How Should Wealth Be Redistributed?

SUMMING UP James Heskett's readers weigh in on Thomas Piketty and how wealth disparity is burdening society.
by James Heskett

Summing Up

Is Wealth Distribution a Problem Cause or Symptom?

The passion and thought that went into this month's questions about wealth redistribution suggest that the topic is of more than passing interest. Some cautioned against hasty changes. Many used the questions as a platform for their own diagnoses. Others advocated tax and non-tax solutions.

The case against hasty change was made by Dave: "Market based capitalism is the greatest driving force of prosperity in the world today, but if we forget this and marginalize it through income redistribution, we will pay the price with less prosperity for everyone." David Wittenberg added, "Experience shows that income inequality need not lead to disaster, provided that there are fair means for the poor to achieve their aspirations." Donna succinctly asked, "Where is the incentive to accomplish if the fruits of one's labor only serve to make fruit salad for everyone else?" Gerald Schultz commented that democracy "is the only way to bring back equality… The problems are being identified. Voters will make changes happen eventually. I hope I'm not too naïve."

Anthony Von Mickle made the general case for taxation. "Democracy has long been for sale; in fact, bought and paid for… taxes have to be properly extracted and redistributed." Others suggested how this could be done. For example, Alan Kalake proposed that "There is a need to distinguish two types of wealth … wealth that is earned … (vs.) that which is inherited…Each member of society must contribute to society's wealth by building their own and sharing…Once you die, the wealth gets transferred to society." Carlos Avendano made the point that wealth eventually flows to real estate, pushing up values. "Isn't it obvious that we must tax the hell out of vacant properties and/or urban land speculation?"

Others suggested non-tax solutions. One such proposal was put forth by Mok Tuck Sung: "(The wealthy) … should be encouraged to participate actively in socially responsible initiatives (such as life-long learning programs) to help the lower income groups and the under-privileged… Government could launch reward programs to both groups to encourage their willingness to participate." Peter McCann said that, "The threat to democracy is almost self-evident, and the response is equally self-evident: campaign donation limitations … The 'playing field' would still be unequal but less severely so." Albert Stepanchic had a suggestion that hit close to home: "If I were evaluating the redistribution of wealth, I'd start with an examination by Harvard on 'redistributing' that endowment by spending some of it supporting open curriculum projects … that democratize higher learning."

Several embraced solutions aimed at what they see as the real heart of the problem. As Bruce Hiller put it, "Redistributing wealth from the super rich or even 'middle class' to poorer citizens … in and of itself will do little to improve general social conditions… Education and family are key ingredients in lasting income generation…" Don Powell's suggestions reflected Hiller's concerns: "'Inequality' is a concept of relativity … Focusing on the absolute will help to engender answers to how the absolute can be changed. A few suggestions: appropriate … education; socio-economic policies that foster the family unit; incentives … for capital formation and application, health improvements, elimination of resource waste (principally government but also business)"

Columnist Michael Gerson, writing in The Washington Post, generally agreed with these views. His thoughtful column suggested ways of overcoming the political differences running through this month's comments, when he said: "Proposals focused mainly on reducing income inequality require the political triumph of the left…But an agenda that increases the rewards of work, encourages stable, engaged families and promotes healthy community institutions could be a shared political enterprise." Is wealth distribution a problem cause or symptom? What do you think?


Michael Gerson, "The social disconnection," May 16, 2014, The Sarasota Herald-Tribune, p. 9A (reprinted from The Washington Post, May 15, 2014).

Original Article

Some years ago, my spouse and I had a conversation with a former student over dinner and a fine French wine. The topic was the proposed imposition of a wealth tax in France and, as a result, whether our host's family would remain in the country. We discussed it sitting near a priceless painting by a master with only a few examples of his work in private hands.

This was all brought to mind by the recent publication of the book Capital in the Twenty-First Century, by French economist Thomas Piketty. It's being hailed by some as one of a handful of important economic treatises in the last 50 years. Others question it as the work of a naïve academic. But the gist of Piketty's findings, based on centuries of historical economic analysis, is that returns to capital have, except for a time after the wars and depression of the twentieth century, outpaced economic growth. As a result, returns to labor have lagged far behind, accentuating the concentration of income and wealth in the hands of an increasingly small number of people. The pace of this trend has accelerated since the 1990s. (Work by a number of other economists, disputed at times, suggests that inequality of wealth is associated with slowing economic growth.)

To Piketty's way of thinking, forces leading to inequality are so serious that they threaten democracy. His data suggest that unless halted by external mechanisms, the situation is not self-correcting. His preferred form of intervention is a global tax on real wealth (minus debt). No fan of big government, he suggests that a mechanism be devised to effect a proportional transfer of wealth from the top to the bottom of the social structure by reducing the tax burden for those at the bottom.

The object here is not to analyze Piketty's work or biases—this is already happening. His strong views on oversized executive paychecks are under debate and estimates of wealth can be subjective. And his wealth tax would have to be imposed globally to discourage the kinds of moves contemplated by our French friend with the priceless painting, prompting comments about Piketty's naivete.

