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View Diary: Wealth Condensation: Why the Rich Get Richer (172 comments)

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  •  The Law of Scarcity (18+ / 0-)

    The Pareto Principle is also known as the Law of Scarcity.  That is to say: at any given point of history, there is only so many resources to distribute; and, if a small group has an outsized amount of those resources, many others have to have, by the nature of the math, very little to none of those available resources.

    I am glad that someone is finally mentioning this mathematical principle in the discussion of economics and wealth distribution.  But here is another aspect that has not been discussed enough:

    in order for the national debt to be paid off, and new infrastructure invested in, the taxes must come from those 20% that control the 90%+ of those resources.

    Recently, John Stewart kind of referred to this in a takedown of Republican congressmen talking about taxation of "job creators" vs. taxation of working people (he mentioned how you would have to take all of the middle and lower class' holdings to close the deficit).

    What is also never discussed (from my standpoint as a former bankruptcy attorney) is the aspect that the Republicans, in their assertion that we are "broke" or "bankrupt," never mention how many assets we have as a country.  In bankruptcy, you have to disclose not only all of your debts, but also all of your assets.  Not doing so amounts to bankruptcy fraud.  If we count the amount of wealth (the last I heard was $64 Trillion, of which the richest 20% own 90%+, which is around $57 to 58 Trillion), which means we have the capability to pay off the national debt.  And our not paying the debt is not due to inability to pay the debt as it is unwillingness.  (I am curious what the total amount of financial wealth is now.)  Another note: this total wealth is accounted for purely by millionaires and billionaires alone.

    Another point: most wealthy people see themselves as "savers."  But the flip side of that is that much of that wealth is not invested -- therefore no jobs are "created."

    Yet another point is that much of their wealth is created by the labor of others.  What has been lost in most markets (not just the United States) is the concept of risk as the basis for greater reward.  But the U.S. is virtually alone in security for those who do not take risks (laborers).  But as Jacob Hacker has written in The Great Risk Shift, the wealthy have managed to shift the business risks that they were supposed to take in exchange for a greater reward onto the workers who are neither supposed to take such risks, nor are able to bear such burdens.

    I wish I had more time to expound of this.  I feel like I could write a book!

    •  Yes! (5+ / 0-)
      Recommended by:
      fhcec, jimreyn, Zydekos, zedaker, Calamity Jean
      The wealthy have managed to shift the business risks that they were supposed to take in exchange for a greater reward onto the workers who are neither supposed to take such risks, nor are able to bear such burdens.

      They have shifted the risks, but not the rewards.

    •  Great Point About Listing Assets (11+ / 0-)

      It reminds me of how annoyed I always get when I listen to people like Boehner or Cantor talk about how "the country is broke."  Excuse me?  How can the country be "broke?"

      We still have all the same assets we did before, the same plants, the same farms, the same IT, the same workforce, all the same natural resources.  We didn't suddenly wake up to find out that we'd misplaced Kansas and now we can't make ends meet.

      What we have is a failure of the economic engine to keep chugging, and unfortunately that tends to be a self-reinforcing failure.  The credit crisis and the sudden loss on paper of people's home values dried up demand.  This slowed business, and put people out of work.  That further dried up demand.  Etc.  And, of course, with the economy in the toilet, tax revenues went down.

      But people like Boehner and Cantor want to use the fact the engine has stopped running to argue that the engine must be "broken" and therefore putting any new gas into the car would be a waste of money.

      Oh, and one other thing about "listing assets."  I like your point about how the economic elite basically own all of these assets, but the idea of liquidating them in order to pay for the things we need is not on the table.  Compare and contrast this with a proposal from - I believe - Michigan, that would deny unemployment benefits to people who get laid off unless the value of all their assets is also below a certain threshold.  So if you lose your job but have $5,000 in savings, you will be forced to blow through your savings before you can apply for job assistance.

      When it comes to further impoverishing the already luckless, America seems to be A-OK with that; when it comes to demanding the people who have accumulated all the country's assets kick something in, that's class warfare.

      Oy.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sat Sep 24, 2011 at 11:42:44 PM PDT

      [ Parent ]

      •  Regarding the ending of unemployment benefits... (1+ / 0-)
        Recommended by:
        Kanscott

        They are arguing we should end unemployment benefits under the theory of "moral hazard."  However, under the Pareto Principle, the moral hazard of underwriting the costs and risks of business is an even greater moral hazard, by a scale of several degrees.

        This is another example of how the risks of loss are shifting from the owners of capital to the workers who make those businesses what they are.  Combine this with student loans (which impede competitiveness on new and innovative intellectual capital -- something I call a "barrier to entry"), along with the shifting of retirement and health care costs (under the mantra of "responsibility") to those who are less capable of monitoring them until it is too late and they are paid far too little to be able to adequately save for these costs when they come due (which is why in the past owners of industry were charged with doing this for them because they had the expertise -- or could hire it -- to look out for them).

        Therefore, the worker, the innovator and the human capital that potentially could drive the country as a whole forward becomes dependent on the goodwill of their employers (which, we are finding, does not really exist).  In the end, a lot of talent goes wasted because people never reach their potential because they can neither move to the job that most suits them, nor start their own business "building the better mousetrap" because they are not able to get access to the capital they need to start a truly small business (as opposed to the definition of "small business" in the law).

        Like I said, I feel like I could write a book on this!

    •  Also known as "The Paradox of Thrift" (1+ / 0-)
      Recommended by:
      drewfromct
      ...most wealthy people see themselves as "savers."  But the flip side of that is that much of that wealth is not invested -- therefore no jobs are "created."

      "If the young are not initiated into the village, they will burn it down just to feel its warmth." African Proverb (-6.00,-7.03)

      by Foreign Devil on Sun Sep 25, 2011 at 03:56:13 AM PDT

      [ Parent ]

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