If left unchecked, the trend in income inequality in this country will continue to widen. It will lead to an increasingly dysfunctional economy, heightened political polarization, paralyses and a level of anger and mistrust that this nation has not seen since the Great Depression.

Income inequality, as I have pointed out, is a worldwide phenomenon brought about by a number of global trends that has transformed how economies do business. Globalization has put downward pressure on wages, especially those of low or unskilled workers. Technological change has favored highly skilled labor. Institutional and regulatory reforms have increased global competition while decreasing the bargaining power of labor. More and more unskilled people enter the labor force in countries like India and China applying even more pressure to wages worldwide. These trends have created distortions in economic growth and transformed economic systems and markets among developing and emerging nations.

Something similar happened during the 1930s but for different reasons. As the world's economies first faltered and then suffered massive downturns, trade embargos sounded the death knell for many economies. As a result, free markets and political systems were turned upside down. In their place, ideologies such as communism, socialism and even Nazism replaced various versions of democracy and capitalism.

Back then, Americans elected Franklin Delano Roosevelt, a scion of wealth, hoping he could deal not only with the Great Depression but the growing threat of income inequality in this country. Roosevelt, in my opinion, realized that the same trends that allowed the Nazis to rise to power and the Russian Revolution to succeed could happen here if the Great Depression and income inequality were permitted to grow.

America was already experiencing sporadic riots, labor battles and vigilante actions that were beginning to escalate. Roosevelt, against bitter opposition from what he called "organized money," instituted several social and economic reforms in an effort to reverse the extreme economic inequality of that time while attempting to jump-start the economy. He was labeled a traitor to his class and admitted that "they are unanimous in their hate for me."

Why the history lesson?

I believe this country needs something radical that goes beyond Roosevelt's New Deal, although elements of that kind of social program could contribute to a solution. But a Roosevelt-style re-distribution would be a hard sell in this country. Today, even the word "re-distribution" represents an almost un-American idea among the majority of voters.

Conservatives and liberals alike extoll the principles and virtues of capitalism and a free markets system. Reaganomics remains the model and the modern-day vindication of "the economic principles of which this country was founded upon."

Free markets, if left to their own devices, so goes the American myth, can distribute wealth equitably and fairly for all. Some economists say that it is a bogus argument, pointing out that the reverse of "trickle down" is what actually happened as a result of Reaganomics over the last 30 years. The data does support that contention.

But I believe both sides are missing the point. In my opinion, the cause of income inequality today is an example of what we don't know we don't know. In this case, what we don't realize is that America's 21st century version of capitalism is far, far different from the capitalism our fathers and grandfathers enjoyed. It has vastly changed just in the last 30 years. There was a time in this country when someone willing to work hard could get ahead, finance a college education, borrow the capital to start a business and succeed. Does it still happen? Sure, but how often?

Economic and political systems change over time. Some systems, communism for example, no longer exists as a political and economic force in the world. Over the last 30 years, China's centrally-planned and run economy has been forced to drastically adjust to the new world order.  Why should we think that our concept of capitalism and free markets remains the same?

But today's capitalism may not distribute wealth as equitably as before. Next week, we will make the case that today's 21st century form of capitalism is a large contributor to our growing income inequality problem. 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Here's a great cocktail party question. What do Cote d'Ivoire, Uruguay and the United States have in common? Answer: all three nations have about the same level of income inequality among its citizens. For those who didn't know it, America now ranks lowest of all developed nations in terms of income distribution.

After my last column on this subject, I realized that when it comes to measuring the wealth gap, rarely do we Americans compare ourselves to other nations. Instead, we check out what our neighbors are making and if we are in the same income ballpark then we leave it at that. And most of the time we ignore the stories of multimillion dollar salaries that others make as simply a one-off event, an exception, not the rule. But times are changing.

Beginning with the Occupy Wall Street movement, income inequality has come to the forefront in our consciousness and has now become a campaign issue. So I decided to find out just where this nation's income inequality stands in comparison to the rest of the world.

As a first step, the easiest measure of determining whether a country is rich or poor is to simply add up its cumulative wealth or gross domestic product (called GDP). If you divided the number of people in a country by its wealth you get per capita GDP. The problem is that measurement falls short in determining whether a society is truly wealthy. You could have, for example, the highest per capita GDP in the world on paper, but if all that wealth were controlled by just one or two people, the society overall would be dirt poor.

In order to discover whether a society is truly wealthy, I needed to account for the distribution of wealth. I quickly discovered that most economists and sociologists use the "Gini Index," which measures how equitable a nation is in its distribution of wealth. The Gini Index or scale begins at "0" (everyone gets the same income) to "1" (one person has all the income). 