Rather, the purpose here is to discuss remedies, assuming for the moment that the concentration of wealth needs to be halted. Just how should it be done? It's not a novel concern. In Switzerland, for example, there is a movement to provide a minimum income for everyone. This, of course, requires a bigger role for government. In the United States, negative taxes are intended to address the problem.

Are significantly higher taxes on income, investment, or wealth the answer? The top income tax bracket used to be 90 percent in the US during the rare period when trends toward inequality were interrupted. How about higher estate taxes to reduce the amount of wealth that can be passed to future generations? If returns to capital are the concern, could those returns be taxed much more than so-called "earned" income? Or should a progressive consumption tax be considered, as suggested by New York Times columnist David Brooks? In his words, the purpose would be to lift "people from the bottom with human capital reform, not pushing down the top" with capital reform.

Can we devise a way that doesn't involve taxes? This might include sanctions on the flight of capital to tax havens. Or should we do something to stimulate competition and technological innovation to reverse accelerating inequality and the threat of stagnation? How should wealth be redistributed? What do you think?

To Read More:

David Brooks, The Piketty Phenomenon, The New York Times, April 25, 2014, p. A19.

Thomas Piketty, Capital in the Twenty-First Century (Cambridge: Harvard University Press, 2014).

    • Barry Shere
    As one dependent on returns from labor, I do not have the time or energy to devote to the studies cited here, and must comment on the basis of observation (over a lengthy period) only.
    While I am critical of "oversized executive paychecks," I recognize the impossibility of defining and fairly, effectively dealing with that situation. Interestingly, many of the critics of income disparity seem to be the beneficiaries of that result themselves, or otherwise able to enjoy the fruits of the current system - like dining with a fine French wine near a priceless painting by a master. Moreover, the tools required to insure that no one makes "too much," merely make those with control of the tools (governing power) the only ones who make too much. (Perhaps a study of the wealth of career politicians would be enlightening.)
    Finally, nothing is more associated with slowing economic growth than larger government. How many times do we need to see or experience this result before we understand it? Can we not see that more people benefited in the United States, while the Rockefellers, Mellons, Gates, et al became "excessively" rich, than under any other system in the world?
    • Peter McCann
    • Consultant, McCann Corporate Consulting Associates
    The points are a) the threat to democracy through the concentration of money and power to influence elections, through unrestricted donations to candidates, b) the concentration of wealth beyond what a rational person might believe to be proportionate to effort and contribution to the economy and c) the implication that some having far more than others, then the others must have far less than would be the case in a reasonable alternative.

    The threat to democracy is almost self-evident; and, the response is equally self-evident: campaign donation limitations of, for example, $100,000 would still provide considerable scope for generosity while avoiding the more questionable donations, directly or indirectly, of millions of dollars. The 'playing field' would still be unequal but less severely so.

    The second point, that the concentration is beyond a reasonable reflection of effort and contribution, is tougher to dismiss or approve. Valuing a contribution of a new technology or business model is very theoretical and then forming a sound opinion of reasonableness would require wisdom beyond our normal practice. However, one can assume that most people would agree that lifetime earnings beyond some threshold of, say, $25,000,000 or $50,000,000, is outsized although not immoral in itself.

    The third point, that some having more means that others have less, is dismissed on the basis that those with more are productive and have grown and will grow the economy for all, including the others. However, the evidence is not convincing that greater inequality leads to growth; in fact, it may be that greater inequality may slow grow and may be causal to social unrest which certainly does cause slow growth.

    The solution may not be an absolutist approach of doing nothing and let what will be, be (the current climate change approach in certain countries) or revolutionizing income and wealth distribution. The safer and saner approach is a series of incremental changes, followed by pauses to assess their impacts, and followed by further course corrections.

    Good first steps would be campaign law reform with perhaps a constitutional amendment in the case of the US, an additional 2% corporate tax on income in excess of, say, $5,000,000, an additional 2% tax on personal income world-wide in excess of, say, $500,000, a reduction of income tax of 5% of income less than, say, $50,000, and increased government expenditures, directly or through vouchers, on human capital, including early education and neo-natal health care.

