Why is inequality bad?

This thread and article kind of hints at my question, but I’d like to know more. Because I’m a dirty socialist who hates America, I’ve accepted for some time now that growing inequality is a big deal and is a bad thing for society. But why? Why should we work to lower economic inequality? Why should society desire to make the poorest people richer, and the richest people poorer? I really want to know why inequality is a bad thing.

While the following graphs only included data up to 2007, Bruce Judson makes it clear that the economic collapse in 2008 more than likely did not decrease inequality:

But, whether the Census Data shows a meaningful increase, or not. is irrelevant. The Census Data reports that, contrary to the almost universal expectations of economists, economic inequality most likely did not decrease in 2008. Experts had anticipated that the declines in income of the rich would lead to a reversal in this groups ever–widening share of our national income. Instead, the Census reported that the 2008 income losses by the top 10% of Americans were offset by larger losses among middle class and poorer Americans.

Graphs from here.

Are these measures of inequality the symptom of a larger problem (the inability of our markets to share wealth across all Americans), a problem in and of itself (causing the imbalances in the market in the first place) or does that distinction even matter?

Someone’s already done the work for me!

“More money won’t fix broken Britain, but sharing the money could. That is the conclusion of The Spirit Level, a groundbreaking study which concludes inequality is at root of all society’s problems, from violent crime to teenage pregnancy.”
Source

Deviance studies would also support this.

You could make the argument that its natural for the wealth to be spread. Either some government body is going to take it and spread it smoothly and evenly, or the poorest in society will become desperate enough to just take it from you.

because this might happen.

Wow, that is a pretty awesome collection of graphs, tromik. Thanks!

p.s. I may have to pick up their book.

http://www.amazon.com/Spirit-Level-Equality-Societies-Stronger/dp/1608190366/ref=sr_1_1?ie=UTF8&s=books&qid=1270665712&sr=8-1

I don’t understand Judson’s thesis. Census Bureau doesn’t look at capital gains. So if the stock market crash in '08 reduced inequality, Census wouldn’t pick it up. So for Judson to cite Census saying that therefore inequality probably didn’t fall is silly.

I would imagine there was a flattening of wealth distribution as a result of the real estate/stock crash

I was going to point that out as well, but the French Revolution was based on inequality due to Divine Rights, that you were inherently better than others simply because of who you were. In the US, all men are created equal, so the comparison to the Revolution isn’t perfect.

I think Cubit’s question was if we begin equal but I work harder and accumulate more wealth, what is the benefit to me for spreading that wealth? Well, hopefully it would lead to me not getting murdered for my shoelaces.

Also are we talking about economic inequality or opportunity inequality, I think we are working more on opportunity equality than economic equality.

There will always be inequality in term of assets, but I think we are doing pretty good in term of opportunity equality.

This is a good thread and great responses. I would just add that we need to encourage individual reward for contribution, risk-taking, talent and effort. But we need to try to open up systems that maintain inequality.

Sometimes those two points blur and people think that closing inequality gaps means removing the incentives for people to work hard.

For example the entitlement to education fights inequality by giving everyone some access to higher learning. Which would have been a significant barrier to equality if only an elite section of our population had access to it. But the entitlement to education doesn’t keep people from being motivated to succeed.

My impressions from my visits in 3rd world countries are simple. Everyone with some money have walls, fences and spikes all around their house. (And talking with those people explains why they need those)
I’m willing to pay a lot not to live in fear and having a lot of disgruntled people in your country can easily deteriorate to that situation.

I’ll second the recommendation of the Spirit Level but if you can’t afford the book you can see most of the evidence highllights online at this website setup by the authors:

In short income and wealth inequality is bad for both the rich and the poor, it also dramatically reduces the opportunity to succeed. There is a massively strong correlation between the income and wealth levels of your parents and the income and wealth level that you end up at in life and this correlation is stronger the more unequal a society is. For instance its easier to achieve the classic rags to riches ‘American Dream’ in Sweden or Japan than it is in the US:

http://www.equalitytrust.org.uk/why/evidence/social-mobility

The most important political lesson really is that world economies need to abandon the obsession with economic growth and switch to economic equality, after a certain point, if they want to improve the well being of all of their citizens:
http://www.equalitytrust.org.uk/why/equality-not-growth

In parts of the world with massive inequality it certainly seems to. Have we devalued education in the developed world?

Because wealth inequality is a feedback loop in a capitalist economy that eventually destroys the standard of living for the labor force. It’s that simple.

This is also increasingly true in the US. Some rich communities even have their own seperate private security forces. The Spirit Level has a great example of a rich community on the edge of an old industrial town gradually seperating itself off from the poor people who live in the city centre with huge walls, private security and attempts to stop any of their taxes going to help the people in the inner city. Greater inequality creates an ‘us & them’ society of the haves and the have nots, with the haves living in perpetual fear of the have nots finally snapping and storming the barricades.

Now the comparison to the French Revolution seems a bit more appropriate. Those guys not only had fences, but they were the Divine tools of God. It’s not even like the entire third estate suddenly went secular, they just stopped believing God had the monarchy’s back.

I’m not suprised by this at all, if you already have great cash wealth a collapse in property values and the stockmarket provides an enormous opportunity as well potential loseses. You can buy while market is at the bottom and ride the inevitable recovery into even greater wealth. The rich, much like the casinos, almost always win. Then there is the small matter of the great wealth transfer from the government to some of our richest institutions - the ability to pay large bonuses to top bankers seemed to barely be affected despite their enormous losses.

Meanwhile, if you have little liquid assets and a non financial sector job its just been a bad thing all round. You lose the little you have and then have no opportunity to profit from the down market by buying when things are cheap.

I wouldn’t. Recessions and economic slowdowns actually benefit the rich who have the capital to invest during those times to take advantage of them.

Or what Dan said.

Is someone going to argue the other direction at some point? I’m genuinely interested.

wait a minute. brettmcd usually shows up around page 2, or such.