posted
The other day I was reading an article about how the number of people on the Forbes Billionaire list has increased. Please tell me why this bothers me besides jealousy and envy. Why does this concern me so much?
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posted
Because you're nai...err...idealistic and you hate to think that with as many billionaires as this country seems to have, our social ills still abound and on some days, multiply.
posted
I'm thinking more about the increasing gap between the rich and the poor. Suppose the middle class disapears altogether? I don't believe that would have a good impact on the economy, but I know little of such matters.
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posted
The "middle" class will always be here - the standard by which we gauge "middle" will probably change.
Once upon a time, 30,000 a year was good money and comfortably middle class.
Nowadays, it's a good starting salary, although if you factor in supporting a wife and kids, it will put your standard of living a couple of notches down the meter.
quote:The "middle" class will always be here - the standard by which we gauge "middle" will probably change.
I don't know that this is self-evident. It's not inconceivable that wealth will cease to be distributed along a bell curve and turn into a two-humped curve.
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posted
I'm not challenging your statement about a two-hump curve; I'm simply having a hard time picturing one, particularly in relation with the current topic.
Of course, I didn't have much of a head for economics either.
posted
When I see that there are lots of people with waaaaaay more money than anybody could ever need, it doen't really bother me. Just because somebody is richer than me doens't make me any poorer.
I am concerned, however, about the state of the poor in this country (and others). I just don't think that you can point to the "haves" and automatically blame them for the "have-nots".
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posted
It's not really blaming them... It just seems like the balance is off a bit... I can't even explain it cohesively... But... It's not something I see as a good thing.
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posted
A two-humped curve is hardly the weirdest possible shape. In a feudal society, the King (in theory) owns all the land, so the income curve (since all wealth comes from the land, usury being forbidden) is a delta function. Zero everywhere except where the King is. Of course, that's theory.
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posted
MPH, you don't have to believe the economy is a zero-sum game to contend that the rich are gaining at the expense of the poor. You'd have to believe that if you contend that this situation is the only possible explanation of the disparity of wealth, a sentiment that has not been expressed so far in this thread as far as I know.
There is some evidence that growing income disparity is at the expense of the the lower and middle classes. Wages adjusted for inflation (real wages) have been declining for a while now. The late 90's tech boom is a significant outlier, but otherwise, real wages have been declining since 1970. When the real GDP is growing, there is no explanation for this other than the rich gaining at the expense of the rest. Growing income disparity is a real problem, and it shames me that some people would claim that it isn't. A system that allows the best-off to profit at the expense of those they employ is unjust.
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posted
If I remember my Soc I correctly, the two prototypical mercantile societies (The english and the dutch) that were fueled by/caused the growth of a middle class both more or less imploded when the middle class disappeared because of the collection of wealth into fewer and fewer hands. As was noted, real wages in America have been declining at a time when the GDP has been going up, suggesting that we are having the same problem.
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posted
I think it's important to note that past a certain point (around five years ago it was about $30,000 a year in the U.S.) there is very little corellation between income and subjective rating of one's quality of life and overall happiness. Even people who win big at the lottery tend to, after an initial euhoric period of a few months, rate their quality of life very similarly to what they said it was prior to winning the lottery.
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quote: MPH, you don't have to believe the economy is a zero-sum game to contend that the rich are gaining at the expense of the poor.
Very true. "Zero sum game" in this context just means "absolute winners who win at the expense of the absolute losers." Non-Zero sum games, such as the economy can still of course have the upper classes benefit at the expense of the lower classes.
Bush's tax cuts are an example of this. Posts: 6316 | Registered: Jun 2003
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posted
Also, a few years back the US had more than a million millionaires. I assume we still do. Kind of an odd stat.
Posts: 6316 | Registered: Jun 2003
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posted
I don't get it. If the number of rich people in the world is going up, wouldn't the number of poor people be going down?
If 10% of the people owned 90% of the wealth of the world, then the remaining 90% would have a .11111...% average share of the world's remaining wealth.
then if 11% of the people still owned 90% of the world's wealth, the remaining 89% would share 10% of the wealth, giving them .11236% of the world's remaining wealth.
