The poor often behave in less capable ways, which can further perpetuate poverty. We hypothesize that poverty directly impedes cognitive function and present two studies that test this hypothesis.
First, we experimentally induced thoughts about finances and found that this reduces cognitive performance among poor but not in well-off participants. Second, we examined the cognitive function of farmers over the planting cycle. We found that the same farmer shows diminished cognitive performance before harvest, when poor, as compared with after harvest, when rich.
This cannot be explained by differences in time available, nutrition, or work effort. Nor can it be explained with stress: Although farmers do show more stress before harvest, that does not account for diminished cognitive performance. Instead, it appears that poverty itself reduces cognitive capacity.
We suggest that this is because poverty-related concerns consume mental resources, leaving less for other tasks. These data provide a previously unexamined perspective and help explain a spectrum of behaviors among the poor. We discuss some implications for poverty policy.
So here’s some bad news: The rise in wealth inequality? It’s permanent.
“Permanent,” here, is a technical term. The other option would be “transitory.” If the inequality we were seeing was merely transitory, it would mean that in any given year, sure, inequality is really high, but five years down the line, the families at the bottom of the income distribution might have moved to the top, or vice versa.
In an impressive new paper, Vasia Panousi and Ivan Vidangos of the Federal Reserve Board, Shanti Ramnath of the Treasury Department, Jason DeBacker of Middle Tennessee State University and Bradley Heim of Indiana University got tax data for 34,000 households between 1987 and 2009 and use it to track what was actually happening to individual families over that period.
Sadly, they did not find households easily shifting up and down the inequality scale. Instead, they found “the advantaged becoming permanently better-off, while the disadvantaged becoming permanently worse-off.” For men, the added inequality was entirely of the permanent sort. For households, three-quarters was permanent.
The takeaway here is rough. The reason the permanent/transitory distinction matters is that lifetime earnings are much more important than a single year’s earnings. It’s lifetime earnings that decide how you live in general, what sort of house you can afford, whether you can send a kid to college, whether you can retire comfortably.Not to mention deciding how long you live.
Freeland's plutocrats are mostly self-made also, and overwhelmingly male; one very rich man suggested to her that women lack the "killer instinct" needed for real success. But they are not the idle heirs of rich parents. The "working rich" are a distinct class: smart, ambitious and often outsiders.
What's more, they represent a dramatic change from the 19th and early 20th century, Freeland argues. Then, the conflict was between capital and workers, with workers doomed to lose because they couldn't own the means of production.
The communist revolutions were supposed to transfer those means to the workers, but instead transferred them to a new class of upstart intellectuals and technical experts. She cites Milovan Djilas, Tito's second in command in communist Yugoslavia. In the 1960s Djilas wrote "The New Class" to describe this phenomenon as a corruption of communist orthodoxy; Tito threw him in jail.
Even more ironically, the same new intellectual class now runs capitalism -- with the exception of the princelings of the Chinese Communist Party, the billionaire sons and grandsons of Mao's old proletarian comrades. But elsewhere, smart young men got possession of ex-Soviet resources, or an operating system for newfangled personal computers, and within months were rich beyond imagining.
They didn't come entirely out of the blue. Freeland documents the gradual but decisive shift in fields like finance, which since the 1930s had been regulated to the point of boredom. This came along with a new struggle: Now it wasn't capital versus labour, but capital versus talent.
The Occupy movement did us all one big favor: It brought income inequality into the public debate. After close to 40 years of gradual income and wealth erosion, North America's middle and working classes now understand that they've been had.
While most of us were trying to make a living and a life, a very small number of well-tailored pickpockets were pilfering much of what we made. Then they had the chutzpah to blame us for not succeeding the way our parents and grandparents had, in the 30-year golden age after the Second World War.
Most of the debate in the past year has been in the U.S., where the 99 per cent have begun to suspect they'll never make it into the one per cent after all. The debate has been quieter in Canada, where programs like medicare have helped to keep the income gap a bit narrower. But it's still a gap, and it's getting worse.
The Broadbent Institute, an Ottawa think tank, recently released its own study of the problem. Towards a More Equal Canada sets out the situation in just 26 well-documented pages. Based in part on an extensive poll, the report has some findings rarely mentioned in political debate.
For example, a Canadian 25-year-old in the top fifth of income earners can expect to live 5.6 years longer than one in the bottom fifth, and 1.7 years longer than one in the middle fifth.
