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RocketDoc Notes for February 13, 2022 – Things that Worry Me (In Reverse Order).

#2 – Public Insurrection (Distrust of Government)

In the past two years public behavior and trust in our way of government has degraded to the point where many people fear to go downtown, and the threat of a civil war can actually be contemplated. I remember 1968 vividly and this might actually be worse. How did we get here?

I believe it started with income equality which alienated a significant portion of the population (especially in the rust belt) and that brought us Donald Trump, who immediately alienated another significant portion of the population. Then COVID happened in January 2020 and in May 2020 we had the murder of George Floyd and weeks of protests and looting associated with Black Lives Matter. I believe we might have bounced back from that, but our government then managed to totally screwup the response to COVID (shortages of masks, conflicting recommendations, and a lack of test kits and contact tracing has meant each of us was on our own). On top of that our government has managed to pour multiple trillions of dollars of unearned income into people’s hands during a shortage of goods caused by COVID and caused the highest rate of inflation in the last 40 years. Oh, and Donald Trump decided he wanted to remain president even though he lost the election and tried to disallow some Biden electors. Ergo, faith in our government couldn’t be much lower and most of us are looking forward to November and election day.

What can we do to fix these problem(s)? I would prioritize and address on the most serious first. For instance, COVID is in transition from pandemic to endemic and will cease to be an issue by summer. Donald Trump will remain a problem until his supporters abandon him and that may never happen until we do something about income inequality. Black Lives Matter and Police accountability is a difficult issue, but the current crime wave is starting to bring the two sides together. It is unfortunate that so many people had to die first.

Our major problem driving most of my worries is income inequality. My approach would be for the President and Congress to bring in the heads of Business Schools and the CEOs and boards of major companies and “explain” to them that Shareholder Value is no longer an acceptable way to do business; and if they continue to short-change their employees and customers to over-reward management and shareholders, we will turn Bernie Saunders and Elizabeth Warren loose on them. Raising individual gains taxes to 90% ought to get their attention.

The bottom line is that the situation has become bad enough that the powers that be are starting to work together to do something about it. It is unfortunately that things have to get so bad before our government decides to act.

#1 – Income Inequality (Both U.S. and Worldwide)

I have discussed this topic numerous times previously and it is a serious problem in the U.S, causing both homelessness and a political divide, but the problem is also worldwide, so I would like to address root causes here and try to point out possible solutions, both here and worldwide.

There is incomes inequality and wealth inequality. Wealth inequality, also known as the wealth gap, is a measure of the distribution of wealth, essentially the difference between the richest of the rich and the poorest of the poor in each country, state, city, or demographic group. Wealth inequality is closely related to income inequality, which tracks the money people earn. However, wealth inequality includes not just income, but also the value of bank accounts, stocks and investments, homes, and personal possessions such as cars, jewelry, artwork, and other valuables. In many parts of the world wealth is largely inherited, not earned, so wealth inequality is a better measurement and the major cause of unequal living standards in many communities.

Research suggests that globalization has reduced global wealth inequality between nations but has increased wealth inequality within nations. Typically, developing countries are characterized by greater inequality than developed countries.

Wealth inequality and the Gini index

The Gini index, or Gini coefficient, is a statistical measure of wealth distribution developed by the Italian statistician Corrado Gini. The Gini index is used to gauge economic inequality by measuring income distribution, also called wealth distribution. The Gini coefficient ranges from 0 to 1. A coefficient of 0 represents perfect equality, a country (or other people group) in which everyone had the same income. The closer to 1 the coefficient is, the greater the wealth inequality. Gini coefficient is also expressed as a percentage in which 0% is perfect equality and 100% would be the maximum possible inequality (one person controls all the wealth).

