When the rich begin to worry that poor people are too poor and that they might be too rich, it is probably a fairly good indicator that society is on the brink of big change.
In an interview with Bloomberg today, notorious investor Rob Arnott, chief executive and co-founder of Research Affiliates LLC warned that as corporate earnings soar, society as a whole is not benefiting from it. This, he argued, could lead to serious social upheaval:
Right now we have earnings coming off of record highs as a percentage of GDP and yet you have Wall Street saying ‘don’t worry, it’s going to soar to new highs.’ Pardon me, but when did the peasants with the pitchforks come out and start rioting? Society at large has to enjoy some of the largesse, or else the pitchforks come out. So earnings as a share of GDP can’t really advance materially from current levels, or at least it’s not healthy if they do.
It is worth repeating this: Society at large has to enjoy some of the largesse, or else the pitchforks come out.
Remember, this is an unfathomably rich person talking, not a pissed off worker fed up with putting in endless hours of back breaking work for not enough money to live on. Last year, the Harvard Business School released a report warning that wealth inequality in America is now so insanely large that it is unsustainable in the long run. "Thriving citizens become more productive employees, more willing consumers, and stronger supporters of pro-business policies," the report stated. "Struggling citizens are disgruntled at work, frugal at the cash register, and anti-business at the ballot box."
Clearly a cause for concern for the party responsible for foisting this insane system that allocates the majority of the country's wealth to a very small minority of people are openly discussing inequality. As Hamilton Nolan points out though:
This tactic is like throwing acid in someone's face and then accusing them of being ugly. The political partymost directly responsible for the rise of economic inequality and its continued growth is using the rise of economic inequality and its continued growth as proof that the other political party is not to be trusted. This is ridiculous even by presidential campaign standards.
The pressing question is, at least to me, how long this can really go on for. The United States has a unique history of being anti labor and pro corporation, so much so that the general population have a deep disdain for the poor, even if they are poor themselves. Free market economics and the philosophy of meritocracy teaches us that the individual is solely responsible for their success and failure. If you are good you will succeed, and if you are bad, you will fail. Unfortunately, people work back from this misguided logic, concluding that if they are wealthy, they must be good, and if they are poor, they must be bad.
The truth is that your wealth is largely a result of your parent's wealth. Social mobility no longer exists in America, and rich people have rigged the tax system in order to ensure they not only get taxed less than everyone else, but their money gets passed down to undeserving children who did nothing more that win the birth lottery.
This truth is getting harder and harder to disguise, and when rich people start to worry about it, it's a good bet a huge amount of unrest is bubbling beneath the surface. We saw a sample of this unrest when Occupy Wall St arose after the financial crisis, but as the turmoil calmed down and the economy got back on track, the urgent need for reform was stalled. But that does not mean systemic change is no longer necessary - it simply means we are delaying a problem that is becoming more extreme by the day.