    Then, every decade there could be further public debate and incremental adjustments.
    • Marlon Burgess
    • CEO, MDG Health Solutions
    Makes for interesting debate, now matter how you're positioned. Hopefully out of these debates, mature solutions to real problems in the world will emerge.
    • Jay Pendarvis
    • President, Cerebral Solutions Inc
    I believe the data discovered in this study is legitimate and profiles a problem in our economy that has been worsening since the Reagan administration. We have experienced systematic deregulation and created the biggest banks in the world, which are now hopelessly tethered to the global economy. Not providing the proper incentives for big business to retain operation capital in the states has lead to less tax revenue. Declining tax incentives to invest in small and mid tier businesses has slowed home-based innovation. Additionally a convoluted and complicated tax code has provided numerous shelters for those at the top. I believe Piketty's theory is being playing out in real-time, but has increased in intensity with our new global economy. Although all isn't lost some political courage could significantly help the situation.
    • John
    • Adjunct, Keuka College
    As both an educator and a president of a consulting firm, I find Piketty idea consistent with hindsight. While the income gap continues to expand, it can be blamed on greedy CEO, investors, unions, and government inability to stop spending. The root of the problem is poor education, government policies that make innovation difficult if not impossible, and over regulation. While all of these contribute to the problems, poor education is the serious one in the US. When I say poor education, I am not talking about degrees, but the fact that we disregard our youth, fail to educate our high school students, and teach our college students things that will not serve them well in the future. We have an abundance of "financially trained" MBA who know nothing about leadership, empowerment, system thinking, or even human resources. If we educate we can solve many of our problems, if we embrace differences at every level and stop placing b
    lame on everyone except ourselves, we may find our way out of this.
    • Gerald Schultz
    • Management Consultant, Retired CEO, Self-Employed
    I agree that we are heading towards more income inequality but that doesn't mean the current trend will continue indefinitely. Many factors have contributed to this but "democracy" is the only way to bring back equality. While it is possible to predict that the power to make changes is dominated by a few, I believe that as long as we have democracy people will "ultimately" decide that it is in their own best interest to vote for candidates that will support their needs. It is only recently that it became widely known that wages were stagnating, medical care was too expensive, education was too expensive, many corporations don't pay taxes, minimum wage changes are over due, some of the I% pay lower taxes than the middle class ......... employees such as those at Walmart are subsidized by the government. The problems are being identified. Voters will make changes happen eventually. I hope I'm not too na?ve.
    • Hugh Quick
    • home, none
    I think that Professor Piketty is discussing the symptoms rather than the disease. The real problem is that talent is not distributed evenly among individual humans.
    • Carlos Avendano
    • Entrepreneur, Lentescol
    I've worked in several countries throughout my life, some very egalitarian, others very unequal. When discretionary policies are run for too long, people take subsidies for granted, wage inflation rises and a large number of the long-term unemployed simply stop looking for jobs (Greece).

    On the other hand, very unequal countries (like Colombia) have lesser fiscal burdens and weaker wealth-transferring attitudes. Hence the rich become richer (thanks to r>g, better education, nepotism and fiscal evasion), while a substantial percentage of the population remain stuck in the informal economy (enough to survive, but not enough so as to break the poverty cycle).

    Surprisingly, once the r in equities and bonds starts to abate, both the Greek rich and the Colombian rich happily agree on placing their money into real estate. And then is when wealth rocks the basic foundations of modern societies, by pushing the middle-class to the outskirts of town, forcing them to plunge neck-deep into large mortgages -in the assumption that they will turn into serious homeowners- while asking others (low-skilled migrants) to fuel the housing bubble with their own sweat and tears. In the meanwhile, the state usually benefits from this type of growth model as it's easily taxable and tangible for all to enjoy.

    Thus, isn't it obvious that we must tax the hell out of vacant properties and/or urban land speculation?????
    • John Stengrevics
    • Consultant
    While creating a stir in the U.S., Piketty's book has gone largely ignored in Europe. This is because the dangers posed by an unchecked income and wealth gap are widely recognized there and policies have long been enacted to counteract it. Thus, in the developed nations of Europe, citizens enjoy extensive social welfare programs, free health care, university education at little expense, etc., etc.

    The growing wealth gap is a threat to democracy and, equally, to economic prospects in the U.S. If the middle class continues to shrink and incomes continue their relative decline, who will buy the products and services offered by corporate America? Unfortunately, regardless of what clever solutions may be devised, there is little chance that the wealth gap will be addressed in the foreseeable future.

    To understand why, one has to confront the elephant in the room, the toxic issue that no one wants to touch: Race. The initial, completely misguided, reaction to the election of Barack Obama was that we had moved, at last, to a post-racial America. With the benefit of hindsight, we now see that his election has set race relations in America back 50 years. How so? And, what does this have to do with solving the wealth gap?

    The election of Barack Obama signaled that for roughly half of the electorate, the decision for whom to vote was indeed color-blind. This half would vote for the best candidate who offered the best prospects, with race playing no role. The other half of the electorate, unable to tolerate the prospect of a black person succeeding in a position of such responsibility, hardened it's racist views and moved itself toward the far right. Thus, the rise of the Tea Party. Thus, the strategy of the Republican party since the election: Obstruct every proposal made by the President and by Democrats, so that at the end of his terms, Republicans could point to the lack of enacted legislation and say: "See, Obama was a complete failure. He did nothing." (Racists rest easy!) Regardless of what may be proposed to address the wealth gap, no matter how well thought out, it stands no chance in Congress.

    The hardening of racial attitudes, and consequent slide to the right, has also given convenient shelter to those, like the Koch brothers, whose rampant greed is their raison d'?tre. Smaller government, dismantling environmental protection, denial of global warming - all euphemisms for lower taxation which exacerbates the wealth gap by eliminating any prospects for the types of programs enacted in Europe. Republicans have tried to repeal Obama care what, 50 times?

    Professor Heskett's call for a discussion of remedies to the wealth gap, while well-intentioned, misses the point. We would be better served by a discussion of racism in America, its contribution to legitimizing right-wing extremism and the unholy alliances it creates.

