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 9)
on Apr 07, 2013

The bloat at the top is terrible, but I think we need to consider the largest areas of funding, the military and surveillance apparatus, above all. Both could be reduced dramatically and rendered a lot stronger and more responsive. Would you agree?

 

Yes, primarily by removing civilian contracted operations.  They spend three times as much contracting work out as they would simply hiring civilians to do the jobs, it's even worse when compared to military personnel.  The exact same force we have now could cost radically less money simply by directly employing the cooks, engineers, scientists, etcetera.  Other intelligent, equally obvious choices, yield similar results.  Such as not canceling production on the worlds greatest air superiority fighter a third of the way through, after most of the cost has already been incurred.  They skip from one partially finished manufacturing run to the next in order to fuel more money into the research and design environment.  They argue cost every time, but it always costs more per unit to develop a jet and only produce two hundred of them, than it does to develop a new jet and claim you'll build a thousand.  You could easily knock a hundred billion a year off the military, probably twice that, and still maintain a high level of combat readiness than we are now.

 

Let me ask you, yes or no: would you completely deregulate the nuclear fuel industry? If you wouldn't, what industries would you agree need to be regulated, and to what extent?

 

At the Federal level, yes.  States are free to hose themselves as they see fit.

 

First, a couple posits.

Government grows increasingly more corrupt and bloated at a rate that increases with it's size and scope.

The magnitude of corruption and bloat sustained by government, and the length of time it persists, increases with it's size and scope.

 

If you agree, there is only one decision left.

 

I see no positives in have the Feds regulate anything, even nuclear power.  They've done a bang-up job in every industry I've researched, and I've researched just about everything at this point.  From babysitting to nuclear waste, the Feds have screwed the pooch in a spectacular fashion.  We've sunk hundreds of billions of dollars into the storage of completely safe "radioactive waste" in the form of clothing, office supplies and dirt from places that people work in every day without protection because the radiation levels are lower than you get flying in a plane.  Between the vast quantities of hard regulation, and the even larger bulk of soft regulation requirements thrown at the states in return for money that belongs to them in the first place, we're so screwed we can't even feel it anymore.

 

Even on the face of it that doesn't make sense, because you're in effect arguing that since many nuclear plant accidents have not occurred, therefore those plants need not have been regulated. We don't get rid of the police if crime goes down, because we know crime will go up if we remove them. And strict regulation doesn't mean accidents will never occur, if that regulation is handled competently; it means accidents will be far less likely to occur, and that those due to negligence--as in the case of the Davis-Besse nuclear power station--will be followed by prosecution and penalties that make a chance of recurrence is slim.

 

I'm arguing that there's little point in having the incompetent people, that have caused most of the accidents, regulate an industry that has to be safe to exist.  If your billion dollar nuclear reactor melts down, you're fucked.  The incentive for running one safely owes little, if anything, to the NRC.  On the other hand, as a government entity, the NRC and the Department of Energy as a whole, have a long, lustrous history of thinking themselves above the law and getting away with it.  Illegal operations run by the government have killed thousands of people.  They are immune to prosecution and civil pursuits, being the deciding party, and comprising part of an entity that has written itself immune to law suit.

 

Davis-Besse is another ideal example, the NRC fined them 5 million, they spent over half a billion making repairs.  The DOJ prosecuted people, and fined them over 20 million.  If there were no NRC, it would still be a crime to cover up dangerous activities.  The DOJ, instead of prosecuting people for misleading regulators, would charge them under the normal criminal code.  Willfully ignoring mechanical failures, that will lead to numerous deaths and property destruction in the billions, falls under numerous categories in the penal code.  Criminal negligence would be my first stop, followed by attempted manslaughter, arson, and anything else I thought might stick.  What's the point of the NRC?  All they do is add a few million to substantially more massive repair costs that would be uncovered in the resulting criminal prosecution that would have taken place anyway, just on different charges.  If they actually have a catastrophic containment failure and kill thousands of people?  Large quantities of the company payroll would be in prison for life, and depending on the state they're in, a shorter than expected life.  The company and everyone involved would be furthered into a state of ruin by the resulting lawsuits.  With or without the NRC, the same thing happens.  The only difference would be who the whistle blower informs first, the press, the DOJ, or the often complicit regulatory body.

 

It's about moving wealth. If the government hires people, they have more money, not less, because they're no longer living on their relatives, or on the government dole, while sitting around, or looking for work they haven't found. If they work, they get paid, and that money is used to buy things--which means more replacement inventory is needed, and the transfer of that inventory, as well. If enough people are hired by the government in an area, local stores find it sometimes necessary to hire more people to provide services as a result. To argue they are jobs without wealth is counterintuitive, because wealth is moving through the economy. If it doesn't stagnate, there is benefit. I get employed, so I drive to work and buy gas; I have more wear on my car, so I get it repaired; I buy more luxury goods, I buy clothes for my kids (or grandkids, or grand nieces and nephews) where they would have had to make do before, I send them to the doctor more often if they come down with something, etc. As I mentioned earlier, there's plenty of evidence for the government as a powerhouse to tazer a sluggish economy into greater action.

 

If the government hadn't hired more people to spur economic growth, the banks would be sitting on trillions in extra assets that are currently tied up in government debt.  Sixty years ago, you could start a business with an idea by walking into your local bank.  Today, your bank wouldn't give you an unsecured business loan if you were a sure bet.  The small time venture capitalists that will even give you the time of day will only invest in you if your business plan is a high margin enterprise.  A grocery store isn't.

