Redistribution of Wealth in the World in Order to Prevent Revolutions
Dec
19
Written by:
Monday, December 19, 2011 5:53 PM
Redistribution of Wealth in the World
By Johan G. van der Galiën
Photo by Kriplozoik. This file is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.
He steals dum dum dum
And dum dum dum dee
Dennis dum, Dennis dee, dum dum dum
Dennis Moore, Dennis Moore
Riding through the woods
Dennis Moore, Dennis Moore
With his bag of things
He gives to the poor
And he takes from the rich
Dennis Moore, Dennis Moore, Dennis Moore
Dennis Moore, Dennis Moore
Riding through the land
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
Stupid bitch
MONTY PYTHON
In my blog comment on Capitalism: A Love Story I promised to get back to you if I had worked out an anti-revolution and anti-rebellion plan to make governments more stable. To stop this constant battle between order (settled governments) and chaos (revolutionary forces) we know so well from millenia of written human history, I have worked out a Robin Hood plan to redistribute wealth taken from the rich and given to the poor in order to calm the masses and give the world more stability. This makes the wealth distribution in a country more like the Pareto 20 – 80 rule (i.e. in the western world this is nowadays more like the Top 20% richest have 95% of the wealth = 20 – 95). Because of the universal nature of the 20 – 80 rule I regard that as the most natural and fair distribution considering the “God given” differences in skills and intelligence among humans leading to income and wealth distributions inequality.
The universe is out of balance! Jing and Jang are not equally strong as suggested by the Taijitu symbol in Fig. 1. If chaos and order were equally strong then there would be everlasting stability and harmony in the world.
Fig. 1: Taijitu symbol. [1]
But it is more like (sometimes) an 20 – 80 distribution of strength, as in the Pareto principle. [2] Which has to do with the causality that NOT 50% of the causes have 50% of the effects, but as an approximate rule of thumb 80% of the effects is caused by only the top 20% of the actions. Consequently sometimes chaos (actions) is stronger then order (effects) and vice versa, since at the 20 - 80 point only 20% action has 80% effect. I depicted this state of chaos and order interaction in our universe in a piece of art, made by my own hands, called "Jing, Jang, Jung" (Fig. 2).
Fig. 2: “Jing, Jang, Jung” (Color Code: Blue - Purple = Order (80% Effect), Red-Pink = Chaos (20% Action)
The 20 – 80 rule comes from the so called power laws, which have general form ( 1. )
f(x) = axk ( 1. )
when
f(0.2) = 0.8
a = 1
k = 0.13703
See this in DATAPLOT Fig. 3. [3,4]
Fig. 3: DATAPLOT power law for the 20 – 80 rule. [3,4]
|
DECILE
|
X
|
Y
|
Y% ΔD
|
|
D1
|
0.10
|
0.7294
|
72.9%
|
|
D2
|
0.20
|
0.8021
|
7.3%
|
|
D3
|
0.30
|
0.8479
|
4.6%
|
|
D4
|
0.40
|
0.8820
|
3.4%
|
|
D5
|
0.50
|
0.9094
|
2.7%
|
|
D6
|
0.60
|
0.9324
|
2.3%
|
|
D7
|
0.70
|
0.9523
|
2.0%
|
|
D8
|
0.80
|
0.9699
|
1.8%
|
|
D9
|
0.90
|
0.9857
|
1.6%
|
|
D10
|
1.00
|
1.0000
|
1.4%
|
Table 1: Calculated deciles from ( 1. ) a = 1 and k = 0.13703 used to make Fig. 3.
|
QUINTILE
|
Y%
|
|
Top 20%
|
80%
|
|
2nd 20%
|
8%
|
|
Middle 20%
|
5%
|
|
4th 20%
|
4%
|
|
Bottom 20%
|
3%
|
Table 2: Rounded “idealized” 20 – 80 Pareto distribution quintiles calculated from Table 1.
The income and the wealth distribution in the world are examples of this approximate Pareto rule. See Table 3 and 4.
|
QUINTILE
|
Income%
|
|
Top 20%
|
82.7%
|
|
2nd 20%
|
11.8%
|
|
Middle 20%
|
2.3%
|
|
4th 20%
|
1.9%
|
|
Bottom 20%
|
1.4%
|
Table 3: World averages income. [5] ( 1. ) a = 1 and k = 0.11072
|
QUINTILE
|
Wealth%
|
|
Top 20%
|
84.0%
|
|
2nd 20%
|
9.9%
|
|
Middle 20%
|
4.0%
|
|
4th 20%
|
1.7%
|
|
Bottom 20%
|
0.4%
|
Table 4: World averages wealth. [6] ( 1. ) a = 1 and k = 0.10081
Fig. 4: Solid line from Pareto 20 – 80 and dashed lines from world income and wealth. As you can see they come very close.