Top 10 Countries with the Highest Wealth Inequality (World Bank Gini index):

  1. South Africa - 63.0%

  2. Namibia - 59.1%

  3. Suriname - 57.9%

  4. Zambia - 57.1%

  5. Sao Tome and Principe - 56.3%

  6. Central African Republic - 56.2%

  7. Eswatini - 54.6%

  8. Mozambique - 54.0%

  9. Brazil - 53.4%

  10. Botswana - 53.3%

South Africa’s income inequality has become worse over the years. The top 1% of earners take home almost 20% of income and the top 10% take home 65%. That means that 90% of South African earners take home only 35% of all income. Incomes in South African remain to be racialized, gendered, and spatialized, meaning that white people are more likely to find work (and work that pays better) than their black counterparts; female workers earn about 30% less than male workers; and urban workers earn about double that of those in the countryside.

For many countries in Africa, income inequality is rooted in their economic structures, in which a few high-income sectors generate significant wealth, but only for a small number of people, leaving the vast majority of the workforce trapped in lower-income sectors in which they earn far less in the lower-income sectors.

This inequality is often exacerbated by inadequate educational systems that fail to prepare all but the richest citizens for better-paying skilled jobs and by the presence of corrupt and/or oppressive governments. Additionally, while many countries in Eastern and Southern Africa enjoy a high concentration of resources (natural and human), many other African countries lack even basic resources such as arable land and clean water, which can hamper overall economic growth.

Top 10 Countries with the Lowest Wealth Inequality (World Bank Gini index):

  1. Slovenia - 24.6%

  2. Czech Republic - 25.0%

  3. Slovakia - 25.0%

  4. Belarus - 25.3%

  5. Moldova - 25.7%

  6. United Arab Emirates - 26.0%

  7. Iceland - 26.1%

  8. Azerbaijan - 26.6%

  9. Ukraine - 26.6%

  10. Belgium - 27.2%

Nine of the top 10 countries are in Europe or on the Europe/Asia border (Azerbaijan). The top 1% of earners in Europe take only 12% of the total income and the bottom 50% of earners take 22% of income. For comparison, in the United States, which has more billionaires than any other country, the top 1% of earners take 20% of income and the bottom 50% of earners take 10%. The less inequality/greater equality in Europe is attributed to the fact that Europe has not let its market economy become a market society, where market forces control other areas of society such as education, health, and wages. Examples of this are social healthcare systems and more favorable labor markets. This is a good example of a successful approach to income inequality and there are some lessons learned there. European businesses have not embraced Stockholder Value to the extent the U.S. has and not outsourced much of there production.

As you can see wealth inequality is “cooked” into much of the world through history, but for the most part population growth is slowing and more economies are growing in much of the “developing” world, so we can hope things are gradually getting better. That is not the situation in the U.S. See figure 1 below.

Figure 1 – Worsening American Income Inequality versus Europe

This shows that income inequality was roughly equivalent between Western Europe and the U.S. in 1980 and then the U.S. became much more unequal. This corresponds with the emphasis on Shareholder Value taught by the leading business schools in the U.S. More about this later.

Income Inequality in the U.S.

In the U.S. income inequality is the large disparity in how income is distributed between individuals, groups, populations, or social classes. It is a major part of how we understand socioeconomic statuses, being how we identify the upper class, middle class, and working class. Income includes wages, investment earnings, rent, and sales of real estate. It's impacted by many other forms of inequality, including wealth, political power, and social status. Income is a major factor in managing quality of life, as it serves to access healthcare, education, housing, and so on. Income inequality varies by social factors such as sexual identity, gender identity, age, and race or ethnicity, leading to a wider gap between the upper and working class.

Key Takeaways

  • National income inequality is becoming a critical issue that must be addressed.

  • The top earners will benefit more from the economic recovery than the bottom earners.

  • In the United States, the top 20% receive more than 50% of total income.

  • Inequality has grown primarily due to outsourcing jobs, capitalism focusing on shareholder value, and somewhat due to companies replacing workers with technology.

  • The United States could improve income inequality by changing business practices, funding more employment training, and investing in education.

How It's Measured

The U.S. Census Bureau measures income inequality using household income. It compares it by quintile, which is the population divided into fifths.

