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 7)
on Mar 30, 2013

Dr Guy

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.

Pretty much what I was thinking.

on Mar 30, 2013

MasonM
Pretty much what I was thinking.

Ditto

on Mar 30, 2013

Responding to posters above.

 

There indeed is more wealth, however all the wealth is at the top. There "might be" some kind of "potential" for wealth to be created on the bottom, however I highly doubt this will ever happen.

 

As money is created at the top, it is distributed in wages (minimized) and brought back in pricing (maximized). Until the day that labor costs of the "mode" form of average employee are higher in value than they are, wealth will remain on the top and scarcity will continue to exist on the bottom to a large degree.

 

Rewind to 1994.

 

There are different kinds of poor and poverty, yes there is the "welfare poor", which include prisoners on work release and former prisoners on  parole and probation, and teenagers at their first job washing dishes. These positions used to "offer crumbs" and there was a class of poor above them, the "well off poor" who made around 12.50 an hour. In 1994 dollars, 12.50 is the average entry position of foundries, warehouses, factories and higher wage cooks and janitors, and maintenance personnel. 4.25 was minimum wage, the wage of the "bottomfeeder", and 7.00 was the normal "temp agency" or entry level position at a factory. 10.00 an hour was "pretty nice".

 

Fast forward to today.

 

Living 5.00-6.00 an hour above minimum wage sure was nice. Then, as this wage increased, and prices increased and jobs went to china, employers began paying less money for the same positions. This caused jobs which once paid 3.00-4.00-5.00 above minimum wage to "level" to the value of minimum wage. To this, and more modern monetization schemes, such as preplanned obsolescence and doing everything through subscription licensing instead of ownership, those who were once at the 9.00-12.00 an hour range that were once okay are now in poverty without any mobility. College is too expensive of a risk, and more and more there aren't jobs even for those with degrees. For those in the lowest income brackets, the costs of student loans are astronomical and unaffordable.

 

Even with a degree, you won't "get more", instead you will have to continue getting less because of all the others who have degrees "devaluing" the job position, outsourcing and hiring immigrants or others at an exploitative cost. As education improves in other countries, jobs which require a masters degree will pay the same low wages.

 

 

on Mar 31, 2013

You ignore, or at least minimize, the economic mobility of our free enterprise system.  Bill Gates, Steve Jobs, Mark Cuban - just to name some notable examples - started with zip and made not only themselves but thousands, maybe hundreds of thousands, of other people very wealthy.  People move into (and out of) economic strata all the time.  It is a myth that all the wealth just circulates among the already rich.

on Mar 31, 2013

Didn't want to start a new thread but I had to post this video. Sorry if it is somewhat off topic. 

 

on Mar 31, 2013


You ignore, or at least minimize, the economic mobility of our free enterprise system.  Bill Gates, Steve Jobs, Mark Cuban - just to name some notable examples - started with zip and made not only themselves but thousands, maybe hundreds of thousands, of other people very wealthy.  People move into (and out of) economic strata all the time.  It is a myth that all the wealth just circulates among the already rich.

 

Hundreds of thousands? Don't make me laugh.

 

Meritocracy has produced 100 to 1 failure per success ratio, and thats being ultra generous. Truth is probably closer to 10,000 to 1. Part of the problem is that any "loss" in meritocracy condemns your entire future. Get sick without health care? better win the lottery because your not getting a "helpful for you" loan, grant, or anything else at all.

 

People move in and out of the middle and upper brackets however, most of the wealth which cycles "down" to the poor only does so in a couple of forms.

 

Wages - which are always reclaimed through price fixing and profit margins.

Loans - which trickle down, create debt, then trickle the profits back up.

 

Neither of these tend to "stay" with those who receive them long enough to build capital.

 

Money (as debt) does occasionally go to the poor, however money (as wealth or capital) always stay with the rich. There is no "perfect answer" in "solving the economy" to work for the most people with the best fruition to society. Socialism is a good equalizer, however it fails to create anything other than itself, it has no "driving forward force" to mobilize wealth. Likewise, capitalism doesn't create wealth for very many people at all.

 

What we need is a new model that starts with maximizing fruition for the most people possible, even if "those with the most" have less than they do now, they would still have the most. They wouldn't lose the capital to create wealth or the wealth to create capital. Another part of a winning model is a banking institution which operates at minimal profit with "cheaper executives" that owes moral agency to anyone they do business with (because anyone who understands economics, ethics or math models also understands that average joe cannot be reasonably expected to have inside, specialist knowledge used to exploit them).

 

We need to care how wealth is created and care where it goes once it "leaves your hands", what kind of agendas it supports in the hands of those you give it to, and what other options exist.

