Day 23 Occupy Wall Street, October 8, 2011. Photo: David Shankbone | FlickrCC.
Income inequality is an issue that everyone has an opinion about today. Opinions about the importance—and severity—of income equality as an important political and cultural issue may vary depending on the amount of your personal income. Business leaders and innovators in the financial industry, like Henry Kravis, recognize the serious problem posed by income inequality.
Income inequality is a growing topic of concern for economists, politicians, and business leaders. It became a very public issue in September 2011 when a group of political activists began a protest in New York City’s Wall Street financial district. The diverse group of activists involved in this protest were concerned about the damage consumerism was doing to the environment and the influence of corporations and the private sector on the government.
Income inequality as a political issue found its rallying cry during the early days of this protest, now known as the Occupy Wall Street Movement. Protesters wielded signs succinctly identifying the issue. “We are the 99%” became the rallying cry for protesters and eventually regular citizens looking for a way to voice their frustrations with stalled income and a loss of hope in their future and the future of their children.
French economist Thomas Piketty has examined our current state of income inequality and proposes a radical solution in his recent book Capital in the Twenty-First Century. Piketty argues that capitalism is unfair and that inherited wealth—the resources of the 1%—will always grow faster than earned wealth. The rich will get richer and the middle class and poor will struggle to stay afloat financially. Piketty’s cure is aggressive form of taxation, which he believes will resolve the gap in resources created by income inequality. In his proposal, the wealthy would be face an income tax of 80% on income over $500,000.
Financial leaders are aware of the negative impact income inequality may have on our culture, economy, and political wellbeing. Henry Kravis recognizes that “there is inequality, maybe a lot of inequality.” But he argues that our economic system is fluid and provides opportunity that academics like Piketty fail to see. “Constantly, people are moving into and out of this 1%. I believe in bringing everyone up, not bringing everyone down to a lower common denominator,” he says.
Bill Gates, billionaire businessman and philanthropist, argues against Piketty’s solution of punitive taxation. He suggests that there are other strategies to consider, such as taxing consumption, which don’t crush the entrepreneur’s spirit. “Imagine three types of wealthy people. One guy is putting his capital into building his business. Then there’s a woman who’s giving most of her wealth to charity. A third person is mostly consuming, spending a lot of money on things like a yacht and plane. While it’s true that the wealth of all three people is contributing to inequality, I would argue that the first two are delivering more value to society than the third. I wish Piketty had made this distinction, because it has important policy implications,” he said.
Our situation isn’t hopeless. There is a reason to be optimistic when considering the issue of income inequality. Business leader Peter Georgescu, chairman emeritus of advertising agency Young & Rubicam, has started to speak to the business community around the country about increasing wages and providing a healthy economy that supports workers recognizes their struggles with real-world economic solutions.
