Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


The Future of Income Inequality

Income inequality is the hot issue of the hour and will probably stay so for the foreseeable future. The Washington Post’s Wonkblog is reporting that even Jeb Bush, who is hardly a socialist or progressive, is planning to make income inequality the focus of his 2016 presidential campaign.

Bush is taking that step and channeling his inner Teddy Roosevelt because of the success of the one major U.S. politician talking about inequality, Elizabeth Warren. The Post noted that even Republican-leaning conservatives in Colorado had a favorable view of Warren.

This, of course, brings us to an intriguing and disturbing train of thought – how will income inequality shape our society in the future? Here are a few of my thoughts on the matter and predictions about the future of income inequality.

  • Income inequality will get worse as technology makes the rich richer and traditional jobs become rarer, causing more and people to fall out of the middle class.


  • Traditional solutions to income inequality, such as minimum wage increases, unionization, tariffs, and confiscatory taxes, will become increasingly ineffective.


  • Income inequality will become the central issue in our political discourse, much as it did in the decades leading up to World War I.


  • The divide between the successful (or as Bill Gates would say, technologically sophisticated) middle class and the working class (or lower middle class) will become as wide and far more disruptive and destructive than the gap between the rich and the poor. One reason for this is that the working class can see the successful middle class up close, while the rich are simply faces on television.


  • Violence and civil disobedience directed at the affluent (and increasingly the successful) middle class will become more common. Shuttle buses carrying employees from San Francisco to Google’s corporate campus, the Googleplex, have been blocked by protestors and reportedly stoned.


  • More and more people will simply drop out of the job market. This is already occurring among African American men, and it is a growing problem among uneducated white men. One reason for this is that life on welfare now offers more security and stability than a “job” does. Food stamps are always available, Medicaid now provides subsidized healthcare thanks to Obamacare, and the welfare-dependent can often qualify for a host of other benefits, such as public housing and free bus passes in many parts of the country. A related problem will be more and more people working off the books for cash so they can qualify for government benefits.



  •  The amount of taxes collected and government revenues could fall because fewer people are working. Social Security, Medicare, and unemployment insurance schemes which are financed by payroll taxes could be especially hard hit.


  • Income inequality will make racial, class, religious, and regional divides worse. The protests and riots in Ferguson and elsewhere in the past few months were as much about income inequality and lack of opportunity among working class blacks as they were about police brutality. We’ve already seen targeted shootings of police officers by both white and black malcontents.


  •  In America, religious divides could be uglier and more divisive than the racial one. The wealthy and the successful middle class are overwhelmingly, and in some cases, aggressively secular. The struggling lower middle class and working class are largely Christian, and in some cases, strongly evangelical. The situation could get ugly fast if a popular and charismatic religious or political leader starts playing up the rich/poor divide and demonizing the wealthy as the pawns of Satan.


  • An example of things to come could be the situation in France, where the divide between poor devout Muslim immigrants and the secular elite is fueling violence. The basis of this is that the Islamic faith is the only thing some of these poor people have to define their identity; they view attacks on it as an insult to their identity. Frighteningly, some American Christians have adopted a similar world view regarding any criticism of their faith as a violation of their rights. Violent assaults on symbols of secularism, such as Charley Hebdo, are a result of this. So is a growing and increasingly ugly anti-Semitism.


  • At some point, anti-technology sentiments (technophobia or neo-luddism) and violence will become popular among certain groups in society. Expect attacks on technology companies and the smashing of electronics and movements like the luddites who destroyed looms and other machines in England’s Industrial Revolution. Such sentiments could spiral out of control if they are justified by religious or political extremism.


  • Expect a rise in all kinds of political and religious extremism: Marxism, Anarchism, Libertarianism, racism, Neo-Luddism, Primitivism, fundamentalist Christianity, Neo-Nazism, anti-Semitism, Radical Islam, and worse. The practitioners will be the increasingly powerless and frustrated have-nots, particularly young men. Old evils, like Communism, Black Nationalism, organized racism, and fascism, will return, and new ones will appear among the victims of inequality.

  • A new generation of demagogic leaders will arise to take advantage of the situation. Some will be dangerous radicals, while others will simply be charlatans out to gain political office and stuff their pockets with corporate cash. An example of such a person is Al Shartpon. Expect a white Southern Christian counterpart to Rev. Sharpton (a sort of 21st century Huey Long or George Wallace) to appear in the near future.



  • Expect government to become more repressive and police forces to become more centralized and militaristic as a result of these developments.


  • Regional divisions will grow as more and more wealth flows to a few affluent areas, such as New York, Denver, Chicago, and Silicon Valley. The situation will get worse as many poor and working class people move away from those areas. Already, incomes in 81% of the counties in the United States are lower than they were in 1999. That situation will get worse as more and more industrial, retail, and related jobs disappear. One growing trend will be a growing migration of the less affluent to warmer climate states in the south and west, such as Texas, because they cannot afford heating.


  • Expect intense and often brutal competition for the few middle class jobs left, such as teachers, government employees, social workers, police officers, etc. to become brutal and intense. Persons in such positions will be increasingly politically active and go to great lengths to protect their position. An example of this is the California unions that have gone out of their way to preserve generous pension plans, even if it means cutting basic government services for everybody else.


  • Politicians will increasingly try to create middle class jobs to buy votes. Examples of this include the prison system – in reality, a make-work program for rural whites – and the Transportation Security Administration – a make-work program for poorly educated urban and suburban residents.


  • Major political battles will break out when taxpayers get fed up with paying for the bill for such  make-work programs. The spark for this conflagration could be libertarian politicians, such as U.S. Senator Rand Paul (R-Kentucky), who will gain traction by campaigning for smaller government and fewer bureaucrats.


  • In the near future, America is going to look a lot like Europe, with extremist politics, deep class divisions, and civil unrest (riots) of the kind often seen in France. Like France, this America will have a large militaristic police force that regularly engages in battles with radicals in the streets.


  • We’ll see the rise of an American welfare state as large and as costly as anything in Europe in an attempt to counteract the effects of income inequality. Like the European welfare state, it will provide subsidized jobs, generous benefits, free government services, and a comfortable, if drab, life for the poor.


  • Expect to see religion and charity become far more influential in American life. One reason for this is that churches will increasingly provide entertainment and social services to average Americans that they cannot pay for themselves.


We need to take serious efforts to deal with inequality, and now. If we don’t, we’ll find ourselves living in an America that we won’t like very much.