A reader writes in regard to the Nicholas Kristof "Hedge Fund Republic" article we posted about here the other day:
Commentators confuse wealth inequality and income inequality and use them interchangeably. Sure there is overlap, but it is not the same. Warren Buffet is the second wealthiest man in the US but his income is far less extreme. There is far more mobility year to year in income distribution than in wealth distribution. That said, old money has a way of dissipating itself--see the Rockefellers, Kennedys, Hartfords, etc.
Whenever comparing income inequality across generations, it would be helpful if commentators mentioned the change in income of the lowest decile of earners. It would not be good for anyone if income inequality dropped while the earnings of the bottom decile of workers declined as well.
Kristof interchanges Latin America and Argentina causing readers to believe the experience has been similar across the region. Kristof believes that Argentina has shown progress on income inequality yet he neglects to mention what happened to that country over the last 70 years. Income equality may have improved but the country is a basket case. The country was once prosperous and unique in terms of its success in Latin America. Now, Chile and Brazil have surpassed Argentina. The decline is remarkable and the peak was in the 1940's when Peron came to power. This data shows the decline from 1962 when the GDP was ranked 9th to 30th in 2006. Is this really the example Kristof means to highlight?
Finally, when did income of $250,000 make someone rich? If it is the super wealthy the Kristofs of the world are worried about, why not income of $1 million or $10 million? Heck, there are union workers who will earn that much income as they approach retirement and need high baseline to set their pensions. Who is looking out for these guys?
Seems to me that progress is making the bottom tiers of families better off each generation. The standard of living for those at the poverty line has done nothing but increase in the US. Isn't that a good thing? I am pretty sure everyone cannot be above average.