Why The Rich Are Getting Richer

[likeabird03]

First I just want to say that I don't want to sound like Obama here because I believe he's got it wrong, and he doesn't know what he's talking about.

However I think a lot of what's responsible for the income inequality in recent decades is advancement in technology and innovation. The computer age has made people in many ways become obsolete, if they haven't been replaced with machines - they're competing with machines which cost far less to run. Secondly, advancements in technology has allowed for successful people and people who create things to become more recognized and far richer than in past times, and in many ways rightfully so.

I don't believe there's an easy answer to this, and I'm not suggesting one at this time. It's just a thought.

I'm also afraid that we may be entering a time period where service jobs, retail positions, and to some degree food service will become more automated, and electronic. This is going to be a very great challenge for our economy as some of these low paying jobs are the only ones left for some people.

 

[OohPooPahDoo]

...Is that sustainable?...

Of course it's sustainable. Left wing loonies have been making up stuff for years, they always have and they always will. Here we have a goofy unsupported 'chart' from --no not an economist, from a lawyer. OK, lawyers know lots of stuff, but it's law they study and work with, not economics for heaven sake!

...income in this country goes either to workers (people who make stuff) or to owners...

--as if owners don't work?

I feel like writing an op-ed with the line "...income in this country goes either to Democrat union people (people who have to be told what to do) or to honest thinking people (owners)..."

Naw, that would be slimy, I couldn't possibly stoop so low...

The point is that the ratio of capital gains+dividend income to wages+salary income has increased markedly.


Owners of a corporation can work for the corporation, too, but they are paid salaries. That makes them both owners and workers. Their salary they get from their labor, their dividends and capital gains they get just from being owners.

 

[The Infidel]

I am wealthy beyond my dreams.
Not by dollars, as our President would have me believe.

I learned long ago the true value of wealth, while mired in the grip of poverty.

Personal dignity, a sense of self-worth, and the love of family defines my fortunes.
Not the hollow words of an ill-gotten nation leader.

President Obama is not the self-professed prophet of my world.
My world is my own prophecy. And I profess a bright future for myself and my family irrespective.

Spoken like a true American

 

[expat_panama]

...The point is that the ratio of capital gains+dividend income to wages+salary income has increased markedly...

That's an easy statement to make up. It would be interesting to actually look at the numbers to see if it's true, and if it is then my bet is that the ratio changed because of a drop in wage earners.

...Owners of a corporation can work for the corporation, too, but they are paid salaries. That makes them both owners and workers. Their salary they get from their labor, their dividends and capital gains they get just from being owners.

Now the story is that if it doesn't get wages then it's not work. That's something else that's easy to make up --this goofy idea that people who get cap. gains and dividends don't work for them. Usually I hear that line from people who've never done it and don't do it because 'it's too much work'.

 

[expat_panama]

...The computer age has made people in many ways become obsolete, if they haven't been replaced with machines - they're competing with machines which cost far less to run...

That's the new phony line Obama's come up with because these days 'it's all Bush's fault' simply won't wash.

The thing is that saying 'it's all tech's fault' is stupid too. Most of the work computers do is replacing tech jobs, and now tech hiring is bigger than other fields. In fact, more people work in internet now than agriculture. Virtually all the work I did as a graduate engineer is now done by computers that we built to do our work for us, and instead of inventing ourselves out of a job we just made our skills more valuable than ever.

 

[editec]

Why The Rich Are Getting Richer

Seriously, this is no mystery.

In a capitalist system, nothing succeeds like success.

It's all about expendable incomes, isnt it?

If you have money beyond your cost of living, and you invest that money wisely, you will end up with still more money to invest (rinse and repeat as needed)

And as the expendable incomes of the affluent have risen, in part because their taxation has declined so dramatically in the last 30 years, naturally that extra expendable income invested into the market is going to reap still more dough for those who already have it.

Meanwhile those who never really had all that much expendable income to invest to begin with, find their purchasing power declining by comparison.

So a comparison of aggregate wealth between classes is obviously going to show a dramatic change, isn't it?

