[white-flame]

If the poor end of the wealth gap are still better off than 90% of the rest of the world, why does the wealth gap matter?

That was my thinking for quite a while.

However, the one thing that happens here in the US is that the wealthy have more representation and power in the legal system. Be it federal or local, the systems tend to get slanted against the not-wealthy because the wealthy take over the communications channel to the movers & shakers.

It's in many ways becoming the new "taxation without representation".

[sedachv]

> If the poor end of the wealth gap are still better off than 90% of the rest of the world, why does the wealth gap matter?

Standard of living increases have come almost exclusively through technological progress. Access to basic survival needs like food (Google "food desert") and shelter (look at rent prices for the past year) is primarily driven by capital speculation by the upper classes.

The repeal of much of the commercial anti-trust regulation in the United States (http://www.theatlantic.com/business/archive/2015/11/cities-e...) enabled capital-consolidating retailers like Walmart to come to a position where they can drive out competitors through predatory pricing (not always noticeable from Walmart's own books because sometimes it is passed down the supply chain). After driving local retailers out of business in some places, as expected some of the speculative expansion does not pay off and Walmart stores have to be closed. Now some regions in the USA are left without access to food: http://time.com/money/4192512/walmart-stores-closing-small-t...

Similarly, anti-development NIMBY policies lobbied for by the upper classes (artificial limit on supply of building sites) combined with the REITs they invest in (impossible for REITs to generate decent returns on B-class housing due to shortage of sites and the huge amount of capital needing to be invested) are the causes responsible for the huge increase in rent prices in major US metropolitan areas.

By far the biggest harm that comes from the wealth gap are the austerity policies pushed by the upper classes to prevent people from having access to education and healthcare. I now need both hands to count the number of acquaintances that have resorted to being sugar babies on Seeking Arrangements or just plain prostitution to help them pay their way through college.

[rayiner]

Even leaving aside rich using their status to solidify their position, consider this: are the policies that maximize GDP and lead to high wealth inequality the same policies that maximize the prosperity of the middle 50% of the population? No economic rule I know of guarantees that to be the case.

Wealth isn't created in a vacuum. Wealth can only be created in places with a high level of social order. That social order isn't created by exceptional individuals, it's created by the behavior and attitudes of ordinary people. Given that, why should societies not structure themselves to maximize the prosperity of the majority?

[dctoedt]

> Wealth isn't created in a vacuum. Wealth can only be created in places with a high level of social order. That social order isn't created by exceptional individuals, it's created by the behavior and attitudes of ordinary people. Given that, why should societies not structure themselves to maximize the prosperity of the majority?

This is a brilliantly-succinct summary of something that conservative politicians should shout from the house tops. It's reminiscent of Elizabeth Warren's famous remarks on fairness during the 2012 campaign. [1] Rayiner, I continue to be bowled over by your socio-political acumen.

[1] https://www.youtube.com/watch?v=htX2usfqMEs

[harryh]

> No economic rule I know of guarantees that to be the case.

Certainly there is no economic rule, however, I think that most people generally believe that for most of human history it has been the case that at least in the medium-to-long-term, top line growth does accrue pretty cleanly to the middle 50%.

There are certainly some people that are starting to wonder if this is no longer the case but personally I'm always pretty skeptical of "this time it's different!" arguments so am unconvinced by the evidence to date. Who knows what the future will hold though!

[rayiner]

I agree that top-line growth accrues to the middle 50%, but I think the proper question is: what policies maximize the prosperity of the middle 50% (as opposed to maximizing the top-line number)? That said, I expect the answer to that question is more or less what the developed democracies are already doing.

[harryh]

If the top line number continues to accrue to the middle 50% then maximizing the top-line number and maximizing the prosperity of the middle 50% are the same problem (at least in the long term). That's really my point.

[AnimalMuppet]

> If the top line number continues to accrue to the middle 50%...

If. But whether that "if" is true was, I think, rayiner's question.

[beat]

The problem is, the policies that maximize transfer of wealth upwards can overwhelm growth policies. That's the situation of the American economy. As it becomes less about wealth generation and more about rent, the already-wealthy benefit disproportionately from control of resources.

[paulpauper]

I've heard of this argument. 'Why do the rich need so much money? Why not just create a 'wealth cap'? The problem is, capitalism is about incentives. When you create a negative incentives, it creates externalities, possibly in the form of companies moving overseas, job loss, and economic stagnation. Second, is it fair for someone or some entity to confiscate what is not theirs, beyond taxes? Third, capitalism is expensive. Venture capital is funded by wealthy, an example being the Space-x and Blue Origin rocket programs, both very costly and funded by billionaires Musk and Jeff Bezos. If taxes were much higher, such programs may not exist.

Most venture capital is private:

http://si.wsj.net/public/resources/images/MK-CQ161_KEYWOR_16...

http://www.wsj.com/articles/humanitys-last-great-hope-ventur...