Between 1982 and 2004, families in the top one per cent saw their share of Canada's taxable income rise from 7.4 per cent to 11.2 per cent. In that period, yearly average income of the one per cent rose from $380,000 to $640,000.
The report finds that from 1982 to 2004, the bottom 60 per cent of Canadian families saw no increase in their incomes: "Over that period of more than 20 years, the income of a family in the exact middle of the income range rose from $42,000 to $43,000 (measured in 2004 purchasing power). ... Almost all of the income gains during that period went to the wealthiest 20 per cent of Canadian families, with much of that going to the top one per cent."
The top one per cent now receive 14 per cent of all income in Canada. That's less than the 18 per cent received by the American one per cent, but decidedly better than Sweden's 7.1 per cent.
In the early 14th century, Venice was one of the richest cities in Europe. At the heart of its economy was the colleganza, a basic form of joint-stock company created to finance a single trade expedition. The brilliance of the colleganza was that it opened the economy to new entrants, allowing risk-taking entrepreneurs to share in the financial upside with the established businessmen who financed their merchant voyages.
Venice’s elites were the chief beneficiaries. Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing. But if you are on top, mobility also means competition.
In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.
The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too.
Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. Eventually, the colleganza was banned. The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally.
By 1500, Venice’s population was smaller than it had been in 1330. In the 17th and 18th centuries, as the rest of Europe grew, the city continued to shrink.
The story of Venice’s rise and fall is told by the scholars Daron Acemoglu and James A. Robinson, in their book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” as an illustration of their thesis that what separates successful states from failed ones is whether their governing institutions are inclusive or extractive.
Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.
The history of the United States can be read as one such virtuous circle. But as the story of Venice shows, virtuous circles can be broken. Elites that have prospered from inclusive systems can be tempted to pull up the ladder they climbed to the top. Eventually, their societies become extractive and their economies languish.
Kathleen Geier makes a point I should have noticed. She points to the shocking story in yesterday’s Times about sharply declining life expectancies for less-educated whites, and points out that these declines took place at a time of rapidly rising income inequality. And we have lots of evidence that low socioeconomic status leads to higher mortality — even if you correct for things like availability of health insurance.
Some of the effects may come through self-destructive behavior, some through simple increased stress; think about what it feels like in 21st-century America to be a worker without even a high school degree. In any case, Geier is surely right: what we’re looking at is a clear demonstration of the fact that high inequality isn’t just unfair, it kills.
On September 12, 2012, the Census issued its report on Income, Poverty, and Healthcare Coverage in the United States: 2011. While the full report has some nice charts, one that was conspicuously missing was on income inequality. The data for such a chart was in the tables, and so I was able to construct the chart above from them. Mean household (not individual) income for each quintile (20%) is expressed in real (inflation-adjusted) dollars.
One feature that jumps out at you are how relatively flat mean income has been for the bottom 80% over the last 45 years and how much it has grown for the top 20%, from an already high baseline. I thought this merited some further investigation.
If you look at the far left, in 1967, the income difference between the quintiles of the bottom 80% was remarkably similar, less than $17,000 between each group ($16,679 between the 1st (lowest quintile) and 2nd; $15,572 between the 2nd and 3rd; and $16,631 between the 3rd and 4th). But even in 1967, we see significant income disparity ($46,619) between the 4th and 5th (top) quintile. The top 20% have an income difference nearly 3 times as great as the other quintiles.
In the succeeding decades, difference between the 4 lower quintiles showed some moderate spreading. For 2011, they are $17,965 from 1st to 2nd; $20,638 from 2nd to 3rd; $30,238 from 3rd to 4th; and $97,940 from 4th to highest 5th). What we see in this is a movement of the top 20% from around 3 times the initial 1967 spreads between quintiles (~$17,000) to something over 5 times them ($97,940).
What is interesting is that the mean income of the top 20% increased $73,100 from 1967 to 2011. About $20,000 of this increase occurred during the Reagan years, but what often gets overlooked is that about $43,000 of it happened during the Clinton years.
Via The Hook, the politics blog at The Tyee: Canadians' health divided by income: CMA. Excerpt:
The health gap is widening between rich and poor Canadians, the Canadian Medical Association says. The CMA is meeting in Yellowknife to consider how to reduce that gap.
