By Rodney LaBruce

"An imbalance between rich and poor is the oldest and most fatal ailment of all republics." – Plutarch

What Does It Mean to Be Rich?

Defining wealth has always been a subjective exercise. For some, being rich means having a million dollars in the bank. For others, wealth is about security—a home to live in, a car to drive, and the luxury of not having to worry about basic necessities. Consider the simple privilege of driving past multiple restaurants to choose the one that satisfies a craving. After eating, you pay for your meal and leave a little extra for the server who brought it to you. These acts, small as they may seem, signal abundance to those who lack such choices.

But just as wealth is subjective, so is poverty. What one group considers "poor" may be another’s "rich." A person in a developing country might view an American living paycheck to paycheck as wealthy, while that same American might consider themselves struggling. This subjectivity extends beyond individuals—it colors how groups, societies, and nations define inequality and its causes.

The shifting definition of wealth highlights a deeper issue: inequality. Discussions about inequality often focus on income and wealth distribution, but the line between acceptable disparities and systemic injustice is not easy to draw. To address this, we must lean on data and analysis to define inequality as scientifically as possible. Without such rigor, the conversation remains mired in opinion, and solutions remain elusive.

What Is Income Inequality, and Why Does It Matter?

Income inequality refers to the uneven distribution of income across a population. In simpler terms, it’s the gap between what the wealthiest and the poorest earn. While some degree of inequality is expected in any economic system, the scale and scope of that inequality have profound implications for society.

Wealth inequality, a related but distinct concept, focuses on the distribution of assets like homes, investments, and savings. Together, these disparities shape the opportunities people have, the quality of life they can afford, and the stability of the society they live in.

Understanding income and wealth inequality is crucial because these issues affect everyone, not just those at the bottom. A society with extreme disparities tends to face higher levels of crime, poorer public health outcomes, and political instability. It also risks alienating significant portions of the population, eroding trust in institutions, and stifling economic growth by concentrating resources in too few hands.

Think about the impact of putting a lot of money in the hands of the wealthy. They would simply hold on to what they’ve accumulated and pass it on to the next generation so they can do the same. But take that same amount of money and place it in the hands of the middle to lower class, you’d see increases in production and pay because our money is more likely to find its way into the economy.

How Inequality Has Changed Over Time

Many people assume that the gap between the wealthy and the poor has always been the same, but the data tells a different story. Over the past 60 years, inequality has grown significantly, particularly in countries like the United States. The reasons for this shift are complex, involving changes in technology, globalization, tax policies, and labor markets.

In his groundbreaking book Capital in the Twenty-First Century, economist Thomas Piketty provides extensive data to illustrate these trends. One key finding is that, historically, the return on capital (investments, property, etc.) has outpaced the growth of wages. This means that those who already have wealth are more likely to accumulate even more, while those who rely solely on their labor see their relative position decline.

Piketty’s work also highlights the role of policy in exacerbating or mitigating inequality. For example, progressive taxation systems and robust public services can reduce income disparities, while policies favoring deregulation and tax cuts for the wealthy often widen the gap.

The Human Capital Hypothesis vs. Reality

One common explanation for inequality is the Human Capital Hypothesis, which suggests that as technology advances, productivity increases, leading to higher wages for skilled workers. In theory, this should result in a merit-based system where individuals are rewarded for their contributions to the economy.

However, the reality is often quite different. While technology has indeed transformed industries and created new opportunities, it has also led to automation and the erosion of middle-class jobs. Moreover, factors like nepotism and systemic barriers often outweigh skill and merit. Instead of a fair distribution of wealth based on contributions, we see arbitrary measures—like family connections or access to elite education—determine who gets ahead.

This divergence between theory and practice underscores why inequality itself is not inherently bad. Some level of disparity can incentivize innovation and hard work. The problem arises when the system becomes rigged, perpetuating cycles of privilege and exclusion.

The Social Costs of Rising Inequality

When inequality reaches extreme levels, it affects not just individuals but the fabric of society. Consider the United States, where the top 1% of earners control more wealth than the bottom 90% combined. Such disparities create power imbalances that undermine democracy, as the wealthy wield outsized influence over politics and policy.

Rising inequality also fuels resentment and division. Those at the bottom may feel left behind, while those at the top may become increasingly insulated from the realities faced by the majority. This disconnect can lead to a breakdown in social cohesion and trust, making it harder to address collective challenges like climate change or public health crises.

Recognizing Invisible Victims

One of the most subtle aspects of inequality is that many of its victims don’t realize they are being harmed. This is especially true for those who have internalized narratives about hard work and self-reliance. They may blame themselves for their struggles rather than recognizing the systemic factors at play.

For example, a low-wage worker might not see how corporate tax policies or weakened labor protections contribute to their financial precarity. Similarly, a middle-class family burdened by student debt may not connect their situation to broader issues like the rising cost of education and declining public investment.

By raising awareness and providing clear, accessible information, think tanks and advocates can help people understand how inequality affects them. Armed with this knowledge, individuals are more likely to demand change and participate in efforts to create a fairer society.

Solutions and the Path Forward

Addressing income and wealth inequality requires a multi-faceted approach. Some potential solutions include:

1. Progressive Taxation: Increasing taxes on the wealthiest individuals and corporations can help fund public services and reduce disparities.

2. Education and Workforce Development: Ensuring access to quality education and training programs can help level the playing field.

3. Labor Protections: Strengthening unions and raising the minimum wage can empower workers and improve living standards.

4. Universal Basic Income (UBI): Providing a guaranteed income floor can reduce poverty and give people more freedom to pursue meaningful work.

5. Wealth Redistribution: Policies like estate taxes or capital gains reform can address the concentration of wealth in a few hands.

Ultimately, any successful strategy must be informed by data and grounded in a deep understanding of the root causes of inequality. This is where organizations like the United Advocacy and Leadership Coalition and other academic research play a crucial role, providing the evidence needed to make informed decisions.

Conclusion

Wealth and poverty are not fixed categories but fluid concepts that vary depending on perspective. While some level of inequality is inevitable, the extreme disparities we see today are neither natural nor inevitable. They are the result of choices—policies and practices that favor a few at the expense of many.

Understanding the nature and causes of inequality is the first step toward addressing it. By combining rigorous analysis with grassroots advocacy, we can work toward a society where everyone has the opportunity to thrive. As we do so, we must remember that the goal is not to eliminate inequality entirely but to ensure that it reflects merit rather than arbitrary measures, and that it does not become a barrier to justice, opportunity, and dignity for all.