Is the United States a banana republic?
Perhaps that seems like an outrageous suggestion – but consider this:
“The richest 1 percent of Americans now take home almost 24 per cent of income, up from almost 9 per cent in 1976 … the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.”
This is an extract from a recent op-ed piece in the “New York Times”.
Inequality in the USA is outrageous and, in the face of a Republican-controlled House of Representatives, it is likely to become even worse. As explained in “The Spirit Level” [my review here], this kind of inequality causes a range of poor social incomes where all citizens in the society suffer.
November 11th, 2010 at 4:10 pm
Hey Roger,
I think the disconnect here is that Kristoff looks at “take home” income and not how that income is later taxed and spent by the US government. He’s really only looking at a part of the overall picture of how money circulates through the US system.
The inequalities mentioned in the article would be very bad and unsustainable were it not for redistribution via a progressive tax system.
Check this link:
http://www.taxfoundation.org/news/show/250.html
If you read Table 1, I think it suggests that the top 50% of taxpayers pay 97.3% of all income taxes. And the bottom 50% of taxpayers pay 2.7% of all income taxes.
And the top 1% US taxpayers pay 38% of all income taxes. In the UK, that same figure is about 24%.
In a true banana republic or corrupt state, I think the richest would pay little if any of the overall tax burden.
So the US — like many countries — is merit-based and has no controls on the income that can be earned in a given year. However, the taxation system ensures that top earners contribute the most back to society.
November 11th, 2010 at 4:13 pm
I should add:
The real problem is probably global inequality.
Examining a developed, western nation like the US or Australia reveals inequalities to be sure, but the overall level of deprivation is much lower. (ie, I would rather be “poor” by US standards than by African standards.)
November 11th, 2010 at 4:54 pm
You raise an interesting point in your last comment, Russ. There are, of course, absolute levels of poverty as set by the United Nations in terms of dollar income per day and, on that basis, the poor of the United Sates are still fantastically rich compared to the poor of say Africa or most parts of Asia.
However, in the real world, citizens do not compare their income with people on the other side of the globe. They compare their income with others in the same nation or community. Once one has reached a certain level of basic income, it is income distribution within a society and not between societies that determines a wide range of social outcomes including states of health and levels of crime.
I would refer you to my review of “The Spirit Level” here.
November 11th, 2010 at 11:28 pm
Hey Roger,
Here’s a tougher review:
http://online.wsj.com/article/SB127862421912914915.html
Quite scathing, huh?
I would still like to read the book, though.
November 12th, 2010 at 12:19 am
I attended a debate in London between the two authors of “The Spirit Level” and two critics – one of them a co-author of the review you mention – and I blogged about my assessment here.