In a news release, the CMA released results of a public opinion survey that found "The health of Canadians is increasingly being affected by how much money they earn, with lower income groups reporting poorer health and greater use of health services than those with higher incomes." The release also said:
In describing their health, only 39 per cent of those earning less than $30,000 a year said it was excellent or very good, compared to 68 per cent of those earning $60,000 or more – a gap of 29 percentage points. In 2009, the gap between the two income groups was 17 points.
The findings come from an Ipsos Reid survey carried out for the Canadian Medical Association as it prepared its 2012 National Report Card on Canadian health care.
"When it comes to the well-being of Canadians, the old saying that wealth equals health continues to ring true," said Dr. John Haggie, president of the CMA. "What is particularly worrisome for Canada's doctors is that in a nation as prosperous as Canada, the gap between the 'haves' and 'have nots' appears to be widening."
Via The Observer: £13tn: hoard hidden from taxman by global elite. Excerpt:
A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.
James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals.
Their wealth is, as Henry puts it, "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy".
According to Henry's research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
The detailed analysis in the report, compiled using data from a range of sources, including the Bank of International Settlements and the International Monetary Fund, suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.
Oil-rich states with an internationally mobile elite have been especially prone to watching their wealth disappear into offshore bank accounts instead of being invested at home, the research suggests. Once the returns on investing the hidden assets is included, almost £500bn has left Russia since the early 1990s when its economy was opened up. Saudi Arabia has seen £197bn flood out since the mid-1970s, and Nigeria £196bn.
"The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments," the report says.
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor.
According to Henry's calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world's population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
Talk about going viral! Nick Hanauer says more in six minutes than most have said in six books. This is the TED talk that TED Talks thought was too partisan. Highly recommended.
Via Paul Krugman's blog: The Economics of Marginalization and Hopelessness. Excerpt:
That’s one of the subject headings in this recent survey paper (pdf) on teen births, which are much higher in America than in other advanced countries. The authors find evidence suggesting that inequality and lack of mobility are central, another sign that Wilkinson-type views about the corrosive effects of inequality are going seriously mainstream.
One of the maddening aspects of much current American discussion of inequality has been the dogged refusal to deal with Wilkinson and with the whole idea of inequality as a cause of poor health and social problems. So it's encouraging that Krugman is endorsing "Wilkinson-type views" and thereby bringing them to more people's attention.
Via TheAtlantic.com: The Deadliness of Income Inequality. Somehow this is still news in the US. Excerpt:
Growing income inequality in the United States has Americans talking about justice and economic fairness, but a new study suggests the burgeoning wealth gap is threatening more than just our pocketbooks. It might be raising our risk for an early death.
In one of the few studies to track the health effects of income inequality over time, one Ohio State University (OSU) researcher has discovered that an increase in inequality leads mortality rates to begin rising after five years. Inequality-linked mortality peaks about two years later, before tapering off five years after that. All told, even a modest increase in American societal inequality more than doubles an average individual's cumulative risk of death over the next 12 years.
Drawing data from the U.S. National Health Interview Survey for the years 1986 to 2004, the study found that for every 0.01 increase in the Gini coefficient -- a standard measure of a country's economic disparity where 0 represents perfect societal equality and 1 represents maximum inequality -- an average person's cumulative risk of death increased by 112 percent in the next dozen years.
Hui Zheng, the OSU sociologist who ran the study, replicated the results using three different measures of inequality across a sample of more than 700,000 Americans aged 30 and older. He then ran the same test on 18- to 25-year-olds, with similar results.
Though Zheng doesn't offer a causal explanation for his results, other studies have suggested that income inequality damages social cohesion, an important factor in maintaining public health. Another possibility may be precisely the argument Occupy Wall Street protesters have taken up for themselves: that the accrual of wealth to the nation's elites creates further incentives to preserve that wealth at the expense of the disadvantaged.
Inexplicably, the effect of income inequality on death rates drops off after a dozen years. But, Zheng said, the point is that income inequality doesn't simply have an immediate impact on public health, as previous studies have suggested.
"We need to look at the general trend of the effect," Zheng said in a phone interview. "The findings may be different if we use a different health outcome. For example, in this paper I use individual mortality risk, but if we use disease-specific mortality rates like those for heart disease and cancer mortality, the findings might be a little different. But I argue it's kind of a general trend -- income inequality may not have an instantaneous effect on mortality, but that it may increase over time."
Via BBC News: Social rank 'linked to immunity'. Excerpt:
A study of rhesus macaque monkeys may have solved a long-standing puzzle on a link between social rank and health.