 

[expat_panama]

...If you have money beyond your cost of living, and you invest that money wisely, you will end up with still more money to invest... ...those who never really had all that much expendable income to invest to begin with, find their purchasing power declining by comparison.

It's not just the lower incomes, it's also the poor's excessive spending. America's poor on average (from here) are spending a lot of money that could be invested:

* 80 percent of poor households have air conditioning. In 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.
* 92 percent of poor households have a microwave.
* Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks.
* Nearly two-thirds have cable or satellite TV.
* Two-thirds have at least one DVD player, and 70 percent have a VCR.
* Half have a personal computer, and one in seven have two or more computers.
* More than half of poor families with children have a video game system, such as an Xbox or PlayStation.
* 43 percent have Internet access.
* One-third have a wide-screen plasma or LCD TV.
* One-fourth have a digital video recorder system, such as a TiVo.
​

...And as the expendable incomes of the affluent have risen, in part because their taxation has declined so dramatically in the last 30 years, naturally that extra expendable income...

Actually, the affluent pay much more in taxes now than they did 30 years ago, and it's because the tax rates are so much lower. This is good all around.

 

[Sundial]

What happens when more and more income goes to people who don't work, and less and less goes to people who do?

do you mean people on welfare or do you mean business owners?

Can you tell me how I can own a business without working?

Yes: purchase it. It's called the "stock market".

 

[Sundial]

First I just want to say that I don't want to sound like Obama here because I believe he's got it wrong, and he doesn't know what he's talking about.

However I think a lot of what's responsible for the income inequality in recent decades is advancement in technology and innovation. The computer age has made people in many ways become obsolete, if they haven't been replaced with machines - they're competing with machines which cost far less to run. Secondly, advancements in technology has allowed for successful people and people who create things to become more recognized and far richer than in past times, and in many ways rightfully so.

I don't believe there's an easy answer to this, and I'm not suggesting one at this time. It's just a thought.

I'm also afraid that we may be entering a time period where service jobs, retail positions, and to some degree food service will become more automated, and electronic. This is going to be a very great challenge for our economy as some of these low paying jobs are the only ones left for some people.

Once the rich perfect the art of building robots that do all the work - including reprogramming and reproducing themselves - what then? Will the poor simply starve to death because the rich don't need them?

 

[Sundial]

...The point is that the ratio of capital gains+dividend income to wages+salary income has increased markedly...

That's an easy statement to make up. It would be interesting to actually look at the numbers to see if it's true, and if it is then my bet is that the ratio changed because of a drop in wage earners.

...Owners of a corporation can work for the corporation, too, but they are paid salaries. That makes them both owners and workers. Their salary they get from their labor, their dividends and capital gains they get just from being owners.

Now the story is that if it doesn't get wages then it's not work. That's something else that's easy to make up --this goofy idea that people who get cap. gains and dividends don't work for them. Usually I hear that line from people who've never done it and don't do it because 'it's too much work'.

That's an easy statement to make up. It would be interesting to actually look at the numbers to see if it's true,

The numbers are in the first post of the thread - the share of income going to workers, as opposed to owners, has declined from 67% to about 57%.

That's something else that's easy to make up --this goofy idea that people who get cap. gains and dividends don't work for them. Usually I hear that line from people who've never done it and don't do it because 'it's too much work'.

You can define "work" however you want. In this case, the distinction is between money obtained by right of owning something - interest, dividends, rent, capital gains - and money obtained by labor. (Both physical and mental, in case that's not obvious.)

You're free to reject it if you want. But there's nothing novel or unusual about it. The distinction has been around for hundreds of years. It's perfectly ordinary and straightforward. It's a distinction routinely made by accountants and tax preparers. The tax rate on unearned income, for example, is taxed at a different (lower) rate than earned income.

The reason rich people are getting richer is not that they're getting smarter or better. Or that they're working harder or more productively. It's that the income they're getting from owning things is going up, and the sum of the things that they own is increasing.

Edit: By the way, when you say, "usually I hear that line from people who've never done it..." What "it" is it you're referring to? Owning stocks and bonds? Are you seriously claiming people tell you they don't own stocks and bonds because it's too much work?

