Too Much Money in Too Few Hands?

Poverty Sucks

Too Much Money in Too Few Hands?

Poverty SucksWealth inequality is at historic levels throughout the world and some consider it the greatest threat to the global economy.

The disparity between the very rich and the very poor seems as old as society itself, but it’s a bit more complicated than Marie Antoinette’s reported, “Let them eat cake” pronouncement upon hearing that her starving peasants had no bread. Or, Oliver Twist’s bold request for more than the issued “three meals of thin gruel a day, with an onion twice a week,” at the parish workhouse.

Wealth or income inequality, according to Investopedia is “an extreme disparity of income distributions with a high concentration of income usually in the hands of a small percentage of a population.” The National Bureau of Economic Research reported earlier this year that the wealth gap has indeed widened since the 1980’s when the top 1% held some 25%-30% of the world’s wealth compared to today’s far heftier 40%. And the prevailing notion that the rich are now getting richer and the poor are getting poorer — could have extreme economic, social and political consequences.

The struggle of those on the bottom echelon of society has been apparent for thousands of years, but there is growing evidence that income inequality now hurts everyone. Researchers at the International Monetary Fund maintain that there’s a distinct correlation between the rising incomes of the top percentage of wage earners and falling GDP. Productivity, spending, and economic mobility all suffer when low-income workers fail to thrive. It’s also an environment ripe for high debt and staggering inflation.

Societies where income inequality is most pronounced also tend to struggle with elevated levels of poverty, public health issues, human rights violations, crime and lawlessness. They are more likely to under-invest in technology, education, and innovation and turn a blind eye to economic fear, anxiety and frustration. Rising unhappiness, lower life expectancy, and a frayed social fabric are the common outgrowths of unequal income distribution. And then there’s the nagging question of social cohesion. Wealth inequality has led to a dramatic rise in political tension and uncomfortable conversations about income transfers, re-distribution, and weighty new taxes on the rich.

The disparity of wealth in America in particular, has caused many to question the notion of capitalism itself and spawned discussions about whether the free enterprise system has failed the poor, no longer works, or does not support the ‘greater good.’ Indeed, billionaire investor, Ray Dalio, recently compared the current wealth gap to the decadent, pre-depression 1930’s. Similarly, J.P Morgan CEO Jamie Dimon, asserted that the widening chasm between the ‘haves and have-nots’ has left too many behind. These are common criticisms of the market economy, and they’ve given rise to 2020 political platforms that embrace socialism, collectivism and communalism by advancing incalculable notions like free college tuition, Medicare-for-all, and the Green New Deal.

We’ve certainly come a long way from the 1982 “poverty sucks” poster with the capped man in riding boots, hoisting a martini in front of his Rolls Royce. But there’s danger in believing that America does not endorse competitive markets, private ownership, and the creation of wealth. And there’s great economic peril in tossing out the free market baby with the free enterprise bath water. If our social and political fabric does indeed unravel in 2020, gold will be the safe haven asset of last resort.

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