In his “60 Minutes” interview of Sunday (which I commented upon in the last post), Ben Bernanke responded to a question (from Scott Pelley) regarding the wealth disparity:
Pelley: The gap between rich and poor in this country has never been greater. In fact, we have the biggest income disparity gap of any industrialized country in the world. And I wonder where you think that’s taking America.
Bernanke: It’s a very bad development. It’s creating two societies. And it’s based very much, I think, on educational differences. The unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is five percent. If you’re a high school graduate, it’s ten percent or more. It’s a very big difference. It leads to an unequal society and a society which doesn’t have the cohesion that we’d like to see.
I think this response from Bernanke is notable for many reasons, one of which that it seems that policy makers rarely mention the wealth disparity.
In his response, Bernanke cites educational differences as the primary cause of the wealth disparity, and as support of this argument states unemployment statistics. For a variety of reasons I think that his reasoning in this response is flawed. However, if one does generally agree that a better level of education is (increasingly) required for wealth attainment, that in itself is problematical. It is hard to envision quick and dramatic increases in the quality of education in this country – such increases could take years. As well, the dramatic increases in the cost of education (especially for undergraduate and advanced degrees) is a major hurdle to a widespread increase in the educational level. Any increases in education should be viewed relative to that being attained by other countries on a global scale.
I strongly believe that the wealth disparity is a very important topic, especially at this juncture. Aside from “societal issues” such as that of fairness, I believe that a sustainable economy cannot coexist with an ever-growing wealth disparity. It has been disconcerting that no policy maker, to my knowledge, has offered any substantive plan to address this ever-growing wealth disparity. This is the type of glaring, continually unaddressed problem that I discussed in my article “America’s Economic Future – ‘Greenfield’ or ‘Brownfield’?”
As well, there is an issue of standard of living for the vast majority of American citizens outside of the upper income and wealth levels. The long-term growth in Real Median Family Income (which I discussed in the September 20, 2010 post) has been, at best, anemic. If one assumes a continual slow-growth economy (the current consensus among economists and other market professionals) there would appear little reason for this Real Median Family Income level to suddenly materially increase. If one assumes a less-favorable economic future, this Real Median Family Income could be ravaged by a variety of factors such as a less favorable employment environment and inflation/deflation effects.
A Special Note concerning our economic situation is found here
SPX at 1226.48 as this post is written