Wow. I have successfully fried my brain. I hate math. Ignore me please.
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posted
Your hypothetical situation is a 1% in the increase of "rich people." There are some 6 billion people (6x10^9) on earth...so a 1 percent increase in rich people would mean 6x10^7 more rich people...The list may be increasing, but I don't think it's by that much.
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posted
Awww come on, analytical macroeconomics isn't like that. Once it all happened, things make a lot more sense.
sarcasmo, There's a big thing you're missing. The people who are not rich (rich in this case I guess means being a billionare) don't get an equal share of what's left. There are varying distributions of wealth. If 11% of the population own 90% of the wealth, it could be that next 14% own 90% percent of what's left, leaving 1% of the total pie for 75%. Or it could be more analogous to the situation that you described, where the remaining 89% eqaully share what's left, but I sure doubt that.
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I'm going to talk a little bit about economic theory. I think it's pretty interesting and important, but you may disagree. So feel free to disregard whatever comes next.
One of the first issues that you run into when trying to get a grasp of capitalism is that there are two distinct ways of getting money: labor and the utilization of capital. The relative payoffs of these two methods go a long way towards determining the distrubution of wealth.
You couldn't get on the billionaires list without owning and exploiting a whole lot of capital. Labor alone just isn't going to cut it. Capital is a much more rewarding source of money that labor is. Thus, you get at least in part the two humped distribution of wealth that some of the people were talking about, where the people in one hump get their wealth almost exclusively through their labor and the people on the other hump have access to capital.
A second issue with capitalism is that strictly speaking, no one earns any money through working. That is, there is no intrinsic quality of labor that results in rewards. Rather, it is only though a relationship with people with capital that labor results in money. Obviously, if we assume that the people with capital are going to be trying to maximize the amount of money they have, it makes sense that they're going to pay their laborers as little as they can get away with.
The early capitalist theorists, such as Smith, Ricardo, and Malthus, believed that the divide between the haves (i.e. those who had the opportunity to utilize capital) and the have-nots (i.e. those who neither had nor could aquire capitial) was inevitable and really the best that could be hoped for. In their systems, they assumed that the majority of laborers would be kept at a level of bare subsistence because their employers would have no reason to pay them any more. Because they assumed that there would always be more jobs than people to fill them, the choice they saw laborers having was to either work for just enough to live on or to starve to death. The people who weren't able to find work were the "surplus population" that you may remember being referenced in Dickens novels.
The flaw in these types of theories is that they fail to predict the rise of the middle class (the intermediate people between the capitalists and the base laborers) and also the tremendously benefical effects a thriving middle class has on both the social and economic nature of a society. Traditionally, the middle class rose from merchants, who combined labor with capital, and skilled workers, who were not easily replaceable and thus could to a certain extent set the wages that they would receive for their labor. With patent laws, a third source of the middle class, inventors/innovators also arose.
Morality, mobility, and, most importantly, the economic pressures brought to bear by the ideas and practices of socialism and communism led to a series of changes in the way even the base laborers got paid. Labor unions, the minimum wage, being able to move to a place where wages were better, the rise of nationalism and social cohesiveness, etc. led to a situation where the common worker in some places was receiving more than they needed to just barely survive. This raise in living standards, along with the potential for either them or their descendents to rise out of the lower class and into the middle class helped to decrease the social unrest previously endemic to the working classes.
The middle class and the more affluent lower class introduced a demand-side characteristic into the capitalistic economy that didn't really exist before. That is, now, instead of there being a relatively few, extremely rich people with surplus income, you had a whole mass of people who had money to spend. Before this, you had two markets, one where you tried to offer as expensive stuff as you could to a very limited clintele and one where, unless you dealt in very large bulk, it was very hard to to make a significant profit on. Now, however, people selling things that weren't all that expensive had a much readier market for their goods. Smaller businesses could surive and even thrive, leading to an even greater rise in the merchant class. The affluence acheived by the middle class provided leisure time so that they could devote tiem to education and/or invention, thus increasing the pool of skilled workers and inventors. Since you now had a wider pool of skilled workers to pull from, businesses could dvelop that relied heavily on having skilled workers who couldn't name exorbidant wages, and thus entire new industries were able to form.
