Marketing Scoops: Is Wealth Inequality Leading To a Class War

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“Wealth” is someone’s net worth that is, their assets (like savings, stock portfolios, and the value of their property) minus their debts (like student loans). “Wealth inequality” is measured by looking at how total wealth is spread out across the population. The more wealth there is at the top, the more inequality there is because there’s less to go around for everyone else. Today, there’s a huge gap in incomes between rich and poor………Continue reading….

By: Abdallah Fayyad

Source: Vox

Critics:

Wealth inequality refers to uneven distribution of wealth among individuals and entities. Although most research depends on written sources, archaeologists and anthropologists often view large houses as occupied by wealthy households. The distribution of contemporaneous house sizes in a society (perhaps analyzed using the Gini coefficient) then can regarded as a measure of wealth inequality.

This approach has been used at least since 2014 and has shown, for example, that ancient wealth disparities in Eurasia were greater than those in North America and in Mesoamerica following the earliest Neolithic period. To model aspects of the distribution and holdings of wealth, there have been many different types of theories used. Before the 1960s, the data regarding this was collected mostly from wealth tax and estate tax records, with further proof gathered from small unrepresentative examinations and a variety of other sources.

The results from these sources tended to show that the distribution of wealth was very unequal, and that material inheritance had a big role in the matter of wealth differences and in the transmission of the status of wealth from generation to generation. There was also reason to believe that the inequality in wealth was shrinking over time, and also the distribution’s shape demonstrated particular statistical regularities that could not have been caused by coincidence.

Thus, early theoretical work on the distribution of wealth wanted to explain the statistical regularities, and also comprehend the relationship of basic forces which could be an explanation for the concentration of wealth to be high and the trend of declining over time. More lately, the research about wealth distribution has moved away from the worry with overall distributional characteristics, and in its place focuses more on the grounds of individual differences in the holdings of wealth.

This change was caused partly because the importance of saving for retirement increased, and it is reflected in the vital role now assigned to the model of lifecycle savings developed by Modigliani and Brumberg (1954), and Ando and Modigliani (1963). Another important progress has been the increase in availability and finesse in sets of micro-data, which offer not just estimations of individuals’ asset holdings and savings but also a variety of other household and personal characteristics that can assist in explain the differences in wealth.

Given an initial condition in which wealth is unevenly distributed (i.e., a “wealth gap”), several non-exclusive economic mechanisms for wealth condensation have been proposed:

A correlation between being rich and being given high-paid employment (oligarchy).
A marginal propensity to consume low enough that high incomes are correlated with people who have already made themselves rich (meritocracy).
The ability of the rich to influence government disproportionately to their favor thereby increasing their wealth (plutocracy).

In the first case, being wealthy gives one the opportunity to earn more through high paid employment (e.g., by going to elite schools). In the second case, having high paid employment gives one the opportunity to become rich (by saving your money). In the case of plutocracy, the wealthy exert power over the legislative process, which enables them to increase the wealth disparity.

An example of this is the high cost of political campaigning in some countries, in particular in the US (more generally, see also plutocratic finance). Because these mechanisms are non-exclusive, it is possible for all three explanations to work together for a compounding effect, increasing wealth concentration even further.

Obstacles to restoring wage growth might have more to do with the broader dysfunction of a dollar dominated political system particular to the US than with the role of the extremely wealthy. Counterbalances to wealth concentration include certain forms of taxation, in particular wealth tax, inheritance tax and progressive taxation of income. However, concentrated wealth does not necessarily inhibit wage growth for ordinary workers with low wages.

The investor, billionaire, and philanthropist Warren Buffett, one of the wealthiest people in the world, voiced in 2005 and once more in 2006 his view that his class, the “rich class”, is waging class warfare on the rest of society. In 2005 Buffet said to CNN: “It’s class warfare, my class is winning, but they shouldn’t be.” In a November 2006 interview in The New York Times, Buffett stated that “[t]here’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.