January 4, 2015 by JImbo
And I think India is near South Africa on this chart… so the fastest growing economies in the world (the “BRIC” countries… Brazil, Russia, India, China) that economists are slobbering over jealously… are the most “unfair”… and the more “equal” you make a society, the slower it grows and less productive it is.
Unless the calculation of “unfair” is flawed. For example if I have 100 people living on an island and they all make 30,000 a year then that’s “fair”. But, if one wins the lottery and makes $3 million, then suddenly the whole group is 100:1 unfair. Now, live for the 99% has NOT CHANGED. The only difference is that one guy is now a millionaire (who in all likelihood will then raise their standard of living now)
That’s how it works.
The 1% have extra money to spend, giving it to the 10% for luxury items and building businesses. The 10% then invest in things for the other 90%.
In this example, let’s say Mike the Millionaire decides to build a mansion. Who builds the mansion? Who provides the materials? Who then WORKS AT THE MANSION?
If you have 100 times as much money, you SPEND 100 times as much money, and that makes everyone else’s standard of living go up.
So, Mike the Millionaire right away puts 10 people up as workers in his mansion. They now become the “10%” even if they only make twice what everyone else makes. They won’t laugh at $60,000 a year, but they’re not millionaires.
However, that does give them the extra capital to start their own businesses on the side and spend a little on luxury goods.
Now those 10 people all buy new cars.
That means the car dealer on the island makes more money. He can afford to expand and hire a new guy on.
The tailor gets an order for new suits from Mike’s butler.
He has to hire two people to work on those.
Mike starts hosting friends at parties.
The caterer and cook go into business supplying drinks and food.
Pretty soon there is ANOTHER 10-20 people doing VERY well.
The market for cars and suits goes up further.
Now there are layers of prosperity.
Is this suddenly an “unfair” society?
For the majority of people NOTHING HAS CHANGED.
They still make the same amount.
Live in the same house.
Drive the same car.
They just see how much Mike has… and his butler… and his tailor… and get jealous.
They THINK they are doing worse because he’s doing so much better.
And that is how “income inequality” is a flawed concept.
It assumes that Mike only got rich from stealing from the “poor.”
It assumes that the WHOLE society is being screwed over.
All of those assumptions are usually wrong.
“Equality” advocates assume that the poor are poorer because there is less money to go around.
Not that the rich are richer from creating extra value.
Even Kim Kardashian and her useless family doesn’t STEAL from you directly. SOMEONE is watching her shows, buying her clothes and perfume, buying tabloids.
Baseball players sell tickets.
Singers sell tickets.
Steve Jobs sold iPods.
If you don’t want those things, then don’t buy them.
Would we be BETTER off if Steve Jobs never sold iPods or iPhones or iKittens?
If Steve Jobs never had a BILLION dollars to live in the top 1%, then the whole country would be a lot more “fair” according to those who measure these things. Just like how Mike the Millionaire would not have upset the balance on this island of 100 people.
If Mike had never won the lottery (or Steve Jobs had never started Apple) then would our country or the World be better off?
If he had simply had that 9-5 job like everyone else, then yes the world would on paper be much more “equal.” If no one ever invented anything or made any money, it would SEEM equal and fair. However, would it?
Would we have a high lifestyle of living?
There would be no ambition to do anything.
There would be no capital to invest in anything.
In Steven Jobs’ case, same with Bill Gates, etc…. we wouldn’t have personal computers.
Would that be a GOOD thing?
Henry Ford… rich guy…. mass produced cars.
Even the Wright Brothers were looking to make it rich.
Nope, no airplanes.
What’s the point? They made airplanes to MAKE MONEY. Same with motorcycles.
If they didn’t make money on them, why not just stick to bicycles?
What’s the rush to get to work if you make the same as everyone else?
And who would have any extra money to buy them?
That extra money, that CAPITAL (as in… Capitalism) makes a difference. The profit motive is a GOOD thing.
In our island scenario, if it turns out like most economies, in a few years we will find the society stratified much like many modern economies. There will be a spectrum of people making different amounts.
However, few if any will be making LESS Than they were before. In fact, the average will be much HIGHER than before, productivity will be up, and you’ll see people with more stuff and more free time to enjoy that stuff in.
The other direction leads to subsistence farming and economic collapse.
You don’t get prosperity by punishing the successful, any more than you get a better baseball team by firing the best players. Or fining them for getting home runs. Or making them sit out games “to be fair to the worse players.”
In doing so, you’re violating the TRUE meaning of the word “fair.” You are violating the freedom of an individual who is too good in order to artificially improve the life of someone else with less talent or drive. That is the opposite of fair.