A Little Callousness for the Holiday Season
of income inequality are misleading because an individual's income
is, at best, a rough proxy for his or her real economic wellbeing.
Because we can save, draw down savings, or run up debt, our
income may tell us little about how we're faring."
This passage is from a recent article in The Economist entitled "The New (Improved) Gilded Age" and it is interesting from a number of perspectives. The first is that the folks over at The Economist start out by conceding the basic point - over the past three decades income inequality has increased sharply in the U.S. and it continues to do so. So, it is nice to have that settled.
The second interesting point is that the authors attempt a bit of slight of hand insofar as they do not mention the truly troubling matter - increasing inequality of wealth. For many, many people in the U.S. there are little or no "savings" to draw down during hard times. Arguably the mal-distribution of wealth in the U.S. says even more about "how we're faring" than does income distribution.
Third, living off of credit is a dangerous strategy in the short term and an easy route to bankruptcy in the medium term. (Of course the recent bankruptcy "reform" worked out to the benefit of creditors who already act in many duplictous ways.) One might well find (this is speculation) that the current mortgage disaster in the U.S. has been generated in considerable part by people trying to finance inordinate consumption by speculating on the equity in their homes (a "creative" form of debt).
So, it seems to me that The Economist essay is pretty much worthless. The authors were writing in reply to Paul Krugman who has, in turn, offered this retort - "Inequality Denial." Krugman basically counters the claims, pressed in The Economist essay, that consumption inequality is not as bad as it might seem. He seems pretty persuasive to me on all counts - especially on the point that it is possible to both recognize that many (but I would hold, hardly all) of the poor are better off than their counterparts were a century ago and find current patterns of ecconomic inequality wholly deplorable.
So, here is a very practical challenge to the folks at The Economist - you can have your choice between the divergent packages of goods you attribute to the weathy and the poor in your essay. You can, in other words:
Drive your used Hyundai Elantra to shop for groceries at Wal-Mart, bringing them home to an IKEA Energisk B18 W (assuming similar accoutrements throughout the suitably matching apartment) ... of course you must do your purchasing of food and everything else on a budget set by the median income for a faimly of four ....
Drive your new Jaguar XJ to shop for groceries at Whole Foods, bringing them home to a Sub-Zero PRO 48 (assuming similar accoutrements throughout the matching house), ... and you have a very loose budget constraint for food and all other goods because you are among the decile of the U.S. income distribution ...
It is your choice folks! Notice that I've been generous, since our "poor" do not approximate the median income. And their consumption is therefore even more constrained than what I sketch here. And if you really believe that "in America the relatively poor suffer no painful indignities"* explain why you choose (as you will) the 'nicer' of the packages which on your account are different only in "well nigh undetectable" ways.
If you don't like that prospect, try taking a job at WalMart. Or think about how the "relatively poor" have fared in the wake of say, Hurricane Katrina. And think about what happens to the relatively poor when, with little or no wealth, their precarious income streams are threatened or cut by man-made disasters like the Hurricane or the mortgage let-down, to say nothing of mere plant closings or layoffs. Then talk about indiginities and who suffers them.
P.S.: Thanks to Mark Woods at Woods' Lot for posting the two essays.
* (Added a bit later) Perhaps the folks at The Economist might explain to the people descibed in this story about dental hygiene among the poor in rural Kentucky that they are suffering no real or imagined indignity. If anything this sort of situation is less excusable now than it might have been in 1907.