Money & Politics

Wealth inequality is THE (inequality) problem.

I’m not entirely sure what I want to convey with this article, but I felt it needed to be talked about. I may branch off and talk about associated topics, and I hope you afford me that luxury. If you’ve come for a scathing critique of capitalism (or any economic system for that matter), you’ve come to the wrong place – much to the disappointment of my communist friend who blames capitalism for all of his and society’s problems. I wish to take on a more holistic view and given my backgrounds in both accounting and finance, and psychology and counselling, I believe I can achieve this.

Starting with an explanation and illustration of the Gini coefficient – the measure used to determine wealth and income inequality – is likely to bore people immediately and turn them away, so let me start somewhere else (and we’ll return to it later). I came across an interesting stat the other day that Elon Musk donated a total of $270m that aided the re-election of current U.S. President Donald Trump – that’s not far off $1 for every American. Musk’s personal wealth now also exceeds the bottom 52% of Americans combined. Now, is this a good thing? I think the majority of people would say it isn’t. In a democracy where 1 person = 1 vote, it’s clear that not all votes are created equal when one can donate so much to one political party, regardless of political affiliation. Also, at what point is your personal wealth too much? I’ll leave it to you to decide whether you think someone having more wealth than half your country is deserving or not.

Maybe not so much anymore - Photo by Samuel Regan-Asante on Unsplash.

The relatively stagnant to minimal increase in income/earnings over the past 50 years compared with cost increases especially house prices are a cause for concern. Back in the day you could buy a house for approximately three times your annual salary. Now, that number has ballooned out to ten or more times, further pricing people out of the market entirely or having them mortgage to the hilt with over half their income used to service the liability on their place of abode. Another comparison is that CEOs used to make approximately five times the average employee, now that number can be over twenty times, adding to the growing separation.

The reality of going your entire life without owning a home was unheard a generation ago. Now, it’s a distinct possibility. With housing prices skyrocketing beyond explanation by supply and demand economics, the idea of homes being viewed as an investment rather than a basic need has appeared to screw over the majority of people over. It’s not about banning owning more than one home, but how many homes do you need?

While the accountant in me always encourages people to manage their money in the most effective way, one can’t ignore the factors that and the effects of keeping the poor, poor. With housing prices through the roof, renting or owning it doesn’t matter, it doesn’t leave much disposable income to spend or invest elsewhere. Cheap food is usually poor-quality food, but it can be all some people can afford or starve essentially. Poor-quality food is likely to lead to sub-optimal health which in turn requires more money to spend on health and less money on other things to improve one’s life.

Entertainment is cheap, but education is expensive. Why bother learning, why bother upskilling, why bother with a qualification that’ll improve your employment prospects when you can just watch a TV subscription for $20/month or play video games endlessly or “freely” peruse your social media? Not only is entertainment cheaper than education, it’s also more mindless which is what is tailored to people after a long day at work (increasingly just to get by) where engaging their brain is the least thing they want to do. Even those with higher education, they are increasingly finding themselves not in employment related to their study, but still with the debt. Growing levels of higher learning debt is a massive problem and, in some countries, you can’t even escape it through bankruptcy. Plenty of people find themselves taking decades to pay back their education loans.

Moving onto relational and familial topics, we’re seeing people stay together more out of financial necessity than for love, emotional and psychological wellbeing. Even through the pandemic, financial stressors were the primary cause of a lot of relationship demises. This is worsened in cases of domestic violence if one feels financially trapped and unable to escape especially when children are concerned. Speaking of children, the modern problem of childcare and help with child raising is a huge concern. Regularly, both parents “have to” work to survive money-wise leaving no one at home to look after the children, negatively impacting both parents and the kids. In a number of cases, some parents are almost working just to put their child/children in childcare. There are a lot of parents who’d love to stay at home and be with their children – I’m a product of such environment, and I’d highly recommend it – but it’s simply not viable for the majority of families anymore. Some people are bypassing kids altogether purely for financial reasons – it really has become an either/or decision for a significant amount.

Photo by Elyse Chia on Unsplash.

Is cramming people in like sardines the best for our health? The overcrowded living situations people find themselves in due to our populations both increasing in number and concentration are not helping us. We used to have more space, now you have to buy space/privacy which generally only the wealthy can afford. We’re no different from ants in that regard, living so close or on top of one another makes us extremely frenetic and subject to greater likelihoods of anger, frustration and rage. Once again, I point to the financial necessity, evidenced by more and more vehicles parked outside each home, a sign of people not being able to afford their own place and space.

The Gini coefficient is a number between 0 and 1 that illustrates the wealth or income inequality within a given population; the closer to 0 the more equal, the closer to 1 the more unequal. According to the most recent federal statistics (ABS) from 2022-23, my home country of Australia sits at a significant 0.606, ranked 20 out of 29 OECD nations.

How much wealth do you need? It has been widely postulated that the baseline human happiness stops climbing around $75k/yr income US, although this has been challenged more recently, both in number and in concept. I ask again, is there a thing as too much wealth? It seems so. Yet we still encourage and facilitate it. I don’t wish to stop people aspiring and striving, but it feels like some do. A problem of production or distribution, is wealth accumulation a zero-sum game? Wealth accumulation takes time – time is the number one factor – but I acknowledge we don’t all start from the same point and the problems with nepotism. We’re biologically hardwired to want to provide for our loved ones, to leave them in a better position than we started; wealth accumulation aids our legacy.  

We all seem to want what we all can’t have! However, I know that solutions start with education, but the question is, who is going to pay for it? Governments, corporations and wealthy individuals all have the responsibility of making society a better place for everyone as opposed to pursuing just self-interest. While the rest of us have our responsibilities too, to hold those accountable, and to honour our lives in the best way possible under the circumstances.

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