The U.S. - Land of Opportunity ... but only for 9.9 percent of the population

Much has be written about the growing inequality of income and associated outcomes such as mental and physical health, family stability, crime, etc.

In my view, the U.S. is being polarized by income and race.  Its social institutions are simply not capable of addressing the major problems which are created by income inequality.  Many Americans believe that the system is not working.  Traditionally this view was confined largely to black Americans, but now it has spread to white America.  In the past thirty years it has become prevalent in agricultural communities affected by "big agriculture" and numerous town and cities that have been hollowed out by the restructuring of America's manufacturing base. 

The following article presents the most penetrating analysis of this syndrome that I have read to date:

The Birth of a New American Aristocracy

The central thesis of the article, while buried in the text, is presented below:

The defining challenge of our time is to renew the promise of American democracy by reversing the calcifying effects of accelerating inequality. As long as inequality rules, reason will be absent from our politics; without reason, none of our other issues can be solved. It’s a world-historical problem. But the solutions that have been put forward so far are, for the most part, shoebox in size.

Matthew Stewart, the author, documents the concentration of wealth in the top 9.9 percent of Americans and advances evidence which shows that it brings a host of associated benefits, including: educational achievement, economic advancement, higher earning, better health, more functional families, etc.  These advantages are not enjoyed by the 90 percent and in fact, the case is made that the potential for ascending to the 9.9 percent is lower than ever.  This, as the preceding quote states, is one of America's greatest challenges.  Unless it is addressed in a meaningful way, it will have a direct impact on the resiliency of America and its ability to compete in the global marketplace over time.  Smaller countries such as Finland, Sweden and the Netherlands seemingly have been able to see their way forward when challenged be bad economic circumstances a few decades ago.  There are lessons to be learned, but is anyone prepared to listen?

In my view, things have not deteriorated to the point where people feel the need for concerted, collective action.  One of America's greatest strengths has been its ability to reinvent itself when faced with major challenges.  So far, the elites have exercised an increasing degree of control over the public agenda, but that may change when people realize that the benefits of "being American" are confined largely to the chosen few. 

This has very significant implications for investors.  For example, U.S. health care costs have skyrocketed.  Why?  

• greater numbers of individuals with chronic health issues: obesity, diabetes, heart issues (poorer people have much higher rates than others and income inequality is one of the major causes)
• higher delivery costs (doctors "unions" insist on much higher rates for services than in other countries; the "drag" of administrative costs imposed by private insurance and health care providers has been estimated to increase costs over other systems by 15 percent, driven largely by the need to generate profits)
• an incoherent policy that frequently is not evidence based. 

As an investor, I worry about these inefficiencies and would rather see money being invested in more productive pursuits such as education, infrastructure - things that would strengthen the economy.  

I am also worried by social stability and the ability of the U.S. to attract the intellectual talent it needs to compete.  Since the Trump era, there is ample evidence that other countries are being regarded as more desirable places to raise a family in safety and to pursue life in a more tolerant society.  

I am also worried that the drift of American society will make it more expensive.  For example, a few decades ago, the organization I worked with was recruiting scientists to staff up a major research facility.  One of the managers was an American.  In response to questions about the lower salaries we offered in comparison to American institutions, he prepared a spread sheet that showed the comparative costs of living in the U.S. and Canada.  When the cost of health care, education for children, taxes, accommodation, transportation etc. were taken into consideration, the balance worked out about even.  He then commented on public safety, the sense of community and other measures of societal well-being and found that it was an easy sell.  

Bottom line:  Investors' money can flow easily to follow opportunity.  I am looking to invest in societies where the "social trajectory" is one of improvement.  India is one such place ... the search continues for others.