Wealth Inequality In the U.S.

It’s Worse Than Most of Us Think  —  But We Can Do Something About It

By Rich Whitney

Most American workers are certainly aware in a general sense that the United States is a vastly unequal society, with extremes of wealth and poverty of long standing. Many are probably aware that the gap between rich and poor has become more extreme in recent years and decades, especially since the turn of the century. Many may also be aware that the wealth gap in the U.S. is more extreme than any, or nearly any, other nation, depending on the survey. But I suspect that most American workers do not fully grasp the sheer magnitude of this divide. That’s perfectly understandable  —  because it’s nothing less than mind-blowing.

Permit me to provide two stark illustrations. The first is based on the Survey of Consumer Finances, which measures the net worth of households in the United States, periodically compiled by that radical left-wing outfit known as the Federal Reserve. For this illustration, I rely on the 2013 survey that appeared in the Federal Reserve Bulletin of September 2014, primarily Table 2, and a further analysis of the data that appeared in Bricker, et al., Measuring Income and Wealth at the Top Using Administrative and Survey Data.

Based on the 2013 survey, the distribution of wealth in the U.S. can be illustrated as follows. Suppose that the population of the United States was represented by 100 people and all household wealth in the U.S. was represented by $100. This is how it would break down:

  • The richest one person would own $36.
  • The next richest nine people would together own $48. So the richest 10 people out of the 100 would collectively own $84 out of the $100.
  • The next richest 15 people, combined, would own about $11.50. That means that the richest 25 people, together, would own $95.50 of the $100. That also means that the other 75 people in the room would be splitting the other $4.50.
  • In fact, it is actually worse than that, because the poorest 25 people in the room actually have negative net worth, meaning that they actually owe money to those folks at the top.

Now consider a second illustration. As of 2013, the median net worth of U.S. households was $81,400. In other words, half of all households had more than that amount and half had less than that amount. If you visualize this wealth as a stack of one-inch blocks, with each block representing $10,000 worth of wealth, this median U.S. family would have a stack of blocks just over 8 inches high. (Obviously, for those American families fortunate enough to possess wealth in this ballpark, most of the wealth we are talking about consists of equity in a home, which may or may not be real wealth when they go to sell it, and, for most, is simply a necessity for living. Unlike the productive wealth owned by the ultra-rich, equity in a home is not a dependable vehicle for generating more wealth, though it can be a dependable vehicle for generating debt!)

In contrast to this modest 8-inch stack of somewhat illusory wealth, the median net worth of people in the Forbes 400, so another words, about the 200th richest person in the U.S., was about $5 billion. That person’s stack of blocks would be almost 8 miles high, which, by the way sounds like the name of a good song. Process that for a moment: 8 inches versus 8 miles! And if we go to the very richest person, Bill Gates, whose wealth stood at $72 billion in 2013 — his stack of blocks would be a staggering 400 miles high.

The implications of this are as enormous as that stack of blocks. To begin with, it is highly pertinent to ask who created these miles-high stacks. We are told that these are the rewards of “risk taking,” innovation, hard work, sacrifice, etc.  —  the shopworn platitudes used to justify this enormously inequitable system we call capitalism. Such mythology can be critiqued on its own terms, beginning by examining how many of the ultra-rich actually did anything to “earn” their wealth, as opposed to simply inherit it or scam it from others who possessed it. One can also ask how many of them who actually were innovators or hard workers nonetheless inherited a substantial financial head start, such as our current chief executive.

More centrally, while innovators like Bill Gates undoubtedly did some marvelous things that set them on the path toward accumulation of wealth, even those true entrepreneurs didn’t build their stacks of blocks by themselves. The workers who worked for them had more than a little something to do with that.

I’ll return to that point momentarily, but one other lesson bears mentioning: Gaining an accurate picture of social inequality in America today also helps us understand the sheer idiocy underlying the proposition that society benefits by giving tax breaks or regulatory relief to the wealthy and the corporations they own and control, based on the premise that these are the “job creators.” This is often accompanied by the equally fatuous corollary proposition that “the government doesn’t create jobs; it only destroys them.”

