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viewpoint

Yes, income inequality really is that bad

| Monday, February 1, 2016

This is a response to Mimi Teixeira’s viewpoint “Is Income Inequality that Bad?” published Jan. 27. In her article, Teixeira argues that concerns surrounding income inequality are overblown and serve only as a political talking point. She contends that “even if income inequality were increasing at alarming rates, it wouldn’t matter.”

Income inequality is increasing at an alarming rate — the bonuses Wall Street employees received last year alone are double the combined annual salary of 1,007,000 full-time minimum wage earners, despite a decline in profits. The 400 richest individuals in our country hold more wealth than the poorest 150 million Americans combined. In other words, the top 0.1 percent is worth more than the entire bottom 90 percent. But these statistics alone are perhaps not enough to decry income inequality — although they can arouse a visceral feeling of injustice. A depression of GDP, deficit of opportunity and a severe decline in social mobility, however, are enough.  

Teixeira claims “economic growth … [has done] far better than any redistributive program could. Focusing on income inequality doesn’t help the poor.” Capitalism works because of incentives, and these incentives must naturally give rise to income inequality. Even though inequality rises, all members of society are better off. 

We neither dispute the nature of this process nor seek to dissolve the “uncontrollable monstrosity” of capitalism and replace it with a “redistributive program.” Instead, we acknowledge the positives of capitalism as an economic system as well as the necessity of some level of income inequality. However, the potential for extreme levels of income inequality is a flaw of capitalism, which can be addressed.

The current level of income inequality is beyond what is required by growth. A 2014 OECD study found that the extreme level of income inequality in the United States has led to the loss of approximately 0.3 percentage points worth of GDP growth per year for the last twenty years. While some level of inequality is the natural result of economic growth, the current level serves only to depress economic growth by degrading educational opportunities and social mobility

Teixeira also says, “There was a time when only the rich could afford refrigerators, phones and computers. As income inequality has grown, standard of living inequality has shrunk.” Although we can all appreciate the wonders of indoor plumbing, refrigerators, cable television — to name a few — and how widely available these commodities now are, we cannot equate certain material possessions with opportunity. Teixeira points out that “most working Americans have the same basic appliances and necessities as the rich.” Although a CEO and a public school teacher both own phones, only one of them can afford a college education for his child. Education is supposed to be the engine of opportunity, but studies show “increasing gaps in academic achievement and educational attainments have accompanied the growth in income inequality.” When you lack the resources to invest in your children’s futures or summit mountains of college loans, a refrigerator loses relevancy.

It is hard to say the United States is a meritocracy when government policies, tax cuts and special interests help the rich get richer and the poor get poorer. For example, the Federal Reserve has created “economic distortions,” according to a leading Wall Street bond expert, that result in a transfer of wealth to those seeking short-term gains and who need it the least. It’s easy to only see the world through the lens of our own experience, but we have to realize that people face different barriers than our own if they do not win the lottery of birth and circumstance. Without first hand experience of the effects of the deleterious effects of income inequality, we should not be so quick to declare it non-problematic.

Further, a general lack of opportunity affects the ability of the less well-off to live up to their full potential. Often disadvantaged for reasons beyond their control, they are forced to live life dreaming of what might have been had the circumstance of their birth been different. Opportunity lies at the crux of the American Dream — in its absence the free-market system is rigged from the start. Not only is this fundamentally unfair, but it violates the principles of equality of opportunity and the pursuit of happiness we hold sacrosanct as a nation. To stand by and do nothing while income inequality threatens these values would be irresponsible. 

At some point we have to ask ourselves: Is this really the society we want to live in? Teixeira says she wants to “challenge you to look at statistics and consider that their only real impact is in shock value used for political purposes.” The ‘shock value’ of income inequality is not so much its usage as a political soundbite, but rather its negative impact on everyday Americans. The entrenchment of wealth at the top, and the deficit of opportunity at the bottom — that’s the real impact of economic inequality. We challenge you to not simply discard the issue of income inequality because it does not directly affect you, but rather to remember Pope Francis’s words: “Human rights are not only violated by terrorism, repression or assassination, but also by unfair economic structures that create huge inequalities.”

Natasha Reifenberg is a sophomore philosophy major living in Badin Hall. She can be reached at nreifenb@nd.edu

Patrick LeBlanc is a sophomore honors mathematics major living in Knott Hall. He can be reached at pleban1@nd.edu

The views expressed in this Letter to the Editor are those of the author and not necessarily those of The Observer.

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Letters to the Editor can be submitted by all members of the Notre Dame community. To submit a letter to the Viewpoint Editor, email viewpoint@ndsmcobserver.com

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  • Amber

    Natasha and Patrick, thanks so much for writing this response. When I read the first viewpoint article, it made me question how ND teaches students to become aware of people’s differences (specifically income level). In my response to the campus climate survey sent by Erin Hoffmann Harding, I stated that ND needs to teach more about this to students. It’s crazy how in 3 years of business courses that this topic has never been discussed in a class. Thank you for speaking up.

  • Rosanne Spellings Bumgarner

    Why not address the useless classes offered in colleges but instead encourage students to attend a trade school that they are more likely to find a career? College degrees are not as useful as in the past. We need people who are trained in a trade more than a degree that they end up with 100k’s they can never pay back. .. or tax payers cover.

    • HolyHandGrenade

      Education is merely an example of how the system biases itself toward richer and bigger interests. It extends into many other realms.

  • Dana

    You state that there is a “general lack of opportunity” for the lower class, but compared to most European countries, this “lack of opportunity” is nonexistent. America provides freedom of opportunity through free education for all. The problem surrounding income inequality is that the ones who are not as well-off tend not to value the relation of education to opportunity.

    • RedheadRemarks

      The free education to which the lower classes have access is not at all comparable to the free education that is made available to privileged students. There are stark dissimilarities in the quality of the free education available to the American people, and often those who attend public schools in disadvantaged communities (think South Side schools) have drastically different experiences than kids who live in wealthy neighborhoods and attend well-resourced (yet still free) public schools (i.e. Lincoln Park). Free education by no means translates to equality of opportunity. If those who are not well off don’t understand the relationship of education to opportunity, it is because they were not afforded the opportunity of a decent education.

    • João Pedro Santos

      “America provides freedom of opportunity through free education for all.”
      Is this a joke?

      • Dana

        Don’t ask if this is a joke… It’s why immigrated to the United States in the first place

        • João Pedro Santos

          I don’t deny that there are a lot of reasons to immigrate to the US (I am an international student, for example). But saying that the US have free education is completely false. In fact, the US are the country in the world with the higher tuitions. Plus, you may have had a lot of opportunities in the US but you can ask a lot of Americans (for example, the 20% poorest) about what opportunities they have. If you do so you can figure out that, while the US is a great place to live for a lot of people, it’s also a terrible place to live for a lot of people.