Further Insight on Why the Rich Get Richer

You’ll never believe who presented a good explanation of why the top 1 percent’s income has risen faster than that of other groups: Bill Moyers.

Moyers cited one Dieter Braeuninger, who points out that rapid technological change is resulting in a shift to more technology-intensive production methods, i.e. automation, and thus higher demand – and higher pay – for for highly-skilled workers who are able to operate such technology. Those smart enough to invest in such technology enjoy a higher payoff as well. Braeuninger adds, “The supply of basic labor has increased enormously… As long as less-skilled workers cannot shift to more productive tasks, increasing income inequality remains a threat.”

In other words, it’s differences in education levels, and an oversupply of low-skilled labor, that explain inequality, not sinister plots by the rich.

And even then, in the U.S. the lower-income groups’ incomes have risen over the past few decades – just not as fast as the higher-income groups. If people are all bent out of shape over the poor getting richer while the rich get richer faster, then your problem is an oversupply of envy. The solution isn’t taxation, but education – not only educating people to acquire the skills of the modern technological world, but also educating the enviers on why they should let go of such a destructive and useless emotion.

Moreover, the rich have been getting richer at least since the dawn of agriculture, some 10,000 years ago. Since then, and especially in the past few hundred years, humans have been continuously adopting more technology-intensive methods requiring higher skill levels. We’ve gone from hunter-gatherer societies where people’s incomes were more equal than today – and equally poverty-stricken – to a highly complex economy requiring an immense differentiation of tasks and skill levels (and thus pay levels).

That said, Moyers also turned to a usual suspect, Robert Reich, who preposterously implied that the rich get richer at the expense of everyone else – by taking away the money of the nonrich. Reich writes, “Now, when they’re taking home that much, the middle class doesn’t have enough purchasing power to keep the economy growing.” Of course he doesn’t explain how such a process would work. The absence of such explanations is a common occurrence among the left. It’s one of the things the prompted me to abandon them long ago.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The New Demagogues

Have you ever come across people who trumpet statistics saying that Jews have a disproportionate share of the wealth? Those statistics may be right, but usually the person spouting them is prejudiced against Jews.

What they do is tout certain statistics without providing the right context or explanation, such as the fact that Jewish parents really emphasize education more so than people of other religions, resulting in their children having higher incomes when they become adults. They should be admired, not vilified. It’s a similar situation with Asian-Americans.

Now, media outlets, as well as President Obama and many others, are trumpeting statistics showing that in recent decades, the top 1 percent’s income has risen much faster than that of the other 99 percent.

To tout statistics like this without providing the right context is like anti-Semitic people touting statistics showing that Jews have a disproportionate share of the wealth. The people in the media and the President are prejudiced against the rich.

Just as the demagogues of old whipped up envy, prejudice, and hate against the Jews, President Obama and his enablers are doing the same against the rich.

(For context regarding the top 1 percent statistics, click here.)

 

The Rich Get Richer and the Poor Get Richer

Here’s a comment I posted in response to an article in The Economist, “The 99 Percent”:

It’s surprising, and encouraging, to see that the income of even the lowest quintile rose over the past 30 years. You’d think with the millions of low-skilled, non-English-speaking immigrants pouring in, the income of the lowest quintile would have declined, since income inequality is mainly a function of differences in education/skill level. The question is, will rising incomes of even the lowest quintile be a thing of the future, as it was of the past?

If it doesn’t last, it certainly wouldn’t be the fault of the top 1 percent. If wages of the lowest-income groups decline, the culprit would be an oversupply of low-skilled (many of whom are non-English-speaking) labor.

Meantime, if everyone’s incomes go up – as has happened over the past 30 years – then that’s a good thing. Only the envious are troubled by the fact that the incomes of the rich have risen faster than everyone else.

If you earn $20,000 a year, and your real income goes up to $25,000 a year, that’s good, right? But what if you hear that someone else’s income goes from $100K to $150K? If you’re the envious and resentful type, you’d be troubled. If you’re emotionally mature, you wouldn’t be troubled.

Moreover, rising incomes of the rich isn’t happening at the expense of everyone else (except perhaps in the case of those who get their wealth through wealth coercion as opposed to wealth creation, such as certain members of the legal profession). It isn’t a zero-sum economy. It’s a positive-sum economy where many wealth creators get rich themselves, and in the process make everyone else’s life better through life-enhancing products (software, electronics, appliances, foods, etc.) and services. So the top 1 percent not only provide the jobs to the 99 percent, but also the life-enhancing products.

Factors causing the 1 percent to get richer faster include globalization, where markets are now much bigger than they were in the past and where one can therefore sell many more products than before. Another factor is population growth – now there are 7 billion of us. If you make an inexpensive product costing $1 and sell it to just one-seventh of the population, you’re a multi-millionaire, perhaps a billionaire if your costs are low.

Is it the top 1 percent’s fault that powerful forces such as globalization and population growth are changing the income dynamics?

The enviers want to raise taxes on the rich in order to try reverse the income inequality statistics. But the rich provide the jobs. They provide the products that enhance our lives. They provide the money so that we can get loans to by cars, homes, and education.

Punish the rich, and you punish us all.

For more on this topic, click here.