The economic miracle of this was that without uncovering new sources of material capital, enormous amounts of new real wealth were being generated.
The danger associated with the widening gap in wealth distribution is that it threatens all these amazing econonmic advancements. A shrinking middle class had historically been a very bad sign for the continued power and prosperity of a society. As has been said, real wages (the amount of purchasing power people receive as a reward for working) have stagnated or even slightly declined since the 70s while the total GDP has been markedly increasing. This is a very worrying thing.
posted
It's funny how our perceptions about money are. I used to, and still do in a way, think that millionaires were some special class that lives in mansions.
Heck, I've probably got millionaires living in my neighborhood. I'm closely related to one, and know several more socially through church, community, or my husband's business connections.
They live in houses a lot like mine, and they are normal people. They don't live in exclusive gated communities and have gardeners. Maybe the billionaires do.
There was a book out called "The Millionaire Next Door" about this very phenomenon - most millionaires are people you wouldn't really expect.
I guess it's because a million dollars isn't as much as many of us think it is.
A billionaire, is an entirely different animal of course. I don't know any of those. My brother in law know Bill. As in Gates. But then, my BIL used to be very high up in the microsoft empire, until he quit working to go to seminary school full time.
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posted
My husband's grandfather is a millionaire. I had no idea until just recently, and was floored when my BIL mentioned it, because he's about the last person I'd expect it of: he's been a farmer his whole life, lives very modestly, etc. etc. Apparently it's because they always lived modestly and been very frugal that he's saved up so much.
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posted
By the time I retire, I fully expect to be a millionaire. For that matter, with inflation the way it is, I expect that this will be downright common by that point.
Posts: 37449 | Registered: May 1999
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posted
A married couple maxing out their IRA with $6,000 per year and earning 5% will have over a million dollars at age 66, with total contributions of $276,000. $6,000 is not a little bit of money, I know, but it's within the reach of many middle-class couples.
What many people don't realize is if they stop making contributions at age 33, so they've only put in $72,000, they'd still have half a million at age 66. Time is so important in these things.
posted
I finally got to do some calculations last night. I had been speculating about all this discussion about income disparity. Suppose you had a world of a million people where everyone had a dollar (I know, money's value changes depending on how much is available--try to picture it, for now, as a fixed amount of something, say food). Then take half of that away from everyone but one person and give it to her. Now you have one person with (roughly) half a million and one short of a million people with fifty cents each. It'd be easy to look at such a world and say, "That one person has too much money--it should be more fairly distributed." But an even distribution would only benefit the rest by a hair while devastating the one person with plenty.
So last night I finally encountered some real-world figures (in USA Today), and I distributed the wealth evenly among 6.16 billion people. Everyone had roughly $5000, which doesn't sound like much (you couldn't even buy a new car with it). The trouble is, I don't know whether the measure was of real wealth, or just of money; in the latter case prices would deflate (albeit rather catastrophically) for us formerly wealthy folk and eventually level out at some point. In the former case, for all I know, we might not have enough material goods each to live out the year.
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posted
Mabus, you've got to realize you've effectively doubled the wealth of everyone in the world (less one) by doing that. So it's not quite fair to say it only raises them up a "hair."
The thing is, if you did redistribute all that wealth, it's not clear there'd be anything to buy with that dollar. If everyone is at a subsistence level, then no one is doing anything but subsisting.
The ideal has got to be somewhere between the two extremes.
posted
Two very good points, Dag. I was, in fact, looking for criticism of that model, which I'm well aware is very simplistic. But it seemed to me that everyone else was working with a different model, where rich people have enough money or "stuff" to make everyone in the world middle-class if it were taken away. I don't think that's necessarily true, and I'm trying to see whether another model could be more realistic.