 

[expat_panama]

...the distinction is between money obtained by right of owning something - interest, dividends, rent, capital gains - and money obtained by labor. (Both physical and mental...

The idea that there's no physical and mental labor involved with getting and keeping the "right of owning something" is basic to the teachings of Karl Marx, so I'm sure that--

Marx really got into it in a big way. In fact he held owners with so much contempt that he suggested replacing managers with clerks. The miserable collapse of the USSR testifies to the folly of that mindset.

 

[Sundial]

...the distinction is between money obtained by right of owning something - interest, dividends, rent, capital gains - and money obtained by labor. (Both physical and mental...

The idea that there's no physical and mental labor involved with getting and keeping the "right of owning something" is basic to the teachings of Karl Marx, so I'm sure that--

Marx really got into it in a big way. In fact he held owners with so much contempt that he suggested replacing managers with clerks. The miserable collapse of the USSR testifies to the folly of that mindset.

Well, there was certainly no mental effort involved in your post.

Also, mangers are workers, not owners.

 

[EdwardBaiamonte]

In fact he held owners with so much contempt that he suggested replacing managers with clerks. The miserable collapse of the USSR testifies to the folly of that mindset.

yes very true, but Marx and Stalin live on today through the left's brainless villification of the rich in modern America. Its no wonder our left spied for Stalin.

 

[likeabird03]

...The computer age has made people in many ways become obsolete, if they haven't been replaced with machines - they're competing with machines which cost far less to run...

That's the new phony line Obama's come up with because these days 'it's all Bush's fault' simply won't wash.

The thing is that saying 'it's all tech's fault' is stupid too. Most of the work computers do is replacing tech jobs, and now tech hiring is bigger than other fields. In fact, more people work in internet now than agriculture. Virtually all the work I did as a graduate engineer is now done by computers that we built to do our work for us, and instead of inventing ourselves out of a job we just made our skills more valuable than ever.

Unlike Obama I'm not blaming anyone, this was happening before Bush, I just think we're really starting to feel the effects of it now.

 

[likeabird03]

First I just want to say that I don't want to sound like Obama here because I believe he's got it wrong, and he doesn't know what he's talking about.

However I think a lot of what's responsible for the income inequality in recent decades is advancement in technology and innovation. The computer age has made people in many ways become obsolete, if they haven't been replaced with machines - they're competing with machines which cost far less to run. Secondly, advancements in technology has allowed for successful people and people who create things to become more recognized and far richer than in past times, and in many ways rightfully so.

I don't believe there's an easy answer to this, and I'm not suggesting one at this time. It's just a thought.

I'm also afraid that we may be entering a time period where service jobs, retail positions, and to some degree food service will become more automated, and electronic. This is going to be a very great challenge for our economy as some of these low paying jobs are the only ones left for some people.

Once the rich perfect the art of building robots that do all the work - including reprogramming and reproducing themselves - what then? Will the poor simply starve to death because the rich don't need them?

I don't look at this as a rich man vs poor man thing. Many poor people have gotten rich by inventing and developing products and new methods, and in the process some get more wealthy, and others become displaced. We've all done it to ourselves really. But like I said, I don't know what the solution is to this because I don't believe you can or should try and stop innovation. That's why policy makers have come up with all these creative ways to create jobs that are only temporary and lead to a worse correction later. Finance, home building - and now that's over it's green jobs.

I read a figure about how in the silicon valley area production is reaching all time highs, yet unlike the first tech boom it's not creating any broad-based job growth as employment levels in that metro area are still about 15% below their 2000 level, among the worst showing in the country. It seems as though economic upswings don't lift all boats like they did in the past, and I think this is because you can more out of less.

 

[Sundial]

Why The Rich Are Getting Richer

Seriously, this is no mystery.

In a capitalist system, nothing succeeds like success.

It's all about expendable incomes, isnt it?

