On reading a fascinating book by Larry M. Bartels, “Unequal Democracy - The Political Economy of the New Gilded Age”, I was struck anew by the degree to which the economic well-being of different groups (“classes”) within our society are determined not so much by how well individuals are equipped to prosper in a “free-market economy” (education, initiative, work-ethic, etc), but at least equally by the degree of their political influence (or lack thereof) in shaping the political environment within which this “free”-market economy operates (tax laws, loop-holes, government subsidies, etc).
Thus, since the discourse about the political infrastructure and policies is so important to the welfare of all of us, it is vital that the words and phrases we use in conducting this political discourse are not perverted by being loaded with ideological bias in one direction or another.
In the current political debate in America, the term “income redistribution” has taken on a decidedly one-sided, ideologically loaded meaning. It is used almost exclusively in a derogatory way to refer to the transfer payments, mostly through government programs, to the poorest among us, such as unemployment benefits, Social Security benefits, Medicare benefits, food stamps, etc.. It is often used in conjunction with the loaded term “class warfare”, meant to conjure up the image of old-style socialism or even communism. In this way, instead of discussing substantive policy alternatives to maintain economic equity and political equality, use of the term “income redistribution” is meant to immediately move from the substantive to the emotional FUD (fear, uncertainty, doubt) level, thus short-circuiting further rational discussion.
One graph in the Bartels book (Chapter 1, Figure 1.3), showing the distribution of real income among various income groups, is a real eye-opener in the context of “income redistribution”. I have reproduced this data below, using a publically available database from the research team cited by Bartels as the source for this data.
This graph shows that the direction of “income redistribution” flows very dramatically from the lower incomes to the top 1% and 0.1% of the income spectrum.
Until about 1970 the trend of all the income lines was more or less horizontal, showing income differentials among different segments, reflecting the “meritocracy” typical of a society with a free-market economy, where initiative and skill is rewarded. However, after 1970 the income growth of the top 5%, and especially the top 1%, started increaing at an exponential rate, reflecting a massive income redistribution from 99% of the population to the top 1%.
Most tellingly, since the numbers shown include the aggregate effect of existing government programs to direct income to the lower income groups (unemployment, food stamps, educational subsidies, etc.), as well as the effect of programs which benefit the top earners (such as tax policies, subsidies, etc.) the net flow of income redistribution over the last 30 years is decidedly in favor of the top 5%.
Applying the polemics of “class warefare” associated with the current usage of “income redistribution” in light of this evidence, it is quite obvious that the “upper classes”, repersented by the top 1% (and especially by the top 0.1% - representing a true oligarchy of the 13,000 super-rich) have been waging a very effective guerilla war against the 99% of the rest of us. Huge amounts of income have been “redistributed” from the poor and middle class to the super rich.
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