A study of 10 social groups of macaque females showed that the activity level of an individual's immune genes was an accurate predictor of her social rank.
In a paper in Proceedings of the National Academy of Sciences, the team also showed that the monkey's immunity changed when social rank was altered.
The work suggests that status drives immune health, rather than vice-versa.
A great many studies have shown associations in both humans and non-human primates between social environment and biological markers of health.
In previous studies of rhesus macaques, the so-called dominance rank has been correlated to levels of the stress-linked glucocorticoid hormones, sex hormones, the brain chemicals serotonin and dopamine, and white blood cell counts.
But one unanswered question concerns cause and effect: does a compromised immunity or imbalance of some chemical cause a particular social rank, or does taking on a particular social rank set the immune system and neural dials?
Jenny Tung, now at Duke University, and colleagues addressed this question by carefully assigning social rank to 10 groups of rhesus macaques, each containing five females.
This can be done by altering the order in which females are introduced into the group; the later she arrives, the lower her social rank.
The team then measured the levels of a broad class of immune cells, peripheral blood mononuclear cells, in the bloodstream.
They found that on the basis of those levels of circulating immune cells alone, they could predict an individual female's social rank with 80% accuracy.
Via CBC News: Some Toronto neighbourhoods more heart-friendly than others - Toronto. Excerpt:
A new study suggests that where you live may be a contributing factor when it comes to assessing your risk of cardiac arrest.
The study, done by researchers at Toronto's St. Michael's Hospital, focuses on the country's largest city but its findings could be applied to other parts of the country.
Simply put, the study suggests that some areas of Toronto — especially in southwest and central Scarborough, western parts of North York and north Etobicoke — had the highest rates of cardiac arrest, about 500 per 100,000 people.
The communities with the lowest rates were those within north Scarborough, downtown Toronto, East York and the northeast part of North York. Those rates were about 160 per 100,000 people.
Katherine Allan, the PhD student who led the study, looked at more than 5,000 cardiac arrest victims in 140 neighbourhoods across Toronto between 2006 and 2010.
Normally cardiac victims are mapped by where the attack happened. But Allan's study mapped the home addresses of the victims.
Mapping by neighbourhood can add to information about lifestyle and environment, the researchers said.
The study found that in some neighbourhoods people are more at risk — and by a large factor in some cases.
Each neighbourhood was examined for possible contributing factors, such as socio-economic status, health status and "how activity friendly the neighbourhoods were."
Those areas with higher household incomes and higher levels of education showed a lower risk of cardiac arrest, according to the preliminary analyses.
Via The New York Times, an excellent op-ed by Paul Krugman: Oligarchy, American Style. Excerpt:
Inequality is back in the news, largely thanks to Occupy Wall Street, but with an assist from the Congressional Budget Office. And you know what that means: It’s time to roll out the obfuscates!
Anyone who has tracked this issue over time knows what I mean. Whenever growing income disparities threaten to come into focus, a reliable set of defenders tries to bring back the blur. Think tanks put out reports claiming that inequality isn’t really rising, or that it doesn’t matter.
Pundits try to put a more benign face on the phenomenon, claiming that it’s not really the wealthy few versus the rest, it’s the educated versus the less educated.
So what you need to know is that all of these claims are basically attempts to obscure the stark reality: We have a society in which money is increasingly concentrated in the hands of a few people, and in which that concentration of income and wealth threatens to make us a democracy in name only.
The budget office laid out some of that stark reality in a recent report, which documented a sharp decline in the share of total income going to lower- and middle-income Americans. We still like to think of ourselves as a middle-class country. But with the bottom 80 percent of households now receiving less than half of total income, that’s a vision increasingly at odds with reality.
Via The Sydney Morning Herald: Gap between rich and poor widens. Excerpt:
The richest Australians saw their wealth rise at more than triple the pace of the poorest as the economy withstood the global recession of 2009, a government report shows.
Average net worth jumped 15 per cent to $2.2 million for the wealthiest households in the four years through June 30, 2010, compared with a 4 per cent gain to $31,829 for those at the other end and an 11 per cent increase to $427,168 for those in the middle, the Australian Bureau of Statistics said in a report released today.
The local economy has avoided a recession for two decades as demand for iron ore, coal and natural gas from Asia’s developing economies bolsters exports, keeps unemployment near 5 per cent and lifts wages.
