The wealth gap - 92% of Americans surveyed prefer Sweden over the US

[russ_watters]

It was a half tongue in cheek response to a flippant remark, dave.

But Ivan's link mentions a guy who picks the US as having an even wealth distribution. That guy just plain didn't understand the math behind the question.

 

[mheslep]

http://en.wikipedia.org/wiki/Demographics_of_Sweden#Sweden_census_2005" are commonly cited in gini/equality/poverty discussions about Scandinavia.* Find me a place as homogeneous in the US, or even just a bunch of Swedes in the US** and then let's talk.

Here are a few of Sweden's more recent socio-economic policies that I like, which I mention here because I doubt many Americans taking that survey would have associated them with Sweden, especially since the election of the center-right Reinfeldt government in 2006 which was re-elected in 2010.

• Universal grade school vouchers, established since 1992, allowing children to attend any school: public, private for profit, even religious.
• Partially privatized pension system
• Privatization of business. In process of selling off/privatizing state owned companies and assets, bringing in revenue in the process
• Taxes. Though the top income tax rate is still 57% to the US's 35%, taxes in Sweden are on the way down. Sweden has been sharply cutting income and business taxes, completely eliminating gift and inheritance taxes. Furthermore Swedish taxes are considerably flatter than the US system. Obviously the VAT tax is not progressive, but neither are the income taxes compared to the US. That is, there's less attempt at wealth transfer, instead people largely get back the same money they pay in (less govt overhead).
• Deregulated airlines, telecom, electricity.
• Cut public spending.
• Voted to stay out of the Eurozone monster.

*Edit: I note those Wiki demographics are a bit old, and that very recently 14% of the Swedish population is foreign born. We'll have to see how that effects the welfare state and equality.

 

[apeiron]

Since clearly those polled didnt understand the concept they were being asked about, perhaps it is telling us that people are only liberal about things they don't understand?

It would be more reasonable to say that they were being allowed to understand the long term consequences of short term choices - and didn't like what they saw.

 

[mheslep]

I hate when people compare us to Norway or Sweden. Impossible, because both have very small homogeneous populations. Scale them up 30x, inject them with diversity and let's see how smoothly it all runs.

That could roughly be called Europe. I doubt the wealth quintiles spread out quite so evenly between Luxemburg and Albania

 

[mheslep]

Lady Thatcher on the GAP, 1990.

https://www.youtube.com/watch?v=okHGCz6xxiw

They'd rawtha the gap were that. Down here. That. Not that. But that.

 

[Physics-Learner]

i did not read the full article. but the pie chart, in and of itself, can lead to some very poor conclusions.

the biggest one that comes to mind is in looking at the chart and concluding that the inequality has lots of people living in poverty like situations. or more so than the country with evenly distributed wealth.

what would need to be included is the spending power that an individual has. how many dollars does he have, and what can be purchased with these dollars ? in the same country, i would rather have $2 out of $1000, rather than $1 out of $100. i still have twice the purchasing power.

also the cost of goods and the availability of goods. in the past, i have talked to people coming back from communist russia. many things were not available for purchase at any cost.

because there are obvious mistakes that the majority of people will make when looking at the charts, it is obvious to me that the people involved in making the charts have ulterior motives.

but i have been telling you guys one thing now for a while - the very wealthy in this country run the country, and do so by using govt as its tool.

which is why i want to dismantle most of it. because most of it is just a tool for the wealthy to control the rest of us.

 

[mege]

Agreed...by wealth standards, I'm dirt poor since I have a mortgage with negative equity (yeah, I'm one of those responsible idiots that won't walk away from a house that's worth less than what I owe). However, I wouldn't consider myself poor since I can afford the things I want.

It was a half tongue in cheek response to a flippant remark, dave.

But Ivan's link mentions a guy who picks the US as having an even wealth distribution. That guy just plain didn't understand the math behind the question.

I think daveb has a point though - the numbers could be grossly skewed because of debt. How is 'wealth' calculated? Net worth? Assets not counting liabilities? I'm reminded of the Michael Moore statement a few months ago where he equated the 100 richest against the bottom half - that statement was later to be evaluated and used a net worth valuation if I remember right (including all liabilities). So of course someone making 50k/yr with a 150k mortgage is going to have a negative or very low net worth. Being in the red does not mean they're poor.

I don't think it's a secret that Americans like their credit cards and mortgages.

 

[Physics-Learner]

another thing that could skew the stats is the difference between average and mean.

the chart depicts the top 20% as having 84% of the wealth.

what would be interesting is to see what wealth the top 2-3 % of the population owns.

