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Is Income Inequality Inevitable?
11-12-2012, 10:12 AM
Post: #1
Is Income Inequality Inevitable?
Income inequality is one of the most talked about subjects in the American media since the outbreak of the financial crisis and the Occupy Wall Street movement. A year ago we were all forced to deal with the understanding that we are one of the 99%, hence we do not own 35% of the wealth in the US, 21% of all income doesn’t go to us, and our income did not increase 392% in the last 20 years. Occupy Wall Street Activists came out, demonstrated, and demanded a more equal distribution of wealth and income, but not much has changed since then.

I recently heard on a radio show a professor of economics stating that income inequality is an inevitable social and economic phenomenon. He mentioned that all we need to do is look back in time and see. His statement sparked my interest. Could it be that millions of people around the world, including me, collectively forgot what they had learned in history class? Apparently so…

A study conducted by Sitabhra Sinha and Nisheeth Srivastava from the Institute of Mathematical Sciences in Chennai, India finds a connection between the hierarchical structure of most societies, throughout history, and their income distribution. They analyzed top-to-bottom income ratios in ancient and modern societies. Their analysis revealed that what is true about today’s income inequality also existed in Byzantium between the 10th and 11th centuries, the Mughal Empire in India during the 15th century, and Indian IT companies in the 21st century. They conclude that income is a resource flowing down the hierarchically branched structure. However, the flow is not linear. It is skewed and it grows exponentially as it goes up the pyramid.

Even though this research gives income inequality a historical and mathematical framework, it proves again that hierarchical society structure is at the main reason for inequality in general, and income inequality in particular.

According to Robert Michels’ “Iron law of oligarchy,” hierarchically organized institutions emerged together with larger, denser populations where decisions could no longer be effectively made by consensus. Democracy and centralization, along with bureaucracy, allow the organization to operate effectively and grow. However, those same things lead to hierarchy, as the power remains in the hands of a few. Those few, who gained power by the hierarchal structure, will actively operate to consolidate the inequality.

Does that mean we have to accept the fact that the power is already “taken”? I say no. Michels claims the people feel a need to be led and therefore are willingly giving the power to others. That claim might have some truth to it, but last year’s events prove that people are starting to change their views. Technology advancements, the Internet, social networks, and the media (to name a few) have allowed people around the world to gain some of that power back. However, we need to stop and ask ourselves how that newly gained power should be divided and where it should be channeled to. We, as a society, must be careful not to perpetuate inequality by taking the power for one oligarchy and giving it to another.

Small businesses have the power to make that shift. We first need to accept the fact that pure capitalism will not take us to where we want to be. Instead, creating business communities, co-operatives, and allowing each business to exploit its comparative advantage to the fullest is a step in the right direction. Communities like the one being built right here at SohoOS are a prime example for how our economy and society can be if we choose solidarity over hierarchy.
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11-13-2012, 07:41 PM
Post: #2
RE: Is Income Inequality Inevitable?
Gillie Davies • An interesting article Rafik, I think that an awareness of these issues is important for change, but dwelling in inequality may not be the way forward. By being grateful for what one has and knowing that "if you are doing the right thing, the money comes." Has always helped me have ample income, ample clients and an abundance in my life. Also provided that business owners are trying to provide a good service at a fair price, and paying a fair price for a good service enables income to be shared around appropriately, it seems to me that it is only when people constantly search for more and to excess that they notice inequality and by focusing on that it manifests it's self because "you get what you think about most".

I seems clear to me that demanding that wealth and income be more evenly distributed does not change anything, of course not. It is only by buying from the corner shop, small business, self employed, and them doing likewise that the wealth will be distributed, but don't hold your breath! Lets just all do a little bit and focus on the equalities and abundance that this world has to offer and maybe we will then realise that wealth is not just measured in $'s, but in quality of life, friendship, laughter, kindness and being of service and help to our fellow woman or man.
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11-14-2012, 12:18 PM
Post: #3
RE: Is Income Inequality Inevitable?
Today, we have the main stream media who is liberal and promotes any inequality in income as "not being fair." They in turn make anyone who is doing well and not in their line of thinking seem like an insensitive person or capitalist. The beauty of capitalism is that it allows those who work hard, take smart risks and innovate the opportunity to create a greater wealth for all who want to come along for the ride. This is one of the keys to America's greatness in the past. If fact, we are the most generous nation in the world but you would never know this by how liberalism tries to paint those who believe in self determination and innovation to achieve new products and services.

Posted by Robb Hiller
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11-15-2012, 10:23 AM
Post: #4
RE: Is Income Inequality Inevitable?
Discussion: Is Income Inequality Inevitable?
Income inequality is inevitable because people are different. Some work harder, some worker smarter, and some, and this often gets overlooked, are a good deal luckier.

The real point, surely, is not whether it is inevitable, it is whether it is desirable. From a moral point of view you may or may not think it is undesirable.

But I would argue that from an economic point too much inequality (apologies, I know this is vague) is not efficient, and thus undesirable because it can impede growth.

For it to grow, an economy needs demand to grow too, and it needs to see specialisation. Only if wealth trickles down from the richest to the rest can sustainable growth occur.

This begs the question how much needs to trickle down. In my view, right now, it is not enough.

If you compare economic growth with distribution of income I think it is telling that the golden age of growth, that’s the 25 years or so that followed World War 2, coincided with an era when income was more evenly distributed across the developed world than it is today.

