Global income gap

[kevm14]

http://a.msn.com/r/2/BBGN4Og?a=1&m=EN-US

This notion of the transfer of wealth from the poor to the rich is an example of misleading with statistics. One thing I learned from Ben Shapiro is that the individual people in these wealth bands can be extremely dynamic. There is an implication with these statistics that there is zero moving around (up OR down). I think mobility is a huge missing aspect of these "studies."

I also don't like the implication and automatic conclusion that any of this is a "problem" that needs to be "solved." Nobody seems to have any idea what the correct statistics would look like. I only sense a push toward socialism. Notice I said "toward," indicating direction of change.

[Adam]

This notion of the transfer of wealth from the poor to the rich is an example of misleading with statistics.

I agree. Its more of a wealth accumulation rate adjustment.

[kevm14]

I don't know what that means so I can't tell if it is intended to be sarcastic.

In any event, it is an economic fact that with fiat currency, it is possible, by definition, for someone to create wealth (particularly through the contribution of value to society) without taking ONE CENT away from anyone else (poor or rich). We always need to be on the lookout for illegal activities because...well, Enron for one. But I digress.

I really resent the narrative that the poor are literally and physically giving money to the rich, against their will. That's not how it works.

This is a good way to look at it in my opinion.

It’s not about what other people have. It’s about what you have. Are you content? If so, why do you care what other people have?
Most Americans are perfectly content with what they have.

Or, if they aren’t content, they blame themselves for mistakes they made in the past that led them to this point in their life. The billionaires in this country didn’t have anything to do with someone not paying attention in school or doing drugs or marrying the wrong person or whatever else led them to their unfulfilling adult life.

I don’t appreciate people who make less than me assuming that I didn’t earn what I make, or I don’t deserve it, or I have more than I need. As a courtesy, I do the same to the people above me on the socio-economic ladder. It’s none of my business how they got it and how they spend it. If they aren’t breaking the law, it’s no one’s business.

Here’s how a mature person responds to the fact that there are very rich people, I think: First, indifference. It’s none of your business. If that doesn’t work, if you insist on minding other people’s business, then try being happy for them, rather than angry or jealous. There are people with better athletic ability than you, or better looks than you, or better health than you. You can spend your life resentful, angry, and jealous of them, or ignore them, or actually be happy for them.

How you react to people that you think have more than you shows a lot about your maturity and character.

And this is good perspective as well:

Americans even in the lowest rung of the economic ladder relative to other Americans are in the top few percent of the wealthiest in the world.

America’s poor are the most obese group of Americans. There is no starvation even in a calamity such as earthquake, flood, drought or destructive storm.

Most everyone in America has a smartphone. Most everyone in America has a flat screen TV, refrigerator, air conditioning and transportation.

Most everyone in America has a computer and internet access.

Mark Zuckerberg is one of the wealthiest in the world. It’s not clear how that diminishes me and my family who have far less. Zuckerberg operates in a global business. My economic activities are restricted to my local community. That is the norm for most Americans. That seems to be the norm in other developed countries as well.

I’m not sure why Kim Kardashian makes north of $200 million a year but that is a topic for another day. But whatever she makes doesn’t affect my daily life or happiness.

The progressive left has been pushing identity politics for some time to try to achieve their political ends. It’s divisive and it doesn’t work. The meme of rich against poor is tiresome.

America could certainly do better in providing our poor better educational opportunities and restructuring our social safety net so that it does not discourage economic advancement the way it does today by punishing workers and two parent families.
But enough of the class warfare and envy.

But how does the well-being of the American family compare with the well-being of people in other countries?

The U.S. still fares very well on that score. On a global scale, the vast majority of Americans are either upper-middle income or high income. And many Americans who are classified as “poor” by the U.S. government would be middle income globally, according to a new Pew Research Center analysis.

It turns out there are almost no poor people in this country by global standards. Poor doesn't mean you can't afford to buy a new car every 5 years.

[kevm14]

But there is a wealth gap, so I’ll address that portion of the question.

