It’s a fact: the rich are getting richer and the poor are getting poorer. People say it like it’s a bad thing. But is it actually a good thing, as Canadian multi-millionaire, television personality and star of Dragons’ Den, Kevin O’Leary suggests?
Back in January, Oxfam released a report stating the combined wealth of the world’s 85 richest people is equal to the wealth of the poorest 3.5 billion people. That is half the planet’s population. Mr. O’Leary’s reaction: “It’s fantastic.” Wait, wha-aat?
On The Lang & O’Leary Exchange, Mr. Leary explained to his co-host, Amanda Lang: “This is a great thing because it inspires everybody, gets them motivated to look up to the one percent and say, ‘I want to become one of those people, I’m going to fight hard to get up to the top.’ This is fantastic news and of course I applaud it.”
Ms. Lang, however, was unconvinced. “Really?” She asked. “So somebody living in Africa on a dollar a day is getting up in the morning and thinking, ‘I’m going to be Bill Gates. The only thing between me and that guy is motivation… I just need to pull up my socks, oh, wait, I don’t have socks!’ ”
The world’s biggest risk
Around the same time as the Oxfam report came out, the World Economic Forum (WEF) warned that the large and growing gap between rich and poor will be the biggest risk to global stability over the next 10 years. Fiscal crises, climate change, unemployment, earthquakes, wars, food and water shortages… these all pale in comparison to what will happen if the rich keep getting richer and the poor keep getting poorer. So what does this mean for normal, middle-class folks?
This is happening
Most of us in the western world, with the exception of people like Megan Ellison, Paris Hilton or Prince George, grow up knowing that there are plenty of people richer than us and plenty of people poorer than us. We’re somewhere in the middle. We have comfy beds, hot showers, abundant food choices and good schools. Some of our neighbors may have more beds with fluffier duvets or fancier showerheads, but by and large, for the majority of us, wealth is a matter of degree.
But what if that comfortable middle ground were to disappear? What if the wealthier people in your community became vastly richer and used their wealth to consume all the best resources, including real estate, health care, food and water, education and technology? What if their massive spending power drove prices up so high, you could no longer afford to live in your neighborhood, to feed, clothe and educate your family in the manner to which you’ve become accustomed? What would you do?
The reality is, this is happening. In 2012, the income of the top 1% of American income earners rose by nearly 20%. The income of the remaining 99% rose by just 1%. The gap between the two groups has been growing for 30 years and has now reached its widest point in the past century.
The 1% reaction
For many people, the Oxfam and WEF reports were not news. Protestors in the Occupy Wall Street and the Arab Spring movements have been making this point since 2011. Over the past three years, the media has lifted the veil on stories of Wall Street and corporate titan excesses. As a result, the flashing of private wealth is no longer quite as fashionable as it once was.
A recent American Express Publishing and Harrison Group poll found that one-third of one-percenters claim to “like it when others recognize me as wealthy,” which is a huge drop from 53% who felt that way in 2010. Another 28% say they worry about “being scorned for being in the top part of the economy.” Twice as many one-percenters (38%) as last year claim to “feel guilty purchasing luxury goods and services.”
However, for a certain segment of one-percenters, all this mea culpa is getting to be a bit much. Kevin O’Leary’s comments may seem out-of-touch, but he is hardly alone in his views.
Bud Konheim, the CEO of fashion brand Nicole Miller, recently told CNBC Squawk Box host Joe Kernen that the 99% in America should stop whining: “That guy that’s making, oh my God, he’s making $35,000 a year… Why don’t we try that out in India or some countries we can’t even name. China, anyplace, the guy is wealthy.” Mr. Kernen agreed, saying: “Our 99% are the 1% in the rest of the world.”
Meanwhile, The Wall Street Journal recently published a letter to the editor from venture capitalist Tom Perkins, who provocatively claimed that criticism of the 1% could be compared to Nazi persecution of Jewish people. While the letter received huge opposition, the WSJ itself followed up with a column asking readers to consider that maybe we are, in fact, all being too hard on the world’s elite. “Liberal vituperation makes our letter writer’s point,” they wrote.
What can we do?
It’s this dissension that is growing right along with the wealth gap that puts the stability of the world’s economies in danger. When 1% of the world’s most powerful people think, live and act one way, while 99% of the mass population think, live and act in a totally different way… well, it’s a recipe for economic class warfare. Just ask Marie Antoinette how that worked out.
Fortunately, all is not lost. Nobel Prize-winning economist Robert Shiller, famous for forecasting the technology bubble and the American housing bubble, agrees with the WEF that rising inequality is the most pressing problem facing our society right now. However, he also says, “This is a problem that has solutions.” For a start, he advocates calling for higher taxes on society’s wealthiest people. “I think there’s a lot more we can do and it will help make a better society.”