The Hidden Cost of Inequality

It’s worse than you may think and a formula for a dark future.

Posted Aug 22, 2011

Most Americans, it seems, don't really know how bad things have become in this country over the past 30 years.  In a recent survey conducted by psychologist Dan Ariely, 92 percent of the 7,000 respondents guessed wrong about our income distribution. They thought ours' was like that of Sweden.  In fact, it is far worse.  We have the widest income gap among all but two of the 30 OECD countries (Mexico and Turkey). 

Last year the top 1 percent of Americans took home 24 percent of the national income, and the top 10 percent took home 49 percent.  As for total wealth, the top 20 percent own 87.2 percent and the bottom 80 percent own the remaining 12.8 percent.  More important, about 25 percent of our population now live in more or less severe poverty.  Last year, an estimated 50 million people (according to the USDA) experienced hunger at various times during the year, including 17 million children.

What is even less well understood is the long term consequences of this dismal state of affairs.  Children born into poverty tend to have low birth weights and lower body weights during childhood and have a much greater incidence as adults of such things as cardiovascular disease and diabetes. A recent study reported on the PBS News Hour put the number of children in poverty or near poverty at 31 million, a 20 percent increase since the year 2000. 

Numerous studies, cited in the recent book The Spirit Level: Why Greater Equality Makes Societies Stronger, written by the British researchers Richard Wilkinson and Kate Pickett, have shown that poverty causes enormous social damage.  Poor children have higher rates of health, mental health and behavioral problems; they are much more likely to do poorly in school and to drop out; they have much higher rates of unemployment, teenage pregnancies and crime and incarceration rates; and social mobility is almost non-existent.

Extreme social distrust, dysfunctional government and civil unrest are also endemic in countries with extreme inequalities of wealth.  A recent study sponsored by the New England Complex Systems Institute confirmed what has been known ever since Plato's Republic.  There is a strong correlation between economic inequality and social disorder and violence -- witness the recent British riots, although the uprisings in "Arab Spring" countries provide even more dramatic examples.  The income disparity in our own country is equally bad.

If we do not take steps to reverse the course we are on, we will condemn the future of this nation to mediocrity and third world status - or much worse.