Wealth Inequality



Christopher Ebbe, Ph.D.   12-17

ABSTRACT:  The possible results of the increasingly unequal wealth distribution in U.S. society are described, along with possible ways of shrinking this inequality.

KEY WORDS:  income inequality, wealth inequality, class in U.S. society

Every human society has inequalities of wealth, even primitive societies in which much is communally owned.  Inequalities exist, also, regardless of economic system.  Communist societies have large inequalities, just as do capitalist economies.  Every capitalist economy will inherently create inequality over time by its own nature, since those with investable resources will always have an economic advantage over those without, since they have more power to set rates of return and exchange.  (It is unimaginable that those in society seeking investment capital would band together, like a union, and accept investment funds from banks or the wealthy only at a certain interest level!)

As the wealth of the wealthy grows faster than the wealth of everyone else, inequality increases.  The result of any inequality is that some will feel and think that the situation is “unfair,” even if there is no standard or law that would declare it unfair.  Envy and frustration increase as inequality increases, but as long as the less wealthy have lives that they deem acceptable, this unhappiness about the inequality will not result in societal changes.  Those who have the power to make societal changes (those with more power or influence, including most legislators) do not do so when things seem stable, since most of those who seek the status and power of governing positions naturally ally with the more wealthy, since they can extract campaign contributions from the wealthy in return for legislative and administrative favors, and since they aspire to be one of the wealthy themselves and therefore will not take actions that would harm the wealthy class.  The wealthy themselves could theoretically voluntarily reduce their demands for return on investment, and there are occasional decisions by groups of wealthy to do just this sort of thing, in order to preserve markets or keep the peace in society, but the tide of individual opportunism in U.S. society is too great for this volunteerism to maintain wealth inequality at a peaceful level. 

The most noticeable results of significant wealth inequality are the “richness” of the rich and the suffering of the poor.  Those at the lower end of the economic scale may not actually suffer materially, depending on whether they have sufficient resources to survive and be well fed, but they will suffer psychologically from having so much less (in relative terms) than the rich.  Unless they are chronically hungry, homeless, or dying for lack of medical care, their plight is generally ignored by those in our society who are better off.

If the less wealthy reach a point of being very unhappy with their lives and view the wealthy as responsible for their unhappiness, there will be violence by the much more numerous unwealthy which will force some changes that reduce that unhappiness.  The election of representatives in democracies could theoretically control the situation without violence, but since elected representatives are by and large aspiring to become like the wealthy, this avenue is usually unproductive (although occasionally they do come through for us, usually driven by fears of not being re-elected).  When there has been no such revolutionary violence in a society for a whole generation, the current players in society have great difficulty imagining that such violence could occur, but history shows that it will occur.  (One other scenario, so far restricted to sci-fi, that becomes theoretically possible when absolute wealth becomes great enough is that the less wealthy can be “bought off” with benefits, money, or happiness drugs paid for by the more wealthy.)

The U.S. government has not grappled seriously with the wealth inequality problem, because it would require a significant change in political philosophy, so the major parties only wish to try their traditional remedies over and over again, whether or not they have good effects.  Republicans always turn to trickle down economics, arguing that the more wealthy the wealthy are, the more crumbs will fall from the table for the less wealthy.  They pass legislation increasing the wealth of the wealthy but never with requirements of them, such as giving tax credits only for each additional job “created” rather than simply reducing the tax burden of the wealthy across the board and asserting that this will result in more jobs.  Democrats turn to giving things to the less wealthy, such as food stamps or medical care, as a solution, but this does not make the less wealthy feel more equal because they have no control over those programs or their incomes and because no one really likes “handouts.”  The election of Mr. Trump as President occurred mainly because the less wealthy had lost faith in both parties, who have dithered rather than acted, and there is more rebellion to come (violent or non-violent) if the wealth gap is not perceived to be closing (which closing might come either from many new and additional jobs becoming available or from some actual redistribution of wealth).

We will leave aside in this essay any thoughts of a moral imperative to close the wealth gap, though it could be argued that it is in some sense immoral (or at least “indecent”) that the gap is so large in a group (our society) the members of which are supposedly all working together economically.  We will be thinking here of remedies only to preserve social order and keep everyone relatively satisfied with their lots in life.

