One of the most serious problems in the United States is the very high degree of wealth inequality – the fact that a large fraction of the national wealth is concentrated in the hands of a few. In the United States the top 10% of the population owns 80% of all financial assets. The top 1% own about 34% of all financial assets. The graph below shows the stunning degree to which wealth in the United States is concentrated in the hands of the few.
Despite all the attention to the Occupy Wall Street movement, we have seen very little done to try to correct this problem, and under the current administration wealth inequality seems to be increasing rather than decreasing.
But what about the next several decades: should we expect that wealth inequality will grow even worse? There is reason to fear this. Certain technological developments on the horizon may tend to increase the degree to which wealth is concentrated in the hands of the few.
One technological development which may increase wealth inequality is the ability to enhance the genes of your offspring. Before long we may have medical advances that allow a prospective father and mother to go to a doctor and request gene modifications that will increase the likelihood of their child being born with a high IQ. At first, this will probably be something rather modest – perhaps a technique that will have a good chance of adding of 10 or 20 IQ points to the intelligence of a child.
When such exotic techniques are developed, it is unlikely that they will be covered by the average person's health insurance. These techniques will probably be expensive treatments that only the rich can afford. The result will be that the rich may tend to have smarter children, who will have a great advantage in the job market for high paying jobs requiring a sharp intelligence. This will help to perpetuate the concentration of wealth in the hands of the few, just as the legacy admissions policies of Ivy League colleges have the same effect (policies that make it easier for you to get into an Ivy League college if your parents went to them).
Another thing that may tend to make wealth inequality worse is the use of chemical or electronic cognitive enhancements, which only the rich may be able to afford. Currently some people are using the prescription drug Adderall to boost mental performance. In the future we may have various high-priced drugs to boost mental performance, as well as electronic devices for cognitive enhancement, possibly including devices for connecting the brain with computers. The people who can afford such cognitive enhancements will tend to get into better schools, get better jobs, and make more money. But it may be that only those from rich families will be able to afford such cognitive enhancements. So it will be a case of rich families getting richer. If you are from a poor family, you won't be able to afford the cognitive enhancements your child may need to get into a top school and become a top earner in tomorrow's world.
Another thing that may tend to make wealth inequality worse is any technology that causes an increase in human lifespans, as long as it also causes an increase in the average retirement age. Imagine if the average retirement age were only 55. A person might work until he was 55 when he had started to become rich, and would then retire, earning no more. But imagine if the average human lifespan increases to 100, and the average retirement age increases to 80. That would greatly increase wealth inequality, because you would have many more cases of rich people piling up additional riches. A person might start working at 22, get rich by 55, then keep working for 25 additional years, during which time he just piles up additional riches. Such a person would also be holding his high-paying job for 58 years, giving much less of an opportunity for a poor person to get ahead by taking his job. The higher the average retirement age, the more commonly we tend to see cases of the rich getting richer. Future increases in lifespan that lead to an increase in the retirement age will therefore tend to increase wealth inequality, the concentration of wealth in the hands of the few.
What are some of the things the government can do to decrease wealth inequality? The main things are increasing inheritance taxes, making the tax code more progressive, and reducing obscure tax loopholes that are used only by those who can afford expensive tax lawyers. Unfortunately, in the United States we have a Congress that seems to operate on the principle of “government of the rich, by the rich, and for the rich.” So there is little chance that we will see any legislation any time soon that will help to limit the every growing concentration of wealth in the hands of the few. Because of the reasons mentioned above, we have reason to fear that the problem of excessive concentration of wealth in a small number of hands will get worse rather than better.