Monday, March 29, 2010

CSRWire: Does greater equality benefit the rich?

Corporate Social Responsibility Wire asks if greater economic equality benefits the rich, as well as the poor:

By Jeffrey Hollender

“We want bigger houses and more cars, not because we need them, but because we use them to express our status. Material goods are how we show the world we’re keeping up, and in a more hierarchical society that’s more important. Status competition becomes more intense, and that increases our need to consume… We came across a website in England called ‘Ferraris for All,’ making the point that if everybody had a Ferrari, there would be no status in owning one.” -Kate Pickett

For years, I have worked to create a more just and equitable society, knowing that it would lead to a more sustainable world but also deeply believing that it was a moral imperative. If you are one of the globe’s vast majority of citizens who live daily with the adverse impacts created by the concentration of wealth in the hands of a very few, chances are you agree with this point of view. However if you are part of the wealthy and powerful 1% of the population that controls 90% of the world’s wealth, you’re likely to think this point of view reeks of a liberal disorder.

But what if increased justice and equity was also the key to greater happiness and fulfillment for the wealthy as well, and would mean less pollution, higher levels of educational achievement, lower health care costs, less crime, more vibrant local communities, and declining rates of cancer and depression? What if the bad stuff we all want less of and all the good stuff we want more of was exponentially achievable if we lived in societies where the spread between the rich and the poor was reduced?

A brilliant and critically important new book, The Spirit Level: Why Greater Equality Makes Societies Stronger, by Richard Wilkinson & Kate Pickett, provides compelling evidence that, in fact, each of eleven different health and social issues-physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage births, and child well-being-fare substantially better in more equal societies.

Until I read the research assembled in The Spirit Level it was difficult to argue that the problem of income inequality in modern societies is about anything other than fairness. But Wilkinson and Pickett methodically compare the scale of income differences in both different countries and different states within the U.S. to reveal just how much the fabric of society is affected by high levels of inequality. Research carried out since the early 1990s shows that many of our most pressing problems are worse in more unequal societies, and that societies with bigger income differences suffer more from a very wide range of health and social ills.

Statistics comparing countries with very high-income inequality like the U.S., the U.K., and Singapore to countries with very low-income inequality like Sweden, Norway, Finland, Netherlands, Belgium and Denmark tell a stark story:

When being asked to agree or disagree with the statement, “most people can be trusted,” people in Sweden, Norway, Finland and Denmark agree 50% more often than citizens of the U.S. and Singapore.

Comparing levels of foreign aid, Sweden, Norway, Finland, and the Netherlands spend on average 400% to 500% more of their national income than does the U.S.

60% more individuals suffer from mental illness in the U.S. and U.K. than in the Netherlands and Belgium.

If you live in Sweden or Norway you’ll live on average 2 to 3 years longer than if you live in the U.S. or Singapore.

Infant deaths per thousand are 100% higher in the U.S. than in Sweden, Norway, and Finland.

Obesity is 200% higher in the U.S. than in Sweden and Norway.

What can we do to erase these and many other remarkable disparities? Here are 10 ideas that would go a long way toward that critical goal:

Develop a national economic plan that places a priority on investing in health, education and welfare over military spending.
Raise income taxes on the wealthiest individuals and families and close loopholes.

Eliminate estate tax deductions.

Change capital gains tax rates to provide aggressive incentives for long-term investments. Short term rates (investments for under 1 year) may need to increase to as much as 90%, with long term rates declining to zero over a twenty-five year time horizon.

Mortgage deductions must be eliminated on second homes and limited to $200,000 for primary residences.

Charitable giving needs to receive even greater financial incentives.

Limit deductions for executive compensation to $500,000.

Minimum wage requirements must be transitioned to “Livable wages.”

We must ensure that “green jobs” are only funded and incentivized in sustainable businesses and industries.

Small Business Administration loan guarantees and tax credits for job creation must be aligned with the interests of local sustainable economies.

For more information on the issue and impacts of inequality, please visit the Equality Trust, Wealth for the Common Good, and Fair

An Inequality Index from the Institute for Policy Studies

Percentage of U.S. total income in 1976 that went to the top 1% of American households: 8.9. Percentage in 2007: 23.5.
Only other year since 1913 that the top 1 percent’s share was that high: 1928.
Combined net worth of the Forbes 400 wealthiest Americans in 2007: $1.5 trillion.
Combined net worth of the poorest 50% of American households: $1.6 trillion.
U.S. minimum wage per hour: $7.25.?· Average hourly wage in 1972, adjusted for inflation: $20.06.?· In 2008: $18.52.
From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation. One hundred average U.S. workers would have to work over 1,000 years to make as much as these 100 executives made in three years. (Institute for Policy Studies, Executive Excess 2009)
About Jeffrey Hollender

Jeffrey Hollender is co-author of the recently published book, The Responsibility Revolution and Co-Founder and Executive Chair of Seventh Generation, the leader in green household products. He is also the author of Inspired Protagonist , the leading blog on corporate responsibility and a co-founder of the American Sustainable Business Council and the Sustainability Institute.

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