You my well not like some of the following suggestions for remedy, but it seems clear that since we have a capitalist system and given that jobs will continue to be redistributed around the globe in a global economy and that automation of service, manufacturing, and even professional jobs is likely to increase, we will need to adopt some one or more of the following in the fairly near future, in order to avoid starvation deaths, increasing crime, and riots.  Note that redistribution of income is not new to our society, since every tax break is a form of redistribution (every lessened taxation of some taxpayer must be made up by some other taxpayer paying more).  If you are getting any of those breaks, like for medical expenses or your home mortgage, you are gaining at the expense of some of your neighbors.

You may whine “Why can’t we just let everybody find their own jobs?  That’s fair enough, isn’t it?  It’s not right to take money from me to give to others.  I’m supposed to get all the benefit of my efforts to earn and rise in status.”   This could be a tenable argument if there were in fact enough jobs that paid enough to live on, but there aren’t!  There may be enough jobs in total, but many of them don’t pay enough to live on or don’t have benefits, as employers have tried every trick possible (like minimum wage or lower, fewer than 40 hours a week, no benefits, etc) to stay in business themselves.


1.  Tax levels for rich and poor could be adjusted, with more being required of the rich than currently, some of which would be used to benefit the less wealthy (by direct gift or by job-creating programs).  Tax changes just now enacted by Republicans lessen taxes for the rich, which could benefit the poor indirectly if the rich use their additional funds to add jobs to their companies through investment or expansion.  It remains to be seen whether enough will trickle down to make any difference to the less wealthy.  (It would be desirable to establish criteria now by which we could determine whether this 2017 tax break largely for businesses and the wealthy does or does not actually “work,” but perhaps Republicans do not wish to have evidence that tax reductions do not reliably work.)

2. The influence of unions could be increased (presumably thus increasing wages) and the legal and regulatory actions of the last thirty years limiting union power could be reversed.  Naturally businesses would rather not have unions pushing for higher wages, but the result of the decline of unions has been to remove another factor that could have helped wage growth.  Unions versus management could be a useful struggle with regard to wealth inequality, if both sides had roughly equal power.

3. Every twenty years, a gross redistribution of wealth could take place, with portions (10 percent, or, everything over one hundred million dollars?) of the wealth of the wealthy seized by the government and given to “the poor.”  We are rightly suspicious of government simply taking money from citizens, but this would be a rational though unpalatable way to address wealth inequality.  The rich would still be rich but not quite so rich.  Some of the rich might change their citizenship, and some of the poor might spend their windfalls unwisely.

4. Arrangements could be made to routinely split the monetary benefits of increases in productivity between investors, management, and workers, instead of investors and managers getting all the benefit, since workers have contributed, too).  Every replacement of workers with robots could require a fee which would go to social programs.

5. By law, all businesses could be required to convert to being “coops,” in which all workers in that business would jointly “own” some proportion of the business.  Thus, management and workers would have to work together to make all business decisions, and all would share to some extent in the profits of the business.  In such a system, workers might not even have fixed hourly wages but could be paid according to the profits of the business for that month, thus ensuring a high level of worker motivation.

6. Wage controls could be instituted, keeping wages of the middle and lower classes somewhat in balance with the incomes of the rich.  The rich vehemently criticize minimum wage arrangements and predict loss of jobs, but if wage controls result in keeping wealth inequality under control, it could be worth the pain.

7. Price controls could be instituted, keeping the prices of essentials low enough that the less wealthy could readily afford them.  Economists in general seem to believe that price controls keep an economy from flourishing, since free markets can find price levels without being controlled, while price controls require some amount of bureaucracy.

8. A legal cap could be placed on wealth, so that no one would be permitted to have more than one hundred million dollars in resources, for example.  Any excess in income would be taken and used for the benefit of the less wealthy.  To do this would end the wealth dream of people aspiring to have more then that limit, but surely a hundred million dollars would be enough to live on comfortably for a lifetime for anyone.

9. The government could implement a minimum annual income for all citizens, using tax revenues to distribute, for example, $40,000 tax free to every citizen every year.  Most citizens would of course choose to also work for additional income.  This would be a guarantee of survival to all.

