Shrinking The Income Disparity Gap: What Would It Mean?


So, I had an interesting discussion with reflectionephemeral over at Poison Your Mind.  We were discussing the meaning of income disparity here in America and then around the world.

I acknowledge that such disparity is increasing; the gap between the rich and the poor seems to be getting wider and wider all the time.  And America is much less income level mobile.  That is, it is more difficult here in America to move from one income bracket to another than it is in say, Europe.

However, I make my point that while the gap may be larger, the rich may indeed be getting a larger slice of the pie, that the slice the poor DO get is much bigger than they otherwise would.

In my conversation, I envisioned two scenarios:

A. On a scale of 1 to 10, with 1 being poor and 10 being rich, the poorest averaged a 2 while the rich averaged a 3.

B. On a scale of 1 to 10, with 1 being poor and 10 being rich, the poorest averaged a 4 while the rich averaged a 9.

In world B, the poor earn MORE than the rich in world A. However, in world B, the rich are wealthier in relation to the poor in world A.

Which would you pick?

As any good host would, RE challenged me on my assumptions.  And offered a third choice:

In world C, GDP grew at only 1% per year since 1987, and reanimated pterodactyls have ripped out the livers of all the world’s best baseball players and entrepreneurs.

Okay okay, not really, but his point is valid.  There are all kinds of alternatives out there.  And its hard to tickle the data to really make a point.

However, I kept chewin on the whole “Europe is better than us” thang.  The US does rank worse in income gap and in income mobility.  But is this a good thing?  That’s when I remembered a post by Mark Perry over at Carpe Diem.

With a few exceptions, the amount of economic output produced per person would rank most European countries among America’s poorest states.  And even America’s poorest states like Mississippi and West Virginia would rank above average among the countries of Europe.

It’s true, Norway, the top earning European nation*, would rank as the 10th richest State behind Colorado.  The next, the very next richest Euro country?  Switzerland.  And it would rank 32nd behind Georgia.  [33rd if Norway were being ranked].

The big ones?  Sweden: 43rd behind Maine.  Germany: 45th behind Idaho.   UK: 49th behind South Carolina.  Finland and France are each behind the Brits.

And to top it off, the European Union as a while would rank dead last behind even Mississippi.

I want my life better.  And if a select few get very rich making that happen, I guess I don’t care.  I’d rather live in Mississippi than the EU.

 

* Luxembourg is REALLY the top, but only because they only do banking.

 

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4 comments
  1. I’d pick B, and the perspective about the MIssissippi surprises me.

    • pino said:

      I’d pick B

      I feel that any rational person would.

      the perspective about the MIssissippi surprises me.

      Amazing, isn’t it. And they make fun of Mississippi.

  2. Arbourist has an interesting survey from HBS on her page that says most Americans want the European wealth distribution model (specifically Sweden’s). While reading her post, however, I immediately thought of all the luxuries and creature comforts Sweden enjoys because of the more capitalist system America has.

    • pino said:

      I immediately thought of all the luxuries and creature comforts Sweden enjoys because of the more capitalist system America has.

      In all of history, humans have only been wealthy and safe when economic liberty is highest. The times and places when people are worse off are precisely those times and places where they are most restricted.

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