When the gods dance...

Monday, June 20, 2011

An Equality-Minded Borough



Researchers at the University of Washington have just completed a project that compares, for the years since 2000, life expectancy in the United States to life expectancy in the ten nations of the world where people live the longest.

The basic take-away from this new research: Over 80 percent of America’s counties have lost life-expectancy ground since 2000 “against the average of the 10 nations with the best life expectancies.” In other words, despite spending far more on health than any other nation, we Americans are dying too young.

What's going on here? In a word: Inequality. We're asking for trouble, say scientists who study the health of populations, because we just have too much of it, as Inequality.Org shows starkly in this new chart series.

So what do we do? We look for inspiration in the struggle against inequality, wherever we can find it, and then we get to work. What could that work look like? In a distant borough of some 200,000 distinctly unequal souls, we've found a new model, and we offer, in this week's Too Much, the inspiring details.


You could call the Los Angeles home that Petra Ecclestone has just purchased the ultimate starter house. Ecclestone, at only 22, is, after all, just starting out. But her new house, on the other hand, doesn’t quite qualify as a fixer-upper. This new abode — the Beverly Hills manse of former TV producer Aaron Spellman — just recently rated as “the most expensive home in America.” Spellman’s widow put the 100-room mansion up for sale two years ago at $150 million. Petra Ecclestone, the daughter of billionaire Bernie Ecclestone, reportedly paid just $85 million. Her new home sports rooms specially designed for gift wrapping, wine tasting, and flower cutting, plus a service wing with five bedrooms for maids and two butler suites . . .

Deep pockets who appreciate luxury digs but don’t want the hassle of finding someone to cut the grass have a rather new exotic option these days. They can buy a residential apartment on a luxury ocean liner. The largest of this breed: The World, a 165-apartment floater that wealthy refugees from 53 different nationscurrently call home. They pay up to $7.9 million each for the apartments, and another $240,000 in annual fees, and spend their time circumnavigating the globe.The World — longer than two football fields in length — takes two years to complete each circumnavigation, and the residents vote on each two-year itinerary. This month’s most notable stops: London, Edinburgh, and Oslo . . .

America’s mega rich who do their traveling in more moderate doses tend to rely on the world’s most exclusive travel advisor, New York’s Bill Fischer. How exclusive? Fischer has, reports Fox Business, a “famously unlisted number” and charges clients an $100,000 initiation fee just to get their foot in his door. He also levies a $25,000 annual service fee. What makes Fischer special? An example: One of his clients wanted a three-bedroom suite in a hotel that only had two-bedrooms. Fischer had the hotel knock down a wall. My clients, says Fischer, “want what they want when they want it, and we’re always saying ‘yes.’”

Wendell Potter has been following what health insurer CEOs do with all the premiums their companies collect ever since he ran the public relations shop for insurer powerhouse CIGNA. Now he’s using his spinmeister talents to blow away health industry PR smokescreens. His latest revelation: Between 2003 and 2010, the five biggest for-profit insurers spent $64.1 billion buying back off the open market their own shares of stock, and UnitedHealth, Potter adds, has just announced a stock repurchase that will likely run another $5.5 billion. Buybacks raise a company’s share price and, in the process, the CEO rewards tied to that share price. In 2007, Potter notes, “American companies spent 12 percent more on repurchases than they spent to improve their businesses.” In 2010, paychecks for the five highest-paid health care CEOs averaged $14.7 million . . .

The sweetest place in the world to be rich at tax time? That may soon be Jersey. No, not Jersey as in Newark or Hoboken. Jersey as in the semi-independent island tax haven off the coast of Normandy. Jersey officials are now planning to drop to just 1 percent their current 20 percent top tax rate on the income wealthy immigrants to Jersey collect from business operations outside Jersey. Mega rich immigrants will still have to pay a minimum total tax of £125,000, the equivalent of about $200,000, a requirement that will raise the effective tax rate on deep pockets making less than $20 million a year a tad over the new 1 percent rate.



Gap Be Gone: A Locality Takes on Inequality

Amid fierce fiscal austerity, a borough in London is doing battle to level up the poor and level down the rich.

In the United States and Britain, the developed world’s two most unequal major nations, you can find localities like Islington in every major metro area.

Islington, a London borough that counts about 200,000 residents, sports some of Britain’s poshest neighborhoods, cocktail bars, and boutiques. But nearly half of Islington’s children live in poverty, and locals in the borough’s poorest areas live seven fewer years, on average, than locals in the richest.

And now residents in those poorest areas have a local government, a borough council, having to make do with less. Much less. Austerity at Britain's national level has ravaged Islington’s available budget for public services, with deep cuts looming in everything from libraries to foster care.   

Thousands of localities, on both sides of the Atlantic, face this same sort of squeeze. These localities have begun slashing away. Islington is slashing, too — but at a different target. Islington has begun slashing away at inequality, the massive gap that divides the borough’s rich and poor.

Last July, the newly elected members of Islington’s borough council created what they called a “Fairness Commission” and asked this new panel to help “make Islington a fairer place to live and work.” That fairness, the council made plain, will require an Islington “with less income inequality.”