10. Government could ensure that every citizen was employed, finding some job for all who could not find their own, even if jobs have to be “created” by the government solely for this purpose.  These might be largely lower paid jobs (dishwasher, street sweeper, trash collector), but some minimum income arrangement could make them capable of providing survival level income.  Even most of those who are disabled or disadvantaged by illness can do some sort of work (envelope stuffing? sheltered workshop assembly?), and this would probably be good for their self-esteem.

Some will predict that providing these jobs would erode the motivation of workers to find their own, but this erosion would only be seen in a certain proportion of workers, as many would still wish to do as well as they possibly could economically, which would require seeking behavior on their part rather than waiting to be provided with work, and the pay levels of the provided jobs could be kept fairly low (though enough to survive) to stimulate desire for more.  If more and more workers opted for these “minimum” jobs, we would have to re-examine the incentives at all levels, as well as the milieu elements in various jobs, since how it “feels” to be in a job has as much to do with job satisfaction as does pay level.

In this vein, we could do much more to help retrain workers whose jobs have “disappeared,” including paying moving expenses for moving to where a job is.  We have some such programs, but they are ill-funded and tiny compared to the need.


Instead of dismissing this essay simply because it is unpleasant to think about, force yourself to choose which of the above actions you would prefer over the others and would implement if you were in charge.  Think about the costs and benefits and how they would change our society.  Some one or more of these will have to be adopted in the near future to avoid bloodshed.


“Final solution” here does not refer to a Hitlerian genocide of the rich or the less wealthy but rather to the attitudes of everyone in our society toward each other.  At present we are a nation of individuals intent mainly on our own advancement and little concerned with the lives of others, except perhaps in times of natural disaster.  In times of economic disaster, though, as when a manufacturing plant closes and leaves most of the people in a small town without work, we feel no responsibility to do anything about it.  Everyone in our society is supposed to find his or her own job and career, which is an aspect of the freedom we cherish, but this means that when a large number of people cannot find jobs, the rest of us feel no need to help.  We are suspicious of “welfare” and government handouts and annoyed with people who receive those monies instead of finding their own jobs.  What would you do, though, if it happened to you, and there were in fact no jobs to be found because of globalization or robotic replacement of workers?

Americans recoil from wealth transfers, but ask yourself why rich people (let’s say, with annual incomes of $400,000 or more) would fight against such transfers (of, let’s say, five percent of income above and beyond current tax levels).  They could still have good lives economically and pay for their children’s college education, so why not give five percent toward people at the other end of the economic spectrum?  Why do they not care enough about those less wealthy to want to give something to them?  What has happened to “Christian charity” (and “compassionate conservatism”)?  This redistribution could be in one’s own community, directly to someone of your choice right there at home, rather than it all going first through the government.  You might ask, cynically, whether I am volunteering any percentage of my income to helping the unwealthy, and the answer is “no” (not beyond paying my taxes and doing some charitable giving), but if everyone else were doing it, I would be quite willing to do it as well.

Consider how different things might be if we viewed all citizens as part of our group of important others, rather like all being in the same huge lifeboat.  We might see it as perfectly natural to help some people find jobs or support them while between jobs, and we would certainly be more concerned about people whose employers offer them no benefits.  It would be more important to us that everyone have similar benefits than that the prices of goods and services might go up somewhat to pay for those benefits.  We could all feel some responsibility for the suffering of anyone else in our society, no matter who it was.

Think seriously about why some form of assistance to the less wealthy could not “work” and why you would oppose it (if you would oppose it).  We are brought up to be “selfish” in our attitudes, but we could also be brought up to be more group oriented.  The extreme worship of individualism in neoliberalism has dulled and softened already, as it becomes more clear that it is starting to destroy any social consciousness that we might have.

There is no reason we could not adopt this attitude.  When huge plants and whole industries shut down in a short space of time, and investment (which goes, for most investors, into investments they know nothing about) is all about returns and profits, it might be comforting to know that everyone else has your back with regard to things you could not control.  Consider the advantages and disadvantages of having one huge family (or benefit society, if you will) to turn to in difficult times.  Some day you might need it!