Posted by Michael Baxter
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11-15-2012, 10:38 AM
Post: #5
RE: Is Income Inequality Inevitable?
Discussion: Is Income Inequality Inevitable?
Income inequality is what we get from following liberals. Up until about 1970, incomes had become more equal. But they we embarked on the path of modern socialism and a culture of debt to satisfy our wants rather than hard work and saving. Enabled by the cheap money of the Federal Reserve, we have followed this road and have transformed ourselves from the most prosperous, biggest creditor nation of the world to the biggest debtor nation. The government treats earners and savers with disdain and the Federal Reserve has lowered interest rates to the point where savers can't earn any interest on their savings.

And the more we have done that, the more unequal incomes have become.

Posted by Ben Simonton
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11-15-2012, 11:36 AM
Post: #6
RE: Is Income Inequality Inevitable?
Discussion: Is Income Inequality Inevitable?
Interestingly, the libera mantra of income inequality has done very little to improve the lot of the poor and lower class. We already have a progressive taxing system. Yet people follow this idea like a religion. Thomas Sowell says it best - individuals are always moving up and down the income ladder, but the averages are fairly static. So in a dynamic society such as ours...creating equal opportunity is the most important aspect...not income redistribution which allocates capital to non-productive or less productive causes. We must remember that one dollar spent by the government is one dollar more that must be taxed. Money taken from the private sector eventually will diminish the economic engine of the entire country...we must find the proper balance. Our country will always take care of the poor and those in need...it always has, let's not get so extreme that the growth engine dies...find the balance.

Once politicians realize that they have the power to vote themselves the contents of someone else's pocket, the system is doomed. They don't let up until they've bankrupted it.

Posted by John Howard
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11-16-2012, 10:14 AM
Post: #7
RE: Is Income Inequality Inevitable?
Inequality follows wants and needs. This is the spark for competition. Competition is inevitable as is inequality.

Every morning we all wake up and leave our homes to fulfill our wants and needs. There is no escaping competition. When competition is driven by wants and still fulfils competitor needs, both go home and live an unequal life. This is healthy competition.

When competition is driven by needs and the playing field is unfair it leads to a life and death struggle. This is how the Arab spring started in Tunisia. The state and its corrupt system deprived a young merchant from earning a meagre living to support his family’s basic needs. His despair led to his immolation. This is an extreme example of unfair competition. When an economic structure finds the majority competing for needs, it risks a fight to bring the system back into balance. People in this state of despair have nothing to loose. The result is civil unrest.

The capitalist structure is based on winning and losing. If you fail more than you win, the system culls out the weak. There is no social net. This is akin to life on the Serengeti. Capitalism works provide the system does not protect the weak. But the system’s “to big to fail” business are protected by government. In 2008, Goldman Sachs and Morgan Stanley were spared from the henchman and countless other business lined up for government bailout. This did side step an economic implosion. Does this indicate a healthy capitalist system?

We also know communism does not work. In 1989, we saw the fall of the Berlin wall and the former Soviet Union.

Perhaps the National Hockey League is coming close to finding the right economic and social balance. The NHL implemented a revenue sharing system to avoid a two team league. They work hard to maintain their ecosystem’s 30 franchises. In light of the current lock out, this might be a poor example. On the dark side, it does show the selfish fight over wants and not needs. This is another example of unhealthy competition. It is an inequality scrap between billionaires and millionaires.

Posted by Jeff Kropman
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11-16-2012, 10:36 AM
Post: #8
RE: Is Income Inequality Inevitable?
When the defense of our nation is not shared by all, and the profits from war making benefit the few at the expense of the many, we find real and visible examples of inequality. Historically we have addressed these issues but we seem presently to lack the (political?) will to address these core issue/value questions. Corporate advantage must benefit the nation as well as the Corporations or we lose our nation to fewer and fewer organizations and individuals.

Posted by William (Bill) Elmore
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11-16-2012, 11:35 AM
Post: #9
RE: Is Income Inequality Inevitable?
The less freedom, the more inequality. Socialism, fascism, and Communism are political and economic systems which result in the greatest loss of freedom and the greatest income inequality. Freedom results in the least amount of income inequality. Freedom for the people means capitalism, an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. Under pure capitalism, freedom is maximized and no one is forced to do anything they don't want to do.

Liberals love to claim that we must have a government strong enough to impose fairness and to protect the interests of the poor. But giving government more power always results in far less freedom, destruction of the middle class, lots of unemployment, and a greatly reduced quality of life for all except those well connected few. The liberal way is very fair in the sense the almost everyone except a well-connnected minority suffers terribly. The US is well on its way to achieving this outcome.

Posted by Ben Simonton
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11-23-2012, 07:09 AM
Post: #10
RE: Is Income Inequality Inevitable?
I moved from senior corporate life to my own, home-based business consulting profession in 1992. I am now 70 and I never looked back. I enjoyed the flexibility of working when my mind was the most productive, whether I was home in the US or in my second home in Europe. My clients did not care where I happened to be working to the extent that technology allowed them to reach me whenever/wherever needed. My productivity was higher because I was not interrupted or even distracted for futile reasons and my overhead as low as can be.
I would never go back to corporate life, I have no nostalgia for my forme "corner office" and I value my freedom more than any executive perk.
My advice for skeptical people: grow up!

Posted by Gerard Tassel
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