Extreme Wealth Inequality in America

The State and Causes of Extreme Income Inequality & Wealth Gap in America

When only 3 richest Americans hold more wealth than bottom 50% of the United States of America (America) ¹, 1% owns twice as much as the combined bottom 90% owns ², and 20% of Americans have nothing at all³ , it is time to change. This is not to imply that all wealthy people are bad people. What is meant here is that the economic and political environment is extremely unfair in which the rich can take all the advantages while the poor and the middle class get the rotten end. There is no equal opportunity in America.

This extreme level of concentration of wealth “has terrifying consequences for democracy” says Bill Moyers, a thinker and writer, and concurred by many other scholars.

Wealth and power gravitate towards each other to exercise predatory influences on the socio-political institutions to render a society unfair and unjust. Without fairness and justice peace and stability cannot prevail. Excessive greed, materialism, self-centeredness, power-hunger, and other vices that obstruct justice also hinder peace. This relationship is timeless and universal.

The American democracy, the trailblazer of the modern world, has failed in its purpose: to look after the interests and welfare of the people and uphold their rights. On the one hand, there is the individual right to be wealthy, it is quite another when the level of concentration of wealth is so extreme that it pushes the rest of the society to become unhealthy and polarized. The collective right of a society to be healthy and equitable is violated at that stage of extreme inequality by the few that can exert undue influences on the government and the society. Democracy cannot survive without the shared benefits of the collective contribution of a society.

History is a testament to the predatory power of the rich and elites to inflict a society with exploitation, abuse, and injustices. When the concentration is extreme and so is the exploitation, the people rise up and revolt and turmoil ensue. A society in that state is dysfunctional and volatile. America has been for a long time approaching towards that threshold. This letter is to give a brief overview of the serious state and the major causes of extreme inequality of income and wealth in the United States of America (USA).

Experts like Paul Krugman, a Nobel prize-winner in economics, believes that the United States is fast becoming an oligarchy – the very system the founders revolted and fought against to establish democracy. That was the era of colonial rule. Today the collective will of the people can bring about a similar paradigm shift in America.

Thomas Piketty, also a renowned economist in our time, showed that between 1977 and 2007, 60% of the national income went to 1% Americans ⁴. This trend has become even more vicious since 2007 and getting worse as time progresses. This definitely is not an outcome of a functioning democracy and a free market economy. It is definitely a consequence of the predatory forces of the rich and the elite groups in America.

In today’s global society the tentacles of these groups spread all over the world. They work with undemocratic forces around the world to serve mutual interests. These alliances of vested interests in the name of ‘free trade’ and ‘free market economy’ use the political forces everywhere especially that of America to pursue the policies that favor the enormous concentration of wealth in America as well as in the world.

The globalization process has made the situations difficult for the workers/employees of both sides of a foreign trade engagement. The benefits of the enormous profit made due to overseas low-cost productions do not come to the workers/employees whose jobs are lost due to the outsourcing.

The ever-increasing greed driven industries also contribute to the heavy exploitation of labors/employees in a society today. The enormous profit is shared by the few top people and groups of businesses on both sides of engagement. Joseph Stiglitz, another world-famous economist and a Nobel prize-winner ⁵says that the trade agreements are always written by and for the corporations while these deals victimize workers on all sides. According to him, the globalization process can be constructive, benefiting all sides if these agreements are fair and conducive to better income distribution. Instead the modern day slavery systems are emerging to serve the top: the rest end up with longer hours, lower pays, no job security, and in many cases no healthcare. For them the future is bleak. The workers and employees are expendable as outsourcing takes place. In the developing countries, since one country competes against another, the governments collaborate with the owners to keep the labor costs as low as possible. Looting takes place on both sides of a trade contributing to the ever-increasing and alarming concentration of wealth domestically and globally.

The Treasury debt owed to the public here and abroad has skyrocketed from 35% of American GDP at the end of 2007 to the alarming 75 percent at the end of 2015 and still increasing. The consequence of chronically high budget deficits is contributing to this unsustainable national debt according to Jeffrey Sachs ⁶, also a leading economist in our time. This is a brief story of the fleecing of the American people.

Extremely unfair taxation policies, laws that create safe heavens for the rich not to pay the fair share of the social cost, laws that favor the rich exploit the workers by manipulating the market and setting unfair prices and remuneration policies are factors contributing towards wealth inequality.

A reckless progression of merging and acquisition has been taking place under the patronage of government that is stifling competition, causing massive job loss, and then price hike ensues contributing enormously to the concentration of wealth in America. The government has been looking the other way while this alarming competition-killing agenda takes place in the market. The small and medium scale businesses – that used to provide 80% of the jobs in America — are systematically and increasingly replaced by mega-corporations, an outcome of a reckless frenzy of merging and acquisitions. In some areas, a few corporations control almost 70% of an industry. One invariable and unfortunate outcome is that with every acquisition or merging there are job losses, sometimes in staggering numbers. The workers and employees at that stage are helpless and silent as no one including the government comes to their rescue. It is important to note on the average in an American company the top 1% employees earned 87 times more than the bottom 50% of workers in 2016 ⁶.

“Wealth is so concentrated that a large segment of society is virtually unaware of its existence”, wrote Thomas Piketty about America. “It is higher than any other time … any other place in history” he exposes in his New York Times bestseller book “Capital in the Twenty-First Century”.

The government “….of the people” – as president Abraham Lincoln once proudly proclaimed – has increasingly become a government “…for the few”.

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