Viral video shows how wealth is really distributed(economy.money.cnn.com)
economy.money.cnn.com
Viral video shows how wealth is really distributed
http://economy.money.cnn.com/2013/03/08/wealth-video/
3 comments
The underlying issue with inequality isn't that some people are rich (although many progressives fall into the trap of making it about this), it's about how to alleviate the unfortunate fact that some people will always be poor because they aren't capable of generating much wealth.
It doesn't take a 'socialist wealth envier' to realize there are serious problems with large imbalances in wealth. This turns into the classic liberal (as in libertarian) vs modern liberal debate. A classic liberal will claim inequality is a natural consequence of an open market and therefore doesn't need to be fixed. This is an increasingly fringe opinion that even most economists disagree with. A classic liberal believes in redistribution of wealth, which unfortunately doesn't fix the underlying issue.
The sad fact is, there may be no clean solution. But that doesn't mean people shouldn't discuss it. Inequality is getting worse, and it looks like it will continue to get worse. This is a problem.
It doesn't take a 'socialist wealth envier' to realize there are serious problems with large imbalances in wealth. This turns into the classic liberal (as in libertarian) vs modern liberal debate. A classic liberal will claim inequality is a natural consequence of an open market and therefore doesn't need to be fixed. This is an increasingly fringe opinion that even most economists disagree with. A classic liberal believes in redistribution of wealth, which unfortunately doesn't fix the underlying issue.
The sad fact is, there may be no clean solution. But that doesn't mean people shouldn't discuss it. Inequality is getting worse, and it looks like it will continue to get worse. This is a problem.
Of course There isn't a fixed amount of wealth. But when a small number of people possess a vast majority of the wealth that is currently in existence, they also possess the means of wealth production and therefore control. By worrying about what the CEO makes, I'm worrying about what I make, too, because their influence directly affects my ability to create wealth for myself.
Please don't tell me that I shouldn't worry about the telecom CEO because I can just start my own telecom. I know the start up culture allows certain adventurous and well-funded white people to take a stab at their dreams, but let's not pretend there aren't a handful of very wealthy pulling the strings.
Please don't tell me that I shouldn't worry about the telecom CEO because I can just start my own telecom. I know the start up culture allows certain adventurous and well-funded white people to take a stab at their dreams, but let's not pretend there aren't a handful of very wealthy pulling the strings.
The question isn't whether wealth is zero-sum or not. It is already super-obvious that wealth is not a zero-sum game.
The issue is that a certain small percentage of people are using positions of political power and influence to capture an unjustly large share of the wealth that is created by others.
Or do you honestly think that a Fortune 500 company CEO's yearly marginal product of labor is actually an 8 figure amount?
The issue is that a certain small percentage of people are using positions of political power and influence to capture an unjustly large share of the wealth that is created by others.
Or do you honestly think that a Fortune 500 company CEO's yearly marginal product of labor is actually an 8 figure amount?
The GDP of the U.S. grows, generously, at 3% per year. Wealth is a zero sum game in that the 3% gain must be distributed amongst the 300 million people in the country.
When wealth is concentrated in too few people it does take away from others. Particularly since they get an inordinate share of the gain (in usual times). The distribution of resources, consumption of resources, and benefits of resources in the world is grossly unfair.
In your example of the Calligrapher the shareholders of Apple play the same role as taxpayers. It's just a matter of scale. It makes no sense to see a difference between the two situations. U.S. government is a corporation for purposes of the analogy. It has a revenue, shareholder, and expenses. It's not possible to say in one case it doesn't matter if such a position exists but it does in the case that it's government providing the paycheck.
When wealth is concentrated in too few people it does take away from others. Particularly since they get an inordinate share of the gain (in usual times). The distribution of resources, consumption of resources, and benefits of resources in the world is grossly unfair.
In your example of the Calligrapher the shareholders of Apple play the same role as taxpayers. It's just a matter of scale. It makes no sense to see a difference between the two situations. U.S. government is a corporation for purposes of the analogy. It has a revenue, shareholder, and expenses. It's not possible to say in one case it doesn't matter if such a position exists but it does in the case that it's government providing the paycheck.
> Wealth is produced. If there were a fixed amount of it, we'd all still be nomadic hunter-gatherers. Therefore, the gain of wealth is NOT a zero sum game.
Sure, but if the 1%er have gains above average growth, they taking it from the rest. A simple fact, that has a lot to do with interest Tt doesn't make them bad people. It ist just a mathematical fact.
The US have a big problem with wealth distribution (the biggest in the western world). The US has a higher GDP per capita then Switzerland, Germany, Austria, Netherland, Sweden, etc. Do you really believe the US has a higher avarage living standard?
Sure, but if the 1%er have gains above average growth, they taking it from the rest. A simple fact, that has a lot to do with interest Tt doesn't make them bad people. It ist just a mathematical fact.