 

The problem facing our nation is that many many people who work hard at jobs they have held for years are in a situation where they earn wages similar to teenagers working their first job and inmates on work release. With the same spending power in the economy. This has less to do with taxation and more to do with wages. If taxes were measured on "impact" to determine fairness, the 60% bottom would pay 5% of all monies earned. However, if wages were distributed more fairly then people would have the ability to get education, health care, and have the capital to attempt to make good choices with. Capitalism is not about "the right to choose", it is about the right to have "good choices to pick from" and if the system fails to provide then the system has failed; and it has.

 

Also, don't mistake me for a "socialist liberal" who thinks "democrats will ride in on the unicorn and save the day". I am able to look at things without biases (other than personal experience and the experience of many close to me, which i filter out up front and reinsert once i have multiple angles of logic). That is, my position against our current system is not an endorsement for any other system which could be "pinned" on someone who dislikes rampant poverty.

 

I just hope somewhere between insightful posts like Frogboy's opening post (and response to the video) will help smarten people up. The video is correct on many fronts, however when you look at Frog's experience, there is credibility there that cannot be denied. Likewise, many posts (from both sides) have good insight on the issues of wealth inequality.

on Mar 31, 2013

thadianaphena
Meritocracy has produced 100 to 1 failure per success ratio, and thats being ultra generous. Truth is probably closer to 10,000 to 1.

What data supports this 'truth'?  Sounds a lot more like opinion than 'truth', but I'm open to being corrected.

on Mar 31, 2013

Nobody to my knowledge has done empirical testing on society as an organism to measure the impact of Meritocracy. Instead, we can look at the impact Meritocracy has on those who try but fail or on those who "weren't the best". We always measure meritocracy by its successors and not failures, and i want both ends to be seen to inspect and repair its shortcomings.

 

Meritocracy is good in theory but has critical flaws:

1. "Training" and "Education" are extremely expensive, for those without capital they can lead only into a debt spiral. If you already have debt then your even more screwed. There is an assumption debt comes from people who buy thousands of Angry Birds apps and write bad checks. Most debt actually comes from people facing high prices and low wages, where only money can move you upward because the means to move upward are dependent on having money.

 

2. For those who graduate college and wind up unable to find a career, or those forced out early (one common cause is a drunken weekend or getting caught with a little bit of pot) to be indebted greatly and unable to recover.

 

3. Automotive Insurance, Repairs and Planned Obsolescence of equipment factor to keep necessities expensive. Most people need (not want) their car. Same with pricing of cell phones, and computers, and upgrades, new software editions, etc.

 

4. So, how does one lose in Meritocracy to the point they can't recover? They can get sick without health care. They can lose their job at the same time their car breaks down in between pay periods. They might get duped into a loan they need for something important which involves a bad math model, designed to drive the debtors knell. They might have a life changing event like unplanned pregnancy, a family illness or death, a natural disaster, a string of bad luck.

 

5. For each "Good Choice" you can make, there are hundreds of bad choices lurking and the consequences of any choice (voluntary or involuntary) is more harsh than ever in the history of private market. The toxicity of values in market are the problem with market. The Market itself, i see as a social tool which could be used for the function of creating prosperity for the many. However, as socialism collapsed in the past, no system can handle being run by toxic values and toxic practices.

 

College graduates working for low income, or college students forced to drop out of college to life changing events are my current observation, another is how in my community, I watched thousands of jobs which paid over 12.00 an hour relocate and get replaced with minimum wage employers and 8.00 an hour ceiling. The "answer" is to "find an opportunity" like there is just some "rabbit you can pull out of a hat" or something. This is why Frog's post compelled me to respond.

 

He is on the other side of my argument about meritocracy and market and has good insights. I am able to disagree with his premise, yet compare my stances and experiences to his, and see that the problem isn't "the market is bad" so much as "there are toxic elements in the market and government which ruin it for everyone".

on Mar 31, 2013

Failure is a matter of degree in most cases, and does not have to be permanent.  Most who succeed fail one or more times on the way to their success.  You throw labels like 'toxic' around without any basis other than opinion.  I'm not saying the market is 'perfect' in any way, that's not possible.  Of all the economic systems ever tried in known history, capitalism (the market, free enterprise) has done more to improve the standard of living of more people, to a higher level, than any other, for all its faults.  For my money, it's current performance in the US is more damaged by the heavy hand of government than helped.  In trying to stamp out every trick of the 5% who are bad players, who ignore those efforts anyway, we've completely hamstrung the 95% who are not the problem.

The notion that people need 'a rabbit pulled out of a hat' in order to succeed is somewhat insulting in a way.  I'll concede that our educational system has miserably failed many students over the last 30 years.  The more centralized control of education has become, the larger the Federal education bureaucracy has become, the less our children seem to learn, at least in the areas that might help them succeed as adults.  The creation of the Department of Education was the worst thing to happen to the education of our children in my lifetime, and it's only getting worse.  The more it fails, the more money thrown at it, the more the feds double-down.  But a kid with smarts and ambition, who wants to succeed, will acquire knowledge and can do just fine, even very well, without even a high school diploma, if the kid makes the effort.  But I digress a bit.

