Before my wife and I retired, I came across an article that broke down by state what it took to be considered in the top 1% of household income in the US. Because our state is poorer than most, we just made it into that now much-maligned category. We still work, in a manner of speaking, but it is all essentially for free, so we have fallen quite a bit in the rankings.
We still live in a respectably modest home and drive Prius’s. We have no vacation home and travel economy most often. We do own a boat, but it is basically the smallest and oldest among those where we keep it.
Having had a passing interest in the subject, I was intrigued by a recent headline stating that the top 1% in the world now own half of all the wealth in the world. Last year, Oxfam reported that just eight people, six of whom are Americans, own half of the world’s wealth, which, if true, is even more troubling.
The American ethos has long held that anyone who applies him or herself, can become a success, and there have been enough examples to support for the myth, including a few recent individuals who earned billions from Internet businesses. The rate of consolidation, however, is likely to make such examples rarer in the future, because new ideas are more apt to be acquired by those with capital.
The trend of holding capital, rather than investing is a relatively new development in the history of capitalism. It is directly contrary to the dictates of Adam Smith, who observed that profits always go back into the system as capital for new profit making endeavors. Apple serves as perhaps the best such bad example, having now over 260 Billion Dollars in cash sitting idly offshore. It seems that the rich not only get richer, they also lose interest in doing anything with what they have. This means that much wealth is no longer is used for ventures that create jobs and opportunities for working people to improve their own lives.
Adam Smith might say that capital is only put to use if there is demand for the product invested in. For the average worker, wages have not kept up with costs now for decades, which reduces demand. The only part of the economy where income has grown is among the one percenters, and it is only there that demand has increased.
Apart from the systemic poverty that all these developments ensure, there is an additional and insidious consequence that we seem to be experiencing even now. Money has always been used to influenced policy in government. Now, it seems, Dollars and not votes, are the currency of government. The most recent and, so far worst, example is are the two tax bills currently before Congress. Politicians are openly advocating increasing taxes on most individuals and eliminating health and entitlement benefits in order to cut taxes for corporations and the wealthy. This kind of thinking is what gets a morally bankrupt, reality TV star elected President.
I can’t say I have any easy answers to these troublesome trends, but we do need some. Societies in which the rich live in excess while the poor struggle and often starve tend to fall in time. People need live with hope for a better future and believe that our government and way of life can make that possible.
As I first wrote this post, I began to list examples of government by and for the plutocracy, but I thought better of the effort. I have tried to avoid political commentary as a rule here, and my point is not a political one, but rather about a worrisome economic tread.
If we avoid “us versus them” arguments, perhaps we can accomplish better economic opportunity for all.