The US have a big problem with wealth distribution (the biggest in the western world). The US has a higher GDP per capita then Switzerland, Germany, Austria, Netherland, Sweden, etc. Do you really believe the US has a higher avarage living standard?
> Sure, but if the 1%er have gains above average growth, they taking it from the rest. A simple fact, that has a lot to do with interest Tt doesn't make them bad people. It ist just a mathematical fact.
So by your logic if the 1% of runners run faster than the average person, they are taking running speed from the rest?
I would suggest to rather see it this way: If they are making above average gains they are probably better at investing their capital than the average person, but also helped by the increased bargaining power of the amount of capital that they have.
> The US have a big problem with wealth distribution (the biggest in the western world). The US has a higher GDP per capita then Switzerland, Germany, Austria, Netherland, Sweden, etc. Do you really believe the US has a higher avarage living standard?
The USA has a much lower GDP per capita than most of those countries you have mentioned.
So by your logic if the 1% of runners run faster than the average person, they are taking running speed from the rest?
I would suggest to rather see it this way: If they are making above average gains they are probably better at investing their capital than the average person, but also helped by the increased bargaining power of the amount of capital that they have.
> The US have a big problem with wealth distribution (the biggest in the western world). The US has a higher GDP per capita then Switzerland, Germany, Austria, Netherland, Sweden, etc. Do you really believe the US has a higher avarage living standard?
The USA has a much lower GDP per capita than most of those countries you have mentioned.
> I would suggest to rather see it this way: If they are making above average gains they are probably better at investing their capital than the average person, but also helped by the increased bargaining power of the amount of capital that they have.
Again you ignoring mathematics. The interest function is an exponential function. It transfers money from borrowers to lenders - it's a law. It has nothing to do with wiser investment decisions. If don't have savings you can't invest.
> The USA has a much lower GDP per capita than most of those countries you have mentioned.
I am sorry, that is not right. All countries that I mentioned have lower GDP per capita that the US. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... There are only 3 countries in Europe who have a higher GDP per capita: Lichtenstein, Luxenbourg and Norway. The economic power of the US is immense, but the allocation should be optimized.
Again you ignoring mathematics. The interest function is an exponential function. It transfers money from borrowers to lenders - it's a law. It has nothing to do with wiser investment decisions. If don't have savings you can't invest.
> The USA has a much lower GDP per capita than most of those countries you have mentioned.
I am sorry, that is not right. All countries that I mentioned have lower GDP per capita that the US. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... There are only 3 countries in Europe who have a higher GDP per capita: Lichtenstein, Luxenbourg and Norway. The economic power of the US is immense, but the allocation should be optimized.
You're mistaking wealth and the money supply. It's the good ol' "let's live in a scarcity driven economy even if we don't have to". Because schadenfreude.
"If there were a fixed amount of it, we'd all still be nomadic hunter-gatherers."
Exactly - how do so many miss this basic economic truth?
Exactly - how do so many miss this basic economic truth?
Inflation?
Wow. In my opinion, the discussion on CNN is better than it is here. If this becomes popular here, this might change but at the moment Disqus is doing a great job of filtering a large number of comments. Kudos to Disqus on making popular media comments work well.
For those on a mobile device (the "Join the Conversation" feature wasn't working for me on my phone), here is the top comment at time of writing this. User 'spm' writes:
I think people are missing the larger point these type of graphs show. Of course there has always been rich and poor in America. And the bottom poor in America are doing better than the "middle class" in Zimbabwe or some other third world country. But the real point of these type of graphs is that return on PRODUCTIVITY has skewed exponentially toward the wealthy. It's evidence that supply side economics does not work. THERE IS NO TRICKLE DOWN lol. The rich just get richer while inflation and stagnant wages make the poor get poorer. This is not political rhetoric or demonization of the wealthy. It's simply reality and can be substantiated with data and numbers.
People also need to stop with this logical fallacy about the wealthy working hard for their wealth. Typically that's not how it works , wealthy people typically increase their wealth exponentially by NOT working hard...instead choosing to use this little thing called....the stock market. The whole point of the stock market is to make your money work for you...and get more of it. That little 15K you've slaved to get into your 401K, yea someone makes that in a week....off of dividends lol. Even CEOs who make hundreds of millions of dollars do not work in the traditional sense. They get paid to make decisions, and often times those decisions are out right HORRIBLE affecting the lives of the middle class and poor who work under them(if they don't get laid off). Luckily many CEOs have golden parachutes which takes care of that pesky notion of accountability which they can then use to make investments(and continue to grow their wealth exponentially) in the case that they are fired
I think people are missing the larger point these type of graphs show. Of course there has always been rich and poor in America. And the bottom poor in America are doing better than the "middle class" in Zimbabwe or some other third world country. But the real point of these type of graphs is that return on PRODUCTIVITY has skewed exponentially toward the wealthy. It's evidence that supply side economics does not work. THERE IS NO TRICKLE DOWN lol. The rich just get richer while inflation and stagnant wages make the poor get poorer. This is not political rhetoric or demonization of the wealthy. It's simply reality and can be substantiated with data and numbers.
