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.We suspect, asHemingway is reputed to have said to F.Scott Fitzgerald, that the richare like you or me, except they have more money.Democracy and InequalityAnother constant theme is the threat to democracy posed by vast ac-cumulations of wealth.While we would like to sound the tocsin to rein-force our case, we cannot, in good conscience.There is no question thatif there is enough concentration, democracy suffers or disappears.Thecase of Nicaragua, where the late dictator Somoza was alleged to haveowned half the real wealth of the entire nation, is a case in point.Yetthat benighted land has had dictatorships, or at least semi-dictatorships,before and after the portly despot, with varying degrees of income ine-quality.The relationship is weak, at best.Closer to home, in the United States the greatest degree of incomeequality was in revolutionary and pre-revolutionary times.We know thisfrom a variety of sources.The revolutionary era is often held up in historytexts as the epitome of direct democracy, with almost everyone gatheredin town halls to debate the vital issues of the day.Yet, to take a few ex-amples at random, there never was a direct vote to declare war on Bri-tain, the franchise was restricted mostly to property owners, and womendid not vote.Neither did slaves, who made up almost one-fifth of thepopulation.None of this suggests that Washington, Jefferson, and theother Founding Fathers were undemocratic.Rather, it points out that therelation between the level of democracy and the extent of wealth and in-come inequality is far from certain.One subtle distinction which is often missed in philosophical musingsis the difference between greed and income distribution.The desire forgold and other valuables has existed at least since the dawn of recordedhistory.This desire is sometimes equated with the fact that there arewealthy and poor people, but it should not be.Greed probably exists inequal measure in all classes.The wealthy merely have more opportunityto indulge in it.If there is one area where the great thinkers of history are found want-ing, it is in recommending measures to correct or alleviate disparities.We could find few, if any, statements indicating how the problem theyillustrated so vividly was to be overcome, or what the chances were thata proposed measure would actually work.HISTORY OF WEALTH 37Gandhi, surely one of the most perceptive figures in world history,could only suggest "wise regulations" to correct the injustices he saw.How is a government to apply this? Or, if one relies on market forcesto solve most economic problems, how is the market to be adjusted tobring about greater equality? We do not know what Gandhi would havereplied, but other writers have said that this is a problem for governmentagencies or economists to solve.That is the difficulty in a nutshell.There are incessant cries for economicjustice ringing down the corridors of time.We also have legislatures andgovernment departments who, from time to time, are seized with the ideaof "doing something right" economically.The gap yawns between theconcept and the action.With our Alternative Distribution System, we haveconstructed at least a rope bridge over the gap, if not the Golden Gate.3A LAW OF INCOMEDISTRIBUTIONFigure 3.1 summarizes the 1987 income tax data in an unusual way.Firstwe will examine this graph, then briefly the economic theory behind thegraph, and then the necessary mathematical tools to analyze it.Thispresentation is common to our arguments for both wealth and income.It provides us with a powerful and objective instrument for comparingdistributions across time and place.The graph paper we are using is probability paper, and it allows usa view of the income depicted in Pen's parade in a new way.Rememberthat the last few percent of people had incomes nine pages above therest of us, according to the very first figure in this book.This type of graphpaper allows us to examine those few in great detail, while still viewingthe other 97% or 95%.It is as if we could look at all ten pages of thatoriginal graph at the same time.The graph is simple, once we understand how it works.We will ac-complish that by illustrating the distribution of 1987 U.S.income, asreflected by tax returns.1 Then we will explore briefly the economictheory and develop the mathematics necessary to understand it.THE DISTRIBUTION OF INCOMEFirst, tax returns are sorted by the adjusted gross income (AGI).Thena table is drawn up, showing how many people had incomes in variousbrackets, for example between $10,000 and $11,000.The final step isdetermining the total income of all the people who reported incomesin this range.For the example we have chosen, the total income inthis bracket will be close to $10,500 times the number of people in thisrange.40 HOW RICH IS TOO RICH?Figure 3.1U.S.Income Distribution in 1987These calculations result in Table 3.1.As we progress down the table,we tabulate for each group how many taxpayers were at or above themin the table.This is shown in the third column, entitled "CumulativePercentage of Returns with Positive AGI", which starts at 2.67 %.Thismeans that 2.67% of the returns with positive AGI had an income of bet-ween $1 and $1,000 [ Pobierz całość w formacie PDF ]