 

Between regulations that tell them they can't, and having most of their capital tied up in bonds or grossly overpriced real estate courtesy of the FHA, there is a small fraction of the economic mobility today that we had even in the 90's.  It's moving from consumer to consumer just fine, but only through enterprise crippling debt.

 

At 25% of GDP in Federal expenditures, with over a trillion dollars a year going into wealth redistribution schemes in particular, economic stimulus would have us roaring along at an obscene rate.  Government has it backwards, encouraging consumption at the cost of creation.  The engine of wealth creation is private enterprise.  You can juice the works all you want, but all you do is burn up the motor.

 

These posts are getting long huh...

on Apr 07, 2013

psychoak
You could easily knock a hundred billion a year off the military, probably twice that, and still maintain a high level of combat readiness than we are now.

A perfect example...it costs several MILLION dollars to train a front-line pilot....but the US goes through ALL the motions...and the last thing they do is actually test the person's ability to actually handle G-forces.  In the USSR the first 'test' was...not whether you came from West Point [or some other BS] but...do you black out and become totally useless as a pilot?  IF you survive....then they spend the money on you.  The AF shouldn't be an 'equal opportunity employer' no matter how touchy-feely that makes them look.

Cancelling development at a whim and/or change of 'leadership' has been around since there was money to be made in mis-management...

on Apr 07, 2013

Sorry, Jafo - not quite so 'perfect' an example.

G-tolerance testing is one of the first items on the agenda for fighter pilot applicants in the US of A's Air Force & Navy.  Don't know where you got your info but it's not correct.  We may be dumb but we's ain't stoopid.

That said, the majority of pilots in the military don't require high G-tolerance as they fly low-performance aircraft.

on Apr 07, 2013

Ah...so they eventually caught up with logic....it wasn't always the case...

on Apr 07, 2013

I know it to have been true as far back as 1979, can't vouch for any earlier.  Mind you, there's millions of other ways they waste money - mind-boggling, mind-numbing, nauseating ways, all worse than your example, were it true.

Our budgeting process, at virtually every level of government, is mostly legalized pickpocketing.  More properly, legalized grand larceny.  So, in that sense, we's is really stoopid.

on Apr 08, 2013

psychoak

These posts are getting long huh...

 

Yeah, they are. And it's evident we're not going to agree. On the other hand, it's interesting to read the arguments of somebody whose viewpoints are often though not always diametrically opposed to mine. If nothing else, it makes me think; and I wish we had an opportunity to sit down and talk away a night in a good restaurant with spouses or significant others to contribute, while annoying waitresses who wish we'd free up a table.

 

Nice meeting you.

on Apr 08, 2013

Glazunov1
while annoying waitresses who wish we'd free up a table.

Never go to restaurants that have multiple sittings....

on Apr 08, 2013



Quoting Glazunov1, reply 126while annoying waitresses who wish we'd free up a table.

Never go to restaurants that have multiple sittings....

Best way is to eat at home... save money.

on Apr 17, 2013

Until people don't die starving in the gutter for refusing to work meaningless jobs or for refusing to accept terribly uneven employment terms, the system will never be fair and revolution is inevitable. (let's learn from the Russians though hmm? While torching the czars, try not to torch all the stuff you need to survive)

If I had basic survival needs met (and granted no luxury I couldn't earn) I'd happily tell people to F off at their wage offers and work on my own long term projects to make my own money...eventually.

As for taxes, it ain't easy being at the top of middle class. Your employers expect 100K of performance out of you and you need to deliver to keep your job. When you start to lose a significant portion of that, it tends to make you angry. (Hrmm, subtract taxes and divide wages by actual worked hours...son of a bitch!).

Remember..most of the economic theories we use today were born out of inadequate technological advancement. You really did have to make people work or everyone would starve and die in the gutter, because there wasn't an army of automated robots and abundant cheap energy to take care of menial jobs that provided basic needs. (like farm work, construction and manufacturing)

Very soon, in my lifetime, robotic fabrication will be reality (the technology will be available to meet basic needs at little cost)...and if you think the system is going to continue as it does now, you're one of the 1% smoking crack and you're going to get dragged into the street and shot after you try and maintain the status quo with force.

The real problem to be focusing on is

1) When we achieve the technological advancements to take care of basic needs for everyone (coming real soon). What system do we use to manage this?
2) How do we motivate people to do work to advance the species when they don't need to? What system do we use to manage this?

I've thought about those questions, but that discussion belongs in a different thread.

on Apr 17, 2013

LORD-ORION
Very soon, in my lifetime, robotic fabrication will be reality (the technology will be available to meet basic needs at little cost)...and if you think the system is going to continue as it does now, you're one of the 1% smoking crack and you're going to get dragged into the street and shot after you try and maintain the status quo with force.

Back in the 60's I subscribed to a comic.....

BTW....that's the first edition.  If you have one it's worth a pretty penny ...

on Apr 24, 2013

Back in the 60's I subscribed to a comic.....



 

Personally, I can't wait to battle a robot 

on May 25, 2013

Killer robots out of control?

SUPER TRUMP!

Nothing like a conservative "I feel good about punishing you for my own happiness" AI.

on Aug 06, 2013

Because everyone needs a little humor.

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