On Questioning the Need to Address Economic Disparity
On Friday, December 27, 2013 the PBS Newshour featured a guest by the name of Scott Winship, of the Manhattan Institute, who argued there is no consensus of research supporting claims that economic disparity hurts the economy. He also argued there was no consensus on whether parity is actually hindering upward mobility, i.e. the ability of individuals to improve their socioeconomic standing.
Although Former Secretary of Labor Robert Reich disputed this expert opinion, economic measures like disparity and upward mobility are not necessarily as solid of measures as people are lead to believe; thereby, they should be heeded, yet not over focused on.
Popular TV series like CSI may like to use catch phrases like “the evidence never lies,” but that is simply not true. What evidence is gathered and how that evidence is interpreted determines the outcome of a scientific investigation. Researchers were wrong about the incredible edible egg, because they did not have all of the facts while they were interpreting their data under a false pretense: all cholesterol is bad.
In the case of economics, researchers must tease data from a variety of sources that are far from comprehensive while they make tons of assumptions, which determine the limitations of a given economic model or theory.
For example, most economic theory cannot give adequate predictions beyond a few years, thus economics is short-sighted by its very nature. In accordance, economic philosophy takes over once the science of economics is no longer reliable. Meanwhile, most economic theory tends to focus on the macroscopic economy; henceforth, macroscopic measures like the Gross Domestic Product (GDP), upward mobility, and inflation reveal what is happening across the overall economy.
An increasing or shrinking GDP cannot necessarily reveal the harmful effects of economic disparity nor can it readily reveal the long-term instability caused by economic disparity. Mr. Winship went so far as to say there are some studies that reveal growing economic disparity could help increase GDP. Even if valid, our attention should be focused on other factors as this type of GDP growth is certainly not in the interests of the majority of the American People.
As far as community and personal economic growth are concerned, GDP only tells us that our nation’s economic environment favors growth. Looking at measures like core inflation, the exclusion of vital and often volatile expenses like energy and food demonstrates the need to over focus on ill-cited economic indicators. What really matter is how much money is steered toward out communities and local businesses.
If the economy is not doing that, we are experiencing economic disparity that makes it less likely our economic interests will be met. This means we have no incentive to support policies that simply increase the GDP as our interests are less likely to be met.
It is also important to remember the advantage of democratic government stems from its ability to hear, balance, and address the interests of all its Peoples. Unfortunately, our wealthy and working class already feel poor people have little right to complain about public policies when they are the ones who have the most pressing interest in forcing government to address their economic interests through improved economic policies.
As economic disparity grows and the purchasing power of consumers decreases, so does their influence. Henceforth, too much economic disparity will weaken our democratic representation and rights. Moreover, what really matters for the individual is the state of their own finances, so we should always pursue policies that best serve our direct and broader economic interests.
As commodity, energy, and food price increase along with the price of essential consumer goods and services like automobiles, computers, cell phones, internet access, education, etc., the ability of individuals to support their current lifestyle, grow their incomes to improve their lifestyles, cope with potential economic catastrophes, and save for the future is what really matters.
In accordance, the expenses involved in maintaining a middle class lifestyle are far greater than what they were in the 70’s when American incomes peaked while the cost of a “Middle Class” lifestyle will only increase in the future. The lesson here is that incomes must grow, versus stagnate or shrink, to simply maintain a certain level of comfort or survivability.
Furthermore, the idea of survivability is often discussed in terms of social welfare programs like food stamps and Medicaid. If we wish to understand the true nature of our economic state, these benefits and others cannot be included in any calculation of economic disparity, which they are often are by those favoring inaction against disparity, while the debt of government must also be included as it determines the real economic value of America, which is shrinking.
With significant numbers of Americans unable to support themselves without government assistance, including Social Security, or other forms of debt (credit cards, home refinancing etc.), and two-thirds of the American economy based on consumer spending, a lack of wealth in the hands of the majority of American will eventually spell disaster. As such, the advent of economic disparity and lack of upward mobility on a massive scale could very well be seen as a sudden catastrophic onset, even if there is no gradual increase in these measures.
Meanwhile, it is important to remember economic disparity creates a great deal of long-term issues. Technologically, the world is headed into an era of unprecedented advancement where the vast majority of the world will not benefit equally due to personal financial constraints and technical skill. Economic disparity will determine how unequal the benefits of technology will be enjoyed in the future.
At a certain point, that financial and technical gap can grow so wide the vast majority of individuals in the world will be permanently denied access to modern lifestyles. In fact, the standard of living of today may no longer be accessible for most American, because they will not be able to afford it or invest into it.
President Obama and other political leaders have decided to take on economic disparity, so there will be those who push back while what policies are pursued should be questioned. Certainly, no one should suppress evidence that undermines popular perceptions.
That evidence is actually valuable as it give us insights into what policies will be most effective, but such evidence improperly interpreted will derail efforts to solve problems. The GDP, economic disparity, and upward mobility of today are not necessarily the issue; it is the trends that reveal our future economic state that matter.
In their book “Why We Want You to Be Rich,” Donald Trump and Robert Kiyosaki, who wrote the quintessential “Rich Dad, Poor Bad,” make the case for increasing and broadening one’s sources of incomes and financial assets. A failure to address economic disparity makes it that much more difficult for Americans to follow the advice of these two financial experts, so the American People always need to be focused on how to decrease economic disparity, increase upward mobility, and decrease poverty.