The growing wealth gap

[AMosely]

When the rich get richer and the poor get poorer, the middle class gets squeezed (or streched and diluted).

The richest 2% of adults in the world own more than half of all household wealth, according to a new study by a United Nations research institute.
The report, from the World Institute for Development Economics Research at the UN University, says that the poorer half of the world's population own barely 1% of global wealth.

http://news.bbc.co.uk/1/hi/business/6211250.stm?ls

[Kerostasis]

Originally Posted by AMosely

When the rich get richer and the poor get poorer, the middle class gets squeezed (or streched and diluted).

The richest 2% of adults in the world own more than half of all household wealth, according to a new study by a United Nations research institute.
The report, from the World Institute for Development Economics Research at the UN University, says that the poorer half of the world's population own barely 1% of global wealth.

http://news.bbc.co.uk/1/hi/business/6211250.stm?ls

Your phrasing of the report implies a change in wealth distribution over time. Unless you know something I don't, the study you linked offers only a single snapshot of time, with no comments on anyone "becoming" either richer or poorer.

[Rick_the_new_guy]

Were did the Middle class come from?

What brought about the Middle class?

When did the middle class take off in population?


Are there Sith Lords seeking to put an end to a middle class that control land, money, and political power that influences the country and its civil rights?

The basis for the text 1984 was a conspiracy that involved [Sith Lords] who wanted to 86 the middle class and bring about the old ways.
The old ways being a system were there were two classes not three. subservient/docile(toward the government)/ignorant masses were what the Sith Lords were creating. Winston found that technology and its improvements in keeping humans alive/feed/ were the enemies to Big Brother and keeping control.

Granted one could argue that there were Black Smiths/Jewers/Cloating/ Lawyers and stuff that were middle class. Their numbers were low and they were pro noble class. Furthermore, their distinction from the peasants were great not just in wealth but in other things also.



I believe the middle class were put on the scene/map by the United States of America.
Post reconstruction, the already growing middle class increased in numbers something fierce. (I mean to say that an explosion of middle class happened here, not that they started here.)

I believe the date would be 1870s and late 1800s. Essentially the peak of the Industrial Revolution, with its vast vast improvements in technology and urbanization, the middle class were increasing and increasing their wealth/education/and political know how.

When you think about it, this has really only been 5 generations ago. (a generation being 20 year) Indeed, someone’s grandpa could have been born in this time frame.

I do not know if there are Sith Lords wanting to retard the middle class.
I know that the Middle Class numbers are shrinking each day.
I want to read Lou Dobbs book: “The Assault on the Middle Class.” Here soon.
I am 27 years old. One of my biggest motivators to nourish my cells with high quality molecules is so that I’ll be here to see how much change will happen in the future. This includes the Middle class in the U.S.A.
My Grandparents saw a sick amount of stuff transpire in the 20th Century, and I want to see a sick amount of stuff go down in the 21th Century.
The centruy has already turned out to be a hummdinger, and we are just on year seven.

[Diceman]

Originally Posted by Kerostasis

Your phrasing of the report implies a change in wealth distribution over time. Unless you know something I don't, the study you linked offers only a single snapshot of time, with no comments on anyone "becoming" either richer or poorer.

Another story on the same report here. This story cites one of the authors making effectively the same claim as AMosely.

[Rick_the_new_guy]

granted in 1984, there were three clase ystems, but the middle class here is greatly differnt than what we know of it today.
The following is taken from the 1984 wikii:

Under Ingsoc, society is composed of three levels:

The Inner Party that makes policy decisions and runs the government, which is referred to as simply The Party.

The Outer Party that works in the state jobs and is the middle class of the society. "Members are allowed no vices other than cigarettes and Victory Gin." The Outer Party is also under the most scrutiny, being constantly monitored by two-way telescreens and other implements of surveillance.

The Proles that are the lower class, the rabble the Inner Party keeps happy and sedate with beer, gambling, sports, casual sex and prolefeed ("rubbishy texts"). The proles are named for the proletariat, the term Marx used for the working class. The Proles make up 85% of the population of Oceania.

works citiation: december 2006, http://en.wikipedia.org/wiki/Ninetee...Four#The_Party

[Kerostasis]

A few notable quotes:

Originally Posted by Various sources in the article

The authors note that "many people in high-income countries — somewhat paradoxically — are among the poorest people in the world in terms of household wealth" because they have large debts.
...
Having assets worth just above $2,200 US would be enough to put an adult into the top half of the world's wealth distribution.

Just being above ZERO puts you in a pretty good position world-wide. Own a car? Your in the top 50%. Own a house? Your in the top 10%, even if most of that house is still mortgaged away to a bank.


Edit: Look, I found a link to the actual study. Also, the reporter who wrote your article did not actually READ the study, as several of his numbers are wrong. Study

[Diceman]

Originally Posted by Kerostasis

Own a car? Your in the top 50%. Own a house? Your in the top 10%, even if most of that house is still mortgaged away to a bank.

