The Paradox of Wealth

Very Rich, but Very Poor

Money, assets, wealth, rich, poor, destitute: all of these are in some ways less tangible than they may seem. Sure, today we have a world full of have's and have not's. Some are suffering in extreme poverty while others lounge on Caribbean beaches. This may seem to reflect some sort of natural arrangement, but in fact it does not. Wealth is really just a socially constructed system to distribute society's resources.

Imagine for example that you are Bill Gates; you have more money than you could ever dream of. Now imagine that you are in a desert with a low-income person. Nobody else is around. You are both walking through the desert alone together and you happen to find a pitcher of water. What would happen? I suspect that you would simply split the water between the two of you. Outside of market system of society, Bill Gates and any other person suddenly become equals. If something cannot be bought or sold, wealth becomes meaningless.

It's important to remember that in the natural world, money does not divide humanity into those who are worthy of something and those who are not. Society simply has needs and wealth is in a very general sense a reward to those who fill some of these needs. So what happens then when society determines that certain individuals should be given a huge share of total wealth, relative to other people? 

I think it depends.

Money alone really is empty. It really takes meaning when it represents something else. For example, for some people money can come with achievement and the fulfillment of ambitions. These people may feel happy earning more and more money because it represents their own accomplishments. On the other hand, some people seem to happen upon money for seemingly no reason, and in these situations it may generate other feelings.

The Rich Can Feel Poor

I know that often times nobody really wants to hear about the problems of the rich. People may think that they have nothing to worry about because they have all the money that they need. But money is not always a solution and I believe that all life problems can really only be in perspective of one's own life. That being said, I truly want to examine the perhaps sad lives of some extremely wealthy individuals.

If someone becomes rich upon accomplishing a major life goal, reaching some milestone or just by chance, they may feel discontent. If money was a motivating force in someone's life and they suddenly have more of it than they will ever need, it could create a sense of being finished in some way. The sense of achievement and abruptness that could come with wealth may leave some rich wondering "What now?" Money alone might have the effect of interrupting a sense of purpose in the world. 

The Rich Can Also Feel Rich

Perhaps if instead we examine a rich person, or a set of rich people who earn wealth over time, we may find a different outcome. If wealth becomes a part of the journey rather than a destination, it may not conjure the same feelings of a sort of existential dread associated with fulfilling a life goal. Those who are able to come into wealth and adjust their life goals to seek new passions and ambitions, rather than just more money, may feel quite happy with their wealth.

Tension Between Rich and Poor

For some reason, there seems to be a theme in our society of being obsessed with knowing who has money and who doesn't and of creating some sort of judgment as a result. If you are rich, you are taught, probably subconsciously, to look down upon those who earn less than you. On the other hand, if you are poor or even middle class, you may resent those who have more money than you do. 

I believe that no matter the direction of the scorn that it is in many ways quite foolish. There is really no point in disliking an individual or a group of individuals just because they fall into a different financial class than you do. Thinking back to the desert example, after extracting the social construct of wealth from the equation, it's easy to see that everyone is really equal to one another in their intrinsic human value. 

Wealth is just the way that society determines the allocation of resources. Individuals really cannot determine how much society will value their contribution; market forces set wage rates for different industries, companies and individuals. Therefore nobody should judge somebody else simply for a difference in income. 

We are all humans and we are all equal. We should stop letting ourselves believe that a person's financial status is at all indicative of their human value. 

Income Matters More Than Race

Wealthy > White

This year many people are commemorating the 50th anniversary of Martin Luther King Jr.'s "I Have a Dream" speech. This speech had lofty goals and among them was making education more equal for Whites and African-Americans. At the time, race was the most important factor in determining whether or not a child would be successful in school. Now fifty years later, race is not as important as another factor: wealth.

Children in the poorest American families are now an average of four grade levels of knowledge behind children in the richest families. The racial gap stands still at around three years. This is a bit bittersweet because although the racial gap is no longer the main obstacle to children this is only so because wealth has become more of an obstacle. The racial gap has not moved far in the last half-century. Let's look at some of the main reasons that wealth has become such a hot issue in education.

Investing in Children

Children who come from wealthy families are now more able than ever before to get ahead of their peers. Disposable income has risen rapidly for the richest families over the past 40 years but has risen much more slowly for lower-income groups.

