Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
Published on March 3, 2013 By Draginol In Economics

Found this video here:

Even being familiar with the stats, it was a really fascinating and well put together illustration of the massive level of inequality in wealth we have in the United States.

I have two fundamental criticisms with it.

First, knowledge isn’t understanding. That is, the author gives me the impression that he thinks wealth is “distributed” by some..entity. That somehow wealth is being divied up by some sort of directed intelligence and that we, as a society (presumably through our government) could somehow alter this inequality.

Second, it doesn’t even try to explain how this inequality happened in the first place. At best, it sets up strawmen such as “does the CEO work 318X harder than the average person in their company?”  While working “hard” is often the difference between poverty and middle class, it has relatively little to do with why 1% of the population controls so much of the nation’s wealth. 

Wealth distribution is a macro-system. If it is to be understood, it needs to be looked at from a macro-level. Emotionally driven anecdotes of individuals or even generalizations of individual groups is worthless.

Your local grocery store

To understand what is happening at the macro level let’s look at something that is so basic to our day to day lives that has also transformed right in front of our eyes. Your local grocery store.

In 1983 the store owner would need to employ many cashiers. When checking someone out, they looked at individual price tags and rang them up on the cash register. Those price tags were placed on every product by employees with a price “gun”. You usually had a bagger. You also needed a lot of these people because checking out was a relatively slow process.  People paid by cash or (burrrrr) more often a personal check.   The goods being purchased had been stocked on the shelves by a small army of stockboys who practically lived in the warehouse in back trying to manually sort out all the goods that had come in from a vast array of different suppliers.

As a result of the above, the owner of the store’s relative wealth was limited because the wealth the store generated was distributed out to a small army of employees.

Fast-forward to today.

That same store owner now owns a much much larger store.  In fact, that store owner is actually a principle at a consolidated franchise company that owns many many stores.

Goods come in with a bar code so no price tagging is needed, eliminating those jobs and the associated expenses. The goods also come him from a tiny number of suppliers who have undergone the same automation and subsequent consolidation as the stores have.  The number of stock boys is far fewer because it’s so much quicker to put things up. Goods arrive in the store already organized by a just-in-time warehouse at a franchise distribution center.

Most of the cash registers are gone having been replaced by automated ones. What few human-run checkout lanes are now operated by people who simply move the bar-coded item through a scanner and the customer does their own bagging. The customer pays by simply sliding their credit card through. 

It would not be an exaggeration to say that the equivalent store generates more than 318X more wealth for the owners than for each employee.

Automation is nothing new. However, the rate and pervasiveness of automation continues to increase exponentially. As a result, the inequality we see is likely to continue to grow.  In fact, the rate is likely to increase.

Our government has actually set in policies that hasten this trend. Minimum wage laws, while well intended, result in these business owners eliminating positions and making cutting edge automation more attractive.  Getting rid of minimum wage laws wouldn’t eliminate this trend, it would merely slow it down. 

We also have increasing regulations and costs associated with hiring humans which create an incentive for the store owner to invest in more machines faster and his suppliers to outsource more overseas where regulations aren’t as tight.  Decreasing regulations, however, would only slow this trend, it wouldn’t stop it.

In another several years, the store owner will likely have machines that can automatically stock goods onto shelves via their RFID tag. Even fewer cashiers will be needed because the customer will be able to simply walk out of the store with their items in the cart and have all their items charged to their credit/debit account as they pass through an automated RFID scanner. Your favorite fast food joint won’t need people to take your order. You’ll simply tell it to a Siri-like order taker (or input it on a keyboard).

Thus, the “store owner”, that 1%-er (and again, at this point, the “store owner” of 1983 is long gone) will have an even greater share of the wealth than they do today.

What can be done?

I don’t really have an answer.  I don’t think anything can be done even though I often feel the same distaste for wealth inequality as most people do.