There is nothing wrong with a wealth gap. What matters is if someone came about their wealth ethically or not. If Person A creates a lot of wealth and Person B plays a lot of video games, and as a result Person A has more wealth than Person B, there’s nothing wrong with that. No injustice has occurred.

If Person A has political pull that transfers the wealth by Person B to Person A, then an injustice has occurred. Even in this situation, Person B may still have more wealth, But Person A is still wrong for taking Person B’s wealth.

The problem occurs when the economically-illiterate obfuscate these two very different situations. If Person A simply has more than Person B, even a lot more, that itself doesn’t indicate any sort of injustice that needs to be corrected. Wealth is created, and if one person has more wealth than another because they’ve created more wealth, then that’s just fine.

Wealth is not a static pie wherein one person has more means that one person has less. That is, one person does not have more at the expense of another person. We can see that wealth is created, not simply shuffled around, by looking at the total of human wealth vs. 100 years ago, or 1,000 years ago, or 10,000 years ago.

The issue occurs when wealth is forcefully redistributed (i.e. taken from one person and given to another without the former’s consent). Since this is the problem regardless of the final distribution, then this should be the focus of moral outrage, not a wealth gap.

[kevm14]

More discussion.

https://www.quora.com/What-would-happen ... time-reset

What would happen if we re-distributed the world's 1%'s wealth back to the 99% as a one-time reset?

I have to paste this answer first as the question is even posed in a ridiculous way.

The majority of the answers here state that the result of such redistribution is not only ineffective (as we can assume a few decades later we’ll find ourselves in a similar scenario of inequality) but also dangerous as history has taught us again and again (and again, and again…). To actually bring something new to that discussion, instead of repeating what they’ve correctly stated I’d like to add something else.

I want to highlight the biggest problem with the question, an assumption that was made and I didn’t see anyone question - and it must be questioned indeed. The question I was requested to answer was "What would happen if we re-distributed the world's 1%'s wealth back to the 99%?". Do you see the little assumption made there? Let me point it out to you: “What would happen if we re-distributed the world's 1%'s wealth back to the 99%?”

Do you see it now? This question assumes the 1%’s was wealth actually originally owned by the 99% - and through some unspecified process was distributed to the 1% and thus must now be redistributed back to its rightful owners. Is this actually the case?

Let’s see who are the 5 richest people in America right now:

1 Bill Gates $86 billion Microsoft, Cascade Investments LLC

2 Warren Buffett $75.6 billion Berkshire Hathaway

3 Jeff Bezos $72.8 billion Amazon.com

4 Mark Zuckerberg $55.5 billion Facebook

5 Larry Ellison $49.3 billion Oracle Corporation

All of these people, without exception, created their wealth by providing people with value. I’ll say it again, they created their wealth. It was not taken from anyone. Not only that - we’re all immensely wealthier thanks to them. Does any question the fact that thanks to PCs we can now do with one person and an hour what used to take whole teams of people days to do? That’s a wealth we all share, not just Gates.

So you can’t re-distribute the world's 1%'s wealth back to the 99%, because it was never theirs in the first place.

Alright, with that out of the way here's a good answer:

First, that seems a very very difficult proposition as the modern State seems to be under significant control of those in the 1% bracket (holding more than 44% of the world's wealth). [1]

Well, if not obviously, then subtly. That's precisely why during the 1900s the communists cried themselves hoarse reminding the world (i.e. at least the 90% people) that the King (President/PM) rules us, the Clergy (Church or any religion) fools us, the Military (Armed forces) shoot us, the Capitalist classes (rich guys) eat for us, and we (the 90%) work to make food, resources and clothes for them. A lot of that may have changed today, at least as far as water-tight boundaries and mobility across classes is concerned. But the basic concept still remains the same. A super-talented, super-endowed, super-lucky plutocracy of maybe under 10,000 individuals has come to rule the vast percentage of humanity (so I read across publications).

Second, there is the physical problem in redistribution. Do we cut open the Porsche, the Eclipse, and the upcoming Streets of Monaco for the millions waiting in line?