I believe the wealth calculation is Assets - Debt. Since a mortgage is debt, I believe the value a house would contribute to someone's wealth would be the market value less the remaining mortgage.

I think this is what they mean when they say that some of the poorest people in the world are in the highest income countries; a person would fit this criteria when they owe almost 100% (or more?) of their net worth to the bank - even if they have a high income.

[Kerostasis]

Right, I was taking that into account. But the reporter indicated you only needed $63,000 to reach the top 10 percent, and since most houses are worth much more than that, you can reach that level of assets with a fairly low equity in your house.

But really, read the study for yourself. I linked it so you can check all the numbers yourself if you want.

Incidentally, want to know where I fall? I have more debts than assets, so I'm somewhere in the bottom 10% with negative net worth. I live with my grandmother, who is retired (no income) but falls in the top 2% of the world by wealth (mostly by owning her own house).

2 people in the same house, separated by about 90% of the world. Wealth gap? Um, right...

[Grunt 70]

Originally Posted by AMosely

When the rich get richer and the poor get poorer, the middle class gets squeezed (or streched and diluted).

The richest 2% of adults in the world own more than half of all household wealth, according to a new study by a United Nations research institute.
The report, from the World Institute for Development Economics Research at the UN University, says that the poorer half of the world's population own barely 1% of global wealth.

http://news.bbc.co.uk/1/hi/business/6211250.stm?ls

The first question for me is how this has trended in the past. Cut through the complicated sentance structure and ask yourself is it really news that the rich get richer while the poor get poorer?

What does it mean that the middle class has been diluted or stretched? If the study accounts for world wide wealth data you must account for the fact that the idea of a middle class is defined differently in many countries or regions -- I don't see a connection form an article that describes distribution of world wide wealth to the idea that american middle class is declining. I would however agree that both international and American economic dynamics have changed, are changing and will change in the future. It's inevitable and natural that financial dynamics in a society will evolve. To me it's a fascinating phenomenon. I think of things like the transformation of American society through the twenties, thirties, forties and fifties. What a roller coaster ride to create what we'd see as the American middle class. That's what resonated for me in your original post I guess.

As a brief aside I'd suggest the 1986 David Byrne movie "True Stories". John Goodman and the front man of the Talking Heads star in this quirky tale of middle class life in Texas. If you like the Heads the music is a must too.

back to the post --

As others have pointed out, $2200 a really low dollar amount. This suggests most Americans are in the upper level of the worldwide picture. This can't be a surprise if you take into account the uncountable millons of people around the earth who take in less than $2200 annully. The wealthy part of the world insulates itself quite well from the overwhelming reality -- with some occaisional exception to the rule i.e. Darfur or the Indian Ocean Tsunami of last year. I'm looking at it from a solidly middle class American point of view, I'll give you that in a hearbeat. We Americans are occaisionally quite selfish.

Your missive got me thinking of how middle class relates to me personally. Socio economic history colors perception of self worth as you grow older in life. Thankfully, I feel good about the station in life that I'm at. At first I rejected your premise that the middle class is being weakened or is in danger. That's because I grew up poor and nowadays I fall well in the middle of the middle class. I got where I am mostly without any help from anyone and but I still think I've really been lucky somehow. I used to think poor people should be able to pull themselves up by the bootstrap, do what it takes to get by and just get it done. That's what I did darn it. But as I've aged I see now that is shortsighted and there is much more to the equation.

I'm looking forward to more discourse on this from the S.B.

[Diceman]

Originally Posted by Kerostasis

Right, I was taking that into account. But the reporter indicated you only needed $63,000 to reach the top 10 percent, and since most houses are worth much more than that, you can reach that level of assets with a fairly low equity in your house.

Ah, I think I see now what you were saying, and I agree.

This result, it seems to me, is unsurprising when you see the vast sprawling slums in some parts of the world, or recall the millions that live on just a few dollars per month. That $63,000 is enough to put an individual in the top 10% of the world (by wealth) serves to underscore exactly how wealthy we collectively are here in North America.

An interesting thought that occurs to me when considering the $2200 figure as the median networth - how many people must have to live with absolutely nothing in order to provide the mathematical counterbalance of one Bill Gates, or one Donald Trump? A quick calculation shows that ~454,545 people must live with nothing (i.e. networth of 0) for every billion held by some billionaire - in order to arrive at the stated average.

Of course, that's not the whole picture. As stated by both the report's author and yourself, Kero, there are a good number of the poorest people on earth living in the highest income nations. Still though, it's interesting.

Originally Posted by Kerostasis

But really, read the study for yourself. I linked it so you can check all the numbers yourself if you want.

I didn't read the whole report, but I skimmed the tables - FWIW, the numbers used in the CBC report struck me as being fairly accurate. I was able to find most of the ones that I chose to look for. Thanks for the link, BTW.