Why focus on inequality at a time public services are crumbling? Islington’s council has an answer: The problems that public services address — from crime to mental health — all get worse as the gap between rich and poor widens. And that hurts everyone.

“Inequality isn't just bad for the people at the bottom,” as council member Andy Hull, the Fairness Commission co-chair, puts it, “Its damaging effects can be felt across society.”

Hull’s Fairness Commission has held seven public hearings throughout the borough, in sites that have ranged from a former crack-haven housing project to the swank offices of Slaughter and May, a prestigious Islington-based international law firm.

The members of the Fairness Commission have reflected a similar diversity, including everyone from veteran advocates for the borough’s poor to the CEO of the Islington Chamber of Commerce.

Their common charge: to come up with recommendations that would be “novel, radical, and affordable.” Earlier this month, in a final report, the Fairness Commission delivered those goods.

This commission report, entitled Closing the gap, may go down in history as a landmark in the global struggle against inequality. The report’s 19 far-reaching recommendations, set for adoption later this month, commit Islington to bring that struggle down to the local level.

No locality, in our deeply unequal modern times, has ever made this ambitious — or this explicit — an attempt to narrow the rich-poor divide.

This clear focus on narrowing Islington's grand divide should come as no surprise. Catherine West, the Islington council member behind the Fairness Commission’s creation, lined up as the panel’s co-chair the top global authority on the impact of income inequality, the epidemiologist Richard Wilkinson, co-author of the widely acclaimed 2009 bookThe Spirit Level: Why Greater Equality Makes Us Stronger.

The more budget cuts public services suffer, Wilkinson posits in Closing the gap’s introduction, the more fairness matters.

“The bigger the gap between rich and poor,” explains Wilkinson, “the more violence, ill health, drug abuse, and signs of social breakdown.”

In Britain, as in the United States, the national pols who push austerity budgets contend that local voluntary community groups can and must pick up the cutback slack. But the social solidarity necessary for vibrant voluntary efforts, notes Wilkinson, evaporates “when the gap between rich and poor grows wider.”

The Fairness Commission recommendations do include a series of proposals that rely on volunteer energy, a Good Neighbors project, for instance, to help residents keep an eye out for the isolated, and “swaps” to create more options for affordable housing by encouraging older residents with empty nests to “downsize from properties they can no longer manage.”

But such volunteer initiatives, the Fairness Commission report emphasizes, will always have trouble getting traction in a locality where “social cohesion and community life have weakened under the impact of widening income differences.”

How can localities narrow those differences? A local government like Islington has, to be sure, limited authority over the local economy. Islington has over 10,000 businesses within its borders, employing over 175,000 workers. The Islington Council can’t mandate that these employers “narrow the pay differential between their lowest paid and highest paid staff.”

But Islington as a public employer, the Fairness Commission points out, can take the lead “in addressing issues of inequality, both from the bottom up and — where top pay or pay differentials are excessive – from the top down.”

To level up the bottom, the commission wants Islington public agencies to set an example by compensating their lowest-paid workers at a “living wage” hourly rate — the equivalent of over $3.50 an hour more than the UK official minimum wage — and negotiating procurement contracts that require subcontractors and suppliers to do likewise.

To level down the top, the commission wants employers to make new hires to executive positions “at below the previous salary level.”

Islington has already begun that process. The newly hired chief executive of the Islington Council will be earning £160,000, a sum £50,000 — about $80,000 — less than the former executive. No top executives in the three major Islington public agencies now earn more than 11 times the agency’s lowest-paid worker.

In Islington’s private sector, meanwhile, top-to-bottom pay gaps can stretch over 100 times. To help narrow these gaps, the Fairness Commission wants “all major employers” in Islington to “publish their pay differentials,” a move that would enable differentials “to be scrutinized and challenged where appropriate.”

Why would employers agree to disclose their differentials? Employers that keep their top-bottom pay differential within 20 to 1 — plus pay at least a “living wage” and meet a variety of other equality-fostering good practices — will earn a “Fair Islington” designation they can proudly display to the general Islington public.

No one connected with Fairness Commission believes, for a moment, that Islington acting alone can bring about a fundamentally more equal society. To succeed in this broader goal, Closing the gap observes, Islington needs “to offer leadership in a drive for fairness across London and nationally.”

And that leadership is already bearing fruit. Two other UK localities, Liverpool and York, have now established Fairness Commissions, and other similar panels appear on the way. Fairness Commission co-chair Richard Wilkinson sees these efforts “as the first steps in a campaign” for greater equality that will “have to involve the whole country and be sustained for ten or twenty years.”

The payoff will be well worth the effort.

“Everyone would prefer to live in a friendlier, more cohesive and caring society,”notes Wilkinson. “Over the last generation modern societies have made huge progress in overcoming racism, homophobia, and discrimination against women. The campaign against excessive inequalities in income is the next major task.”


Don’t Worry, Be Happy, Be More Equal

Shigehiro Oishi, Selin Kesebir, and Ed Diener, Income Inequality and HappinessPsychological Science (in press). June 2011.