Income Gap: Current Statistics

In 2019, the top 20% of the population earned 51.9% of all U.S. income. Their average household income was $254,449. The richest of the rich, the top 5%, earned 23% of all income.

Their average household income was $451,122.

The bottom 20% only earned 3.1% of the nation’s income. The lower earner's average household income was $15,286. Most low-wage workers receive no health insurance, sick days, or pension plans from their employers. They can't get ill and have no hope of retiring. That creates health care inequality, which increases the cost of medical care for everyone.

Also, people who can't afford preventive care will wind up in the hospital emergency room. In 2014, 15.4% of uninsured patients who visited the ER said they went because they had no other place to go. They use the emergency room as their primary care physician. The hospitals passed this cost along to Medicaid.

Up until the pandemic-driven worker shortage about 30% of American workers made less than $10.10 per hour. That creates an income below the federal poverty level. These are the people who wait on you every day. They include cashiers, fast food workers, and nurse's aides, and maybe even you.

Income inequality has varied over the years as shown in figure 2 below. income inequality in the U.S. peaked with the stock markets in 1929, fell off during WWII, and stayed low until 1980 when corporate leaders in the U.S embraced Shareholder Value.

Figure 2 – Top Ten Percent versus the Remainder Share of total Income in the U.S.

To maximize shareholder value corporate leaders: 1) systematically closed unionized facilities and moved their production offshore or to right-to-work states thereby reducing the cost of production, 2) laid-off a significant portion of their work force (especially the older and/or well-paid, accepting the loss of knowledge to further reduce the cost of goods, and 3) purposely reduced wage offers and wage increases to the absolute minimum to retain a workforce just capable of meeting production goals.

As you probably know I worked thirty-three years for the Boeing Company, and I personally witnessed all three of the actions listed above. I could see which way the wind was blowing and retired early in the year 2000 at age 55 to escape the slow train wreck that was coming.

Now we understand the problem, what can we do about it? As I see it, we have two choices, either get many companies in the U.S to recant on Shareholder Value or turn Bernie Saunders loose and let him tax that shareholder value and give it to the poor. I would prefer the first option, but my past interactions with the leaders at Boeing indicate to me that they will go down kicking and screaming before they give up their salary perks. They really liked the higher pay and stock options involved with Shareholder Value. Maybe things have changed for the better in the twenty-two years I have been gone, but I remain skeptical.

I see income inequality in the U.S. as primarily a problem with the business leaders in companies, large and small. Business schools caused this problem, and I would like to see them solve it, but I think things have gone on far too long for that to happen. Hence, it’s Congresses turn, and Heaven help us.

We are currently witnessing “The Great Resignation” where people are quitting low-paying jobs and only accepting higher-paying jobs. This is an amazing occurrence and I hope it goes far.

Wrap-up for Ten Worries

I listed ten problems to show that we needed to prioritize or we’re going to waste resources (something our government excels in). Here are the ten again in order.

1. Income Inequality

2. Public Insurrection (Facts Disbelief)

3. Failures of current education systems

4. Racism (all types)

5. Institutional response to Homelessness

6. Current Crime Wave

7. Impacts of COVID on Institutions

8. Progressive Government vs Capitalism

9. U.S. Debt Levels

10. Global Warming

As I have presented repeatedly, Global Warming is a real issue but not a near threat. We can easily wait ten years for technology to solve this problem before investing significant funds. Remember, I went through this before during the Limits to Growth incipient disaster back in the 1970s and 80s. Technology growth will solve Global Warming as well. Unfortunately, Global Warming has become a political badge that must be worn with honor no matter what the science says, or doesn’t say, so Trillions of dollars will be wasted before working technologies are available.

U.S. debt levels are at a scary point, but we are still the best house on a bad block. Besides, there is little you or I can do about it. This problem rests with the Fed and the Biden administration. God help us all.