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posted
I agree. Your model, coupled with Squick's post, demonstrates quite well why simply taking wealth and redistributing it won't work (not that I think anyone's advocating precisely that). But, on a global level, we do need to acknowledge the terrible poverty some live in and the relatively paltry sums that would greatly enhance their lives.
There must be some concentration of capital (that is, wealth accumulated and held over time) in order to produce things efficiently. Whether that wealth is held by individuals, corporations, or government entities, the mere fact of concentration leads to the possibility of abuses.
posted
Here's an interesting stat, in 1993, the aggregate income of the top 10% of Americans, or about 25 million people, was greater than the aggregate income of the poorest 43% of the world, or about 2 billion people. This gap is growing.
Can anyone honestly claim that this state of affairs is just? Why should someone be subjected to such abject poverty by accident of birth while others have such absurd amounts of wealth? I'm not claiming the time for revolution has come, or anything like that, I'm just saying policies like reducing the tax burden on the rich and eliminating overtime rules is only making the problem worse. And as Mr. Squicky pointed out, the non-zero-sum game of the economy is stacked in favor of a strong middle class. The further we go from this, the weaker an economy becomes, and the less stable the geopolitical climate becomes.
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posted
It will be a disaster in the future. I'm not saying take the money from the rich and give it to the poor. Many rich people do work hard to earn their money. I'm saying make them pay their taxes. Don't give welfare to corporations who don't need it, give it to small businesses and farmers. And for heaven's sake, these people need to realize that trickle down is just going to make it WORSE!
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quote: I'm not saying take the money from the rich and give it to the poor. Many rich people do work hard to earn their money. I'm saying make them pay their taxes.
You do realize this is contradictory, don't you?
I'm not saying you're wrong that the rich can take a much heavier share of the burden than the poor--it's no different than not requiring us weaklings to do heavy manual labor. But this is not inherently the same thing as justice or fairness.
I have always maintained that people deserve to keep (the majority, at least) of what they earn. To me, the biggest question is what exactly people can be said to earn--is it really more work to manage a business along with a dozen other people than to load and carry all day? Obviously it is worth something ...but is it worth as much more as it pays?
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posted
Morbo, Besides it being cool that you're back, I wanted to thank you for your acknowledgement. From time to time I tend to spout off information like this on topics that I think are interesting. Now, don't get me wrong, I'm arrogant enough to pretty much know that my info is good, so I'm not looking for approval. However, I do sometimes wonder if people actually read what I write or find it useful. It's nice every once is awhile to see that at least some people do. Thanks. (Oh, and if that's not false modesty, it should be. You've written higher quality stuff than that.)
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Mabus, You're asking for trouble any time you bring moral questions of earning and worth into market capitalism, which is an emphatically amoral system.
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I think that part of the answer for reforming our economic system is changing our expected utility values. Right now, the metric we generally use is amount of money something will net. However, as I said, there is a very low correlation between wealth and people's happiness and perception of their quality of life. I think the money thing is a mythological artifact of a time where deprivation was the fact of life. A time where the majority of people were under that barrier (now it's around $30,000 a year) where wealth and happiness are highly correlated. Money has, in large part, ceased to be a positive goal. The amount of money people say they would need to be happy increases in relation to how much money they already have. It used to be (and still is for many people, especially in other places) a realistic negative goal (i.e. lack of money is a bad thing) and now it's taken on the character of a fantastic negative goal (money and having more of it than others and than I do now makes me feel better about myself when I feel bad), but it's never had a large, reliable positive effect. Money doesn't really make people feel good. It stops them from feeling bad or gives them a temporary jolt of power-feeling. It is not a route to sustainable happiness, but it has become the goal that we are conditioned to pursue, believing against all evidence that it will eventually, once we have enough of it, make us truely happy.
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posted
Squicky, you mistake me. In this case I'm not asking about moral worth. I'm questioning the valuation of different kinds of labor. The market, of course, can value things at any level it likes, but that depends on what employers think is important to their business and thus what they're willing to pay. Their priorities are perfectly capable of being wrong, after all.
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