Old Money and Income Inequality

The One Percent have taken a beating lately in the media, much of it well-deserved. This might come as a shocking statement from someone who wrote a book extolling the virtues of Old Money, but history and economics are on my side.

There will always be a difference in the financial circumstances of various groups of people in society, for a multitude of reasons: some people have the intellectual capacity and drive to earn more; some people couldn’t save a dime if they made a million dollars a year; some people save and invest wisely, even on limited incomes; some people inherit money and squander it; some hold on to it and preserve it.

So it’s cheap journalism and lazy logic that demonizes the rich among us. Not all rich people are evil. In fact, most are more like the majority than the media likes to admit. (Read The Millionaire Next Door, if you have any doubts.)

Inequality is one thing. Injustice is quite another. Consider the following: from 2009 to 2012, the incomes of the top 1% rose by 30%, perhaps more, depending on whose numbers you look at. The remainder of the workforce saw their incomes grow about 0.5%.

Not only is this unfair, it’s unwise. When businesses (major corporations, mostly) increase the pay of their executives and cut the number and wages of their workforce, they shoot themselves in the proverbial foot. They often reap the short term rewards of bolstering next quarter’s financial statement, but they damage the very customer base that often purchases the same goods and services their companies create. That’s stupid.

Why? Because unemployed, underemployed, or broke middle class consumers don’t buy much. They’re either cutting back on their spending or not spending at all. It is their spending–and confidence that they’ll have a job next week and a better tomorrow for their families–that keeps the economy rolling. It keeps people productively employed. It keeps tax revenues elevated and makes social services and infrastructure improvements in education and healthcare possible. It allows people to save enough money to open up their own business and thrive.

Lastly, it keeps society from going off the rails and spiraling into violence and revolution. We need only to look a the recent events in the middle east–specifically the Arab Spring–to see the results of corruption, chronic unemployment, runaway inflation, and a pervasive lack of hope. When people don’t feel they have a stake in society, their behavior becomes unpredictable. They feel they have nothing to lose if they take to the streets. They feel they have no other options in addressing what they see, often correctly, as not just inequality, but injustice.

The Boston Brahmins who made their fortunes in their city then set about to define its character were circumspect, and the example they set is worth emulating today. They did not spend lavishly on themselves, as the wealthy are doing today. They lived modestly and contributed mightily to hospitals, museums, and universities. They knew that a prosperous, healthy, and educated middle class would only increase their quality of life, and make everyone’s future more secure. They endeavored to create educated voters, informed and involved citizens, and prosperous customers. There might be protests, because people were free to express themselves, but the remedies sought would most likely be available through their democratic institutions.

Revolution would be a distant and foreign thought, as it always is when you feel you’re a part of something that has value, whether it be within your city, neighborhood, family, or place of employment.

Erode that sense of value through short-sighted business strategies, corrupt practices, and greed, and you can create a great deal of wealth for a small percentage of the people for a brief period of time. Then discontent grows among the majority. Society is no longer truly enjoyable. Life is lived behind gates, with security, and in the absence of goodwill from fellow citizens who have not done as well financially.

If you doubt me, consider the billionaires who walk down the streets of Boston without a security detail, nodding and conversing easily with their neighbors who may or may not know of their net worth. (There are several.) Then consider the billionaires in Moscow who speed with armed bodyguards from gated dachas to private jets, escaping to another country where they can, actually, enjoy themselves without worry.

Who lives better?


6 thoughts on “Old Money and Income Inequality

  1. The injustice you describe, is fueled by either stupidity or greed. Both are bad, and create an insurmountable imbalance. It’s dissolving our middle-class. Love your publication, by the way! It’s a great read. 🙂

  2. One of the few views that has laid out the subtle, or not so subtle, differences between “inequality” and “injustice.” Ironically, injustice makes for a far more interesting and intellectual discussion, however it seems the powers that be prefer the inequality view since it grabs more “me too” attention and requires nothing more than simple stats and numbers.

    Raising the minimum wage? Perhaps, in some cases, but I think a more powerful move with greater impact would be if all of the board of directors would mandate a cut in executive salaries to be redistributed to their workforces. (let’s agree to overlook reality here for a second…wink, nod)

    We are, after all, a mega-consumer society so there is little concern that most of that redistribution won’t find its way naturally back into the market, boosting company revenues and investor interests, and still finding its way back to the employees and executives in the way of performance rewards.

    Probably safe to say that most things that become lopsided continue that way until they eventually collapse. Best for all though if the market recognizes this and self-corrects.

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