While it is said that the rich are getting poorer than they were a hundred years ago, it isn't by much. The top 10% in Europe and America still own 60-70% of the total wealth in their respective area. Wealth has become even more concentrated within the rich - the top 1% owns 25% of everything - to the detriment of the shrinking middle-class.
Apparently, the problem derives from the ability of "superstars" to set their own wages and command an enormous premium over the rest of the population in our new "winner-takes-all" economy, which is further enabled by technology and globalisation. This, in turn, gives them better access to capital, which they accumulate at a faster rate to everyone else. As taxes on the wealthy are lowered and more favourable inheritance and gifting laws passed, it's only going to get worse. Concentration of wealth will continue to favour the uber elite.
One suggestion to alleviate this is to increase taxes on the rich and bring back the progressive income redistribution strategies of yesteryear. However, there are some doubts that this, in itself, makes a difference, as opposed to focusing on the levers that encourage growth. This is born out by some evidence in the US that the most thriving cities have the biggest income gap, so the link between cause and effect needs further investigation.
It's also possible that, since the elites control the allocation of resources and encourage an overconsumption of them, yet are buffered from the consequences (until it's too late), the poverty gap could lead to the destruction of our society. If so, expect to see more demonstrations and riots in the future.
The middle-class is important to social and economic stability, because the super-rich just can't consume enough themselves to keep the economy going. This becomes exacerbated by the concentration of wealth amongst the rich to the one percenters. A thriving middle-class means more people can contribute to the growth of the economy and consume the goods and services that it produces, leading to greater employment and self-sufficiency.
Consider the alternative. In the poorest parts of the world, criminality is rife and a fertile ground for the spread of terrorism. Generation after generation of desperate and destitute people does not provide much hope for the future. Eventually, people give up.
Unfortunately, social mobility - especially, in the US - has remained low and stagnant. 70% of those born into the lowest quintile of income distribution never make it to middle-class and 40% remain poor into adulthood and only 20% of the middle quintile make it to the top, so the wealth of the family you are born into has pretty much everything to do with your future earning capacity.
It looks like the income gap is not only here to stay, but likely to get wider.
What do you think...?
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Given that the super wealthy just cannot spend enough on themselves to prop up the GDP of their host country, it may contribute to a tendency - not necessarily by design - to become "rent-seekers" rather than wealth creators. After reading this article on Harvard grads choosing the finance industry over others, there seems to be a goldrush mentality to get rich quicker than everybody else, even if it's at other people's expense. Big banks and investment firms spend a great deal of time crafting financial instruments and packages that are exclusively for the wealthy and help to accelerate the transfer of wealth to the top tier, rather than increasing wealth creation opportunities for society at large.--David G. Wilson
Interestingly, the expansion of the middle-class was facilitate by two World Wars and economic depression, which wiped out the capital of those with large inheritances. Subsequent to this, policies that favoured high taxation on the rich, trade unionisation of labour and welfare programs stopped the ultra-rich from reconstituting themselves. That is, until the 1970's when these restrictions were relaxed and the era of the "superstars" and "super managers" began.--David G. Wilson