Assuming still that this redistribution can be done, perhaps using violent means, or (to appeal to the non-violent Quorans) through a sudden Buddhaesque enlightenment, then

1. First of all, there will be rapturous joy all around. The disenfranchised will celebrate with vigour when they see the downfall of the high and mighty. When everyone is brought down to where everyone knows exactly what the other guy's actual worth is. When everyone has to live almost the same kind of lives (at least for a few weeks).

2. Then, everyone will start planning what to do with that money. Because most of the newly rich ones (moderately rich, or now-not-poor actually) would have no prior experience - two things will happen
a. Inflation shoots up worldwide - all normal goods and services suddenly become very expensive as everyone is in the market to buy, and
b. Investment Advisory becomes the hottest career worldwide

3. Soon enough, most of these newly-endowed will start running out of money, as the rich of today are rich precisely because they know how to get rich and stay rich (Sorry for this predictable twist). So history will slowly start asserting itself, and concentration of wealth will start all over. (Wait - I get innovative hereon)

4. That will lead to massive frustration, and a whole new bout of violence as the newly-rich-but-soon-back-to-square-one will not accept this sudden twist of fate, and will reassert. They'll either go communist (welcome back Stalin sir) or will create communal living ( Commune ) or will simply finally resign to their fate.

5. Wait - perhaps all this will be easily visible to the intelligent (and non-greedy) members of the world community, and they may suggest an altogether new solution - Creation of a 'Worldwide Sovereign Humanity Fund' - that funds everything mankind does. Peace, finally. Everywhere.

Alas - the last part was fantastic, till the international arms lobby learned of it. Bye, get back to work now.

The end is a little weird but he makes some very good points with #1-#3 which people who don't understand economic theory would do well to study.

[kevm14]

I like this as it plays to the original point I made in the first post.

As alluded to in a previous post, the 80/20 principle would ensure a redistribution back to 1% holding 50% of the wealth.

This isn’t because of some unfair dealings, or unnatural goings on. The law of 80/20 is a universal law and has two key effects here…
1.80/20 is fractal. In the top 20% of inputs, there is a second 80/20. Therefore 64% of outputs come from 4% of inputs. And in that 4% there is yet another 80/20. Therefore 50% of outputs come from 1% of inputs.
2.80/20 applies to more things than you could ever imagine. Financial control is only one of many.

Here are some examples…

80% of the wear is on 20% of your carpets.
80% of your driving is done on 20% of the roads.
In a group, 80% of the noise is made by 20% of the people (I witnessed this at a railway station just last night!)
You use 20% of your cutlery and crockery for 80% of the time.

Each of these can be expanded by the fractal law.

1% of your carpet gets half of the wear.
Half of your driving is done on just 1% of the roads.
In a room of 100 kids, one of them is causing half of the commotion.
And your favourite cup or glass gets half of the use of all the crockery combined.

Whenever we try to unbalance 80/20 it never lasts. Things don’t revert to average, they revert to the curve.

Look at the USSR. We’ll redistribute the wealth to everybody. Except for the poorest. And, of course, those running the country need more. As do the generals who protect those running the country. 80/20. 50/1.

If you fight a universal law, you always lose. The universe is bigger and smarter than any human.

Granted 80/20 is not really a "law" but it goes a long way to explaining why people maybe should spend less energy trying to "fix" things that aren't broken.

[kevm14]

We would soon be back where we are today, certainly within a generation.

The issue is that the poor are not poor because they lack money. The poor are poor because they lack the means of making money. Give them a sudden influx of cash and they will spend it, but be no more productive than they were before. Once the money is spent they will be poor again. Similarly the wealthy are wealthy because they know how to produce goods and services that others want to buy. That advantage is not eliminated by taking away their wealth. (Of course, doing it continuously may remove their motivation, but causing them to stop producing would hurt everyone, including the poor.)

There are several sources of data on this very phenomena. One study looked at modern lottery winners in Florida and how winners went bankrupt at twice the rate as those who did not win the lottery.

http://www.marketwatch.com/story...

