Why “Economic Inequality” Is a Bogus Issue

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By virtually every objective measure, Americans today are better off economically than ever before.

Our standard of living has never been higher. Our life spans have never been longer.

We have never had larger homes, safer cars, more labor-saving devices, faster communications, more effective medicines, cheaper food, easier long-distance travel, better technology, more modern conveniences or greater entertainment choices.

And, thanks in part to soaring asset values, U.S. household net worth is at an all-time high.

We should count our blessings.

Yet politicians in some quarters don’t want us to. They want us to feel angry and demoralized. Why? So we’ll vote for them, of course.

And they have found a near-perfect issue to stoke our sense of grievance: economic inequality.

These office seekers want you to overcome your natural sense of contentment and gratitude and instead compare yourself to the richest fraction of 1% of the population. That way you can still imagine that life has handed you a raw deal.

The problem is… for most of us, it hasn’t.

It’s true that wages have been stagnant for much of the middle class over the last few years. Yet our purchasing power is still expanding.

For example, economists Donald Boudreaux and Mark Perry note that spending by households on most of modern life’s “basics” – food, clothing, housing, household furnishings and utilities – fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today.

And these figures actually understate the matter.

Forty years ago, lounge chairs didn’t give massages. A TV was at most 25 inches and had bad reception and terrible resolution. Cars didn’t have leather interiors with walnut trim, rack-and-pinion steering, high-powered stereos, front- and side-impact airbags and a GPS. Nor did they easily last for more than 100,000 miles.

According to the Census Bureau, the median square footage of newly built single-family homes hit 2,400 square feet last year. That’s nearly 1,000 square feet larger than the median home built in 1992.

We in the West today live longer, healthier, safer, richer, freer lives than any people on the history of the planet.

Yet instead of feeling grateful, many look at those in the top 100th of 1% and feel bitterness and envy instead.

Bill Gates has a 66,000-square-foot mansion that overlooks Lake Washington. Warren Buffett zips around the country in his private jet, a Bombardier Challenger 6000. Oracle founder Larry Ellison recently traded his 453-foot, 82-room yacht for ownership of Hawaii’s sixth largest island.

Maybe it’s just me, but these facts don’t make me want to boo-hoo about the terrible unfairness of it all.

Perhaps we need a bit of perspective.When Donald Trump goes out to eat does he get a better cut of steak than you do? Does Oprah Winfrey have a better iPhone 6? Does Rupert Murdoch have a faster Internet connection?

In the past, most men earned a living doing hard, backbreaking work in farming, forestry, mining or construction. We blazed trails, forded rivers, crossed mountain ranges, and built our own homes and barns.

Nobody does those things anymore. Our lives are sedentary. Health experts have to remind us to walk, swim, stretch and “exercise our cores.” Nobody told your grandparents to exercise their cores. They were too busy trying to survive.

Maybe it takes a humorist to wake us up.

In The Wall Street Journal, Dave Barry wrote, “My mom, like my Dad, and millions of other members of the Greatest Generation, had to contend with real adversity: the Great Depression, the Dust Bowl, hunger, poverty, disease, World War II, extremely low-fi 78 rpm records and telephones that – incredible as it sounds today – could not even shoot video.”

It’s true that the richest have gotten richer faster than the rest of us. But the tide is rising for us all.

Over the last 35 years, the inflation-adjusted income of the average American has more than doubled. (Over the past 50 years, it has more than tripled.)

If yours hasn’t, bear in mind that an annual income of just $34,000 puts you in the top 1% of all income earners worldwide.

Even our poor are rich by historical standards. Most Americans living under the poverty line today live in larger accommodations than the average European.

Historically, being poor meant having to struggle to get enough calories to survive. Today we have the opposite problem. Obesity – and, in particular, morbid obesity – is creating a healthcare crisis among the poor.

The average person living below the poverty line in the U.S. today has a telephone, a TV set, indoor plumbing, central heat and an automobile. One hundred and fifty years ago, the richest robber barons couldn’t have dreamed of such wealth.

Your living standards are superior to 99.9% of all the human beings who ever walked this planet.

Yet despite your incredible good fortune, you can still feel unhappy, even miserable… if you listen to self-serving politicians, most of whom are rich themselves.

Don’t get me wrong. Poverty and social mobility are real problems – and we should do what we can to alleviate the former and increase the latter.

But “economic inequality” – the fact that Mark Zuckerberg and Jeff Bezos have a lot more than you and me – that’s not a problem.

Good investing,

Alex Green
for The Daily Reckoning

P.S. This article was originally posted at the Investment U website, right here.

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