People also need to stop with this logical fallacy about the wealthy working hard for their wealth. Typically that's not how it works , wealthy people typically increase their wealth exponentially by NOT working hard...instead choosing to use this little thing called....the stock market. The whole point of the stock market is to make your money work for you...and get more of it. That little 15K you've slaved to get into your 401K, yea someone makes that in a week....off of dividends lol. Even CEOs who make hundreds of millions of dollars do not work in the traditional sense. They get paid to make decisions, and often times those decisions are out right HORRIBLE affecting the lives of the middle class and poor who work under them(if they don't get laid off). Luckily many CEOs have golden parachutes which takes care of that pesky notion of accountability which they can then use to make investments(and continue to grow their wealth exponentially) in the case that they are fired
You mention that their wealth is put into the stock market, which is only part of the story since most of that wealth is in a variety of investments with a potential return of which the stock market is only one example. That wealth also provides the capital that funds many startups or help other companies grow. Some of these investments are rubbish, as you say, but the rubbish investments reduces the value of the portfolio. The wealth that remains and grows are because they are generally managed well by the wealthy individuals or whoever is managing it for them, picking the right investments. This is a good thing and there is a kind of trickle down that results because of this, in the form of investments being allocated to people worthy to invest in.
What is the difference between a good investment and a rubbish one? A good investment is one where you invest in a company that produces a product for which there is demand greater than supply. And where does demand come from?
You have to be able to produce the product or deliver the service at a lower cost than people are willing to pay for it. Demand is just one factor that affects how much they are willing to pay. The most basic example is an investment in an invention that saves people time and money, so people are willing to pay a portion of the time and money they are saving. Demand is then influenced by various things, including how important or significant this saving is, and how many other options they have to achieve similar savings, including alternatives from competitors. A good investor would be someone who understands and consider all these factors.
When you have a large wealth gap it simply becomes less profitable to produce goods that are of high utility to those with less money.
So you may get more bang for your buck by investing in companies that give labour saving benefits to the already wealthy, thus net increasing unemployment. With less income disparity the best goods to invest in may be ones which provide quality of living improvements across the spectrum.
So you may get more bang for your buck by investing in companies that give labour saving benefits to the already wealthy, thus net increasing unemployment. With less income disparity the best goods to invest in may be ones which provide quality of living improvements across the spectrum.
Wrong again, there is no such thing, than well investments. Nobody beats the market portfolio in the long run - even not Warren Buffet.
You have to be a bit careful talking about things in terms of "working hard" since this is hard to define.
Apart from a few who have inherited enough wealth to throw it all at a financial advisor and say "Keep me solvent so I can chill and do coke for the rest of my life" you're going to have to do something.
Some might consider spending long hours doing research as to the best way to get the most growth out of your money to be hard work. Whereas others may think that anything which isn't back breaking manual labour isn't really work at all.
Apart from a few who have inherited enough wealth to throw it all at a financial advisor and say "Keep me solvent so I can chill and do coke for the rest of my life" you're going to have to do something.
Some might consider spending long hours doing research as to the best way to get the most growth out of your money to be hard work. Whereas others may think that anything which isn't back breaking manual labour isn't really work at all.
Exactly - I used to feel guilty that I wasn't "getting my hands dirty" and instead working in front of a computer all day. Then it comes out that actually sitting all day might be bad for your health. Someone will undoubtedly chime in with the whole "market value" argument. But one point has always stuck with me: the right decisions are important, but how much work would get done with "the right decisions" and no one to execute them? Is making the right decision really worth more than all the work to implement it?
Maybe Sam Harris should have used the reality vs. the perception of inequality rather than firewood for his case study in how people can become irrationally attached to a comforting idea.
Wealth is produced. If there were a fixed amount of it, we'd all still be nomadic hunter-gatherers. Therefore, the gain of wealth is NOT a zero sum game. When some CEO (good, bad, or hopelessly incompetent) makes 14 bazillion dollars, that does nothing whatsoever to take anything from you. You don't need to worry about what that CEO makes. You need to worry about what YOU make.
Consider the White House Chief Calligrapher makes $96,725 per year. What a complete and utter waste of tax money. If it were not for the fact that its our tax money, it wouldn't matter a hill of beans. If Microsoft or Apple wanted to hire a Chief Calligrapher at $96,725 or $967,250 it wouldn't matter a hill of beans except to the shareholders of each company who might not think such an expenditure is going to pay off all that well.
I recommend reading Henry Hazlitt's Economics in One Lesson: http://www.fee.org/library/detail/economics-in-one-lesson-pd...