During an Inaugural speech in 2009, the US President Barack Obama said that the nation can’t prosper as long as it will continue favoring the wealthy and the prosperous. There are very few people who clearly understood the justification behind this presidential opinion until they take a close look at their daily activities. En route to your favorite places where you can spend some quality leisure time, you hardly think about the amount of your dollars that you would spend in one evening. Do you give a second thought before paying for your entertainment costs like paying for your movie tickets? But unfortunately, when most people hire domestic help or other helpers, they negotiate and reach the cheapest rates. It is rather damaging to think that most people, amongst us, don’t even comprehend the concept of minimum wage, which is set by the government.
Some statistics that speak the truth
Yes, the rich are getting richer and money keeps moving from the poor class to the richer class. Did you know that the top 1% controls 50% of the assets of the world and 85% of the global wealth is owned by the richest 10%? Despite this, two-thirds of the adults of the world have wealth of less than $10,000. These statistics and numbers were compiled by Swiss bank Credit Suisse in the latest World Wealth Report and it clearly implies how income inequality has become a global crisis. In fact, Credit Suisse also predicts that there’ll be a billion millionaires and 11 trillionaires within 2 generations. Within a few years, billionaires will be commonplace!
Further reports suggest that there are nearly 2 million new millionaires in 2013, as compared to 2012, majority of whom are residing in the US. A revamped real estate market and a stock exchange bull market helped America post its 5th consecutive year of increases in terms of personal wealth. As compared to the tough times during the financial crisis, the millionaires are experiencing even better times than before. Wealth ownership rose by 12.7% in 2013 to $73 trillion, 25% more than the pre-financial crisis high in 2006. Overall, global wealth has doubled since 2000, reaching a record level of $242 trillion. This increasing asymmetry in terms of wealth accumulation at the upper class wouldn’t be such a dramatic issue if the median wealth would also be increasing at the same time. It is certainly getting worse for the poor families and the individuals. In fact Credit Suisse expects that the wealth for those in the bottom percentage will steadily fall over the next 50 years.
Can all the Americans feel that the economy is growing?
Yes, the economy might be growing but do all Americans feel the effect? The middle-wage jobs have been stripped, forcing some of the people to shove off the ladder of wealth and enter into poverty. Half of the people in the US are considered as low income and the median household income actually fell for the second consecutive year in 2011 to something more than $50,000. Does this sound as a promising statistic for a nation that is also known as the Land of Opportunity?At the same time, the ranks of the wealthy and rich like Berkshire Hathaway’s Warren Buffett and Microsoft Bill Gates, have bloated in the last few years.
When compared to the other nations, according to the International Labour Organization, the gap between the rich and the poor is the worse than the other industrialized countries. The other developing countries have been faster to rebound from the economic downturn offer some insight. Colombia and Chile have seen employment grow since 2007 and youth and unemployment in Chile reduced by nearly 10 points from 2009-2012. One thing that is common between both the governments is that they took serious measures to safeguard the most vulnerable residents, who had some record low balance in their savings accounts.
Potential reasons behind the shift of wealth from the poor to the rich
While it’s easy to say that the top 1% are the wealthiest of all, deducing the reasons become a necessity. What is it that plays a role in transferring the wealth from the poor to the rich, thereby making the rich richer and the poor poorer? These are some logical, but unsatisfactory explanations:
- The rich are engrossed with the idea of success: The average person usually believe that obsession is a bad word and the truth is that the wealthy have a healthy obsession with grabbing what they want, and this includes money. It is materialism that is a part of their motivation and this is the reason behind the large number of millionaires who are chasing success.
- Exact focus on the money making activities: The masses spend a substantial time in different types of entertainment and are aware of the state of consciousness where pleasure is king and effort is minimal. However, the rich focus majorly on their attention on activities that involve money-making. While the masses are fighting the averages, the rich are directing the same energy into the revenue-producing ideas.
- The rich plan their lives: The great ones live large and make their plans by night, only to execute them by the next day. They’re the critical thinkers who value time and every second that passes by. While their failures are big, their accomplishments are even bigger.
However, the debate now focuses on other kind of reasons: during an era when the Wall Street firms are stealing from their customers and the LIBOR scandal where 6 financial institutions have been fined for 1.71 billion euros for rigging financial benchmarks, the attention goes to widespread illegal or borderline practices that the top 1% is engaged with. The wealthiest Americans, the titans of global finance, whose blunders brought about the financial meltdown, got richer, a lot richer. There has been enough instances of ballooning incomes at the top level and stagnant incomes in the middle and at the bottom.
Political scientists Jacob Halker and Paul Pierson, break free from the argument that this skyrocketing inequality and imbalance is a natural upshot of market forces and also argue that it is a result of the public policies that have augmented the effects of the economic transformation and redirected its gains towards the wealthy. Congress has curtailed tax rates on high incomes, resulting in a windfall of profit among the wealthier Americans. Like most social critics, both Pierson and Hacker are long on diagnosis but short on treatment. They rather re-emphasize building the organizational capacity of the middle and working class as the place to start rejuvenating the structure of American politics. If they prove themselves to be right, the job of restoring some sense of proportion to the economy is necessary if the US has to recover from its diseased condition of the striking imbalance between the rich and the poor.
Lorena is a professional financial writer. She has contributed many articles on Finance topics to numerous websites. She is associated with Oak View Law Group (Ovlg). It’s a law firm and dedicated to relieve the financial stress of peoples.