I’ve already discussed why I prefer capitalism over the proposed progressive actions, but if capitalism in the U.S. doesn’t get its act together, I will support the progressives.

COVID will soon cease to be a worry.

The current crime wave has a way to run, but I can already see movement in the opposing political sides. Unfortunately, Gun Control only takes guns away from you and I, not the criminals.

Homelessness is mainly a funding problem. When states start sufficiently funding mental health and addiction clinics, it will largely go away.

Racism is a real problem, but it being used for political reasons, and that needs to stop. The media have really stepped up to combat racism and I think it is working.

The current educational system is in serious trouble. It has become a political football and once that ceases, we can get it functioning again. It is sad to say that I got a better education in a one room country schoolhouse in Nebraska seventy years ago than my grandkids did in Seattle last year.

The current political divide in this country is actually scary. As I said earlier, it could be worse than what we experienced in 1968, even with the assassinations. We need better leadership in both parties, and we need a centrist party to form so that independents like me have people to vote for. The Democrats need to listen to their moderates and steer more to the center, and the Republicans need to dump Trump (who has demonstrated he is not presidential material with his actions after the 2020 election) and move on. Unfortunately, despite how obvious these actions are, I don’t see them happening. That’s why I worry.

Finally, we’re back to income inequality. I see this as a root cause of many of our problems, but the $550 Billion dollars budgeted for the Infrastructure Investment and Jobs Act of 2021 has no provisions for improving the lot of the working poor, and even the $1.75 Trillion dollar Build Back Better Bill had nearly one third ($555 Billion dollars) set aside for Climate Change companies. I am expecting much of the $400 Million dollars for childcare and preschools in the original bill to be passed in follow-on bilateral bills. Likewise, I would like to see about $200 Billion dollars for improvements in education, Medicare, and extended home care for seniors included in some follow-on bills.

These bills will help, but the key causes of income inequality need to be addressed. We need to in-source much of the production we sent overseas thirty years ago. This is starting to happen because of shortages caused by COVID and to improve our strategic position (about time). The CEOs and corporate boards of businesses have been short-changing their workers and customers for too long. It’s time we stopped Share Holder Value as the driving force in successful businesses. I would hope that the top business schools would recognize this and make changes to their curriculum (a few have).

Income inequality is basically about jobs that pay a living wage. Supply and Demand handled this problem from 1945 until 1980. Then corporate executives decided to maximize profits no matter what the cost to workers and customers. They succeeded in sending entire industries overseas, creating the rust belt, and our nation’s government turned a blind eye. That alienated a large subsection of the country, but nobody cared. Until they elected Donald Trump, who talked the great talk, but even though unemployment decreased during his term, he actually increased income inequality with his corporate tax reductions.

That brings us to the present. The Republicans are currently useless with Trump as their defacto leader, Biden has been largely ineffective for myriad reasons, and Congress is deadlocked.

I wish I had a good answer, but I don’t. We have serious problem, and our national government seems unable to address it. We need a change at the national level. Wish us luck.

Bonus Topic – First Commercial Space Station Contract Awarded

NASA has awarded$160 million to Nanoracks, Voyager Space and Lockheed Martin to build the Starlab commercial space station. Starlab, planned to be operational by 2027, will support people in a large inflatable habitat, which will be built by Lockheed Martin. It will also feature a metallic docking node, a 60kW power and propulsion element, and a large robotic arm for servicing cargo and external payloads.

An onboard laboratory system will host research, science, and a manufacturing capability.

The Low Earth Orbit (LEO) Starlab is part of NASA’s efforts to commercialize space through its LEO Development Program. It will also provide science and crew capabilities prior to the retirement of the International Space Station (ISS). The Starlab concept is shown in figure 3 below.

Figure 3 – Starlab Configuration Picture

I worked the Space Station Program for Boeing back in 1985-8 and it’s time to raise the bar on space-based manufacturing and tourism. Good luck to Starlab and others.

Thanks for Reading and Stay Safe,

Dana Andrews

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