    John Stengrevics, DBA (HBS)
    • Anthony Von Mickle
    • President, The Investment Forum
    As a student of great wealth, I've thought about this more than a few times. One of my favorite experts would be former labor secretary Robert Reich. I think a progressive tax on income above one million dollars going up to the 85% level is necessary. The one tenth of one percent are making out like bandits and sticking the middle and upper middle class with the bill. I'm all for my $40 million or $400 for that matter and can see no problem with paying progressively more in income taxes to help the redistribution of wealth. I love yacht shoes from Ft Lauderdale to Dubai to Monaco but I can't agree with docking a $ 40 million yacht in another country to avoid USA taxes while still sucking up public services in conjunction with the lower class. Democracy has long been for sale; in fact, bought and paid for. I'm not even sure I still believe the public elects our highest government officials. I think their bought by 1 per center
    s who own businesses and requires tax favors in return. In short, yes taxes have to be properly extracted and redistributed. .......Please excuse any typos as I'm responding via smart phone. A laptop would have produced a much more passionate and longer response.
    • Arthur
    • President, One-person Consulting Business
    You ask: How Should Wealth Be Redistributed? In actuality wealth has been redistributed since the beginning of time. There is an optimum distribution of wealth in any economy that allows that economy to work most efficiently. I don't believe anyone knows exactly what that optimum level is, but let's refer to it as the balance point. When we get out of balance, as one would expect, we have problems. So is true about distribution of wealth. While wealth has been redistributed upward for last several decades in the U.S. and other countries, we find these economies out of balance. Rather than saying we need to reduce inequality we should be talking about getting the distribution of wealth back into a reasonable balance. Similarly your question carries the implicit concept that we are and have not been redistributing wealth upward until now.
    So the question shouldn't be "How Should Wealth Be Redistributed?," but how should it be re-redistributed to get back to a better balance.
    • Michael leahy
    • Visiting Professor of Health Administration, Linfield College
    After reading your comments on wealth disparity, I chose to ask my Linfield College Global Health and Health Planning classes what they thought. The irony of the mostly 1% commenting on income and wealth disparity did not escape me. Some of their reactions:
    1 - "Duh" - do rich well educated people really understand this is becoming a crisis for my generation?
    2 - Some of the solutions - like $10.10 minimum wage are only bandaids with Post-It-Note glue. More bold, creative thinking needs to think about what is causing these increasing disparities and needs to include not only more fairness in income but also in life necessities - basic housing, food, health universality.
    3 -Income and Jobs no longer are seen as the route to enormous wealth.
    Perhaps the solution needs to include a better understanding of the causes of growing disparities so we are solving the real problem? Mike
    • Alan Kalake
    • Veterinarian studying futures, Gauteng Department of Agriculture and Rural Development
    Very interesting food for thought. Herewith my naive two cents worth:
    There is a need to distinguish two types of wealth (maybe there are more: (1) wealth that is earned from sacrifice, toil and even delayed gratification, which in my mind is wealth that should be encouraged and discouraged through 'harvesting and giving to those who have not sown anything' - After all, the common saying that "you shall live by the toil of your hands and from the sweat of ones labour??? is a common wisdom. (2) This type of wealth is that which is inherited. I presume most of the billionaires on earth today will be leaving this wealth to someone. If this wealth is not passed on to society to generate more wealth, the heir who has not worked for it must only get very little. Each member of society must contribute to society wealth by building their own and sharing with whoever whilst they are still alive, if they so wish. Once you die, the wealth gets transferred to society. This is to avoid creating a society that develops negative tendencies of taxing the few
    rich, whereas the majority do not want to sacrifice, save, toil and delay gratification to build wealth. This is a naive view from a non-economist and non-social scientist
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    Any thought of redistribution of wealth is logical theoretically but this is something which is hard to achieve for various reasons. Firstly, the rich class is never comfortable to welcome any action which may make their wealth stagnant or less (by application of high level of wealth tax &c.). Similarly for those occupying high places in Government/private corporate sector. Reliefs by way of very low /nil levies on below poverty line and lower middle class can provide some respite. But it is easier thought than done. It is almost impossible to minimise the gulf between haves and have-nots.. Only a strict socialistic pattern of society could lead to this but no country can claim it falls in essence in such a category.
    • donna
    My question is "Why" we think we need to redistribute wealth? I agree with Barry...Can we not see that more people benefited in the United States, from the Rockefellers, Mellons, Gates... Where is the incentive to accomplish if the fruits of one's labor only serve to make fruit salad for everyone else?
    • Toni Webb
    • President, Web Marketing Intl
    What will the world look like in 100 years if wealth continues to be consolidated? Do individuals really need millions and billions to live comfortably, while the majority barely survive? We might as well abandon the pretense that Christianity, as it has evolved, is all about caring for your brothers and sisters.
    • Ron Kurtz
    • Owner, American Affluence Research Center
    It is interesting to see the variety of opinions expressed about this issue. I would like to add the following 5 points for consideration:

    1) Maintenance and growth of our middle class is essential to preserving the stability of our democracy, the civility of society, and our consumer based economy.

