25 years.

This chart from the World Bank shows the income growth from 1988 to 2008.

See: Global Income Distribution from the Fall of the Berlin Wall to the Great Recession.

I listened to a podcast from the London School of Economics today, Globalisation, Migration and the Future of the Middle Classes where Branko Milanovic, the researcher responsible for the graph above, asserted that new data extends these findings to 2013.

So, after making this correction, I offered the suggestion that it would be fair to tax the top 10% to provide benefits to those in the 75% to 90% range so that everybody can participate in the benefits of globalization.

I felt that readers who are in this 75% to 90% range would likely look favorably upon this argument - because it means giving them more wealth. It means making them better off. It's something that should please them and cause them to like my comment.

On the surface, this has a hint of fairness.

The people in this range of the top 75% to 90% have gotten RELATIVELY poorer. They sit at this income level and they see people below them getting jobs, making money, and getting regular pay raises. They see the people in the top 10% making more and more money - more money than they can even imagine. They are falling further and further behind the people on their right, and the people on their left are catching up to them. Meanwhile, they sit with the same income that they had 25 years ago. They do not like standing still while everybody else gets ahead.

It is easy to imagine the frustration these people must feel. They are like a runner who is in third place in a 20-person race. She sees the people in first and second place pulling ahead. Meanwhile, the pack that is behind her is catching up. There is bound to be a sense of frustration.

However . . .

We are not talking about winning a race. We are talking about income.

On the left side of this graph there are still 750 million people still living off of less than $2.00 per day. These are the people whose children suffer health and developmental disabilities due to malnutrition, whose bellies are bloated by parasites they cannot afford to have removed.

My suggestion in that comment would be to ignore the plight of these people - to turn a blind eye to the reduction in suffering that we could provide to them - and benefit people in the 75% to 90% income range instead.

On any measure of the types of kindness and sympathy that we have reason to promote, the money should be redistributed first to those making less than $2.00 per hour. There is no argument to be made that says that redistribution should benefit first those who are already in the top quartile and, only incidentally or as an afterthought, used to help those who are undergoing the greatest suffering.

I was wrong to suggest that the money be redistributed into the 75% to 90% income range.

Now, what should we do for the people in that range - the people who have not obtained any benefit from globalization.

I must repeat - we are talking about people who are already in the top quartile. Indeed, 99% of of the population of the United States is "above average" in terms of global income - they are at 50% and above. Only a very few Americans are in the bottom 50%. It is odd, at best, to see these people as "suffering" and in need of assistance - particularly at the expense of those who are worse off than they are.

Politically, they may use their power to demand some benefits for themselves - demand some redistribution of wealth into the top 75% to 90% income range. Politically, they may have the power to vote for Brexit or support Donald Trump (or Bernie Sanders - who built his campaign on a campaign promise to redistribute income into this the 75% to 90% range) for President.

However, having the political power to force a program through the political process does not imply a moral right to do so.

I wrote in a facebook post that we should be redistributing income into the top quartile. I was wrong.

No comments: