The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Should the fight against inequality focus on the top or the bottom?

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Source: "Working for the few: Political capture and economic equality". Oxfam briefing paper, available at http://bit.ly/Py1O2J. Source: "Working for the few: Political capture and economic equality". Oxfam briefing paper, available at http://bit.ly/Py1O2J.

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Some allies say we shouldn’t focus on the 1 percent. But the facts say otherwise.

Some allies say we shouldn’t focus on the 1 percent. But the facts say otherwise.

There’s a kind of inequality trolling that some otherwise intelligent people are doing that is becoming hard to ignore. A recent example came up in the New York Times over the weekend by Professor Senhil Mullainathan, a MacArthur genius and an economist at Harvard. He said,

“I worry about growing income inequality. But I worry even more that the discussion is too narrowly focused.”

He argues that a focus on the wealthiest 1% of Americans appeals to our lower emotions (of jealousy and spite) and is a distraction from the more important cause of lifting up the poorest 20 percent. He calls for soft hearts, but hard heads about the problem, which, to him, means trying not to think about the 1%.

But look at this chart:

Source: Congressional Budget Office

This shows that the bottom 80% of US households (quintiles 1-4) lost shares of income in the last 30 years. The top 20% gained share significantly. But it wasn’t really the top 20%, it was actually just the top 1% that gained; they more than doubled their share of the economy.

Or look at this one:

Source: Economic Policy Institute

This one shows the distribution of the growth of wealth, not income. American wealth has grown over the last 30 years. But the share of the bottom 60% shrank, while the top 1% captured nearly 40% of the growth in wealth over the last 30 years.

What we can see is that the spread between the bottom and the top of the wealth and income scale in America is growing. But the main reason is the stratospheric growth in the share taken by the top 1%.

So, it’s pretty hard to talk about growing economic inequality without focusing on the 1%. Understanding why the 1% are flying away, and identifying the forces acting to make this happen, are the keys to the story. It’s nothing personal. It has nothing to do with envy or avarice. It’s in the charts. That’s where the facts lead us.

I can respect people like Professor Senhil Mullainathan who want to focus on the problems of the bottom 20 percent. That’s a legitimate and honorable perspective. In fact, I spend most of my time doing just that; after all, I work for Oxfam. But it’s not credible – not “hard-headed” – to also worry about economic inequality and NOT to focus also on the 1 percent.

Some respectable and sympathetic economists argue that inequality is not a problem or is a lesser problem. It’s a respectable position to prioritize reducing poverty or increasing income mobility over reducing economic inequality. There’s an honest debate to be had.

But I am annoyed when commentators claim to worry about inequality, but then refuse to look at the facts honestly. Even worse is to intimate that those of us who are paying attention to inequality and the 1% – based on facts – are somehow “not at their best.” Or committing a mortal sin.  Or are akin to Nazis.

There’s no shame in thinking that economic inequality is a big and growing problem. And therefore, no shame in focusing on the fact that the biggest cause of growing economic inequality – at least in the USA – is changes in the position of the 1%.

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  1.  avatarGraham Long

    Hi, I had a question about the detail of Oxfam’s stance on inequality.

    Oxfam’s “Working for the few” report says:
    “Some economic inequality is essential to drive growth and progress, rewarding those with talent, hard earned skills, and the ambition to innovate and take entrepreneurial risks.” (summary, p1).

    Do you agree? and if so,
    (a) what’s the line between essential and excessive inequality?
    (b) how far is talent, skill, ambition, entrepreneurial risk-taking responsible for the richest 1% “flying away”, in your judgement? (this seems like it ought to matter on Oxfam’s account?)

    Both of these strike me as important issues for deciding precisely what to do about “the 1%”.

    thanks for any thoughts

    Reply
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  3.  avatarParke

    This is amusing. I followed your link to Lant Pritchett’s essay at Bloomberg, which uses a pile of biblical passages to draw implications 180 degrees contrary to their plain meaning. Pritchett concludes that to pay attention to the wealth of the 1% is to commit the sin of envy.

    Curious, I followed the link from Bloomberg to his official Harvard bio. In the context of Pritchett’s diatribe, the envy-saturated parenthetical footer to his Harvard bio is priceless:

    “[And nothing else. Some bios list non-family and non-professional accomplishments like climbing Everest or playing the cello making it seem as if all of the rest was just tossed off. I believe the only point of this is to make the rest of us, who collapse on the couch and watch Friends reruns at the end of the day, feel like slackers. I think getting the above done while being a husband and father to three children is plenty.]“

    Reply

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