Because the world income and wealth averages approximately comes down to this 20 – 80 rule, as can be seen from the preceding tables and Fig. 4, I regard the Table 2 “idealized” Pareto principle as the natural average. Natural as in survival-of-the-fittest. In my opinion human societies will always evolve (on average) to the idealized Pareto income and wealth distribution. A significant deviation is sign of an unstable political and economical climate and triggers or calls for a revolution in those countries (i.e. a income and wealth distribution reset).
For many individual countries I have calculated the wealth distribution from data provided in an academic publication. [6] See Table 5.
|
|
Q1
|
Q2
|
Q3
|
Q4
|
Q5
|
Q1 Weight
|
Q2 Weight
|
Q3 Weight
|
Q4 Weight
|
Q5 Weight
|
SUM
|
Q1 (%)
|
Q2 (%)
|
Q3 (%)
|
Q4 (%)
|
Q5 (%)
|
|
USA
|
1.9
|
3.2
|
3.5
|
4.9
|
13.9
|
0.0076
|
0.0544
|
0.1400
|
0.4851
|
11.6760
|
12.3631
|
0.06
|
0.44
|
1.13
|
3.92
|
94.44
|
|
Japan
|
0.0
|
0.4
|
0.7
|
1.7
|
10.8
|
0.0000
|
0.0068
|
0.0280
|
0.1683
|
9.0720
|
9.2751
|
0.00
|
0.07
|
0.30
|
1.81
|
97.81
|
|
Germany
|
1.7
|
0.5
|
0.8
|
1.3
|
4.5
|
0.0068
|
0.0085
|
0.0320
|
0.1287
|
3.7800
|
3.9560
|
0.17
|
0.21
|
0.81
|
3.25
|
95.55
|
|
UK
|
0.2
|
0.6
|
0.8
|
1.0
|
3.4
|
0.0008
|
0.0102
|
0.0320
|
0.0990
|
2.8560
|
2.9980
|
0.03
|
0.34
|
1.07
|
3.30
|
95.26
|
|
Italy
|
0.0
|
0.1
|
0.4
|
1.3
|
4.5
|
0.0000
|
0.0017
|
0.0160
|
0.1287
|
3.7800
|
3.9264
|
0.00
|
0.04
|
0.41
|
3.28
|
96.27
|
|
China
|
10.2
|
24.0
|
36.0
|
31.1
|
12.5
|
0.0408
|
0.4080
|
1.4400
|
3.0789
|
10.5000
|
15.4677
|
0.26
|
2.64
|
9.31
|
19.91
|
67.88
|
|
Spain
|
0.0
|
0.3
|
0.4
|
0.5
|
3.1
|
0.0000
|
0.0051
|
0.0160
|
0.0495
|
2.6040
|
2.6746
|
0.00
|
0.19
|
0.60
|
1.85
|
97.36
|
|
France
|
0.2
|
0.5
|
0.8
|
1.5
|
3.1
|
0.0008
|
0.0085
|
0.0320
|
0.1485
|
2.6040
|
2.7938
|
0.03
|
0.30
|
1.15
|
5.32
|
93.21
|
|
Canada
|
0.3
|
0.3
|
0.3
|
0.5
|
1.7
|
0.0012
|
0.0051
|
0.0120
|
0.0495
|
1.4280
|
1.4958
|
0.08
|
0.34
|
0.80
|
3.31
|
95.47
|
|
India
|
21.0
|
21.6
|
16.3
|
13.0
|
5.3
|
0.0840
|
0.3672
|
0.6520
|
1.2870
|
4.4520
|
6.8422
|
1.23
|
5.37
|
9.53
|
18.81
|
65.07
|
|
Brazil
|
3.7
|
2.6
|
2.4
|
2.8
|
2.6
|
0.0148
|
0.0442
|
0.0960
|
0.2772
|
2.1840
|
2.6162
|
0.57
|
1.69
|
3.67
|
10.60
|
83.48
|
|
Taiwan
|
0.0
|
0.1
|
0.2
|
0.4
|
1.4
|
0.0000
|
0.0017
|
0.0080
|
0.0396
|
1.1760
|
1.2253
|
0.00
|
0.14
|
0.65
|
3.23
|
95.98
|
|
Australia
|
0.2
|
0.1
|
0.2
|
0.1
|
1.2
|
0.0008
|
0.0017
|
0.0080
|
0.0099
|
1.0080
|
1.0284
|
0.08
|
0.17
|
0.78
|
0.96
|
98.02
|
|
Mexico
|
1.4
|
1.2
|
1.3
|
1.8
|
1.9
|
0.0056
|
0.0204
|
0.0520
|
0.1782
|
1.5960
|
1.8522
|
0.30
|
1.10
|
2.81
|
9.62
|
86.17
|
|
Netherlands
|
0.0
|
0.1
|
0.1
|
0.3
|
1.1
|
0.0000
|
0.0017
|
0.0040
|
0.0297
|
0.9240
|
0.9594
|
0.00
|
0.18
|
0.42
|
3.10
|
96.31
|
|
Russia
|
3.1
|
2.8
|
2.8
|
3.7
|
2.1
|
0.0124
|
0.0476
|
0.1120
|
0.3663
|
1.7640
|
2.3023
|
0.54
|
2.07
|
4.86
|
15.91
|
76.62
|
|
Turkey
|
0.9
|
0.9
|
0.9
|
1.4
|
1.3
|
0.0036
|
0.0153
|
0.0360
|
0.1386
|
1.0920
|
1.2855
|
