While I often write about income gaps, the rich versus the poor, and our sea-monster of an economy, I haven't recently (ever?) discussed the wealth gap
. Luckily, my good buddy Tom sent me this graphic recently, to outline the situation:
He says (my emphasis):
Here's an interesting little tidbit I found while trying to remember a statistic I recently heard on NPR regarding the distribution of wealth in the US (which is, of course, different than distribution of "income"). Turns out that many, many individuals in the US have absolutely 0 wealth (determined by the sum of your assets minus your debts).
To sum, the top 5% of households in the US control 60% of all wealth, while the bottom 60% of US households control only 4% of wealth. This stat doesn't even fully reflect the disparity, considering so many Americans actually have negative wealth (owing money, presumably, to the rich), and as you point out, it is so much easier for the wealthy to hide their income (and thus, I imagine, their wealth). These statistics are compiled from the Federal Reserve's Survey of Consumer Finances.
I never expected it to be so disparate. Certainly I've always thought that the accumulation of wealth is necessary to any economy to drive risk-taking, innovation, and hard-work. Certainly, many economists and free-market wonks alike are quick to tell you this. But I'm wondering if and when the unfettered ability to accumulate wealth becomes detrimental to a functioning economy. I happen to think that similar to the situation when a lack of fiduciary incentive prevents development of economic tools, excess incentive (i.e. ability to accumulate unchecked wealth) leads to exploitation of workers, government policies, etc, leading to inefficient economies.
So, then I remembered this theory about oil rich countries. Turns out (probably according to some pinko commie government-handout-receiving academic elitist) various metrics of "freedoms" of citizens of oil-producing countries have a distinct inverse correlation with the amount of oil in that country (think Russia, Venezuela, the Middle East, etc. Try to forget about Canada). Then there is the interesting anecdote of Bahrain, the tiny Mid East country that used to have highly concentrated natural oil reserves. Bahrain had an ancient monarch when oil was discovered; before you know it some military dictator organizes a coup and establishes a fundamentalist Islamic theocracy. Riches are amassed by the ruling party, while the citizens go hungry. However, the oil ran out quite quickly (it's a small frickin' country!), and the free lunch was over. Within a decade the tyrant was kicked out, replaced by a democracy, the burkas were put on the shelves, and a local economy was initiated. Just sayin', I think there's a thesis in macroeconomics in there somewhere (highly likely), and maybe even some practical lesson for policy-making (less likely).
Luckily, he included a self-deprecating sign-off like you're used to reading here on the blog:
Oh, you have something better to do then read 1500 words of my babble? I didn't even consider that. My bad.
Tom, I read ever word (but there were only 479, according to Microsoft Word).