Wealth Inequality in America 

This video is rather old, but it came across my news feed again today, and I figured it warranted comment.

With the hard charge of Bernie Sanders in the race for the Democratic presidential nomination, it would seem that this idea of inequality is becoming increasingly more popular.

There’s a major problem with it, though, and that’s that they are looking only at one side of the financial ledger to measure wealth solely by dollar income.

This isn’t all that surprising given that the cultural understanding of economy centers entirely around the government and their attempts to manipulate things through the income tax. 

Never mind that the effect of the income tax pales in comparison to the damage done by the Federal Reserve. That really doesn’t matter to most people who remain blissfully unaware of all but what the news media talks about. 

So to most people the economy is all about how much is the rich people’s money the government takes to help the poor. Republicans, of course, counter the Democrats’ desire to take it all (Democrats are no true socialists by the way, but that’s off topic), by saying that doing so would stifle the economy. 

Why is this bad? To them is because the money won’t trickle down in the form of jobs. So really both sides ultimately measure the health of the economy by how much of the dollar wealth finds its way into the pockets of poor people. 

(Kind ironic then, isn’t it, that this is the same government that encourages those poor people to spend their little hearts out by disincentivizing savings while at the same time sapping the purchasing power of what dollars they do have to spend…. But that’s another digression).

So what’s the proper economic analysis here? Is there a problem with this distribution? It certainly seems unfair, doesn’t it? But is it?

No. It’s not. Why not? Because of that whole idea of trickle down. 

Of course any time a fiscal conservative mentions the trickle down, the progressives are always quick to point out that the trickle down doesn’t work.

Is that true? No way! The fact is that the trickle down has already worked and this distribution is the proof.

Now that sounds backwards, right? If the trickle down worked, this graph would even out, wouldn’t it?

Well it certainly seems like it would, and that’s what the progressives say world happen. But that’s only because they are incorrectly measuring wealth in terms of income or dollars in a bank account instead of standard of living.

If you look at standard of living and then compare those poorest Americans with people in, say, Rwanda, it’ll put things into proper perspective pretty quickly.

All of this of course begs the question of why any one person has any greater claim than another to any given unit of wealth. 

The videographer’s bias (and the one growing increasingly common) is that at a certain point someone has enough and someone else has a greater claim to his excess, because… fairness.

The root of this idea has to do with need. Why does the top 1% NEED all that cash? Certainly if we distributed a chunk of that to the bottom 10% that would significantly increase their standard of living, right?

Or would it?

This whole thing seems to forget what money and income really are. Money is the measure of how much you have enriched the lives of to those around you.

It’s easy to understand when we break it down. If I give you a gallon of milk, and you give me $3, that $3 I have been enriched is roughly equivalent to the amount I have enriched you. My wealth has improved by $3. Yours has improved by $3 worth of milk.

Then suppose I buy a cow and sell all the milk I get from it to not just you but all my other neighbors. Every gallon I sell enriches someone else by $3 worth of milk and enriches me by $3 worth of currency. 

Now after a while that currency will start to pile up. Except for the amount I have to spend feeding and keeping my cow healthy, and except for the amount I have to spend on consumable goods and services for my own well-being, that cash is all going to accumulate into a nice pile of dough.

And since that wealth comes from a multitude of sources, if you compare me to any one of my customers, it will appear as though I have a great advantage over them. But that is merely because I serve more people than just that one. To be fair, you would have to compare me to the whole community, and you would have to count all the milk I’ve produced in the balance on their side.

These guys in the top 1% got there because in one way or another they have directly or indirectly enriched the lives of millions of people. 

Suppose $1 of every Star Wars ticket found its way into JJ Abrams’ pocket. If a million people went to see the movie, that would be $1 million to Mr Abrams.

It wouldn’t be fair for my neighbors to gang up on me and demand I distribute my pile of cash among them. Why do I owe them anything? I gave them milk. 

Similarly, it’s not fair for society to gang up on rich people and demand they redistribute their wealth. Why should they redistribute it? 

They gave us Star Wars and iPhones and Facebook and well-stocked grocery stores and cars and loans when we needed to buy a house or pay for college and so on and so forth.

Don’t look at this graph and think only about how much cash is at the top without realizing that that cash got to the top because the guys at the top are responsible for the fact that the guys at the bottom live better than kings did 400 years ago.

The wealth has already trickled down – not in the form of cash, but in the form of standard of living.

Don’t believe me, just look around you! The poor in this country are not that bad off. Some people are truly suffering, but there are almost always circumstances surrounding that, and even the worst of of them are doing pretty well actually.

Again, compare them to people living in Rwanda or the Philippines or Myanmar. 

With relatively few exceptions, the poor in the United States (and most of the so called “first world”) have food, clothing and even cell phones and tvs. 

But more to the point, because if the efforts of guys at the top, even the poorest in this country have indoor plumbing, electricity, refrigeration, forced air central heating, air conditioning, some firm of automotive transportation, telephones, access to a computer with Internet access, and a thousand other things poor Americans take the granted every day that simply did not exist or at least were not available to the poorest of people even as recently as 100 years ago. 

All of these comforts enjoyed by everyone in our society that came about because of the hard work of those at the top.

Sure there’s always going to be a certain handful of exceptions to every rule. But by and large, the pattern is that the guys at the top, though they have indeed amassed a vastly greater sum of cash than everyone else in this country, have done so by serving others.

The implication – or rather the outright statement of this video maker – that the rest of the people are suffering as a result of all this hoarding is patently false. In fact quite the opposite is the truth, because how did these guys amass all this wealth? 

They did it by enriching the lives of millions of other people which has drastically improved the standard of living for those who seem to have less.

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