    2) We have an economy where job opportunities increasingly require a good education (even of many skill trades) to make a middle class living.

    3) Latinos and African Americans, among which the attainment of a good education falls well behind the levels of our Asian and Caucasian population, will soon represent half or more of the total population. If this continues, their inability to qualify for good paying jobs will further reduce median (and average) income numbers and make the wealth disparity even larger.

    4) Incomes in the billions by hedge fund managers and in the multi millions by corporate executives (as well as sports and entertainment celebrities) may be repulsive, but a 100% income tax for these people will not provide the government funds needed to support the growing share of our population that will need some form of welfare and social services. (see #3 above).

    5) Until the political system is changed to prevent the existence of "career politicians" in congress, so they will do what is best for the country and not what is best for their next election, it is not likely that we will get the government strategies and programs needed to address the pending crisis implied by extrapolation of the above factors.
    • Govind
    • Freelancer
    Affordable Food, Education, Housing, Transportation should provide equal opportunities to each irrespective of family income. This may be solution.
    • Steve Hickman
    Wealth concentration is at least partially caused by the scalability of modern enterprise. Consider Whatsapp - purchased for $19B (including $4B cash) with less than 100 employees. While allowing "too big to fail" enterprises to continue to exist is one of many ways to enable wealth concentration, the reality is that automation makes it possible for very few people to service a large customer base. Even if you only make a small margin on each transaction, those pennies add up.

    Automation continues to get easier - and the incentives to continue to automate will only increase.

    I don't think you can legislate away the use of automation - nor do I think you want to. This may mean that tax policy and weath redistribution is the only way to effectively address this.
    • Dave
    • Rice, SABMiller
    My college studies in the origins of the US constitution and government, started with the philosophers of the enlightenment. Men like Locke made the case that the fundamental reason for government was to protect property and the individual.

    Now we are arguing the opposite - government must redistribute property in a way that has popular appeal. Government is there to protect the body politic from individuals with too much wealth, as the French would argue. High income individuals are a risk to the state, because of the political instability caused by the common man's jealousy of the wealth captured by bankers and CEOs.

    This will take us from a meritocracy of the rich and talented to a much worse tyranny of popularism and government intrusion (starting with burdensome regulation). That is the real threat to democracy.

    When government stops protecting property and starts redistributing and over-regulating it, the individual loses protection. And something else happens - the value creating force of markets, become marginalized. Instead government allocates vast amounts of capital (in the form of income redistribution or entitlements) and for the purposes of staying in-power. They fail to achieve a return on investment and the pie starts to shrink.

    Entitled classes are created and the individual loses incentive to invest in his education, the risk of starting a business or the stress of difficult executive leadership roles. As this incentive is reduced, economic growth slows further and everyone has less.

    That is the future we are creating as we prioritize income equality over the drivers of economic growth (e.g., protection of property, free markets, limited regulation, limited government). Instead we seek equality by taking from the top 1% or 5% or 25%, but the more we do this, the less the 99% or 95% or 75% have in an America with slower and slower economic growth.

    We worry about the vanishing middle class in America. Ironically, America's influence in the world this past century has resulted in the greatest growth of prosperity and middle class expansion the world has ever seen. Since the fall of the Soviet Union, billions have been welcomed into global capitalism and hundreds of millions have become middle class around the world. It is the American middle class that is losing now, because the industries that depend on the middle class for labor are leaving as investing in America has become less attractive with the highest corporate tax rate in the world and increasingly burdensome regulation of all forms.

    And the more we seek income equality in America, the faster investments and the industries they create will vanish along with what remains of the American middle class. The goal of income equality, leads to wealth redistribution by government and that ends with a large, bureaucratic government presiding over a weak economy where everyone is worse-off. See the Soviet Union. See France. See California and Illinois.

    Do we really have to repeat this cycle and squander the prosperity of a generation to finally understand what we are doing? Don't we know enough to aviod this terrible mistake? Where are the John Lockes, Alexander Hamiltons, Milton Friedmans, Ayn Rands, etc. of our generation to make the case for American democracy, rights of the individual, property protection and free markets?

    Market based capitalism is the greatest driving force of prosperity in the world today, but if we forget this and marginalize it through income redistribution, we will pay the price with less prosperity for everyone.
    • Michael White
    • Chairman, Rite-Hite Holding
    In my view, an analysis of wealth distribution in America should not exclude the increased percentage of GDP that has been absorbed by various levels of government, and the subsequent returns, or lack thereof, garnered by society from it. Anecdotally, in my lifetime, government's share of the pie has close to doubled and the fruits received by most have not come close.
    • PS
    Well, as a result of the process, the U.S. is already an oligarchy, with some oligarchs buying republican politicians, and other oligarchs buying democratic politicians.
    • John Arnott
    • CEO, Nimble Ventures Inc.
    I believe re-distribution in some form is desirable as the concentration of wealth amongst the top 0.1%, the 1% or the 5%, simply distorts society. The super rich can escape to gated communities but they still need public services such as roads, bridges, water, etc., so some mechanism to make sure these are provided is necessary.
    Also, we derive no benefit from the maintenance of a large portion of society living in poverty, this is a sign of failure.
    I'm not suggesting socialism - just look at Denmark and Sweden - they have a 'balanced approach' and it seems to work rather well.
    • Frankie Salinas-Contreras
    • Managing Director, USA ES TRADE, LLC.
    The United States of America (Federal Government) will save billions of dollars by making every member of the U.S. House of Representatives a volunteer Job with no pay. Also, every U.S. Senator should not get pay...these positions in the government should be a volunteer non-paying job.

