Wealth divide: Concern for America’s future

The wealthiest country in the world unfortunately has the greatest disparity of wealth among the developed nations. We always knew, division between rich and poor is very steep, but the facts are more startling than our imagination. Katrina showed us a very disturbing picture of poverty and inequality in our society. While poverty is color blind, but in America color and ethnicity matters when it comes to wealth accumulation. According to the latest Census Bureau report: the median net wealth of non-Hispanic White household is $79,400; of Hispanic household $9750; and of African-American $7500. The income disparity has grown so much over last two decades that four of five households now take home a slice of the economic pie that is smaller than what they took home in 1977 (Soss, 2002). In the United States, wealth is highly concentrated in a relatively few hands. As of 2001, the top 1% of households (upper class) owned 33.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 51%, which means that just 20% of the people owned a remarkable 84%, leaving only 16% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth, the top 1% of households had an even greater share: 39.7%.In terms of types of financial wealth, the top 1 percent of households have 44.1% of all privately held stock, 58.0% of financial securities, and 57.3% of business equity. The top 10% have 85% to 90% of stock, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America (Woff, 2004). Another disturbing feature is the inflated pay package of average CEOs. The ratio of CEO pay to factory worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble, when CEOs were cashing in big stock options; It was at 431:1 in 2004. By way of comparison, the same ratio is about 25:1 in Europe and much lower in Japan and Korea. It’s even more revealing to compare the actual rates of increase of the salaries of CEOs and ordinary workers; from 1990 to 2004, CEOs’ pay increased over 300% (adjusted for inflation), while production workers gained a scant 4.5%. The purchasing power of the federal minimum wage actually declined by 6%, when inflation is taken into account. (Domhoff, 2006) Chuck Collins argued in FairEconomy.org, "we can’t ignore how, in the last three decades, the United States has also become more of an economic apartheid society. The concentration of wealth and power that exists in 2005 is rivaled in our history only by the grotesque Gilded Age inequalities of the early 1900s. These current disparities of wealth and opportunity are not the result of some natural law, but the outcome of 30 years of economic policies and social spending priorities that have been tilted in favor of wealth-holders at the expense of wage-earners." Under these circumstances, the recent attempt to repeal the estate tax is ill-advised. The tax laws of 2006 allows an individual to pass $2 million ($4 million of per couple) without paying any tax. It means 99.73% of all the estates will pass their assets to heirs tax free. Only 0.27% will be affected, and the share will fall to 0.16% in 2009 anyway. Studies indicate repealing estate tax would cost the US Treasury $1 trillion over the first ten years of full repeal.

When rich become richer (super rich) and poor becomes poorer, in an extreme disproportionate manner, we may not be able to sustain a fair society which we can be proud of. When too much wealth is accumulated in the hands of too few people, we can not run a democratic society based on rule of law – majority will always be marginalized at the expense of a few. All the ills of a divided society are very visible in America. Our health, education, retirement, job, culture are in crisis. Wealth is directly linked to power. More wealth leads to more power. In political debates, we see politicians are very reluctant to talk about the real issues, which affect common people. Wealth direct the political discourse of America to the benefit of the wealthy. According to a report from United of a fair Economy, only 18 families worth a total of $185 billion have financed and coordinated the estate tax repeal campaign. Like absolute power, absolute wealth corrupts absolutely. Americans need to wake up. We need to ask; What kind of society we want to be?


Dr. Nasir Ahmed is a professor of public administration in the Political Science/Public Administration Department at GSU.