Another was a study that looked at a significant land lottery in Georgia that happened in 1832, and traced the economic status of the families over several generations, to see if those that won ended up better off than those that did not win. The findings were negative.

http://freakonomics.com/2013/09/...

It is instructive also to look at land redistribution in Zimbabwe, where the wealth of the nation, in the form of farm land, was taken from the wealthy landowners and distributed among the poor. It led to mass starvation for all since the poor were not able to make productive use of the farm land.

After Zimbabwe's Land Revolution, New Farmers Struggle and Starve
http://www.nytimes.com/2002/12/26/world ... wanted=all

Presumably I have no need to rehash the similar case of property seizures and collectivized farming in the Soviet Union, and the mass starvation that resulted from that.

This same myth about redistribution also explains the general failure for many decades of foreign aid to help the developing world. Institutions matter. Culture matters. Habits matter. Discipline matters. Education matters. Wealth? The error is to confuse results for causes and to subsidize roosters to make the sun rise.

All of this is inline with everything I've heard from Ben Shapiro and to a greater extent (given that he's an actual degreed and practicing economist), Thomas Sowell. I don't think people should have a hard time understanding these things.

And here's a question where someone thinks, oh, I gotcha, some people have good ideas but just don't have money and that's not fair!

But what about people who know how to make money (for example, run a restaurant), but don't have money to start it?

But there's a great answer:

That's a good reason to bring in investors.

That is what banks are for - to lend money to productive people who have no capital. It’s a core reason that a free market in capital is so good for growth.

Turns out we already have infrastructure in place to address this.

[kevm14]

70% of millionaires in the USA are first-generation, though - we worked very hard for this money, and are understandably offended by people who now want to take it and hand it out like cheap candy in exchange for votes.

And when you impose obscenely high inheritance taxes on “the rich”, you invoke the rule of unintended consequences, such as destroying a large number of family farms in the 1970s with a 70% inheritance tax that could only be paid by selling the farm on which you’ve worked and improved your entire life.

The rule of unintended consequences is also a big talking point of Thomas Sowell. When you do one thing that seems well meaning (and popular), unintended consequences may arise. Which is why policy needs to be written on sound reason and fact, not emotions.

When I say I am conservative, it is in this way that I mean it. This thread.

[kevm14]

https://www.forbes.com/sites/afontevecc ... a62a113369

There Are More Self-Made Billionaires In The Forbes 400 Than Ever Before

Agustino Fontevecchia , CONTRIBUTOR
From global billionaires to art market fraud, I cover power and money
Opinions expressed by Forbes Contributors are their own.
Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today.

The figures show an unequivocal shift from inherited fortunes to self-made fortunes.

While our self-made scores aren’t a perfect measure, they do shine a light on an interesting story: more and more, the richest people in the country have worked hard, in an incredibly difficult context, to earn a spot in the Forbes 400. And while it is a known fact that the wealthiest have amassed a greater proportion of the nation’s output than the rest, the self-made scores demonstrate social mobility is indeed possible.

This is exactly the mobility I am talking about. And here's some actual data/evidence to support my point.

http://www.nytimes.com/books/first/s/st ... naire.html

This looks like a good read. Here's a snippet:

PORTRAIT Of A MILLIONAIRE

Who is the prototypical American millionaire? What would he tell you about himself?(*)

* I am a fifty-seven-year-old male, married with three children. About 70 percent of us earn 80 percent or more of our household's income.

* About one in five of us is retired. About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.

* Many of the types of businesses we are in could be classified as dullnormal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.

* About half of our wives do not work outside the home. The number-one occupation for those wives who do work is teacher.

* Our household's total annual realized (taxable) income is $131,000 (median, or 50th percentile), while our average income is $247,000. Note that those of us who have incomes in the $500,000 to $999,999 category (8 percent) and the $1 million or more category (5 percent) skew the average upward.