    Their salaries should be adjusted to the real cost of leaving in a very frugal manner.

    By definition all of positions in the U.S. is government cabinets should be a volunteer position. By making all of the these positions volunteer jobs, the Federal Government will save billions of dollars and control unnecessary spending in the U.S. Government.

    It sounds like a radical idea but it will prevent people from entering the government as a form of making a leaving rather than really making changes that will benefit American and the country as a whole.
    • Ferdinand
    It is so important to get this debate going on all levels of our societies! Too many take things for granted and assume that nothing will change their life situation. Politics cannot solve it through different taxation, the way that most low level income households spend their money won't be altered. If you are engaged parents will spend it on the education of their children. If not then they won't.

    Thus, we as societies have to start with the individual character behind the young employee or student from a low income family background. This requires extremely well funded foundations so to allow one tutor to take intensive care of not more than a handful persons at any given time. Foundations like these exist in many countries. Of course, they are cash-strapped like most NPOs.

    I remember a presentation of life objectives and the lecturer put out the message to this audience. Be all you can be, earn as much money as you possibly can and then spend it all for a good cause! That's it, that is exactly it!

    To all the super-rich folks out there, ask yourself:
    1. How many cars can you drive at any given time?
    2. How many rooms of a super-luxury mansion can you actually enjoy at any given time?
    3. What is the limit weight of jewellery you can you put on your wrist, fingers or neck before it becomes a burden for movement?
    4. If you knew you die tomorrow what would be the likely statements at your grave? Would you like these statements? Would they make you satisfied of your life's output?

    Sharing is so much more rewarding than owning. Nurturing young kids or students to successfully set foot on a career path is likely one of the most rewarding things you can do in your life.
    • Albert Stepanchic
    • project management
    The premise that a "concentration of wealth needs to be halted" seems to be ironic to me for two reasons:

    1) It's being discussed by the Harvard Business School which is an institution devoted to training and research on business and how to succeed and create wealth.

    2) The Harvard endowment has current assets of approximately $32 billion and has enjoyed an annual rate of return of over 10%.

    Education costs have risen even higher than medical care and there seems to be no end in sight. If I were evaluating the redistribution of wealth, I'd start with an examination by Harvard on "redistributing" that endowment by spending some of it supporting open curriculum projects like MIT's OpenCourseWare and other projects that seek to provide a modern approach to higher education through technology and innovation that democratize higher learning.

    Would it be a good world for Harvard if anyone with internet access could benefit from the teaching and knowledge it provided? I'd be fascinated to see a study that examined the effects of a Harvard exercising "creative destruction" and creating a radically new higher education model made free for all who wanted one. I think that would be a more intractable problem than simply taking and giving away someone else's money.
    • Hugh Quick
    • home, none
    I have been fortunate to live and work in quite a number of different countries. For the most part I remain confused about how humans should try to live their lives but one conclusion that I have reached is that material wealth has little to do with happiness. For example my wife and I went to live in Thailand in 1964. It was obvious that most people there were materially poorer than those in the UK but they certainly didn't seem to be less happy, rather the opposite.
    • Don Powell
    • Retired (Business)
    The discussion about inequality completely misses the point. "Inequality" is a concept of relativity (i.e., ratio of rich to poor). The real issue is one of absolutes, e.g., why is a segment of the population "poor" / "lower income" not why is x% poorer than y.

