The US Distribution of Wealth is Like a Canal with Broken Locks

© Josh Sager – June 2014

A canal is a man-made body of water, usually built between larger bodies of water so that ships can take a short cut (ex. the Panama Canal allows ships to cut through Panama rather than travel all the way down the coast of South America). Sometimes, these canals have a series of “locks” that allow people to increase or decrease the water level, making it possible for ships to travel vertical distances between bodies of water with dramatically different water levels.

For a simple diagram of a canal with locks, look at the following picture:

ABCPg14e

The ship shown in the picture started in the lowest level and is traveling towards the higher body of water. In order to do this, the middle lock was drained to the level of the lowest body of water so that the ship could sail past the first lock; after the ship passes the first lock, it is sealed and water is pumped back into the middle body of water until it reaches equilibrium with the top body of water and the ship can sail out.

The Economic Canal Analogy

At a very basic level, the economic distribution in the USA resembles a canal with a series of locks that separate the different income levels—each of the canal levels represents an economic class within the American population, with the number of boats representing the population of the class and the volume of the water representing their wealth.

For example: the lowest canal section is shallow, but densely populated with small boats (the millions of Americans who have virtually no wealth, if not negative wealth due to debt), while the highest canal section is extremely large and populated by a select few cruise ships (ex. the 6 Walton heirs who have more wealth than the bottom 40% of our country).

In this analogy, the locks themselves represent ceilings to achievement that are overcome through education, skill, luck, or connections. To advance upward through these levels, an individual must get past the locks by having one or more of the aforementioned keys. Individuals are usually born at the same level as their parents and there is significant inertia keeping them at that level.

In a healthy economy, the middle class section of this canal would be the largest and would have a significant water level (percentage of the wealth). The middle class would be a significant portion of the population that captures most of the wealth in society. Additionally, upward movement from the lower canal levels would be relatively easy and people would not get stuck on the lowest canal level for multiple generations. This upward movement would be facilitated by strong education and social programs that give people the tools that they need to better their lives.

ideal-wealth-distribution

Observe the nice steady rise with a robust middle class.

Unfortunately, a combination of bad politics and economic exploitation by the rich has resulted in an absolute failure in achieving this ideal, and money has increasingly become concentrated at the top. The rich get preferential tax rates and subsidies, while the middle class has had its wages stagnate while suffering crippling austerity, massive debt, and a joblessness crisis.

In effect, all of the water in this economic canal system is getting drawn up to the highest income levels, leaving the poor on a crowded and dry lake-bed, the middle class in the shallows, and the rich in the ocean. Upward movement has become virtually impossible, as it is increasingly difficult for the low and middle class individuals to pass the “locks” because of the decay of education and social programs—sure, some people will still make it, but the odds are severely stacked against them. Conversely, it has become very easy for the middle class to be forced down into the lower class, either due to job loss, accrued debt, or a stroke of bad luck.

wealth3

If this were a canal, the poor are run aground and the rich are in the middle of the ocean.

Both the Republicans and Democrats have supported “solutions” to this problem that involve pumping even more money into the top canal areas and hoping that it will flow down to the lower areas—unfortunately, these people are either corrupt, or too ignorant to realize that there are barriers keeping all of the money at the top levels and that simply pumping more money towards the rich will only exacerbate the problem—more money will pool at the top and the gap between the rich and the poor will become even more extreme.

In order to fix the current predicament, what we really need to do is to fix the locks so that people from the lower classes can move up (I.E. repairing the education system and safety net programs) while redistributing resources from the top to the lower levels (I.E. taxing the rich and investing in the poor). If we can increase upward mobility while implementing a more progressive set of redistribution programs, we will gradually re-balance the distribution of resources to a much healthier level.

3 thoughts on “The US Distribution of Wealth is Like a Canal with Broken Locks

  1. Pingback: Colin's Blog » Blog Archive » Canal Systems

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