Tag Archives: wealth

Happiness is sharing

I think we can all agree that we know what happiness is and when we and or our friends are happy, but can happiness be measured for whole countries? And when we talk about happiness for a whole population, just what are we talking about.

For individuals., important things like being in a stable and loving relationship, having a secure and fulfilling job, being secure in the fact that if you get sick or have an accident that you will be able to afford proper care all come to mind. Other factors include access to education, freedom of activities, a comfortable retirement, and importantly protection from violence and even political coercion.

A number of organizations from the United Nations to the Gallup poll, using survey and economic data come to the same conclusions: Scandinavia wins every time, Canada beats the USA which is in about the middle in happiness, and at the bottom despotic, and especially war-torn countries.

Factors which gather all this input into a simple number are the Gini indices for wealth and income, especially income. The Gini index is a way to put a number, between 0 and 1, on the distribution of some asset. It is usually applied as noted to wealth or income but can be applied other things. If something, wealth for instance, is held by very few or even one and nobody else has any then the index would be at or near 1. On the other hand, if it is evenly distributed throughout the population, then the value would be near 0.

Back to happiness. It should be obvious that the happiest countries all favor socialism in the broadest meaning of the word. Economic systems in countries are organized somewhere between capitalism and socialism, although neither exist in the purest form anywhere in the world.

Even in capitalistic United States we have socialism in the form of social security, medicare and medicaid, and even more mundane structures such as police and fire protection. Rigidly socialist North Korea has some capitalism by way of street vendors who sell things like food and cheap commodities.

The strongest objection by capitalists to socialism is that it throttles innovation. Why work hard or try to create wealth when the government just takes so much in taxes? The happiest people live in the Scandinavian countries which are all are relatively socialistic. They also have relatively high gini (wealth) indices. The people of Denmark, frequently ranked as the happiest, has a gini index comparable to the United States.

Where we and the countries with the happiest people vary is the gini index for income. Income is much more evenly dispersed in the happy countries. This is net income which includes not only cash payments for work but also the social welfare network which provides healthcare, education, retirement, a host of other services which enrich life.

The happiest people in the world live in countries that have low gini indices for income but relatively high indices for wealth. This means that the largest number of people have sufficient income to ensure that they don’t have to worry, while at the same time allowing wealth to accumulate to those who seek it.

Measuring Wealth

Currently, the top 2% hold over 50 % of the wealth in this country, and about the same holds true for the rest of the world. It hasn’t always been that way. A recent study published in Nature examined wealth distribution over time.

The most primitive cultures, stone age hunter/gatherer societies were quite egalitarian. Early agricultural societies were likewise egalitarian. The first large-scale shift to a wealthy class came with the domestication of animals. In early agriculture all labor was manual, an individual could only manage so much land. With a draft animal however, the amount of land that could be utilized greatly increased. Their study used archaeological records of the sizes of houses to create a Gini index of wealth distribution within various societies.

The Gini index is a number between 0 and 1. In a hypothetical society where the wealth is equally distributed the value is 0. At the other end of the spectrum, 1, would be a society where all the wealth is held by one person, hence the lower the index the more equally distributed is the wealth.

Agrarian societies at the earliest stages in both the old and new world were compared and both had Gini Indices of about 0.35. Over time, wealth inequality grew in old world Europe (Gini index 0.6) but remained flat in the new world (the Americas.) The difference was accounted for by the development and use of draft animals in the old world. With the exception of Llamas in limited use in the Andes, no draft animals existed in the New World.

Wealth in modern societies today is much more complex but Gini Indices are still relevant. The United States has an index of about 0.8, the highest in the developed world. Interestingly, we don’t think so. Chris Rock, a comedian, said “If poor people knew how rich rich people are, there would be riots in the streets.” In multiple surveys, Americans greatly underestimated the degree of inequality even while expressing that it should be more equitable than what they thought it was.

Averages from the survey suggested that people think the first quintile, the top 20%, should have 32% of the wealth, and they think that group has 60%. In reality, they own 85%. For the poorest 40%, people thought that they should have 25% of the wealth and guessed that they had 9%. They actually have a paltry 0.3%. The disparity has been widening over the last quarter century. The rich are getting richer, the middle-class share of the pie is decreasing slightly and the poor are rapidly getting poorer.

So what about the proposed tax reform being rushed through Congress? The Congressional Budget (CBO) scored the Senate bill and found that it will increase the national debt by 1.7 trillion dollars over ten years, the benefits of the tax cuts will favor the rich, and will actually burden the middle and lower class citizens. The rich will continue to get richer and the poor poorer.