"It is no accident that the periods in which the broadest cross sections of Americans have reported higher net incomes--when inequality has been reduced, partly as a result of progressive taxation--have been the periods in which the U.S. economy has grown the fastest. It is likewise no accident that the current recession, like the Great Depression, was preceded by large increases in inequality. When too much money is concentrated at the top of society, spending by the average American is necessarily reduced--or at least it will be in the absence of some artificial prop. Moving money from the bottom to the top lowers consumption because higher-income individuals consume, as a fraction of their income, less than lower-income individuals do."
He sums up the effects on society as a whole as follows:
"The rich do not exist in a vacuum. They need a functioning society around them to sustain their position. Widely unequal societies do not function efficiently and their economies are neither stable nor sustainable. The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price."
Richard Wilkinson and Kate Pickett demonstrate in their book "The Spirit Level" that most of the ills that afflict rich countries rise with income inequality. Mental illness, alcohol and drug abuse, obesity, stress, anxiety, homicide and prison population are higher in less economically equal societies. Positive traits such as life expectancy, social mobility, and trusting each other are lower in less economically equal societies.
Inequality, injustice and grinding poverty lead to the whole of society becoming the poorer; we all lose, rich and poor. Faced with such a future, politicians of all persuasions need to be radical in drastically altering the corrupt capitalism model we currently have; tinkering around the edges will not significantly alter the dark trajectory in which society is moving. Significant reforms are the only way to rekindle the hopes of millions.
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