John Paulson, by short-selling the subprime market, earned $3.7 billion last year. He was the highest paid individual in 2007, and he joined the top five hedge-fund managers who each made at least $1.5 billion. (Mind boggling considering that just one percent of a billion dollars is $10 million!) The top 25 hedge-fund managers earned an average $892 million in 2007, up from $532 million in 2006.
Does earning an excessive income represent the American dream, or present a moral problem? With excessive income comes greater wealth inequality. What are the consequences for society and the individual? Can society be healthier by pursuing greater wealth equality for the common good?
Historically, America has entered a new Gilded Age. The disparity between income and wealth of the superrich and those on the bottom has never been greater since before WWI. The richest one percent now holds far more wealth than the bottom 90 percent. Meanwhile average household debt has hit its highest level since 1933, and millions of families may lose their homes.
The route to the new Gilded Age took three decades to travel: cutting taxes for the rich, undermining labor unions and deregulating safety rules for consumers and workers. Elected officials, caught in the tide of a freer marketplace, unabashedly pursued public spending and trade agreements that greatly benefitted the wealthy and global corporations.
The implications of the wealth gap show themselves in social and political ways. The extremely wealthy live in their mansions away from the rest of us. They use private means to purchase services like health care and education, so they frequently see tax dollars that support social programs not directly benefitting themselves. This separateness leads to a less cohesive society, and the good of all, the common good, suffers.
Politically, wealth concentration means political power concentrates in the hands of the wealthy. Those with means can lavishly support favorite candidates and hire lobbyists to promote their interests. Protecting property from theft means more police and security guards, more jails and prisons–diverting resources from more socially productive activities, like job training and family support services. Wealth inequality fuels social conflict and actually, with a seriously indebted middle class, slows economic growth.
Finally, Ichiro Kawachi, a professor of social epidemiology at the Harvard School of Public Health, says that a high level of economic inequality is bad for your health! An individual’s health is affected by her social world, and that world can shift dramatically when the distance between the rich and poor widens. With a secure income people have a sense of control of their lives. But, when people adopt a pattern of conspicuous consumption to imitate the lifestyles of the wealthy, they suffer consequences to their health from overwork, stress and absence from their loved ones.
Kawachi believes strongly in the theory of relative deprivation: when you think you’re not doing as well as other, you start feeling bad. His studies show that Scandinavian countries enjoy a better level of health than other Western European nations, though all have universal health coverage. His point: “The more egalitarian the country, the healthier its citizens tend to be.”
When the Vatican updated the 7 Deadly Sins for our times, it included “Excessive Wealth,” perhaps because the top one percent of the world’s population owns a third of the world’s wealth.
People of faith hear the demand of distributive justice. Rewriting the U.S. tax code and repairing the social safety net could prove beneficial for the good of society and the health of the people.
Rev. John S. Rausch is a Roman Catholic priest in service to the communities of