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 6)
on Mar 09, 2013

What's a 'yatch'?

What, you don't have one?

I'd have my second by now if it weren't for my last PC upgrade...

... and the fact I couldn't fit both together in the bathtub.

Well not with my rubber ducky in there as well.

on Mar 09, 2013

Dr Guy


Klaxton - I understand the percentages, but it masks my point.   Clearly if everyone is living fine, but some are just super rich, what is the problem?  The poor in this country are richer than 75% of the world's population.  They have cars, TVs, Cell phones and everything that is needed to live a comfortable life.  So why would anyone care if Bill Gates has billions?  He cannot eat more than you. In other words, why care?  The reason is simple.  The politics of envy.  I do not own a yacht.  Can everyone?  no.  But the chart wants you to think that since the super rich do, you should too.  And that is my problem with it.  it does not address the fact that we can have super rich, and it does not affect any of the rest of us.

I think the argument is less "everyone should have a yacht" and more "the American businessmen who have yachts are not investing in their American employees or creating more American jobs". It's a broad generalization that isn't true in several cases, yet there's no denying that the only group of Americans that haven't seen their incomes stagnate over the last 30 years have been the rich and super-rich.

 

As to your first question, nothing is wrong with having some people being super-rich if everyone else is "living fine". The problem is that everyone else isn't "living fine". Poor people may have used cars, hi-def TV's and cell phones but they can't afford decent housing, decent insurance or higher education (the three main things that have skyrocketed in price over the last 30 years)... basically they cannot afford the tools to get themselves out of their situation (unless they get lucky). Fortunately some companies are investing into education programs for their workforce, but it's not enough. Education budgets are being slashed all over the country while we encourage a corporate welfare culture and investment overseas with bailouts and increased taxes. There's no easy fix, and I don't see how the US government can even attempt to try given its current ideological state of paralysis.

on Mar 09, 2013

Good news - the recession ended summer 2009!

on Mar 09, 2013

When you use an inflation adjusted graph to show income changes over time, you have to understand what inflation actually is.

 

The government lies about their inflation statistics.  They use the prices of goods to measure their inflation, which mandates a flat line income for the bottom 10% as they're making money relative to how much things cost.  The middle class changes little, but it's the costs that are important.  People in the exact same spot there in the middle would be able to afford far more now than they would have in the sixties.

 

Wealth is the things you have, not how much paper with an arbitrarily assigned value you had to spend on it.  When you're living in an air conditioned two story house with a two car garage that has two cars in it and you watch tv on a 50 inch flat screen, it doesn't matter that you're making the same amount of money you would have been in 1960 watching tv on a 10 inch black and what piece of shit in your small house with a swamp cooler, driving around a gas guzzling ford pos that wouldn't run five years without needing work.

 

Actual inflation is how much money our asshole government prints to devalue the dollar.  What we have is a great deal of inflation, offset by massive reductions in the cost of creating wealth.

on Mar 10, 2013

The real issue is that education, housing, and insurance are massively overpriced (maybe not insurance, but the first two definitely)

 

The issue with housing is largely due to tax gamification

 

The issue with education is that the value of it has gone down heavily, while costs have skyrocketed.  Market forces would fix it if it wasn't for student loans being undischargable in bankruptcy + overseas education having more subsidy.   It needs a governmental fix.

 

Insurance- that's probably related to property values.

 

on Mar 10, 2013

Education and housing are the same problem.  Uncle provides lots of money for them.  Market forces only work when the market isn't being played around with by the government.  Get rid of the government insured loans in both markets, and they'll come back down to earth on pricing when no one can afford them at such obscene levels.

 

Insurance is more a matter of judgement, but it's the same basic principle.  Employer based insurance separates the consumer from the cost.  When most people go to the doctor, they end up getting a bunch of irrelevant tests ordered just in case there's something wrong.  It's done both to make money, and to cover ones ass.  The more directly you have to pay for something, the more you care about how much it is.  Even insurance you pay for yourself is making things seem less expensive.

 

Exacerbating this problem is the minor detail that much of the country doesn't even have medical insurance, they have prepaid medical.  Our wonderful new healthcare law will end up mandating it to finish driving the stake in.

 

Prepaid medical is where you pay another company to pay your bills.  Naturally, this other company has overhead they need to pay for.  It's like buying the extended warranties when you get stuff at the store, you're just an absolute sucker to be getting this stuff.  Actual insurance is the stuff known as catastrophic coverage.  High deductible, total coverage.  You break a wrist, you pay for it.  You get the flue, you pay for it.  You end up hospitalized for a month, get cancer, something serious, your insurance pays for it.

 

There are other problems in the insurance world, like hurricane insurance companies in Florida, they can only make a certain percentage of their revenue in profit.  What does this mean?  The company makes more money with higher costs.  The most highly regulated sectors of the market are always the ones that perform the worst.  Flood insurance isn't even private, a government program entirely.

on Mar 10, 2013

Good news - the recession ended summer 2009!

No, it won't end until mega-rich bastards in the US start investing again manufacturing and building... employment, instead of just sitting on their wealth and waiting for somebody else to fix the fucked economy before they act.

In doing so they would be spreading some of the wealth around... giving folks a chance to be a little more equal.

 

And before anyone says the mega rich are doing their bit, bullshit!  If they were, the US would be in far better shape and not having to rely on the Chinese buying US dollars/bonds, etc... read LOANS.

on Mar 10, 2013

Governments are a check to destructive individual/corporate greed, citizens are a check to government power.  Unfortunately, when one of these groups identifies itself as part of the other, the checks are eliminated.

If business runs government--bad.  If people yield full decision making authority to government--bad.

