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Social justice isn’t simple. For one thing, it’s not easy to reconcile social justice and capitalism. On one hand, we have the American Dream, which promises every American the opportunity to achieve success and prosperity, regardless of their originating circumstances. On the other hand, we have statistics that reveal a shocking level of income and wealth inequality in the United States.
The Organization for Economic Cooperation and Development (OECD) is an inter-governmental economic organization that has 38 member countries. Out of these 38 countries, only Costa Rica has more income inequality than the United States.
Seven years ago, the 2018 World Inequality Report, issued by the World Inequality Lab, warned “the divergence in inequality levels has been particularly extreme between Western Europe and the United States, which had similar levels of inequality in 1980 but today are in radically different situations. While the top 1 percent income share was close to 10 percent in both regions in 1980, it rose only slightly to 12 percent in 2016 in Western Europe while it shot up to 20 percent in the United States.” The report went on to say that “the income-inequality trajectory observed in the United States is largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s, and in top capital incomes in the 2000s.”
The latest World Inequality Report revealed “wealth inequality levels in the contemporary U.S. are close to those observed at the beginning of the 20th century, with a top 10 percent wealth share above 70 percent. Wealth inequality has followed similar dynamics as income over the past century. The share of total wealth owned by the poorest half of the U.S. population is extremely small (1.5 percent of the total). While average household wealth in the U.S. is 3.5 times higher than in China, the bottom 50 percent of the U.S. population owns less wealth than the Chinese bottom 50 percent, in purchasing power parity terms.”
That is absolutely insane. China? A unitary one-party socialist republic?
In October 2024, the Federal Reserve Bank of St. Louis reported that, in America, the “top 10 percent of households by wealth had $6.9 million on average. As a group, they held 67 percent of total household wealth. The bottom 50 percent of households by wealth had $51,000 on average. As a group, they held only 2.5 percent of total household wealth.”
Wow! So, most of us probably agree that it doesn’t seem like massive income inequality is a particularly positive thing for a society, and obviously the Americans trapped at the bottom of the income ladder are more than ready for us to bridge the divide. But why should the middle and upper classes care about this? Well….
First, this should matter to all of us because inequality is a creeper. In the past, the devastating consequences of considerable income disparity was largely confined to those on the margins of society, but now it’s quickly enveloping the middle class.
The Pew Research Center discovered that the growth in income in recent decades has tilted to upper-income households while the middle class, which once comprised most Americans, is shrinking. In 1971, 61 percent of Americans lived in middle-class households, but by 2023 that share had fallen to 51 percent.
They continue, “As a result, Americans are more apart than before financially. From 1971 to 2023, the share of Americans who live in lower-income households increased from 27 percent to 30 percent, and the share in upper-income households increased from 11 percent to 19 percent.”
In fact, “the middle class has fallen behind on two key counts. The growth in income for the middle class since 1970 has not kept pace with the growth in income for the upper-income tier. And the share of total U.S. household income held by the middle class has plunged.”
Second, rising inequality strangles our economy and impedes our growth in a big way. The International Monetary Fund (IMF), an organization with 191 member countries, says “a 10 percentile decrease in inequality increases the expected length of a growth spell by 50 percent.” That’s huge!
These realities are startling. Quite frankly, it just doesn’t seem fair. However, to succeed we must build strategies within the context of the realities of our situation, not what we wish the realities were.
The reality is that America’s economic system is capitalism. This is a universal fact that isn’t going to change and for this we should be exceedingly grateful. As the old saying goes, capitalism is the worst kind of economy until you try all the rest. The great irony about capitalism is that, although a competitive market operates at its best when capital is widely distributed, a well-functioning free market doesn’t care who gets what as long as it’s operating efficiently.
This means that, basically, the who gets what as well as the when, where, and how they get it is largely left up to us… and on so many levels we’ve been doing this horribly wrong.
