INCOME AND WEALTH DISPARITY – PART V – THE EFFECTS AND CONSEQUENCES

The facts are indisputable.  There is a widening gap in the income and wealth of Americans, as well as in the rest of the world.  The effects and/or consequences of the disparity, however, are partially predictable, but largely speculative.

The disparity advocates warn that there are serious consequences to this gap that include an invitation to social unrest, as well as a deepening rut into which the poor will be entrenched.  It will foment resentment, failing morale, disincentive, unrest and maybe revolution.

British researches claim that, as this disparity continues to widen, it will likely cause higher rates of obesity, divorce, mental illness, drug use and declining health, as well as increasing crime.

We have seen some protests against meetings of the World Bank and other international organizations; although the reasons for these protests were never clear.  On our home front, we saw the Occupy Wall Street movement a year-and-a-half ago attempting to call attention to the widening difference in the US between the 1% and the 99%.  Their tactics and actions were so egregious that it obscured the message they were trying to communicate, if, in fact, they had one.

They suffered from a decided lack of a goal or anything to promote a path to resolution.  Their horrendous behavior muddled the problem and offered no agenda or even any idea of what they wanted to happen.  Their primary goal, it appeared, as it is for all the disparity advocates, is to “create awareness.”

In terms of consequences, some of what the British have speculated may be possible; increases in mental health, obesity and divorce.  For some, it could also be a lowering of morale and a disincentive to get out of poverty.  All of which, of course, could be countered and mitigated by the tremendous opportunities which our free market society offers, if our leaders would promote this avenue.

As far as social unrest that we’ve seen in other parts of the world, that seems very unlikely here.  As we outlined in our last blog post objectively, the “poor” in this country, in general, are living pretty well.

To gain a little historical perspective, we have always had recessions, “inequality” and protests.  Here is one of the first that made it into our history and our culture:

In the depression years of 1893-94, the unemployment rate was a staggering 18%.  A colorful Ohio labor leader, Jacob Coxey, gathered about 100 men and set off for Washington, DC, in late March to lobby the government to create jobs building roads and other public works and pay in paper currency.

Various groups joined the march as it grew to over 500 when they reached the U.S. Capitol on April 30th.  Unfortunately, Coxey was arrested the next day for walking on the grass at the Capitol.  The protest and the numbers of the army rapidly dwindled.

At the same time, other militant groups formed their own “armies” all over the country and specifically in the Pacific Northwest.  Many of the protesters were unemployed railroad workers who blamed railroad companies for excessive freight rates and President Cleveland’s monetary policies.  Their plan to join Coxey in D.C. stalled in Montana when they commandeered a Northern Pacific railway train to ease their travel.  Federal troops (a first) came in and ended their escapade and their protest.

In our culture, the expression “enough food to feed Coxey’s army” came out of this episode.  More significantly, the book “The Wonderful Wizard of Oz” (you heard me correctly) was interpreted to characterize all the principal players on the whole Coxey army story.

The end result of these protests produced no real changes.

It’s hard to imagine any kind of real groundswell forming as the disparity advocates postulate anymore productive than Coxey’s army.  If there was, the so-called 99% could easily overwhelm the so-called 1%…but to do what?

Most of the consequences the naysayers speculate do not seem to be a reality.  Can it happen if the disparities get worse?  Maybe, but we appear to be a long way off from that point.  Yes, the disparities are somewhat eye opening but hardly a call to arms.

On the other hand, the consequences of following the lead suggested by the disparity advocates of continually increasing the safety net, more spending by the government of money we have to borrow, expanding unionization and raising the debt ceiling offers no easy or acceptable path that will produce any positive results.

As of December 2013, our liabilities were staggering:

United States Population:                              317,508,063
United States National Debt:                         $17.3 trillion
United States National Debt per Person:    $54,254
Social Security Unfunded Liability:              $15 trillion
Medicare Unfunded Liability:                        $79 trillion
Prescription Drug Unfunded Liability:         $20 trillion
National Healthcare Unfunded Liability:     $9.3 trillion
Total US Unfunded Liabilities per Person:   $388,385

Truth be told, all the spending we’ve done and are asked to keep doing may help the “poor” incrementally but it won’t do anything to narrow the gap in our income and wealth disparity, and we’re not sure anything can or should be done on that score.

There are several things that can be done to elevate “the poor” and we’ll discuss those more fully in our last blog on this subject.

In our next blog, we talk about how America really continues to be the land of opportunity.

Gary and I would entertain your comments on these income and wealth disparity blogs, especially if you disagree.

ArtSchwartzSig

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