I discovered that the U.S. ranks at 0.450 on the Gini Index, sandwiched between the two Third World nations I first mentioned at the beginning of the column. America ranks the lowest of all developed nations in the index. What is equally shameful is that not one state ranked in the normal range of income distribution anywhere within the developed world.

The ranking of your state might shock you. For example, California, at 0.466, was comparable to income distribution in Rwanda. Connecticut was slightly worse at 0.480, the same as Venezuela. Massachusetts was about equal to Mexico at 0.461. New York came in on par with Costa Rica at 0.495. New Hampshire at 0.417 equated to Cambodia while Maine at 0.428 had the same inequality that citizens of Singapore endure.

The U.S. is a great deal wealthier than all of these nations. It boasts one of the highest GDP per capita in the world, but in terms of distributing that wealth, this nation is sucking wind. No matter how wealthy we become, if an increasing share of that wealth continues to flow to the same one percent then this country is no better off than it was before. It is, in fact, worse off.

Unfortunately, researchers expect the trend of income inequality in this country to increase and maybe accelerate. As more and more of us become disenfranchised, our stake in the country and in its political system will decline. Bottom line: income inequality undermines democracy. What can be done about it? Stay tuned for my next column.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Income inequality in the United States should worry you. Chances are, if you are reading this column, you still consider yourself one of America's Middle Class. Just how long you remain one may be entirely out of your hands.

If you think I'm exaggerating, just take a moment to review this most recent data. You may already be aware that income inequality in America has been on the rise over the last 30 years. Last month, the Census Bureau found that the highest-earning 20 percent of households earned 51.1 percent of all income last year. That is the biggest share on record since 1967. The share earned by middle-income households fell to 14.3 percent, a record low. From 1979 to 2007, incomes of the richest one percent of Americans soared 275 percent. That same 1 percent earned 23.5 percent of all income, the largest share since 1928. At that rate, the rich are 288 times richer than you, the middle class.

At the same time poverty has deepened. Fifteen percent of Americans live below the poverty line, which comes to 46.2 million people — 46 percent more than in 2000. If it were not for unemployment benefits and Social Security payments, millions more would fall below that poverty line. And guess what, the politicians are bound and determined to reduce those benefits within the next year. Bottom line: income inequality is worse today than at any time in American history.

That's right, back in 1774 the gap between American's incomes were smaller than it is today, according to the National Bureau of Economic Research. Hold on to your seats — two historians argue that our present condition is even worse than it was during the Roman Empire! The top 1 percent of ancient Roman earners controlled 16 percent of the Empire's wealth compared to America's 1 percent, who controls 40 percent of America's riches.

And yet, when American voters are asked how important income inequality is to them only about 17 percent thought it was extremely important for the government to try to reduce income and wealth inequality. There could be several explanations for that willingness to witness more and more of the nation's wealth falling into fewer and fewer hands.

One reason is the belief that each of us has a chance to become one of those favored few. Back in the Fifties, for example, 87 percent of Americans thought there was plenty of opportunity to progress. After all, that's the American Dream, right? Americans may be worried that if the government attempts some kind of Robin Hood redistribution grab it could hurt their chances or their children's prospect of becoming the next Donald Trump.

Equally important is the belief that capitalism cannot work without income inequality. We have been spoon fed this myth ever since Trotsky first offered his alternative to capitalism. What incentive would the entrepreneur have to invest, to take chances, to innovate if the government's heavy hand of taxation simply appropriated his hard-won gains? It is the same argument that Ayn Rand used in her book "Atlas Shrugged." The logic is simple and erroneously simplistic: since inequality is good for capitalism, the more inequality, the better capitalism works.

Some economists contend that the phenomenon of income inequality is not confined to the United States. The rich are getting richer all over the world. One economic theory that could account for this trend stems from a study by Simon Kuznets called "Kuznets' Curve" that income inequality rises in an industrial revolution, falls as the country grows and develops and then rises again.

For some of the wealthiest nations, especially industrial exporters like America in the 1950s and 1960s, income equality was on the rise. The U.S. was one of the dominant capital goods exporters in global trade and average incomes kept pace with productivity. But as the rest of the world caught up, America began shipping much of our industrial capacity off-shore. In its place the technology and service sectors came to the forefront. Unfortunately, technology actually reduced the number of middle-income jobs in America and the service sector paid far less than factory jobs. This all happened as economic growth began to moderate.

In my next column we will see exactly where the United States now stands in relation to the rest of the world in income inequality. We will also address what this continuing trend will mean for you and your children in the years to come and what can be done to reverse this trend.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.