Causes and Consequences

Wealth and Entitlements

How often have you heard the term “entitlement” used as it relates to getting something for nothing or with very little effort? In my experience it is almost always used by the rich or by conservatives when referring to the poor. That is a defensive technique used to direct the conversation away from their own wealth and how it was acquired. This approach attempts to frame the issue thusly: the poor are lazy and they are the cause of their own circumstances; they are “takers” rather than “makers”; they accept assistance from others not in gratitude but from a sense of entitlement; and by continuing to aid them we are only perpetuating their circumstances.

But guess what? None those labels nor their corresponding assertions is true . They do not show up in the scientific literature on these subjects as having anything at all to do with the poor. Quite the contrary. Scientific studies show that it is the wealthy who have a strong sense of entitlement, it stems from greed, and too much wealth in the hands of the few is the cause of too much poverty that must be endured by the many. That cause/effect relationship between wealth and poverty is as clear as any social connection that can be examined. Facts, data, and critical analysis of this subject support that conclusion with undeniable clarity. 1

According to new studies on the subject, those who actually enjoy more of life’s leisures and pleasures—whether earned or not—also feel entitled to them. Psychologists have developed and validated a scale that measures the degree to which we possess a personal sense of entitlement (PES). This attribute is also associated with a lengthy list of other undesirable attributes beginning with greed. Moreover, it is found predominantly among the wealthy, not among the poor. And sharing any of their advantages with the less advantaged is not even a part of their vocabulary to say nothing of their propensities. Perhaps these revelations can shed new light on the subject of how to share the pool of wealth we all have contributed to making. 2

In seven separate studies conducted on the UC Berkeley campus and funded by the National Science Foundation, UC Berkeley researchers consistently found that upper-class participants were more likely to lie and cheat when gambling or negotiating. In ordinary life they were the group who loved to cut people off when driving, and they consistently endorsed unethical behaviors in the workplace.

I will let interested readers dig into those articles and their findings. I am much more comfortable when discussing my own conclusions rather than somebody else’s. But their findings support my own conclusions on this subject from the perspective of economics as well as the conclusions by many others. It is comforting to know that all of us who have taken a position against inequality have the methods of scientific inquiry and the compassion of human understanding on our side. It is a solvable problem, and the solution does not require that we “take from the rich and give to the poor.” The lasting solution is faster, it is much more humane, much more effective, and it can be defended by facts, logic, how wealth is created, and how a democratic society can come together to bring about the necessary changes—with minimum pain.

To begin it is appropriate to re-state the conclusions of two epidemiologists who examined major sets of data from 500 sources arising from 23 of the largest industrialized nations around the world. This monumental work is a classic in its simplicity and in the clarity of its conclusions. They show unequivocally that wealth inequality is the fundamental factor that repeats across nations, and it is directly linked to every one of these outcomes: to high crime rates, high imprisonment rates, to mental health issues, obesity rates, suicides, illiteracy rates, teen pregnancies, to shorter life expectancies, to social immobility, and to a lack of human trust. I urge everyone to read a copy of their work (The Spirit Level, Wilkinson and Pickett, 2009). Of particular interest is the revelation that the one country with the highest inequality of them all also leads all other countries in every one of those undesirable outcomes.

I have made the argument that wealth inequality in the United States results primarily from our inheritance laws. Most personal wealth is handed down to generation after generation, and, in time, the accumulated wealth that has been produced by us all ends up in the hands of a very few who did nothing to earn it. Such wealth is further enlarged by a small network of bankers who direct huge sums of new money created by the Federal Reserve into the coffers of the bankers’ own accounts and into the accounts of a network of 500 large corporations. Money thus intended for loans to individuals and small businesses and consumers (the real job creators) finds its way primarily into stocks, and bonds, and real estate holdings of the very rich. All of these diversions are reinforced by huge sums of money given by the super rich to the political campaigns of those who will pass and sustain laws that defend and reinforce the status quo. The net result of this collaboration is that the economy suffers, unemployment lingers, inequality gets worse, our economic infrastructure weakens, social ills perpetuate and worsen, and there seems to be nothing that anyone can do to change matters.

The preceding argument is not idle theory. It is documented by a multitude of studies, by overwhelming macro data, and by visible outcomes that show the rising wealth accruing to the rich and the expanding squalor surrounding the poor. Stated as compactly as possible, we are the richest society on earth, with the worst allocation of our wealth on earth, that is getting worse, and until now, we did not know how to stop it or to reverse it. Our destiny with disaster of unparalleled proportions nevertheless depends on such a solution.

Here is that solution:

Our wealth is our household net worth (assets minus debts). The national total (excluding churches, schools, and charities) today is $75 trillion. On a per capita basis, that comes to $500,000 for every income earner. For a family of four, that comes to $840,000 of net worth.

The problem with those numbers, however, is that they are averages. And when there is a large skew in the data, it tells us very little about the typical family. Indeed, the skew in the U.S. data is about 1000 times more severe than most of us believe. The top 5 percent hold nearly all the wealth, while the bottom 50 percent hold no wealth at all. This unequal distribution affects each of us individually, and all of us collectively. It establishes and perpetuates family dynasties. It opens the floodgates to all the social ills. It sets up massive barriers to education, to health care, to food, to employment, to opportunities, to planning, to reasonable prospects for life, liberty, and the pursuit of happiness.

The key to bringing about change lies with banks. We need to redirect those huge money flows created by the Federal Reserve, direct them away from large banks and into new channels managed by those who can and will get that money into the hands of small businesses and individuals. The new money managers need to be small community banks, credit unions, the Small Business Administration. Recall that 70 percent of our Gross Domestic Product comes from consumer spending. And 70 percent of all new jobs are created by small businesses. Both depend on inflows of money from the Fed. We need to review and change the Fed’s charter and give them the tools and the structure to carry out the nation’s true banking needs. The present arrangement is rigged in favor of banks, bankers, and large corporate CEO’s, and their primary stockholders. It is no coincidence that this group also comprises our biggest wealth holders.

Since 2009, the U.S. personal wealth grew by $20 trillion. Nearly all of it went into the personal balance sheets of the wealthiest Americans. Here are estimates of what the U.S. economy was cheated out of as a consequence:

M1 X V1 = GDP
$3.8 trillion X 6.5 = $24.7 trillion (in GDP)
= $21 trillion in new personal incomes
= 18 million new jobs
= $9.8 trillion in new tax revenues (local, state, national)

On a recent Sunday morning TV show, 5 or 6 political panelists all agreed that inequality is a legitimate national issue that needs to be resolved. But the conservatives among them lamented “yes, but nobody has a solution to this issue.”

Now we do.
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Endnotes

1 In UC Berkeley Newscenter, Upper class more likely to be scofflaws due to greed, Feb. 2012.
2 Campbell, W. K., Bonacci, A. M., Shelton, J., Exline, J. J., & Bushman, B. J. (2004). Psychological entitlement: Interpersonal consequences and validation of a new self-report measure. Journal of Personality Assessment, 83, 29-45. (Paper includes Psychological Entitlement Scale (PES) in appendix)