Overall, the lives of nearly all Americans are vastly better than they were 30 years ago.  And before someone points out a statistic on “purchasing power” I think you’d be hard pressed to find any sane person who would want to go back and live in 1983.  Life is far better now than it was 30 years ago for virtually everyone in the United States.

But the wealth inequality strikes most people as being fundamentally unfair. Having had some success myself I am no stranger to that tingle of envy at the advantages others got – especially when they are given kudos by a society that is oblivious that the biggest difference between those people and the hundreds, if not thousands, of others who had the same idea/ability/drive was that those people started out with massive massive advantages.

While I spent much of my childhood growing up in a 2 bedroom apartment with my single mother eating “shit on a shingle” a few times a week because that’s what we could afford to eat and saving and scraping from an early age so that I could work 3-jobs to afford to attend a minor state-school that wouldn’t even get me an interview at a major tech company,  I’ve watched people become more “successful” largely in thanks to them starting out with connections from Harvard or MIT or some other place their parents sent them.  My point is, I can relate to that unspoken feeling of unfairness.

However, someone less successful than I am can point out that I was raised by a mother who instilled responsibility and economic common sense from an early age and that I’m a white male thus I too have many advantages over many others. There’s always someone more disadvantaged than you.

Hence, envy or resentment is a futile path to take. You just have to let it go or it’ll poison you.

As a society, should we really care about this growing wealth inequality? And if we should care, we should have take a hard look as to why we care. Because if that reason boils down to envy or resentment then any solutions that spring up are likely to take us down a very dark path.

I personally don’t like the level of wealth inequality. It offends my sense of fairness. But I can’t think of any solutions to it that don’t essentially involve stealing from one group and handing it to another “just because”.  It’s one of the reasons why I don’t like a strong federal government, it just creates more opportunity for the gamification of our economic system (talk to a successful hedge fund manager – federal regulations make the hyper-wealthy financial managers of the world possible).

Besides, in another 30 years, we should reach the singularity and at which point, who will give a crap? Winking smile


Comments (Page 3)
on Mar 04, 2013


The vid should definately comparing to Canada at the end!

Mixed Economy FTW!

on Mar 04, 2013

It does not really matter if running water was a luxury and now is a "necessity"...the point is that most poor people have it while back in the day they did not...

And thus, the life of a poor person now is better than it was in the past...it does not matter if they are relatively better (relative to those above them), they are still absolutely better and that I think is far more relevant when it's you being the poor person...

I really could care less whether the richest people in the world control 90% of the wealth or 99.9% of the wealth...all I'm really going to care about is my own standard of living, because that affects me far more on a daily basis...

on Mar 04, 2013

My 2 cents. 

1st Remove the stock market.  I find it hard to comprehend people make money from money.   People are making a fortune and losing a fortune off digital numbers.  Work for your money.

2nd Remove pre-payment billing.  Companies are making interest on monies paid before the service is rendered and removing the potential interest from the consumer.  Service should be paid when the service is received.   It also drives me up a wall when it takes 2 months to get a check after I cancel a service and the company is collecting interest on my funds before I receive them.  I'm not implying getting rid of interest rates.

3rd Standard taxes.  I’m sorry, I know it’s not popular but I think there should be a flat rate for everything and not double taxed on used goods.   I’m from California where I’m taxed to take a dump after I’m taxed to eat the food.  That’s a used commodity in my opinion.   Then I’m taxed on the service fee to remove that waste, including the water I used and the tax on the water.    So my original hamburger I bought for $5 costs me $8 at the end.  I’m not implying eliminate the service of waste removal.

on Mar 04, 2013

lulapilgrim


Quoting Seleuceia, reply 24.it is boggling how many "poor" people have cell phones and computers, items one might consider luxuries...

In short, I'd rather live at the bottom of society today than live at the bottom of society many years ago....

 

The "poor" in America are "wealthy" in comparison to the poor people in some other countries.

 

 

With respect...