If you have money beyond your cost of living, and you invest that money wisely, you will end up with still more money to invest (rinse and repeat as needed)

And as the expendable incomes of the affluent have risen, in part because their taxation has declined so dramatically in the last 30 years, naturally that extra expendable income invested into the market is going to reap still more dough for those who already have it.

Meanwhile those who never really had all that much expendable income to invest to begin with, find their purchasing power declining by comparison.

So a comparison of aggregate wealth between classes is obviously going to show a dramatic change, isn't it?

That's not quite right. It's not all about expendable income. People obtain financial wealth through all sorts of means: Enron, Madoff, insider trading and CEOs paying hundreds of millions in "consulting fees" to family members and friends are just some examples.

Starting off with a lot of money certainly helps. But you have to make a distinction between real wealth and financial wealth. Real wealth - houses, food, clothing, computers, education, etc. - is produced by people doing work. Financial wealth, on the other hand, merely determines how real wealth is divvied up. Capital gains, interest, dividends, etc. make the person who gets them better off. But they don't make the country as a whole any richer.

It's important because Republicans work so hard at covering it up. They think if they can convince people being rich means you've been especially productive, they're halfway to winning the game. It's a lie, of course.

Financial wealth is a zero-sum game. The production of real wealth is what's important.

 

[Sundial]

First I just want to say that I don't want to sound like Obama here because I believe he's got it wrong, and he doesn't know what he's talking about.

However I think a lot of what's responsible for the income inequality in recent decades is advancement in technology and innovation. The computer age has made people in many ways become obsolete, if they haven't been replaced with machines - they're competing with machines which cost far less to run. Secondly, advancements in technology has allowed for successful people and people who create things to become more recognized and far richer than in past times, and in many ways rightfully so.

I don't believe there's an easy answer to this, and I'm not suggesting one at this time. It's just a thought.

I'm also afraid that we may be entering a time period where service jobs, retail positions, and to some degree food service will become more automated, and electronic. This is going to be a very great challenge for our economy as some of these low paying jobs are the only ones left for some people.

Once the rich perfect the art of building robots that do all the work - including reprogramming and reproducing themselves - what then? Will the poor simply starve to death because the rich don't need them?

I don't look at this as a rich man vs poor man thing. Many poor people have gotten rich by inventing and developing products and new methods, and in the process some get more wealthy, and others become displaced. We've all done it to ourselves really. But like I said, I don't know what the solution is to this because I don't believe you can or should try and stop innovation. That's why policy makers have come up with all these creative ways to create jobs that are only temporary and lead to a worse correction later. Finance, home building - and now that's over it's green jobs.

I read a figure about how in the silicon valley area production is reaching all time highs, yet unlike the first tech boom it's not creating any broad-based job growth as employment levels in that metro area are still about 15% below their 2000 level, among the worst showing in the country. It seems as though economic upswings don't lift all boats like they did in the past, and I think this is because you can more out of less.

You didn't answer the question, and you're looking at the issue upside down.

Suppose the day comes when robots can do everything, and human workers aren't needed anymore. The thrust of your argument is that when that day comes, human workers will simply starve to death, because the rich don't need them anymore.

But why is that exactly? It's obvious why the rich need the poor: they need them to do their work for them (at least until they finish building their robot army). But why do the poor need the rich?

 

[likeabird03]

Once the rich perfect the art of building robots that do all the work - including reprogramming and reproducing themselves - what then? Will the poor simply starve to death because the rich don't need them?

I don't look at this as a rich man vs poor man thing. Many poor people have gotten rich by inventing and developing products and new methods, and in the process some get more wealthy, and others become displaced. We've all done it to ourselves really. But like I said, I don't know what the solution is to this because I don't believe you can or should try and stop innovation. That's why policy makers have come up with all these creative ways to create jobs that are only temporary and lead to a worse correction later. Finance, home building - and now that's over it's green jobs.

I read a figure about how in the silicon valley area production is reaching all time highs, yet unlike the first tech boom it's not creating any broad-based job growth as employment levels in that metro area are still about 15% below their 2000 level, among the worst showing in the country. It seems as though economic upswings don't lift all boats like they did in the past, and I think this is because you can more out of less.

