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Distribution of Wealth

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Thy Neighbors Cash

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In the August 5, 2007 New York Times Book review of Robert H. Frank’s new book Falling Behind: How Rising Inequality Harms the Middle Class, reviewer Daniel Gross notes:

Knowing that Steve Schwarzman of the Blackstone Group made almost $400 million last year, or that he spent $3 million last February on his 60th-birthday party, doesn’t simply make the typical American green with envy, and hence unhappy. Rather, Frank argues, the problem is that extreme consumption — at which Schwarzman excels — helps shape norms for the whole society, not just his fellow plutocrats.

This theme, which is also the focus of much of Deep Economy by Bill McKibben, is wrapped in a sobering view of just how concentrated wealth is becoming. What sounds fascinating about Gross’ book is how this effects our dreams and aspirations, and causes us to plummet ever faster toward an unsustainable future. Gross’s review continues:

In an economy where the wealthy set the norms for consumption and people at every rung strain to maintain the consumption of those just above them, that spells trouble. In today’s arms race, the top 1 percent are armed to the teeth and everybody else is scavenging for ammunition. Between 1980 and 2001, Frank notes, the median size of new homes in the United States rose from 1,600 to 2,100 square feet, “despite the fact that the median family’s real income had changed little in the intervening years.” The end result? Frank methodically presents data showing that the typical American now works more, saves less, commutes longer and borrows more to maintain what he or she views as an appropriate standard of living.

Because the gains have been so lopsided — the richest 1 percent have seen their share of national income rise from 8.2 percent in 1980 to 17.4 percent in 2005.

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