Wednesday, September 20, 2017

Insanely Concentrated Wealth Is Strangling Our Prosperity

Steve Roth argues that high concentrations of wealth are bad for pretty much everyone except the super rich themselves. We’ve argued that they would benefit from having their lucre reduced, since levels of inequality pose a cost on longevity, even among the top rich. Highly unequal societies have shallow social bond, and even those who are doing well much spend at the level that their friends, or risk being excluded. For instance, the very well off live in certain communities, engage in mutual back-scratching by giving to various charities, have catered parties for each other. And they also worry about their personal safety, as the building of safe rooms and well stocked bunkers.

Remember Smaug the dragon, in The Hobbit? He hoarded up a vast pile of wealth, and then he just hung out in his cave, sitting on it (with occasional forays to further pillage and immolate the local populace).
That’s what you should think of when you consider the mind-boggling hoards of wealth that the very rich have amassed in America over the last forty years. The picture at right only shows the very tippy-top of the scale. In 1976 the richest people had $35 million each (in 2014 dollars). In 2014 they had $420 million each — a twelvefold increase. You can be sure it’s gotten even more extreme since then.
These people could spend $20 million every year and they’d still just keep getting richer, forever, even if they did absolutely nothing except choose some index funds, watch their balances grow, and shop for a new yacht for their eight-year-old.
If you’re thinking that they “deserve” all that wealth, and all that income just for owning stuff, because they’re “makers,” think again: between 50% and 70% of U.S. household wealth is “earned” the old-fashioned way (cue John Houseman voice): it’s inherited.

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