    Focusing on the absolute will help to engender answers to how the absolute can be changed. A few suggestions: appropriate (please note "appropriate") education; socio-economic policies that fosters the family unit; incentives (conversely, eliminate disincentives) for capital formation and application, health improvements, eliminate resource waste (principally government but also business.
    • Mok Tuck Sung
    • MD, Profit Tools
    It is unfair to use institutional intervention measures to force the wealthy population to part with their wealth that they have accumulated honestly and ethically through their competencies and hard work. They should be encourage to participate actively in social responsible initiatives to help the lower income groups and the under-privilege. At the same time, life-long learning programs be actively promoted to the low income and under-privilege groups to better their competencies and enhance their earning opportunities. Government could launch reward programs to both groups to encourage their willingness to participate.
    • Giulio
    Best way to redistribute wealth is to introduce soon a single Global Governance on financial transitions.
    • Larry Rohde
    • Analyst, CLI
    One of the ways to address the disparities could be as simple as making a rule mandating raises for employees based on tenure as opposed to performance. Although it could be a difficult start could not both the organization and the individual benefit? Take the employee who maintains status or position would they not become more efficient in the jobs just from constant repetition the output would improve. Since we have changed the way we do business in the US that is to say we no longer promote from within because the organization is satisfied with the output of the individuals the perception is the employee is also satisfied. Which is not always the case we stand to lose a stable workforce as long as we continue down the path where the individual needs to find another employer in order to get a raise which in reality puts them in the same boat as executive management without the opportunity to increase wages in the same corporation. Thus
    leaving them at a very large gap in opportunity. When people are forced to live within a certain income bracket. I believe more and more will come to a conclusion that to be subsidized by the government is the individual preferred choice if one learns how to live within their own budget where is the incentive to change? We have taken efficiency as far as it can go so we are now working on reducing cost through give backs when will we realized this is not the solution and only exacerbates the problem by adding bad moral to the workforce. I believe this just drives a bigger wedge between the two groups.
    • William Travis
    • Chairman, Maintenance, Inc; Pine Ridge Ranch
    A major consideration that is overlooked is that concentration of industry restricts small business and implementation of new ideas......restricting wealth growth. One example is Walmart destroying small retailers and the elimination of higher paying jobs. A second example occurs through large company acquisitions and the continuous absorption of new ideas and growth companies.
    • David Wittenberg
    • CEO, The Innovation Workgroup
    Income equality is not the summum bonum for a society. A heavy focus on this metric reflects only envy.

    The more serious question is whether income inequality will lead to a breakdown of social order or the collapse of other important elements, such as freedom, health and prosperity. Experience shows that income inequality need not lead to disaster, provided that there are fair means for the poor to achieve their aspirations. Revolutions don't arise from an unequal distribution of wealth; they happen in times of rising expectations when the expectations of the middle and lower classes are not met.
    • Aim
    Professor Heskett, you certainly have the authority to raise these kind of questions, and ordinary Americans have the right to put their views across, and God bless America for that. However I would like to challenge you on how you use your influential position to open up debates like these.

    Because this question specifically is based on a completely false perception that democracy's sole existence is totally dependent upon financial/economic well being. Inequality and wealth distribution mean that there is a hick up in economy'c management at large; you indeed are posing the headline correctly: How Should Wealth Be Redistributed, but the driving question is a misleading one that the problem by itself threatens democracy. Democracy is far beyond mere financial or military well being of people: it is the "right" for an opinion that can potentially change the course of a democratic country and its individuals.

    Do you even realize that alternative implication of that posed question mean that resource or intellectually poorer states have no shot at a democracy. Please understand that it took 100 years of bloody civil war (1866) for a "poor" America, relatively speaking, to establish policies of inclusiveness and further improve with civil rights movement of '60ies. At that time, America was not the world power and yet blood's were spilled to primarily have a "say" in the direction of the young nation.

    And by the way, if choice is given I would much rather live in a poor democracy than a rich dictatorial regime, and I would know as I was born in USSR.
    • Chris Combs
    • Lead Pastor, Family Tabernacle Church of God
    It is important to me as I deal with those in the trenches of public service that there are many people in need. The divide for many goes far beyond income and their families budget. Money does not solve many of the problems of those less fortunate. The upwardly mobile population is so focused on economics that the simplicity of living has been lost. People need hope. Money does boost the health of the bank account, yet plays little on their pursuit of happiness. The redistribution of wealth will indeed help some. Yet there are many who will squander their assistance. The heart of the matter is that there are major societal issues that make redistribution such a pipe dream. The economically desperate are desperate because of the opportunity that is presented to them and the way they handle those opportunities. Education is key to humanitarian success. We should forget meeting quotas and benchmarks, and begin to train men and wo
    men for life. Vocational education could be an answer to much of our debate. Give those finishing high school an option for a service career. When a student meets GPA and community service benchmarks they are given a chance to fill vacancies in real jobs. It is very prevalent in small town USA that many people feel stuck. They do not know that there are jobs to be filled by good people. When an employer is given an individual who loves their job they will be productive and successful. The solution often times can be found by looking at where we want to be. We want every American to be employed, happy, and productive. We want those unable to work due to handicaps and illnesses to be well taken care of. We want security for every family. and to meet that vision we must be less selfish, and more willing to provide a road map for every individual.
    • Gerald Nanninga
    • Principal Consultant, Planninga From Nanninga
    1) If you take the really, really long view (many centuries), you will see that when almost everyone had similar incomes (in centuries past), those similar incomes were at subsistence poverty levels. What's so good about that kind of equality?

    2) The average global standard of living is higher now than at any time in history. More people are better off than ever before (and that trend is continuing). Why would anyone want to change that type of trend?

    3) The problem is that we are focused on comparing our incomes to each other today rather than comparing our collective incomes to times past. So what if some people are getting better faster than others if, in general, all are getting better? I dare say that most of the proposed attempts to slow down those rising faster will also hurt the opportunities for the rest.

    4) My proposal, if you must have one, is to divide income formation into two camps: a) Those who earn it by creating real value and b) those who earn it through financial manipulations. Reward the real value creators and punish those who just push money around with little purpose other than greed. Of course the devil is in the details, so I'm not sure how even this would work.
    • Richard Sherrill
    • Retired
    The discussion seems focused on the reduction of wealth for those who have it, and the use of taxes as the only tool.
    If the purpose is to help the less well off, whose income is wage based, I think there is another alternative.

