Monday, February 7, 2011

Reminder: The U.S. is Actually More Plutocratic than Egypt, Yemen, Tunisia, or Pakistan

Undoubtedly, one of the main causes of the current unrest in Egypt and Tunisia is the fact that much of those countries' wealth has been monopolized in the hands of a small elite. Lots of Americans might sympathize with their plight without realizing that income inequality is actually worse (by some measures, significantly worse) in the United States than in Egypt, Yemen, Tunisia, or Pakistan:

(Note: a higher Gini coefficient means that a society is more unequal. Picture from the Atlantic.)

Brief aside: the U.S. Gini coefficient has been rising steadily over time since the late 1960s, documenting that the U.S. has steadily become more unequal since then. There are a myriad of reasons for this, but one of the central reasons has been U.S. tax policy, which has steadily shifted the tax burden away from corporations and the super wealthy and onto the middle and working classes. This is illustrated starkly by this New York Times graphic:

More on U.S. income inequality in a later post.

So, why aren't Americans taking to the streets like the Egyptians and Tunisians, demanding revolution? Well, the U.S. is, of course, a much nicer place to live than Egypt, Yemen, etc. according to a host of other important measures - average and median income, infant mortality, poverty rate, civil rights, rule of law, etc.

As discussed in this Economix post, it is, for the most part, better to be relatively poor in a rich country like the U.S. than to be relatively rich in a poor country like India:

As Economix explains:
The graph shows inequality within a country, in the context of inequality around the world. It can take a few minutes to get your bearings with this chart, but trust me, it’s worth it.
Here the population of each country is divided into 20 equally-sized income groups, ranked by their household per-capita income. These are called “ventiles,” as you can see on the horizontal axis, and each “ventile” translates to a cluster of five percentiles.
The household income numbers are all converted into international dollars adjusted for equal purchasing power, since the cost of goods varies from country to country. In other words, the chart adjusts for the cost of living in different countries, so we are looking at consistent living standards worldwide.
Now on the vertical axis, you can see where any given ventile from any country falls when compared to the entire population of the world.
Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants.
In such a world, it is easy to see how much of your lifetime income is determined by the accident of where you were born.

A final note: Even though people aren't rioting in the streets over income inequality in the U.S., income inequality in this country is, in my opinion, a huge and growing problem that has been purposefully ignored (or even championed) by U.S. policymakers for the last 30-40 years. More on this in a later post.

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