The only real  "system" that promises to "fix" inequality is communist socialism and it proposes the fix by giving the power of all government and business to a few individuals to dictate exhanges and rights for everyone. Great...if you are part of the chosen few.

It isn't any more complicated than, "If you try to take something someone earns or produces away from them, they will resist." and in the same manner if you give power to a group or individual, they will resist having it taken away.

The only real answer to inequality is collectively shared personal ethics--and like communism, we can see how consistently that works.

It is the human condition.  There is no superman to save us from ourselves--just back-and forth see-sawing of ceded decision making authority by vote, by purchase, by violence, trickery and by mob insistence.

We just got a robot that can learn by mimicking human actions--no further programming required and we are near the first $25,000 practical multi-task robot--some are in nursing home trials now in Germany though their version is more expensive.

So one reverse-solution to inequality could leverage future inexpensive robots capable of doing menial tasks as a way to compete with less wealthy countries' cheap labor pools.

Your country's manufacturing can't compete with Chinese labor and wages? They can when they can hire semi-skilled laborers for a $10,000 up front cost, minimal maintenance expense and the elimination of salaries, benefits and retirement over a robot's twenty to forty year working life.

As technology advances and sophistication becomes cheaper--that's where we are headed.

Where it leaves the individual citizen is frightening--and then we are back to the mob demanding a new king and there we go again back to all the power being given to a "savior".

I'm sure by then we'll have genetically recreated unicorns and the revived butterfly population will be so great the flapping of their dew-moistened wings will spontaneously create rainbows all over the world and truly altruistic people will be fair to everyone. and we all will willing sacrifice so our brother has what we do.

on Mar 11, 2013

BruntFCA nailed it. The widening social gap will eventually erode the social contract, resulting first in "cold" civil war (it's already happening, Occupy Wall Street), and then open civil war a.k.a. revolution. 

on Mar 11, 2013



What's a 'yatch'? ....

A Yiddish Bedbug.

on Mar 11, 2013

jackswift85
I think the argument is less "everyone should have a yacht" and more "the American businessmen who have yachts are not investing in their American employees or creating more American jobs".

Probably for the same reason you mow your own lawn, instead of hiring a landscaping service to do it.  When you penalize someone for doing something, they will stop doing it.  And that is how the tax laws are structured here.

on Mar 11, 2013

Dr Guy


Quoting jackswift85, reply 77I think the argument is less "everyone should have a yacht" and more "the American businessmen who have yachts are not investing in their American employees or creating more American jobs".

Probably for the same reason you mow your own lawn, instead of hiring a landscaping service to do it.  When you penalize someone for doing something, they will stop doing it.  And that is how the tax laws are structured here.

I'm in total agreement here. We're at a point now that simply raising taxes to cover more government spending, even if it's all put towards stimulus (and it definitely is not), isn't going to get us anywhere. We need a way to encourage private sector growth and reinvestment in the American worker without cutting profit margins drastically, while at the same time not alienating trade partners by imposing stuff penalties for outsourcing.

on Mar 12, 2013

jackswift85
We need a way to encourage private sector growth and reinvestment in the American worker without cutting profit margins drastically, while at the same time not alienating trade partners by imposing stuff penalties for outsourcing.

Um...it's called 'a miracle'....

on Mar 12, 2013

jackswift85


Quoting Dr Guy, reply 86

Quoting jackswift85, reply 77I think the argument is less "everyone should have a yacht" and more "the American businessmen who have yachts are not investing in their American employees or creating more American jobs".

Probably for the same reason you mow your own lawn, instead of hiring a landscaping service to do it.  When you penalize someone for doing something, they will stop doing it.  And that is how the tax laws are structured here.

I'm in total agreement here. We're at a point now that simply raising taxes to cover more government spending, even if it's all put towards stimulus (and it definitely is not), isn't going to get us anywhere. We need a way to encourage private sector growth and reinvestment in the American worker without cutting profit margins drastically, while at the same time not alienating trade partners by imposing stuff penalties for outsourcing.

The problem is many companies have been stagnant for years. Asking them to change or adapt with the times is like asking a pig to fly. Companies like Google have proven that they will be this generation's innovators and other companies have shown that they should just go out of business. The fundamental problem with this country is the lack of scientists and engineers, we need a high skill job market not one revolving around mindless hyperconsumerism.

on Mar 26, 2013

Alstein



It used to be that running water was a luxury, or electricity.   Eventually luxuries become utilities/necessities.  That whole "poor people have it better than they used to argument" is one that I think is overdredged and needs to be retired.


 

 

The line works because few people attack it head on. I roll with Romneywords because Republicans hate having their phrases used against them:

 

"American Exceptionalism itself mandates striving to be the best, however we have become one of the worst. Better than Somalia doesn't cut the cookie, we have a history of innovation, to have created the poverty state we have today is frankly, not exceptional. Reaganomics and Nixoncare and other right-wing ideologies have become a theology which has proven itself as blasphemy. For 30 years of Reaganomics, the market didn't fix itself, and less regulated banks, corporations and markets didn't create wealth or empower the nation. Likewise, private health care has sentenced many to debt slavery, death and intense suffering just to prevent the top margin from spending an amount of money which isn't big enough to reduce their lifestyle."

 

I also like to add "Why is it, in times of war and peace, we are all called to make shared sacrifice and show patriotism? There is one group, the top 1% who still needs to take that pledge."

This is also not an argument about socialism whatsoever. Some people introduce false dichotomy, red herrings and straw men when they run out of grounds to argue, so they use demeaning remarks about socialism. Lets get back to virtue ethics, utilitarianism and take away the hoard of ill-gotten gains from the robber barons who destroyed our once-great nation.

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