Interesting turn of phrase there, rich people taking an increased share vs earning it.
Well, there's no doubt that anyone who holds a difficult job, such as CEO of a big company, does earn some serious compensation. But the job hasn't gotten harder since the 1960s, when CEOs took home maybe 20 times what someone working the factory floor earned, and yet they're now making hundreds of times what the typical working-class person makes. That change is a result of changes in the economic rules -- they didn't earn it.
The truth is that many if not most of those 1%ers earned what they got legitimately, through years of hard work and/or putting themselves through school and accumulating large debts.
I'm aware of that. The assertion here isn't that the rich don't deserve to be rich (on the whole, recognizing that there are some exceptions to that). The question, though, is HOW rich. Really, the way that the rich today became so much richer than the rich of decades ago, has little to do with anyone's individual effort and a lot to do with bribing politicians.
I'm not sure there are any honest studies out there that support the claim that spreading the wealth around will make any difference to the economic output. I'm pretty sure though that if the gov't is involved it'll be more for political reasons and therefore be less effective and probably subject to more fraud, waste, and abuse.
The theory is easiest to explain so I'll start with that. Several facts which may not seem obvious:
1) An economy is driven by consumer demand. The more demand, the more investment in the production of products and services to meet the demand, hence the more production of wealth.
2) All income goes either to consumer spending or to capital formation. The more consumer spending happens, the less capital will be formed out of any one year's income, and vice-versa.
3) People save/invest a larger share of their income, on the average, as income rises. That is, people who make lots of money tend to save and invest an increasing share of what they make, compared to people who don't make as much, who tend to spend a larger share of it.
What that means is that the more UNequally income is distributed, the more of that income goes to capital formation and the less of it goes to consumer spending. Or (to say the same thing a different way), the more equally income is distributed, the more of that income goes to consumer spending and the less to capital formation.
Now refer back to #1, above. The more consumer demand there is, the more money will be invested in the production of goods and services to meet that demand. Above the point where consumer demand is all met, capital still gets invested, but it goes into various rent-seeking schemes, financial-instrument shell-games, or bubble-blowing. These things "make" money for the investor (or lose it), but they don't produce any real wealth, and that means all that's happening is that money is being shifted from one person to another -- from the losing investors to the winning ones.
So up to a theoretical point where consumer demand actually outstrips available capital (which we've never reached), it's always better for the economy to make incomes more equal.
That's the theory. On the basis of that theory, I would predict two things:
1) The U.S. economy has grown fastest when incomes were more nearly equal, and grown more slowly overall when incomes were more unequal.
2) The richest countries in the world will, in most cases, be ones in which incomes are more nearly equal, and poorer countries will tend to be ones in which incomes are more unequal.
Both of these turn out to be true. American incomes were most nearly equal during the four decades from 1940 until 1980, compared to either the earlier four decades (1900 to 1940), or the time since then (1980 to present). The middle four decades saw real per capita income grow, on average, more than twice as fast as either the earlier or later period. As for the international situation, I'll give you two links to lists. Open these in two separate tabs:
List of countries by income equality - Wikipedia, the free encyclopedia
List of countries by GDP (PPP) per capita - Wikipedia, the free encyclopedia
On the first one (countries by income equality), scroll down to the first table and leave it in alpha order for easy reference.
Looking at the richest country list from the second link, I go down the list and take out small, oil-rich Middle Eastern countries. The resulting list of the richest 20 countries, let's say, with their associated Gini coefficients (World Bank), is as follows:
1. Luxembourg (31)
2. Singapore (42)
3. Norway (26)
4. United States (41)
5. Switzerland (34)
6. Netherlands (31)
7. Ireland (34)
8. Austria (29)
9. Denmark (25)
10. Australia (35)
11. Sweden (25)
12. Canada (33)
13. Germany (28)
14. Belgium (33)
15. Finland (27)
16. UK (36)
17. Iceland (28)
18. Japan (25)
19. France (33)
20. Spain (35)
Now, looking at the 20 poorest countries in the list, and making the same comparison, we find:
1. Dem. Rep. of the Congo (44)
2. Burundi (33)
3. Liberia (38)
4. Niger (34)
5. Central African Republic (56)
6. Sierra Leone (43)
7. Malawi (39)
8. Timor-Leste (32)
9. Mozambique (46)
10. Afghanistan (29)
11. Madagascar (47)
12. Togo (34)
13. Ethiopia (30)
14. Mali (39)
15. Guinea (39)
16. Comoros (64)
17. Haiti (60)
18. Rwanda (53)
19. Guinea-Bissau (36)
20. Nepal (47)
The 20 richest countries have a GINI coefficient averaging 31.55. For the 20 poorest countries, it's 42.15.
There are some exceptions in both lists, especially the second one. But while there are many exceptions on the second list, there are only two on the first (Singapore and the U.S.) with GCs above 35, and even those aren't nearly as high as the highest on the poor list. So we can say it's fairly easy to have relatively equal incomes and be poor (poverty can come from lack of technology, lack of resources, etc.), but it's really hard to have highly unequal incomes and be rich. And I would say that at least one of the rich exceptions (the U.S.) once had a Gini coefficient much lower than we do now, and at that time would have been no. 1, not no. 4. We're still quite high, but that's because we had so far to fall.