 

[apeiron]

i did not read the full article. but the pie chart, in and of itself, can lead to some very poor conclusions.

The PBS link is in fact misleading as the "US" graph is of wealth and the "Sweden" one is of income.

As a rule of thumb, wealth inequality is usually about double income inequality, so the charts themselves are comparing apples and oranges. Or at least oranges and mandarines.

If you want actual like for like, the top quintile owns 84% of the US, it owns 73% of Sweden.

The second quintile is 11% to 20%. So the bigger difference lies there.

And in both countries, the bottom two quintiles are in negative territory because what they own is debt.

The gini data I would focus on is income. Unfortunately, when I present that data, it gets deleted by people perhaps not too familiar with this area of research.

 

[Ivan Seeking]

another thing that could skew the stats is the difference between average and mean.

the chart depicts the top 20% as having 84% of the wealth.

what would be interesting is to see what wealth the top 2-3 % of the population owns.

There is very little data about the distribution of wealth in America. There is one source, the Survey of Consumer Finances, sponsored by the Federal Reserve Board, that does provide data from 1983.

These data suggest that wealth is concentrated in the hands of a small number of families. The wealthiest 1 percent of families owns roughly 34.3% of the nation's net worth, the top 10% of families owns over 71%, and the bottom 40% of the population owns way less than 1%..

http://www.faculty.fairfield.edu/faculty/hodgson/courses/so11/stratification/income&wealth.htm

[PLAIN]http://www.faculty.fairfield.edu/faculty/hodgson/courses/so11/stratification/Wealth2004.gif

 

[apeiron]

This is the more telling finding from the original study.

http://www.people.hbs.edu/mnorton/norton ariely.pdf

What is really surprising is that it didn't matter if those surveyed were rich or poor, republican or democrat. They all had about the same mistaken underestimate of wealth inequality in the US, and the same belief about what would be fair.

So 1) all folk felt that wealth should be much more evenly distributed in US society than they believed it to be. And 2) wealth is in fact far more unevenly distributed than they realize.

Is this another inconvenient truth?

 

[apeiron]

I don't think it's a secret that Americans like their credit cards and mortgages.

The recent consumer credit bubble is of course something that masked the true levels of income and wealth inequality in the US (and other credit junkie countries). The poor could borrow to buy big TVs, cars and homes. So their wealth was not zero but negative.

But it felt like they were rich for a while. They had the same toys as those who actually were rich. People could enjoy the illusion.

 

[WhoWee]

This is the more telling finding from the original study.

http://www.people.hbs.edu/mnorton/norton ariely.pdf

What is really surprising is that it didn't matter if those surveyed were rich or poor, republican or democrat. They all had about the same mistaken underestimate of wealth inequality in the US, and the same belief about what would be fair.

So 1) all folk felt that wealth should be much more evenly distributed in US society than they believed it to be. And 2) wealth is in fact far more unevenly distributed than they realize.

Is this another inconvenient truth?

Actually, the inconvenient truth has yet to be described in the charts. It's the value of benefits owned by/entitled to the the bottom 20%. Free or subsidized food, medical, housing, education, transportation, communication, and utilities all have a significant value. We can either label it income or capitalize the anticipated lifetime benefit (potentially $millions cradle to grave) - but it needs to be accounted for in a sincere discussion.

 

[russ_watters]

...the biggest one that comes to mind is in looking at the chart and concluding that the inequality has lots of people living in poverty like situations. or more so than the country with evenly distributed wealth.

Yes, these discussions tend to involve people playing fast-and-loose with the definition of poverty. The title of one of those pbs shows linked in the OP, for example, is "land of the free, home of the poor", which is either reckless or dishonest reporting from our public news source.

For income inequality to be a predictor of poverty requires a recursive definition that has poverty defined in terms of income inequality. Quite obviously, there is little or no real correlation with the dictionary/standard definition, as some of the main examples given in this thread show us: China's poverty rate is much higher than the US's, despite similar income inequality.

In addition, the US's poverty rate has been pretty stagnant, despite rising inequality and a sliding definition of "poor" that moves the poverty level up over time.

 

[russ_watters]

I think daveb has a point though - the numbers could be grossly skewed because of debt. How is 'wealth' calculated? Net worth?

Yes, net worth. Note, this is another example of sloppiness in the article linked by the OP: it mixes and matches wealth and income.

The PBS link is in fact misleading as the "US" graph is of wealth and the "Sweden" one is of income.