You didn't answer the question, and you're looking at the issue upside down.

Suppose the day comes when robots can do everything, and human workers aren't needed anymore. The thrust of your argument is that when that day comes, human workers will simply starve to death, because the rich don't need them anymore.

But why is that exactly? It's obvious why the rich need the poor: they need them to do their work for them (at least until they finish building their robot army). But why do the poor need the rich?

Sorry, I mentioned that machines were making people obsolete so I think the scenario you mention kind of goes without saying. We won't be needed, and American companies are increasing their influence in growing markets so they won't need a strong US consumer base. I don't think I would like to live in a society where there's an obsolete non-productive class dependent on a rich productive class in order to get by either. Do you have an answer?

 

[expat_panama]

Well, there was certainly no mental effort involved in your post...

You're right, please let me up my effort a bit and say there's no way I'd ever want to offend you because I'm fully aware that you're a decent person and not a Marxist.

We both know that a manager works hard and that most owners are managers who are not simply (as Marx would say) exploiting the workers. The thing is that there are non-managing owners who also do difficult work such as raising cash for funding company expansion and operation. Most don't get a salary, but they've still got to be rewarded somehow or else nobody gets paid.

 

[Sundial]

I don't look at this as a rich man vs poor man thing. Many poor people have gotten rich by inventing and developing products and new methods, and in the process some get more wealthy, and others become displaced. We've all done it to ourselves really. But like I said, I don't know what the solution is to this because I don't believe you can or should try and stop innovation. That's why policy makers have come up with all these creative ways to create jobs that are only temporary and lead to a worse correction later. Finance, home building - and now that's over it's green jobs.

I read a figure about how in the silicon valley area production is reaching all time highs, yet unlike the first tech boom it's not creating any broad-based job growth as employment levels in that metro area are still about 15% below their 2000 level, among the worst showing in the country. It seems as though economic upswings don't lift all boats like they did in the past, and I think this is because you can more out of less.

You didn't answer the question, and you're looking at the issue upside down.

Suppose the day comes when robots can do everything, and human workers aren't needed anymore. The thrust of your argument is that when that day comes, human workers will simply starve to death, because the rich don't need them anymore.

But why is that exactly? It's obvious why the rich need the poor: they need them to do their work for them (at least until they finish building their robot army). But why do the poor need the rich?

Sorry, I mentioned that machines were making people obsolete so I think the scenario you mention kind of goes without saying. We won't be needed, and American companies are increasing their influence in growing markets so they won't need a strong US consumer base. I don't think I would like to live in a society where there's an obsolete non-productive class dependent on a rich productive class in order to get by either. Do you have an answer?

Yes. Suppose the rich "productive" class finishes its robot army and retreats to Galt's Gulch, taking their money with them. They don't need ordinary human workers anymore, so they leave them behind to starve.

Here's the problem with that scenario. There's no reason for the workers to starve, or to be any poorer than when the rich people left. The money the rich take with them is not real wealth. Money is a financial asset, which means its only value is as a claim on real assets. In other words, a claim on the work of others.

When the rich disappear with their money, they've simply removed a claim on the work of ordinary workers. They haven't made those workers any less productive, any less skilled, or any less willing to work. They haven't reduced their productive capacity. The difference is there are fewer people the workers now have to support.

But what about the money? If the rich take - say - 90% of the money with them, there would be deflation, right?

Yes. Everything would get a lot cheaper. If people didn't want that to happen, there's an easy, efficient, simple way to stop it. Simply replace the money the rich took with them to Galt's Gulch.

Money can be created cheaply and in literally infinite amounts. (It's merely a claim on real assets. It's not a real asset itself.) If the people want prices to remain stable, they need only print up enough money to replace whatever disappeared into Galt's Gulch and distribute it amongst themselves. Everyone would be richer, and able to consume more, and there's no need for anyone to be unemployed, or for prices to fall.

In effect, the only result is that the financial assets of the rich - their money - is redistributed among everyone else. If or when the rich decide to make the trip to Galt's Gulch, the rest of us should pack their bags and wish them well.