* We have an average household net worth of $3.7 million. Of course, some of our cohorts have accumulated much more. Nearly 6 percent have a net worth of over $10 million. Again, these people skew our average upward. The typical (median, or 50th percentile) millionaire household has a net worth of $1.6 million.

* On average, our total annual realized income is less than 7 percent of our wealth. In other words, we live on less than 7 percent of our wealth.

* Most of us (97 percent) are homeowners. We live in homes currently valued at an average of $320,000. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.

* Most of us have never felt at a disadvantage because we did not receive any inheritance. About 80 percent of us are first-generation affluent.

* We live well below our means. We wear inexpensive suits and drive American-made cars. Only a minority of us drive the current-model-year automobile. Only a minority ever lease our motor vehicles.

* Most of our wives are planners and meticulous budgeters. In fact, only 18 percent of us disagreed with the statement "Charity begins at home." Most of us will tell you that our wives are a lot more conservative with money than we are.

* We have a "go-to-hell fund." In other words, we have accumulated enough wealth to live without working for ten or more years. Thus, those of us with a net worth of $1.6 million could live comfortably for more than twelve years. Actually, we could live longer than that, since we save at least 15 percent of our earned income.

* We have more than six and one-half times the level of wealth of our nonmillionaire neighbors, but, in our neighborhood, these nonmillionaires outnumber us better than three to one. Could it be that they have chosen to trade wealth for acquiring high-status material possessions?

* As a group, we are fairly well educated. Only about one in five are not college graduates. Many of us hold advanced degrees. Eighteen percent have master's degrees, 8 percent law degrees, 6 percent medical degrees, and 6 percent Ph.D.s.

* Only 17 percent of us or our spouses ever attended a private elementary or private high school. But 55 percent of our children are currently attending or have attended private schools.

* As a group, we believe that education is extremely important for ourselves, our children, and our grandchildren. We spend heavily for the educations of our offspring.

* About two-thirds of us work between forty-five and fifty-five hours per week.

* We are fastidious investors. On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent. Seventy-nine percent of us have at least one account with a brokerage company. But we make our own investment decisions.

* We hold nearly 20 percent of our household's wealth in transaction securities such as publicly traded stocks and mutual funds. But we rarely sell our equity investments. We hold even more in our pension plans. On average, 21 percent of our household's wealth is in our private businesses.

* As a group, we feel that our daughters are financially handicapped in comparison to our sons. Men seem to make much more money even within the same occupational categories. That is why most of us would not hesitate to share some of our wealth with our daughters. Our sons, and men in general, have the deck of economic cards stacked in their favor. They should not need subsidies from their parents.

* What would be the ideal occupations for our sons and daughters? There are about 3.5 millionaire households like ours. Our numbers are growing much faster than the general population. Our kids should consider providing affluent people with some valuable service. Overall, our most trusted financial advisors are our accountants. Our attorneys are also very important. So we recommend accounting and law to our children. Tax advisors and estate-planning experts will be in big demand over the next fifteen years.

* I am a tightwad. That's one of the main reasons I completed a long questionnaire for a crispy $1 bill. Why else would I spend two or three hours being personally interviewed by these authors? They paid me $100, $200, or $250. Oh, they made me another offer--to donate in my name the money I earned for my interview to my favorite charity. But I told them, "I am my favorite charity."

Maybe some countries in Europe have an old money problem but we apparently are doing a lot better.

So next time someone, the media, a politician, says "the rich," "the wealthy," or "the 1 one percent" know the statement is politically charged and misleading.

[Adam]

Its more of a wealth accumulation rate adjustment.

I don't know what that means so I can't tell if it is intended to be sarcastic.

I meant that rather than making a system to "redistribute the wealth" they've instead made it easier to keep/grow money if you already have it. But in a sarcastic way.

It turns out there are almost no poor people in this country by global standards. Poor doesn't mean you can't afford to buy a new car every 5 years.

That's what we think it means in the US. We don't know what's outside our bubble.

As a group, we believe that education is extremely important for ourselves, our children, and our grandchildren. We spend heavily for the educations of our offspring.

I agree with most of what this guy says, especially this.