The Gini Index is a conventional measure of income distribution equality. A Gini index of 0 corresponds to every household having the same income, while an index of 100 corresponds to one person earning all the income. The Gini index in the United States tends to be a higher than in Western European countries. The US Gini index is about 45, while most European countries have Gini indices in the 30s. However, this comparison can be misleading, since European countries individually tend to be more culturally and socially homogeneous than a large continental nation like the US. The more proper comparison is between the US and the entire EU. The total US population is comparable to that of EU and there are significant income disparities from country to country within EU that broaden the net EU income disparity. The per capita gross national product (GDP) in Denmark is $34,800 as compared to Poland whos per capita GDP is about $13,100. Hence, income inequality for the EU as a whole can be substantially larger than that for any single European country. (See the CIA World Factbook for these figures)
There can be little statistical doubt that there has been a gradual increase in US household income inequality since 1980, with a particularly large jump in the early to mid 1990s. There are many causes for this increase. There has been a long-term change in the labor market valuing skilled as opposed to unskilled labor increasing the relative income of highly trained individuals. Households have changed, with more single-parent households which traditionally have had lower incomes. Even for a couple where both people earn a good income, divorce will drive down relative household income and putting them at a relative economic disadvantage. The rise in two-income families has widened household income disparity. Two people can generally earn more income than one person working outside the home. Moreover, high income individuals tend to marry other high-income people further exacerbating household income disparity.
There are two important values that seem to be at odds here. It is important for countries to maintain a sense of community identity and common purpose. This affinity can be attenuated with high levels of income disparity. On the other hand, we value meritocracy where earnings and achieve are not artificially limited by forced equality of outcomes. The more severe the meritocracy is, the greater the income disparity is likely to be. A common example of this effect can be found in professional sports where even members of the same team can earn radically different salaries based on their perceived contribution to the team.
It seems that dealing with widening income distribution with punitive tax policies is counterproductive. It reduces growth, which hurts the poor the most, and sets one income class against another income class. An alternate solution is to maximize social mobility in a couple of ways.
First, schools, particularly those for the poor, are largely a failure. The differences between public schools in affluent neighborhoods and poor neighborhoods will tend to broaden income distributions in the following generations. The introduction of vouchers for educational choice will broaden the range of educational options for poor children. It would also likely improve public schools in those very same poor neighborhoods.
Second, the collapse of families is correlated with all sorts of pathologies that curb the prospects of child in such families. As a culture we should encourage the maintenance of stable two-parent families and not pretend that all familial configurations are just as likely to produce successful and happy children. The government can help by easing the economic pressure on young families. One method to do this is to increase the dependent deduction, particularly for young children.
One thing is clear, unless changes are made on the front end of life, there will be little can be done on the back end to reduce the consequences.
America Alone
Sunday, January 7th, 2007The world is not at a loss for doomsday scenarios. During the 1970s, we were all concerned that the world would end in a nuclear exchange with the Soviet Union. We were told that would exhaust the worlds oil and food resources before the current century. New worries have ascended to the top of the list of worries recently. There is always the possibility of a large asteroid smashing into the Earth and wiping out most of the life on the surface, much as a similar asteroid probably accounted for the rapid extinction of dinosaurs. Evidence is accumulating that the Earth is warming auguring significant climate change effects.
Of course, the danger of nuclear war with the USSR was real and we fortunately avoided it. This does mean that the dangers of nuclear weapons have entirely been eliminated. Predictions of natural resource shortages have proven unduly pessimistic, or at least premature. While it is certain that a large asteroid will, at some time in the future, be on a collision course with the Earth, the probability of an impact in the foreseeable future is tiny. The net effect of climate change is still speculative.
To these concerns, Mark Steyn adds one more in his American Alone. Steyn’s thesis begins with unassailable fact that much of the Western World, particularly in Europe is in demographic collapse. In order for any society to maintain it population it must have a fertility rate of about 2.1, i.e., women on average have 2.1 children. The European Union, as a whole, suffers under a weak fertility rate of 1.47 with some countries like Italy and Spain suffering with anemic fertility rates of 1.33 and 1.28, respectively. Literally, there are places in Europe which will become depopulated of ethnic European in one or two generations.
There are at least a couple of consequences of a declining and aging population. First, the generous social welfare states of Europe are dependent upon an influx of young people to support the pensions and increased medical expenses of retirees. Without such an influx these countries face economic stagnation and declining living standards. Second, culture is a reflection of the integrated perceptions and attitudes of its citizens. A demographically young culture is innovative and energetic culture, whereas a demographically older culture is likely to be risk adverse and focused on maintenance of pension checks.
Now, it is always possible that the fertility rates in Europe will undergo dramatic reversal. However, these rates have declined over decades and it difficult to foresee a circumstance that would change current trends. Moreover, Steyn argues that the European social welfare states are themselves nurture suicidal attitudes to reproduction. He writes:
The Muslim population is increasing the Europe due to both immigration and the high-fertility rates of immigrant populations. Steyn questions whether Europe can undergo dramatic demographic change and not undergo dramatic political change. Thanks to lavish funding of radical mosques by Saudi Arabia and others, the Muslim populations in Europe and elsewhere are becoming radicalized. Certainly, there are moderate Muslims and they probably constitute a majority, but radical Islam represents the Zeitgeist of the Islamic world.
Moreover, the self-absorption of modern secular welfare states saps culture confidence. What Steyn calls “culture exhaustion” will make it impossible for Europeans to resist the Islamic demands for deference. In Steyns assessment, Europes demographic and cultural death spiral is too far along to reverse. Before the end this century, there will parts of Europe where Sharia law is enforced. Great societies are not killed, but rather commit suicide.
Steyn writes American Alone with cleverness and humor that belies his deeply pessimistic message. America may soon represent the only remnant of Western ideals, of liberty and personal independence. The only hope Steyn offers is that the example of Europes demise will make obvious even to the American Left, the necessity to resist the clash of cultures. After all, a world dominated by Sharia law as practiced by radical Islamists is not that will be hospitable to gay or abortion rights, the key concerns of the modern American Left. It is not one where women will be treated with equal rights and dignity. It will represent a return to the Dark Ages, before the Renaissance and before the Enlightenment. As Steyn asserts, “…much of what we call the Western World will no survive the twenty-first century, and much of it will effectively disappear with our lifetimes.”
Abraham Lincoln described the American Civil War as a great test of democracy and liberty that would determine “if any nation so conceived and so dedicated, can long endure.” The United States represents are far freer country with a far less protective welfare state. Nonetheless, the United States, over the decades, has moved steadily closer to the European model, though among modern industrial states it is still “exceptional.” If Steyn is correct in his assessment that European suicidal fertility rates are an inevitable outcome of the “Eutopian” welfare state, then the clash with radical Islam represents a test to determine whether a society so structured can long endure.
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