The very wealthy obviously have a lot of money to invest in things that create jobs if they wanted to do that. The fact is, sometimes they invest in enterprises or initiatives that create jobs, sometimes they invest in things that have nothing to do with creating jobs, sometimes they just hang onto their wealth and enjoy it, and sometimes they invest in automation, robotization, hostile takeovers, leveraged buyouts, mergers or other initiatives that destroy jobs, or relocate jobs to other countries where workers are paid poverty wages. But when they invest it at all, the one thing you can be sure of is that they will invest it in something that will make them more money.

Therefore, if we give the wealthy a tax break or regulatory relief, it is literally nothing more than wishful or magical thinking to suppose that, overall, they will invest more of their added wealth on enterprises or projects that will create jobs than on initiatives that will destroy or relocate them. In contrast, the vast majority of the same tax revenue, if expended directly on the public sector, will be spent on payroll, i.e., employing people to do work. This is not to say that it will all be spent wisely, of course, but most of it assuredly will go toward actual job creation or sustaining existing jobs.

Debates over whether the uber-rich somehow deserve almost inconceivable hordes of wealth, or more tax breaks, however, should not distract us from a more fundamental point: All wealth, ultimately and necessarily, is the product of only two things  —  the resources of the Earth itself, and human labor power. Only human labor can convert land and natural resources into tangible usable objects for consumption or productive tools; only human labor can provide human services. Capital  —  the tools, machinery and other facilities of production, and capital in its monetary form — is itself nothing more than the congealed prior application of labor to natural wealth. It is only the private ownership of these means of production that gives it the characteristics and social function of “capital.” That private ownership is itself the consequence of prior acts of accumulation of capital by its owners, the capitalists, who constitute a distinct, privileged social class.

The capitalist class accumulates capital through the exploitation of wage labor. A detailed explanation of how capitalism works (and how it fails) is, of course, beyond the scope of the present article, but the essence of exploitation is that workers as a class are paid, in wages or salaries, only a fraction of the value of the commodities they create. The rest of the value they create is appropriated by the capitalists solely by reason of their social position as the owners of the facilities of production.

As capitalism has become more monopolistic, concentrating more and more wealth in the hands of a smaller and smaller but increasingly powerful few  —  because under capitalism, wealth equals power  —  it has allowed capitalists to more or less completely dominate the state, even in the nominally “democratic” nations. This is especially true in the United States, where the capitalists use their wealth to control the machinery of both the Democratic and Republican parties, which in turn limit access to the ballot by other parties, the capitalists control the major news media and political debates, and there is only a weak, highly compromised labor movement and other social movements to provide pushback.

Capitalist domination of the state, in turn, has allowed the capitalist class to increasingly turn the state from an institution that at least somewhat served the public good into yet another means of wealth accumulation, especially through its establishment of a titanic war machine, used to dominate other nations around the globe and appropriate their natural wealth, labor and markets. Thus the extreme inequality that has evolved in the United States is both a cause and an effect of capitalist domination of the state.

This is painting matters in very broad strokes, of course, but it should inform us of what needs to be done. Inequality in the U.S. has reached obscene extremes, leaving growing numbers of workers in poverty or near-poverty, and giving capitalists an ever freer hand to devastate the planet’s eco-system and much of humankind through extreme methods of resource extraction and war. It follows that, as working people struggle to create a more humane and egalitarian society, their efforts to wrest control of the state from the capitalist class and create genuine political democracy must be conjoined with an equally earnest effort to organize economic democracy  —  meaning a new economic system in which those who produce society’s wealth shall exercise democratic control over what is produced, how it is produced, how labor is allocated and rewarded, and how wealth is distributed.

This, in turn, requires building a genuine working-class party that aims to wrest control of the state, not only to serve the public good directly, but also to help facilitate the transition to a democratic economic system based on social ownership of the facilities of production. The Green Party, a political party that has already elected hundreds of its members to political office at the local level, and which now embraces such a transformational role in its platform, is the best vehicle for fulfilling that role. It can succeed  —  if enough people who support this goal actually join the party and help make it happen by doing the hard work of organizing and making the party better, instead of carping about its perceived current shortcomings.