    One of the rules for access to the several stock markets could be that the highest paid person in the organization, including all compensation, can only be paid 100 times [or some other defined number] the compensation for the lowest paid person in the organization [regardless of country or temp/permanent employment status].

    Such a rule for access would not affect private companies, but would reinforce the idea that Capitalism brings benefits to everyone. It would not require tax legislation, not prevent high pay, not give money to those not working, not hurt share holders.
    • Anonymous
    Thanks Heskett for bringing this. This really leads to a deep and serious debate.

    Piketty & Goldhammer work is revealing. I would risk to state that this reading calls at least for two others - The bottom billion (Paul Collier) and the Other side of Innovation (Govindarajan & Trimble).

    An even and equal world "at the top" as defined by most academics is not even imaginable. At the middle, based on top 4 OCDE countries, or Liechtenstein, or Luxembourg, is not truly possible.

    It is reasonable to admit that the conversion of poverty into a better quality of life and living conditions is something insolvable.

    According to some studies, world?s population is heading to 9 billion by 2040; this is just the next-door neighbor reality. So statistics may easily prove that based on per capta GNP we all may be richer or poorer. Take China, for instance, with some spectacular changes, China has made second post on world?s economy rank. Nevertheless, what this means for 1,2 billion Chinese out of it is nearly 1,4 billion people?
    Let us try to figure out a new China and India as countries like Singapore. Same for any BRICS. What about the entropy rules?

    What the discussion seems to miss is the need for idiosyncratic changes, to start with human behavior towards consume(rism) which is by far the most complicated element of the set of changes needed. For the corporate side, the constant growth management (quarterly, it?s been a while) at any social cost, is a killing machine of nature, tradition and myths.

    There?s nothing na?ve on the work. But yes, it omits some truths that do not belong to economic analysis.
    The only possible equality is that based on non-material growth and evolution, but this is also difficult to be accepted.

    Piketty & Goldhammer go to Malthus, Ricardo, and others, I picked up this one in particular related to Condorcet (page 363):
    ... despite being quite radical for the time. Proponents of this revolutionary legislation were convinced that they had found the key to future equality. Since, moreover, the Civil Code granted everyone equal rights with respect to the market and property, and guilds had been abolished, the ultimate outcome seemed clear: such a system would inevitably eliminate the inequalities of the past. The Marquis de Condorcet gave forceful expression to this optimistic view in his Esquisse d'un tableau historique des progr?s de l'esprit humain (1794): "It is easy to prove that fortunes tend naturally toward equality, and that excessive differences of wealth either cannot exist or must promptly cease, if the civil laws do not establish artificial ways of perpetuating and amassing such fortunes, and if freedom of commerce and industry eliminate the advantage that any prohibitive law or fiscal privilege gives to acquired wealth."

    In this beginning of the XXI century, this equality is restricted to 1.000 families and a bit of it extended to no more than 10% of the world?s population (placed in all continents, no matter the political and economic systems). So, who?s democracy would be affected and what kind of democracy?
    • Brian Hoffman
    I have not had a chance to read all of the comments below, but two things have struck me because they each came up several times:

    First, a couple of times, in one form or another, the idea that excessive wealth is not a problem because it helps the economy overall has been suggested, but isn't this the old chestnut "all boats rise with the tide"? Look at the statistics - most boats are sinking.

    Second, the wealth distribution question seems to be universally understood as distribution from the haves to the have-nots. Does it not occur to anyone that the changes in tax codes and business-friendly policies over the past thirty years are already redistributing wealth - but in the opposite direction? Isn't the question not whether to redistribute wealth, but in which direction we think it is fair to do so?

    Finally, I want to point out, regarding the threat to Democracy, how much empathy can we expect our senators and congressman to have for the middle class, never mind the working poor, when the average net worth of the U.S. Congress is almost $8 million? While lavishing them with perks are lobbyists backed by "citizens" with even more wealth?
    • Bruce Hillier
    • CAO, Financial Services
    Education and family are key ingredients in lasting income generation. My work experience in developing countries 15 years back exposed me to a general hunger for relevant education and skills in younger populations. Their families had little, the driving want was to better the situation no matter the effort. That may be a generalization, however when considering that in terms of high school drop out rates in the US, the juxtaposition is stark. Redistributing wealth from the super rich or even "middle class" to poorer citizens, in democracies like the US, in and of itself will do little to improve general social conditions.
    • Charalambos Vlachoutsicos
    • Adjunct Professor, Athens University of Economics and Business
    I would opt for higher estate taxes and higher taxes on luxury goods, private planes, yachts, expensive cars, expensive restaurants and other luxury costs.
    • Hugh Quick
    • home, none
    The discussion of 'Wealth Distribution' reminds me of a quote in Madeleine Albright's autobiography. An elderly friend feels she is dying and says, "I go out of this world as I came into it - bewildered."