Why "x% of people have y% of the wealth" is irrelevant.

[Borodog]

I've seen this tired old horse trotted out so many times it's pathetic. It's time to finally put it out of my misery.

A) The pie is getting bigger. It does not matter if 3% of the people own 90% of the wealth (numbers from another thread which I will not bother to investigate or dispute, since it is irrelevent regardless of what the numbers actually are), if the standard of living of the individuals continues to go up, which it does in a capitalist society. It doesn't matter if the "Gini" coefficient, a measure of "wealth concentration" continues to go up, because the standard of living of all individuals in society continues to go up. Anyone who doesn't believe this is invited to compare the standard of living of a modern janitor in the United States to kings and queens of prior centuries. The standard of living of the janitor is higher in practically every respect, with the exception of the ability to command servants.

B) Wealth turns over. As pvn has pointed out before, empirical studies have shown that 90% of affluent families lose their fortunes within 3 generations. Under capitalism, fortunes can only be build by continually innovating and pleasing large numbers of customers. Once that process stops, say when dilletant children take over the family business, poor decisions accumulate and that capital stock is lost, spent. It finds it's way into the hands of other capitalists better able to provide consumers what they want.

C) Concentrated wealth is good for consumers. Henry Ford started out with a capital investment of $25,000. By 1947 he was worth $1 billion. The reason he was worth $1 billion is because he provided consumers with what they wanted, a high quality inexpensive automobile. Better yet, he could provide high quality inexpensive automobiles because of the high productivity of his plants, which was only possible because of, you guessed it, a large capital accumulation; i.e. the factories and machineries whose value represented most of his $1 billion of "wealth". I.e. the vast majority of the "wealth" that all those evil capitalists have is the capital stock that they put to work for YOU. I don't have to own Ford to benefit from all of that capital. I don't even have to be a stockholder. All I have to do is buy a car, at far higher quality than I could build myself, and at far lower cost, and I gain the MASSIVE benefit of all that accumulated capital and productivity. I don't have to own Exxon's oil derricks, refineries, pipelines and trucks to gain the benefit of all that accumulated capital. All I need do is buy the gallon of gas at far lower cost and higher quality than I could ever hope to provide myself.

[pokerbobo]

Great post Boro...just wanted to add something for everyone to think about.

I often hear about the gap between rich and poor getting bigger.....What is better?

Choice 1) Rich people all have ten million more than they had last year...poor people all have 10000 more than they had last year. Net result rich to poor gap grows by almost ten million.

Choice 2) All rich people have 10 million less than last year...all poor people have 1 dollar more...net result rich to poor gap is smaller.

Do you socialists really want the gap between rich and poor to be smaller...or do you just want to stick it to the rich so they are a little bit closer to the hardships of being poor.? Be honest with yourselves.

[Arnfinn Madsen]

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Do you socialists really want the gap between rich and poor to be smaller...

[/ QUOTE ]

I am probably a socialist based on American nomenclature (I wouldn't be called in Europe). That the gap becomes smaller to the richest is not an important goal, it is about securing an adequate living standard for everybody. You cannot do that in any way which will not hurt the rich either through direct taxation of them or through any other interference into business life that will affect them negatively. For me the x% has y% is more a way to show that there are funds available for distribution.

[LinusKS]

You're making the mistake of treating wealth as if it were an objective, rather than a relative measure.

It really doesn't matter whether the kings and queens were poorer than the janitor in terms of colot TVs and Ipods; because the kings and queens were not acquainted with the janitor. Their point of reference was to the people over whom they ruled.

Similarly, it doesn't matter if a janitor is richer than the monarchs. He's not comparing himself to the kings and queens. He's point of reference is to the people whose toilets he cleans. If he's poorer then them (which is what it means to clean their toilets), then he's poor. Regardless of the queens and kings.

To put it differently, the rich need the poor; without the poor, they cannot exist. The poor, on the other hand, having nothing to lose but their chains.

[Girchuck]

People who are worried about the increasing wealth disparities are worried, that the trend will accelerate to the point that a small percentage of country will own close to 100% of the wealth, and at that point they will be in position of power over everyone else and can dispense with the niceties of representative democracy or respublic whenever they choose.
People who do not have the wealth will be unable to stop this. Since most people are not in the top one percent, it is very easy to scare them with this scenario. The trend of rich getting richer is a real trend, and it really appears to be accelerating. What do you think will stop this trend, so that it does not continue to the absurd conclusion of one small group owning all the wealth?

[TomCollins]

[ QUOTE ]
[ QUOTE ]
Do you socialists really want the gap between rich and poor to be smaller...

[/ QUOTE ]

I am probably a socialist based on American nomenclature (I wouldn't be called in Europe). That the gap becomes smaller to the richest is not an important goal, it is about securing an adequate living standard for everybody. You cannot do that in any way which will not hurt the rich either through direct taxation of them or through any other interference into business life that will affect them negatively. For me the x% has y% is more a way to show that there are funds available for distribution.

[/ QUOTE ]
Wow

[ShakeZula06]

[ QUOTE ]
To put it differently, the rich need the poor; without the poor, they cannot exist. The poor, on the other hand, need the rich

[/ QUOTE ]
fyp

[NickMPK]

The ""x% of people have y% of the wealth" stat isn't irrelevant, it is just incomplete. Certainly it is useful in describing different societies with similar levels of total wealth.

Given the diminishing marginal utility of wealth, it would be generally preferable from a utilitarian perspective to spread wealth around as much as possible, if that spreading doesn't decrease the total amount of wealth created.

You say:

"It does not matter if 3% of the people own 90% of the wealth, if the standard of living of the individuals continues to go up."

...Except it does matter if the standard of living would have gone up even more had wealth been less concentrated.

The fact that American capitalism has made things slightly better for the poor doesn't mean another system could not have made even greater improvements. In fact, if one accepts that people's labor/leisure curves are backward bending at certain points, a higher level of taxation could create incentive to produce more wealth.

[GoodCallYouWin]

Despite your conclusion that there is something 'great' or 'morally right' about capitalism, it is in the end, just another economic theory. One that is working, to be sure, but still it has its flaws and will eventually be replaced by some other product of human reasoning and imagination. That you write off the symptom's of your systems failure you dismissively merely reawakens the viewer to your huge bias towards this system.

C) Are you so sure? Giving people what they want is not neccessarily "good for them". If my friend wants to commit suicide, should I give him a gun? Or if my friend addicted to heroin wants to shoot up, should I go out and buy him a needle? Happiness is not obtained by material things (nor, it is important to note it is not taken away by them) but there are things that can take away happiness. Starvation, for example, or a life dulled and removed from inspiration. Death. What is good for someone as a customer or consumer may not be good for a nation, or a person.

[Arnfinn Madsen]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Do you socialists really want the gap between rich and poor to be smaller...

[/ QUOTE ]

I am probably a socialist based on American nomenclature (I wouldn't be called in Europe). That the gap becomes smaller to the richest is not an important goal, it is about securing an adequate living standard for everybody. You cannot do that in any way which will not hurt the rich either through direct taxation of them or through any other interference into business life that will affect them negatively. For me the x% has y% is more a way to show that there are funds available for distribution.

[/ QUOTE ]
Wow

[/ QUOTE ]

Hehe [img]/images/graemlins/cool.gif[/img]. I am not an extremist aka. communists or such, but I don't believe you have a 100% right to keep what you earn/have. I understand that taxing too hard is both hurting the economy and also crossing a moral line. But I believe that the boy next door is more entitled to your money for food and schoolbooks if he/his parents can't afford than you are too them for your own consumption. If you don't agree to that I am willing to use force to make it happen anyway.