0.28
|
1.19
|
2.80
|
10.78
|
84.95
|
|
Argentina
|
0.5
|
0.4
|
0.5
|
0.7
|
1.1
|
0.0020
|
0.0068
|
0.0200
|
0.0693
|
0.9240
|
1.0221
|
0.20
|
0.67
|
1.96
|
6.78
|
90.40
|
|
Indonesia
|
5.7
|
4.5
|
3.2
|
2.6
|
0.8
|
0.0228
|
0.0765
|
0.1280
|
0.2574
|
0.6720
|
1.1567
|
1.97
|
6.61
|
11.07
|
22.25
|
58.10
|
|
Thailand
|
1.3
|
1.2
|
1.0
|
1.2
|
0.8
|
0.0052
|
0.0204
|
0.0400
|
0.1188
|
0.6720
|
0.8564
|
0.61
|
2.38
|
4.67
|
13.87
|
78.47
|
|
Pakistan
|
2.5
|
2.5
|
2.2
|
1.3
|
0.6
|
0.0100
|
0.0425
|
0.0880
|
0.1287
|
0.5040
|
0.7732
|
1.29
|
5.50
|
11.38
|
16.65
|
65.18
|
|
Bangladesh
|
2.3
|
2.3
|
2.1
|
1.7
|
0.6
|
0.0092
|
0.0391
|
0.0840
|
0.1683
|
0.5040
|
0.8046
|
1.14
|
4.86
|
10.44
|
20.92
|
62.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World
|
100.0
|
100.0
|
100.0
|
100.0
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
World (%)
|
0.4
|
1.7
|
4.0
|
9.9
|
84.0
|
|
|
|
|
|
Mean (%)
|
0.40
|
1.66
|
3.66
|
9.06
|
85.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 5: Wealth distribution (%) per quintile [Qx (%) x={1,2,3,4,5}] of some countries and the world. [6] NB: Q1 Weight USA = 0.4 * (1.9/100) = 0.0076 Q1 (%) USA (0.0076/SUM) * 100 = (0.0076/12.3631) * 100 = 0.06%
I have also more data on individual countries regarding income distribution. A very common measure for inequality is the S80/S20 Quintile Share Ratio. [7] See Table 6.
|
|
S80/S20 Quintile Share Ratio
|
|
|
mid90s
|
2000
|
2005
|
|
Australia
|
5
|
5.2
|
4.8
|
|
Austria
|
3.4
|
3.8
|
4.1
|
|
Belgium
|
4.6
|
4.7
|
4
|
|
Bulgaria
|
|
3.7
|
3.7
|
|
Canada
|
4.6
|
5.1
|
5.6
|
|
Cyprus
|
|
|
4.3
|
|
Czech Republic
|
3.4
|
3.7
|
3.9
|
|
Denmark
|
2.9
|
3.1
|
3.3
|
|
Estonia
|
|
6.3
|
5.9
|
|
Finland
|
3.4
|
3.8
|
4
|
|
France
|
4.2
|
4.2
|
4.1
|
|
Germany
|
4.1
|
4.1
|
4.9
|
|
Greece
|
5.3
|
5.7
|
5.1
|
|
Hungary
|
4.4
|
4.5
|
4.5
|
|
Iceland
|
|
|
4.3
|
|
Ireland
|
5.1
|
4.8
|
5.4
|
|
Italy
|
6.4
|
6.1
|
6.1
|
|
Japan
|
5.5
|
6.3
|
5.5
|
|
Korea
|
|
|
5.2
|
|
Lathvia
|
|
5.5
|
6.7
|
|
Lituania
|
|
5
|
6.9
|
|
Luxembourg
|
3.7
|
3.8
|
3.8
|
|
Malta
|
|
4.6
|
4.1
|
|
Mexico
|
15.6
|
14.3
|
11.6
|
|
Netherlands
|
3.8
|
4.2
|
4.2
|
|
New Zealand
|
5.4
|
5.6
|
5.9
|
|
Norway
|
3.7
|
3.8
|
4.2
|
|
Poland
|
|
5.2
|
7.6
|
|
Portugal
|
5.9
|
5.9
|
7
|
|
Romania
|
|
4.5
|
4.9
|
|
Slovakia
|
|
|
4
|
|
Slovenia
|
|
3.2
|
3.4
|
|
Spain
|
6.1
|
6
|
5.3
|
|
Sweden
|
3.1
|
3.5
|
3.4
|
|
Switzerland
|
|
4.2
|
4.2
|
|
Turkey
|
11.8
|
|
8.6
|
|
United Kingdom
|
4.8
|
6.5
|
5.6
|
|
United States
|
6.7
|
6.6
|
7.7
|
|
OECD-30
|
5.3
|
5.2
|
5.3
|
|
EU-27
|
4.4
|
4.6
|
4.7
|
Table 6: Quintile Income Share Ratios from some countries. [8]
In Table 5 and 6 I discovered a paradox, which I would like to call the income / wealth paradox. Take for instance The Netherlands which is among the most equal income distributions (i.e. among the lowest S80/S20 Quintile Income Share Ratio = 4.2). But it has also one of the most distorted and extreme unequal wealth distributions (i.e. Bottom 20% = 0.00%, 4th 20% = 0.18%, Middle 20% = 0.42%, 2nd 20% = 3.10% and Top 20% = 96.31%). This is more or less true for all western civilized and industrialized countries in Table 5 and 6. This can only mean that much of the Top 20% wealth either comes from savings, inheritance or from multiplying money by very successful investments and business ventures.
