In the days of the recent COVID-19 pandemic, the US has become the new foreground of transmission. 475,000 Americans were infected, with 18,000 fatalities at the time of this writing. But for a ‘non-discriminating’ virus, it is clear that wealth matters.
During the pandemic, wealth inequality within the US has been painfully clear: here we see a widening divide between the middle class and lower classes, compared to upper class Americans. The majority of those who are directly affected by the pandemic belong to lower-wage and front-line service professions. Hence, it is worth investigating how wealth inequality has evolved in the US, and the levers that can change it.
US income and wealth inequality has grown significantly in the last few decades. According to think tanks, the share of total income received by middle class households has fallen by 21% since 1971; the share of total income received by upper-income households has increased by 19% during the same period.
It should be mentioned that middle and lower-income families are more dependent on home equity for their source of wealth. In addition, the responsibility of businesses has shifted to one that is more shareholder oriented. In the 1970s, the ‘shareholder commitment’ objective became increasingly popular. The result was the share buy-back frenzy: corporations could now reduce the number of shares in the market by buying them directly. What was once illegal became a common practice which benefits shareholders.
Today, the widely accepted understanding of corporate purpose is focused on a narrow subset of US society. It is worth evaluating the current thinking around what is ‘acceptable’ business behaviour. But, lasting change also requires deep knowledge of the system’s current status quo: who the key players are, their relative powers, and the levers needed to address each. This is where social laboratories have come in. As wealth inequality has grown, social labs such as The World Inequality Lab at the Paris School of Economics have grown in number. Such think-tanks offer the promise that by drawing together teams from different sectors of society, they can address complex levers of change.
Another tactic cited by academics and experts is to create more business accountability by creating a link between business behaviour and public knowledge about how businesses behave. The theory is that businesses will self-regulate when public knowledge about business behaviour is made available and widely published. Such policies seek to create accountability in a system where there is very little.
In understanding something so complex as US wealth inequality, context matters. It is important to take into account the US’s history and deep-rooted beliefs in a free, capitalist system. Changing societal perceptions, business behaviour, and laws will leave a lasting impact on the social landscape of the country. To address them, Americans must reckon with their deepest convictions. With a pandemic waging war on the country, rebuilding from within may not be far off.