I have heard this many times but we are not in another country.  We are in the United States and our poor are our issues not the issues of the poor in another country. 

on Mar 04, 2013

AM_Shark
3rd Standard taxes. I’m sorry, I know it’s not popular but I think there should be a flat rate for everything and not double taxed on used goods. I’m from California where I’m taxed to take a dump after I’m taxed to eat the food. That’s a used commodity in my opinion. Then I’m taxed on the service fee to remove that waste, including the water I used and the tax on the water. So my original hamburger I bought for $5 costs me $8 at the end. I’m not implying eliminate the service of waste removal.

Not 'popular'?  Not doable.

Would your solution be to add the cost of waste disposal to the purchase of the hamburger?  Since a hamburger is likely 90% waste and 10% nutrient [at best] shouldn't the burger manufacturer be charged for HIS 'waste disposal' to you...and pay you to take the burger...

on Mar 04, 2013

Haha.. I know hamburger was not the best example but to answer your question I would feel better with the cost added on.  At lease we can lower the health care cost if people would see a high flat tax on a 90% waste hamburger.  maybe that might wake them up not to eat 10 a week and be 300+ lbs with health issues.  but that's another thread... also I would only have to complain and bitch one time instead of 3 times seeing taxes.

on Mar 04, 2013

GFireflyE

The vid should definately comparing to Canada at the end!

Mixed Economy FTW!

Here have some data from the OECD. The Gini Coefficient measures income inequality. A Gini coefficient of zero expresses perfect equality, for example, where everyone has an exactly equal income. A Gini coefficient of one expresses maximal inequality among values,  where only one person has all the income. I know this isn't nearly as good as having a video with little stickmen and stacks of cash but it's what I got. The countries here are all rich first world ones that could be compared to the States. The Gini Coefficient is usually much higher in developing countries.

 Gini Coefficent 2008
OECD 0.3151845
AUS 0.3360
AUT 0.2607835059
CAN 0.3235
FRA 0.2930
NOR 0.2474
MEX 0.4755
GBR 0.3422
USA 0.3782
on Mar 04, 2013

Let's say poor people own 20% of 1 trillion of all money today. If after 50 years they own 10% the standard of living is maintained only if wealth of a country grew to 2 trillions. If they have 5% it requires a country to produce 4 trillions etc.

 

An example of the gravity of the situation would be that statements like this are not only common, but accepted as fact in government policy.

 

Money is not wealth, at best it's paper.  Wealth is what you can get with that paper.  Thirteen years ago I got a computer that was a good performer for a year, with two grand.  I then needed an upgrade to stay current that required giving my mother the system and buying a new one, for three so I would be able to keep it several years before needing to upgrade.  Two years ago I got a computer for $700 that will probably still play anything that comes out for the next few years.

 

In terms of computers, ignoring the relative power and just going with the relative usage requirements for the typical user, two thousand dollars is several times more wealth than it was a decade back.  How much you make in a market economy is just like everything else.  Supply and demand.  You have a need for money relative to how much you can get with it, and your employer has a need for your labor relative to how much money he can get for you.  You get a job when how much you'll work for is equal or less than how much he'll pay you.  The fact that you pay a fraction of what you would have fifty years ago for the basic necessities is not something that exists in a vacuum.

 

Money is just a method of streamlining the barter system, if they hadn't inflated it into being worth less than the metal it's made from, you could eat well on change you wouldn't bend over to pick up today.  A penny would have real use instead of being the change return you get when you buy a candy bar to let the mentally weak think they didn't pay a dollar.

on Mar 04, 2013

Our government has actually set in policies that hasten this trend. Minimum wage laws, while well intended, result in these business owners eliminating positions and making cutting edge automation more attractive.  Getting rid of minimum wage laws wouldn’t eliminate this trend, it would merely slow it down.