OccupyWallStreet has come out of nowhere (well, out of Vancouver's Adbusters) to become a strange new event. Via The New York Times: On Wall Street, a Protest Matures. Excerpt:
“Is this Occupy Wall Street thing a big deal?” the C.E.O. asked me. I didn’t have an answer. “We’re trying to figure out how much we should be worried about all of this,” he continued, clearly concerned. “Is this going to turn into a personal safety problem?”
As I wandered around the park, it was clear to me that most bankers probably don’t have to worry about being in imminent personal danger. This didn’t seem like a brutal group — at least not yet.
But the underlying message of Occupy Wall Street — which spread to Boston, Chicago and Los Angeles on Monday — is something the big banks and corporate America may finally have to grapple with before it actually does become dangerous.
What’s the message?
At times it can be hard to discern, but, at least to me, the message was clear: the demonstrators are seeking accountability for Wall Street and corporate America for the financial crisis and the growing economic inequality gap.
And that message is a warning shot about the kind of civil unrest that may emerge — as we’ve seen in some European countries — if our economy continues to struggle.
“Ultimately this is about power and greed, unchecked,” said Jodie Evans, the co-founder of Code Pink. She, too, said she wanted to see Wall Street executives go to jail.
Consider the protests a delayed reaction to the financial crisis that has now reached a fever pitch as the public’s lust for scalp has gone unfulfilled. In Chicago on Monday, one sign read: “If corporations are people, why can’t we put them in jail?”
Via The Globe and Mail: When business talks about inequality, it’s time to worry. Excerpt:
As nations steel themselves to provide more taxpayer-funded cash to stave off a new round of defaults while cutting supports for taxpayers, policy makers are pointing to rising income inequality as cause for concern in a climate of growing instability.
Notably, it’s not the usual voices of the left sounding the alarms, but pro-market heavyweights like the Conference Board of Canada and the International Monetary Fund.
That such groups are worried should be a signal to Canada’s private sector leaders: pay attention to the compensation gap between your lowest paid worker and that of the CEO, because those differences may tell us a lot about the mess we’re in. After all, businesses rely on the rising purchasing power of the many, not the few, to deliver growth and profits.
But income inequality has grown more rapidly in Canada than in the U.S. lately, according to the Conference Board report. Among 32 OECD nations, Canada has gone from better-than-average to worse-than-average levels of inequality since the mid 1990s, slumping from 14th to 22nd place, despite a decade of robust economic growth and record levels of job creation. Meanwhile, 15 OECD nations -- including peers like Norway and the U.K. -- were reducing income inequality.
Its earlier report noted: “[H]igh inequality can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions. Second, high inequality raises a moral question about fairness and social justice.” The links between rising inequality, halting economic growth and increasing volatility are getting harder to ignore.
Via The Tyee: Big Media Afraid to Take Wall Street Protest Seriously. Excerpt:
It's been over a week now of protests, meetings, and confrontations with police on Wall Street, and yet mainstream North American media outlets, who have provided us with daily updates on uprisings in Egypt, Libya, and Spain, to name a few, have given either thin or dismissive notice to what is happening on Manhattan.
Known as the Occupy Wall Street campaign, it started on September 17 with thousands marching into New York's financial district, waving slogans such as "Wall Street is Our Street" and "We are the 99%." Cops were waiting for the crowds on Wall Street, so they set up camp a block away and have been there ever since, day and night.
Fueling these protests is the widening gap between the wealthy and everyone else, which continues to grow because of rising unemployment and mortgage foreclosures.
In other words, this is a much different kind of movement from the tax-cut loving Tea Party protests that the media eagerly covers. This might make more sense when one considers that the Tea Party protests are funded by the ultra-right billionaire Koch Brothers, and treated as a grassroots mega-story by Rupert Murdoch's Fox News.
The Murdoch-owned Wall Street Journal has run a handful of stories on Occupy Wall Street, seeming to take a close interest only when protesters began being arrested.
On the day the protest launched, CNN filed the story not as general interest news about a developing social movement, but as a business item. The story was published on CNNMoney, which advertises itself as "A service of CNN, Fortune and Money."
The New York Times tucked its September 23 story into its regional section (as if this weren't a story of significance beyond New York) and topped the supposed news piece with a dismissively biased headline: Gunning for Wall Street, With Faulty Aim.
In case readers didn't get the point, the writer's snide asides included describing Occupy Wall Street as "a diffuse and leaderless convocation of activists against greed, corporate influence, gross social inequality and other nasty byproducts of wayward capitalism not easily extinguishable by street theater."