Feb
5
Class #3 – Sheena Chin
February 5, 2015 | Leave a Comment
Income inequality is inevitable in capitalistic societies. From my understanding of the provided readings for this class, I learned from Picketty that there’s more to the story than it appears. In my vague perspective of income inequality, I had always assumed that income inequality favored the opportune, the intelligent, and oftentimes, the lucky ones born into wealth. On the flip side, just the opposite exists. What I have failed to perceive were those affected in the middle of the spectrum followed by the impending consequences that may occur from societies with vast income differences.
From The New Yorker Magazine, which explained Picketty’s ideas through a series of simple line graphs, we notice that the top 10% of incomes followed a U-shaped trend from the early 1900s to 2010. This was caused by war, financial crises, and changing time periods. In the second graph, it was interesting to see how while the graph retained a semblance of the U-shape, it was placed much higher on the y-axis. It was amazing to see how much the graph can change moving from the top 10% to top 1% of incomes. Graph 3 shows evidence of how income inequality is a trending global pattern, covering Anglo-Saxon countries. While the U.S. and Canada may have started out with the same amount of inequality, it is definitely eye-opening to see how the U.S. have far increased in income inequality since. Graph 4 showed the income inequalities in developing countries and I thought it was a mess. From the messy, unstable rises and falls, the familiar U-shape peeks through and it just goes to show how income inequality is truly effecting all different nations, with more inequality to come.
I think the most compelling line I read from the articles was this summarization of Picketty’s book: “The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.” It is hard to compare the economies of the early 19th century to today’s day and age, so to claim that capitalistic societies as we know it is moving backwards is nothing short of an exaggeration. In addition, Picketty says we are moving back societies dominated by dynasties. Pause. Dynasties?
I doubted the validity of this claim then, but after reading the rest of the article, I am somewhat convinced. With income stagnation, it leads to social stagnation. More and more, the status of our wealth is reflective of our parents’, so it should come with no surprise that those with money should dominate politics soon enough. I don’t agree with his solution, however. Picketty goes on to explain his version of a solution to end income inequality by way of taxing 80% of households earning more than $500,000. Mathematically, it would bring the income gap together, but I think this solution is completely impractical.
To start, we recognize that some conflicts that can arise from income inequality include social and psychological problems when households ranging in wealth interact in society. If the wealthiest households were then burdened with a 80% tax on their income, I believe even worse social problems will follow. How can Picketty advocate for equal income redistribution while seemingly punishing those who fare better? I believe by punishing through taxing the wealthy, society will be at a loss for innovation and improvement.