 

Before the advent of minimum wage, however, the disparity between great wealth and poverty was even greater than it is today in Western Europe and the US. There's plenty of evidence to this from the files of corporations operating in, among other places, Edinburgh (late 19th century) and various companies in Manhattan's so-called Garment District (early 20th century). The minimum wage didn't drive down employment: it raised the baseline salary, companies funneled a bit more money into employment, and that was all that happened--as numerous European economies showed. And I'm having a hard time understanding how paying people who are making $7.25 cents an hour, the federal minimum wage, a dollar less, is going to cause corporations to hire more of them, when the profits can be taken instead an given out as dividends, or provided as golden handshakes to CEO--which seems quite the habit these days. (And then if people make less, they have less to spend, slowing down the economy.) We also have to contend with jobs being ferried overseas to some nations where there is no minimum wage, and pay people the equivalent of $2.00 an hour. I can't say that I have any answers, but it would seem to be commonsense that laws preventing the exporting of jobs overseas would be a good first step, instead.


on Mar 05, 2013



Quoting Alstein, reply 25That whole "poor people have it better than they used to argument" is one that I think is overdredged and needs to be retired.

I don't see how you can pretend that reality is irrelevant.  When you get to any social stratum above the homeless, the standard of living (as traditionally defined) is in-arguably far better for all, poor or rich, in capitalist societies.  Some people define the 'standard' differently, however, and that may be what you mean.  It's a different discussion, though.

 

Much of that was financed by borrowing, and it's come crashing down over the past few years as the borrowing bubble burst.

 

Right now we have a society where people have much less security, and that does reduce the quality of life.  The massive insecurity around my current job is impacting me negatively, and I took the job I did precisely because of the banking crisis making what I was going to school for back in 2008 almost impossible to find a job in.

 

I'm getting tired of having jobs shut down on me.  When I was younger, it was easy to go in a different direction- and I did, and I perservered.  It's much harder now.  You have no idea how angry and anxious I am right now.

 

on Mar 05, 2013

An article by The Economist on the minimum wage in America. It focuses on the economic fundamentals. It is a little technical, but this is the Economics section. I work for close to minimum wage and was joking just the other day with coworkers that Baxter the robot could do my job easily, although they pay me so little they would still lose money.

http://www.economist.com/blogs/democracyinamerica/2013/02/minimum-wage

on Mar 05, 2013

Draginol,

This is an interesting post.  You are likely positioned right of center on the economic graphs you present yet you see the flaws in the system.  You seem to value the left half's money possibly more than the individuals do themselves (evidence:  WoM performed poorly so you provided FE/LH free to compensate).  A patch says sorry our company stands behind it's products.  Your response speaks to your "sense of fairness".

Having said that, do you use your money/influence to spur change?  America needs people who can see the challenges and have the capacity to influence the system, even on a local level.  Regardless, I applaud you for having the courage to discuss difficult topics.

on Mar 05, 2013

The problem with the presentation - and most of the comments seem to ignore this - is that it assumes a static pie.  So all of a sudden, someone is getting a bigger slice of the pie.  And that is the way liberals want you to view it - the more someone gets, the less you get.

But our "wealth" (as a nation) is not the same as it was in 1983.  There is a lot more of it.  So the "poor" are rich be even the standards of 1983.  The wealthy are indeed more wealthy, but the middle class and the poor have picked up a lot as well.  That trend has stopped in the last 5 years, but not due to the wealthy taking a bigger slice of the pie.

The politics of envy will always get you the result you desire.  But not the outcome you want.  Bill Gates cannot possibly spend all his money, nor does he even try.  But the wealth he created has enriched almost every person in this country.  A computer in even the poorest houses.  If you create a policy to "get" the Bill Gates, you will only impoverish everyone.

And that is what the video is all about.  The politics of envy and making sure that everyone suffers equally.  Just like the latest Kim has accomplished in North Korea.

on Mar 05, 2013

Dr. Guy,

You bring up an interesting point for discussion.  However, with all due respect, I think the presentation doesn't assume a static pie.  He speaks in percentages.  Thus, enlarging the pie doesn't necessarily elevate the bottom quarter of the population.  This is the argument the presenter is trying to make.  Growth alone can't solve this issue.

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