The extra money that richer parents now have has allowed them to spend more on early educational opportunities for their children. Many wealthy children can now afford private preschools, language classes and a host of extracurricular activities that other students cannot. At the same time, public schools have cut back funding and have been asked to do more with less. These factors together push wealthy children up while putting extra pressure on children from lower-income families. 

The gap also tends to self-perpetuate. As wealthy children increasingly outperform lower-income children they are more able to get into top tier universities and thus are more likely to land high-paying jobs. The wider the gap grows between the groups, the easier it is for the disparities to become even stronger.

School Achievement Gaps

Similarly, there are geographical divisions between where rich and poor families live. This impacts the quality of public education across the country. Poorer school districts often receive less property tax revenue and spend extra money recruiting and paying teachers. These districts often struggle with underfunding, outdated books and classroom overcrowding. Richer public schools often have the tax funds to ward off many of these issues. As students in poorer districts receive less funding, they do not have the resources to keep up with wealthier peers in neighboring school districts. 

How a Fat Paycheck Can Buy You 20 More Years of Life

Wealthier American Live Longer

Yesterday I wrote about how Americans in some parts of the country live for 82 years, while in other parts only live for about 62 years, if you need a refresher check out my post here. Today I plan on overlaying life expectancy statistics with those of other factors such as income and obesity. I will start by showing the change in life expectancy over time.

1985 Life Expectancy

2010 Life Expectancy

The first thing that I want to point out is the dramatic change in the map between 1985 and 2010, sort of. In almost every area of the country, life expectancy rose by over ten years during this period. But now focus on Mississippi, Alabama and Louisiana and notice that these numbers barely budged. In a few counties in these states, life expectancy actually declined in the 25 year period.

Obesity statistics are not as widely available for the whole country dating back to 1985, but even the following map from 2010 should be telling.

American Obesity by County 2010

Notice that the three states with the lowest life expectancies are also the states shown in the darkest red coloring on this new map. In red counties, more than a third of adults are obese; if we include people who are simply overweight this number approaches 70%. It appears that obesity does directly relate to shorter life expectancies. America has become more obese over time and much of the increase has been concentrated in the south. It seems as though some of the gains in medical technologies nationwide are being offset in the south by increasing obesity rates.

Finally let's examine income. This map is from 2008 and shows median income by county. I think you will notice a trend here.

2008 Median Income by County

Once again it appears clear that there is an almost direct relationship between higher incomes and longer life. Almost all of the counties with life expectancies below 70 in the United States fall below average on the median income scale. 

One way to tie all of this together is the fact that it is much cheaper to buy unhealthy food than healthy food. People living on lower incomes are more likely to eat cheaper and thus less healthy which in turn can correlate with a spike in obesity. If you want to learn more about obesity and food access, check out this link.

To continue this series on health, I will further investigate medical costs and differences within healthcare itself and report back tomorrow with more information.

American Consumerism: Why We Shop

The United States has long been plagued by one of the lowest saving rates in the developed world. After hitting a low of 1.5% in 2005, this rate has since increased slightly to around 3%. What this means is that generally, Americans barely break even despite earning incomes that average higher than most other countries. To further put this into perspective, 48% of Americans have more debt than savings, giving them a negative net worth.

But what do Americans spend all of their money on? All of this.

We feel the need to purchase more than we can afford even after the recent financial crisis. Americans seem to have an obsession with keeping up with one another. Wealth is a huge status symbol in the United States as it signifies ones success at navigating the capitalistic system. Easy credit and a culture of loans makes it easy for people to pretend that they make more money than they do, living beyond their means.

One of the most common ways for Americans to splurge is through the purchase of luxury homes or McMansions. The average size for an American home is about 2,300 square feet, compared to about 800 square feet in the United Kingdom. Many Americans would not even consider living in an 800 square foot house.  

Many other cultures place more value on other things such as education, family ties or social abilities. In these countries, residents are less likely to purchase out of insecurity because financial status is not a top priority.

Ironically, Americans who spend more money than they make as a way to prop up their lifestyle end up actually having no money at all. Across the United States, people routinely become bankrupt and lose their homes to foreclosures because they are in over their heads. Trying to appear rich can end up keeping you poor!