Archive for the ‘DOMESTIC ECONOMIC POLICY’ Category

Many Americans take pride in “American Exceptionalism,” the idea that their country is unique and in some way special.  In many respects, this notion is true; the United States doesn’t seem to fit the norm.  However, is this good or bad?  Should it be a source of jingoistic pride, or does it mean that there is work to do?  Here, one aspect of American Exceptionalism is explored.  The United States is a wealthy country, but to what extent do all citizens share in this wealth?  How does this distribution compare with that of its other developed, western peers?  Where does it fit among the nations of the world?  What can be expected in the future – i.e. where is the nation heading with regard the distribution of wealth?  That is, this the middle class growing as the poor increasingly share in the American dream…or are fewer and fewer gobbling up more and more?

One common way to look at the distribution of wealth is through a statistic called the Gini Coefficient.  A short discussion of the coefficient can be found at the end of this article, and more extensive discussions of it can be found in Wikipaedia or a number of other web sites easily found through a Google search.  Suffice it here, the coefficient measures how wealth is distributed in society.  It consists of a decimal value ranging for zero (0) to one (1).  The smaller the value, the more evenly wealth is distributed.  A gini coefficient of zero (0) indicates a society where all are equal – no rich or poor.  As the coefficient rises toward one (1), more and more wealth is concentrated in fewer and fewer hands.  Zero (0) – utopian state, one (1) greedy gus gone wild.  For practical purposes, gini coefficients range from .230 (Sweden, the nation with the most equitable distribution of wealth) to .707 (Namibia, the nation where wealth in most maldistributed).


So how does the USA fare?  Not well – it ranks 91th among the 134 nations included in the CIA World Factbook. (Illustration I provides a sampling of nations ordered by gini coefficient – the complete world Factbook list is located at  In itself, this does not make the USA exceptional and it provides no indication Nations1of the nature of this exceptionalism should it exist.  One must dig a little deeper to explore these issues.  The poor of all developed, “western” countires possess more of their society’s wealth than do those of the USA.  Consider: Sweden – .23; Denmark – .24; Norway and Iceland – .25; Luxembourg and Austria – .26; Germany – .27; Belgium – .28; Finland – .30; Australia and the Netherlands – .31; Italy, Spain, Ireland, and Canada – .32; France – 33; Switzerland and the UK – .34, New Zealand – .36; Japan – .38.  And the USA? – a dismal .45.   Unlike the countries we look to as peers, our actual peers are third world countires.  Jamaica, Uruguay, Cameroon, Cote d’Ivoire, and Iran are our closest neighbors (all rounded to .45).  Other of these less developed countries score much better than we do – i.e. Yemen (.38), Laos (.35), Egypt (.34), Mongolia (.33), Pakistan (.31),  Ethiopia (.30), and Albania (.27).



Additional data suggests that the maldistribution of wealth in the USA is growing more extreme.  Illustration II presents a historical series of US gini coefficient scores spanning the 61 years starting in 1947 and ending in 2007.  The chart indicates that wealth became more evenly spread across society through the first two decades following the second world war.  Since that time, more and more of the nation’s wealth has ended up in fewer and fewer hands.

In summary, this suggests that the USA is exceptional.  However, it is not an exceptionalism to be proud of.  We are a first-world country with a third-world pattern of wealth distribution.  Furthermore, it tells us that we are becoming a two class society – the rich are getting richer relative to the poor; meanwhile,  the  middle class is shrinking.  A study by the US Department of Labor raises the alarm about this trend.  It suggests that the pattern of wealth distribution is approaching that of Mexico and will be statistically equally by 2043  (  Recent data suggests that this will happen much sooner.

What does all this imply politically and regarding public policy?   The pattern of changing wealth distribution does not reveal partisan differences.  Eight years of Republican and twelve years of Democratic administrations presided over the twenty-year era of diminishing disparity.  Economic equality has diminished steady during the following forty years, i.e. through the Nixon, Ford, Carter, Reagan, Bush, Clinton, and Bush administrations.  The largest one-year decline was experienced during the Clinton presidency.  It would seem, then, that the poor and middle class need to analyze any redistributive government action more wisely than in the past.  It doesn’t matter who is supporting or opposing it.  The habitual sales-pitch “lower taxes” appears to be a mere deception – the question needs to be asked, is “how much is this tax break going to cost me?”  For example, are the few dollars saved in a “tax holiday” worth more than the rising cost of college education, or disadvantages our children will experience from a poorer quality of education?  But the issue is not restricted to government – private enterprise and the “market” have played a role in the growing disparity.  Should executives receive huge bonuses for failure (irrespective of whether they receive government bailouts or not)?  Should they be rewarded for eliminating jobs, disrupting communities, and ruining families?  Should sports figures pull in huge salaries when the majority of kids can’t afford to attend games?  Are Corn Flakes really worth $4 a box?  Hell no to all of this!

From the Abyss,




The Gini Coefficient: Imagine everyone in a society forming a line arranged by their wealth, starting with the poorest and ending with the richest.  If the value of the first person’s (the poorest) wealth is placed on a bar chart, and then the second bar is included representing the second person’s wealth stacked atop the first, and so on until the value of the last person’s (the richest) wealth is stacked on the wealth of all others, a curve will be created (called a Lorenz Curve – which I won’t mention here!).  This line depicts the distribution of wealth within the society.  When the line forms a diagonal running straight from the first bar to the last the society, it represents a society in which all people are economically equal (the line of “Perfect Distribution” in the Illustration III.  However, wealth is never equally distributed; some will have less while others have more.  Invariably then, the line representing  the actual economic distribution of a society will sag (the line of “Actual Distribution” in the Illustration).  The more it sags, the greater the economic disparity.  The gini coefficient is the area of A divided by the total of areas A and B.


We are obsessed the “market.”  Market indicators, the Dow, the S & P 500, and NASDAX (and in this international era, the Hang Seng, Nikkei, DAX, and FTSE), are looked upon as a measure of economic health.  These measures tell little about the economic well-being of the lives of individuals and families.  In fact, there is a complete disconnect – market rises usually coincide with worsing conditions of common people.  Shrinking levels of unemplyment cause drops in market prices because they are omens of increasing demands by labor and higher wages – and that puts a squeeze on the all-imp0rtant profit.  Obviously, we have come to look at the nation as a nation not of people but of investment and business.  Tellingly, Presidents Bush and Obama alike have chosen Wall Streeters as their economic advisors while passing by such people-oriented economists as Paul Krugman or Joseph Stiglitz (both nobelauriats). 

It’s time to develop a new measure of the economy indicating how individuals are doing – buying power – employment – full time employment – leisure time – life expectancy.  It is only then that we will once again (or at last?) place a premium on the quality of life of the many rather than profit for a few.  Any ideas?

From the Abyss,


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