Disparity Between Rich and Poor


It’s not like we weren’t warned. Some say the gap between rich and poor has been growing over the past decade and is causing a host of social problems.

In fact, Pope Benedict XVI released a 44-page encyclical, titled “Caritas in Veritate” or “Charity in Truth”, last July. At the time, the The Wall Street Journal noted that popes only address financial issues in encyclicals “during moments of tectonic shift” such as the Industrial Revolution (1891, Pope Leo XIII, argued for workers’ rights) and the Great Depression (1931 Pope Pius XI, warning about the dangers of capitalism run amuck).

Caritas in Veritate calls for people to put aside greed and let their consciences guide them in economic and environmental decisions.

David Ian Miller, a blogger for the San Francisco Chronicle, discussed the encyclical with social ethics Professor William O’Neill.

O’Neill says he was very impressed, both with its scope and its depth. He calls it a remarkable document that raises very difficult questions, particularly for many Americans, partly because it speaks to the possibility of economic redistribution.

The pope is not the only one who recognizes the problem. Even stalwarts of the business world are waking up to the social ramifications of income disparity.

“We are at the end of a difficult generation of business leadership, and maybe leadership in general. Tough-mindedness, a good trait, was replaced by meanness and greed, both terrible traits,” General Electric Co Chief Executive Jeff Immelt said in a speech at West Point last week.

“Rewards became perverted. The richest people made the most mistakes with the least accountability,” Immelt said. “In too many situations, leaders divided us instead of bringing us together,” the head of the largest U.S. conglomerate said in prepared remarks to be delivered at the U.S. Military Academy.

A study last year by The Wall Street Journal found that the top .01% or 14,000 American families hold 22.2% of wealth – the bottom 90%, or over 133 million families, just 4% of the nation’s wealth.

In a discussion last year with Bill Moyer, author and historian, Steve Fraser, said the current economic times remind him of the late 19th century period between Reconstruction and Roosevelt, pejoratively named ‘The Gilded Age’ by Mark Twain. Mr. Fraser lists the hallmarks of this era: crony capitalism, extreme inequalities in wealth and income, ostentatious spending and wage depression.

Fraser notes that the first Gilded Age was met with labor unrest and political agitation. AMERICAN CONSERVATIVE magazine suggested the second might be as well:

“In the course of the 20th century, there were several eras of growing economic inequality. On a few occasions, they came to an end in a relatively gentle way, with democratic elections and more egalitarian legislation. More often, however, they were ended by a catastrophe, such as the Great Depression, a violent social revolution, or a world war. When the rich went out, it seems, they normally did so with a bang, and not with a whimper. The way things are now going, it is likely to be so in the future.”

The problem was recently highlighted in a study by Professor Su at the Beijing University of Science and Technology.

The reasons behind the growing gap between rich and poor in China are legion but the obvious wealth gap on campus is a challenge other universities, and in fact, entire nations, have also been urged to address.

The poor, as the Bible has it, will always be with us and, therefore, accepted as part of the human condition. But it isn’t the poverty that is unacceptable; it is destitution, the hopelessness of life at the end of its tether that raises the question, What’s to be Done?.

Blogger Larry Cheng says the solution is to create jobs.

Cheng worries that by focusing on the disparity metric and creating policies around mitigating that metric, we are in fact just lowering the wealth creation opportunity for everyone including the poor themselves. He would rather focus on policies that enhance the wealth creation opportunity for everyone, rather than policies that are intended to bring one segment down to theoretically bring another segment up.

Bahamian blogger Rick Lowe, has made similar comments.

In fact, some people do not even believe there is a problem. Brian S. Wesbury And Robert Stein, from Forbes magazine, note that a new paper from Northwestern Professor Robert Gordon, a pillar of the “mainstream” academic establishment, argues that the factors used to determine income disparity may be skewed.

Correcting for these factors, Gordon says, eliminates 90% of the gap between productivity and middle-class household incomes.

Lawrence W. (Larry) Reed, president of the Mackinac Center for Public Policy, in his ‘Seven Principles of Sound Public Policy’ says that while some lament the fact and speak dolefully of “the gap between rich and poor,” he thinks people being themselves in a free society is a wonderful thing.

Obviously, in a democracy, inequality matters. When people feel left behind, populism expands and freedom comes under attack.

The challenge is, how do we regulate the economy in a way that will protect fundamental rights, especially for those who are least prosperous? Pope Bennedict appears to be calling for appropriate redistributive measures that would regulate the economy to satisfy its moral purposes, rather than displace it.