High corporate tax rates create an economic incentive for companies to move factories and offices overseas through 'inversions' to get a lower tax rate:

http://www.economist.com/blogs/economist-explains/2015/08/ec...

Relative to most developed countries, America has a very high corporate tax rate:

It’s a rock-solid fact that the U.S. corporate statutory tax rate is the highest among developed nations and is significantly higher than the average. According to 2014 data from the OECD, the combined federal and state statutory corporate tax rate for the United States is 39.1 percent. The average of the other 33 members of the OECD is 24.8 percent — 14.3 percentage points lower than the U.S. rate. Weighted by country GDP, the average for these 33 countries is 28.3 percent — 10.8 percentage points lower than the U.S. rate.

[totalrobe]

Venture capital is important, but don't forget that the recent private space ventures have piggybacked on 50 years of government funded technologies...same as pretty much the entire modern IT industry that developed out of military and publicly funded research.

[Eric_WVGG]

The wealth gap matters because it's a gap. The middle class disappears, which shuts down social mobility, and leaves a society that has more in common with medieval serfdom than “the American Dream”.

This chucklehead thinks that the solution to dealing with folks who have to work two full-time jobs at minimum wage salaries to make ends meet is to eat at McDonalds when he goes out with his less-fortunate friends and save the caviar and 16-year-old scotch for when he’s home or out with his investment buddies. It’s goddamned nonsense and, ironically, shows an unbelievable blindness to the very thing he’s trying to embrace — empathy.

[RodericDay]

Exactly.

Wealth isn't a zero-sum game, but power/influence is.

[ryandrake]

Relative wealth is zero-sum, and relative wealth disparity can and does negatively affect you.

Let's stay your wealth/income remains static, but most people around you see a great increase in their own wealth/income. You are certainly less better off now because all this extra wealth in your area will increase demand for goods and thus prices. See Bay Area housing market for an example.

[RodericDay]

Yeah, my original comment simplifies. I'm just trying to find common ground with "grow the size of the pie" thinkers.

[crimsonalucard]

Wealth IS a zero sum.

Take a very abstract product... something we assume to be unlimited in nature and examine it.... let's say a poem. A poet produces poems and sells a book of poems. We assume that the poet has created wealth out of thin air and that wealth is therefore not a zero sum game.

But in order to produce the poem, the poet needs energy. Energy for sustenance, comes to all humans in the form of food. Food is either meat or vegetables. Meat comes from animals that usually eat vegetables. Vegetables gain their energy from the sun. The wealth (poems included) that humans produce is limited by the energy we extract from the sun and material we can extract from the earth. All abstraction comes from physical primitives which are limited by physical laws, thus all abstract products such as poems, literature and art are all limited and thus part of a zero sum game.

Actually if you follow the energy chain of everything to the root, all things end at the sun (nuclear power is an exception). You could say that the sun is basically an unlimited source of energy... but commerce is directly affected by the rate in which we can extract energy from the sun. Since it is physically impossible to extract energy from the sun at an unlimited rate, the rate must therefore be limited and all commerce, products and abstract ideas that arise from usage of this energy must also be, in turn, limited.

[danharaj]

If wealth weren't power, then wealth wouldn't be wealth.

[VLM]

There's also the utility argument.

If I'm the best farmer its probably in the entire cultures best interest if I get the most farmland because we'll share in the utility of an average increase in production despite the unfair concentration.

If, people earn their pile of wealth by providing the most utility, then them having it is naturally great news. On the other hand if they got their pile via less than fair means, and they are not using their pile of wealth to maximize societal utility, well, then there's no real loss in taxing it away from them, if they're not the "best holders" of that wealth.

[jkyle]

> If I'm the best farmer its probably in the entire cultures best interest if I get the most farmland because we'll share in the utility of an average increase in production despite the unfair concentration.

This is probably little consolation to out of work farmers unable to purchase food for lack of employment.

The question is at what point do such concentrations cease to enough of the culture/population to be worth the negative consequence?

It may be more beneficial, over all, for more to have jobs within an industry and thus able to afford essential goods than for maximum efficiency at the cost of fewer able to earn a living.

[oldmanjay]

There is nothing new in the way the powerful wield more power than the powerless. It's a story older than history.

[gk94]

Slavery is a story older than history too. Just because it is old and ongoing doesn't mean we should ignore it.

[oldmanjay]

Ignore it, wring hands about it, hell, produce an interpretive dance to proclaim it. Doesn't matter, because power is a fundamental feature of being human.

Hyperbolic comparisons to slavery intended to evoke some emotional connection between wealth and evil definitely won't change that.

[DamnYuppie]

As it is an ongoing problem around the world I would say we are still doing a good job of ignoring it. We are however doing a great job of renaming it....

[white-flame]

Except that the US seems to have far greater financial inequality than most other first world countries.

[oldmanjay]

That isn't a response to what I said.

[dikdik]

The problem is if this trajectory is allowed to continue, what happens to your kids and grandkids?