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.
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