When Inequalities Widen

~ Economic theory for you all

Jeffery Sachs, speaking on youtube, says that, “over the last forty years” our society let the inequalities widen. He also said, “we are under one-man rule” — and, I would add, he’s a crazy man. Totally nuts.

But from an economic standpoint, why do “inequalities” seem to widen? Here is a photo of Sachs for you to contemplete, before I continue. The small-font part of the title is totally inaccurate and misleading; what Sachs says in the video is “our political system is…”, not “US Economy is” [in a st…]. [1:13] Typical sloppiness, which, in our times, we expect.

Inequality is a standard phrase used in the economics literature.

So why should inequality widen? Why did inequality decrease and when? If it decreased it was not for very long. Total wealth increased quite a bit however. If total wealth (measured as money and goods) increased, then the low income group could be expeced to increase its wealth along with everyone else. So that is what usually happened, and even that did not happen in the capitalist world until after 1850 in England and after 1880 in the USA. This means that there was approximately 100 years of capitalist growth (1750-1850 in England) before “workingmens wages” even increased at all (my source on this is Fernand Braudel, the well-regarded French historian).

Inequality increased from 1750 to 1850 and again from 1980 until the present (or, for the US, 1780 to 1880 and again from 1980…) In between were the hard years of the depression of 1929 and two world wars. I do not believe wages increase that much between 1880 and 1920 for most working class people.

That is a poor record. Total wealth grows but many persons do not participate. An increase in the number who do not participate in growth is called “inequality.” So it seems a big struggle to get this growing amount of overall wealth into the hands of the population, which assumes that anyone even cares. What grows is the middle-class. I would like to see a growing middle-class and better conditions for (even) poor and the low-income groups. That also seems important in the context of a democracy.

So. When the overall population, the mass, does not participate in economic growth —even if let us say the lower half of the population does not participte in economic growth — that would probably not be very good for democracy.

It is very difficult to get that kind of economic participation. Elites tend to want more for themselves. If you have competition -or if everyone is competing to get as much as they can -this is what you would expect. If a small group of people in business want to get as much as they can, this is what we should expect.

In fact, the situation is more complicated than that because you have a social elite as well as a money and business elite. These are obviously different groups: if there is a wealthy family, with four children, three might go into business and one might demur. There is also the gender difference to be considered, in some cases. So, every single person in every rich family does not become one of the business elite. Some may go into government, for example, and that is different. So what do we mean by “economic” inequality? The family of four is part of the economy too. Even the fourth child who went into government service is part of the economy. The economy is the persons in it, not only the persons directly involved in business or work.

So, it is very difficult to get a population-wide reduction in inequality.