It's not clear to me, but in any case, that's part of what I was talking about (the commentators also sometimes mix them). The "Land of the free..." link, there is one chart that looks like the US's wealth distribution, but at the bottom of the page says:

In the pie charts used to illustrate this story, the middle pie chart represents the income distribution of Sweden.

...which may be referring to the "wealth quiz" link. If that's the case, then the poll asked about:

Country A, which was made-up/not possible.
Country B, which is Sweden's income distribution.
Country C, which is the US's wealth distribution.

If that's what the poll really was, it was just horrible. It's asking people to judge something, while purposely misleading them about what they are looking at! And this is purported to be a scholarly research article from a Harvard and Duke psychologists! Yikes!

 

[russ_watters]

What is really surprising is that it didn't matter if those surveyed were rich or poor, republican or democrat. They all had about the same mistaken underestimate of wealth inequality in the US, and the same belief about what would be fair.

So 1) all folk felt that wealth should be much more evenly distributed in US society than they believed it to be. And 2) wealth is in fact far more unevenly distributed than they realize.

Is this another inconvenient truth?

No, peoples' opinions about something they don't understand and is based on fantasy do not tell us anything useful about how a government/economic system should be set up.

If you surveyed all Americans and asked if they wish there were more lottery winners, pretty much everyone would say yes, including lottery winners. And that would tell us nothing of value, just as this poll tells us nothing of value.

 

[russ_watters]

The recent consumer credit bubble is of course something that masked the true levels of income and wealth inequality in the US (and other credit junkie countries). The poor could borrow to buy big TVs, cars and homes. So their wealth was not zero but negative.

But it felt like they were rich for a while*. They had the same toys as those who actually were rich. People could enjoy the illusion. [emphasis and asterisk added]

Isn't that what matters? The standard of living that one lives should define whether someone is "poor" or "rich", not their net balance sheet, right?

In particular, these stats will badly misrepresent young people because young people tend to carry more debt than older people. So a wealthy - in terms of lifestyle and earnings - young person could still end up being extremely poor on a "wealth" basis because of how much debt they carry.

*The way you word that implies that it will eventually disappear. But for young people who take on a lot of debt early in life, but have a high income, it doesn't disappear - they eventually pay off their debts and end up with a lot of wealth. Indeed, negative wealth would necessarily be proportional to earning potential, as only those with high earning potential are capable of carrying a high debt, and credit card companies and lenders - though they made a lot of mistakes in the past 15 years - aren't completely stupid.

 

[Jack21222]

A poor inner city kid has the same opportunity as a rich kid.

This is simply not true at all. Here is a brief list off of the top of my head of advantages rich kids have over poor inner city kids:

Access to better schools, public and private

Access to private tutors

Better nutrition and health care

Better neighborhoods with less crime.

More influential business contacts and potential employers

These factors do not paint a picture of "equal opportunity." It's like you're saying if I played you in chess without my queen, I'd have an equal opportunity to win. This is just absolute nonsense.

 

[WhoWee]

This is simply not true at all. Here is a brief list off of the top of my head of advantages rich kids have over poor inner city kids:

Access to better schools, public and private

Access to private tutors

Better nutrition and health care

Better neighborhoods with less crime.

More influential business contacts and potential employers

These factors do not paint a picture of "equal opportunity." It's like you're saying if I played you in chess without my queen, I'd have an equal opportunity to win. This is just absolute nonsense.

Let's assume you are correct - especially your last item "More influential business contacts and potential employers" - I keep asking the majic question now what? Even if all other variables (regardless of the cost) are made equal - you can't make one person like another person, play with another person, or want to share with another person. IMO - the more you try to force behavior - the more push-back you'll encounter.

 

[Jack21222]

Let's assume you are correct - especially your last item "More influential business contacts and potential employers" - I keep asking the majic question now what? Even if all other variables (regardless of the cost) are made equal - you can't make one person like another person, play with another person, or want to share with another person. IMO - the more you try to force behavior - the more push-back you'll encounter.

Did I, or anybody else in this thread, suggest "forcing the behavior" of "liking another person?" No? Then that's a straw man.

There is nothing that can be done. The playing field will ALWAYS be tilted in favor of the rich. It's impossible to give everybody exactly the same opportunity. But it's completely insane to claim that everybody currently has the same opportunity.

The best we can hope for is to make the playing field as level as reasonably practical.

 

[WhoWee]

Did I, or anybody else in this thread, suggest "forcing the behavior" of "liking another person?" No? Then that's a straw man.

There is nothing that can be done. The playing field will ALWAYS be tilted in favor of the rich. It's impossible to give everybody exactly the same opportunity. But it's completely insane to claim that everybody currently has the same opportunity.