The Robin Hood Plan
The situation in the Netherlands as example:
|
|
Numbers Year 2000 [5]
|
|
Top 20% Wealth
|
96.31%
|
|
Mean Wealth per Adult
|
$ 159,910
|
|
Adult Population
|
12 million
|
|
Total Wealth Top 20%
|
$ 1,850 billion
|
|
80% Wealth Top 20% after Pareto Tax
|
$ 1,535 billion
|
|
Income Dutch Government by Pareto Tax
|
$ 315 billion
|
Table 7: (Pareto) Taxing the rich.
The plan starts simply by taxing the excessive wealth (above the Top 20% - 80% wealth Pareto rule) from the Top 20%. Take from the rich and give it to the poor.
|
|
Numbers Year 2011
|
|
# People on Minimum Wage
|
266,000
|
|
# People on Welfare
|
318,000
|
|
Minimum Wage after Taxes
|
$ 1,600 per month
|
|
Minimum Standard of Living A
|
$ 1,625 per month
|
|
Welfare Singles B
|
$ 1,175 per month
|
|
A – B
|
$ 450 per month
|
Table 8: Some poor people from the Bottom 20% in the Netherlands “at” or below the poverty line.
|
|
Idealized Pareto
|
Actual Situation 2000 [5]
|
Weight
|
Total Extra Wealth (billions)
|
Per Adult by One-Time Cheque
|
|
Top 20%
|
80%
|
96.31%
|
-16.31
|
$ -315.0
|
$ -131,250
|
|
2nd 20%
|
8%
|
3.10%
|
5.90
|
$ 107.4
|
$ 44,762
|
|
Middle 20%
|
5%
|
0.42%
|
4.58
|
$ 83.4
|
$ 34,747
|
|
4th 20%
|
4%
|
0.18%
|
3.82
|
$ 69.6
|
$ 28,981
|
|
Bottom 20%
|
3%
|
0.00%
|
3.00
|
$ 54.6
|
$ 22,760
|
Table 9: Redistributing the wealth for compliance with the idealized Pareto distribution.
The Robin Hood plan might as well be called the Sabbatical Pareto Redistribution. Because the idea is to Pareto tax the rich and the government then redistributes the wealth among the poor every 7th year (Sabbatical year). Every 7th year there comes once a governmental cheque (additional tax free income above welfare, wages and other income) with a substantial amount of money (depending to which quintile an adult person belongs from Table 9) in the mail for the 80% poorest adult people in the country. This cheque can be returned for cash at the bank or deposited on any bank account. When this plan will be in effect my advice is: “Do not spend it all in one place! Use it wisely!”
NB: As I said earlier the Robin Hood plan is for the Netherlands, Take for instance China. If you want to make China comply with the Pareto rule of Table 2 then you would need to tax the middle class (Q3,Q4) and divide that among the poor (Q1,Q2) AND THE RICH (Q5) according to be calculated Weight factors.
[7] The income quintile share ratio or the S80/S20 ratio is a measure of the inequality of income distribution. It is calculated as the ratio of total income received by the 20% of the population with the highest income (the top quintile) to that received by the 20% of the population with the lowest income (the bottom quintile).
Satoconor © 2011