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Why is wealth important? Wealth is very important because people rely on it to carry them through financial emergencies, fund retirement, provide an education for their children, or to start a new business. Wealth translates into opportunity and quality of life. Income is important because it’s the primary source for starting to build wealth . What’s all the controversy about? Wealth and income disparity have existed as long as societies have existed. After all, people have different occupations with different values and are paid at different levels. People live in different circumstances. There will always be gaps between the “haves” and the “have nots.” Over the past few years, however, the levels of wealth and income inequality in the United States have increased dramatically, making these major political and social issues . In 1976 the top one percent of households received 8.9 percent of all U.S. pre-tax income . By 2012, the top one percent received 22.46 percent of all U.S. income and that number continues to grow. The statistics for wealth inequality are even more staggering: 84% of American wealth is owned by the wealthiest top 10% of people . The average net worth (that means the average total wealth) of upper income families is nearly 70 times that of average lower-income family . Those are some pretty dramatic numbers! In the last 30 years, rich Americans have gotten a lot richer, while poor and middle class Americans have increased their wealth by very little if at all. How do wealth and income inequality impact commerce? There’s a lot of controversy about the effects of wealth and income inequality on commerce . Some economists and politicians think that rising income and wealth inequality is a natural effect of changes in the U.S. economy . In this view, rising inequality isn’t all bad, because the people who benefit most use their wealth by reinvesting in commerce and the economy to create new jobs , technologies, and opportunities which are available to everyone. Other economists and politicians think that wealth inequality is an unnatural burden on the U.S. economy. They argue that government policies favoring the wealthy over the poor and middle class, harm the economy by limiting the ability of most people to contribute to economic growth and gain access to wealth. This has a detrimental impact on commerce. It slows economic growth by reducing the purchasing power of the middle class , and forces many people into credit card and other debt in order to make ends meet. Wealth inequality also inhibits social mobility (the ability better one’s living circumstances), and may contribute to a less-educated workforce unable to compete in the global economy. Economist Thomas Picketty, author of “Capital in the Twenty-First Century” believes this situation is a direct threat to the cherished American ideals of meritocracy and opportunity. PRODUCT PREVIEW
Lesson 6 | Crusaders, Unpleasant Peasants & Mobsters 102
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