The best we can hope for is to make the playing field as level as reasonably practical.

It's not a strawman - I agree that regardless of the amount of money spent to even the playing field - you can't force personal relationships.

Actually, the best indicator of this might be the high unemployment rate among minorities - even though there are $Billions of unused tax credits available to hire minorities, welfare recipients, convicts, etc. If a nursing home doesn't want to hire a convicted felon (or want it to be made public) - a 100% tax incentive might not entice the management to hire an "reformed" armed robber (for instance).

 

[mege]

This is simply not true at all. Here is a brief list off of the top of my head of advantages rich kids have over poor inner city kids:

Access to better schools, public and private

Access to private tutors

Better nutrition and health care

Better neighborhoods with less crime.

More influential business contacts and potential employers

These factors do not paint a picture of "equal opportunity." It's like you're saying if I played you in chess without my queen, I'd have an equal opportunity to win. This is just absolute nonsense.

Are those institutional advantages (IE: there is a discriminating law?) or just competive differences? Regarding the crime/neighborhood claim specifically: from personal experience - my cost of living went UP when I moved to the city from a large rural community (and my job didn't pay any better so I moved back to a rural area).

I don't think there's any law barring poor kids from going to private schools or eating better. Do their parents have the drive to do so? That's the better question.

Lastly, 'poor inner city kids' is adding another qualification to the distinction rather than just by wealth. Maybe the trouble is more the mentality of the inner city than any intrinsic wealth disparity. (IMO urbanization contributes to much of the perceived problem both in culture and economics)

 

[WhoWee]

But it's completely insane to claim that everybody currently has the same opportunity.

Aren't you being a little rough on Greg?

"Originally Posted by Greg Bernhardt
A poor inner city kid has the same opportunity as a rich kid."

 

[Jack21222]

Are those institutional advantages (IE: there is a discriminating law?) or just competive differences?

There are institutional advantages in that government policies make it easier for wealthy people to hold onto their wealth and other advantages listed above. And, since the "differences" tend to be passed along from parents to children, it becomes an institutionalized (even if not governmental) problem.

Regarding the crime/neighborhood claim specifically: from personal experience - my cost of living went UP when I moved to the city from a large rural community (and my job didn't pay any better so I moved back to a rural area).

So you solution is for inner-city poor to somehow scrape up enough money to move to an area where there are fewer jobs and no public transportation?

I don't think there's any law barring poor kids from going to private schools or eating better.

This is so absurd I don't even know how to respond to it. There's no law preventing me from buying a Lamborghini either. So why don't I? Oh, right, I DON'T HAVE THE MONEY.

Lastly, 'poor inner city kids' is adding another qualification to the distinction rather than just by wealth. Maybe the trouble is more the mentality of the inner city than any intrinsic wealth disparity. (IMO urbanization contributes to much of the perceived problem both in culture and economics)

Oh, right, poor people are poor because they have a poor attitude. If only they WISHED hard enough, they'd be rich.

Aren't you being a little rough on Greg?

"Originally Posted by Greg Bernhardt
A poor inner city kid has the same opportunity as a rich kid."

I know exactly who I was responding to.

 

[russ_watters]

Locked pending moderators' decision about the quality of the source. Also guys - Greg is on vacation, so he won't be responding to that part of the discussion...

 

[russ_watters]

After some discussion with other moderators, this thread will remain locked, due to concerns about the quality of the source.

Though the news report is about a published paper, the paper contains misleading elements to both the people polled and the general public. Regardless of whether the deception was intentional or incidental, it is real: The PBS report and other news articles about this are littered with the misunderstanding that people chose Sweden's wealth distribution over the US's. For example:

The middle pie represents the wealth distribution of Sweden.

No, it doesn't - it represents Sweden's income distribution.

They were not presented with Sweden's wealth distribution, but rather Sweden's income distribution, put up next to the US's wealth distribution and a hypothetical/non-existent one.

In addition, the statement that people's prefer Sweden's whatever is also misleading. The question that was asked is that (paraphrased), if you were randomly dropped into a country, which income distribution would you prefer for that country? Obviously, if there is any income inequality, odds are that you will end up with below-average income. So the equal distribution is really a "correct" answer in terms of math/probability.

The authors also make some unwarranted logical leaps in their conclusions, concluding that because people want a more even distribution, they would also favor implementing policies to make it happen. That isn't necessarily true. The questions are too different.

The original paper can be found here: http://www.people.hbs.edu/mnorton/norton ariely in press.pdf

I have found several scathing articles echoing my concerns.