BY: Arunima Sodhani
The over pronounced capitalism in America has catapulted the country to the club of not only one of the richest nations of the world but also one with the highest income disparity. Income disparity has been an economic feature of the country since time immemorial with a huge chunk of wealth concentrated in the hands of a few rich Americans, and this gap has only widened with time.
A statistic taken in 2011 showed that the top 1 percent wealth owners in the country own more than 33 percent of the wealth, and a family in the top 1 percent owns approximately 225 times the assets owned by a median American family. Moreover, the top 10 percent own 75 percent of the total wealth. This information led to the Occupy Wall Street movement, which saw scores of people pouring out to Wall Street raising slogans and banners we are the 99 percent.
The question arises of whether such disparity is harmful to the nations economy? But before answering this question, it is first important to understand the above mentioned statistics. The top 1 percent own 33 percent of the wealth and not income. Income is how much money one earns in a given year. Wealth, also known as net worth, is the cumulative value of all of the assets minus debts. What qualifies as an asset? Cash in the bank, investments such as stocks, bonds, CDs, 401(k)s, real estate, jewelry, art, collectibles and anything of tangible value. Debts include outstanding mortgages, loans and overdue credit card balances.
The parallel statistic about income shows that top 1 percent income earners of the country earn 17 percent of the total income earned in a given year. The reason that wealth disparity is much higher than income disparity is simply because it is easier to get richer if you are rich to start with. Wealthy people can invest more money and earn returns on it whereas their humbler counterparts use the money they have to pay bills, pay off loans, and pay taxes. Also, capital gains are taxed at a rate lower than income, which widens the divide.
So, is capitalism adding fuel to the fire it itself ignited? Is such wealth inequality unfair? To answer these questions, going back to the concept of The American Dream is important. There was once a time when Americans were ambitious and determined go-getters. They were motivated to make something of themselves, to do something of their lives. Their hard earned income is their own, whether they belong to the top 1 percent, or 10 percent, or 20 percent. If one wants to join the club, then one needs to work towards it. As long as everyone gets an equal opportunity, the disparity in incomes is only an indicator of who deserves it the most. The number of rags-to-riches stories sprouting from the country is testimony to this fact, and to the American Dream.