Originally Posted by Kerostasis

2 people in the same house, separated by about 90% of the world. Wealth gap? Um, right...

Sure, why not? How do you define wealth?

Edit: Some consideration of this question reminds me that there are two measures used in the report - networth per capita and household networth. So while you would have a personal low networth, as indicated to your asset to debt ratio, your household networth would still be quite high.

[Diceman]

Originally Posted by Diceman

An interesting thought that occurs to me when considering the $2200 figure as the median networth - how many people must have to live with absolutely nothing in order to provide the mathematical counterbalance of one Bill Gates, or one Donald Trump? A quick calculation shows that ~454,545 people must live with nothing (i.e. networth of 0) for every billion held by some billionaire - in order to arrive at the stated average.

Taking this idea a little further, a quick lookup on the interweb shows that the collective net worth of the 400 richest americans is $1,250,000,000,000. In order to compensate for that obscene wealth, ~568,181,818 people must have a net worth of 0 in order to balance the world's wealth on the $2200 figure.

That's more than the whole population of North America!

[jepzilla]

Distribution of wealth gets quoted a lot, but it's probably the most misleading and downright useless human development statistic.

We record typical wealth growth in percentage figures- wealth grows exponentially over time for most people so really nobody should be looking at the raw numbers at all, but the logarithmic disribution of wealth. Also consider that in many countries, such as America, or Canada, your typical person starts off heavily in debt with mortgages, car loans, possibly student loans, etc... On the other hand if you're living in France, housing prices are so low that the initial starting point is a much smaller negative. For example, according to the distribution of wealth method, a successful young doctor with a new family, and a nice house, making perhaps $100,000 a year is - according to the wealth statistics - one of the poorest people in the world, being hundreds of thousands of dollars in debt. Certainly poorer than a 60 year old with $1200 to his or her name and nothing else.

Furthermore, when you look at international distribution of wealth figures... well, it's a pretty meaningless. There are so many confounding influences between different countries (varying levels of social services, housing prices, interest and inflation rates, etc...) that it doesn't really provide you with much useful information in terms of human development.

It's all lies, damn lies and statistics. It's enlightening that the crusaders who parade this figure around don't use income distribution, which far more accurately reflects the disparities in society, especially when fully adjusted for purchasing power. And even income distribution needs to be taken with a grain of salt, considering most people's income growth over time.

As for a 'growing wealth gap,' it's an exponential function. If you consider it only in naive terms, the 'wealth gap' will always grow, even if everybody is getting richer at the same rate.

/math geek

[xTYBALTx]

Wow, excellent points Jep. I never would've thought of it that way.

Additionally, isn't some historical frame of reference needed? What was the wealth / income gap two hundred years ago, when slaves were still commonplace in the south and most non-pseudo-aristocrats were renting their farmland?

Go back another three hundred years and you're pre-capitalism and in a feudal society.

[Steeler]

Complaints about the wealth gap are more about power than numerical wealth. Throughout history we have had varying degrees of power (in terms of ability to affect local or global change) concentrated in the hands of an elite few. But it's hard to measure this in terms of material wealth (especially in the age of the middle class), because the relationship of wealth to power is not a linear scale. The difference in say, governmental influence between a $100k/year consultant and a $6/hour clerk is negligible compared to the difference between the consultant and, say, Rupert Murdoch.

There is also the humanitarian aspect. The lowest income-earner in Sweden, the United States or Canada has a level of comfort, health and independence far beyond that of even a successful laborer in Uganda. That kind of disparity is also poorly represented by economic data, especially the debt vs. assets model.

But it can be very well documented with a camera.

[jepzilla]

Originally Posted by Steeler

Complaints about the wealth gap are more about power than numerical wealth. Throughout history we have had varying degrees of power (in terms of ability to affect local or global change) concentrated in the hands of an elite few. But it's hard to measure this in terms of material wealth (especially in the age of the middle class), because the relationship of wealth to power is not a linear scale. The difference in say, governmental influence between a $100k/year consultant and a $6/hour clerk is negligible compared to the difference between the consultant and, say, Rupert Murdoch.

There's far more to economic power than simple government influence, but yes, disparity of wealth figures measure exactly that: distribution of economic power. However, it is always presented to the public disingenuously. Just look at the photos used in the BBC article and the taglines: 'The people at the top of the tree are enjoying the best things in life' and 'Many the world's poorer children will have very little to look forward to' with suitably heartwrenching photos.

But if you're concerned about the richest 400 people, who apparently own an 'obscene' amount of wealth... well, let's suppose they didn't exist. Those 500 million people with nothing would still have nothing. Obsessing over how much the rich have doesn't help the poor, and really only serves good old Marxist 'means of production' arguments. The rich getting richer does not imply that the poor are getting poorer. In fact, serious poverty has been dropping by about 1% a year for the past few decades. It's been cut in half since the 1980s and the advent of globalisation.