It also requires building a revived, democratic labor union movement in the U.S., and internationally, that is worthy of the name. What is needed is a union that has a vision beyond simply organizing particular trades and bargaining with particular firms for better wages and conditions  —  a model that has proved to be inadequate, reducing most unions to vehicles for helping a few career bureaucrats, helping get a few sellout Democratic politicians elected to office and begging for jobs no matter how destructive they are for the planet or humankind. What is needed is a union or similar organization that aims to unite workers as a class on the industrial and commercial front, for the purpose of actually transforming the economic foundations of society, and creating a democratic economic system based on social ownership of the facilities of production.

The Industrial Workers of the World, along with rank-and-file efforts to take over and transform what remains of the existing unions, can provide a vehicle for fulfilling that role. It can succeed  —  if enough people who support this goal actually join the IWW and help make it happen by doing the hard work of organizing and making the IWW better, instead of carping about its perceived current shortcomings.

As former Supreme Court Justice Louis Brandeis warned us decades ago: “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” Right now, we clearly have the latter, and we sure as hell don’t have anything that can be called democracy. But as the producers of all social wealth, workers have the power in their hands to change this state of affairs. They have the potential to undermine the power of the capitalist class, knock down the miles-high stacks of blocks and use their productive power to build a new society — one that can and will restore the health of the environment on which all life depends, and allow every member of society to enjoy the fruits of their labor and live a healthy, fulfilling life.

The potential exists. The means exist. The vision and general plan for transforming society exists. The vehicles for transforming society exist. All that is missing is the critical mass. Every person who joins the effort brings us one step closer to a better world.

What are you waiting for?


The above depiction of the maldistribution of wealth in the United States raises one other important point: Given the enormity of our ability to generate wealth in the United States, a society that corrects its maldistribution ought to be able to do one other very important thing: It should be possible to build a society in which that modest $80,000 sliver of wealth is no longer the median household wealth in the U.S., but something approximating that sum could become the floor, for everyone.

Typically, this concept is discussed in terms of a guaranteed national income rather than guaranteed wealth, but the point is that a redistribution of wealth will allow us to build a floor providing for everyone’s most basic needs. Every child born into this society and every living person should be guaranteed the right to thrive  —  with a roof over their head, a clean and healthy environment, enough healthy and nutritious food to eat, high quality health care provided, high quality public transportation provided, and high quality education provided from pre-K through a bachelor’s degree for all who want one.

This is not a new idea, nor is it a particularly radical one. The idea of a guaranteed national income is actually a conservative idea, embraced by the likes of Richard Nixon and Milton Friedman. What I am suggesting is simply a variation and fuller version of that concept. An accurate understanding of our collective ability to generate wealth shows that it is eminently attainable, not pie-in-the-sky.

Now, I can safely predict that sooner or later someone will read this article and raise the old shopworn argument: “The flaw in the kind of egalitarian society you envision is that there will no longer be any incentive to produce wealth, so it is doomed to failure, as sure as the Soviet Union collapsed.” So I may as well respond to that in advance.

Point one, the society I am discussing is not modeled on the Soviet Union or any other state-run economy controlled by a one-party dictatorship. It is based instead on the workplace cooperative and workers’ councils models, in which working people democratically control their own workplaces, and elect accountable and removable representatives to broader regional economic planning councils charged with allocating labor and resources for the economy as a whole.

Second, I am not suggesting or advocating that everyone would be paid or remunerated exactly the same. The operating principle would not be absolute equality of income or wealth but a guaranteed floor plus equality of opportunity. If people want to earn more gravy on top of the basics, they could still do that  —  by working for it, not by exploiting the labor of others. Society could still reward innovation and even entrepreneurship, in the form of creating new products  —  it simply would not go to such ridiculous extremes as we see under the present system. There could still be small family and independent businesses as well; what society would need to forbid would be the exploitation of the labor of others via private ownership of facilities of production.

When capitalism succeeded feudalism as the dominant economic system, private ownership of land was not abolished altogether; it simply ceased to serve as the principal organizing basis of economic activity. Similarly, a democratic economic system that succeeds capitalism would not abolish all private property; it would simply abolish private ownership of productive property as a means of accumulating wealth from the labor of others.

In short, the incentive to live better materially would neither vanish nor be suppressed under economic democracy. As is already the case today, some people will want more material things than others, and some people will value more free leisure time than others. What will change would be that every able-bodied adult would have the ability to live a comfortable life with a relatively modest commitment of labor time, those who wanted more could work more, and everyone unable to contribute would be cared for by a caring, humane society.