Sunday, May 15, 2016

Income Inequality in the Good Ol' USA

Well, we’ve been hearing a lot lately about income equality. Is there a way, though, we can quantify all that? So, it’s not just a bunch of stories and opinions?

Well, yes, there is. It’s called the Gini Coefficient, and it’s basically a number that tells you how equal or unequal a country is based on distribution of income.

I won’t get into all the gory details (though you can find them on good ol' Wikipedia), but essentially the Gini will give you a value of 1 for complete equality (everybody makes the same) and 0 for complete inequality (1 person makes all the money, and nobody else makes nuthin’). It’s something that any serious economist knows all about and takes very seriously.

Now, there are two ways to look at this number …


Believe it or not, this country was pretty darn equal at one time. Can you guess when? It was actually in the 1950s, the heyday of the middle class. Yup, everyone was working, unemployment was usually under 5%, the CEO of the average company made 25 times more than the average worked at that company (it's over 200 now), the highest tax rate was 90% (it's 40 now), and the Gini bottomed out at just under 39. (Oh, we were also the strongest country in the world and basically paid everyone’s military bill, gave foreign aid all over the place, and managed to fund all sorts of internal improvements and R&D.)

Now, this was a major contrast to what was going on pre-Depression, when the (mixed metaphor alert) Fat Cats were rolling in the dough and the Gini was over 50. 

What’s really interesting, though, is what happened in the 1980s, when numbers started to rise and rise, advancing to almost pre-Depression levels. 

So, what exactly was going on in those years? Well, you may remember a fellow by the name of Ronald Reagan. As avuncular and charming as he was, he was also the first Republican in almost 60 years who wasn’t essentially a DINO (a Democrat In Name Only). Yup, all the Republicans elected in FDR’s (and the Depression’s) very long shadow basically believed in the same model of government. That means Eisenhower, of course, but also Nixon and Ford too.

Reagan, however, wanted to blow the whole thing up. In that regard, he was essentially as nutso as Barry Goldwater (who ran in ’64) – but somehow managed to win more than his little home state and the Deep South.

And Reagan did (blow the whole thing up, that is). He totally changed the game – so that gummint was the enemy, unregulated capitalism was the hottest thing since the middle of the 19th Century, economic victims deserved their plight, and greed was good. And one of the major effects of all that was for the Gini coefficient to rise by almost a quarter, back to figures similar to those of the Roaring 20’s.


Another way to look at this is to compare ourselves to the rest of the world. Yes, I realize we American don’t really like to do that. American exceptionalism is, after all, a storied tradition in this land. Sometimes, though, the exception is on the debit, not the credit, side.

Like, for example, when it comes to the Gini coefficient:

On the plus side, it looks like we’ve got everybody beat directly south of us. Take that, Colombia! And that, Guatemala! At the same time, though, it looks like we’re in the same boat as Argentina and Nicaragua – and Suriname’s got us beat flat. Dang!

Africa’s looking pretty good too – at least south of the equator, that is. It’s a little hard to believe, though, that were losing out to Ghana, and Sudan, and Mali, and Burkina Fasso.

And here’s a call out to China, and Malaysia, and – um, er – Papua-New Guinea. It’s looking, though, like Japan, and South Korea, and even such light weights as Mongolia and Vietnam and Afghanistan have us bested in Asia.

As for Europe? Are you kidding? Canada? Fuggedaboutit. The ANZAC countries? Yeah, right. Heck, even India and Iran and Greece have us beat.

Care to see it in a list? Well then, the World Bank has us coming in at 96, just above Gabon, but just below Qatar. Not a World Bank fan? Well, how about the CIA? They’ve got us at 102.

Ready to give up? I know I am.