Why haven’t Americans become happier over the past 50 years? Economists have trouble with that question. America's average household wealth has doubled since 1962. We have become, as a nation, considerably richer. We should be much happier, too, at least according to conventional economic theory.

So what’s the problem? Three psychologists — Shigehiro Oishi and Selin Kesebir from the University of Virginia and Ed Diener from the University of Illinois — have an answer forthcoming in the journal Psychological Science.

We haven’t become happier, the three scholars show in their new study, because we’ve become more unequal.

“Americans are happier,” as the three put it, “when national wealth is distributed more evenly than when it is distributed unevenly.”

Psychologists have examined links between inequality and unhappiness before, but not as rigorously in one society, over time, as Oishi, Kesebir, and Diener do in their new Psychological Science research.

Previous studies have contrasted levels of inequality and happiness across nations, states, and cities and generated generally mixed results. Oishi, Kesebir, and Diener stick to one nation — the United States — and track evolving trends through four rich decades of data.

Their data come from the General Social Survey, a National Science Foundation effort that has been quizzing a broad cross-section of Americans on a variety of topics since 1972.

In all, Oishi, Kesebir, and Diener plowed through 53,043 surveys completed between 1972 and 2008, focusing first on responses to the question: “Taken all together, how would you say things are these days — would you say that you are very happy, pretty happy, or not too happy?”

Americans on average, the three researchers found, have rated themselves happier, over the past four decades, “at times of relative income equality.”

What explains this connection? Oishi, Kesebir, and Diener went digging into the data for the “psychological mechanisms” that could “account for the link between societal income inequality and individual-level happiness.” They feel they've found that link — in people’s sense of trust and fairness.

Over recent decades, the General Social Survey data show, Americans on average have become less trusting and less convinced they live in a fair society. And this mistrust and sense of unfairness, the researchers discovered, matches up significantly with levels of inequality.

“Americans,” write Oishi, Kesebir, and Diener, “perceived others to be less fair and trustworthy in the years with greater income disparity.”

But not all Americans. The richest 20 percent of Americans show no linkage here. And more affluent Americans also do not show less happiness in those years when income inequality increases.

That finding makes eminent sense to Oishi, Kesebir, and Diener. Lower-income people, the three note, will understandably “perceive the world to be unfair if only the rich get richer,” and this “greater income disparity,” in turn, will “disjoint and divide” their communities, leaving lower-income people less trusting of others.

Couldn’t lower-income people be less happy simply because their household incomes are falling in years of growing inequality?

The researchers took the time to test this explanation with the General Social Survey data. They found no link. “Lowered levels of perceived fairness and trust,” not reduced income, turned out to be the factors “that made low-income Americans feel less happy in the years with greater income inequality.”

Other psychological mechanisms besides trust and fairness, Oishi, Kesebir, and Diener acknowledge, could be at play here, and they urge more study to explore those possibilities.

But the three analysts remain confident in their paper’s most basic insight. Only “income growth without income disparity,” they agree, will “result in an increase in the mean happiness of a general population.”

Quote of the Week

“If we care about the happiness of most people, we need to do something about income inequality.”
Shigehiro Oishi, University of Virginia psychologist, co-author of a newly released analysis of 40 years of U.S. happiness data, June 13, 2011

Stat of the Week

How broken has the “alternative minimum tax” become? Congress created this tax over four decades ago to ensure that America's rich, after loopholes, pay at least some of their income in federal income tax. In 2008, new IRS data show, 10,824 taxpayers reported over $200,000 in income and paid no taxes on that income either to Uncle Sam or any other country.

New Wisdom
on Wealth

Pat Schneider, Can Wisconsin uprising grow nationwide movement?Capital Times, June 15, 2011. Americans now believe, this analysis posits, they can impact “inequities in income distribution and tax policy.”

Michael Niman, Been to a Nursing Home Lately?ArtVoice, June 16, 2011. America's real "death tax": an inadequate safety net that pauperizes middle class seniors while the rich get tax breaks.

Nicholas Kristof, Our Lefty MilitaryNew York Times, June 15, 2011. If America's military can operate with only a ten times pay gap between top generals and privates, why do America's corporations need a 300 times pay gap between CEOs and average workers?

Katie Baird, Unfair distribution of wealth has nation going to the dogs,Tacoma News Tribune, June 16, 2011. A $235,000 price-tag for a pooch, notes this University of Washington economist, signals an economy gone terribly perverse.

Michael Hudson, Free Money Creation to Bail Out Financial Speculators, but not Social Security or Medicare, Naked Capitalism, June 17, 2011. Sure sign of plutocracy: “bailing out” the wealthiest 1 percent of Americans “while saying there is no money” for “long-term public social spending.”

Simon Mann, How low can taxes go? Sydney Morning Herald, June 18, 2011. America's rich, notes this Australian analysis, pay far less in taxes than they once did, and that dip has enormous consequences.

Peter Whoriskey, With executive pay, rich pull away from rest of AmericaWashington Post,June 19, 2011. High-ranking execs at U.S. corporations and banks are making 59 percent of America's top 0.1 percent of incomes.

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