 

on Mar 31, 2013

The notion that people need 'a rabbit pulled out of a hat' in order to succeed is somewhat insulting in a way. I'll concede that our educational system has miserably failed many students over the last 30 years. The more centralized control of education has become, the larger the Federal education bureaucracy has become, the less our children seem to learn, at least in the areas that might help them succeed as adults. The creation of the Department of Education was the worst thing to happen to the education of our children in my lifetime, and it's only getting worse. The more it fails, the more money thrown at it, the more the feds double-down. But a kid with smarts and ambition, who wants to succeed, will acquire knowledge and can do just fine, even very well, without even a high school diploma, if the kid makes the effort. But I digress a bit.

Oddly enough this is a bad situation. The education system hasn't failed every child and it is not completely due to government mishandling either. Facts do come down to numbers and in some extent money. For those that go into the teaching profession, many do not earn enough money to get by, and those that have a heart to teach (bless them) do not have the skill or knowledge to teach well. But then you get people with the knowledge to teach a particular subject and they finish college. They have a choice to teach a starting salary of roughly $30,000 a year for their degree (maybe $40,000 depending on the state), but the amount of knowledge they truly need to be able to teach the subject, these people could refocus and earn easily a $60,000 (or $80,000) a year job (I'm talking about the truly talented and knowledgable). Why in the world would they want to succomb to a lower paying job when they can be more comfortable a year.

This was not as problematic in the 60's and 70's because unfortunately inequity of jobs between men and women. Smart women (lawyers or business owners of today), one of the few jobs they can get to keep them knowledgable and use their skills was teaching. Thus, you had better teachers on average because you can choose from a better standard of choice. But today we have more equity when it comes to expectations between men and women and so we are left with trying to entice people who are knowledgable in their field, but not lose the desire to do so because of the pay inequity. The solution unfortunately is to try to entice people to the field, but if you raise their salary you will still only get the people who have already chosen to teach at the lower salary anyway and not a large bunch of talented people.

There is no clean solution to this problem and I don't claim I know the best solution, but some understanding of the situation at hand is in order. The statistic of teachers quiting their job forever within the first five years of doing that job is roughly 45% (http://www.edutopia.org/schools-out). It is not an easy job to do and for the pay and knowledge required and the situation these teachers are put in is not an inviting one. I do know there are bad teachers, but these teachers may not be the ones that are being kicked to the curb or quitting their job (they know they couldn't get a better job if they tried).

Of course there are those that need very little guidance and can do well, there are plently of examples throughout the years, but education serves many other purposes than making an individual successful.

on Mar 31, 2013

I aspired to get into education, however learned I would be blackballed out of programs I wanted to do. They only have room for math and chemistry, and my interests are in philosophy, ethics, anthropology and sociology. Likewise, I learned how constrained I would be by the bureaucracy of education and realized maybe it wouldn't be a good field for me even though I have much to contribute.

 

Instead, i am relegated to jobs I find immoral, underpaying and outright embarrassing. Despite that I am in college trying to do something about it, there just aren't any doors of opportunity in any subject which I am interested in. For people like me, meritocracy is a bad thing. I suppose for people naturally wired to be engineers or doctors there is better outlook.

 

This is why I look at both sides of every issues around the whole picture. We have a lot of systems in play that "of themselves" sound good on paper or when explained by an expert. However, when all of them are combined we wind up with a plutocracy. More and more college graduates year by year has caused community college to have the "social equity" of a high school Diploma or GED.

on Mar 31, 2013

thadianaphena
and my interests are in philosophy, ethics, anthropology and sociology.

Unless you intend to be a 'career student'  you'd be better served choosing subjects that actually result in some form of employment.

A cerebral education can be all very quaint but if it actually gets you no-where it's patently useless.  You do NOT want to become the highest qualified member of the dole queue...

on Mar 31, 2013

Just to add.... I studied Sociology, Psychology and Philosophy .... as they were included in Architecture.  In other words...they 'rounded' an education that resulted in actual employment and contribution to society...

on Mar 31, 2013

Once our high schools have largely failed to truly educate our kids, colleges take the ones who've done reasonably well & offer them future-less majors out the wazoo, most of which have leave no option but to turn around & teach the BS to a new set of victims.  Bit of an exaggeration, but not by much.

on Apr 01, 2013


Just to add.... I studied Sociology, Psychology and Philosophy .... as they were included in Architecture. 

 

And yet, we still have the Bauhaus everywhere.

 

 

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