Impact of the Growing Wealth and Income Gaps
In a recent CNBC news story, it was reported that since 1995 the top 1% of the wealthiest people in the world have seen 19 times more wealth growth than the bottom 50%, the report says. During the first two years of the pandemic, over 2020-2021, the 10 richest people doubled their collective fortunes from $700 billion to $1.5 trillion. In 2021 alone, the 10 richest people in the world added more than $400 billion to their fortunes, led by Tesla and SpaceX CEO Elon Musk’s $121 billion gain.
The growing wealth and income gap is one of the biggest threats to the stability of our democracy, and to those democracies we depend on as allies against totalitarian regimes. History has consistently shown that when the wealth of a society is concentrated in the hands of just a few citizens, the top 1%, 5% or 10%, the society eventually experiences a collapse, and the disintegration of the common values and norms that previously held the society together. Think of where wealth was concentrated in history in monarchies, empires, and theocracies. Where is wealth concentrated in Communist nations and military dictatorships? What has eventually happened to most of those societies when the wealth gap reaches an extreme level.
Today, the rise in the mistrust of democracy as a form of government around the world is directly related to the growing wealth and income inequality that accompanies capitalism and free market economies today. No nation has yet been able to successfully combine a free society and a democratic form of government, with economic policies that can leverage the benefits of free market capitalism for most of their citizens. This is reflected in the research by Forbes a few years ago, reporting that 51% of young adults aged 18 to 29 said they didn't support capitalism, while only 42% supported it.
In the US, as the wealth and income gap has widened in the past 40 years, there has been an increasing demand for government policies to intervene to correct the inequality. Governments generally respond to this need by raising taxes on the wealthy and providing money to the poor via welfare programs. Such programs haven’t ever resulted in both strong economies and strong societies, the taxes have often negatively impacted overall economic GDP growth and increased deficits. But they also exacerbated the divisions in the country between the individuals being taxed and the individuals receiving the funds, too often without effective work or training requirements.
In my new book, American Turning Point: Repairing and Restoring our Constitutional Republic, I suggest an innovative approach to address this issue. Within the new “Citizen Rules”, Rule #5 defines new processes for budgeting, taxing, and spending public money, requiring that budgets be balanced (excluded declared wars or national emergencies); be produced on time (at least 10 days before the start of the fiscal year); that spending programs have a publicly stated goal with specific measures to indicate success in meeting the goals; and that results be reported annually before the spending is continued.
In addition, Chapter 5 discusses the kinds of policy solutions that would be possible under a government operating within the new “Citizen Rules”. An innovative program is presented that would simultaneously achieve the following results: Grow the overall economy and jobs, and minimize the income gaps and the deficit. The rationale behind the program is a fact-based analysis based on the factor that drives 70% of overall economic GDP growth, and a proven effective way of growing working middle class incomes without divisive government spending programs or increased debt. But most importantly, developing an economic policy where capitalism better supports a free society is perhaps the most important factor in the future of democracies around the world.
You can read a summary of the “Citizen Rules” on the website at www.citizenrules.org, including the road map for implementing the changes. There is also a page for providing comments and an email link to the author. Finally, if the summary generates interest in the details, there is a “Buy the Book” button on the website’s home page.