Inequality is in the spotlight. Not since Teddy Roosevelt set about busting trusts has this issue gotten people so exercised. But the hullabaloo around inequality is more than just an Occupy rallying cry for the 99%. It’s about whether the consumer marketplace can rally. A newly released report from ratings agency Standard and Poor’s (S&P) made headlines with its conclusion that rising income inequality is a significant drag on the economy, both today and over the next decade.
The S&P analysis is not an indiscriminate censure of inequality. Unequal outcomes are expected and necessary in a thriving market economy, says the report, but when inequality becomes “extreme,” strong growth is unsustainable. Several factors are cited as reasons why, chief among them that middle incomes stagnate when income skews top heavy, thus forcing middle-class consumers to borrow to keep up. This leads inevitably to over-leveraging and economic downturns. The resulting damage to household balance sheets from these boom and bust cycles takes a long time to repair, keeping growth in check.
The bigger issue with inequality mentioned in the report, though, is the well-documented phenomenon of a declining marginal propensity to consume. This is to say that people with lots of money spend less of their next dollar of income than people with less money. It’s the intuitive idea that if you have a lot already, you don’t need more, so you save the next dollar you earn. By contrast, if you don’t have a lot already, you spend the next dollar instead of saving it. Inequality diverts income from middle- and lower-class consumers who would spend it, channeling it instead to the rich who just sock it away. Growth slows because demand is weakened. Princeton economist Alan Krueger estimates that the shift in income gains from the middle to the top since 1979 have reduced annual consumer spending today by $400 billion to $500 billion, or about 3.5 percent of GDP.
I sent back my Google Glass. Why? No killer app.
As any banker will tell you, the moment a bank is forced to ask depositors for trust is the very moment at which, for all practical purposes, that bank becomes insolvent. A run is sure to ensue. Nobody wants their money in a bank with even the slightest chance of losing it. The mere mention of trust spooks people.
The biggest technology trend these days is about less of it not more. Perhaps most emblematic of this is the Personal Surveillance Identity Prosthetic for which Chicago artist Leo Salvaggio is currently crowdsourcing funding. It’s an anti-surveillance mask fabricated so that facial recognition systems see it as Leo’s face. It’s not the first or only thing Leo has created to enable other people to hide their identities behind his. His URME project is beta testing video facial encryption software, and his You Are Me project gives people the ability to assume his digital profile when using social networks like Facebook and Twitter.
Mind you, Salvaggio is not anti-technology. He just wants boundaries, places where technology is not allowed to go. So does artist Adam Harvey, who created a clothing line called Stealth Wear. Harvey’s hoodie, scarf and burqa are all made with a metalized fabric that impedes thermal imaging. Harvey believes that as technological surveillance grows, people will want tools like his clothing to reassert control over their privacy.
Worries about the overreach of technology are growing as commercial enterprises, not just law enforcement or national security agencies, beef up their databases and surveillance. For example, Google and Facebook have been enhancing their facial recognition capabilities through acquisitions and applications development, though not without controversy. In the face of heavy criticism, Google Glass dropped plans to include a beta version of NameTag, an app that can instantly match a face with a person’s name, occupation and Facebook profile. In fact, ever since Google Glass was first unveiled in 2012, wearers have been faced with forceful, often ferocious, hostility from people who don’t want to be photographed or recorded without their permission.
The word is out. Big headlines. Facebook is running experiments with users’ news feeds. Apparently, shock and outrage are in order. But, honestly, I’m not sure why. From the outside looking in, it appears to be nothing more than garden-variety brand marketing, and ineffective to boot.